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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Helical Plc | LSE:HLCL | London | Ordinary Share | GB00B0FYMT95 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 1.00 | 0.49% | 206.50 | 201.00 | 213.50 | 210.00 | 206.50 | 210.00 | 9,259 | 11:57:22 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Lessors Of Real Property,nec | 49.85M | -64.51M | -0.5230 | -3.95 | 254.73M |
From Apr 2023 to Apr 2024
TIDMHLCL
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 GBP233m (our share GBP213m) 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 GBP158.5m, a premium to 31 March 2022 book value, reflected a net initial yield of 4.3% and a capital value of GBP1,789 psf.
-- We also completed the disposal of Trinity in Manchester on 20 May 2022 to clients of Mayfair Capital for GBP34.6m (GBP590 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 GBP16.5m (our share GBP8.2m), 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 GBP19.7m (our share GBP9.9m), 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 GBP3.7m (our share GBP1.8m).
Continued lettings momentum delivering GBP5.4m (our share GBP3.4m) 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 GBP5.4m (our share GBP3.4m) 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 GBP80 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 GBP64.5m (2022: profit of GBP88.9m). -- See-through Total Property Return(1) of -GBP51.4m (2022: GBP89.5m): - Group's share(1) of net rental income increased 7.2% to GBP33.5m (2022: GBP31.2m).
- Net loss on sale and revaluation of investment properties of GBP88.1m (2022: gain of GBP51.7m).
- Development profits of GBP3.2m (2022: GBP6.6m).
-- 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 GBP608.7m (31 March 2022: GBP687.0m). -- 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 GBP231.4m (31 March 2022 restated(2) : GBP388.3m).
-- 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 GBP12.8m (2022: GBP18.0m). -- 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 GBP244.2m (31 March 2022 restated(2) : GBP147.0m).
-- 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 GBP681.7m (31 March 2022: GBP938.8m).
-- 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 GBP839.5m (31 March 2022: GBP1,097.3m).
-- Contracted rents of GBP39.0m (31 March 2022: GBP46.4m), compared to an ERV(1) of GBP60.4m (31 March 2022: GBP67.1m).
-- 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:
Hot Features
Premium
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
Twitter: @helicalplc
FTI Consulting 020 3727 1000
Dido Laurimore/Richard Gotla/Andrew Davis
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
The presentation will be on the Company's website www.helical.co.uk and a live webcast and Q&A will also be available.
Webcast Link:
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 GBP53m 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 GBP64.5m (2022: profit of GBP88.9m) with a see-through Total Property Return of -GBP51.4m (2022: +GBP89.5m). See-through net rental income increased by 7.2% to GBP33.5m (2022: GBP31.2m) while developments generated see-through profits of GBP3.2m (2022: GBP6.6m). The see-through net loss on sale and revaluation of the investment portfolio was GBP88.1m (2022: net gain of GBP51.7m).
Total see-through net finance costs reduced to GBP12.0m (2022: GBP19.7m), reflecting a lower level of debt and much lower debt cancellation costs of GBP0.1m (2022: GBP5.9m). An increase in expected future interest rates led to a GBP12.8m credit (2022: GBP18.0m) from the valuation of the Group's derivative financial instruments. Recurring see-through administration costs were 4.2% higher at GBP10.3m (2022: GBP9.9m), with performance related awards, reflecting the results for the year, reduced to GBP2.7m (2022: gain of GBP6.0m) and National Insurance on these awards of GBP0.3m (2022: GBP1.2m).
The election to become a REIT from 1 April 2022 has resulted in a GBPnil (2022: credit of GBP16.0m) 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 GBP839.5m (31 March 2022: GBP1,097.3m), 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 GBP39.0m (2022: GBP46.4m), equating to an average of GBP60 psf. This increases to GBP48.9m on the letting of currently vacant space as we move towards capturing the portfolio ERV of GBP60.4m (2022: GBP67.1m). 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 GBP244.2m (31 March 2022: GBP147.0m) to fund capital works on its portfolio and future acquisitions.
At 31 March 2023, the Group had GBP31.9m of cash deposits available to deploy without restrictions and a further GBP13.7m 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 GBP9.1m. Furthermore, the Group had GBP189.5m 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 GBP53.4m, 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 GBP0.7bn, 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 GBP1.7bn, 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 GBP7.6m, was sold for a headline disposal price of GBP158.5m. 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 GBP1,789 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 GBP16.5m (Helical share GBP8.2m). 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 GBP34.6m (GBP590 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 GBP12.9m 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
GBPm % GBPm % GBPm %
------------------------- ---------- ----- ----------- ----- ----- -----
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
GBPm GBPm GBPm %
---------------------- ---------- ---------- ------- ----------
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.
Capex Remaining Total
budget spend Pre-redeveloped New completed
(Helical share) (Helical share) space space space Completion
Property GBPm GBPm sq ft sq ft sq ft date
---------------------- ---------------- ---------------- --------------------- ------- ---------- --------------
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
value Passing ERV change
weighting rent Contracted rent ERV like-for-like
Investment portfolio % GBPm % GBPm % GBPm % %
----------------------- ---------- ------- ----- --------------- ----- ----- ----- --------------
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
GBPm
---------------------------------------------------------------- --------------------------------
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 Investment portfolio Investment portfolio
Valuation change excl sales and weighting weighting
inc sales and purchases purchases 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
up NIY up NIY yield yield True equivalent yield True equivalent 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
GBP psf GBP 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 (GBP) 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.
