REG - Helical PLC - Annual Results for the Year to 31 March 2023
23/05/2023 07:00
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RNS Number : 2715A Helical PLC 23 May 2023
HELICAL PLC
("Helical" or the "Group" or the "Company")
Annual Results for the Year to 31 March 2023
Helical Well positioned with 790,000 SQ FT development pipeline
Gerald Kaye, Chief Executive, commented:
"The central London office market has suffered a fall in capital values over
the last year and Helical has not been immune to these market movements, with
our portfolio experiencing a valuation decline of 10.1% (on a like-for-like
basis).
"While previous valuation falls have been caused by recessions following
periods of economic exuberance leading to an oversupply of new office space,
the current decline in values reflects a number of differing cyclical and
structural factors.
"The impact of all these factors has accelerated the bifurcation in the
market. With best-in-class property valuations adjusting to reflect the
movement in bond yields, it is the older, poorer quality buildings that are
facing what is likely to be a deeper correction, with downward price discovery
potentially not reaching an endpoint until a lease ends and the rent stops, or
from refinancing events.
"Tenant demand for the best, newly developed or refurbished buildings at the
forefront of sustainability with top quality amenities is strong, and seeing
rising rental values.
"Against this backdrop, Helical has continued to recycle capital out of its
mature, stabilised assets, reduced leverage and cut its ongoing core
administration costs by over 13% for the year ahead. As a result, it is well
placed to capitalise on any ongoing market dislocation and the structural
trends impacting the office sector.
"Being selected by Transport for London ("TfL") as their joint venture partner
for the Platinum Portfolio was a significant milestone, boosting our
development pipeline by almost 600,000 sq ft, with the potential for
additional schemes to be added to the joint venture in the future. This
collaboration with TfL, one of London's largest landowners, is an endorsement
of the Helical brand and recognises our track record of producing high
quality, successful developments across central London over many years.
"With 100 New Bridge Street, EC4, our 192,000 sq ft office scheme, due to
start later this year and the three TfL schemes anticipated to start over the
period from 2024 to 2026, this pipeline, our most significant for a number of
years, is scheduled to deliver best-in-class office space to an undersupplied
market from 2025 to 2029.
"London remains a leading world city and, barring economic or geopolitical
catastrophe, there will be ongoing demand for best-in-class office buildings
from occupiers who require well located, highly sustainable offices with good
amenities, which are essential in attracting and retaining the top talent.
There remains a shortage of this best-in-class newly refurbished or
redeveloped office space in central London, enabling landlords to command
premium rents, a dynamic that is likely to persist for the rest of this decade
as the market plays catch up.
"With an experienced management team, a substantial development pipeline, no
legacy assets and historically low gearing levels, Helical is well positioned
to capitalise on the structural trends impacting the office sector."
Operational Highlights
Disposals of £233m (our share £213m) achieved at 3.7% above book value
· On 21 September 2022, we completed the disposal of the single asset
company, Farringdon East (Jersey) Limited, which owns the long leasehold
interest in Kaleidoscope, EC1, to Chinachem Group. The disposal price of
£158.5m, a premium to 31 March 2022 book value, reflected a net initial yield
of 4.3% and a capital value of £1,789 psf.
· We also completed the disposal of Trinity in Manchester on 20 May 2022
to clients of Mayfair Capital for £34.6m (£590 psf), reflecting a net
initial yield of 5.0%. The sale represented a premium to 31 March 2022 book
value, net of rental top ups, and concluded the disposal of our Manchester
office portfolio.
· 55 Bartholomew, EC1, an office building located in the Barts Square
development, was sold on 14 June 2022 to a private European investor for
£16.5m (our share £8.2m), reflecting a net initial yield of 4.5% and a
premium to 31 March 2022 book value.
· We completed the sale of 14 apartments at Barts Square for total sale
proceeds of £19.7m (our share £9.9m), with the sale of the final apartment
in this 236 unit residential scheme completing after the year end. We also
completed the sale of the freehold of the entire residential estate to its
residents for £3.7m (our share £1.8m).
Continued lettings momentum delivering £5.4m (our share £3.4m) of contracted
rent at a 6.9% premium
· In the year, we completed nine new lettings totalling 65,550 sq ft,
delivering contracted rent of £5.4m (our share £3.4m) at a 6.9% premium to
31 March 2022 ERVs. Lettings include:
- The sixth and seventh floors at The JJ Mack Building, EC1 to Partners
Group, a leading global private markets firm. The 37,880 sq ft letting
represents an 11.7% premium to 31 March 2022 ERVs.
- The 12(th) floor at The Tower, EC1, comprising 9,572 sq ft, to fintech
business Stenn at a rent of £80 psf, in line with 31 March 2022 ERVs.
- The 1,880 sq ft ground floor unit at 25 Charterhouse Square, EC1 to
natural stone purveyors, SolidNature, in line with 31 March 2022 ERVs.
- Two lettings totalling 6,999 sq ft at The Loom, E1 at rents in line
with 31 March 2022 ERVs.
- Four retail units totalling 9,219 sq ft at Barts Square, EC1 to
Michelin-starred Restaurant St Barts, LAP Bikes, MyLuthier and Little
Farm/Athletic Fitness, leaving only one retail unit remaining available.
Development milestone hit at 100 New Bridge Street, EC4
· At 100 New Bridge Street, EC4, the City of London has resolved to grant
planning permission and the formal decision notice will be issued upon signing
of the Section 106 Agreement. On completion in Q2 2025, the carbon friendly
new building will be one of the most sustainable in London and will provide
192,000 sq ft of net internal area across 10 floors, including two additional
new floors which will benefit from exceptional views of St Paul's Cathedral.
Construction work is anticipated to commence in Q4 2023 once Baker McKenzie
vacate the building.
600,000 sq ft expansion of development pipeline following TfL joint venture
selection
· In February 2023, Helical was selected by Transport for London's wholly
owned commercial property company, TTL Properties Limited, as the investment
partner for its commercial office portfolio joint venture. Contracts are
expected to be signed shortly to formalise the joint venture. The portfolio
will create well‐connected, highly sustainable and inclusive workspaces
across central London and initially will be seeded with three over‐station
development sites, namely:
- Bank Over-Station Development - located above the recently opened Bank
station entrance on Cannon Street. This eight-storey office development will
measure 142,000 sq ft and the joint venture intends to start on site in 2024.
- Southwark Over-Station Development - located above Southwark Tube
station. The scheme has consent for a 220,000 sq ft hybrid timber office
building over 17 floors. The development is expected to start on site in 2025.
- Paddington Over-Station Development - located on the Grand Union Canal,
close to the Elizabeth Line station at Paddington. This 19-storey building
will provide 235,000 sq ft of office space and construction is expected to
commence in 2026.
Financial Highlights
Earnings and Dividends
· IFRS loss of £64.5m (2022: profit of £88.9m).
· See-through Total Property Return(1) of -£51.4m (2022: £89.5m):
- Group's share(1) of net rental income increased 7.2% to £33.5m (2022:
£31.2m).
- Net loss on sale and revaluation of investment properties of £88.1m
(2022: gain of £51.7m).
- Development profits of £3.2m (2022: £6.6m).
· Total Property Return, as measured by MSCI, of -5.6%, compared to the
MSCI Central London Offices Total Return Index of -8.6%.
· IFRS basic loss per share of 52.6p (2022: earnings of 72.8p).
· EPRA earnings per share(1) of 9.4p (2022: 5.2p).
· Final dividend proposed of 8.70p per share (2022: 8.25p), an increase
of 5.5%.
· Total dividend for the year of 11.75p (2022: 11.15p), an increase of
5.4%.
Balance Sheet
· Net asset value down 11.4% to £608.7m (31 March 2022: £687.0m).
· Total Accounting Return(1) on IFRS net assets of -9.4% (2022: 15.0%).
· Total Accounting Return(1) on EPRA net tangible assets of -12.1%
(2022: 10.2%).
· EPRA net tangible asset value per share(1) down 13.8% to 493p (31
March 2022: 572p).
· EPRA net disposal value per share(1) down 11.1% to 490p (31 March
2022: 551p).
Financing
· See-through loan to value(1) decreased to 27.5% (31 March 2022
restated(2): 35.0%).
· See-through net borrowings(1) of £231.4m (31 March 2022 restated(2):
£388.3m).
· Average maturity of the Group's share(1) of secured debt of 2.9 years
(31 March 2022: 3.0 years).
· Change in fair value of derivative financial instruments credit of
£12.8m (2022: £18.0m).
· See-through average cost of secured facilities(1) of 3.4% (31 March
2022: 3.2%).
· Group's share(1) of cash and undrawn bank facilities of £244.2m (31
March 2022 restated(2): £147.0m).
· Helical elected to become a REIT, effective 1 April 2022, and is exempt
from UK corporation tax on relevant property activities.
Portfolio Update
· IFRS investment property portfolio value of £681.7m (31 March 2022:
£938.8m).
· 10.1% valuation decrease, on a like-for-like basis(1) (7.7% including
sales and purchases), of our see-through investment portfolio, valued at
£839.5m (31 March 2022: £1,097.3m).
· Contracted rents of £39.0m (31 March 2022: £46.4m), compared to an
ERV(1) of £60.4m (31 March 2022: £67.1m).
· See-through portfolio WAULT(1) of 5.0 years (31 March 2022: 5.6
years).
· Vacancy rate increased from 6.7% to 16.1%, primarily due to The JJ Mack
Building, EC1 achieving practical completion during the year, excluding which
the vacancy rate was 6.2% (31 March 2022: 6.1% on a like-for-like basis).
Sustainability Highlights
· Net Zero Carbon Pathway published in May 2022, setting out our
commitment to becoming a net zero carbon business by 2030. Signatory to the
BPF Net Zero Pledge and the Better Build Partnership Climate commitment.
· The JJ Mack Building, EC1 achieved 2018 BREEAM "Outstanding" at the
design stage and an EPC A rating following practical completion. A NABERS 5
Star rating is anticipated, reflecting our commitment to achieving excellent
energy efficiency in operation.
· Improvements across sustainability measures, with 5 Star GRESB ratings
awarded for both our standing investments and our developments and a CDP Score
of B (up from C). We have also retained MSCI ESG AAA and EPRA Sustainability
BPR Gold.
Dividend Timetable
Announcement date 23 May 2023
Ex-dividend date 22 June 2023
Record date 23 June 2023
Dividend payment date 28 July 2023
Equiniti were appointed the Company's Registrar on 31 October 2022.
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
09:00 am on Tuesday 23 May 2023 at The JJ Mack Building, 33 Charterhouse
Street, London EC1M 6HA. 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 live webcast and Q&A will also be
available.
Webcast Link:
https://brrmedia.news/Helical_FY23 (https://brrmedia.news/Helical_FY23)
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 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 ("see-through").
2. See Note 29.
Chief Executive's Statement
Overview
The central London office market has suffered a fall in capital values over
the last year and Helical has not been immune to these market movements, with
our portfolio experiencing a valuation decline of 10.1% (on a like-for-like
basis).
While previous valuation falls have been caused by recessions following
periods of economic exuberance leading to an oversupply of new office space,
the current decline in values reflects a number of differing cyclical and
structural factors.
The economy has been affected by multiple geopolitical and economic events
which have generated high levels of inflation and a steep rise in interest
rates. We have had ultra-low interest rates since 2009 and with the base rate
rising from 0.10% in December 2021 to the current 4.50%, the financing of real
estate has become significantly more expensive. The rise in interest rates has
also led to a repricing of government bonds across the market. Consequently,
valuation yields have risen.
In addition, structural changes are impacting the office market, with the
latest sustainability criteria challenging the suitability of older office
buildings.
Around 75% of buildings in the central London office market do not meet the
MEES (Minimum Energy Efficiency Standards) rating of EPC A or B rating
required by 2030 and these buildings will need significant capex to bring them
up to the necessary standard when leases end and tenants vacate. Previously,
these less sustainable buildings could have remained in the market with a low
cost refurbishment and a reletting at a significantly lower rent than for the
better buildings. For buildings below an EPC rating of B this will no longer
be an option. The additional costs of bringing these older buildings up to the
required standard is exacerbated by the significant build cost inflation we
have seen in the last year.
The impact of all these factors has accelerated the bifurcation in the market.
With best-in-class property valuations adjusting to reflect the movement in
bond yields, it is the older, poorer quality buildings that are facing what is
likely to be a deeper correction, with downward price discovery potentially
not reaching an endpoint until a lease ends and the rent stops, or from
refinancing events.
Tenant demand for the best, newly developed or refurbished buildings at the
forefront of sustainability with top quality amenities is strong, and seeing
rising rental values.
Against this backdrop, Helical has continued to recycle capital out of its
mature, stabilised assets, reduced leverage and cut its ongoing core
administration costs by over 13% for the year ahead. As a result, it is well
placed to capitalise on any ongoing market dislocation and the structural
trends impacting the office sector.
Our Pipeline
The Group seeks to grow the business by realising surpluses from its recently
developed investment assets, and reinvesting that recycled equity into new
opportunities.
In the year to 31 March 2023, the judicious sales of Kaleidoscope, EC1 and
Trinity, Manchester realised revaluation surpluses of over £53m and reduced
our gearing level from an LTV at 31 March 2022 of 35.0% to 27.5% at 31 March
2023.
Being selected by Transport for London ("TfL") as their joint venture partner
for the Platinum Portfolio was a significant milestone, boosting our
development pipeline by almost 600,000 sq ft, with the potential for
additional schemes to be added to the joint venture in the future. This
collaboration with TfL, one of London's largest landowners, is an endorsement
of the Helical brand and recognises our track record of producing high
quality, successful developments across central London over many years.
With 100 New Bridge Street, EC4, our 192,000 sq ft office scheme, due to start
later this year and the three TfL schemes anticipated to start over the period
from 2024 to 2026, this pipeline, our most significant for a number of years,
is scheduled to deliver best-in-class office space to an undersupplied market
from 2025 to 2029.
Results for the Year
The loss for the year to 31 March 2023 was £64.5m (2022: profit of £88.9m)
with a see-through Total Property Return of -£51.4m (2022: +£89.5m).
See-through net rental income increased by 7.2% to £33.5m (2022: £31.2m)
while developments generated see-through profits of £3.2m (2022: £6.6m). The
see-through net loss on sale and revaluation of the investment portfolio was
£88.1m (2022: net gain of £51.7m).
