Annual Report • May 24, 2016
Annual Report
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RNS Number : 0696Z
Helical Bar PLC
24 May 2016
24 May 2016
HELICAL BAR PLC
("Helical" or the "Group" or the "Company")
Unaudited Preliminary Results for the Year to 31 March 2016
HELICAL DELIVERS A RECORD YEAR
Michael Slade, Chief Executive, commented:
"I am extremely proud to announce today's record results which show rental levels, investment gains, pre-tax profits, shareholders' funds and EPRA net asset value per share all at the highest level in Helical's 32 year history as a real estate company. These results clearly demonstrate that our strategy of targeting London for capital growth and development profits and the regions for higher yielding investment assets provides the most appropriate allocation of resources to enable us to meet our long term objectives.
"The greatest proportion of our performance this year has come from London where we have increased our portfolio weighting, primarily with the purchase of The Bower EC1. We also increased our weighting in industrial assets whilst reducing our exposure to retail. We have sold our Polish assets and continue to deliver on our retirement village programme.
"Since 2012, we have targeted an income producing investment portfolio representing at least 75% of our total property assets with our development programme making up the remaining 25% which is capable of producing exceptional profits. We have now exceeded our original targets and, as we complete the current development programme over the next three years, our objectives are clear. We seek to:
· Complete and let our London office schemes at The Bower, One Creechurch Place, One Bartholomew Close and Charterhouse Square;
· Complete the residential scheme at Barts Square and sell the remaining units;
· Capture the reversion in our investment portfolio;
· Maintain and grow a sustainable investment income surplus; and
· Take forward our London schemes in Hammersmith and Drury Lane and at the appropriate time restock the London development pipeline to enable us to continue to create capital growth and development profits.
"We aim to do this against a background of increasing uncertainty, exacerbated by the imminent possibility of the UK voting to leave the European Union. However, with substantially increased contracted rents on our portfolio and having de-risked our two largest London office developments at One Creechurch Place EC3 and One Bartholomew Close EC1, Helical is well placed to deal with any headwinds that may come its way.
"This will be my last Chief Executive's Statement after nearly 32 years with the Company. I joined the Board on the 21 August 1984 when the equivalent share price was around one pence per share giving a market capitalisation of c. £800,000 and with Helical Bar plc a steel company making reinforcement bars for the construction industry. I joined the Company to change things. With a quick sale of the steel business followed by over 30 years as an entrepreneurial property company, Helical has grown to have a current market capitalisation of over £460m having distributed £276m to shareholders during that period. I now look forward to becoming Chairman and leave the Company in the excellent hands of my successor, Gerald Kaye, and the wider executive team who have an average tenure with the Company of a mere 19 years! I look forward to continuing both on the Board and as the Company's largest shareholder and am confident that Helical's outperformance will continue."
Financial Highlights
Record results
· EPRA net asset value per share up 19.7% to 461p (2015: 385p).
· CAGR of EPRA net asset value per share over three years of 20.4% pa (2015: 15.5% pa).
· EPRA earnings per share of 17.1p (2015: 2.4p) - up 613%.
· IFRS Profit before tax of £120.1m (2015: £87.4m) - up 37%.
· Total Property Return of £170.6m (2015: £155.3m) - up 10%.
- Group's share of net rental income of £43.4m (2015: £38.6m) - up 12%.
- Development profits of £27.5m (2015: £17.6m) - up 56%.
- Net gain on sale and revaluation of investment properties of £99.7m (2015: £96.6m).
· Final dividend proposed of 0.72p per share, increasing total dividend per share to 8.17p (2015: 7.25p) - up 12.7%.
Strong capital returns
· Group's share of property portfolio £1,240m (2015: £1,021m) - up 21%.
· Unleveraged return of property portfolio as measured by IPD of 21.7% (2015: 20.4%) compared to 11.4% (2015: 17.5%) for the benchmark index.
· Investment property valuations, on a like-for-like basis, up 14.9% (11.1% including sales and purchases) with London office valuations up 30.8% (18.8% including sales and purchases).
Secure financial position
· See-through loan to value of 40% on a secured basis (2015: 34%) and 55% overall (2015: 52%).
· Average maturity of the Group's share of debt of 4.5 years (2015: 4.3 years) at an average cost of 4.2% (2015: 4.1%).
· Group's share of cash and undrawn bank facilities at 31 March 2016 of £193m (2015: £229m).
Operational Highlights
London portfolio well positioned to provide future development surpluses whilst being highly reversionary - delivering c. 80% of property returns
· 18.8% valuation increase of London investment portfolio (2015: 9.2%), now valued at £593m (56% of total investment portfolio).
· Lettings at The Bower EC1, Shepherds Building W14, C-Space EC1 and One King Street W6 increased contracted gross rents on London portfolio to £23.6m (2015: £8.7m) compared to an ERV of £45.4m (2015: £28.1m).
· Offices at The Bower EC1 acquired for £248m (with Helical reinvesting its existing 1/3rd ownership), Joint venture partner Crosstree acquired the retail parade for £23m and Empire House sold for £20.65m in November 2015, a 38% premium to 31 March 2015 book value.
- First phase 100% let
- Second phase under construction
· At Barts Square EC1, 102 residential units exchanged at 23 May 2016 (31 March 2015: 56 units) and two reserved on phase 1 of 144 units.
· At One Bartholomew Close EC1, the site was sold for £102.4m and the 213,000 sq ft office development forward funded, releasing £34m cash to Helical.
· Major refurbishment commenced at Charterhouse Square EC1, increasing the office space to 38,500 sq ft with 5,100 sq ft of retail, with delivery in early 2017.
· At Drury Lane & Dryden Street WC2 a resolution to grant planning was issued for a residential led scheme of 62 apartments.
· Power Road Studios W4, a 62,000 sq ft office complex of five buildings acquired for £34m.
Regional portfolio
· Contracted gross rents on regional investment portfolio (44% of total investment portfolio) of £32.4m.
· Regional investment portfolio increased with the purchase of £89m of high yielding industrial/logistics warehouses.
· 3.0% valuation increase on regional offices dominated by performance of Churchgate and Lee House in Manchester.
· Regional investment portfolio now comprises 22% offices, 13% in town retail, 17% retail parks, 46% industrial/logistics and 2% other.
· Sale of 16 regional assets comprising eight industrial units, three regional offices and five retail assets for £67m in total.
Succession strategy delivered
· Michael Slade to step down as Chief Executive at 2016 AGM and remain on the Board as Non-Executive Chairman.
· Gerald Kaye to be appointed Chief Executive at 2016 AGM.
· Nigel McNair Scott, Chairman, and Andrew Gulliford, Non-Executive Director, to retire at the 2016 AGM.
· Susan Clayton and Richard Cotton appointed Non-Executive Directors to provide further independence and balance to the Board.
For further information, please contact:
| Helical Bar plc | 020 7629 0113 | |
| Michael Slade (Chief Executive) | ||
| Gerald Kaye (Chief Executive Designate) | ||
| Tim Murphy (Finance Director) | ||
| Address: | 5 Hanover Square, London W1S 1HQ | |
| Website: | www.helical.co.uk | |
| FTI Consulting | 020 3727 1000 | |
| Dido Laurimore/Tom Gough/Clare Glynn | ||
Full Year Results Presentation
Helical will be holding a presentation for analysts and investors at 9:30am (BST), Tuesday 24 May 2016 at FTI Consulting, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD. If you would like to attend, please contact Jenni Nkomo on 020 3727 1000, or [email protected].
The presentation will be on the Company's website www.helical.co.uk and a conference call facility will be available. The dial-in details are as follows:
| Participants, Local - London, United Kingdom: | +44(0)20 3427 1916 |
| Confirmation Code: | 7221684 |
Financial Highlights
| See-through Income Statement | Notes 1 |
Year To 31 March 2016 £m |
Year To 31 March 2015 £m |
Year To 31 March 2014 £m |
| Net rental income | 43.4 | 38.6 | 29.8 | |
| Development property profits | 27.5 | 17.6 | 65.0 | |
| Trading property profits | - | 2.5 | 0.3 | |
| Gain on revaluation of investment properties | 55.8 | 93.0 | 36.4 | |
| Gain on sale of investment properties | 43.9 | 3.6 | 8.6 | |
| Total property return | 170.6 | 155.3 | 140.1 | |
| Profit before tax | 120.1 | 87.4 | 101.7 | |
| EPRA earnings | 19.6 | 2.8 | 38.9 | |
| Earnings Per Share and Dividends | pence | pence | pence | |
| Basic earnings per share | 2 | 96.1 | 64.6 | 75.0 |
| Diluted earnings per share | 2 | 92.6 | 60.8 | 73.2 |
| EPRA earnings per share | 2 | 17.1 | 2.4 | 33.3 |
| Dividends per share paid in period | 12.60 | 6.85 | 5.70 | |
| Dividends per share declared for period | 8.17 | 7.25 | 6.75 | |
| See-through Balance Sheet | 3 | At 31 March 2016 £m |
At 31 March 2015 £m |
At 31 March 2014 £m |
| See-through property portfolio | 1,240.0 | 1,021.4 | 801.7 | |
| See-through net borrowings | 681.8 | 531.9 | 365.1 | |
| Net assets | 486.2 | 404.4 | 340.5 | |
| Net assets per share, gearing and loan to value | ||||
| EPRA net asset value per share | 2 | 461p | 385p | 313p |
| See-through loan to value | 4 | 55% | 52% | 46% |
| See-through net gearing | 5 | 140% | 132% | 107% |
| See-through net asset value gearing | 6 | 125% | 113% | 99% |
Notes
1. Includes Group's share of income and gains of its subsidiaries and joint ventures. See Appendix 1.
2. Calculated in accordance with IAS 33 and guidance issued by the European Public Real Estate Association ("EPRA"). EPRA earnings per share exclude the net gain on sale and revaluation of the investment portfolio of £99.7m (2015: £96.6m) but include development profits of £27.5m (2015: £17.6m).
3. Includes the Group's share of assets and liabilities of its subsidiaries and joint ventures. See Appendix 1.
4. See-through loan to value is the ratio of see-through net borrowings to see-through property portfolio. See Appendix 2.
5. See-through net gearing is the ratio of see-through net borrowings to net assets. See Appendix 2.
6. See-through net asset value gearing is the ratio of see-through net borrowing to EPRA net asset value.
See Appendix 2.
Chief Executive's Statement
Overview
I am extremely proud to announce today's record results which show rental levels, investment gains, pre-tax profits, shareholders' funds and EPRA net asset value per share all at the highest level in Helical's 32 year history as a real estate company. These results clearly demonstrate that our strategy of targeting London for capital growth and development profits and the regions for higher yielding investment assets provides the most appropriate allocation of resources to enable us to meet our long term objectives.
The greatest proportion of our performance this year has come from London where we have increased our portfolio weighting, primarily with the purchase of The Bower EC1. We also increased our weighting in industrial assets whilst reducing our exposure to retail. We sold our Polish assets and continue to deliver on our retirement village programme.
Within the investment portfolio we have a strong and diverse tenant profile. We have increased contracted rents by £12.7m (29% increase) from new lettings and by capturing some of the reversionary potential of the portfolio and expect this growth to continue. Our London investment portfolio remains highly reversionary and its inherent value will be unlocked through the completion of our redevelopment and refurbishment programme and the letting of the vacant and remaining reversionary space. London continues to outperform the rest of the UK and our strategy is to increase our London holdings.
We now have an investment portfolio poised for future earnings growth which, if supported by a benign economic background, should lead to substantial capital appreciation.
Performance
We measure our performance at both portfolio and Company level, seeking to outperform in the medium and long term relevant sector indices and our peer group.
EPRA earnings per share increased from 2.4p to 17.1p, reflecting growing net rental income and increased development profits. On a like-for-like basis, the investment portfolio increased by 14.9% (11.1% including sales and purchases) contributing to an overall growth in the portfolio to £1,240m (2015: £1,021m). The unleveraged return of our property portfolio, as measured by IPD, was 21.7% (2015: 20.4%), compared to 11.4% (2015: 17.5%) for the benchmark index. These investment gains contributed to an increase in EPRA net asset value per share, up 19.7% to 461p (2015: 385p). Since the start of 2016, the listed real estate sector has been affected by concerns over global economic issues and the forthcoming referendum on our membership of the European Union. Despite this, we achieved a positive Total Shareholder Return for the year to 31 March 2016 of 1.0% (2015: 7.6%), compared to the sector index which fell by 6.4% (2015: increase of 22.8%).
Results for the Year
The profit before tax for the year to 31 March 2016 was £120.1m (2015: £87.4m), the highest in the Group's history. Total Property Return increased by 10% to £170.6m (2015: £155.3m) and included growing net rents of £43.4m, an increase of 12% on 2015 (£38.6m), and development profits of £27.5m (2015: £17.6m). The gain on sale and revaluation of the investment portfolio contributed £99.7m (2015: £96.6m) and there were no trading profits (2015: £2.5m).
Net finance costs of £22.6m were lower than in 2015 (£24.8m), however the income statement was adversely affected by falls in expected future interest rates which led to a £6.9m (2015: £8.4m) charge arising from the valuation of the Group's derivative financial instruments. The valuation of the Group's Convertible Bond provided a credit of £0.5m (2015: charge of £3.3m). Recurring administration costs were marginally higher at £10.7m (2015: £10.2m). Performance related awards, reflecting the success of the Group's activities in the year were £13.3m (2015: £13.4m). National Insurance costs on remuneration, including performance related awards, were £2.1m (2015: £3.0m).
These results allow the Board to continue its progressive dividend policy and to recommend to shareholders a final dividend of 0.72p which, together with the two interim dividends paid to date of 7.45p takes the total dividend for the year to 8.17p (2015: 7.25p), an overall increase of 12.7%.
The London Portfolio
The London investment and development portfolio continues to contribute the greater proportion of capital growth and development profits. In the year to 31 March 2016, London provided c. 80% of the total property return of £170.6m (2015: £155.3m).
Since 2010 we have steadily acquired property in two "clusters"; the Tech Belt districts of Farringdon, Shoreditch, Aldgate and through to Whitechapel and the West London districts of Hammersmith, Shepherds Bush and Chiswick.
The East
At The Bower EC1, we have acquired the outstanding 2/3rd interest from our joint venture partner Crosstree Real Estate Partners LLP ("Crosstree"), of the buildings known as The Warehouse (122,858 sq ft of offices, 5,404 sq ft of restaurant use) and The Studio (18,283 sq ft of offices, 4,894 sq ft of restaurant use). Construction work on these two buildings was completed in November 2015 and both are fully let at average office rents of £55.00 psf and £43.85 psf respectively. In addition, we have acquired The Tower at 207 Old Street, a 179,000 sq ft refurbishment and extension of the existing building on which work has commenced and is due for completion Q1 2018. At £248m, this purchase is our largest ever acquisition and strongly reaffirms our belief in the London office market. The remaining buildings at The Bower, being Empire House and the retail parade, were sold by the joint venture to Standard Life and Crosstree respectively.