Contracted rent Rent roll
Rank Tenant Tenant industry GBPm %
------ ---------------- ------------------ --------------- ---------
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
Increase to
31 March 2022 ERV
Contracted rent (exc Plug and Play and Average
Area (Helical's share) Rent managed lettings) lease term to expiry
sq ft GBP GBP psf % 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
GBP64.5m (2022: profit of GBP11.5m (2022: GBP6.4m)
GBP88.9m)
Loss per share (EPS) EPRA EPS
52.6p (2022: earnings of 9.4p (2022: 5.2p)
72.8p)
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
-9.4% (2022: 15.0%) EPRA NTA
-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 GBP11.5m, or 9.4p per share compared to GBP6.4m or 5.2p last year. In addition, the Group disposed of GBP233m (our share GBP213m) 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 GBP64.5m (2022: profit of GBP88.9m) includes revenue from rental income and development management of GBP49.8m, offset by direct costs of GBP13.6m. The profit from joint venture activities added GBP3.5m and the net loss on sale and revaluation of investment properties was GBP93.3m. Administration expenses of GBP12.8m and net finance costs of GBP10.9m were offset by a gain in fair value of derivatives of GBP12.8m.
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 GBP33.5m, a net loss on sale and revaluation of the investment portfolio of GBP88.1m and development profits of GBP3.2m, leading to a Total Property Return of -GBP51.4m (2022: GBP89.5m). Total see-through administration costs of GBP13.3m (2022: GBP17.1m) and see-through net finance costs of GBP12.0m (2022: GBP19.7m) were partially offset by see-through derivative financial instrument gains of GBP12.8m (2022: GBP18.0m) and contributed to an IFRS pre-tax loss of GBP64.5m (2022: profit of GBP72.9m).
The election to become a REIT from 1 April 2022 has resulted in a GBPnil (2022: credit of GBP16.0m) tax charge for the year.
The loss for the year was GBP64.5m (2022: profit of GBP88.9m) 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 GBP840.4m (31 March 2022: GBP1,108.1m) 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 GBP92.8m, offset by capital expenditure on the investment portfolio of GBP24.0m.
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 GBP189.5m and cash of GBP54.7m 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
GBPm GBPm GBPm GBPm GBPm
---------------------- ----- ------- ------- ------- -------
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 GBP33.5m (2022: GBP31.2m) and development profits of GBP3.2m (2022: GBP6.6m), but excluding losses on sale and revaluation of investment properties of GBP88.1m (2022: gains of GBP51.7m).
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 GBP64.5m (2022: income of GBP88.9m), less GBP13.8m of dividends (2022: GBP12.6m).
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 GBP36.6m (2022: GBP35.3m), with gross rents in joint ventures remaining at GBP0.3m (2022: GBP0.3m). Property overheads in respect of wholly owned assets and in respect of those assets in joint ventures reduced to GBP3.4m (2022: GBP4.4m). Overall, see-through net rents increased by 7.2% to GBP33.5m (2022: GBP31.2m).
Included within gross rental income is GBP1.7m (31 March 2022: GBP5.8m) 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
GBP000 GBP000
---------------------- -------------- ---------------------------
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 GBP0.7m of income. Additional fees of GBP0.1m were recognised for carrying out accounting and corporate services at Barts Square, EC1 and The JJ Mack Building, EC1.
A profit of GBP1.0m on a retail scheme at East Ham and deferred consideration of GBP0.4m from the previous sale of the retirement villages portfolio added to development profits. Further development income on closing out legacy projects of GBP0.2m, offset by other costs of GBP0.4m, contributed to a net development profit in the Group of GBP2.0m (2022: GBP5.8m).
Share of Results of Joint Ventures
The revaluation of our investment assets held in joint ventures generated a surplus of GBP5.1m (2022: GBP18.5m). A profit of GBP1.3m (2022: GBP0.7m) was recognised in respect of sales at our Barts Square, EC1 residential development.
Finance, administration and other sundry costs totalling GBP2.3m (2022: GBP0.5m) were incurred. An adjustment to reflect our economic interest in the Barts Square, EC1 development to its recoverable amount generated a loss of GBP0.6m (gain of GBP0.8m), and after a tax charge of GBPnil (2022: credit of GBP1.2m), there was a net profit from our joint ventures of GBP3.5m (2022: GBP20.7m).
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 GBP88.1m (2022: gain of GBP51.7m).
Administrative Expenses
Administration costs in the Group, before performance related awards, increased from GBP9.6m to GBP9.9m, 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 GBP8.5m, a 13% reduction on the year to 31 March 2023.
Performance related share awards and bonus payments, before National Insurance costs, decreased to GBP2.7m (2022: GBP6.0m). Of this amount, GBP1.1m (2022: GBP3.2m), 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 GBP0.3m (2022: GBP1.2m).
In joint ventures, administrative expenses increased from GBP0.3m to GBP0.5m.
2023 2022
GBP000 GBP000
--------------------------------------------------------------- -------- --------
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 GBP1.0m (2022: GBP3.8m).
2023 2022
Group GBP000 GBP000
----------------------------------------------------------------------------------------------- -------- --------
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 instruments 1,839 (1,232)
------------------------------------------------------------------------------------------------ -------- --------
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 financial instruments 771 (1,678)
------------------------------------------------------------------------------------------------ -------- --------
Net finance costs excluding change in fair value of derivative financial instruments (11,986) (19,674)
------------------------------------------------------------------------------------------------ -------- --------
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 GBP13.5m in the Group (GBP1.7m in joint ventures) was released in the prior year, with a credit of GBP14.9m in the Income Statement and a charge of GBP1.4m 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 GBPnil (2022: credit of GBP1.1m), resulting in no tax charge or credit on the loss on ordinary activities (2022: total credit of GBP16.0m).