Total see-through net finance costs reduced to £12.0m (2022: £19.7m),
reflecting a lower level of debt and much lower debt cancellation costs of
£0.1m (2022: £5.9m). An increase in expected future interest rates led to a
£12.8m credit (2022: £18.0m) from the valuation of the Group's derivative
financial instruments. Recurring see-through administration costs were 4.2%
higher at £10.3m (2022: £9.9m), with performance related awards, reflecting
the results for the year, reduced to £2.7m (2022: gain of £6.0m) and
National Insurance on these awards of £0.3m (2022: £1.2m).
The election to become a REIT from 1 April 2022 has resulted in a £nil (2022:
credit of £16.0m) tax charge for the year.
The IFRS basic loss per share was 52.6p (2022: earnings of 72.8p) and EPRA
earnings per share were 9.4p (2022: 5.2p).
On a like-for-like basis, the investment portfolio fell in value by 10.1%
(7.7% including purchases and gains on sales). The see-through total portfolio
value reduced to £839.5m (31 March 2022: £1,097.3m), reflecting the
revaluation loss and the sales of Kaleidoscope, EC1, 55 Bartholomew, EC1 and
Trinity, Manchester in the year.
The total return of our property portfolio, as measured by MSCI, was -5.6%
(2022: 10.7%), which outperformed the Central London Offices Total Return
Index of -8.6%.
The portfolio was 83.9% let at 31 March 2023 and generated contracted rents of
£39.0m (2022: £46.4m), equating to an average of £60 psf. This increases to
£48.9m on the letting of currently vacant space as we move towards capturing
the portfolio ERV of £60.4m (2022: £67.1m). The Group's contracted rent has
a Weighted Average Unexpired Lease Term ("WAULT") of 5.0 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 -9.4% (2022: 15.0%).
Based on EPRA net tangible assets, the TAR was
-12.1% (2022: 10.2%). EPRA net tangible assets per share fell by 13.8% to 493p
(31 March 2022: 572p), with EPRA net disposal value per share falling by 11.1%
to 490p (31 March 2022: 551p).
Balance Sheet Strength and Liquidity
The Group has a significant level of liquidity with see-through cash and
unutilised bank facilities of £244.2m (31 March 2022: £147.0m) to fund
capital works on its portfolio and future acquisitions.
At 31 March 2023, the Group had £31.9m of cash deposits available to deploy
without restrictions and a further £13.7m of rent in bank accounts available
to service payments under loan agreements, cash held at managing agents and
cash held in joint ventures. In addition, the Group held rental deposits from
tenants of £9.1m. Furthermore, the Group had £189.5m of loan facilities
available to draw on.
The see-through loan to value ratio ("LTV") reduced to 27.5% at the Balance
Sheet date (31 March 2022: 35.0%) and our see-through net gearing, the ratio
of net borrowings to the net asset value of the Group, reduced to 38.0% (31
March 2022: 56.5%) over the same period.
At the year end, the average debt maturity on secured loans, on a see-through
basis, was 2.9 years (31 March 2022: 3.0 years). The average cost of debt, on
a see-through basis, was 3.4% (31 March 2022: 3.2%).
Dividends
Helical is a capital growth stock, seeking to maximise value by successfully
letting comprehensively 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 2023, EPRA earnings per share increased by 80% from
5.2p last year to 9.4p this year. The sales of Kaleidoscope, EC1, 55
Bartholomew, EC1 and Trinity, Manchester, during the year realised capital
profits of £53.4m, transferred into distributable retained earnings.
In the light of the increased EPRA earnings and the capital profits realised
in the year, the Board will be recommending to Shareholders a final dividend
of 8.70p per share, an increase of 5.5% on last year. If approved by
Shareholders at the 2023 AGM, the total dividend for the year will be 11.75p,
up 5.4% on 2022.
This final dividend, if approved, will be paid out of distributable reserves
generated from the Group's activities. Following its conversion to a UK REIT,
dividends payable by Helical will comprise a Property Income Distribution
("PID") from the operations that fall under the REIT regime, and a dividend
from those operations that fall outside the REIT regime. The PID, for the year
to 31 March 2023, will be 5.70p, with the balance of the final dividend of
3.00p representing an additional ordinary dividend.
Sustainability
Sustainability remains at the heart of our business, both at a corporate and
asset level.
We have made good progress in the year and continue to perform strongly
against the targets we have set. Despite increasing occupancy levels, energy
intensity across our like-for-like portfolio fell by 8% during the year to an
average of 129 kWh/m(2), on track for our 2030 net zero carbon target of
90kwh/m(2).
The JJ Mack Building, EC1 completed in September 2022, at which point we have
accounted for 100% of the associated upfront embodied carbon emissions in our
reporting. The building achieved an embodied carbon intensity of 741
kgCO(2)e/m(2), on track for our 2030 net zero carbon target of 600
kgCO(2)e/m(2). This considerable reduction was achieved through a combination
of using materials with a high recycled content, adopting modern methods of
construction and embedding circular economy principles into the design and
delivery of the project. The building received an EPC A rating and is
anticipated to achieve a NABERS 5 Star for the commitment to excellent energy
efficiency in operation. Furthermore, the building received BREEAM
"Outstanding" at the Design Stage, which is expected to be retained upon final
certification.
We continue to perform well across the industry benchmarks we participate in.
We received a 5 Star GRESB rating for both our Standing Investments and
Developments and retained our Green Star status. For our sustainability
reporting, we were granted a Gold Award for the second consecutive year, for
reporting in accordance with EPRA's European Sustainability Best Practice
Recommendations (sBPR). We were also pleased to receive an improved CDP score
of B, further demonstrating our commitment to best practice disclosure and
enhanced climate change risk assessment.
Our portfolio is market leading 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 rating of B by
2030.
Looking forward, we plan to define our approach to carbon offsetting and
uphold our commitment to deliver all future developments as net zero carbon.
The Opportunity
London remains a leading world city and, barring economic or geopolitical
catastrophe, there will be ongoing demand for best-in-class office buildings
from occupiers who require well located, highly sustainable offices with good
amenities, which are essential in attracting and retaining the top talent.
There remains a shortage of this best-in-class newly refurbished or
redeveloped office space in central London, enabling landlords to command
premium rents, a dynamic that is likely to persist for the rest of this decade
as the market plays catch up.
With an experienced management team, a substantial development pipeline, no
legacy assets and historically low gearing levels, Helical is well positioned
to capitalise on the structural trends impacting the office sector.
Finally
It is with great sadness that we record the death on 7 April of Nigel
MacNair-Scott. Nigel was Finance Director of Helical Bar plc from 1986 to 2013
after which he became Chairman, retiring in 2016. Nigel was the other half of
the duo with Michael Slade who jointly turned Helical from producing steel
rebar for the construction industry into a highly successful property company.
Nigel's financial acumen and general shrewdness, coupled with Mike's property
skills, enabled Helical to survive the major downturns of the early 1990s and
the Global Financial Crisis in 2008-2009 and prosper in subsequent years,
becoming a well-known brand in the property sector.
Gerald Kaye
Chief Executive
23 May 2023
Our Market
The past year has seen significant headwinds impact the central London office
market. The macro-economic landscape has been altered by multiple geopolitical
and economic events which have weakened the economic outlook; this and the
recent rapid paradigm shift in monetary policy have combined to present a
difficult environment for real estate.
The fundamentals of the office occupier market remain robust and aligned to
our strategy. Occupiers continue to seek to provide best-in-class working
environments for their employees.
The Economic Environment
Over the course of the past year the Bank of England's Monetary Policy
Committee has pursued an agenda of sustained, rapid interest rate rises to
moderate the inflationary pressures experienced across the economy. At 1 April
2022 the Bank Rate stood at 0.75% and it has subsequently increased nine times
to 4.50%. The impact of this adjustment to monetary policy has been felt
throughout the economy and within the central London office market it has been
most keenly felt in two areas: outward yield shift and increased cost of debt.
Investment Market
After an encouraging rebound in investment volumes in 2021 and early 2022, the
investment market was subdued in the second half of 2022 as the market paused
to assess the impact of interest rate rises upon yields. At £0.7bn, the
volume of investment transactions in Q4 2022 represented the lowest quarterly
figure since 1996 and illustrated the impact of the increasing cost of debt
and economic uncertainty. Transaction volumes increased in Q1 2023 to £1.7bn,
albeit this is still below the long-term average and there remains limited
transactional evidence to fully substantiate pricing.
The MSCI London City Equivalent Yield, which includes both prime and non-prime
office buildings, has moved to 6.40% in April 2023 from 5.31% in April 2022.
However, best-in-class yields have been less impacted, with our portfolio
adjusting by 79bps over the same period.
The limited transactions that have taken place demonstrated the focus on
best-in-class assets, which experienced less dramatic outward movements in
pricing. In contrast, poorer quality assets, characterised by significant
vacancy, short unexpired lease terms and weak sustainability credentials
resulting in the imminent need to invest significant capital expenditure, have
seen significant downward repricing, further illustrating the bifurcation
within the market.
The volatility in swap rates and the rapid increase in the Bank Rate have had
significant adverse implications for the cost of external debt which has also
suppressed investment volumes. Yet the debt markets remain open, with an
increasingly diverse lender pool seeking opportunities to deploy significant
amounts of capital. Undoubtedly, the challenges presented in the current
market are making lenders more discerning in their choice of counterparty, but
leverage is still available for experienced borrowers delivering credible
business plans. The rise in the all-in cost of debt has required a
reassessment of the composition of capital structures, with external debt no
longer being as accretive to value but continuing to enable equity to be
spread across new opportunities.
The past year has seen best-in-class assets continue to outperform. Record
rents continue to be achieved for the limited best-in-class space available,
as tenants demonstrate a willingness to pay a premium to occupy these
buildings, as seen at The JJ Mack Building, EC1. In contrast, secondary
buildings are becoming increasingly obsolete as tenant demand for these assets
shrinks and tenant controlled secondary supply remains high. New build vacancy
remains low at 1.4% whilst overall vacancy remains above the long term average
at 8.5%, driven by second-hand space which represents 67% of total
availability in the central London market.
Occupational Market
Following the Covid-19 related lockdowns, we have seen an extended period of
stability enabling businesses to refine their workplace practices to reflect
lower occupational densities and, while more flexible ways of working exist,
there is still the need to accommodate peak occupancy. These trends have
resulted in generally similar space requirements compared to pre-pandemic
levels, with certain sectors expanding their footprint to accommodate growth
and increasing amenity offerings to employees.
Increasingly businesses are encouraging employees to work primarily in the
office and the sustained return to office working has exceeded the predictions
of the more negative commentators. Employers and employees alike are
experiencing the benefits to culture and innovation the office environment
brings and this is apparent with take-up for 2022 up 28% on 2021 levels at
12.3m sq ft. Occupiers remain focused upon providing their employees with the
optimal workplace environment and continue to seek buildings with the highest
levels of amenity, connectivity, service and sustainability, which aligns with
our portfolio characteristics. These trends manifest in variable demand across
central London, with those sub-markets with newer stock and greater access to
transport nodes experiencing greater levels of demand.
The current macro-economic turbulence has had contrasting impacts on sectors
throughout the economy. While the technology sector has experienced a year of
rebalancing, the banking, finance and professional services sectors have
demonstrated their resilience and make up 61% of the 9.0m sq ft of active
demand in the market as at February 2023, according to global real estate
consultancy JLL.
Occupiers are not immune to cost pressures, with rising fit-out costs and
operational energy price increases impacting the all-in cost of occupation,
and this may slow the pace of rental growth in the short term. However, in the
long term the benefits of investment in best-in-class space should translate
into continued and strong demand from occupiers across a variety of sectors.
Development Pipeline
The past year has seen significant construction cost inflation, peaking within
the London market at over 10% in 2022. The impact of energy price rises and
imbalances in supply and demand dynamics for key materials as well as labour
shortages have all contributed to persistently high inflation. The effect of
rising building costs upon the sector is nuanced with the broad headline rate
only partially articulating the wider picture, with specific areas of the
construction sector including steel, rebar and structural timber seeing
greater levels of inflation. Furthermore, energy intensive materials, such as
concrete and plasterboard, remain exposed to future volatility as energy price
protections are slowly released.
Moving forward, the expectation is for inflationary pressures to moderate,
with property consultancy, Arcadis, predicting a more stable 3% building cost
inflation forecast over the medium term, although uncertainty remains.
While we remain of the view that the opportunity exists to deliver
best-in-class product into a supply constrained market, some investors will be
reassessing business plans in light of significant rises in material and debt
costs alongside an increasingly complex planning environment.
Deloitte's latest Crane Survey highlights new starts have begun to increase,
with 4.4m sq ft of new sites commencing in the six months to 31 March 2023,
across 50 schemes. Of these new starts, the trend towards refurbishment is
also illustrated, with 37 of the 50 schemes recorded as refurbishment
projects. These levels of development, while encouraging, will be insufficient
to accommodate the 23.5m sq ft of lease expiries occurring up to 2027 on
office space over 20,000 sq ft in London identified by Knight Frank, where
tenants are likely to look for best-in-class alternative space.
Alongside new starts, work will be required across central London to upgrade
the existing unsustainable occupied buildings ahead of 2030, with c.75% of
space currently below EPC B. With many assets facing obsolescence upon
upcoming lease events, owners will be required to invest considerable capital
to bring these assets back to the market in a manner which will be both
sustainable and attractive to occupiers. At present a disparity continues to
exist between the value expectations of buyers and sellers, driven partly by
the mispricing of the costs of refurbishment. However, once the gap has
sufficiently closed there will be good opportunity to acquire and reposition
these assets, allowing us to take advantage of our skillset and track record.
Overall
Our portfolio of best-in-class, sustainable buildings remains optimally placed
to outperform the market in the current environment. Furthermore, Helical's
expertise is well suited to take advantage of the challenges that face the
sector and seize upon the undoubted opportunities that exist within the
central London market.
Sustainability and Net Zero Carbon
We continue to make good progress against the targets we set out in our
sustainability strategy "Built for the Future" and our aim to become a net
zero carbon business by 2030. With the publication of our "Net Zero Carbon
Pathway" in May 2022, our progress towards rapidly decreasing our emissions
across our development activities and existing portfolio has been recognised
by our improved GRESB status.