At Barts Square EC1, our scheme in joint venture with The Baupost Group LLC, we have now exchanged contracts for sale at an average of £1,580 psf on 102 of the 144 residential units with a further two units reserved in phase 1 of the development which is due for completion in summer 2017. The office development of 212,858 sq ft at One Bartholomew Close EC1 has been forward funded with clients of Ashby Capital, is currently under construction and is due for completion in July 2018.
Our 272,426 sq ft office development at One Creechurch Place EC3, equity funded with our joint venture partner HOOPP (Healthcare of Ontario Pension Plan) is expected to complete in September 2016. C-Space EC1 completed its refurbishment in October 2015 and is 75% let at an average rent of £56 psf. At 23-28 Charterhouse Square EC1 we have commenced construction works, due to complete in Q1 2017 on a refurbishment which will comprise 38,500 sq ft of offices and 5,100 sq ft of retail/restaurant use. Our 112,000 sq ft listed building at The Loom, Whitechapel E1 is now undergoing a comprehensive refurbishment and is due for completion in September 2016.
The West
There has been substantial growth in rents at our West London properties. At Shepherd's Building W14 we have completed the lease renewal and increased the space let to our largest tenant Endemol, increasing the rent by £1.25m pa, with average rents for the building now £45.75 psf. At One King Street W6 following the completion of the refurbishment works, we have achieved a benchmark rent for the area of £55.00 psf. We have added to our portfolio with the acquisition of Power Road Studios W4, 62,000 sq ft of offices over five buildings acquired for £34m.
The Regional Portfolio
The regional investment and development portfolio provides a growing stream of net rents from a high yielding investment portfolio while contributing development profits from our retirement village and retail development programmes.
The regional investment portfolio increased to £460m at 31 March 2016 (2015: £420m) with the addition of 13 distribution warehouses and a regional office for an aggregate £94m, offset by the sale of eight distribution warehouses, five retail assets and three regional offices for £67m. Regional assets contributed £31.0m of net rental income during the year (2015: £30.7m) which is expected to continue to grow with contracted rents on the portfolio of £32m and an ERV of £36m. Net gains on the sale and revaluation of the regional portfolio contributed £6.7m (2015: £18.8m).
Our regional development exposure is limited to our retirement village, out-of-town retail development programmes and our Scottish Power project in Glasgow, where balance sheet risk is limited. At our retirement village development programme we continued the construction of units at Durrants Village Horsham, Millbrook Village Exeter and Maudslay Park Great Alne, near Stratford-upon-Avon. During the year we completed the clubhouse at Durrants Village and sold 33 residential units at the three schemes (2015: 25 units). In our retail development programme, we have completed our scheme at Shirley, West Midlands and continue to make progress on our scheme at Truro. Subsequent to the year end we forward funded a 79,750 sq ft out-of-town retail development at Cortonwood with a client of Aberdeen Asset Management. The Scottish Power project is pre-let and pre-sold and due for completion in September 2016. As part of the overall deal Helical takes on three existing Scottish Power sites which are surplus to requirements. One has been sold and good progress is being made on the business plans for the other two.
Finance
The Group has expanded its activities significantly in the last three years, seeking to increase shareholder funds through the generation and retention of increased net rental streams, development profits and valuation surpluses. This growth has been financed through an increase in secured debt borrowed primarily from UK high street banks and, since 2013, through the use of unsecured debt in the form of a retail bond and a convertible bond. In assessing the needs of the business the Company is conscious that it needs to manage any risks inherent in this leveraged approach to growing the business. It seeks to do this through the use of unsecured debt (23% of total debt), by increasing the maturity of its debt profile and by hedging its interest rate exposure. In addition, the Group's debt profile includes borrowings in respect of residential and retirement village developments which are expected to be repaid as sales complete.
In pursuing this strategy, the Group has increased the average debt maturity to 4.5 years (2015: 4.3 years), with no secured loan repayable before November 2019, whilst marginally increasing the average cost of debt at 4.2% (2015: 4.1%). The Group continues to retain a significant level of liquidity with cash and unutilised bank facilities of £193m (2015: £229m) to fund capital works on its portfolio.
Board Changes
As previously announced with our half year results, I will be handing over the reins of the Company to Gerald Kaye, our senior development director for the last 22 years, and I will stand to be re-elected as Non-Executive Chairman, at the 2016 Annual General Meeting. At that AGM, Nigel McNair Scott, our current Chairman, former Finance Director and my close friend and confidant, will retire after 30 years on the Board. Nigel has proved to be a constant source of advice, support and wisdom during his time at Helical and I wish him a long and happy retirement.
The AGM will also see the retirement of Andrew Gulliford, a Non-Executive director for the last ten years. Andrew has also proved to be a tremendous support to the Board and his contribution is greatly appreciated. With these two planned departures we have sought to strengthen the Board with the addition of two new independent Non-Executive Directors and were delighted to be able to announce the appointments of Susan Clayton and Richard Cotton earlier this year.
Outlook
Since 2012, we have targeted an income producing investment portfolio representing at least 75% of our total property assets and a development programme of the remaining 25% which is capable of producing exceptional profits. We have now exceeded our original targets and, as we complete the current development programme over the next three years, our objectives are clear. We seek to:
· Complete and let our London office schemes at The Bower, One Creechurch Place, One Bartholomew Close and 23-28 Charterhouse Square;
· Complete the residential scheme at Barts Square and sell the remaining units;
· Take forward our London schemes in Hammersmith and Drury Lane and at the appropriate time restock the London development pipeline to enable us to continue to create capital growth and development profits;
· Capture the reversion in our investment portfolio; and,
· Maintain and grow a sustainable investment income surplus.
We aim to do this against a background of increasing uncertainty, exacerbated by the imminent possibility of the UK voting to leave the European Union. However, with substantially increased contracted rents on our portfolio and having de-risked our two largest London office developments at One Creechurch Place EC3 and One Bartholomew Close EC1, Helical is well placed to deal with any headwinds that may come its way.
Finally, this will be my last Chief Executive's Statement after nearly 32 years with the Company. I joined the Board on the 21 August 1984 when the equivalent share price was around one pence per share giving a market capitalisation of circa £800,000 and with Helical Bar plc a steel company making reinforcement bars for the construction industry. I joined the Company to change things. A quick sale of the steel business followed by over 30 years as an entrepreneurial property company, Helical has grown to have a current market capitalisation of over £460m having distributed £276m to shareholders during that period. I now look forward to becoming Chairman and leave the Company in the excellent hands of my successor, Gerald Kaye, and the wider executive team who have an average tenure with the Company of a mere 19 years! I look forward to continuing both on the Board and as the Company's largest shareholder and am confident that Helical's outperformance will continue.
Michael Slade
Chief Executive
24 May 2016
Our Strategy
Overview
Helical is a UK focused property company investing in London for capital growth and development profits and the regions for income.
Locate assets with significant potential
We use our knowledge of the market and our extensive network of contacts to seek out assets where we see the potential to add significant value. Our development schemes are focused on delivering innovative and modern space, whilst retaining local character. We target areas where we anticipate strong growth. Our asset management opportunities focus on maximising income through attracting and maintaining a balanced and diverse portfolio of tenants and driving increases in the rental value through refurbishment programmes that make intelligent use of space and deliver high yielding assets.
Structure and funding
When the Group identifies assets that it intends to develop or asset manage and hold for the longer term, it uses its own capital combined with appropriate external debt.
Where we see significant potential to create profit in the short to medium term and are keen to limit our equity commitment and risk exposure, we look to bring in a partner. Our approach to working with our partners includes:
• Co-investing alongside a larger partner where we have a minority equity stake, whilst receiving a "waterfall" payment whereby we obtain a greater profit share than the percentage of our investment, depending upon the profitability of the project. This strategy is used for the developments at Barts Square, London EC1 and One Creechurch Place, London EC3.
• Managing the development process from site acquisition, through construction to letting or sale. In these structures we do not own the asset, committing no or minimum equity. Our return is linked to the profitability of the development, allowing us to potentially benefit from a significant profit that reflects our contribution to the project's success. We are using this strategy in the development of the office at One Bartholomew Close, London EC1.
Develop, let and asset manage
We actively manage our developments from inception to completion. Our close involvement allows us to continue to develop and improve the design whilst being able to rapidly respond to challenges as they arise. Key to this is working closely with trusted contractors who share our values and are focused on quality, health and safety, sustainability and consideration for the local community.
Building strong relationships with our tenants and having a good understanding of their business, combined with a detailed knowledge of the market, is fundamental to our approach to maximising rental value and maintaining a high level of occupancy. We actively look to redevelop space where we can see the opportunity to better meet market demands, allowing us to drive rental value and help secure the future of the asset.
Exit
Determining the most appropriate time to sell an asset is critical in crystallising value. We look to dispose of a property when we believe future market growth is limited, where we have limited opportunity to add further value, or when we see greater value elsewhere. Our view of the market and the availability of other opportunities determines whether we reinvest the equity into new properties, repay debt or return capital to shareholders.
Our risk strategy
Risk is an integral part of any group's business activities and Helical's ability to identify, assess, monitor and manage each risk to which it is exposed is fundamental to its financial stability, current and future financial performance and reputation. As well as seeing changes in our internal and external environment as potential risks, we also see them as being opportunities which can drive performance.
Risk management starts at Board level where the Directors set the overall risk appetite of the Group and the risk management strategies. Helical's management runs the business within these guidelines and part of its role is to act within these strategies and to report to the Board on how they are being operated.
The Group's risk appetite and risk management strategies are continually assessed by the Board to ensure that they are appropriate and consistent with the Group's overall strategy and with external market conditions. The effectiveness of the Group's risk management strategy is reviewed every six months by the Audit Committee and by the full Board.
The Board has ultimate responsibility for risk within the business. However the small size of our team and our flat management structure allows the Executive Directors to have close contact with all aspects of the business and allows us to ensure that the identification and management of risks and opportunities is part of the mindset of all decision makers at Helical.
The principal risks faced by the Group, and the steps taken by the Group to mitigate these risks, can be found in Appendix 5.
Performance
We measure our performance using a number of financial and non-financial key performance indicators ("KPIs").
We incentivise management to outperform the Group's competitors by setting appropriate levels for performance indicators against which rewards are measured. We also design our remuneration packages to align management's interests with shareholders' aspirations. Key to this is the monitoring and reporting against identifiable performance targets and benchmarks.
Investment Property Databank
The Investment Property Databank ("IPD") produces a number of independent benchmarks of property returns which are regarded as the main industry indices.
IPD has compared the ungeared performance of Helical's total property portfolio against that of portfolios within IPD for the last 20 years. The Group's annual performance target is to exceed the top quartile of the IPD database, which it has consistently achieved. Helical's ungeared performance for the year to 31 March 2016 was 21.7% (2015: 20.4%) compared to the IPD median benchmark of 11.4% (2015: 17.5%) and upper quartile benchmark of 13.0% (2015: 19.7%). Helical's portfolio unleveraged returns to 31 March 2016 were as follows:
| 1 yr % pa |
3 yrs % pa |
5 yrs % pa |
10 yrs % pa |
20 yrs % pa |
|
|---|---|---|---|---|---|
| Helical | 21.7 | 22.0 | 15.8 | 10.0 | 15.0 |
| IPD | 11.4 | 14.1 | 10.4 | 5.5 | 9.2 |
| Helical's Percentile Rank | 4 | 4 | 5 | 4 | 1 |
Source: Investment Property Databank
Helical's trading and development portfolio (15% of gross assets) is shown in IPD at the lower of book cost or fair value and uplifts are only included on the sale of an asset.
EPRA Net asset value per share
A property company's share price should reflect growth in net assets per share. Our Group's main objective is to maximise growth in assets from increases in investment portfolio values and from retained earnings from other property related activities. Net asset value per share represents the share of net assets attributable to each ordinary share. Whilst the basic and diluted net asset per share calculations provide a guide to performance, the property industry prefers to use an EPRA adjusted net asset per share to represent the fair value of net assets on an ongoing long term basis. The adjustments necessary to arrive at this figure are shown in note 31 to these results.
Management is incentivised to exceed 15% pa growth in net asset value per share.
The diluted net asset value per share, excluding trading stock surplus, at 31 March 2016 increased by 23.5% to 410p (2015: 332p). Including the surplus on valuation of trading and development stock, the EPRA net asset value per share at 31 March 2016 increased by 19.7% to 461p (2015: 385p). EPRA triple net asset value per share increased by 17.6% to 428p (2015: 364p).
Total Shareholder Return
Total Shareholder Return is a measure of the return on investment for shareholders. The table below demonstrates this return compared to various indices. Over one, three, ten, fifteen, twenty and twenty five years, Helical's Total Shareholder Return exceeded that of the Listed Retail Estate Sector Index.
| Performance Measured Over | ||||||||
|---|---|---|---|---|---|---|---|---|
| 1 year Total return pa % |
3 years Total return pa % |
5 years Total return pa % |
10 years Total return pa % |
15 years Total return pa % |
20 years Total return pa % |
25 years Total return pa % |
||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Helical Bar plc | 1 | 1.0 | 20.5 | 10.0 | 1.7 | 9.4 | 13.2 | 14.2 |
| UK Equity Market | 2 | -3.9 | 3.7 | 5.7 | 4.7 | 5.0 | 6.5 | 8.0 |
| Listed Real Estate Sector Index | 3 | -6.4 | 13.6 | 11.5 | -0.1 | 5.8 | 7.3 | 6.6 |
| Direct Property - monthly data | 4 | 11.7 | 14.6 | 10.5 | 5.0 | 7.9 | 9.0 | 8.6 |
1. Growth over all periods to 31/03/16
2. Growth in FTSE All-Share Return Index over all periods to 31/03/16
3. Growth in FTSE 350 Real Estate Super Sector Return Index over all periods 31/03/16. For data prior to 30
September 1999 FTSE All Share Real Estate Sector Index has been used
4. Growth in Total Return of IPD UK Monthly Index (All Property) over all periods to 31/03/16
Financial Review
Helical Business Model
Helical aims to deliver market leading returns by committing to projects with the potential for substantial capital growth and by deploying limited equity into development situations which have the potential to be highly profitable. Risks associated with our development programme are mitigated through limited equity exposure, options, forward funding, conditional contracts and joint ventures with major UK and global institutions. We have an active asset management programme for the investment portfolio with a clear strategy of increasing net operating income. Our aim is to have a stable platform with all recurring operational and finance costs and dividends fully covered by revenue streams from our investment portfolio. Gearing is used on a tactical basis throughout the property cycle, being raised to accentuate property performance when property returns are judged to materially outperform the cost of debt and lowered when seeking to reduce exposure to the property cycle.