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 GBP687.0m. The Group had a loss of GBP64.5m (2022: profit of GBP88.9m), 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 GBPnil. The Company paid dividends to Shareholders during the year of GBP13.8m. The net decrease in Shareholders' Funds from Group activities during the year was GBP78.3m to GBP608.7m.
Investment Portfolio
Head
Wholly In joint leases Lease Book
owned venture See-through capitalised incentives value
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------- ----------------- --------- -------- ----------- ------------ ----------- ---------
Valuation at 31 March 2022 961,500 135,820 1,097,320 6,524 (25,002) 1,078,842
- wholly
Capital expenditure owned 10,523 - 10,523 (14) - 10,509
- joint ventures - 13,537 13,537 (29) - 13,508
- wholly
Letting costs amortised owned (200) - (200) - - (200)
- joint ventures - (12) (12) - - (12)
- wholly
Disposals owned (178,736) - (178,736) - 9,166 (169,570)
- joint ventures - (9,749) (9,749) - 98 (9,651)
Revaluation - wholly
surplus/(deficit) 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 GBP24.0m on capital works across the investment portfolio, at The JJ Mack Building, EC1 (GBP13.1m), 100 New Bridge Street, EC4 (GBP8.7m), The Bower, EC1 (GBP0.3m), The Loom, E1 (GBP1.3m), 25 Charterhouse Square, EC1 (GBP0.1m), Barts Square, EC1 (GBP0.4m) and Trinity, Manchester (GBP0.1m).
Revaluation losses resulted in a GBP94.3m decrease in the see-through fair value of the portfolio, before lease incentives, to GBP839.5m (31 March 2022: GBP1,097.3m). The accounting for head leases and lease incentives resulted in a book value of the see-through investment portfolio of GBP831.8m (31 March 2022: GBP1,078.8m).
Debt and Financial Risk
In total, the see-through outstanding debt at 31 March 2023 of GBP290.4m (31 March 2022: GBP440.9m) 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
facility utilised facility interest rate Average maturity of facilities
GBP000s GBP000s GBP000s % Years
---------------------------------- --------- --------- --------- ---------------- ------------------------------
GBP400m 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:
- GBP400m Revolving Credit Facility
The Group has a GBP400m 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 GBP693m (31 March 2022: GBP870m) 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 GBPnil (31 March 2022: GBPnil).
Cash and Cash Flow
At 31 March 2023, the Group had GBP244.2m (31 March 2022 restated: GBP147.0m) 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 GBP440.9m to GBP290.4m during the year to 31 March 2023. After deducting cash balances of GBP54.7m (31 March 2022 restated: GBP47.9m) and unamortised refinancing costs of GBP4.3m (31 March 2022: GBP4.7m), net borrowings decreased from GBP388.3m to GBP231.4m. The see-through gearing of the Group, including in joint ventures, decreased from 56.5% to 38.0%.
31 March
31 March 2022
2023 Restated(1)
------------------------------------------- --------- ------------
See-through gross borrowings GBP290.4m GBP440.9m
See-through cash balances GBP54.7m GBP47.9m
Unamortised refinancing costs GBP4.3m GBP4.7m
See-through net borrowings GBP231.4m GBP388.3m
Shareholders' funds GBP608.7m GBP687.0m
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 GBP230.0m (31 March 2022: GBP300.0m) 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 GBPnil floating rate debt (31 March 2022: GBP100.0m) with an effective rate of nil (31 March 2022: 3.5%). In addition, the Group had GBPnil interest rate caps (31 March 2022: GBP145m at an average rate of 1.75%). In our joint ventures, the Group's share of fixed rate debt was GBP60.4m (31 March 2022: GBP40.9m) 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 31 March
2023 Effective interest rate 2022 Effective interest rate
GBPm % GBPm %
--------------------- -------- ----------------------- -------- -----------------------
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
Year to Year to
31 March 31 March
2023 2022
Notes GBP000 GBP000
------------------------------------------------------------------------------- ----- --------- ---------
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
At At
At 31 March 31 March
31 March 2022 2021
2023 Restated(1) Restated(1)
Notes GBP000 GBP000 GBP000
--------------------------------------------- ----- --------- ------------ ------------
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 -
D erivative 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 2022
2023 Restated(1)
GBP000 GBP000
--------------------------------------------------------------- --------- ------------
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)
--------------------------------------------------------------- --------- ------------
N et 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
Capital
Share Share Revaluation redemption Own shares Other
capital premium reserve reserve held reserves Retained earnings Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------ -------- -------- ----------- ----------- ---------- --------- ----------------- --------
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 GBP1,073,000 (31 March 2022: GBP3,223,000) 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 GBP13,009,000 (31 March 2022: GBP10,012,000) made up of the Performance Share Plan credit of GBP1,073,000 (31 March 2022: GBP3,223,000) and related deferred tax charge of GBPnil (31 March 2022: charge of GBP1,325,000), dividends paid of GBP13,842,000 (31 March 2022: GBP12,582,000), the issued share capital of GBP10,000 (31 March 2022: GBP10,000) and corresponding share premium of GBP3,965,000 (31 March 2022: GBP4,610,000), share settled Performance Share Plan awards charge of GBP339,000 (31 March 2022: GBP3,591,000), the share settled bonus awards charge of GBP3,536,000 (31 March 2022: GBP1,031,000), deferred bonus shares of GBPnil (31 March 2022: GBP620,000) and the loss on the sale of shares of GBP240,000 (31 March 2022: profit of GBP54,000).