We have been ranked the number one company in the UK Office Listed sector,
scoring 88% and receiving a 5 Star GRESB rating in the annual sustainability
performance index for our standing investment properties. Alongside this, we
have also received a 5 Star GRESB rating for our developments, scoring 94%.
For our sustainability reporting, we achieved a Gold Award for the second
consecutive year, for reporting in accordance with EPRA's European
Sustainability Best Practice Recommendations (sBPR). The EPRA sBPR is intended
to raise the standards and consistency of sustainability reporting for listed
real estate companies across Europe.
We also improved our CDP score to B, up from C, demonstrating our rigorous
approach to assessing climate change risks and opportunities and our
transparent disclosures.
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 rating of B by
2030. Market research suggests that only c.25% of commercial assets are
currently compliant, with significant capital outlay likely to be required to
take non-compliant buildings up to the minimum standard. Likewise, 99% of our
assets (by value) hold a BREEAM certification, with 88% being "Outstanding" or
"Excellent" (excluding 100 New Bridge Street, EC4 which is to be refurbished).
The JJ Mack Building, EC1 was the UK's first commercial building to be awarded
BREEAM "Outstanding" at the design stage under the 2018 regulations. On 30
September 2022, the building achieved practical completion and we anticipate
the "Outstanding" rating will be retained at the post construction assessment
stage. Through the use of recycled materials, Earth Friendly Concrete and
modern methods of construction, we have reduced embodied carbon to 42% below
the current "Business as Usual" RIBA target. Operationally, it is estimated
that carbon emissions will be c.53% lower than the regulated Targeted
Emissions Rate as defined by Part L of the Building Regulations (2013). This
reduction is a result of sustainable, intelligent and renewable technologies
designed into the building alongside connection to the Citigen District Energy
Network. Our embodied carbon from construction is in the process of being
offset and, once completed, will provide us with our first net zero carbon
building.
Going forward, we will continue to focus on minimising embodied carbon in our
new buildings and, where we can, delivering "carbon friendly new build"
schemes, such as the planned redevelopment of 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.
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.
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 2023
was -9.4% (2022: 15.0%).
2023 2022 2021 2020 2019
% % % % %
Total Accounting Return on IFRS net assets -9.4 15.0 3.3 7.7 8.4
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 2023
was -12.1% (2022: 10.2%).
Year to Year to Year to Year to Year to
2023 2022 2021 2020 2019
% % % % %
Total Accounting Return on EPRA net tangible assets -12.1 10.2 4.5 9.3 8.0*
* 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 2023 decreased by
13.8% to 493p (31 March 2022: 572p).
2023 2022 2021 2020 2019
p p p p p
EPRA net tangible asset value per share 493 572 533 524 494
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 Shareholders 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 2023 was -24.8% (2022:
1.7%).
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) -24.8 -2.5 1.2 4.9 0.8 7.0
UK Equity Market(2) 2.9 13.8 5.0 5.8 6.1 8.2
Listed Real Estate Sector Index(3) -29.3 0.4 -2.9 3.1 0.7 5.2
1. Growth over all years to 31/03/23.
2. Growth in FTSE All-Share Return Index over all years to 31/03/23.
3. Growth in FTSE 350 Real Estate Super Sector Return Index over all
years to 31/03/23.
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 2023 was -5.6% (2022: 10.7%).
This compares to the MSCI Central London Offices Total Return Index of
-8.6% (2022: 7.9%) and the upper quartile return of -5.4% (2022: 9.9%).
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.
Helical's unleveraged portfolio returns to 31 March 2023 were as follows:
1 year 3 years 5 years 10 years 20 years
% % % % %
Helical -5.6 3.8 6.2 11.5 11.0
MSCI Central London Offices Total Return Index -8.6 -1.1 1.1 7.1 7.7
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 2023 was
13.2 years and the average staff turnover during the year to 31 March 2023 was
7.7%.
2023 2022 2021 2020 2019
Average length of service at 31 March - years 13.2 11.8 11.0 10.0 8.7
Staff turnover during the year to 31 March - % 7.7 3.7 3.6 10.3 6.9
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 2023, five of our seven (31 March 2022: seven of our ten) office
buildings had achieved, or were targeting, a BREEAM certification of
"Excellent" or "Outstanding". These five buildings account for 88% of the
portfolio by value.
Building BREEAM rating EPC rating
Completed properties
The JJ Mack Building, EC1 Outstanding (2018)(1) A
The Warehouse and Studio, EC1 Excellent (2014) B
The Tower, EC1 Excellent (2014) B
25 Charterhouse Square, EC1 Excellent (2014) B
Under development or to be redeveloped
100 New Bridge Street, EC4 Outstanding (2018)(2) A(2)
1. Certified at design stage.
2. Targeted.
At The Loom, E1, it was not possible to obtain a BREEAM certification at the
design or development stage, however, during the year the building achieved a
BREEAM In Use rating of "Very Good", a high accolade given the listed status
of the building.
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 2023
Property Overview
Helical's portfolio is comprised of income-producing multi-let offices and
office refurbishments and developments, all located in central London within
12 minutes of the Elizabeth Line. Our strategy is to continue to increase our
central London holdings, focusing on areas where we see strong tenant demand
and growth potential for our best-in-class office led schemes.
The JJ Mack Building, EC1
The development of our 206,050 sq ft office building, in 50:50 joint venture
with AshbyCapital, achieved practical completion on 30 September 2022. The JJ
Mack Building, named after the market trader who occupied the site in the
1940s, is one of London's smartest and most sustainable new office buildings.
The building is situated in vibrant Midtown, just 100m from Farringdon Station
and the Elizabeth Line, which provides occupiers with unparalleled
connectivity. The building has adopted market leading technologies, design and
operational practices so that it is highly sustainable. This commitment to
market leading sustainability has been recognised by a BREEAM 2018 New
Construction "Outstanding" rating at the design stage which is currently being
reconfirmed post completion, an EPC A rating and an anticipated NABERS 5 Star
rating. It also provides a technologically pioneering environment for
occupiers with smart building systems and a fully integrated building
management app for tenants.
In November 2022, we completed the first letting of the sixth and seventh
floors, comprising 37,880 sq ft, to Partners Group, a leading global private
markets firm, for its new London office.
100 New Bridge Street, EC4
The City of London has resolved to grant planning permission and the formal
decision notice will be issued upon signing of the Section 106 Agreement for
the substantial redevelopment of this 1990s office building, located adjacent
to City Thameslink and a short walk from Farringdon and Blackfriars stations.
Work to deliver the scheme will commence in November 2023 when vacant
possession of the building, currently occupied by Baker McKenzie, is achieved.
The building is targeted for completion in spring 2025.
This major refurbishment will achieve the highest standards of sustainability
through the retention of the existing structure, with three facades reclad,
and the reuse of materials wherever possible. The new building will provide
high-quality tenant amenities, including extensive cycle parking and changing
facilities, and will be equipped with the latest technology to create a new
best-in-class office building. We are targeting BREEAM "Outstanding", EPC A,
NABERS 5 Star and WELL Platinum.
Two new floors will be added to the building, increasing the net internal area
from 167,026 sq ft to 192,000 sq ft. Extensive outdoor space will be
incorporated, including an impressive 5,000 sq ft terrace on the eighth floor
overlooking St Paul's Cathedral and St Bride's Church. We will also undertake
significant public realm improvements around the site in conjunction with the
City of London to enhance the arrival experience and benefit the wider
community.
Kaleidoscope, EC1
Helical completed the sale of the single asset company which held the long
leasehold interest in Kaleidoscope to Chinachem Group on 21 September 2022.
The 88,581 sq ft office building, which was let in its entirety to TikTok
Information Technologies UK Limited on a 15-year lease term at an annual rent
of £7.6m, was sold for a headline disposal price of £158.5m. The sale
reflected a net initial yield of 4.3% and a premium to the 31 March 2022 book
value and represented a record capital value per square foot for the
sub-market at £1,789 psf.
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 where the
significant remodelling works are due to complete shortly, providing extensive
additional public realm to occupiers.
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.
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 12(th) floor, previously occupied by Brilliant Basics, to
Stenn on a five year lease at a rent which is in line with the 31 March 2022
ERV. We expect the 14(th) floor to be returned in May 2023 when existing
tenants, Snowflake, vacate to take expansion space elsewhere and the floor
will be marketed as a fitted option for tenants.
Barts Square, EC1
Residential/Retail
At Barts Square, EC1, we have completed the sale of 14 apartments in the year
and post year end completed the sale of the last remaining unit in this 236
unit residential scheme. We also completed the sale of the ground rent
investment to the residents of Barts Square.
We have completed four new retail lettings comprising 9,219 sq ft in the year.
These lettings to Michelin-starred Restaurant St Barts, Lap Bikes, MyLuthier
and Athletic Fitness/Little Farm have enhanced the extensive amenity across
the 3.2 acre Barts Square estate. One retail unit remains available.
55 Bartholomew
At 55 Bartholomew, EC1 we completed the sale of the comprehensively
refurbished 10,976 sq ft office building to a private European investor for
£16.5m (Helical share £8.2m). The sale price reflected a net initial yield
of 4.5% and represents a premium to book value, net of rental top ups.
The Loom, E1
At this 106,838 sq ft former Victorian wool warehouse, we have completed two
new lettings, totalling 6,999 sq ft, and have continued our active asset
management with existing tenants moving units to accommodate business changes.
25 Charterhouse Square, EC1
25 Charterhouse Square comprises 42,921 sq ft of offices adjacent to the newly
operational Farringdon East Elizabeth Line station and overlooking the
historic Charterhouse Square.
The newly refurbished ground floor unit has been let to natural stone
purveyors SolidNature. The comprehensive refurbishment of the fourth floor has
been completed and the floor is now available to let.
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 significant capital works to improve the
roof, undertaken on behalf of the tenants, have now been completed.
Trinity, Manchester
We simultaneously exchanged and completed contracts in May 2022 for the sale
of Trinity, to clients of Mayfair Capital, for £34.6m (£590 psf), reflecting
a net initial yield of 5.0%. The sale represented a premium to book value, net
of rental top ups. Helical acquired the property in May 2017 for £12.9m and
undertook a comprehensive remodelling and refurbishment to deliver 58,533 sq
ft of modern office space across ground and seven upper floors, which was 76%
let to eight occupiers upon disposal. Its sale concluded the disposal of
Helical's Manchester office portfolio.
The Platinum Portfolio, London
Helical was selected in February 2023 by Transport for London's wholly owned
commercial property company, TTL Properties Limited, as the preferred
investment partner for its commercial office portfolio joint venture.
Contracts are expected to be signed shortly to formalise the joint venture.
The portfolio will create well‐connected, sustainable and inclusive
workspaces across central London and initially will be seeded with three
over‐station development sites, namely:
· Bank Over-Station Development - located above the recently opened Bank
station entrance on Cannon Street. This eight-storey office development will
measure 142,000 sq ft and the joint venture intends to start on site in 2024
with practical completion expected in late 2026.
· Southwark Over-Station Development - located above Southwark Tube
station. The scheme has consent for a 220,000 sq ft hybrid timber office
building over 17 storeys. The joint venture is expected to start on site in
2025 with practical completion expected in 2028.
· Paddington Over-Station Development - located on the Grand Union Canal,
close to the Elizabeth Line station at Paddington. This 19-storey building
will provide 235,000 sq ft of office space and construction is expected to
commence in 2026, with practical completion expected in 2029.
The joint venture company will purchase leasehold interests in the sites from
TfL and establish individual property companies for each of the sites. The
sites will then be developed directly by the companies, which are to be funded
with equity and debt. Other properties and development opportunities may in
the future be acquired by the joint venture, expanding the partnership's
portfolio, subject to feasibility and assessment.
Portfolio Analytics
See-through Total Portfolio by Fair Value
Investment % Development % Total
£m £m £m %
London Offices
- Completed properties 699.9 83.4 - - 699.9 83.3
- Development pipeline 139.5 16.6 - - 139.5 16.6
London Residential - - 0.6 62.0 0.6 0.1
Total London 839.4 100.0 0.6 62.0 840.0 100.0
Other 0.1 0.0 0.3 38.0 0.4 0.0
Total Non-Core Portfolio 0.1 0.0 0.3 38.0 0.4 0.0
Total 839.5 100.0 0.9 100.0 840.4 100.0
See-through Land and Development Portfolio
Book value Fair value Surplus Fair value
£m £m £m %
London Residential 0.6 0.6 - 62.0
Land and Developments - 0.3 0.3 38.0
Total 0.6 0.9 0.3 100.0
Capital Expenditure
We have a committed and planned development and refurbishment programme.
Property Capex Remaining New Total Completion
date
budget spend space completed
space
(Helical share) (Helical share) Pre-redeveloped space sq ft
sq ft
£m £m sq ft
Investment - committed
- The JJ Mack Building, EC1 66.0 1.7 - 206,050 206,050 September 2022
Investment - planned
- 100 New Bridge Street, EC4 119.8 116.8 167,026 24,974 192,000 Q2 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 83.4 27.9 79.7 31.9 81.8 43.5 72.0 3.0
- Development pipeline 16.6 7.1 20.3 7.1 18.1 16.8 27.8 13.1
Total London 100.0 35.0 100.0 39.0 99.9 60.3 99.8 5.6
Other 0.0 0.0 0.0 0.0 0.1 0.1 0.2 0.0
Total 100.0 35.0 100.0 39.0 100.0 60.4 100.0 5.6
See-through
total portfolio contracted rent
£m
Rent lost at break/expiry (1.6)
Rent reviews and uplifts on lease renewals 0.1
New lettings 3.4
Total increase in the year from asset management activities 1.9
Contracted rent reduced through disposals of London Offices (7.9)
Contracted rent reduced through disposals of Manchester Offices (1.4)
Total contracted rental change from sales (9.3)
Net decrease in contracted rents in the year (7.4)
Investment Portfolio
Valuation Movements
Valuation change Valuation change Investment portfolio Investment portfolio
inc sales and purchases excl sales and purchases weighting weighting
% % 31 March 2023 31 March 2022
% %
London Offices
- Completed properties (6.4) (8.5) 83.4 71.5
- Development pipeline (17.3) (17.3) 16.6 25.7
Total London (8.1) (10.1) 100.0 97.2
Manchester Offices
- Completed properties 4.9 - - 2.8
Total Manchester 4.9 - - 2.8
Total (7.7) (10.1) 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 2023 2022
2023 2022 2023 2022 % %
% % % %
London Offices
- Completed properties 4.1 4.2 5.7 4.8 5.6 4.9
- Development pipeline 3.6 4.2 5.1 4.5 4.9 4.2
Total London 4.0 4.2 5.5 4.7 5.4 4.6
Manchester Offices
- Completed properties - 4.1 - 5.4 - 5.3
Total Manchester - 4.1 - 5.4 - 5.3
Total 4.0 4.2 5.5 4.7 5.4 4.6
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
2023 2022 2023 2022 2023 2022
£ psf £ psf % % Years Years
London Offices
- Completed properties 1,166 1,289 19.8 6.9 5.8 6.3
- Development pipeline 835 1,086 2.6 0.0 0.7 1.7
Total London 1,104 1,213 16.1 5.4 5.0 5.6
Manchester Offices
- Completed properties - 530 - 23.9 - 6.1
Total Manchester - 530 - 23.9 - 6.1
Total 1,104 1,175 16.1 6.7 5.0 5.6
See-through Lease Expiries or Tenant Break Options - Excluding Development
Pipeline
Year to Year to Year to Year to Year to 2028
2024 2025 2026 2027 2028 onward
% of rent roll 17.9 12.5 2.3 12.1 31.7 23.5
Number of leases 18 15 7 9 14 21
Average rent per lease (£) 317,049 264,590 104,473 427,481 720,457 356,483
Top 15 Tenants
We have a strong rental income stream and a diverse tenant base. The top 15
tenants account for 79.4% of the total rent roll.