See-through analysis
Since 2010 Helical has held a significant proportion of its property assets in joint ventures with partners that provide the majority of the equity required to purchase the assets, whilst relying on the Group to provide asset management or development expertise. Accounting convention requires Helical to account under IFRS for our share of the net results and net assets of joint ventures in limited detail in the income statement and balance sheet. Net asset value per share, a key performance measure used in the real estate industry, as reported in the financial statements under IFRS, does not provide stakeholders with the most relevant information on the fair value of assets and liabilities within an ongoing real estate company with a long term investment strategy.
In this review and elsewhere in this statement, we have incorporated the separate components into a more detailed "see-through" analysis of our property portfolio and debt profile and the associated income streams and financing costs to assist in providing a more comprehensive overview of the Group's activities. This see-through analysis can be found in Appendix 1.
Results for the year
For the third year running we are delighted to be able to report on excellent results with record pre-tax profits of £120m in the year to 31 March 2016 (2015: £87m). Continued rental growth, good development profits and strong valuation surpluses arose from of the implementation of our London development and asset management strategies.
The Group's real estate portfolio, including its share of assets held in joint venture, increased to £1,240m (2015: £1,021m) largely the result of acquiring the remaining 2/3rd share of The Bower, London EC1, plus substantial gains on sales and revaluation of the investment portfolio.
The continued expansion of the Group's activities has resulted in an increase in its loan to value to 55% (2015: 52%) and an increase in see-through net gearing to 140% (2015: 132%). The Group lengthened its borrowings profile, repaying short term facilities and extending existing secured loans. These actions enabled the Group to extend its overall debt maturity profile to 4.5 years (2015: 4.3 years) with a weighted average cost of debt marginally increasing to 4.2% (2015: 4.1%).
At 31 March 2016, the Group had unutilised bank facilities of £106m and £87m of cash. These facilities are primarily available to fund phase 2 of the Group's redevelopment of The Bower, London EC1, its retirement village development programme and the phase 1 construction works at Barts Square, London EC1.
EPRA Earnings per Share
EPRA earnings per share were 17.1p (2015: 2.4p), reflecting the Group's share of net rental income of £43.4m (2015: £38.6m) and development profits of £27.5m (2015: £17.6m) but excluding gains on sale and revaluation of investment properties of £99.7m (2015: £96.6m) and trading profits of £nil (2015: £2.5m).
EPRA Net Asset Value
EPRA net asset value per share increased by 19.7% to 461p per share (2015: 385p). This increase arose principally from a total comprehensive income (retained profits) of £110.3m (2015: £74.9m) less dividends paid of £14.4m (2015: £7.9m) and reflecting a reduction in the surplus on valuation of the trading and development stock to £19.4m (2015: £36.2m).
Income Statement
Rental income and property overheads
Gross rental income receivable by the Group in respect of wholly owned properties increased by 19% to £45.5m (2015: £38.3m) reflecting the growth in the investment portfolio and the partial capture of its reversionary potential. In the joint ventures, gross rents fell from £6.1m to £1.8m reflecting the sale of Clyde Shopping Centre in March 2015. Property overheads in respect of wholly owned assets and in respect of those assets in joint ventures fell significantly from £5.4m to £3.4m reflecting the rotation out of management intensive secondary shopping centres to high yielding distribution warehouses, regional offices and out-of-town retail parks. After taking account of net rents payable to our profit share partners of £0.5m (2015: £0.3m), see-through net rents increased by 12.4% to £43.4m (2015: £38.6m).
Development profits
Developments profits increased by 56% from £17.6m to £27.5m on a see-through basis. The main contributor was in respect of the development management fees of £23.2m crystallised by the acquisition of The Bower, London EC1. We also received development management fees of £3.7m in respect of the development at the Scottish Power headquarters in Glasgow and at One Creechurch Place, London EC3. Our retirement village programme contributed £0.4m of profits. In our joint ventures we recognised £3.2m of development profit on our schemes at Leisure Plaza and Shirley. Set against these profits was a write-down of £0.9m against a site in Telford and £1.8m against our retail development programme.
Share of Results of Joint Ventures
The results of the joint ventures include our share of The Bower, London EC1 until it was acquired and fully consolidated in January 2016; our development schemes at Barts Square, London EC1; One Creechurch Place, London EC3; Shirley Town Centre, West Midlands; Leisure Plaza and C.4.1, both Milton Keynes; and King Street, London W6. Detailed analysis of our share of these joint ventures is provided in note 16 to this report and in the see-through analysis in Appendix 1. In the year under review, net rents of £1.3m (2015: £4.4m) were received, offset by net finance costs of £3.7m (2015: £3.6m). Gains on the sale or revaluation of the investment assets of £43.9m (2015: £27.2m) arose primarily in respect of The Bower, London EC1 and Barts Square, London EC1. Net of taxes, our joint ventures contributed £50.5m (2015: £27.5m).
Gain on sale and revaluation of investment properties
During the year we sold two London assets, Enterprise House W2, a 45,000 sq ft office building let to Network Rail for 20 years and Artillery Lane E1, a 17,000 sq ft refurbished office building, for total gross proceeds of £57m, a small premium to book value. In the regions we sold eight industrial units, three offices and five retail assets, a total of 16 regional assets, for £67m at a small net premium to book value.
The valuation of our investment portfolio reflected our increased exposure to London offices where we generated an increase of 18.8% overall and 30.8% on a like-for-like basis. The regions contributed 1.1% overall and 1.2% on a like-for-like basis. In total, the investment portfolio showed a valuation increase of 11.1%, or 14.9% on a like-for-like basis.
The total impact on our financial statements of the gain on sale and revaluation of our investment portfolio was a net gain of £99.7m (2015: £96.6m).
Administration Costs
Administration costs, before performance related awards, increased by 5% from £10.2m to £10.7m. This increase arose from employing a greater number of asset managers, development executives and in the finance team as the portfolio increased and we move through the delivery phase of the development programme.
Performance related share awards and bonus payments, before National Insurance costs, were £13.3m (2015: £13.4m). Of this amount, the £6.7m (2015: £6.4m) charge for share awards under the Performance Share Plans is expensed through the Income Statement but added back to Shareholders Funds through the Statement of Changes in Equity. The £6.6m (2015: £6.9m) charge for bonus payments comprises £5.5m (2015: £5.8m) which will be paid in June 2016 and £1.1m (2015: £1.1.m) which will be paid in deferred shares to be held for a minimum of three years. In addition, National Insurance of £2.1m (2015: £3.0m) has been accrued in the year.
| 2016 | 2015 | |
| £000 | £000 | |
| Administration Costs | 10,717 | 10,156 |
| Share awards | 6,666 | 6,432 |
| Directors and senior executives' bonuses | 6,633 | 6,920 |
| NIC on share awards and bonuses | 2,087 | 3,022 |
| Total | 26,103 | 26,530 |
Finance Costs, Finance Income and Derivative Financial Instruments
Interest payable on secured bank loans including our share of loans on assets held in joint ventures, but before capitalised interest, increased to £20.2m (2015: £16.7m). Interest payable in respect of the unsecured Retail and Convertible Bonds was £8.8m (2015: £8.0m). The continued fall in medium and long term interest rate projections at 31 March 2016 contributed to a charge of £6.9m (2015: £8.4m) on the derivative financial instruments which have been valued on a mark to market basis. Capitalised interest increased from £3.6m to £4.9m as development schemes progressed. Other interest payable reduced to £3.7m from £6.3m (which includes £2.8m of costs incurred in issuing the Convertible Bond). Total finance costs increased from £27.3m to £27.8m. Finance income earned was £5.1m (2015: £2.5m).
Taxation
Helical pays corporation tax on its net rental income, trading and development profits and realised chargeable gains, after offset of administration and finance costs.
The deferred tax charge for the year is principally derived from the revaluation surpluses recognised in the year offset by the recognition of tax losses which the Group believes will be utilised against profits in the foreseeable future.
Dividends
Helical follows a progressive dividend policy increasing its dividends in line with its results, whilst retaining the majority of funds generated for investment in growing the business. The interim dividend paid on 30 December 2015 of 2.30p was an increase of 9.5% on the previous interim dividend of 2.10p. On 4 April 2016, the Company paid a second interim of 5.15p and together with the final dividend of 0.72p payable on 29 July 2016, this is an increase of 14.0% on the previous year (2015: 5.15p). In total, the dividend paid or payable in respect of the results for the year to 31 March 2016 is 8.17p (2015: 7.25p), an increase of 12.7%. Since 2013 the compound annual growth rate of the Company's dividends has been 13.8%
Balance Sheet
Investment portfolio
Sales of £55m of London assets and £64m of regional assets provided funds, net of loan repayments, for £377m of acquisitions. Included in these acquisitions was the purchase of The Bower EC1, from the joint venture with Crosstree, where the existing cash equity and share of profits to date remained invested in the scheme. The acquisition was funded through new bank finance of £200m, of which £149.5m was drawn down to complete the purchase with the remaining facility available to fund the redevelopment of The Tower at 207 Old Street EC1. Revaluation surpluses of £53.5m (£0.3m attributable to our profit share partners) and £2.3m in our joint ventures contributed to an increase in the overall size of the investment portfolio on a see-through basis to £1,053m (2015: £790m).
| Wholly owned £000 |
In joint venture £000 |
See-through £000 |
||
| Valuation at 31 March 2015 | 701,521 | 88,305 | 789,826 | |
| Acquisitions | 376,899 | - | 376,899 | |
| Capital Expenditure | 28,234 | 16,260 | 44,494 | |
| Disposals | (119,385) | (96,687) | (216,072) | |
| Transfer from stock | - | 1,358 | 1,358 | |
| Revaluation Surplus | - Helical | 53,508 | 2,316 | 55,824 |
| - Profit Share Partners | 323 | - | 323 | |
| Valuation at 31 March 2016 | 1,041,100 | 11,552 | 1,052,652 |
Debt and Financial Risk
In seeking to finance Helical's recent expansion, the Group has used a combination of new secured facilities, whose purpose and terms reflect the nature of the assets charged to the lenders, and unsecured bonds which have provided the firepower to acquire many of the assets which have contributed to the recent growth in shareholders' funds. The composition of the Group's debt structure has significantly changed since 31 March 2014 with unsecured debt now representing 23% of debt drawn at 31 March 2016.
In total, Helical's outstanding debt at 31 March 2016 of £778m (2015: £675m) had an average maturity of 4.5 years (2015: 4.3 years) and a weighted interest cost of 4.2% (2015: 4.1%).
Debt profile at 31 March 2016 - excluding the effect of arrangement fees
| Total Facility £000's |
Total Utilised £000's |
Available Facility £000's |
Net LTV % |
Weighted Average Interest Rate % |
Average Maturity Years |
||
| Investment facilities | 568,635 | 509,331 | 59,304 | - | 3.8 | 5.0 | |
| Development facilities | 65,000 | 50,501 | 14,499 | - | 5.5 | 4.0 | |
| Total wholly owned | 633,635 | 559,832 | 73,803 | - | 4.0 | 4.8 | |
| In joint ventures | 58,035 | 35,302 | 22,733 | - | 3.4 | 3.7 | |
| Total secured debt | 691,670 | 595,134 | 96, 536 | 40.2 | 3.9 | 4.7 | |
| Retail bond | 80,000 | 80,000 | - | - | 6.0 | 4.2 | |
| Convertible bond | 100,000 | 100,000 | - | - | 4.0 | 3.2 | |
| Working capital | 10,000 | - | 10,000 | - | - | - | |
| Fair value of convertible bond | 2,747 | 2,747 | - | - | - | ||
| Total unsecured debt | 192,747 | 182,747 | 10,000 | - | 4.9 | 3.7 | |
| Total debt | 884,417 | 777, 881 | 106,536 | 55.0 | 4.2 | 4.5 | |
Secured debt
The Group arranges its secured investment and development facilities to suit its business needs as follows:
- Investment facilities
We have £190m of revolving credit facilities which enable the group to acquire, refurbish, reposition and hold significant parts of our investment portfolio. We have used these facilities to finance our regional portfolio. Our London investment assets are primarily held in £380m of term loan secured facilities which, where appropriate, allow us to finance refurbishment projects. The value of the Group's properties secured in these facilities at 31 March 2016 was £945m (2015: £639m) with a corresponding loan to value of 54% (2015: 58%). The average maturity of the Group's investment facilities at 31 March 2016 was 5.0 years (2015: 4.6 years) with a weighted average interest rate of 3.8% (2015: 3.7%).
- Development facilities
These facilities finance the redevelopment of The Tower at The Bower, Old Street, London EC1 and the construction of the retirement villages at Durrants Village, Horsham; Maudslay Park, Great Alne; and Milbrook Village, Exeter. The average maturity of the Group's development facilities at 31 March 2016 was 4.0 years (2015: 2.0 years) with a weighted average interest rate of 5. 5% (2015: 3.7%).
- Joint venture facilities
We hold a number of investment and development properties in joint venture with third parties and include in our reported figures our share, in proportion to our economic interest, of the debt associated with each asset. The average maturity of the Group's share of bank facilities in joint ventures at 31 March 2016 was 3.7 years (2015: 3.0 years) with a weighted average interest rate of 3.4% (2015: 4.5%).
Unsecured debt
The Group's unsecured debt, including the convertible bond at its mark to market valuation, is £182.7m (2015: £183.9m) as follows:
- Retail Bond
In June 2013, the Group raised £80m from the issue of an unsecured Retail Bond with a 6.00% coupon. This bond is repayable in June 2020.
- Convertible Bond
In June 2014, the Group raised £100m from the issue of a listed unsecured Convertible Bond with a 4.0% coupon, repayable in June 2019, or, subject to certain conditions, convertible at the option of the bond holders into ordinary shares, unless a cash settlement option is exercised by the Company. The initial conversion price has been set at £4.9694 per share, representing a 35% premium above the price on the day of the issue and a premium of 59% above the Company's EPRA net asset value per share at 31 March 2014. The value of the Bond at 31 March 2016, as determined by the listed market price, was £102.7m (2015: £103.3m).
- Short term working capital facilities
These facilities provide access to additional working capital for the Group.
Cash and cash flow
At 31 March 2016, the Group had £193m (2015: £229m) of cash and agreed, undrawn, committed bank facilities including its share in joint ventures as well as £153m (2015: £131m) of uncharged property on which it could borrow funds.