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 GBP400m 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
GBP000 GBP000
-------------------------------------------- --------- ---------
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 GBP5,000 was recognised in the year to 31 March 2023 (2022: GBP5,000).
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.
Investments Developments Total Developments Total
Year to Year to Year to Investments Year to Year to Year to
31.03.23 31.03.23 31.03.23 31.03. 22 31.03.22 31.03.22
Revenue GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------- ----------- ------------ --------- ------------------- ------------ ---------
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
---------------------------- ----------- ------------ --------- ------------------- ------------ ---------
Investments Developments Total Developments Total
Year to Year to Year to Investments Year to Year to Year to
31.03. 23 31.03.23 31.03.23 31.03. 22 31.03.22 31.03.22
Cost of sales GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------------- ----------- ------------ --------- ------------------- ------------ ---------
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)
---------------------------------- ----------- ------------ --------- ------------------- ------------ ---------
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
Profit before tax GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------------ ----------- ------------ --------- ----------- ------------ ---------
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
------------------------------------------ ----------- ------------ --------- ----------- ------------ ---------
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
Net assets GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------- ------------ ------------ ------------ ------------ ------------ ------------
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
GBP000 GBP000
---------------------------------- --------- ---------
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 GBP1,609,000 (2022: GBP5,638,000) of accrued income for rent free periods.
5. Profit on Sale of Investment Properties
Year to Year to
31 March 31 March
2023 2022
GBP000 GBP000
------------------------------------------------------------ --------- ---------
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
GBP000 GBP000
----------------------------------------------------- --------- ---------
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
GBP000 GBP000
------------------------------------------------------------------------------- --------- ---------
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
GBP000 GBP000
------------------------------------------------------- ------------- ---------
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: GBPnil).
9. Dividends
Year to Year to
31 March 31 March
2023 2022
GBP000 GBP000
------------------------------------------------------ --------- ---------
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 GBP10,732,000, 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 earnings per share 122,742 122,084
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 (loss)/earnings per share 122,742 124,446
----------------------------------------------------------------------------------------------- ---------- ---------
GBP000 GBP000
------------------------------------------------------------------------------------------- ---------- ---------
(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
----------------------------------------------------------------------------------------------- ---------- ---------
GBP000 GBP000
----------------------------------------------------------------------------- -------- --------
(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
- subsidiaries 93,290 (33,266)
- joint ventures (5,161) (18,473)
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
GBP000 GBP000
------------------------------ --------- ---------
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
GBP000 GBP000
------------------------------------------------------------------- --------- ---------
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 GBP9,620,000 (31 March 2022: GBP13,102,000). Interest capitalised during the year in respect of the refurbishment of investment properties amounted to GBPnil (31 March 2022: GBPnil) and an amount of GBP3,482,000 (31 March 2022: GBPnil) was released on the sale of the properties in the year.
The historical cost of investment property is GBP633,237,000 (31 March 2022: GBP739,231,000). 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
31 March value
2023 % GBP000
--------------------- --------- --------- ----------
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 GBP78.09
+ 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
Year to Year to
31 March 31 March
2023 2022
Share of results of joint ventures GBP000 GBP000
----------------------------------------------------------------------- ------------- -------------
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 interest(1) (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%.
At At
31 March 31 March
2023 2022
Investment in joint ventures GBP000 GBP000
----------------------------------------------------------------------- ------------- -------------
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
GBP000 GBP000
------------------------------------------------------------------- --------- ---------
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
GBP000 GBP000
---------------------- --------- ---------
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 GBP1,000,000 to invest in the Pi Labs European PropTech venture capital fund ("Fund") of which GBP47,000 (31 March 2022: GBP306,000) 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
GBP000 GBP000
------------------------------------ --------- ---------
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 GBP302,000 (31 March 2022: GBP302,000) above book value. This surplus has been included in the EPRA net tangible asset value (Note 22).
No interest has been capitalised or included in land and developments.
15. Trade and Other Receivables
At
At 31 March
31 March 2022
2023 Restated(1)
GBP000 GBP000
---------------------------------- --------- ------------
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 GBP13,987,000 (31 March 2022: GBP22,965,000).
16. Cash and Cash Equivalents
At
At 31 March
31 March 2022
2023 Restated(1)
GBP000 GBP000
-------------------------------- --------- ------------
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
GBP000 GBP000
------------------------------- --------- ---------
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
GBP000 GBP000
---------------------------- --------- ---------
Current lease liability 683 658
----------------------------- --------- ---------
Non-current lease liability 5,589 6,271
----------------------------- --------- ---------
Included within the lease liability are GBP683,000 (31 March 2022: GBP658,000) of current and GBP3,399,000 (31 March 2022: GBP4,082,000) 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
GBP000 GBP000
----------------------------- --------- ---------
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 2022
2023 Restated(1)
GBP000 GBP000
----------------- --------- ------------
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 GBP59,416,000 (31 March 2022: GBP39,585,000) and cash of GBP3,749,000 (31 March 2022: GBP4,474,000). All borrowings in joint ventures are secured.
At
At 31 March
31 March 2022
2023 Restated(1)
GBP000 GBP000
----------- --------- ------------
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
GBP000 GBP000
------------------------------------------- --------- ---------
Derivative financial instruments asset 23,245 11,104
-------------------------------------------- --------- ---------
Derivative financial instruments liability - (538)
-------------------------------------------- --------- ---------
A gain on the change in fair value of GBP12,757,000 has been recognised in the Consolidated Income Statement (31 March 2022: GBP17,996,000).
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
GBP000 GBP000
----------- --------- ---------
Authorised 39,577 39,577
------------ --------- ---------
The authorised share capital of the Company is GBP39,577,000 divided into ordinary shares of 1p each.