Tenant Tenant industry Contracted rent Rent roll
Rank £m %
1 Baker McKenzie Legal services 7.0 17.9
2 Farfetch Online retail 4.3 11.1
3 WeWork Flexible offices 4.0 10.2
4 Brilliant Basics Technology 2.4 6.1
5 VMware Technology 2.2 5.6
6 Partners Group Financial services 1.9 4.8
7 Anomaly Marketing 1.4 3.6
8 Viacom Media 1.2 3.0
9 Allegis Media 1.1 2.7
10 Dentsu Marketing 1.1 2.7
11 Stripe Financial services 1.0 2.5
12 Verkada Technology 1.0 2.5
13 Incubeta Marketing 0.9 2.4
14 Openpayd Financial services 0.9 2.3
15 Snowflake Technology 0.8 2.0
Total 31.2 79.4
Letting Activity - New Leases
Area Contracted rent Rent Increase to Average
sq ft (Helical's share) £ psf 31 March 2022 ERV lease term to expiry
£ (exc Plug and Play and managed lettings) Years
%
Investment Properties
London
- The Tower, EC1 9,572 766,000 80.00 0.1 5.0
- The Loom, E1 6,999 402,000 57.50 4.5 5.5
- 25 Charterhouse Square, EC1 1,880 141,000 75.00 0.0 5.0
- The JJ Mack Building, EC1 37,880 1,892,000 99.90 11.7 15.0
Offices Total 56,331 3,201,000 85.61 7.3 11.0
Barts Retail, EC1 9,219 162,000 35.04 0.4 12.5
Retail Total 9,219 162,000 35.04 0.4 12.5
Total 65,550 3,363,000 80.06 6.9 11.2
Financial Review
IFRS Performance EPRA Performance
Loss after tax EPRA profit
£64.5m (2022: profit of £88.9m)
£11.5m (2022: £6.4m)
Loss per share (EPS) EPRA EPS
52.6p (2022: earnings of 72.8p)
9.4p (2022: 5.2p)
Diluted NAV per share EPRA NTA per share
489p (31 March 2022: 551p)
493p (31 March 2022: 572p)
Total Accounting Return Total Accounting Return on EPRA NTA
-9.4% (2022: 15.0%) -12.1% (2022: 10.2%)
Overview
In the year to 31 March 2023, the Group made significant progress across the
board against its targets for the year. With growth in net rental income, a
good level of development profits, reduced administration costs (with savings
in core administration costs to come next year) and lower finance costs as the
Group continues to benefit from its hedging strategy, EPRA earnings grew to
£11.5m, or 9.4p per share compared to £6.4m or 5.2p last year. In addition,
the Group disposed of £233m (our share £213m) of properties at 3.7% above
book value, reducing its LTV to 27.5% (2022 restated: 35.0%) and increasing
cash and undrawn bank facilities.
However, the overall results for the year reflect the impact on the London
office market of the challenging environment we have faced over the last 12
months, with the UK experiencing persistently high inflation and rising
finance costs, as well as political instability. These factors have impacted
on bond yields with a consequent outward shift in valuation yields and
significant valuation declines across the portfolio, partially offset by a
revaluation gain at The JJ Mack Building, EC1. These net valuation losses have
turned what would have been a profitable year into a net loss.
Results for the Year
The loss for the year of £64.5m (2022: profit of £88.9m) includes revenue
from rental income and development management of £49.8m, offset by direct
costs of £13.6m. The profit from joint venture activities added £3.5m and
the net loss on sale and revaluation of investment properties was £93.3m.
Administration expenses of £12.8m and net finance costs of £10.9m were
offset by a gain in fair value of derivatives of £12.8m.
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 similar to 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 2023 include net rental
income of £33.5m, a net loss on sale and revaluation of the investment
portfolio of £88.1m and development profits of £3.2m, leading to a Total
Property Return of -£51.4m (2022: £89.5m). Total see-through administration
costs of £13.3m (2022: £17.1m) and see-through net finance costs of £12.0m
(2022: £19.7m) were partially offset by see-through derivative financial
instrument gains of £12.8m (2022: £18.0m) and contributed to an IFRS pre-tax
loss of £64.5m (2022: profit of £72.9m).
The election to become a REIT from 1 April 2022 has resulted in a £nil (2022:
credit of £16.0m) tax charge for the year.
The loss for the year was £64.5m (2022: profit of £88.9m) and the EPRA net
tangible asset value per share decreased by 13.8% to 493p (31 March 2022:
572p).
The Company has proposed a final dividend of 8.70p per share (2022: 8.25p)
which, if approved by Shareholders at the 2023 AGM, will be payable on 28 July
2023. The total dividend paid or payable in respect of the year to 31 March
2023 will be 11.75p (2022: 11.15p), an increase of 5.4%.
The Group's real estate portfolio, including its share of assets held in joint
ventures, decreased to £840.4m (31 March 2022: £1,108.1m) primarily due to
the sales of Kaleidoscope, EC1, Trinity, Manchester, 55 Bartholomew, EC1, the
freehold of the estate at Barts Square, EC1, residential apartment sales at
Barts Square, EC1 and the net loss on revaluation of the investment portfolio
of £92.8m, offset by capital expenditure on the investment portfolio of
£24.0m.
The sale of investment properties allowed the Group to repay debt during the
year which resulted in a decrease in the Group's see-through loan to value to
27.5% (31 March 2022 restated: 35.0%). The Group's weighted average cost of
debt at 31 March 2023 was 3.4% (31 March 2022: 3.2%) and the weighted average
debt maturity was 2.9 years (31 March 2022: 3.0 years).
At 31 March 2023, the Group had unutilised bank facilities of £189.5m and
cash of £54.7m on a see-through basis. These are primarily available to fund
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
2023 2022 2021 2020 2019
£m £m £m £m £m
Total Property Return -51.4 89.5 48.6 83.9 81.4
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
2023 2022 2021 2020 2019
% % % % %
Helical's unleveraged portfolio -5.6 10.7 7.0 9.6 10.1
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
2023 2022 2021 2020 2019
% % % % %
Total Accounting Return on IFRS net assets -9.4 15.0 3.3 7.7 8.4
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
2023 2022 2021 2020 2019
% % % % %
Total Accounting Return on EPRA net tangible assets -12.1 10.2 4.5 9.3 8.0*
* Calculated using EPRA Net Assets.
Earnings/(Loss) Per Share
The IFRS earnings/(loss) per share decreased from earnings of 72.8p to a loss
of 52.6p and is based on the after tax (loss)/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 was 9.4p compared to an earnings per
share of 5.2p in 2022, reflecting the Group's share of net rental income of
£33.5m (2022: £31.2m) and development profits of £3.2m (2022: £6.6m), but
excluding losses on sale and revaluation of investment properties of £88.1m
(2022: gains of £51.7m).
Net Asset Value
IFRS diluted net asset value per share decreased by 11.3% to 489p per share
(31 March 2022: 551p) 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 decreased by 13.8% to 493p per share
(31 March 2022: 572p). This movement arose principally from a total
comprehensive expense (retained losses) of £64.5m (2022: income of £88.9m),
less £13.8m of dividends (2022: £12.6m).
EPRA net disposal value per share decreased by 11.1% to 490p per share (31
March 2022: 551p).
Income Statement
Rental Income and Property Overheads
Gross rental income for the Group in respect of wholly owned properties
increased to £36.6m (2022: £35.3m), with gross rents in joint ventures
remaining at £0.3m (2022: £0.3m). Property overheads in respect of wholly
owned assets and in respect of those assets in joint ventures reduced to
£3.4m (2022: £4.4m). Overall, see-through net rents increased by 7.2% to
£33.5m (2022: £31.2m).
Included within gross rental income is £1.7m (31 March 2022: £5.8m) 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 2026, based on the tenant leases as at 31 March 2023.
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 2023 14,172 1,748
Year to 31 March 2024 13,485 (687)
Year to 31 March 2025 12,892 (593)
Year to 31 March 2026 10,486 (2,406)
Rent Collection
March 2022 - December 2022
quarters
%
Rent collected to date 98.9
Rent under discussion 0.4
Rent concessions 0.7
At 23 May 2023, the Group had collected 98.9% of all rent contracted and
payable for the March, June, September and December 2022 quarters.
Development Profits
In the year, from our role as development manager at The JJ Mack Building,
EC1, we recognised £0.7m of income. Additional fees of £0.1m were recognised
for carrying out accounting and corporate services at Barts Square, EC1 and
The JJ Mack Building, EC1.
A profit of £1.0m on a retail scheme at East Ham and deferred consideration
of £0.4m from the previous sale of the retirement villages portfolio added to
development profits. Further development income on closing out legacy projects
of £0.2m, offset by other costs of £0.4m, contributed to a net development
profit in the Group of £2.0m (2022: £5.8m).
Share of Results of Joint Ventures
The revaluation of our investment assets held in joint ventures generated a
surplus of £5.1m (2022: £18.5m). A profit of £1.3m (2022: £0.7m) was
recognised in respect of sales at our Barts Square, EC1 residential
development.
Finance, administration and other sundry costs totalling £2.3m (2022: £0.5m)
were incurred. An adjustment to reflect our economic interest in the Barts
Square, EC1 development to its recoverable amount generated a loss of £0.6m
(gain of £0.8m), and after a tax charge of £nil (2022: credit of £1.2m),
there was a net profit from our joint ventures of £3.5m (2022: £20.7m).
Loss on Sale and Revaluation of Investment Properties
The loss on valuation, partially offset by the gain on sales, of our
investment portfolio on a see-through basis resulted in an overall loss on
sale and revaluation, including in joint ventures, of £88.1m (2022: gain of
£51.7m).
Administrative Expenses
Administration costs in the Group, before performance related awards,
increased from £9.6m to £9.9m, marginally above budget for the year.
In setting the administration budget for the year to 31 March 2024, the Group
has reviewed staffing levels and all categories of expenditure, seeking
efficiencies and cost reductions where available. The budget for the new
financial year is set at £8.5m, a 13% reduction on the year to 31 March 2023.
Performance related share awards and bonus payments, before National Insurance
costs, decreased to £2.7m (2022: £6.0m). Of this amount, £1.1m (2022:
£3.2m), 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 £0.3m (2022: £1.2m).
In joint ventures, administrative expenses increased from £0.3m to £0.5m.
2023 2022
£000
£000
Administrative expenses (excluding performance related awards) (9,845) (9,598)
Performance related awards (2,702) (6,019)
NIC (288) (1,151)
Group (12,835) (16,768)
In joint ventures (459) (295)
Total (13,294) (17,063)
Finance Costs, Finance Income and Change in Fair Value of Derivative Financial
Instruments
Total finance costs, finance income and change in fair value of derivative
financial instruments, including joint ventures, reduced to £1.0m (2022:
£3.8m).
Group 2023 2022
£000
£000
Interest payable on secured bank loans (8,284) (10,169)
Other interest payable and similar charges (2,780) (3,179)
Total interest payable before cancellation of loans (11,064) (13,348)
Cancellation of loans (128) (5,886)
Total finance costs (11,192) (19,234)
Finance income 274 6
Net finance costs (10,918) (19,228)
Change in fair value of derivative financial instruments 12,757 17,996
Finance costs, finance income and change in fair value of derivative financial 1,839 (1,232)
instruments
Joint Venture
Interest payable on secured bank loans (2,703) (2,407)
Other interest payable and similar charges (203) (181)
Interest capitalised 1,815 2,142
Total finance costs (1,091) (446)
Finance income 23 -
Net finance costs (1,068) (446)
Total finance costs, finance income and change in fair value of derivative 771 (1,678)
financial instruments
Net finance costs excluding change in fair value of derivative financial (11,986) (19,674)
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) was released in the prior year, 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. There is no deferred tax charge in the current year.
The current tax charge for the year was £nil (2022: credit of £1.1m),
resulting in no tax charge or credit on the loss on ordinary activities (2022:
total credit of £16.0m).
Dividends
The interim dividend paid on 13 January 2023 of 3.05p was an increase of 5.2%
on the previous interim dividend of 2.90p. The Company has proposed a final
dividend of 8.70p, an increase of 5.5% on the previous year (2022: 8.25p), for
approval by Shareholders at the 2023 AGM. If approved, the total dividend paid
or payable in respect of the results for the year to 31 March 2023 will be
11.75p (2022: 11.15p), an increase of 5.4%.
The final dividend, if approved by Shareholders, will partly be paid as a PID
(5.70p) in respect of the Group's REIT property business and partly as an
ordinary dividend (3.00p), 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 2022 were £687.0m. The Group had a loss of
£64.5m (2022: profit of £88.9m), net of tax, representing the total
comprehensive expense for the year. Movements in reserves arising from the
Group's share schemes had a net effect of £nil. The Company paid dividends to
Shareholders during the year of £13.8m. The net decrease in Shareholders'
Funds from Group activities during the year was £78.3m to £608.7m.