Net borrowings and gearing
Total gross borrowings of the Group, including in joint ventures, have increased from £674.6m to £777.9m during the year to 31 March 2016. After deducting cash balances of £86.8m (2015: £136.3m) and unamortised refinancing costs of £9.3m (2015: £6.4m), net borrowings increased from £531.9m to £681.8m. The gearing of the Group, including in joint ventures, increased from 132% to 140%. Including EPRA adjustments to IFRS shareholders funds, the see-through net asset value gearing increases from 113% to 125%. This gearing measure, the ratio of see-through net borrowings to EPRA net asset value, represents a longer term view of gearing than the standard measure.
| 2016 | 2015 | |
| See-through gross borrowings | £777.9m | £674.6m |
| See-through cash balances | £86.8m | £136.3m |
| Unamortised refinancing costs | £9.3m | £6.4m |
| See-through net borrowings | £681.8m | £531.9m |
| Shareholders' funds | £486.2m | £404.3m |
| EPRA shareholders' funds | £546.8m | £469.1m |
| See-through gearing - IFRS | 140% | 132% |
| See-through gearing - EPRA | 125% | 113% |
Hedging
At 31 March 2016, the Group had £635.5m (2015: £500.2m) of fixed rate debt with an average effective interest rate of 4.2% (2015: 4.4%) and £107.1m (2015: £103.4m) of floating rate debt with an average effective interest rate of 3.9% (2015: 2.8%). In addition, the Group has £157m of interest rate caps at an average of 4.0% (2015: £143.2m at 4%), all of which expire within 12 months. In our joint ventures, the Group's share of fixed rate debt was £nil (2015: £23.3m) with an effective rate of nil% (2015: 6.8%) and £35.3m (2015: £47.9m) of floating rate debt with an effective rate of 3.4% (2015: 3.3%).
| 2016 £m |
% | 2015 £m |
% | |
| Fixed rate debt | ||||
| - Secured borrowings | 452.8 | 3.9 | 316.9 | 4.1 |
| - Retail Bond | 80.0 | 6.0 | 80.0 | 6.0 |
| - Convertible Bond | 100.0 | 4.0 | 100.0 | 4.0 |
| - Fair value of Convertible Bond | 2.7 | - | 3.3 | - |
| Total fixed rate debt | 635.5 | 4.2 | 500.2 | 4.4 |
| Floating rate debt | ||||
| - Secured | 107.1 | 3.9 | 103.4 | 2.8 |
| Total wholly owned | 742.6 | 4.2 | 603.6 | 4.1 |
| In joint ventures | ||||
| - Fixed rate | - | - | 23.3 | 6.8 |
| - Floating rate | 35.3 | 3.4 | 47.9 | 3.3 |
| Total borrowings | 777.9 | 4.2 | 674.8 | 4.2 |
Interest cover
In assessing the results of the Group for each financial year, Helical considers its interest cover as a measure of its performance and its ability to finance its annual interest payments from its net operating income, before revaluation gains or losses on the investment portfolio and net realisable provisions on the trading and development stock. In the year to 31 March 2016, this interest cover was 5.4 times (2015: 2.5 times).
| 2016 | 2015 | |
| See-through net operating income | £121.3m | £62.7m |
| See-through net finance costs | £22.6m | £24.8m |
| Interest cover | 5.4x | 2.5x |
Tim Murphy
Finance Director
24 May 2016
Helical's Property Portfolio - 31 March 2016
Total Portfolio by Fair Value
| Investment £m |
% | Development £m |
% | Total £m |
% | |
| London Offices | 593.2 | 47.8 | 18.0 | 1.5 | 611.2 | 49.3 |
| London Residential | - | - | 60.0 | 4.8 | 60.0 | 4.8 |
| Total London | 593.2 | 47.8 | 78.0 | 6.3 | 671.2 | 54.1 |
| Regional Offices | 102.5 | 8.3 | 1.0 | 0.1 | 103.5 | 8.4 |
| Regional Industrial | 210.5 | 17.0 | - | - | 210.5 | 17.0 |
| Regional Retail | 134.5 | 10.8 | 8.1 | 0.7 | 142.6 | 11.5 |
| Retirement Villages | 11.9 | 1.0 | 91.6 | 7.3 | 103.5 | 8.3 |
| Land | 0.1 | - | 8.6 | 0.7 | 8.7 | 0.7 |
| Total Regional | 459.5 | 37.1 | 109.3 | 8.8 | 568.8 | 45.9 |
| Total | 1,052.7 | 84.9 | 187.3 | 15.1 | 1,240.0 | 100.0 |
Investment portfolio by asset status
| Income Producing £m |
% | Major Projects £m |
% | Total £m |
% | |
| London Offices | 414.6 | 39.4 | 178.6 | 17.0 | 593.2 | 56.4 |
| London Residential | - | - | - | - | - | - |
| Total London | 414.6 | 39.4 | 178.6 | 17.0 | 593.2 | 56.4 |
| Regional Offices | 97.8 | 9.3 | 4.7 | 0.4 | 102.5 | 9.7 |
| Regional Industrial | 210.5 | 20.0 | - | - | 210.5 | 20.0 |
| Regional Retail | 134.5 | 12.8 | - | - | 134.5 | 12.8 |
| Retirement Villages | 11.9 | 1.1 | - | - | 11.9 | 1.1 |
| Land | - | - | 0.1 | - | 0.1 | - |
| Total Regional | 454.7 | 43.2 | 4.8 | 0.4 | 459.5 | 43.6 |
| Total | 869.3 | 82.6 | 183.4 | 17.4 | 1,052.7 | 100.0 |
Income producing assets are those assets where the majority of the space is let. Major projects are those assets that are being substantially developed or refurbished.
Trading and development portfolio
| Book Value £m |
Fair Value £m |
Surplus £m |
Fair Value % |
|
| London Offices | 14.0 | 18.0 | 4.0 | 9.6 |
| London Residential | 56.0 | 60.0 | 4.0 | 32.0 |
| Total London | 70.0 | 78.0 | 8.0 | 41.6 |
| Regional Offices | 0.2 | 1.0 | 0.8 | 0.5 |
| Regional Retail | 8.1 | 8.1 | - | 4.3 |
| Retirement Villages | 83.6 | 91.6 | 8.0 | 48.9 |
| Land | 5.9 | 8.6 | 2.7 | 4.7 |
| Total Regional | 97.8 | 109.3 | 11.5 | 58.4 |
| Total | 167.8 | 187.3 | 19.5 | 100.0 |
The London Portfolio
London's economy continues to outperform the rest of the UK and the proportion of our assets located in the Capital now represents 56% of our investment portfolio. London's population is expected to grow by one million in the next ten years and 175,000 new office jobs are expected to be created by 2020. London is a leading technology centre and there is a "war for talent" which is driving demand for high quality office space. London continues to attract overseas capital as it has a liquid and transparent property market with a long established rule of law.
Our strategy is to increase our London holdings, focusing on select areas where we see strong tenant demand and growth potential, such as the "Tech Belt" that runs from Kings Cross through Old Street and Shoreditch to Whitechapel and in West London, in particular Hammersmith, Shepherds Bush and Chiswick. Our London portfolio comprises income producing multi-let offices, office refurbishments and developments and residential development schemes.
The East
The Bower, Old Street EC1
This 3.12 acre asset was acquired in November 2012 for £60.8m in joint venture with Crosstree Real Estate Partners LLP. The site is in the heart of an area which has become a "creative halo", a district of London which is a hub for technology, media and telecommunications companies and which is benefitting from substantial investment in infrastructure. A planning consent has been implemented to increase the floor space on the site by 116,000 sq ft, to refurbish existing areas and significantly upgrade the public realm with the creation of a new pedestrian street.
On 20 January 2016, Helical acquired The Warehouse and The Studio (211 Old Street) and The Tower (207 Old Street) from the joint venture for £248m.
- 211 Old Street EC1
Building work started on phase 1 in January 2014 comprising The Warehouse, 128,262 sq ft, and The Studio, 23,177 sq ft, and was completed in November 2015.
Phase 1 is fully let:-
| Total sq ft |
Rent £ psf |
|
| The Warehouse | ||
| Offices | 122,858 | 50.25-67.50 (55.00 average) |
| Restaurants | 5,404 | |
| 128,262 | ||
| The Studio | ||
| Offices | 18,283 | 40.00-45.00 (43.85 average) |
| Restaurants | 4,894 | |
| 23,177 |
- 207 Old Street EC1
Comprising The Tower, phase 2 of the redevelopment of The Bower commenced in January 2016 and will deliver 171,000 sq ft of office space and 7,500 sq ft of retail/restaurant. It is due for completion in Q1 2018.
- 183-213 Old Street EC1
This retail parade comprises 55,724 sq ft fully let to tenants including Gymbox, Co-op Food Store, Argos, Peacock and the Post Office generating c. £915,000 rents. The parade was acquired from the joint venture by Crosstree for £23m in January 2016.
- Empire House, City Road EC1
Empire House, fully let to Z Hotels and restaurant Ceviche, was sold during the year to Standard Life Investments for £20.65m, a premium of 38% to the 31 March 2015 value.
Barts Square EC1
In joint venture with The Baupost Group LLC we own the freehold interest in land and buildings at Bartholomew Close, Little Britain and Montague Street, a 3.2 acre site adjacent to the new Barts Hospital and just south of Smithfield Market. Existing buildings are let to the NHS on a number of short term leases that expire in 2016.
Planning consent has been implemented for a comprehensive redevelopment of 19 buildings to provide a total of 236 residential apartments, three office buildings of 213,000 sq ft, 23,000 sq ft and 10,200 sq ft, 20,600 sq ft of retail/A3 at ground floor as well as major public realm improvements, which will be incorporated into the wider Smithfield Area Strategy being worked up by the City of London.
- Phase 1 - Residential/offices/retail
Phase 1 of the redevelopment of Barts Square comprises 144 residential units, 8,800 sq ft of retail space, 23,000 sq ft of new offices behind retained facades and public realm improvements. The demolition of buildings in Bartholomew Close and Little Britain commenced in January 2015, with the retention of various facades behind which the buildings are being demolished. Completion of phase 1 is expected in summer 2017. Contracts have been exchanged for the sale of 102 residential units for a total value of c. £132m at an average £1,580 psf, with a further two units under offer.
- Phase 2 - One Bartholomew Close - Offices
One Bartholomew Close was sold to clients of Ashby Capital LLP ("Ashby") for £102.4m in August 2015, releasing £34m of cash to Helical. The demolition of the existing building and the construction of a new 12 storey office block of 212,858 sq ft, commenced in January 2016. The building is due to be completed in July 2018. Ashby's clients finance the development costs and when the building is completed and successfully let the joint venture will be entitled to receive a profit share payment. Helical Bar is the development manager for delivery of the project.
- Phase 3 - Residential/retail
Phase 3 of the redevelopment of the site, involving the demolition of Queen Elizabeth II Building, 62 Bartholomew Close, 42-44 Little Britain and 45-47 Little Britain, is expected to commence after vacant possession of these buildings is obtained in November 2016. In their place, 92 residential units and 11,800 sq ft of retail space will be constructed, with completion due in early 2019.
C-Space, 37-45 City Road EC1
Helical acquired C-Space in June 2013. Planning consent was obtained for a complete refurbishment of the building which increased the previous existing 50,000 sq ft office building to 62,000 sq ft. The works, which were completed in October 2015, involved an additional floor and extensions to the third floor, a landscaped courtyard and entrance "pavilion" to the rear and full height glazing to the raised ground floor. 75% of the space was pre-let to MullenLowe (formerly DLKW Lowe) the creative agency, and only the top floor and half of the third floor remain available.
One Creechurch Place, City of London EC3
One Creechurch Place, London EC3, is a landmark City office scheme in the heart of the insurance sector in London. In May 2014, Helical signed a joint venture agreement with HOOPP (Healthcare of Ontario Pension Plan) to redevelop the site. Under the terms of the joint venture, HOOPP and Helical will jointly fund the project on a 90:10 split, with Helical acting as development manager for which it will receive a promote payment depending on the successful outcome of the scheme. It is anticipated the completed development will have a capital value of c. £250m. The new building, comprising 272,000 sq ft NIA of offices and 2,227 sq ft of retail, is expected to be completed in September 2016.
23-28 Charterhouse Square, Smithfield EC1
In January 2016, Helical was granted a new 155 year leasehold interest in 23-28 Charterhouse Square, London EC1, from the Governors of Sutton's Hospital in Charterhouse for £16m. Helical has received planning for and commenced a major refurbishment of the existing building, which will increase the current 34,000 sq ft to 38,500 sq ft of offices, with the addition of a new sixth floor, and add 5,100 sq ft of retail/restaurant. The completed building is expected to be delivered in early 2017.
The Loom, Whitechapel E1
This 112,000 sq ft listed building was acquired in 2013 and Helical has secured planning consent for a comprehensive refurbishment/reconfiguration of the common parts to include a new entrance/reception, showers, bike store, refurbishment of c. 25,000 sq ft of offices, including the creation of a single 11,000 sq ft unit and 4,000 sq ft of café and restaurants. The works are underway and are due for completion in July 2016. Tenant demand in the area is extremely strong and we anticipate achieving rents of c. £45 psf compared to an average passing rent in the building of £24.50.
Chart House, Islington N1
Chart House is a 10,500 sq ft office building in Islington. There is currently planning consent for an additional floor of residential on top of the building. This building is 100% let.
In addition to our holdings in East London we have one scheme in Covent Garden WC2.
Drury Lane & Dryden Street, Covent Garden WC2
The existing buildings, which are in office and retail use, sit on an island site of approximately 0.5 acres. Approximately half of the site, adjacent to Dryden Street, sits within the Covent Garden Conservation Area. In July 2015, contracts were exchanged with Diageo Pension Fund (a fund managed by Savills Investment Management) for the conditional acquisition of the Drury Lane site. The contract is conditional on Helical securing planning consent. A planning application for the residential led scheme of 68 apartments was submitted in August 2015 and resolution to grant consent was issued at a planning committee in April 2016.
The West
Shepherds Building, Shepherds Bush W14
This 151,000 sq ft multi-let office building close to the Westfield London shopping centre maintains an occupancy approaching 100%, as it has for eight consecutive years. We have completed a renewal of existing leases to Endemol, who have also taken additional space and are the largest tenant in the building, increasing the total contracted rent roll by £1.27m and securing their occupation of the building until December 2026, with a tenant break option in 2021. The average contracted rent for the building is now £45.75 psf with total contracted net rent of £6.68m compared to a passing net rent of £4.38m.