At At
31 March 31 March
2023 2022
GBP000 GBP000
---------------------------------------------------------------------- --------- ---------
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 At
31 March 31 March
2023 Number of shares 2022 Number of shares
GBP000 000 p GBP000 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 At
31 March 31 March
2023 Number of shares 2022 Number of shares
GBP000 000 p GBP000 000 p
------------------- --------- ---------------- --- --------- ---------------- ---
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
GBP000 GBP000
--------------------------------- --------- ---------
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 GBP50,000 (March 2022: GBP50,000) was charged by the Group to the Barts Square companies. In addition, a development management, accounting and corporate services fee of GBP779,000 (31 March 2022: GBP1,380,000) 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
GBP000 GBP000
------------------------------ ----------------- --------- ---------
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
GBP000 GBP000
--------------------------------------------------- --------- ---------
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
GBP000 GBP000
------------------------------------------------------------ ------------------ --------- ---------
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
GBP000 GBP000
------------------------------------------ ----------------- --------- ---------
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
GBP000 GBP000
---------------------------------------------- ----------------- --------- ---------
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
GBP000 GBP000
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 2022
2023 Restated(1)
GBP000 GBP000
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 2022
2023 Restated(1)
GBP000 GBP000
--------- ------------
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
GBP000 GBP000
--------- ---------
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
GBP000 GBP000
--------- ---------
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
GBP000 GBP000
------------------------------------------------------------- --------- ---------
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 GBP1,700,000 (31 March 2022: GBP13,100,000), 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.
31 March 31 March
31 March 2022 31 March 2021
2022 Restatement Restated 2021 Restatement Restated
Balance Sheet GBPm GBPm GBPm GBPm GBPm GBPm
--------
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 Year
Year ended Year ended Year ended ended ended
31.3.23 31.3.22 31.3.21 31.3.20 31.3.19
GBP000 GBP000 GBP000 GBP000 GBP000
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 31.3.22 31.3.21 At At
31.3.23 Restated(1) Restated(1) 31.3.20 31.3.19
GBP000 GBP000 GBP000 GBP000 GBP000
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 ventures 539 8,349 16,545 34,164 56,935
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
Vacancy rate
at 31 March
Area sq ft 2023 Vacancy rate at 31 March 2022
Property Description (NIA) % %
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
Single-let recording
The Power House, W4 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
Unsold
apartments Unsold apartments
at 31 March at 31 March
Property Description Total apartments 2023 2022
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 GBP613.5m GBP713.3m
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 GBP11.5m GBP6.4m
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 Changing market conditions leading to a Management constantly monitors the market and makes changes to the The Covid-19
strategy is reduction in demand or deferral of decisions Group's strategy in light pandemic had various
inconsistent with by occupiers, of market conditions. The Group conducts an annual strategic review strategic impacts on
the market impacting property values, could hinder the and maintains rolling property companies
Group's ability to buy, develop, let and sell forecasts, with inbuilt sensitivity analysis to model anticipated and uncertainty
assets as envisioned in its strategy. The economic conditions. regarding the full
location, size and mix of properties in The Group's management team is highly experienced and has a strong economic and social
Helical's track record of interpreting impacts of the
portfolio determine the impact of the risk. If the property market. Covid-19 pandemic
the Group's chosen markets underperform, the The small size of the Group's management team enables quick continues. Over the
impact on the Group's liquidity, investment implementation of strategic change course of the year,
property revaluations and rental income will when required. we have seen an
be We have robust and established governance and approval processes. improved sentiment
greater. We are active members of industry bodies and professional towards the future
organisations and participate in of the office, but
local business and community groups. This ensures we are actively the agile working
engaged in decisions affecting movement continues,
our business, customers, partners and communities. with many businesses
adopting hybrid
working practices.
It has become
evident that the
market favours the
best-in-class space
with strong
sustainability
credentials and
Helical's portfolio
is well positioned
to respond to this
trend. The office
is no longer seen as
a fixed asset, but
as an overall
workplace experience
that is not tied
to a physical
location and rather
is influenced by
increased investment
in onsite amenities,
better workplace
technology, flexible
space layout, work
models and increased
sustainability
credentials.
Consequently the
likelihood of this
risk has decreased.
Risks arising from The Group carries out significant development Management carefully reviews the risk profile of individual The Group completed
the Group's projects over a number of years and is developments and in some cases The JJ Mack
significant therefore builds properties in several phases to minimise the Group's exposure Building, EC1 in
development exposed to fluctuations in the market and to reduced demand for September 2022 and
projects tenant demand levels over time. particular asset classes or geographical locations over time. The is in preparation to
Development projects often require substantial Group carries out developments start
capital expenditure for land procurement and in partnership with other organisations and pre-lets space to reduce the enabling works
construction and they usually take a development risk, where at 100 New Bridge
considerable amount of time to complete and considered appropriate. Street, EC4 later in
generate The management team is highly experienced and has a track record of the year, as well as
rental income. developing best-in-class progressing
The risk of delays or failure to get planning office spaces in highly desirable, well connected locations. the three sites to
approval is an inherent risk of property Management places significant focus on timely project delivery and be developed in
development. strong relationships with joint venture with
The construction industry is faced with both construction partners with appropriate risk sharing. We opt to work TfL.
labour and materials supply shortages which with highly regarded suppliers There continues to
could and contractors to minimise cost uncertainty. be the risk of
lead to cost escalation and project delay. We typically enter into contracts with our contractors on a fixed insolvencies in the
Exposure to developments increases the price basis and incorporate construction
potential financial impact of cost inflation, appropriate contingencies. industry given the
adverse Development plans and exposure to risk are considered in the annual uncertainties
valuation or other market factors which could business plan. around the future
affect the Group's financial capabilities and Detailed planning pre-applications and due diligence are conducted in macroeconomic
targeted financial returns. advance of any site environment and
acquisition. geopolitical market
Board approval is required for commitments above a certain threshold. influences.