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 2022 961,500 135,820 1,097,320 6,524 (25,002) 1,078,842
Capital expenditure - wholly owned 10,523 - 10,523 (14) - 10,509
- joint ventures - 13,537 13,537 (29) - 13,508
Letting costs amortised - wholly owned (200) - (200) - - (200)
- joint ventures - (12) (12) - - (12)
Disposals - wholly owned (178,736) - (178,736) - 9,166 (169,570)
- joint ventures - (9,749) (9,749) - 98 (9,651)
Revaluation surplus/(deficit) - wholly owned (99,537) - (99,537) - 1,683 (97,854)
- joint ventures - 5,198 5,198 - (103) 5,095
Economic interest adjustment - joint ventures - 1,181 1,181 - (14) 1,167
Valuation at 31 March 2023 693,550 145,975 839,525 6,481 (14,172) 831,834
The Group expended £24.0m on capital works across the investment portfolio,
at The JJ Mack Building, EC1 (£13.1m), 100 New Bridge Street, EC4 (£8.7m),
The Bower, EC1 (£0.3m), The Loom, E1 (£1.3m), 25 Charterhouse Square, EC1
(£0.1m), Barts Square, EC1 (£0.4m) and Trinity, Manchester (£0.1m).
Revaluation losses resulted in a £94.3m decrease in the see-through fair
value of the portfolio, before lease incentives, to £839.5m (31 March 2022:
£1,097.3m). The accounting for head leases and lease incentives resulted in a
book value of the see-through investment portfolio of £831.8m (31 March 2022:
£1,078.8m).
Debt and Financial Risk
In total, the see-through outstanding debt at 31 March 2023 of £290.4m (31
March 2022: £440.9m) had a weighted average interest cost of 3.4% (31 March
2022: 3.2%) and a weighted average debt maturity of 2.9 years (31 March 2022:
3.0 years).
Debt Profile at 31 March 2023 - Including Commitment Fees but Excluding the
Amortisation of Arrangement Fees
Total Total Available Weighted average Average maturity of facilities
facility utilised facility interest rate Years
£000s £000s £000s %
£400m Revolving Credit Facility 400,000 230,000 170,000 3.1 3.3
Total wholly owned 400,000 230,000 170,000 3.1 3.3
In joint ventures 69,900 60,369 9,531 4.2 1.3
Total secured debt 469,900 290,369 179,531 3.3 2.9
Working capital 10,000 - 10,000 - -
Total unsecured debt 10,000 - 10,000 - -
Total debt 479,900 290,369 189,531 3.4 2.9
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 wholly
owned investment assets are secured. The value of the Group's properties
secured in this facility at 31 March 2023 was £693m (31 March 2022: £870m)
with a corresponding loan to value of 33.2% (31 March 2022: 46.0%). The
average maturity of the facility at 31 March 2023 was 3.3 years (31 March
2022: 3.1 years). During the year, this facility was converted into a
Sustainability Linked Loan.
- 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
2023 was 1.3 years (31 March 2022: 2.3 years) with a weighted average
interest rate of 4.2% (31 March 2022: 5.6%). The average interest rate will
fall as The JJ Mack Building, EC1 facility is drawn down and would be 4.00% on
a fully utilised basis, reducing to 2.25% once the building is let. There is a
one-year extension option in this facility.
Unsecured Debt
The Group's unsecured debt is £nil (31 March 2022: £nil).
Cash and Cash Flow
At 31 March 2023, the Group had £244.2m (31 March 2022 restated: £147.0m) of
cash and agreed, undrawn, committed bank facilities including its share in
joint ventures.
Net Borrowings and Gearing
Total gross borrowings of the Group, including in joint ventures, have
decreased from £440.9m to £290.4m during the year to 31 March 2023. After
deducting cash balances of £54.7m (31 March 2022 restated: £47.9m) and
unamortised refinancing costs of £4.3m (31 March 2022: £4.7m), net
borrowings decreased from £388.3m to £231.4m. The see-through gearing of the
Group, including in joint ventures, decreased from 56.5% to 38.0%.
31 March 31 March
2023 2022
Restated(1)
See-through gross borrowings £290.4m £440.9m
See-through cash balances £54.7m £47.9m
Unamortised refinancing costs £4.3m £4.7m
See-through net borrowings £231.4m £388.3m
Shareholders' funds £608.7m £687.0m
See-through gearing - IFRS net asset value 38.0% 56.5%
1. Trade and other receivables and cash and cash equivalents have been
restated as at 31 March 2022 following the IFRIC agenda decision in respect of
demand deposits with restrictions on use arising from a contract with a third
party (see Note 29).
Hedging
At 31 March 2023, the Group had £230.0m (31 March 2022: £300.0m) of
borrowings protected by interest rate swaps, with an average effective
interest rate of 2.6% (31 March 2022: 2.8%) and average maturity of 3.3 years.
The Group had £nil floating rate debt (31 March 2022: £100.0m) with an
effective rate of nil (31 March 2022: 3.5%). In addition, the Group had £nil
interest rate caps (31 March 2022: £145m at an average rate of 1.75%). In our
joint ventures, the Group's share of fixed rate debt was £60.4m (31 March
2022: £40.9m) at 0.5% plus margin with an effective rate at 31 March 2023 of
4.2% and no floating rate debt (31 March 2022: none).
31 March Effective interest rate 31 March Effective interest rate
2023 % 2022 %
£m £m
Fixed rate debt
- Secured borrowings 230.0 2.6 300.0 2.8
Total 230.0 2.6 300.0 2.8
Floating rate debt
- Secured - - 100.0 3.5
Total - 3.1(1) 400.0 3.0
In joint ventures
- Fixed rate 60.4 4.2(2) 40.9 5.6(2)
Total borrowings 290.4 3.4 440.9 3.2
1. This includes commitment fees on undrawn facilities. Excluding these
would reduce the effective rate to 2.6%.
2. This includes commitment fees on undrawn facilities. Excluding these
would reduce the effective rate to 4.00% (31 March 2022: 4.95%).
Tim Murphy
Chief Financial Officer
23 May 2023
Consolidated Income Statement
For the year to 31 March 2023
Notes Year to Year to
31 March 31 March
2023 2022
£000 £000
Revenue 3 49,848 51,146
Cost of sales 3 (13,567) (14,228)
Net property income 4 36,281 36,918
Share of results of joint ventures 12 3,494 20,708
39,775 57,626
Gain/(loss) on sale of investment properties 5 4,564 (45)
Revaluation of investment properties 11 (97,854) 33,311
(53,515) 90,892
Administrative expenses 6 (12,835) (16,768)
Operating (loss)/profit (66,350) 74,124
Net finance costs and change in fair value of derivative financial instruments 7 1,839 (1,232)
(Loss)/profit before tax (64,511) 72,892
Tax on (loss)/profit on ordinary activities 8 - 16,002
(Loss)/profit for the year (64,511) 88,894
(Loss)/earnings per share 10
Basic (52.6)p 72.8p
Diluted (52.6)p 71.4p
There were no items of comprehensive income in the current or prior year other
than the (loss)/profit for the year and, accordingly, no Statement of
Comprehensive Income is presented.
Consolidated Balance Sheet
At 31 March 2023
Notes At At At
31 March 31 March 31 March
2023 2022 2021
£000 Restated(1) Restated(1)
£000 £000
Non-current assets
Investment properties 11 681,682 938,797 740,207
Owner occupied property, plant and equipment 4,351 4,631 5,362
Investment in joint ventures 12 87,330 100,604 79,953
Other investments 13 353 306 -
Derivative financial instruments 20 23,245 11,104 171
796,961 1,055,442 825,693
Current assets
Land and developments 14 28 2,089 448
Corporation tax receivable 7 338 -
Trade and other receivables 15 24,935 33,776 27,648
Cash and cash equivalents 16 50,925 43,484 167,227
75,895 79,687 195,323
Total assets 872,856 1,135,129 1,021,016
Current liabilities
Trade and other payables 17 (31,232) (43,986) (46,764)
Lease liability 18 (683) (658) (634)
Corporation tax payable - - (655)
(31,915) (44,644) (48,053)
Non-current liabilities
Borrowings 19 (226,677) (396,633) (336,703)
Derivative financial instruments 20 - (538) (7,601)
Lease liability 18 (5,589) (6,271) (6,929)
Deferred tax liability 8 - - (13,569)
(232,266) (403,442) (364,802)
Total liabilities (264,181) (448,086) (412,855)
Net assets 608,675 687,043 608,161
Equity
Called-up share capital 21 1,233 1,223 1,478
Share premium account 116,619 112,654 107,990
Revaluation reserve 46,416 197,627 164,316
Capital redemption reserve 7,743 7,743 7,478
Own shares held (848) - -
Other reserves 291 291 291
Retained earnings 437,221 367,505 326,608
Total equity 608,675 687,043 608,161
1. Trade and other receivables and cash and cash equivalents have been
restated as at 31 March 2022 and 31 March 2021 following the IFRIC agenda
decision in respect of demand deposits with restrictions on use arising from a
contract with a third party (see Note 29).
Consolidated Cash Flow Statement
For the year to 31 March 2023
Year to Year to
31 March 31 March
2023 2022
£000 Restated(1)
£000
Cash flows from operating activities
(Loss)/profit before tax (64,511) 72,892
Adjustment for:
Depreciation 798 766
Revaluation deficit/(surplus) on investment properties 97,854 (33,311)
Letting cost amortisation 200 226
(Gain)/loss on sale of investment properties (4,564) 45
Profit on sale of plant and equipment (18) (11)
Net financing costs 10,918 19,228
Change in value of derivative financial instruments (12,757) (17,996)
Share based payments charge 1,073 3,843
Share of results of joint ventures (3,494) (20,708)
Cash inflows from operations before changes in working capital 25,499 24,974
Change in trade and other receivables (3,560) (6,028)
Change in land, developments and trading properties 2,061 (1,641)
Change in trade and other payables (11,477) 5,941
Cash inflows generated from operations 12,523 23,246
Finance costs (12,361) (18,335)
Finance income 274 6
Tax received 331 13
(11,756) (18,316)
Net cash generated from operating activities 767 4,930
Cash flows from investing activities
Additions to investment property (10,509) (174,057)
Net purchase of other investments (47) (306)
Net proceeds/(costs) from sale of investment property 186,541 (45)
Returns/(investments) in joint ventures and subsidiaries 3,323 (3,323)
Dividends from joint ventures 13,446 3,381
Sale of plant and equipment 48 44
Purchase of leasehold improvements, plant and equipment (548) (68)
Net cash generated from/(used by) investing activities 192,254 (174,374)
Cash flows from financing activities
Borrowings drawn down - 190,000
Borrowings repaid (170,000) (131,150)
Finance lease repayments (659) (631)
Shares issued 10 10
(Purchase)/sale of own shares (1,089) 54
Equity dividends paid (13,842) (12,582)
Net cash (used by)/generated from financing activities (185,580) 45,701
Net increase/(decrease) in cash and cash equivalents 7,441 (123,743)
Cash and cash equivalents at start of year 43,484 167,227
Cash and cash equivalents at end of year 50,925 43,484
1. Trade and other receivables and cash and cash equivalents have been
restated as at 31 March 2022 following the IFRIC agenda decision in respect of
demand deposits with restrictions on use arising from a contract with a third
party (see Note 29).
Consolidated Statement of Changes in Equity
At 31 March 2023
Share Share Revaluation Capital Own shares Other Retained earnings Total
capital premium reserve redemption held reserves £000 £000
£000 £000 £000 reserve £000 £000
£000
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
Total comprehensive expense - - - - - - (64,511) (64,511)
Revaluation deficit - - (97,854) - - - 97,854 -
Realised on disposals - - (53,357) - - - 53,357 -
Issued share capital 10 3,965 - - - - - 3,975
Performance Share Plan - - - - - - 1,073 1,073
Purchase of own shares - - - - (848) - - (848)
Share settled Performance Share Plan - - - - - - (439) (439)
Share settled bonus - - - - - - (3,536) (3,536)
Revaluation deficit on valuation of shares - - - - - - (240) (240)
Dividends paid - - - - - - (13,842) (13,842)
At 31 March 2023 1,233 116,619 46,416 7,743 (848) 291 437,221 608,675
For a breakdown of Total Comprehensive (Expense)/Income see the Consolidated
Statement of Comprehensive Income.
The adjustment to retained earnings of £1,073,000 (31 March 2022:
£3,223,000) 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 £13,009,000 (31 March 2022:
£10,012,000) made up of the Performance Share Plan credit of £1,073,000 (31
March 2022: £3,223,000) and related deferred tax charge of £nil (31 March
2022: charge of £1,325,000), dividends paid of £13,842,000 (31 March 2022:
£12,582,000), the issued share capital of £10,000 (31 March 2022: £10,000)
and corresponding share premium of £3,965,000 (31 March 2022: £4,610,000),
share settled Performance Share Plan awards charge of £339,000 (31 March
2022: £3,591,000), the share settled bonus awards charge of £3,536,000 (31
March 2022: £1,031,000), deferred bonus shares of £nil (31 March 2022:
£620,000) and the loss on the sale of shares of £240,000 (31 March 2022:
profit of £54,000).
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 certain 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 2023. These accounts will be delivered to the
Registrar of Companies following the Annual General Meeting. The auditor's
opinion on the 2023 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 2022. The Group Annual Report and Financial
Statements for 2022 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 2023 are detailed below, however none of these have had a
material impact on the financial statements:
· 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); and
· Amendments to IAS 37 Onerous Contracts - Cost of Fulfilling a Contract
(effective for periods beginning on or after 1 January 2022).
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 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 2023 compliance position for these covenants is summarised below:
Covenant Requirement Actual
LTV <65% 31%
LRV <12.0x 8.25x
ICR >150% 488%
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 32% 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 46% before loan to value covenants come
under pressure;
• Whilst the Group has a WAULT of 5.0 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 2023.
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.
· Consideration has been given to climate risk but it has been concluded
that it does not give rise to material new sources of estimation uncertainty.
2. Revenue from Contracts with Customers
Year to Year to
31 March 31 March
2023 2022
£000 £000
Development property income 4,921 7,490
Service charge income 8,372 8,304
Other revenue - 28
Total revenue from contracts with customers 13,293 15,822
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 2023 (2022: £5,000).