Power Road Studios, Chiswick W4
Helical acquired this asset in December 2015 for £34.2m at a NIY of 4.4%. The site comprises 62,000 sq ft of offices across five buildings and is multi let to a wide range of predominantly media tenants. Recent lettings have been concluded at a rent of £38 psf compared to an average rental of £24 psf at acquisition. Studies are currently underway to determine how best to add further office space to the site which at two acres has substantial potential.
One King Street, Hammersmith W6
One King Street, Hammersmith W6, is a 39,000 sq ft building acquired in 2012 comprising 26,000 sq ft of offices and 13,000 sq ft of retail. Refurbishment of the fourth floor and the addition of a fifth floor of offices on top of the building has completed, providing 3,500 sq ft of space. The fourth and fifth floors have been let to Orion Healthcare at a headline rent of £52.50 psf and £55.00 psf and the building is now fully let with total contracted rent of £1.8m.
King Street, Hammersmith W6
King Street, Hammersmith W6, is a Council led regeneration project which is being carried out in a 50/50 joint venture with Grainger plc. Planning permission for the scheme has been granted for 196 apartments, a three-screen cinema, new retail and restaurant space and replacement offices for the Council. A minor amendment to the existing planning approval has been submitted and work is expected to commence in 2017.
The Powerhouse, Chiswick W4
Helical acquired this 43,325 sq ft office and recording studios by way of sale and leaseback. The Powerhouse is a listed building on Chiswick High Road and is fully let on a long lease to Metropolis Music Group.
Sales
Enterprise House, Paddington W2
Enterprise House, Paddington W2, is a freehold building adjacent to Paddington Station in London comprising 45,000 sq ft of offices. The building was acquired in 2013 on a sale and lease-back agreement from Network Rail, which holds a 20 year lease without breaks, for c. £31m representing a 5.7% yield generating annual rental income of £1.8m. In October 2015, the asset was sold to a private overseas buyer for £43m, a premium of 10% to the 31 March 2015 valuation, crystallising an IRR in excess of 100%.
Artillery Lane, Bishopsgate E1
Artillery Lane, Bishopsgate, E1, is an office building in the City of London. Acquired for £6.8m in 2013 the property was sold to Standard Life in October 2015 for £15.1m following the completion of works which provided 17,000 sq ft of newly refurbished offices.
The Regional Portfolio
Our regional portfolio contributed 71% of our net rental income from tenants in diverse sectors and geographical locations. The £568.8m regional portfolio comprises £210.5m of industrial/logistics (37% of the portfolio), £103.5m of offices (18%), £142.6m of retail comprising £76.9m of retail warehousing and £65.7m of in-town retail, mainly the Morgan Quarter, Cardiff (in aggregate 25%), £103.5m in our retirement village development programme (18%) and £8.7m of land (2%).
Our approach to regional investment is to acquire assets where occupational demand is robust throughout the property cycle and the barriers to new supply are high. Successfully picking the sectors and assets with these attributes will ensure strong cash flows and rental growth. In general, yields for regional assets are higher than those in London and these assets are acquired to provide significant cash flow for the Group. We anticipate that income will become an increasingly important part of total returns as yield compression slows and, as such, we focus our attention on areas where we believe the occupational market remain robust.
Distribution Warehouses
Helical has 36 distribution and light industrial units located around major UK transport networks, a net increase of five units with 13 acquisitions (£89m) being offset by sales of eight units with (£28m) at a small premium to book value. These units generally have few bespoke features making them straightforward to re-let if vacancies occur with minimal capital expenditure required. The majority of the assets are single let. Significant assets within the portfolio include a 256,000 sq ft distribution warehouse let to Sainsbury's in Yate, Bristol, a 203,000 sq ft facility in Leighton Buzzard, Bedfordshire, a 210,000 sq ft distribution warehouse in Northampton and a 183,000 sq ft distribution warehouse let to the Royal Mail in Chester.
Regional Offices
Our regional office investment portfolio comprises nine assets valued at £102.5m, with over 60% of value in Manchester. Other assets are located in Crawley, Glasgow, Reading, Cobham, Castle Donington and Cheadle. During the year we sold three assets for £11.2m, a 16% premium to book value.
We now have three offices in Manchester having acquired Fountain Court, 31 Booth Street earlier this year. Manchester is a city with a diverse, thriving and growing economy and is widely regarded as England's second city and the centre of the "Northern Powerhouse".
Churchgate and Lee House, Manchester
Helical acquired Churchgate and Lee House, two interlinked office buildings comprising 248,000 sq ft of offices, in March 2014. We have refurbished the reception, café and a number of office floors and continue to reposition the asset as floors become vacant. We have concluded 14,000 sq ft of new lettings in the year, including letting a refurbished second floor Churchgate suite at £16.50 psf, with a further 19,300 sq ft since year end. The building is now 92% occupied.
Dale House, Manchester
Dale House is a 42,000 sq ft office building situated in the Northern Quarter of Manchester. It is 85% let to a number of tenants with an average rent of £12.00 psf and was acquired in March 2015 for £7.4m. The property is a long term hold with plans to refurbish the building over time and move rents upwards as the location improves.
Fountain Court, 31 Booth Street, Manchester
This vacant office located in the prime city core was acquired in January 2016 for £4.7m. Refurbishment of this 25,349 sq ft building is underway and we anticipate having it available to let before the end of 2016.
St Vincent Street, Glasgow
In partnership with local development partner, Dawn Developments Ltd, Helical is the development manager for the construction of the new headquarters building for Scottish Power at St Vincent Street, Glasgow. The completed building will comprise c. 220,000 sq ft of prime office space in the heart of the City's commercial district. Funded by M&G Investments, the scheme is under construction and all works, including Scottish Power's fit out, are due to be completed by Autumn 2016. As part of the overall deal, Helical took on three existing Scottish Power sites which are surplus to requirements. We have received planning permission for a change of use of the grounds of Cathcart House to 158 residential units and are in discussions with a number of parties in relation to a sale. At Yoker, we have exchanged contracts, subject to planning, with a supermarket operator to sell the site, and we sold the site at Falkirk during the year.
Retail
Our retail assets total £142.6m, 11.5% of our portfolio (31 March 2015: £171.7m). This part of the portfolio includes a prime retail asset in Cardiff, eight retail parks (one of which has been sold since year end), one retail unit and a number of pre let and/or prefunded retail developments. During the year we sold five assets for £27.0m, marginally below book value.
The retail market is undergoing major structural changes with high profile companies going into administration. There is a continued migration of customers and retailers to prime centres where the leisure offer and quality of environment are a big driver of footfall.
During the year, five retail properties were sold for a total of £27.0m. At the year end the portfolio consisted of assets in Cardiff, Ellesmere Port, Great Yarmouth, Harrogate, Huddersfield, Leicester, Scarborough, Sevenoaks, Southend and Stockport. Harrogate has been sold since the year end at its book value.
The Morgan Quarter and Royal Arcades, Cardiff
Tenant demand for the property is strong and rents are steadily increasing. The creative quarter office refurbishment is now largely complete generating £116,000 of rent from previously unusable space, with a further c. £80,000 of rent to follow as the remainder of the new space is let.
The Morgan Quarter was originally purchased in 2005 and comprised the David Morgan Department Store and two Victorian Arcades. The main ground floor retail units fronting The Hayes, a prime fashion pitch in Cardiff, have been completely reconfigured and they are now let to tenants such as White Stuff, Urban Outfitters, Molton Brown, Jack Wills and Fred Perry.
Retail Developments
Parkgate, Shirley, West Midlands
The shopping centre at Parkgate, Shirley, where Helical has a 50% interest, was completed in 2014 and the 80,000 sq ft Asda, which had been pre-sold to the food-store, together with a number of other retailers have all opened successfully for trade. The space beyond the food-store is let to occupiers such as B&M, Peacocks, Poundland, Pizza Express, JD Wetherspoon, Prezzo, Shoe Zone and Shirley Library.
A second phase of high density residential is being progressed on a 10 acre site opposite the Parkgate scheme. Terms have been agreed with a care home provider, a residential developer and a supermarket operator for a petrol filling station. Planning consent has been achieved subject to a S106 Agreement.
Truro
Helical has entered into a Conditional Purchase Agreement on the six acre Truro City Football Club site which has planning consent, subject to a s106 Agreement, for a 78,000 sq ft non-food retail park. The scheme proposals provide for the relocation of the football club and we anticipate starting on site in summer 2017.
Cortonwood
This 79,750 sq ft retail park has been 95% pre-let to tenants including Outfit, H&M, New Look, River Island and Marks and Spencer. The scheme has been forward funded with clients of Aberdeen Asset Management and construction on site has started with completion due in June 2017.
Poland
During the year, we completed the sale of our 50% share in the 720,000 sq ft retail development at Europa Centralna, Gliwice, Poland, to our joint venture partners, clients of Standard Life, in accordance with a pre-arranged contractual exit two years post completion of the scheme. The sale, at book value, reduced gross property assets by £41m and reduced net debt by £26m. In July 2015, we also completed the sale of our 103,000 sq ft retail development at Wroclaw, Poland at €17m, a small premium to book value. The sale of these two assets completed the exit of our joint venture in Poland.
Retirement Villages
Our retirement village portfolio consists of four villages. We design each of the villages with an active, independent retirement in mind and the communities that we create are the ideal place to live a social and varied lifestyle. Each private, age-exclusive retirement community is centred around a residents' clubhouse, and feature many amenities including an indoor pool and gym, landscaped gardens, bar, restaurant and library. With an increasing UK population over 65 years old, and a severe under supply in retirement housing, this sector creates significant opportunities for investors and developers. This year has seen us bring the management of this portfolio entirely in house and early results have shown an increase in sales rates.
Bramshott Place, Liphook, Hampshire
This village is situated amongst natural parkland near the village of Liphook on the border of Hampshire, West Sussex and Surrey. The village features a selection of two and three bedroom cottages and one, two and three bedroom apartments arranged around a residents' clubhouse. All construction works to Phases 1-3 are completed. 151 units in total are constructed and sold. Phase 4 will commence in 2016 with the construction of 40 additional cottages. Enabling works have commenced on site with completion due in June 2018.
Durrants Village, Faygate, West Sussex
Durrants Village is set within 30 acres of private parkland in the hamlet of Faygate, near Horsham in West Sussex. The village features a selection of cottages and apartments. Phase 2 of the construction completed in January 2016 with 105 units located around the residents' clubhouse. Phase 3 consists of an additional 50 units towards the front of the site and construction is due to commence in late 2016 with completion in early 2019. Sales are progressing at a good rate with 51 units sold and an additional 24 reserved.
Millbrook Village, Exeter, Devon
Millbrook Village is nestled close to the river in the heart of the historic cathedral city of Exeter. The village will feature a selection of two and three bedroom cottages and one, two and three bedroom apartments. The site will comprise 164 units once completed. The clubhouse will include a restaurant and bar, games room, gym, cinema and a swimming pool. The build programme is well advanced with 43 units currently completed with more stock now coming online at regular three month intervals. We anticipate that the village will be fully constructed by early 2018. Contracts have been exchanged on 14 units with an additional 13 units reserved.
Maudslay Park, Great Alne, Warwickshire
Maudslay Park is set in 90-acres of parkland in the Warwickshire village of Great Alne, near Stratford-upon-Avon. The village will comprise 150 units with a mixture of cottages and apartments built around the central clubhouse facility. Following the administration of our main contractor, progress was delayed last year. We have now appointed a new main contractor and we anticipate the first units will be available for sale at the end of 2017.
Asset management
Asset management is a critical component in driving Helical's performance. Through having intelligent business plans and by maximising the combined skills of our management team, we are able to create value in our assets without relying on market movements.
| Fair Value Weighting % |
Passing Rent £m |
% | Contracted Rent £m |
% | ERV £m |
% | ERV Change Since March 2015 % |
||
| London Offices | 49.3 | 11.2 | 26.7 | 23.6 | 42.1 | 45.4 | 56.0 | 7.6 | |
| London Residential | 4.8 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | |
| Total London | 54.1 | 11.2 | 26.7 | 23.6 | 42.1 | 45.4 | 56.0 | 7.6 | |
| Regional Offices | 8.4 | 6.5 | 15.6 | 7.0 | 12.6 | 8.8 | 10.9 | 2.8 | |
| Regional Industrial | 17.0 | 15.0 | 35.7 | 15.9 | 28.3 | 16.7 | 20.6 | 1.1 | |
| Regional Retail | 11.5 | 9.2 | 22.0 | 9.5 | 17.0 | 10.1 | 12.5 | 3.5 | |
| Retirement Villages | 8.3 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | |
| Land | 0.7 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | |
| Total Regional | 45.9 | 30.7 | 73.3 | 32.4 | 57.9 | 35.6 | 44.0 | 2.2 | |
| Total | 100.0 | 41.9 | 100.0 | 56.0 | 100.0 | 81.0 | 100.0 | 4.4 | |
During the year contracted income increased by £12.7m as a result of new lettings and rent reviews, net of any losses from breaks and lease expiries (2015: £1.1m). With notable contributions from some regional assets, in particular Churchgate House in Manchester, the majority of these rental increases come from our London assets. The completion and letting of phase 1 at The Bower EC1 and C-Space EC1 contributed £10.5m of new lettings, while the renewal of the Endemol lease in the Shepherds Building added a further £1.3m to the rent roll. The London portfolio remains highly reversionary and this value will continue to be unlocked through refurbishment and leasing activities.