Management continuously monitors the cost of materials and pressures Despite
on supply chain and distribution technological
networks. Ongoing consideration is given to investing in the most advancements, supply
energy efficient machinery chain bottlenecks as
and building materials and using renewable sources of energy where a result of the
possible. pandemic,
Acceleration of digitalisation of logistics and supply chain recent geopolitical
management, such as real-time escalations and
warning systems that forecast shortages at an early stage, is crucial economic uncertainty
to respond agilely and (causing productions
avoid delays in real estate developments. to slow or even
halt), along with
labour shortages,
were, and still are,
challenges for the
sector and a risk
for the global
economy.
Consequently the
likelihood of this
risk has remained
the same.
Property values The property portfolio is at risk of valuation The Group's property portfolio has tenants from diverse industries, Although there has
decline/reduced falls through changes in market conditions, reducing the risk of over-exposure been a notable
tenant demand for including underperforming sectors or to one sector. We carry out occupier financial covenant checks ahead increase in the
space locations, lack of tenant demand, deferral of of approving leases in return of employees
occupiers' order to limit our exposure to tenant failure. Management reviews to their offices, a
decisions or general economic uncertainty. external data, seeks the number of corporates
Property valuations are dependent on the level advice of industry experts and monitors the performance of individual are continuing to
of rental income receivable and expected to assets and sectors in offer hybrid working
be receivable on that property in the future. order to dispose of non-performing assets and rebalance the portfolio opportunities.
Therefore, declines in rental income could to suit the changing Despite the strong
have market. Management regularly models different property revaluation market sentiment
an adverse impact on revenue and the value of scenarios through its forecasting towards new,
the Group's properties. process in order to prepare a considered approach to mitigating the best-in-class office
Whilst the impact of Covid-19 has reduced potential impact. space and given
significantly, there remains a risk of We continue to design and innovate in the areas of sustainability, Helical's
continued technology, wellbeing and Grade A portfolio,
economic downturn given the broader service provision and, working closely with our management agents, the severity of this
geopolitical climate, inflation and interest Ashdown Phillips, we engage risk has been
rate rises. with our occupiers to understand their evolving needs and respond increased to reflect
quickly and collaboratively the yield shifts
This could result in further pressure on rent to any changing requirements. seen in the market
collection figures with a prolonged period of The Board and management team continually monitor the property market. in response to
corporate failures, leading to a decline in The bi-weekly management inflation and
occupancy and increase in office vacancies. meeting considers factors such as new leases, lease events and tenant interest rate rises
This risk is further heightened by the recent issues with respect and recent bank
bank failures and impact on liquidity. to each property in the portfolio. failures.
Geopolitical and Significant events or changes in the global/UK Management monitors macroeconomic research and economic outlook Geo-political
economic political or economic landscape may have a considerations are incorporated uncertainty from
significant impact on the Group's ability to into the Group's annual business plan. conflicts continues
plan and deliver its strategic priorities in Management conducts ongoing assessments of post-Brexit impacts and the to affect global and
accordance with its business model. Such continuing effects local economies e.g.
events or changes may result in decreased of the Covid-19 pandemic. inflationary
investor We will continue to monitor the economic and political situations in pressures arising
activity and reluctance of occupiers to make the UK and globally and from supply chain
decisions with respect to office space uptake. adapt any business decisions accordingly. shortages, interest
Macro-economic drivers, such as interest Management seeks advice from experts to ensure it understands the rate rises and cost
rates, can significantly impact pricing in the political environment and of
real the impact of emerging regulatory and tax changes on the Group. It energy. These
estate market. For example, in order to curb maintains good relationships conflicts could
inflation the Bank of England has raised with planning consultants and local authorities. Where appropriate, escalate or spread
interest management joins with to include other
rates further and this will increase the cost industry representatives to contribute to policy and regulatory debate countries.
of borrowing, which will in turn provide relevant to the industry. More recently, the
challenge banking sector has
for investors. seen turmoil with
Political instability and unrest can have a the collapse of the
significant knock-on effect on global Silicon Valley
economies Bank and the
and trade (as evidenced by the Russo-Ukrainian acquisition of
war). Geopolitical risks lead to changed Credit Suisse by
market UBS. This has caused
dynamics and influence, such as the increasing instability in the
role of governments in economies and the global
shifts markets and concern
in geopolitical powers. for the rest of the
The ongoing transition of the UK from the EU financial sector.
remains a risk and has an impact on global However, whilst the
trade. duration of
inflation will
significantly impact
the sector along
with
the still uncertain
responding behaviour
of investors, real
estate as a sector -
along with
real estate
portfolios - will
remain an attractive
asset class.
Overall, this risk
has increased.