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 31.03.22 Year to Year to
31.03.23 31.03.23 31.03.23 £000 31.03.22 31.03.22
£000 £000 £000 £000 £000
Gross rental income 36,555 - 36,555 35,324 - 35,324
Development property income - 4,921 4,921 - 7,490 7,490
Service charge income 8,372 - 8,372 8,304 - 8,304
Other revenue - - - 28 - 28
Revenue 44,927 4,921 49,848 43,656 7,490 51,146
Cost of sales Investments Developments Total Investments Year to Developments Total
Year to Year to Year to 31.03.22 Year to Year to
31.03.23 31.03.23 31.03.23 £000 31.03.22 31.03.22
£000 £000 £000 £000 £000
Rents payable (157) - (157) (169) - (169)
Property overheads (2,092) - (2,092) (4,069) - (4,069)
Service charge expense (8,372) - (8,372) (8,304) - (8,304)
Development cost of sales - (2,915) (2,915) - (3,864) (3,864)
Development sales expenses - (1) (1) - (107) (107)
(Provision)/reversal of provision - (30) (30) - 2,285 2,285
Cost of sales (10,621) (2,946) (13,567) (12,542) (1,686) (14,228)
Profit before tax Investments Developments Total Investments Developments Total
Year to Year to Year to Year to Year to Year to
31.03.23 31.03.23 31.03.23 31.03.22 31.03.22 31.03.22
£000 £000 £000 £000 £000 £000
Net property income 34,306 1,975 36,281 31,114 5,804 36,918
Share of results of joint ventures 4,867 (1,373) 3,494 20,603 105 20,708
(Loss)/gain on sale and revaluation of Investment properties (93,290) - (93,290) 33,266 - 33,266
Segmental (loss)/profit (54,117) 602 (53,515) 84,983 5,909 90,892
Administrative expenses (12,835) (16,768)
Net finance costs (10,918) (19,228)
Change in fair value of derivative financial instruments 12,757 17,996
(Loss)/profit before tax (64,511) 72,892
Net assets Investments Developments Total Investments Developments Total
at 31.03.23 at 31.03.23 at 31.03.23 at 31.03.22 at 31.03.22 at 31.03.22
£000 £000 £000 £000 £000 £000
Investment properties 681,682 - 681,682 938,797 - 938,797
Land and developments - 28 28 - 2,089 2,089
Investment in joint ventures 84,255 3,075 87,330 96,157 4,447 100,604
765,937 3,103 769,040 1,034,954 6,536 1,041,490
Other assets 103,816 93,639
Total assets 872,856 1,135,129
Liabilities (264,181) (448,086)
Net assets 608,675 687,043
4. Net Property Income
Year to Year to
31 March 31 March
2023 2022
£000 £000
Gross rental income 36,555 35,324
Head rents payable (157) (169)
Property overheads (2,092) (4,069)
Net rental income 34,306 31,086
Development property income 4,921 7,490
Development cost of sales (2,915) (3,864)
Sales expenses (1) (107)
(Provision)/reversal of provision (30) 2,285
Development property profit 1,975 5,804
Other revenue - 28
Net property income 36,281 36,918
Included within Gross rental income above is £1,609,000 (2022: £5,638,000)
of accrued income for rent free periods.
5. Profit on Sale of Investment Properties
Year to Year to
31 March 31 March
2023 2022
£000 £000
Net proceeds/(costs) from the sale of investment properties 186,541 (45)
Book value (Note 11) (169,570) -
Tenants' incentives on sold investment properties (12,407) -
Profit/(loss) on sale of investment properties 4,564 (45)
6. Administrative Expenses
Year to Year to
31 March 31 March
2023 2022
£000 £000
Administration costs (9,845) (9,598)
Performance related awards, including annual bonuses (2,702) (6,019)
National Insurance on performance related awards (288) (1,151)
Administrative expenses (12,835) (16,768)
7. Net Finance Costs and Change in Fair Value of Derivative Financial
Instruments
Year to Year to
31 March 31 March
2023 2022
£000 £000
Interest payable on bank loans and overdrafts (8,284) (10,169)
Other interest payable and similar charges (2,780) (3,179)
Total before cancellation of loans (11,064) (13,348)
Cancellation of loans (128) (5,886)
Finance costs (11,192) (19,234)
Finance income 274 6
Net finance costs (10,918) (19,228)
Change in fair value of derivative financial instruments 12,757 17,996
Net finance costs and change in fair value of derivative financial instruments 1,839 (1,232)
8. Tax on Profit on Ordinary Activities
Year to Year to
31 March 31 March
2023 2022
£000 £000
The tax credit is based on the profit for the year and represents:
United Kingdom corporation tax at 19%
- Group corporation tax - -
- Adjustment in respect of prior years - 1,146
- Use of tax losses - (38)
Current tax credit - 1,108
Deferred tax
- Capital allowances - 4,540
- Tax losses - (1,024)
- Unrealised chargeable gains - 13,512
- Other temporary differences - (2,134)
Deferred tax credit - 14,894
Total tax credit for year - 16,002
The Group became a UK REIT on 1 April 2022. As a REIT, the Group is not
subject to Corporation Tax on the profits of its property rental business and
chargeable gains arising on the disposal of investment assets used in the
property rental business, but remains subject to tax on profits and chargeable
gains arising from non REIT business activities.
On conversion to a REIT, the deferred tax assets and liabilities previously
recognised 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, previously recognised deferred tax assets 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 assets could be offset. At 31 March 2023, no deferred tax was
recognised (31 March 2022: £nil).
9. Dividends
Year to Year to
31 March 31 March
2023 2022
£000 £000
Attributable to equity share capital
Ordinary
- Interim paid 3.05p per share (2021: 2.90p) 3,750 3,547
- Prior year final paid 8.25p per share (2021: 7.40p) 10,092 9,035
13,842 12,582
A final dividend of 8.70p, if approved at the AGM on 13 July 2023, will be
paid on 28 July 2023 to the Shareholders on the register on 23 June 2023. This
final dividend, amounting to £10,732,000, has not been included as a
liability as at 31 March 2023, 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
2023 2022
000 000
Ordinary shares in issue 123,355 122,325
Weighting adjustment (613) (241)
Weighted average ordinary shares in issue for calculation of basic and EPRA 122,742 122,084
earnings per share
Weighted average ordinary shares issued on share settled bonuses 561 662
Weighted average ordinary shares to be issued under Performance Share Plan 846 1,700
Adjustment for anti-dilutive shares (1,407) -
Weighted average ordinary shares in issue for calculation of diluted 122,742 124,446
(loss)/earnings per share
£000 £000
(Loss)/earnings used for calculation of basic and diluted earnings per share (64,511) 88,894
Basic (loss)/earnings per share (52.6)p 72.8p
Diluted (loss)/earnings per share (52.6)p 71.4p
£000 £000
(Loss)/earnings used for calculation of basic and diluted earnings per share (64,511) 88,894
Net loss/(gain) on sale and revaluation of investment properties
93,290 (33,266)
-
subsidiaries
(5,161) (18,473)
- joint
ventures
Tax on profit on disposal of investment properties 463 -
Loss/(gain) on movement in share of joint ventures 564 (820)
Fair value movement on derivative financial instruments (12,757) (17,996)
Expense on cancellation of loans 128 5,886
Deferred tax on adjusting items (503) (17,844)
Earnings used for calculations of EPRA earnings per share 11,513 6,381
EPRA earnings per share 9.4p 5.2p
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
2023 2022
£000 £000
Book value at 1 April 938,797 740,207
Additions at cost 10,509 165,505
Disposals (169,570) -
Letting cost amortisation (200) (226)
Revaluation (deficit)/surplus (97,854) 33,311
As at year end 681,682 938,797
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 is as
follows:
At At
31 March 31 March
2023 2022
£000 £000
Book value 681,682 938,797
Lease incentives and costs included in trade and other receivables 13,987 24,836
Head leases capitalised (2,119) (2,133)
Fair value 693,550 961,500
Interest capitalised in respect of the refurbishment of investment properties
at 31 March 2023 amounted to £9,620,000 (31 March 2022: £13,102,000).
Interest capitalised during the year in respect of the refurbishment of
investment properties amounted to £nil (31 March 2022: £nil) and an amount
of £3,482,000 (31 March 2022: £nil) was released on the sale of the
properties in the year.
The historical cost of investment property is £633,237,000 (31 March 2022:
£739,231,000). The anticipated capital expenditure included in valuations
reflect our commitment to achieving the highest standards of sustainability.
Any capex contractually committed is included in Note 28.
The fair value of the Group's investment property as at 31 March 2023 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
2023 % £000
True equivalent yield 5.35%
+ 50 bps (5.7) (39.7)
+ 25 bps (2.4) (16.5)
- 25 bps 5.3 36.8
- 50 bps 9.7 67.5
ERV £78.09
+ 5.00% 3.3 22.6
+ 2.50% 1.6 11.2
- 2.50% (1.6) (10.9)
- 5.00% (3.1) (21.7)
12. Joint Ventures
Share of results of joint ventures Year to Year to
31 March 31 March
2023 2022
£000 £000
Revenue 10,141 9,495
Gross rental income 287 317
Property overheads (1,103) (175)
Net rental (expense)/income (816) 142
Revaluation of investment properties 5,095 18,473
Gain on sale of investment properties 66 -
Development property profit 1,262 764
5,607 19,379
Administrative expenses (459) (295)
Operating profit 5,148 19,084
Interest payable on bank loans and overdrafts (2,703) (2,407)
Other interest payable and similar charges (203) (181)
Interest capitalised 1,815 2,142
Finance income 23 -
Profit before tax 4,080 18,638
Tax (22) 1,249
Profit after tax 4,058 19,887
Adjustment for Barts Square economic interest¹ (564) 821
Share of results of joint ventures 3,494 20,708
( )
1. This adjustment reflects the impact of the consolidation of a joint venture
at its economic interest of 50% (31 March 2022: 46.0%) rather than its actual
ownership interest of 33.3%.
Investment in joint ventures At At
31 March 31 March
2023 2022
£000 £000
Summarised balance sheets
Non-current assets
Investment properties 150,151 140,045
Owner occupied property, plant and equipment 109 40
150,260 140,085
Current assets
Land and developments 539 8,349
Trade and other receivables 727 2,527
Deferred tax - 172
Cash and cash equivalents 3,749 4,474
5,015 15,522
Current liabilities
Trade and other payables (3,332) (10,062)
Borrowings - -
(3,332) (10,062)
Non-current liabilities
Trade and other payables (406) (408)
Borrowings (59,416) (39,585)
Leasehold interest (4,927) (4,744)
Deferred tax - (297)
(64,749) (45,034)
Net assets pre-adjustment 87,194 100,511
Acquisition costs 136 93
Investment in joint ventures 87,330 100,604
The fair value of investment properties at 31 March 2023 is as follows:
At At
31 March 31 March
2023 2022
£000 £000
Book value 150,151 140,045
Lease incentives and costs included in trade and other receivables 185 166
Head leases capitalised (4,361) (4,391)
Fair value 145,975 135,820
13. Other Investments
At At
31 March 31 March
2023 2022
£000 £000
Book value at 1 April 306 -
Acquisitions 47 306
As at year end 353 306
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
£47,000 (31 March 2022: £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 3 fair value measurement as defined in IFRS 13
Fair Value Measurement.
14. Land and Developments
At At
31 March 31 March
2023 2022
£000 £000
At 1 April 2,089 448
Acquisitions and construction costs - 2,913
Disposals (2,031) (3,557)
(Provision)/reversal of provision (30) 2,285
At 31 March 28 2,089
The Directors' valuation of development stock shows a surplus of £302,000 (31
March 2022: £302,000) 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
2023 2022
£000 Restated(1)
£000
Trade receivables 2,517 4,130
Other receivables 752 762
Prepayments 1,990 4,310
Accrued income 19,676 24,574
Total trade and other receivables 24,935 33,776
1. Trade and other receivables and cash and cash equivalents have been
restated as at 31 March 2022 following the IFRIC agenda decision in respect of
demand deposits with restrictions on use arising from a contract with a third
party (see Note 29).
Included in accrued income are lease incentives of £13,987,000 (31 March
2022: £22,965,000).
16. Cash and Cash Equivalents
At At
31 March 31 March
2023 2022
£000 Restated(1)
£000
Cash held at managing agents 4,156 10,589
Rental deposits 9,069 14,677
Restricted cash 9,495 3,978
Cash deposits 28,205 14,240
Total cash and cash equivalents 50,925 43,484
1. Trade and other receivables and cash and cash equivalents have been
restated as at 31 March 2022 following the IFRIC agenda decision in respect of
demand deposits with restrictions on use arising from a contract with a third
party (see Note 29).
Restricted cash is made up of cash held by solicitors, rental deposits and
cash in restricted accounts.
17. Trade and Other Payables
At At
31 March 31 March
2023 2022
£000 £000
Trade payables 15,212 23,122
Other payables 2,136 3,957
Accruals 5,404 7,418
Deferred income 8,480 9,489
Total trade and other payables 31,232 43,986
18. Lease Liability
At At
31 March 31 March
2023 2022
£000 £000
Current lease liability 683 658
Non-current lease liability 5,589 6,271
Included within the lease liability are £683,000 (31 March 2022: £658,000)
of current and £3,399,000 (31 March 2022: £4,082,000) 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
2023 2022
£000 £000
Current borrowings - -
Borrowings repayable within:
- two to three years - 100,000
- three to four years 226,677 296,633
Non-current borrowings 226,677 396,633
Total borrowings 226,677 396,633
At At
31 March 31 March
2023 2022
£000 Restated(1)
£000
Total borrowings 226,677 396,633
Cash (50,925) (43,484)
Net borrowings 175,752 353,149
1. Trade and other receivables and cash and cash equivalents have been
restated as at 31 March 2022 following the IFRIC agenda decision in respect of
demand deposits with restrictions on use arising from a contract with a third
party (see Note 29).
Net borrowings exclude the Group's share of borrowings in joint ventures of
£59,416,000 (31 March 2022: £39,585,000) and cash of £3,749,000 (31 March
2022: £4,474,000). All borrowings in joint ventures are secured.
At At
31 March 31 March
2023 2022
£000 Restated(1)
£000
Net assets 608,675 687,043
Gearing 29% 51%
1. Trade and other receivables and cash and cash equivalents have been
restated as at 31 March 2022 following the IFRIC agenda decision in respect of
demand deposits with restrictions on use arising from a contract with a third
party (see Note 29).