There was significant activity within the investment portfolio with 165 lease events.
| Contacted Rent £m |
|
| Rent lost at break/expiry | (2.5) |
| Rent lost to administrations | (0.2) |
| Rent reviews | 0.1 |
| Uplift at Lease renewals | 2.0 |
| New Lettings | 13.3 |
| Total increase in the year | 12.7 |
Capital expenditure
We have a planned development and refurbishment programme to drive the rental value and secure the future of our assets.
| Property | Capex Budget (Helical Share) £m |
Remaining spend (Helical share) £m |
Current Total Space Sq ft |
Refurbished Space Sq ft |
New Space Sq ft |
Completion date |
| 207 Old Street EC1 | 91.0 | 85.0 | 114,000 | 114,000 | 65,000 | Mar 2018 |
| Barts Square EC1 | 88.7 | 76.8 | - | - | 236,000 | Mar 2019 |
| One Creechurch Place EC1 | 9.7 | 2.6 | - | - | 273,000 | Sept 2016 |
| King Street W6 | 55.0 | 55.0 | - | - | 300,000 | Dec 2021 |
| Charterhouse Square EC1 | 15.0 | 13.0 | 34,000 | 34,000 | 9,600 | Mar 2017 |
| Drury Lane WC2 | 75.0 | 74.0 | - | - | 80,000 | Jun 2019 |
| The Loom EC1 | 10.0 | 2.0 | 112,000 | 37,500 | - | July 2016 |
| Booth St, Manchester | 2.3 | 2.0 | 25,500 | 25,500 | - | Dec 2016 |
Retirement Villages
| Property | Capex Budget (Helical Share) £m |
Remaining spend (Helical share) £m |
Total number of units | Completed units | Under construction | Completion date |
| Exeter | 40.1 | 19.2 | 164 | 29 | 88 | Mar 2018 |
| Durrants | 41.0 | 12.4 | 156 | 105 | 0 | Feb 2019 |
| Maudslay | 57.5 | 49.9 | 150 | 5 | 0 | Dec 2020 |
| Bramshott | 15.9 | 15.6 | 40 | 0 | 0 | Jun 2018 |
| 154.5 | 97.1 | 510 | 139 | 88 |
Portfolio yields
| EPRA Topped Up NIY % |
Reversionary % |
|
| London Offices | 2.50 | 6.14 |
| Regional Offices | 5.92 | 7.48 |
| Regional Industrial | 6.42 | 7.20 |
| Regional Retail | 6.12 | 6.50 |
| Total | 3.97 | 6.60 |
Capital values, vacancy rates and unexpired lease terms
| Capital value psf £ |
Vacancy rate % |
WAULT Years |
|
| London Offices | 656 | 19.3 | 7.1 |
| London Residential | n/a | n/a | n/a |
| Total London | 656 | 19.3 | 7.1 |
| Regional Offices | 197 | 6.5 | 5.6 |
| Regional Industrial | 56 | 5.9 | 5.3 |
| Regional Retail | 183 | 0.2 | 6.1 |
| Total Regional | 93 | 5.0 | 5.6 |
| Total | 180 | 7.1 | 6.3 |
Valuation movements
| Val Change inc Capex, Sales & Purchases % |
Val Change inc Capex, excl Sales & Purchases % |
Investment Portfolio Weighting 2016 % |
Investment Portfolio Weighting 2015 % |
|
| London Offices | 18.8 | 30.8 | 56.4 | 46.9 |
| Total London | 18.8 | 30.8 | 56.4 | 46.9 |
| Regional Offices | 3.0 | 2.0 | 9.7 | 13.1 |
| Regional Industrial | 1.1 | 2.8 | 20.0 | 18.5 |
| Regional Retail | (0.3) | 0.0 | 12.8 | 20.1 |
| Retirement Villages | 4.9 | 4.9 | 1.1 | 1.4 |
| Total Regional | 1.1 | 1.2 | 43.6 | 53.1 |
| Total | 11.1 | 14.9 | 100.0 | 100.0 |
Lease expiries or tenant break options
| Year to 2017 |
Year to 2018 |
Year to 2019 |
Year to 2020 |
Year to 2021 |
|
| % of rent roll | 5.4 | 11.1 | 11.3 | 9.3 | 3.9 |
| Number of leases | 88 | 95 | 79 | 32 | 22 |
| Average rent per lease (£) | 31,652 | 59,707 | 73,463 | 149,346 | 90,768 |
We have a strong rental income stream and a diverse tenant base, with the largest tenant in the portfolio accounting for only 7.1% of the rent roll. The top 10 tenants account for 30.4% of the total rent roll and the tenants come from a variety of industries.
| Rank | Tenant | Tenant Industry | Rent £m |
Rent Roll % |
| 1 | Endemol UK Ltd | Media | 4.0 | 7.1 |
| 2 | MullenLowe Ltd | Marketing Communications | 2.6 | 4.6 |
| 3 | Gopivotal (UK) Limited | Technology | 2.0 | 3.6 |
| 4 | Farfetch UK Ltd | Online Retail | 1.9 | 3.4 |
| 5 | DSG Retail Limited | Retail | 1.3 | 2.3 |
| 6 | Sainsbury's Supermarkets Ltd | Food Retail | 1.2 | 2.2 |
| 7 | CBS Interactive Limited | Media | 1.0 | 1.9 |
| 8 | B&M Retail Limited | Retail | 1.0 | 1.8 |
| 9 | Allegis Group Limited | Recruitment | 1.0 | 1.8 |
| 10 | Economic Solutions Ltd | Employment and Skills Training | 1.0 | 1.7 |
| Total | 17.0 | 30.4 |
Consolidated Income Statement
For the year ended 31 March 2016
| Note | Year ended 31.3.16 £000 |
Year ended 31.3.15 £000 |
||
| Revenue | 2 | 116,500 | 106,341 | |
| Net rental income | 3 | 42,164 | 34,233 | |
| Development property profit | 4 | 24,252 | 15,674 | |
| Trading property gain | 5 | - | 2,503 | |
| Share of results of joint ventures | 16 | 50,469 | 27,497 | |
| Other operating income | 20 | 368 | ||
| Gross profit before net gain on sale and revaluation of investment properties | 116,905 | 80,275 | ||
| Net gain on sale and revaluation of investment properties | 6 | 55,893 | 69,384 | |
| Impairment of available for sale assets | 19 | (1,370) | (773) | |
| Gross profit | 171,428 | 148,886 | ||
| Administrative expenses | 7 | (26,103) | (26,530) | |
| Operating profit | 145,325 | 122,356 | ||
| Finance costs | 8 | (24,113) | (23,678) | |
| Finance income | 8 | 5,128 | 2,480 | |
| Change in fair value of derivative financial instruments | (6,860) | (8,389) | ||
| Change in fair value of convertible bond | 516 | (3,263) | ||
| Foreign exchange gains/(losses) | 100 | (2,061) | ||
| Profit before tax | 120,096 | 87,445 | ||
| Taxation on profit on ordinary activities | 9 | (9,745) | (12,669) | |
| Profit after tax | 110,351 | 74,776 | ||
| - attributable to equity shareholders | 110,411 | 74,489 | ||
| - attributable to non-controlling interests | (60) | 287 | ||
| Profit for the year | 110,351 | 74,776 | ||
| Basic earnings per share | 12 | 96.1p | 64.6p | |
| Diluted earnings per share | 12 | 92.6p | 60.8p | |
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2016
| Year ended 31.3.16 £000 |
Year ended 31.3.15 £000 |
|||
| Profit for the year | 110,351 | 74,776 | ||
| Exchange difference on retranslation of net investments in foreign operations | (16) | 149 | ||
| Total comprehensive income for the year | 110,335 | 74,925 | ||
| - attributable to equity shareholders | 110,395 | 74,638 | ||
| - attributable to non-controlling interests | (60) | 287 | ||
| Total comprehensive income for the year | 110,335 | 74,925 | ||
The exchange differences on retranslation of net investments in foreign operations will be reclassified to the Income Statement in the future.
Consolidated Balance Sheet
As at 31 March 2016
| Note | 31.3.16 £000 |
31.3.15 £000 |
|
| Non-current assets | |||
| Investment properties | 13 | 1,041,100 | 701,521 |
| Owner occupied property, plant and equipment | 15 | 2,200 | 2,361 |
| Investment in joint ventures | 16 | 27,990 | 71,585 |
| Derivative financial instruments | - | 1 | |
| Trade and other receivables | 20 | - | 1,555 |
| 1,071,290 | 777,023 | ||
| Current assets | |||
| Land, developments and trading properties | 17 | 92,035 | 92,578 |
| Property derivative financial asset | 18 | - | 16,388 |
| Available-for-sale investments | 19 | 3,114 | 4,342 |
| Corporate tax receivable | - | 1,418 | |
| Trade and other receivables | 20 | 73,057 | 65,216 |
| Cash and cash equivalents | 21 | 74,670 | 120,993 |
| 242,876 | 300,935 | ||
| Total assets | 1,314,166 | 1,077,958 | |
| Current liabilities | |||
| Trade and other payables | 22 | (71,000) | (65,802) |
| Corporate tax payable | (1,592) | - | |
| Borrowings | 23 | (885) | (45,428) |
| (73,477) | (111,230) | ||
| Non-current liabilities | |||
| Borrowings | 23 | (733,178) | (552,813) |
| Derivative financial instruments | (14,955) | (8,096) | |
| Deferred tax liability | 10 | (6,367) | (1,456) |
| (754,500) | (562,365) | ||
| Total liabilities | (827,977) | (673,595) | |
| Net assets | 2 | 486,189 | 404,363 |
| Equity | |||
| Called-up share capital | 25 | 1,447 | 1,447 |
| Share premium account | 98,798 | 98,798 | |
| Revaluation reserve | 149,766 | 108,060 | |
| Capital redemption reserve | 7,478 | 7,478 | |
| Other reserves | 291 | 291 | |
| Retained earnings | 228,409 | 188,229 | |
| Equity attributable to equity holders of the parent company | 486,189 | 404,303 | |
| Non-controlling interests | - | 60 | |
| Total equity | 486,189 | 404,363 |
Consolidated cash flow statement
For the year to 31 March 2016
| 31.3.16 £000 |
31.3.15 £000 |
|
|---|---|---|
| Cash flows from operating activities | ||
| Profit before tax | 120,096 | 87,445 |
| Depreciation | 338 | 544 |
| Revaluation gain on investment properties | (53,508) | (66,904) |
| Gain on sales of investment properties | (2,385) | (2,480) |
| Profit on sale of plant and equipment | - | (23) |
| Net financing costs | 18,985 | 20,806 |
| Change in value of derivative financial instruments | 6,860 | 8,389 |
| Profit on forward property contract | - | (16,388) |
| Change in fair value of Convertible Bond | (516) | 3,263 |
| Share based payment charge | 6,666 | 6,432 |
| Share of results of joint ventures | (50,469) | (27,497) |
| Impairment of available for sale assets | 1,370 | 773 |
| Foreign exchange movement | 250 | 2,213 |
| Cash inflow from operations before changes in working capital | 47,687 | 16,573 |
| Change in trade and other receivables | (5,074) | (25,975) |
| Change in forward property contract | 16,388 | - |
| Change in land, developments and trading properties | 306 | 4,125 |
| Change in trade and other payables | 5,314 | 13,162 |
| Cash inflow generated from operations | 64,621 | 7,885 |
| Finance costs | (25,312) | (22,277) |
| Finance income | 3,915 | 2,480 |
| Tax paid | (4,712) | (7,064) |
| (26,109) | (26,861) | |
| Cash flows from operating activities | 38,512 | (18,976) |
| Cash flows from investing activities | ||
| Purchase of investment property | (405,133) | (271,093) |
| Sale of investment property | 121,770 | 133,209 |
| Investment in joint ventures | - | (10,141) |
| Return of investment in joint ventures | 11,495 | 11,778 |
| Dividends from joint ventures | 82,569 | 17,013 |
| Available-for-sale asset additions | (142) | (144) |
| Sale of plant and equipment | 70 | 23 |
| Purchase of leasehold improvements, plant and equipment | (263) | (1,859) |
| Net cash used in investing activities | (189,634) | (121,214) |
| Cash flows from financing activities | ||
| Borrowings drawn down | 299,754 | 375,503 |
| Shares issued | - | 120 |
| Borrowings repaid | (161,648) | (156,381) |
| Purchase of own shares | (18,857) | (13,349) |
| Equity dividends paid | (14,437) | (7,944) |
| Net cash generated from financing activities | 104,812 | 197,949 |
| Net (decrease)/increase in cash and cash equivalents | (46,310) | 57,759 |
| Exchange losses on cash and cash equivalents | (13) | (3) |
| Cash and cash equivalents at 1 April | 120,993 | 63,237 |
| Cash and cash equivalents at 31 March | 74,670 | 120,993 |
Consolidated statement of changes in equity
For the year to 31 March 2016
| Group | Share capital £000 |
Share premium £000 |
Revaluation reserve £000 |
Capital redemption reserve £000 |
Other reserves £000 |
Retained earnings £000 |
Own shares held £000 |
Non- controlling interests £000 |
Total £000 |
|||
| At 31 March 2014 | 1,447 | 98,678 | 33,106 | 7,478 | 291 | 200,455 | (950) | 22 | 340,527 | |||
| Total comprehensive income | - | - | - | - | - | 74,638 | - | 287 | 74,925 | |||
| Revaluation surplus | - | - | 66,904 | - | - | (66,904) | - | - | - | |||
| Realised on disposals | - | - | 8,050 | - | - | (8,050) | - | - | - | |||
| Payment to minority interest | - | - | - | - | - | - | - | (249) | (249) | |||
| Performance share plan | - | - | - | - | - | 6,432 | - | - | 6,432 | |||
| Performance share plan deferred tax | - | - | - | - | - | 2,477 | - | - | 2,477 | |||
| Share settled bonus | - | - | - | - | - | 1,424 | - | - | 1,424 | |||
| New share capital issued | - | 120 | - | - | - | - | - | - | 120 | |||
| Dividends paid | - | - | - | - | - | (7,944) | - | - | (7,944) | |||
| Purchase of own shares | - | - | - | - | - | - | (13,349) | - | (13,349) | |||
| Own shares held reserve transfer | - | - | - | - | - | (14,299) | 14,299 | - | - | |||
| At 31 March 2015 | 1,447 | 98,798 | 108,060 | 7,478 | 291 | 188,229 | - | 60 | 404,363 | |||
| Total comprehensive income | - | - | - | - | - | 110,411 | - | (60) | 110,351 | |||
| Revaluation surplus | - | - | 53,508 | - | - | (53,508) | - | - | - | |||
| Realised on disposals | - | - | (11,802) | - | - | 11,802 | - | - | - | |||
| Performance share plan | - | - | - | - | - | 6,666 | - | - | 6,666 | |||
| Performance share plan deferred tax | - | - | - | - | - | (3,002) | - | - | (3,002) | |||
| Share settled bonus | - | - | - | - | - | 1,121 | - | - | 1,121 | |||
| Dividends paid | - | - | - | - | - | (14,437) | - | - | (14,437) | |||
| Movement on foreign exchange | - | - | - | - | - | (16) | - | - | (16) | |||
| Purchase of own shares | - | - | - | - | - | - | (18,857) | - | (18,857) | |||
| Own shares held reserve transfer | - | - | - | - | - | (18,857) | 18,857 | - | - | |||
| At 31 March 2016 | 1,447 | 98,798 | 149,766 | 7,478 | 291 | 228,409 | - | - | 486,189 | |||
For a breakdown of Total Comprehensive Income, see the Consolidated Statement of Comprehensive Income.
Included within changes in equity are net transactions with owners of £28,509,000 (2015: £10,840,000) made up of: the performance share plan charge of £6,666,000 (2015: £6,432,000) and related deferred tax of credit of £3,002,000 (2015: charge of £2,477,000), dividends paid of £14,437,000 (2015: £7,944,000), the purchase of own shares of £18,857,000 (2015: £13,349,000), new share capital issued of £nil (2015: £120,000) and the share settled bonuses of £1,121,000 (2015: £1,424,000).