Climate change The Group is alive to the risks posed by The Group has a Sustainability Committee, which reviews the Group's Climate change risk
climate change. Failing to respond to these approach and strategy continues to
risks to climate related risks and presents regularly to the Board and increase in
appropriately (in line with societal attitudes Executive Committee on emerging prominence and
or legislation) or failing to identify issues and mitigation plans. The Board has a designated Non-Executive importance. In the
potential Director responsible UK, the Government
opportunities could lead to reputational for sustainability. The Committee sets appropriate targets and KPIs to continues to
damage, loss of income or decline in property effectively monitor introduce more
values. the Group's performance. legislation linked
Having strong sustainability credentials is a During the year, a detailed scenario analysis was performed to to climate risk e.g.
market differentiator and provides a ascertain the potential risks TCFD and legislation
competitive and opportunities that arise due to specific climate related requiring
advantage. scenarios. The outcome of this higher standards for
analysis has been incorporated into our wider TCFD statement. The energy efficiency in
There is also the risk that the costs to Group will conduct detailed commercial and
operate our business (energy or water) or scenario analysis of the risks and opportunities on an annual basis to residential
undertake ensure the appropriate properties (EPCs).
development activities (construction actions/responses are taken. The risks associated
materials) will rise as a consequence of Annually, the Group produces a Sustainability Performance Report with with the impact of
climate change key data and performance climate change
and the actions taken to safeguard against it. points which are externally assured. continue to increase
In May 2022, the Group released its Net Zero Carbon Pathway, which and businesses
commits to becoming net are being encouraged
zero carbon by 2030 and includes the actions and steps required to to proactively
meet the associated targets. respond by all their
stakeholders.
Building and
operating buildings
which are resilient
to climate change
protects Shareholder
value. Identifying
the risks and
opportunities that
are material to us
as a business under
a number of
different climate
scenarios allows us
to appropriately
align our mitigation
plan
and long-term
strategy.
This risk to the
business has not
changed since March
2022.
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 The inability to roll over existing facilities The Group maintains good relationships with many established lending During the year the
cost of bank or take out new borrowing could impact the institutions and borrowings Group restructured
borrowing, cash Group's ability to maintain its current are spread across a number of such lenders. its hedging to
resources and portfolio and purchase new properties. The Funding requirements are reviewed monthly by the management team, further protect its
potential breach of Group may which seeks to ensure that Revolving Credit
loan covenants forego opportunities if it does not maintain the maturity dates of borrowings are spread over several years. Facility from rising
sufficient cash to take advantage of them as Management monitors the cash levels of the Group on a weekly basis and interest rates. This
they arise and requires new sources of debt to maintains sufficient has resulted in the
finance its development programme. levels of cash resources and undrawn committed bank facilities to fund interest rate on
The Group is at risk of increased interest opportunities as they drawn amounts
rates on unhedged borrowings. arise. up to GBP250m under
If the Group breaches debt covenants, lending The Group hedges the interest rates on the majority of its borrowings, the RCF being fixed
institutions may require the early repayment effectively fixing for the duration of
of borrowings. or capping the rates over several years. the facility to July
Covenants are closely monitored throughout the year. Management 2026.
carries out sensitivity analyses The rise in interest
to assess the likelihood of future breaches based on significant rates will increase
changes in property values the cost of
or rental income. financing new
The risk is further mitigated through the obtaining of tenant development
guarantors/bank guarantees/deposits. opportunities.
The pandemic and
ensuing economic
uncertainty have put
some tenants under
cash flow pressure.
The Group has cash
and undrawn bank
facilities available
to it and an
appropriate level of
borrowings. However,
given the recent
banking failures and
economic climate, we
have increased
the severity of this
risk.
Operational Risks
Operational risks are internal risks that could prevent the
Group from delivering its strategy.
Our people and The Group's continued success is Our people Although there is
relationships with reliant on its management and staff The senior management team is very experienced with a high average strong competition
business partners and maintaining its successful length of service. The for talent in the
and reliance on relationships with its joint Nominations Committee and Board continuously review succession plans, employment market at
external partners venture partners. and the Remuneration present, this
Ineffective succession planning, or Committee oversees the Directors' Remuneration Policy and its risk has remained
failure to attract, develop and application to senior employees, broadly similar due
retain the right people and reviews and approves incentive arrangements to ensure they are to our high staff
with requisite skills, as well as commensurate with market retention levels.
failing to maintain a positive practice. Remuneration is set to attract and retain high calibre The Board reaffirmed
working environment for employees, staff. the succession plans
could inhibit the execution of our Our annual appraisal process focuses on future career development and for key roles within
strategy and diminish our long-term staff are encouraged the Company during
sustainability. to undertake personal development and training courses, supported by the year
As several of the Group's the Company. which support the
properties are held in conjunction The Board and senior management engage directly with employees through long-term success of
with third parties, the Group's a variety of engagement the business.
control over these properties is initiatives which enable the Board to ascertain staff satisfaction External factors
more limited and these structures levels and implement changes such as the Covid-19
may also reduce the Group's to working practices and the working environment as necessary. pandemic,
liquidity. We also arrange all-staff training activities and events throughout geopolitical
Operational effectiveness and the year. tensions and high
financing strategies may also be Business partners levels of demand
adversely impacted if partners The Group nurtures well established relationships with joint venture for certain raw
are not strategically aligned. partners, seeking future materials and
The Group is dependent on a number projects where it has had previous successful collaborations. components place
of external third parties to ensure Management has a strong track record of working effectively with a increased pressure
the successful delivery diverse range of partners. on supply chains and
of its development programme and Our joint venture business plans are prepared to ensure operational distribution
asset management of existing and strategic alignment networks.
assets. These include: with our partners. Given our reliance
* Contractors and suppliers; External partners on external third
The Group actively monitors its development projects and uses external parties to ensure
project managers to the successful
* Consultants; provide support. Potential contractors are vetted for their quality, delivery of our
health and safety record development
and financial viability prior to engagement. programmes and asset
* Managing agents; and The Group has a highly experienced team managing its properties, which management, these
regularly conduct on-site external factors
reviews and monitors cash flows against budget. could have a
* Legal and professional teams. The Group seeks to actively monitor and maintain excellent significant impact
relationships with its specialist on
professional advisors, often engaging parties with whom it has our business.