20. Derivative Financial Instruments
At At
31 March 31 March
2023 2022
£000 £000
Derivative financial instruments asset 23,245 11,104
Derivative financial instruments liability - (538)
A gain on the change in fair value of £12,757,000 has been recognised in the
Consolidated Income Statement (31 March 2022: £17,996,000).
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
2023 2022
£000 £000
Authorised 39,577 39,577
The authorised share capital of the Company is £39,577,000 divided into
ordinary shares of 1p each.
At At
31 March 31 March
2023 2022
£000 £000
Allotted, called up and fully paid:
- 123,355,197 (31 March 2022: 122,325,413) ordinary shares of 1p each 1,233 1,223
1,233 1,223
22. Net Assets Per Share
At Number of shares At Number of shares p
31 March 000 31 March 000
2023 2022
£000 £000
p
IFRS net assets 608,675 123,355 687,043 122,325
Adjustments:
- own share sale (283)
Basic net asset value 608,675 123,072 495 687,043 122,325 562
- share settled bonus 561 662
- dilutive effect of Performance Share Plan 751 1,657
Diluted net asset value 608,675 124,384 489 687,043 124,644 551
Adjustments:
- fair value of financial instruments (23,245) (10,565)
- deferred tax - 503
- fair value of land and developments 302 302
- real estate transfer tax 56,591 73,155
EPRA net reinstatement value 642,323 124,384 516 750,438 124,644 602
- real estate transfer tax (28,868) (36,656)
- deferred tax - (503)
EPRA net tangible asset value 613,455 124,384 493 713,279 124,644 572
At Number of shares At Number of shares p
31 March 000 31 March 000
2023 2022
£000 p £000
Diluted net assets 608,675 124,384 489 687,043 124,644 551
Adjustments:
- surplus on fair value of stock 302 302
EPRA net disposal value 608,977 124,384 490 687,345 124,644 551
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 own 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 2023.
23. Related Party Transactions
The following amounts were due from the Group's joint ventures:
At At
31 March 31 March
2023 2022
£000 £000
Charterhouse Place Limited group 577 405
Barts Square companies 79 79
Shirley Advance LLP 8 8
Old Street Holdings LP - 3
An accounting and corporate services fee of £50,000 (March 2022: £50,000)
was charged by the Group to the Barts Square companies. In addition, a
development management, accounting and corporate services fee of £779,000 (31
March 2022: £1,380,000) 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
2023 2022
£000 £000
Gross rental income - subsidiaries 36,555 35,324
- joint ventures 287 317
Total gross rental income 36,842 35,641
Rents payable - subsidiaries (157) (169)
Property overheads - subsidiaries (2,092) (4,069)
- joint ventures (1,103) (175)
See-through net rental income 33,490 31,228
See-through Net Development Profits
Helical's share of development profits from property assets held in
subsidiaries and in joint ventures is shown in the table below.
Year to Year to
31 March 31 March
2023 2022
£000 £000
In parent and subsidiaries 2,005 3,519
In joint ventures 1,262 764
Total gross development profit 3,267 4,283
(Provision)/reversal of provision - subsidiaries (30) 2,285
See-through net development profits 3,237 6,568
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
2023 2022
£000 £000
Revaluation (deficit)/surplus on investment properties - subsidiaries (97,854) 33,311
- joint ventures 5,095 18,473
Total revaluation (deficit)/surplus (92,759) 51,784
Net gain/(loss) on sale of investment properties - subsidiaries 4,564 (45)
- joint ventures 66 -
Total net gain/(loss) on sale of investment properties 4,630 (45)
See-through net (loss)/gain on sale and revaluation of investment properties (88,129) 51,739
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
2023 2022
£000 £000
Administration expenses - subsidiaries 9,845 9,598
- joint ventures 459 295
Total administration expenses 10,304 9,893
Performance related awards, including NIC - subsidiaries 2,990 7,170
Total performance related awards, including NIC 2,990 7,170
See-through administration expenses 13,294 17,063
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
2023 2022
£000 £000
Interest payable on bank loans and overdrafts - subsidiaries 8,284 10,169
- joint ventures 2,703 2,407
Total interest payable on bank loans and overdrafts 10,987 12,576
Other interest payable and similar charges - subsidiaries 2,908 9,065
- joint ventures 203 181
Interest capitalised - joint ventures (1,815) (2,142)
Total finance costs 12,283 19,680
Interest receivable and similar income - subsidiaries (274) (6)
- joint ventures (23) -
See-through net finance costs 11,986 19,674
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
2023 2022
£000 £000
Investment property fair value - subsidiaries 693,550 961,500
- joint ventures 145,975 135,820
Total investment property fair value 839,525 1,097,320
Land and development stock - subsidiaries 28 2,089
- joint ventures 539 8,349
Total land and development stock 567 10,438
Total land and development stock surplus - subsidiaries 302 302
Total land and development stock at fair value 869 10,740
See-through property portfolio 840,394 1,108,060
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
2023 2022
£000 Restated(1)
£000
Gross borrowings more than one year - subsidiaries 226,677 396,633
Total 226,677 396,633
Gross borrowings more than one year - joint ventures 59,416 39,585
Total 59,416 39,585
Cash and cash equivalents - subsidiaries (50,925) (43,484)
- joint ventures (3,749) (4,474)
Total (54,674) (47,958)
See-through net borrowings 231,419 388,260
1. Trade and other receivables and cash and cash equivalents have been
restated as at 31 March 2022 following the IFRIC agenda decision in respect of
demand deposits with restrictions on use arising from a contract with a third
party (see Note 29).
25. See-through Net Gearing and Loan to Value
At At
31 March 31 March
2023 2022
£000 Restated(1)
£000
Property portfolio 840,394 1,108,060
Net borrowings 231,419 388,260
Net assets 608,675 687,043
See-through net gearing 38.0% 56.5%
See-through loan to value 27.5% 35.0%
1. Trade and other receivables and cash and cash equivalents have been
restated as at 31 March 2022 following the IFRIC agenda decision in respect of
demand deposits with restrictions on use arising from a contract with a third
party (see Note 29).
26. Total Accounting Return
At At
31 March 31 March
2023 2022
£000 £000
Brought forward IFRS net assets 687,043 608,161
Carried forward IFRS net assets 608,675 687,043
(Decrease)/increase in IFRS net assets (78,368) 78,882
Dividends paid 13,842 12,582
Total accounting return (64,526) 91,464
Total accounting return percentage (9.4)% 15.0%
At At
31 March 31 March
2023 2022
£000 £000
Brought forward EPRA net tangible assets 713,279 658,663
Carried forward EPRA net tangible assets 613,455 713,279
(Decrease)/increase in EPRA net tangible assets (99,824) 54,616
Dividends paid 13,842 12,582
Total EPRA accounting return (85,982) 67,198
Total EPRA accounting return percentage (12.1)% 10.2%
27. Total Property Return
At At
31 March 31 March
2023 2022
£000 £000
See-through net rental income 33,490 31,228
See-through development profits 3,237 6,568
See-through revaluation (deficit)/surplus (92,759) 51,784
See-through net gain/(loss) on sale of investment properties 4,630 (45)
Total property return (51,402) 89,535
28. Capital Commitments
The Group has a commitment of £1,700,000 (31 March 2022: £13,100,000), all
of which relates to the finalisation of works at The JJ Mack Building, EC1.
29. Prior year adjustment
The Group has assessed the impact of the IFRS Interpretation Committee's
(IFRIC) recent Agenda Decision in respect of Demand Deposits with Restrictions
on Use arising from a Contract with a Third Party accounted for under IAS 7.
The Group holds tenant deposits in separate bank accounts, the use of which is
restricted under the terms of the lease agreements. Following the
clarification by IFRIC, these tenant deposits are judged to meet the
definition of restricted cash under IAS 7. The Group's accounting policy has
been updated to align with this clarification.
The Group comparative balances have been restated to reflect this change in
accounting policy, which resulted in the below reclassification of tenant
deposits from trade and other receivables to cash and cash equivalents.
Balance Sheet 31 March 31 March 2022 31 March 31 March 2021
2022 Restatement Restated 2021 Restatement Restated
£m £m £m £m £m £m
Cash and cash equivalents 28,807 14,677 43,484 154,448 12,779 167,227
Trade and other receivables 48,453 (14,677) 33,776 40,428 (12,779) 27,649
LTV 36.4% (1.4)% 35.0% 22.6% (1.5)% 21.1%
30. Post Balance Sheet Events
There were no material post Balance Sheet events.
Appendix 1 - Five Year Review
Income Statements
Year ended Year ended Year ended Year ended Year ended
31.3.23 31.3.22 31.3.21 31.3.20 31.3.19
£000 £000 £000 £000 £000
Revenue 49,848 51,146 38,596 44,361 44,175
Net rental income 34,306 31,086 24,965 27,838 24,599
Development property profit 2,005 3,519 678 2,076 2,564
(Provisions)/reversal of provisions (30) 2,285 (82) 1,198 (4,345)
Share of results of joint ventures 3,494 20,708 2,352 13,396 (3,217)
Other operating income - 28 48 88 -
39,775 57,626 27,961 44,596 19,601
Gain/(loss) on sale of investment properties 4,564 (45) (1,341) (1,272) 15,008
Revaluation (deficit)/surplus on investment properties (97,854) 33,311 19,387 38,351 44,284
Fair value movement of available-for-sale assets - - - - 144
Administrative expenses excluding performance related awards (9,845) (9,598) (9,276) (10,524) (10,858)
Performance related awards (including NIC) (2,990) (7,170) (5,140) (6,191) (5,895)
Finance costs (11,192) (19,234) (14,079) (16,100) (17,407)
Finance income 274 6 58 1,345 983
Change in fair value of derivative financial instruments 12,757 17,996 2,938 (7,651) (3,322)
Change in fair value of Convertible Bond - - - 468 865
Foreign exchange gains - - - 8 53
(Loss)/profit before tax (64,511) 72,892 20,508 43,030 43,456
Tax on profit on ordinary activities - 16,002 (2,631) (4,313) (836)
(Loss)/profit after tax (64,511) 88,894 17,877 38,717 42,620
Balance Sheets
At At At At At
31.3.23 31.3.22 31.3.21 31.3.20 31.3.19
£000 Restated(1) Restated(1) £000 £000
£000 £000
Investment portfolio at fair value 693,550 961,500 756,875 836,875 791,250
Land, trading properties and developments 28 2,089 448 852 2,311
Group's share of investment properties held by joint ventures 145,975 135,820 82,516 76,809 25,382
Group's share of land, trading and development properties held by joint 539 8,349 16,545 34,164 56,935
ventures
Group's share of land and development property surpluses 302 302 578 578 578
Group's share of total properties at fair value 840,394 1,108,060 856,962 949,278 876,456
Net debt 175,752 353,149 169,476 273,598 227,712
Group's share of net debt of joint ventures 55,667 35,111 11,688 24,933 40,861
Group's share of net debt 231,419 388,260 181,164 298,531 268,573
Net assets 608,675 687,043 608,161 598,689 567,425
EPRA net tangible assets value 613,455 713,279 658,663 640,424 597,321
Dividend per ordinary share paid 11.30p 10.30p 8.70p 10.20p 9.60p
Dividend per ordinary share declared 11.75p 11.15p 10.10p 8.70p 10.10p
EPRA earnings/(loss) per ordinary share 9.4p 5.2p (1.8)p 7.6p (8.4)p
EPRA net tangible assets per share 493p 572p 533p 524p 494p
1. Trade and other receivables and cash and cash equivalents have been
restated as at 31 March 2022 and 31 March 2021 following the IFRIC agenda
decision in respect of demand deposits with restrictions on use arising from a
contract with a third party (see Note 29).
Appendix 2 - Property Portfolio
London Portfolio - Investment Properties
Property Description Area sq ft Vacancy rate Vacancy rate at 31 March 2022
(NIA) at 31 March %
2023
%
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 0.0 5.3
The Loom, E1 Multi-let office building 106,838 28.4 20.1
The JJ Mack Building, EC1 Multi-let office building 206,050 81.6 n/a
25 Charterhouse Square, EC1 Multi-let office building 42,921 15.2 4.4
The Power House, W4 Single-let recording studios/office building 21,268 0.0 0.0
710,709 19.8 6.9
Development pipeline
100 New Bridge Street, EC4 Single-let office building 167,026 2.6 0.0
877,735 16.1 6.7
London Portfolio - Development Properties
Property Description Total apartments Unsold Unsold apartments
apartments at 31 March
at 31 March 2022
2023
Barts Square, EC1 Residential apartments and 8 retail units 236 0 14
Appendix 3 - EPRA Performance Measures
At At
31 March 31 March
2023 2022
EPRA net tangible assets £613.5m £713.3m
EPRA net reinstatement value per share 516p 602p
EPRA net tangible assets per share 493p 572p
EPRA net disposal value per share 490p 551p
EPRA net initial yield 3.9% 3.5%
EPRA "topped up" net initial yield 4.0% 4.5%
EPRA vacancy rate 16.3% 4.8%
EPRA cost ratio (including direct vacancy costs) 39.5% 52.8%
EPRA cost ratio (excluding direct vacancy costs) 35.7% 48.8%
EPRA earnings £11.5m £6.4m
EPRA earnings per share 9.4p 5.2p
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 Covid-19 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, let 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 interpreting 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 office is no longer seen as a fixed asset, but
strategic change when required. as an overall workplace experience that is not tied to a physical location and
rather is influenced by increased investment in onsite amenities, better
We have robust and established governance and approval processes. workplace technology, flexible space layout, work models and increased
sustainability credentials.
We are active members of industry bodies and professional organisations and
participate in local business and community groups. This ensures we are Consequently the likelihood of this risk has decreased.
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 completed The JJ Mack Building, EC1 in September 2022 and is in
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 preparation to start the enabling works at 100 New Bridge Street, EC4 later in
levels over time. exposure to reduced demand for particular asset classes or geographical the year, as well as progressing the three sites to be developed in joint
locations over time. The Group carries out developments in partnership with venture with TfL.
Development projects often require substantial capital expenditure for land other organisations and pre-lets space to reduce development risk, where
procurement and construction and they usually take a considerable amount of considered appropriate. There continues to be the risk of insolvencies in the construction industry
time to complete and generate rental income.
given the uncertainties around the future macroeconomic environment and
The management team is highly experienced and has a track record of developing geopolitical market influences.