The adjustment to retained earnings of £6,666,000 adds back the performance share plan charge (2015: £6,432,000), in accordance with IFRS 2 Share-Based Payments.
Notes:
Share capital - represents the nominal value of issued share capital.
Share premium - represents the excess of value of shares issued over their nominal value.
Revaluation reserve - represents the surplus/deficit of fair value of investment properties over their historic cost.
Capital redemption reserve - represents amounts paid to purchase issued shares for cancellation at their nominal value.
Retained earnings - represents the accumulated retained earnings of the Group.
Notes to the financial statements
1. Basis of preparation
These financial statements have been prepared using the recognition and measurement principles of International Financial Reporting Standards ("IFRS"), including International Financial Reporting Interpretations Committee ("IFRIC") interpretations as adopted by the European Union.
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, available-for-sale investments, convertible bonds and derivative financial instruments.
The principal accounting policies of the Group are set out in the Group's 2015 annual report and financial statements. There has been no significant change to these since the previous annual report.
The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The Group Annual Report and Financial Statements for 2015 are available at Companies House. The auditor's opinion on the 2015 accounts was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
2. Segmental information
IFRS 8 requires the identification of the Group's operating segments, which are defined as being discrete components of the Group's operations whose results are regularly reviewed by the Chief Operating Decision Maker (being the Chief Executive) to allocate resources to those segments and to assess their performance. The Group divides its business into the following segments:
· Investment properties, which are owned or leased by the Group for long-term income and for capital appreciation, and Trading properties which are owned or leased with the intention to sell; and,
· Developments, which include sites, developments in the course of construction, completed developments available for sale, pre-sold developments and interests in third party developments.
| Revenue | Investment and trading Year ended 31.3.16 £000 |
Developments Year ended 31.3.16 £000 |
Total Year ended 31.3.16 £000 |
Investment and trading Year ended 31.3.15 £000 |
Developments Year ended 31.3.15 £000 |
Total Year ended 31.3.15 £000 |
|
| Rental income | 45,158 | 347 | 45,505 | 37,246 | 1,086 | 38,332 | |
| Development property income | - | 70,876 | 70,876 | - | 30,416 | 30,416 | |
| Trading property sales | - | - | - | 37,394 | - | 37,394 | |
| Other revenue | 119 | - | 119 | 199 | - | 199 | |
| Total revenue | 45,277 | 71,223 | 116,500 | 74,839 | 31,502 | 106,341 | |
All revenue is from external sales and is attributable to continuing operations. There were no inter-segmental sales.
Revenue for the year comprises revenue from construction contracts of £nil (2015: £nil), revenue from the sale of goods of £42,910,000 (2015: £63,953,000), revenue from services of £28,085,000 (2015: £4,056,000), and rental income of £45,505,000 (2015: £38,332,000).
All revenues are within the UK other than proceeds from the sale of a development property in Poland of £12,351,000 (2015: £nil), rental income from development properties in Poland of £347,000 (2015: £1,086,000) and £225,000 (2015: £630,000) of development income derived from the Group's operations in Poland.
| Profit before tax | Investment and trading Year ended 31.3.16 £000 |
Developments Year ended 31.3.16 £000 |
Total Year ended 31.3.16 £000 |
Investment and trading Year ended 31.3.15 £000 |
Developments Year ended 31.3.15 £000 |
Total Year ended 31.3.15 £000 |
|
| Net rental income | 42,010 | 154 | 42,164 | 33,270 | 963 | 34,233 | |
| Development property profit | - | 24,252 | 24,252 | - | 15,674 | 15,674 | |
| Trading property profit | - | - | - | 2,503 | - | 2,503 | |
| Share of results of joint ventures | 47,592 | 2,877 | 50,469 | 27,398 | 99 | 27,497 | |
| Gain on sale and revaluation of investment properties | 55,893 | - | 55,893 | 69,384 | - | 69,384 | |
| 145,495 | 27,283 | 172,778 | 132,555 | 16,736 | 149,291 | ||
| Impairment of available for sale assets | (1,370) | (773) | |||||
| Other operating income | 20 | 368 | |||||
| Gross profit | 171,428 | 148,886 | |||||
| Administrative expenses | (26,103) | (26,530) | |||||
| Finance costs | (24,113) | (23,678) | |||||
| Finance income | 5,128 | 2,480 | |||||
| Change in fair value of derivative financial instruments | (6,860) | (8,389) | |||||
| Change in fair value of convertible bond | 516 | (3,263) | |||||
| Foreign exchange losses | 100 | (2,061) | |||||
| Profit before tax | 120,096 | 87,445 | |||||
| Net assets | Investment and trading At 31.3.16 £000 |
Developments At 31.3.16 £000 |
Total At 31.3.16 £000 |
Investment and trading At 31.3.15 £000 |
Developments At 31.3.15 £000 |
Total At 31.3.15 £000 |
| Investment properties | 1,041,100 | - | 1,041,100 | 701,521 | - | 701,521 |
| Land, developments and trading properties | 28 | 92,007 | 92,035 | 28 | 92,550 | 92,578 |
| Investment in joint ventures | 14,162 | 13,828 | 27,990 | 57,209 | 14,376 | 71,585 |
| Property derivative financial asset | - | - | - | - | 16,388 | 16,388 |
| 1,055,290 | 105,835 | 1,161,125 | 758,758 | 123,314 | 882,072 | |
| Owner occupied property, plant and equipment | 2,200 | 2,361 | ||||
| Derivative financial instruments | - | 1 | ||||
| Available-for-sale investments | 3,114 | 4,342 | ||||
| Trade and other receivables | 73,057 | 66,771 | ||||
| Corporation tax receivable | - | 1,418 | ||||
| Cash and cash equivalents | 74,670 | 120,993 | ||||
| Total assets | 1,314,166 | 1,077,958 | ||||
| Liabilities | (827,977) | (673,595) | ||||
| Net assets | 486,189 | 404,363 |
All non-current assets are derived from the Group's UK operations except for owner occupied property, plant and equipment with a net book value of £31,600 (2015: £69,000).
3. Net rental income
| Year ended 31.3.16 £000 |
Year ended 31.3.15 £000 |
|
| Gross rental income | 45,505 | 38,332 |
| Rents payable | (80) | (269) |
| Property overheads | (2,728) | (3,489) |
| Net rental income | 42,697 | 34,574 |
| Net rental income attributable to profit share partner | (533) | (341) |
| Group share of net rental income | 42,164 | 34,233 |
Property overheads include lettings costs, vacancy costs and bad debt provisions. The amounts above include gross rental income from investment properties of £45,158,000 (2015: £37,246,000) and net rental income from investment properties of £42,010,000 (2015: £33,270,000). No contingent rental income was received in the year (2015: £nil).
4. Development property profit
| Year ended 31.3.16 £000 |
Year ended 31.3.15 £000 |
|
| Development property income | 70,876 | 30,416 |
| Profit on forward property contract | 14 | 16,388 |
| Cost of sales | (29,519) | (30,136) |
| Sales expenses | (10,671) | (542) |
| Provision against book values | (6,448) | (452) |
| Development property profit | 24,252 | 15,674 |
5. Trading property gain
| Year ended 31.3.16 £000 |
Year ended 31.3.15 £000 |
|
| Trading property sales | - | 37,394 |
| Cost of sales | - | (33,512) |
| Sales expenses | - | (1,379) |
| Trading property gain | - | 2,503 |
6. Net gain on sale and revaluation of investment properties
| Year ended 31.3.16 £000 |
Year ended 31.3.15 £000 |
|
| Net proceeds from the sale of investment properties | 122,201 | 133,782 |
| Book value (note 13) | (119,385) | (130,729) |
| Tenants incentives on sold investment properties | (431) | (573) |
| Gain on sale of investment properties | 2,385 | 2,480 |
| Revaluation surplus on investment properties | 53,508 | 66,904 |
| Gain on sale and revaluation of investment properties | 55,893 | 69,384 |
7. Administrative expenses
| Year ended 31.3.16 £000 |
Year ended 31.3.15 £000 |
|
| Administrative expenses | 26,103 | 26,530 |
| Operating profit is stated after the following items that are contained within administrative expenses: | ||
| Depreciation | ||
| - owner occupied property, plant and equipment | 338 | 544 |
| Share-based payments charge | 6,666 | 6,432 |
| Auditors' remuneration: | ||
| Audit fees | ||
| - audit of parent company and consolidated financial statements | 159 | 154 |
| - audit of company's subsidiaries | 90 | 62 |
| - audit of interim consolidated financial statements | 65 | 68 |
| - audit of Company's subsidiaries by affiliate of Group Auditor | - | 3 |
| Operating lease costs | 1,118 | 730 |
8. Finance costs and finance income
| Year ended 31.3.16 £000 |
Year ended 31.3.15 £000 |
|
| Interest payable on bank loans and overdrafts | (25,353) | (21,055) |
| Other interest payable and similar charges | (3,700) | (6,264) |
| Interest capitalised | 4,940 | 3,641 |
| Finance costs | (24,113) | (23,678) |
| Interest receivable and similar income | 5,128 | 2,480 |
| Finance income | 5,128 | 2,480 |
On projects where specific third party loans have been arranged, interest has been capitalised in accordance with IAS 23 - Borrowing Costs, at the rate for the individual loan. The weighted average capitalised interest rate of such loans was 3.50% (2015: 3.68%). Where general finance has been used to fund the acquisition and construction of properties the rate used was a weighted average of the financing costs for the applicable borrowings of 4.18% (2015: 4.62%).
9. Taxation on profit on ordinary activities
| Year ended 31.3.16 £000 |
Year ended 31.3.15 £000 |
|
| The tax charge is based on the profit for the year and represents: | ||
| United Kingdom corporation tax at 20% (2015: 21%) | ||
| - Group corporation tax | (7,010) | (215) |
| - adjustment in respect of prior periods | (115) | (22) |
| - overseas tax | (712) | (39) |
| Current tax charge | (7,837) | (276) |
| Deferred tax at 19% (2015: 20%) | ||
| - capital allowances | (385) | (297) |
| - tax losses | 500 | 3,033 |
| - unrealised chargeable gains | (8,046) | (15,096) |
| - other temporary differences | 6,023 | (33) |
| Deferred tax charge | (1,908) | (12,393) |
| Tax charge on profit on ordinary activities | (9,745) | (12,669) |
Factors affecting the tax charge for the year
The tax assessed for the year is lower than the standard rate of corporation tax in the UK.
The differences are explained below:
| Year ended 31.3.16 £000 |
Year ended 31.3.15 £000 |
||
| Profit on ordinary activities before tax | 120,096 | 87,445 | |
| Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 20% (2015: 21%) | (24,019) | (18,363) | |
| Effect of | |||
| - expenses not deductible for tax purposes | (534) | (1,041) | |
| - income not subject to UK corporation tax | - | 285 | |
| - adjustment to capital allowances | 707 | 331 | |
| - tax movements on share awards | 2,807 | 609 | |
| - additional tax losses unavailable | - | (143) | |
| - tax losses not previously recognised in deferred tax | 1,930 | - | |
| - operating profit of joint ventures | 10,094 | 5,774 | |
| - prior year adjustment | (115) | (22) | |
| - movement on sale and revaluation not recognised through deferred tax | 1,355 | (1,370) | |
| - chargeable gain in excess of the profit or loss on investment property | (2,472) | (278) | |
| - overseas tax | (505) | (39) | |
| - other temporary differences | 943 | 901 | |
| - effect of change of rate of corporation tax | 64 | 687 | |
| Total tax charge for the period | (9,745) | (12,669) | |
Note: all deferred tax balances have been calculated at the substantively enacted future rate of corporation tax of 19% for the years from 1 April 2017 to 31 March 2020.
Factors that may affect future tax charges
The tax charge is expected to be less than the full rate in future years, primarily due to the Group continuing to claim allowances in respect of eligible expenditure on investment properties.
10. Deferred tax
Deferred tax provided for in the financial statements is set out below:
| 31.3.16 £000 |
1.3.15 £000 |
|
| Capital allowances | (1,946) | (1,561) |
| Tax losses | 12,521 | 12,021 |
| Unrealised chargeable gains | (24,733) | (16,687) |
| Other temporary differences | 7,791 | 4,771 |
| Deferred tax liability | (6,367) | (1,456) |
Other temporary differences include deferred tax assets arising from the recognition of the fair value of derivative financial instruments and future tax relief available to the Group from capital allowances and when share awards vest. A debit of £3,002,000 (2015: credit of £2,477,000) in respect of future tax relief for share awards has been recognised in reserves in accordance with IAS 12.
The Group contains entities with tax losses for which no deferred tax asset is recognised. The total unrecognised losses amount to approximately £9,026,000 (2015: £9,036,000). A deferred tax asset has not been recognised because the entities in which the losses have been generated either do not have forecast taxable profits or the losses have restrictions whereby their utilisation is considered to be unlikely.
If upon sale of the investment properties the Group retained all the capital allowances, the deferred tax provision in respect of capital allowances of £1,946,000 (2015: £1,561,000) would be released and further capital allowances of £20,340,000 (2015: £18,031,000) would be available to reduce future tax liabilities.
11. Dividends paid and payable
| Year ended 31.3.16 £000 |
Year ended 31.3.15 £000 |
|
| Attributable to equity share capital | ||
| Ordinary | ||
| - interim paid of 2.30p (2015: 2.10p) per share | 2,652 | 2,406 |
| - second interim paid of 5.15p (2015: nil) per share | 5,886 | - |
| - prior period final paid of 5.15p (2015: 4.75p) per share | 5,899 | 5,538 |
| Total dividends paid and payable in year - 12.60p (2015: 6.85p) per share | 14,437 | 7,944 |
An interim dividend of 2.30p was paid on 30 December 2015 to shareholders on the register on 4 December 2015 and a second interim dividend of 5.15p was paid on 4 April 2016 to shareholders on the register on 11 March 2016. The final dividend of 0.72p, if approved at the AGM on 25 July 2016, will be paid on 29 July 2016 to shareholders on the register on 1 July 2016. This final dividend, amounting to £823,000, has not been included as a liability as at 31 March 2016, in accordance with IFRS.
12. 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. Shares held by the ESOP, which has waived its entitlement to receive dividends, are treated as cancelled for the purposes of this calculation.
The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the effect of all dilutive options and awards.