The Group would be adversely successfully worked previously. This risk has
impacted by increases in the cost remained at the same
of services provided by third level as assessed in
parties. March 2022.
Health and safety The nature of the Group's operations and The Group reviews and updates its Health & Safety Policy regularly and Whilst the amount of
markets exposes it to potential health and it is approved by the on-site development
safety Board annually. has fallen, this
risks both internally and externally within Contractors are required to comply with the terms of our Health & remains a key area
the supply chain. Safety Policy. The Group of focus for
engages an external health and safety consultant to review contractor the business and the
agreements prior to risk remains the
appointment and ensures they have appropriate policies and procedures same.
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 The Group's operations, reputation or In the event of a significant event: Global rollout of
business financial performance could be adversely * The Executive Committee will be tasked with the daily Covid-19
disruption/external affected and monitoring and managing of the risk, and will focus vaccinations has
catastrophic disrupted by major external events such as on the impact on property locations, the business and reduced the
event/cyber-attacks pandemic disease, civil unrest, war and supply chain. probability of
to our business geopolitical further significant
and our buildings instability, terrorist attacks, extreme and prolonged
weather, environmental incidents and power disruption due to
supply * Regular Board discussions will be held during any the disease.
shortages. pandemic to review the Group's response and The current
All of these potential events could have a mitigating actions. Russo-Ukrainian war
considerable impact on the global economy, as and associated
well sanctions are
as that of our business and our stakeholders. continuing to put
The Group relies on information technology * Enhanced engagement with our stakeholders will be pressure on
("IT") to perform effectively and a conducted (particularly with occupiers, contractors, global supply chains
cyber-attack shareholders and employees). and economies.
could result in IT systems being unavailable, Furthermore, the
adversely affecting the Group's operations and UK's terrorism
reputation. national threat
The increasing reliance on and use of digital * There will be continuous review of Government level continues to
technology heighten the risks associated with guidelines and emerging practice, with risk be rated as
IT and cyber security. assessments undertaken as control measures change. "substantial".
Commercially sensitive and personal Cyber risks persist
information is electronically stored by the as cyber criminals
Group. Theft continue to exploit
of this information could adversely impact the * Guidance will be issued to our staff, occupiers and changes in working
Group's commercial advantage and result in contractors on how to protect themselves and others. practices
penalties where the information is governed by post-pandemic.
law (GDPR and Data Protection Act 2018). The Group's cyber
Risks are continually evolving, and we must The Group ensures that it has adequate Business Continuity security controls
design, implement and monitor effective Plans and IT Business Continuity have continued to be
controls Plans in place to enable remote working for all staff. strengthened and no
to protect the Group from cyber-attack or Testing of business resilience and risk planning is major breaches
major IT failure. conducted throughout the year. were reported during
The Group increasingly employs IT solutions The Group engages and actively manages external IT experts the year.
across its property portfolio to ensure its to ensure its IT systems operate However, as the
buildings effectively and that we respond to the evolving IT security number of UK
are "smart". environment. This includes regular businesses reporting
The Group is at risk of being a victim of off-site backups and a comprehensive disaster recovery security threats has
social engineering fraud. process. The external provider also not decreased over
ensures the system is secure and this is subject to routine the year, we have
testing including bi-annual disaster not revised the risk
recovery tests and annual Cyber Essential Plus severity rating for
Certification. the forthcoming
There is a robust control environment in place for invoice year.
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 Reputational damage resulting in a loss of The Group believes that successfully delivering its strategy and This risk is
stakeholder credibility with key stakeholders including mitigating its principal consistent for the
relations and Shareholders, risks should protect its reputation. business due to the
non-compliance with analysts, banking institutions, contractors, The Group regularly reviews its strategy and risks to ensure it is ever changing legal
prevailing managing agents, tenants, property acting in the interests and regulatory
legislation, purchasers/sellers of its stakeholders. landscape
regulation and best and employees is a continuous risk for the The Group maintains a strong relationship with investors and analysts the business
practice Group. through regular meetings. operates in. Impact
The nature of the Group's operations and We ensure strong community involvement in the design process for our of regulatory change
markets exposes it to financial crimes risks developments and create and scrutiny on
(including employment and education opportunities through our construction and operational
bribery and corruption risks, money laundering operations activities. resilience
and tax evasion) both internally and A Group Disclosure Policy and Share Dealing Code, Policy & Procedures and management
externally have been circulated practices continues
within the supply chain. to all staff in accordance with the UK Market Abuse Regulation (UK to be a risk for our
The Group is exposed to the potential risk of MAR). business.
acquiring or disposing of a property where the The Group's anti-bribery and corruption and whistleblowing policies Therefore, the risk
owner/purchaser has been involved in criminal and procedures are reviewed remains at a similar
conduct or illicit activities. and updated annually and emailed to staff and displayed on our level.
The Group would attract criticism and negative website. Projects with greater
publicity were any instances of modern slavery exposure to bribery and corruption are monitored closely.
and human trafficking identified within its The Group avoids doing business in high-risk territories. The Group
supply chain. has related policies and
The Group would attract criticism and negative procedures designed to mitigate bribery and corruption risks
publicity if instances of non-compliance with including:
GDPR and the Data Protection Act 2018 were Know Your Client checks, due diligence processes, capital expenditure
identified. Non-compliance may also result in controls, contracts
financial risk assessment procedures, and competition and anti-trust guidance.
penalties. 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
www.helical.co.uk
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