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.
property development.
Despite technological advancements, supply chain bottlenecks as a result of
Management places significant focus on timely project delivery and strong the pandemic, recent geopolitical escalations and economic uncertainty
The construction industry is faced with both labour and materials supply relationships with construction partners with appropriate risk sharing. We opt (causing productions to slow or even halt), along with labour shortages, were,
shortages which could lead to cost escalation and project delay. to work with highly regarded suppliers and contractors to minimise cost and still are, challenges for the sector and a risk for the global economy.
uncertainty.
Exposure to developments increases the potential financial impact of cost
Consequently the likelihood of this risk has remained the same.
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 is 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.
Acceleration of digitalisation of logistics and supply chain management, such
as real-time warning systems that forecast shortages at an early stage, is
crucial to respond agilely and avoid delays in real estate developments.
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 Despite the strong market sentiment towards new, best-in-class office space
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 and given Helical's Grade A portfolio, the severity of this risk has been
in rental income could have an adverse impact on revenue and the value of the changing market. Management regularly models different property revaluation increased to reflect the yield shifts seen in the market in response to
Group's properties. scenarios through its forecasting process in order to prepare a considered inflation and interest rate rises and recent bank failures.
approach to mitigating the potential impact.
Whilst the impact of Covid-19 has reduced significantly, there remains a risk
of continued economic downturn given the broader geopolitical climate, We continue to design and innovate in the areas of sustainability, technology,
inflation and interest rate rises. wellbeing and service provision and, working closely with our management
agents, Ashdown Phillips, we engage with our occupiers to understand their
evolving needs and respond quickly and collaboratively to any changing
requirements.
This could result in further pressure on rent collection figures with a
prolonged period of corporate failures, leading to a decline in occupancy and The Board and management team continually monitor the property market. The
increase in office vacancies. bi-weekly management meeting considers factors such as new leases, lease
events and tenant issues with respect to each property in the portfolio.
This risk is further heightened by the recent bank failures and impact on
liquidity.
Geopolitical and economic Significant events or changes in the global/UK political or economic landscape Management monitors macroeconomic research and economic outlook considerations Geo-political uncertainty from conflicts continues to affect global and local
may have a significant impact on the Group's ability to plan and deliver its are incorporated into the Group's annual business plan. economies e.g. inflationary pressures arising from supply chain shortages,
strategic priorities in accordance with its business model. Such events or
interest rate rises and cost of energy. These conflicts could escalate or
changes may result in decreased investor activity and reluctance of occupiers Management conducts ongoing assessments of post-Brexit impacts and the spread to include other countries.
to make decisions with respect to office space uptake. continuing effects of the Covid-19 pandemic.
More recently, the banking sector has seen turmoil with the collapse of the
Macro-economic drivers, such as interest rates, can significantly impact We will continue to monitor the economic and political situations in the UK Silicon Valley Bank and the acquisition of Credit Suisse by UBS. This has
pricing in the real estate market. For example, in order to curb inflation the and globally and adapt any business decisions accordingly. caused instability in the global markets and concern for the rest of the
Bank of England has raised interest rates further and this will increase the
financial sector.
cost of borrowing, which will in turn provide challenge for investors. Management seeks advice from experts to ensure it understands the political
environment and the impact of emerging regulatory and tax changes on the However, whilst the duration of inflation will significantly impact the sector
Political instability and unrest can have a significant knock-on effect on Group. It maintains good relationships with planning consultants and local along with the still uncertain responding behaviour of investors, real estate
global economies and trade (as evidenced by the Russo-Ukrainian war). authorities. Where appropriate, management joins with industry representatives as a sector - along with real estate portfolios - will remain an attractive
Geopolitical risks lead to changed market dynamics and influence, such as the to contribute to policy and regulatory debate relevant to the industry. asset class.
increasing role of governments in economies and the shifts in geopolitical
powers. Overall, this risk has increased.
The ongoing transition of the UK from the EU remains a risk and has an impact
on global trade.
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 Board has a risk e.g. TCFD and legislation requiring higher standards for energy
loss of income or decline in property values. Having strong sustainability designated Non-Executive Director responsible for sustainability. The efficiency in commercial and residential properties (EPCs).
credentials is a market differentiator and provides a competitive advantage. Committee sets appropriate targets and KPIs to effectively monitor the Group's
performance. The risks associated with the impact of climate change continue to increase
and businesses are being encouraged to proactively respond by all their
During the year, a detailed scenario analysis was performed to ascertain the stakeholders.
There is also the risk that the costs to operate our business (energy or potential risks and opportunities that arise due to specific climate related
water) or undertake development activities (construction materials) will rise scenarios. The outcome of this analysis has been incorporated into our wider Building and operating buildings which are resilient to climate change
as a consequence of climate change and the actions taken to safeguard against TCFD statement. The Group will conduct detailed scenario analysis of the risks protects Shareholder value. Identifying the risks and opportunities that are
it. and opportunities on an annual basis to ensure the appropriate material to us as a business under a number of different climate scenarios
actions/responses are taken. allows us to appropriately align our mitigation plan and long-term strategy.
Annually, the Group produces a Sustainability Performance Report with key data This risk to the business has not changed since March 2022.
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, cash resources and potential breach The inability to roll over existing facilities or take out new borrowing could The Group maintains good relationships with many established lending During the year the Group restructured its hedging to further protect its
of loan covenants impact the Group's ability to maintain its current portfolio and purchase new institutions and borrowings are spread across a number of such lenders. Revolving Credit Facility from rising interest rates. This has resulted in the
properties. The Group may forego opportunities if it does not maintain
interest rate on drawn amounts up to £250m under the RCF being fixed for the
sufficient cash to take advantage of them as they arise and requires new Funding requirements are reviewed monthly by the management team, which seeks duration of the facility to July 2026.
sources of debt to finance its development programme. to ensure that the maturity dates of borrowings are spread over several years.
The rise in interest rates will increase the cost of financing new development
The Group is at risk of increased interest rates on unhedged borrowings. Management monitors the cash levels of the Group on a weekly basis and opportunities.
maintains sufficient levels of cash resources and undrawn committed bank
If the Group breaches debt covenants, lending institutions may require the facilities to fund opportunities as they arise. The pandemic and ensuing economic uncertainty have put some tenants under cash
early repayment of borrowings.
flow pressure.
The Group hedges the interest rates on the majority of its borrowings,
effectively fixing or capping the rates over several years. The Group has cash and undrawn bank facilities available to it and an
appropriate level of borrowings. However, given the recent banking failures
Covenants are closely monitored throughout the year. Management carries out and economic climate, we have increased the severity of this risk.
sensitivity analyses to assess the likelihood of future breaches based on
significant changes in property values or rental income.
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 and relationships with business partners and reliance on external The Group's continued success is reliant on its management and staff and Our people Although there is strong competition for talent in the employment market at
partners maintaining its successful relationships with its joint venture partners.
present, this risk has remained broadly similar due to our high staff
The senior management team is very experienced with a high average length of retention levels.
Ineffective succession planning, or failure to attract, develop and retain the service. The Nominations Committee and Board continuously review succession
right people with requisite skills, as well as failing to maintain a positive plans, and the Remuneration Committee oversees the Directors' Remuneration The Board reaffirmed the succession plans for key roles within the Company
working environment for employees, could inhibit the execution of our strategy Policy and its application to senior employees, and reviews and approves during the year which support the long-term success of the business.
and diminish our long-term sustainability. incentive arrangements to ensure they are commensurate with market practice.
Remuneration is set to attract and retain high calibre staff. External factors such as the Covid-19 pandemic, geopolitical tensions and high
As several of the Group's properties are held in conjunction with third
levels of demand for certain raw materials and components place increased
parties, the Group's control over these properties is more limited and these Our annual appraisal process focuses on future career development and staff pressure on supply chains and distribution networks.
structures may also reduce the Group's liquidity. are encouraged to undertake personal development and training courses,
supported by the Company. Given our reliance on external third parties to ensure the successful delivery
Operational effectiveness and financing strategies may also be adversely
of our development programmes and asset management, these external factors
impacted if partners are not strategically aligned. The Board and senior management engage directly with employees through a could have a significant impact on our business.
variety of engagement initiatives which enable the Board to ascertain staff
The Group is dependent on a number of external third parties to ensure the satisfaction levels and implement changes to working practices and the working This risk has remained at the same level as assessed in March 2022.
successful delivery of its development programme and asset management of environment as necessary.
existing assets. These include:
We also arrange all-staff training activities and events throughout the year.
· Contractors and suppliers;
Business partners
· Consultants;
The Group nurtures well established relationships with joint venture partners,
· Managing agents; and seeking future projects where it has had previous successful collaborations.
· Legal and professional teams. Management has a strong track record of working effectively with a diverse
range of partners.
The Group would be adversely impacted by increases in the cost of services
provided by third parties. Our joint venture business plans are prepared to ensure operational and
strategic alignment with our partners.
External partners
The Group actively monitors its development projects and uses external project
managers to provide support. Potential contractors are vetted for their
quality, health and safety record and financial viability prior to engagement.
The Group has a highly experienced team managing its properties, which
regularly conduct on-site reviews and monitors cash flows against budget.
The Group seeks to actively monitor and maintain excellent relationships with
its specialist professional advisors, often engaging parties with whom it has
successfully worked previously.
Health and safety The nature of the Group's operations and markets exposes it to potential The Group reviews and updates its Health & Safety Policy regularly and it Whilst the amount of on-site development has fallen, this remains a key area
health and safety risks both internally and externally within the supply is approved by the Board annually. of focus for the business and the risk remains the same.
chain.
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.
Significant business disruption/external catastrophic event/cyber-attacks to The Group's operations, reputation or financial performance could be adversely In the event of a significant event: Global rollout of Covid-19 vaccinations has reduced the probability of further
our business and our buildings 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 The current Russo-Ukrainian war and associated sanctions are continuing to put
business and supply chain. pressure on global supply chains and economies.
All of these potential events could have a considerable impact on the global
economy, as well as that of our business and our stakeholders. Furthermore, the UK's terrorism national threat level continues to be rated as
"substantial".
The Group relies on information technology ("IT") to perform effectively and a · Regular Board discussions will be held during any pandemic to review the
cyber-attack could result in IT systems being unavailable, adversely affecting Group's response and mitigating actions. Cyber risks persist as cyber criminals continue to exploit changes in working
the Group's operations and reputation.
practices post-pandemic.
The increasing reliance on and use of digital technology heighten the risks
The Group's cyber security controls have continued to be strengthened and no
associated with IT and cyber security. · Enhanced engagement with our stakeholders will be conducted (particularly major breaches were reported during the year.
with occupiers, contractors, shareholders and employees).
Commercially sensitive and personal information is electronically stored by
However, as the number of UK businesses reporting security threats has not
the Group. Theft of this information could adversely impact the Group's decreased over the year, we have not revised the risk severity rating for the
commercial advantage and result in penalties where the information is governed
forthcoming year.
by law (GDPR and Data Protection Act 2018). · There will be continuous review of Government guidelines and emerging
practice, with risk assessments undertaken as control measures change.
Risks are continually evolving, and we must design, implement and monitor
effective controls to protect the Group from cyber-attack or major IT failure.
The Group increasingly employs IT solutions across its property portfolio to · Guidance will be issued to our staff, occupiers and contractors on how to
ensure its buildings are "smart". protect themselves and others.
The Group is at risk of being a victim of social engineering fraud. 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.
The Group engages and actively manages external IT experts to ensure its IT
systems operate effectively and that we respond to the evolving IT security
environment. This includes regular off-site backups and a comprehensive
disaster recovery process. The external provider also ensures the system is
secure and this is subject to routine testing including bi-annual disaster
recovery tests and annual Cyber Essential Plus Certification.
There is a robust control environment in place for invoice approval and
payment authorisations including authorisation limits and a dual sign off
requirement for large invoices and bank payments.
The Group provides training and performs penetration testing and disaster
recovery network vulnerability testing to identify emails of a suspicious
nature, ensuring these are flagged to the IT providers, and ensures employees
are aware they should not open attachments or follow instructions within the
email. On an annual basis, our external IT providers provide IT security
training to ensure all staff are adopting best practice IT security measures
to help protect the business against cyber-attack.
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 and non-compliance with prevailing Reputational damage resulting in a loss of credibility with key stakeholders The Group believes that successfully delivering its strategy and mitigating This risk is consistent for the business due to the ever changing legal and
legislation, regulation and best practice including Shareholders, analysts, banking institutions, contractors, managing its principal risks should protect its reputation. regulatory landscape the business operates in. Impact of regulatory change and
agents, tenants, property purchasers/sellers and employees is a continuous
scrutiny on operational resilience and management practices continues to be a
risk for the Group. The Group regularly reviews its strategy and risks to ensure it is acting in risk for our business.
the interests of its stakeholders.
The nature of the Group's operations and markets exposes it to financial
Therefore, the risk remains at a similar level.
crimes risks (including bribery and corruption risks, money laundering and tax The Group maintains a strong relationship with investors and analysts through
evasion) both internally and externally within the supply chain. regular meetings.
The Group is exposed to the potential risk of acquiring or disposing of a We ensure strong community involvement in the design process for our
property where the owner/purchaser has been involved in criminal conduct or developments and create employment and education opportunities through our
illicit activities. construction and operations activities.
The Group would attract criticism and negative publicity were any instances of A Group Disclosure Policy and Share Dealing Code, Policy & Procedures have
modern slavery and human trafficking identified within its supply chain. been circulated to all staff in accordance with the UK Market Abuse Regulation
(UK MAR).
The Group would attract criticism and negative publicity if instances of
non-compliance with GDPR and the Data Protection Act 2018 were identified. The Group's anti-bribery and corruption and whistleblowing policies and
Non-compliance may also result in financial penalties. procedures are reviewed and updated annually and emailed to staff and
displayed on our website. Projects with greater exposure to bribery and
corruption are monitored closely.
The Group avoids doing business in high-risk territories. The Group has
related policies and procedures designed to mitigate bribery and corruption
risks including:
Know Your Client checks, due diligence processes, capital expenditure
controls, contracts risk assessment procedures, and competition and anti-trust
guidance. The Group engages legal professionals to support these policies
where appropriate.
All employees are required to complete anti-bribery and corruption training
and to submit details of corporate hospitality and gifts received. 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 regulations.
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).
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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