The earnings per share are 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.
| Earnings per share | Year ended 31.3.16 000 |
Year ended 31.3.15 000 |
| Ordinary shares in issue | 118,184 | 118,184 |
| Weighting adjustment | (3,296) | (2,897) |
| Weighted average ordinary shares in issue for calculation of basic earnings per share | 114,888 | 115,287 |
| Weighted average ordinary shares to be issued on share settled bonuses | 1,197 | 1,016 |
| Weighted average ordinary shares to be issued under performance share plan | 3,212 | 6,182 |
| Weighted average ordinary shares in issue for calculation of diluted earnings per share | 119,297 | 122,485 |
| £000 | £000 | |
| Earnings used for calculation of basic and diluted earnings per share | 110,411 | 74,489 |
| Basic earnings per share | 96.1p | 64.6p |
| Diluted earnings per share | 92.6p | 60.8p |
| £000 | £000 | |
| Earnings used for calculation of basic and diluted earnings per share | 110,411 | 74,489 |
| Net gain on sale and revaluation of investment properties | (55,893) | (69,384) |
| Share of net gain on sale and revaluation of investment properties in joint ventures | (50,210) | (27,225) |
| Tax on profit on disposal of investment properties | 998 | - |
| Trading property gain | - | (2,503) |
| Fair value movement on derivative financial instruments | 6,860 | 8,389 |
| Fair value movement on Convertible Bond | (516) | 3,263 |
| Share of fair value movements on derivative financial instruments in joint ventures | (211) | 578 |
| Impairment of available-for-sale investment | 1,370 | 773 |
| Deferred tax | 6,811 | 14,425 |
| Earnings used for calculation of EPRA earnings per share | 19,620 | 2,805 |
| EPRA earnings per share | 17.1p | 2.4p |
The earnings used for calculation of EPRA earnings per share includes net rental income and development property profits but excludes trading property gains/losses.
13. Investment properties
| Freehold 31.3.16 £000 |
Leasehold 31.3.16 £000 |
Total 31.3.16 £000 |
Freehold 31.3.15 £000 |
Leasehold 31.3.15 £000 |
Total 31.3.15 £000 |
|
| Fair value at 1 April | 591,870 | 109,651 | 701,521 | 450,276 | 42,925 | 493,201 |
| Property acquisitions | 377,890 | 27,243 | 405,133 | 191,280 | 79,813 | 271,093 |
| Disposals | (96,237) | (23,148) | (119,385) | (112,089) | (18,640) | (130,729) |
| Revaluation surplus | 51,779 | 1,729 | 53,508 | 61,376 | 5,528 | 66,904 |
| Revaluation surplus attributable to profit share partner | 323 | - | 323 | 1,027 | 25 | 1,052 |
| Fair value at 31 March | 925,625 | 115,475 | 1,041,100 | 591,870 | 109,651 | 701,521 |
Interest capitalised during the year in respect of the refurbishment of investment properties amounted to £1,200,000 (2015: £667,000).
Interest capitalised in respect of the refurbishment of investment properties is included in investment properties at 31 March 2016 to the extent of £6,571,000 (2015: £5,449,000).
Investment properties with a total fair value of £945,400,000 (2015: £628,621,000) were held as security against borrowings.
All of the Group's properties are level 3, as defined by IFRS 13 Fair Value Measurement, in the fair value hierarchy as at 31 March 2016 and there were no transfers between levels during the year. Level 3 inputs used in valuing the properties, are those which are unobservable, as opposed to level 1 (inputs from quoted prices) and level 2 (observable inputs either directly, i.e. as prices, or indirectly, i.e. derived from prices).
Transfers into and transfers out of the fair value hierarchy levels are recognised on the date of the event or change in circumstances that caused the transfer. There were no transfers in or out of level 3 for investment properties during the year.
Valuation methodology
The fair value of the Group's investment property as at 31 March 2016 was determined by independent external valuers at that date, except for investment properties valued by the Directors. The valuations are in accordance with the Royal Institution of Chartered Surveyors ('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 nominal equivalent yield is applied as a discount rate to the rental cash flows which, after taking into account of 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 output, 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 investment properties have been valued at 31 March 2016 as follows:
| 31.3.16 £000 |
31.3.15 £000 |
|
| Cushman & Wakefield LLP | 801,800 | 697,521 |
| Colliers International UK plc | 239,200 | - |
| Directors' valuation | 100 | 4,000 |
| 1,041,100 | 701,521 |
The historical cost of investment property is £889,493,000 (2015: £590,965,000).
14. Operating lease arrangements
The Group earns rental income by leasing its investment properties to tenants under non-cancellable operating leases. At the balance sheet date, the Group had contracted with tenants to receive the following future minimum lease payments:
| 31.3.16 £000 |
31.3.15 £000 |
|
| Not later than one year | 43,266 | 39,393 |
| Later than one year but not more than five years | 157,948 | 104,268 |
| More than five years | 115,382 | 159,001 |
| 316,596 | 302,662 |
At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
| 31.3.16 £000 |
31.3.15 £000 |
|
| Not later than one year | 818 | 281 |
| Later than one year but not more than five years | 3,273 | 3,273 |
| More than five years | 5,319 | 7,773 |
| 9,410 | 11,327 |
15. Owner occupied property, plant and equipment
| Short leasehold improvements 31.3.16 £000 |
Plant and equipment 31.3.16 £000 |
Total 31.3.16 £000 |
Short leasehold improvements 31.3.15 £000 |
Plant and equipment 31.3.15 £000 |
Total 31.3.15 £000 |
||
| Cost at 1 April | 2,007 | 1,008 | 3,015 | 2,373 | 935 | 3,308 | |
| Additions at cost | 99 | 164 | 263 | 1,695 | 164 | 1,859 | |
| Disposals | - | (160) | (160) | (2,061) | (91) | (2,152) | |
| Cost at 31 March | 2,106 | 1,012 | 3,118 | 2,007 | 1,008 | 3,015 | |
| Depreciation at 1 April | 111 | 543 | 654 | 1,811 | 447 | 2,258 | |
| Provision for the year | 146 | 192 | 338 | 361 | 183 | 544 | |
| Eliminated on disposals | - | (74) | (74) | (2,061) | (87) | (2,148) | |
| Depreciation at 31 March | 257 | 661 | 918 | 111 | 543 | 654 | |
| Net book amount at 31 March | 1,849 | 351 | 2,200 | 1,896 | 465 | 2,361 | |
Plant and equipment include vehicles, fixtures and fittings and other office equipment.
16. Investment in joint ventures
| Investment & trading 31.3.16 £000 |
Development 31.3.16 £000 |
Total 31.3.16 £000 |
Investment & trading 31.3.15 £000 |
Development 31.3.15 £000 |
Total 31.3.15 £000 |
||||
| Summarised statements of consolidated income | |||||||||
| Revenue | 917 | 911 | 1,828 | 5,523 | 575 | 6,098 | |||
| Gross rental income | 917 | 911 | 1,828 | 5,523 | 575 | 6,098 | |||
| Rents payable | - | - | - | (809) | - | (809) | |||
| Property overheads | (483) | (75) | (558) | (683) | (194) | (877) | |||
| Net rental income | 434 | 836 | 1,270 | 4,031 | 381 | 4,412 | |||
| Development profit | - | 3,223 | 3,223 | - | 1,902 | 1,902 | |||
| Profit on sale of property | 41,553 | - | 41,553 | 1,087 | 4 | 1,091 | |||
| Gain on revaluation of investment properties | 995 | 1,321 | 2,316 | 26,134 | - | 26,134 | |||
| Other operating income/(expense) | 196 | 22 | 218 | (1) | 294 | 293 | |||
| Administrative expenses | (705) | (435) | (1,140) | (291) | (660) | (951) | |||
| Finance costs | (1,902) | (1,771) | (3,673) | (2,254) | (1,390) | (3,644) | |||
| Finance income | 12 | 9 | 21 | 4 | 39 | 43 | |||
| Change in fair value movement of derivative financial instruments | 211 | - | 211 | (578) | - | (578) | |||
| Profit before tax | 40,794 | 3,205 | 43,999 | 28,132 | 570 | 28,702 | |||
| Tax | 458 | (329) | 129 | (734) | (471) | (1,205) | |||
| Profit after tax | 41,252 | 2,876 | 44,128 | 27,398 | 99 | 27,497 | |||
| Economic interest adjustment* | 6,341 | - | 6,341 | - | - | - | |||
| Share of results in joint ventures | 47,593 | 2,876 | 50,469 | 27,398 | 99 | 27,497 | |||
| Summarised balance sheets | |||||||||
| Non-current assets | |||||||||
| Investment properties | 10,107 | 1,445 | 11,552 | 88,205 | 100 | 88,305 | |||
| Owner occupied property, plant and equipment | 50 | 46 | 96 | - | 42 | 42 | |||
| Deferred tax | 50 | 362 | 412 | 256 | 278 | 534 | |||
| 10,207 | 1,853 | 12,060 | 88,461 | 420 | 88,881 | ||||
| Current assets | |||||||||
| Land, development and trading properties | - | 75,904 | 75,904 | - | 61,782 | 61,782 | |||
| Trade and other receivables | 769 | 2,728 | 3,497 | 1,468 | 1,258 | 2,726 | |||
| Cash and cash equivalents | 6,433 | 5,744 | 12,177 | 7,030 | 6,423 | 13,453 | |||
| 7,202 | 84,376 | 91,578 | 8,498 | 69,463 | 77,961 | ||||
| Current liabilities | |||||||||
| Trade and other payables | (836) | (13,600) | (14,436) | (3,947) | (20,749) | (24,696) | |||
| (836) | (13,600) | (14,436) | (3,947) | (20,749) | (24,696) | ||||
| Non-current liabilities | |||||||||
| Trade and other payables | - | (26,586) | (26,586) | (5,590) | (19,842) | (25,432) | |||
| Borrowings | (2,413) | (32,213) | (34,626) | (29,503) | (14,916) | (44,419) | |||
| Derivative financial instruments | - | - | - | (473) | - | (473) | |||
| Deferred Tax | - | - | - | (237) | - | (237) | |||
| (2,413) | (58,799) | (61,212) | (35,803) | (34,758) | (70,561) | ||||
| Net assets | 14,160 | 13,830 | 27,990 | 57,209 | 14,376 | 71,585 | |||
*Under the Barts Square joint venture agreement the Company is entitled to varying returns dependent upon the performance of the development. Whilst the Group holds a 33.35% equity share in the Barts Square group, it has accounted for its share at 43.8% to reflect its expected economic interest in the joint venture. This has changed from the 33.35% interest shown at 31 March 2015, and resulted in a gain of £6,341,000 being recognised in the Consolidated Income Statement to reflect the Groups increased share in the opening net assets of the joint venture.
The Directors' valuation of the trading and development stock shows a surplus of £7,000,000 above book value (2015: £11,013,000).
Dividends of £82,569,000 were received from joint venture companies during the year (2015: £17,013,000). The joint venture companies are private companies, therefore no quoted market prices are available for their shares.
At 31 March 2015, the Group had an investment in Helical Sosnica Sp. Zoo, which had been accounted for as an investment held for sale due to a commitment to sell the Group's share. At 31 March 2015 Helical Sosnica Sp. zoo held a development property, the fair value of which the Directors believed to be £81,866,000 (of which Helical's share was £40,933,000), and a bank loan of £51,156,000 (of which Helical's share was £25,578,000) repayable in September 2017. During the year, the Group sold its investment in Helical Sosnica Sp. Zoo.
During the year, Old Street Holdings LP sold its investments in 207 Old Street Unit Trust, 211 Old Street Unit Trust, Old Street Retail Unit Trust and City Road Jersey Limited. Helical purchased the trust capital of 207 Old Street Unit Trust and 211 Old Street Unit Trust from Old Street Holdings LP.
17. Land, developments and trading properties
| Development properties 31.3.16 £000 |
Trading stock 31.3.16 £000 |
Total 31.3.16 £000 |
Development properties 31.3.15 £000 |
Trading stock 31.3.15 £000 |
Total 31.3.15 £000 |
||
| At 1 April | 92,550 | 28 | 92,578 | 95,632 | 2,528 | 98,160 | |
| Acquisitions and construction costs | 31,465 | - | 31,465 | 21,131 | 31,012 | 52,143 | |
| Interest capitalised | 3,740 | - | 3,740 | 3,381 | - | 3,381 | |
| Disposals | (29,063) | - | (29,063) | (25,685) | (33,512) | (59,197) | |
| Foreign exchange movements | (237) | - | (237) | (1,457) | - | (1,457) | |
| Provision | (6,448) | - | (6,448) | (452) | - | (452) | |
| At 31 March | 92,007 | 28 | 92,035 | 92,550 | 28 | 92,578 | |
The Directors' valuation of trading and development stock shows a surplus of £12,412,000 above book value (2015: £25,230,000).
Interest capitalised in respect of the development of sites is included in stock to the extent of £11,626,000 (2015: £9,788,000).
Land, developments and trading properties with carrying values totalling £81,870,000 (2015: £83,948,000) were held as security against borrowings.
18. Property derivative financial asset
| 31.3.16 £000 |
31.3.15 £000 |
|
| Property derivative financial asset | - | 16,388 |
| - | 16,388 |
In the year to 31 March 2015, the Group assigned its forward purchase contract on Clifton Street, London EC2 to a third party. The agreement to assign the forward purchase contract was considered to be a derivative financial instrument. As such, under IAS 39, it was carried at its fair value with gains and losses taken to the Income Statement. Cash of £17.3m was received during the year to 31 March 2016.
19. Available-for-sale investments
| 31.3.16 £000 |
31.3.15 £000 |
|
| At 1 April | 4,342 | 4,973 |
| Additions | 142 | 144 |
| Disposals | - | (2) |
| Impairment in the year | (1,370) | (773) |
| At 31 March | 3,114 | 4,342 |
The fair values of the Group's available-for-sale investments have been determined by assessing the expected future consideration receivable from these investments, representing Level 3 fair value measurements as defined by IFRS 13 Fair Value Measurement as the value cannot be derived from observable market data. The fair value of the asset is sensitive only to potential sales proceeds.
The decline in value of £1,370,000 (2015: £773,000) has been recognised in the Income Statement.
20. Trade and other receivables
| Due after 1 year | 31.3.16 £000 |
31.3.15 £000 |
| Trade receivables | - | 1,555 |
| - | 1,555 | |
| Due within 1 year | ||
| Trade receivables | 20,869 | 12,432 |
| Other receivables | 32,382 | 43,099 |
| Prepayments and accrued income | 19,806 | 9,685 |
| 73,057 | 65,216 |
21. Cash and cash equivalents
| 31.3.16 £000 |
31.3.15 £000 |
|
| Rent deposits and cash held at managing agents | 4,906 | 3,049 |
| Restricted cash | 17,063 | 91,955 |
| Cash deposits | 52,701 | 25,989 |
| 74,670 | 120,993 |
Restricted cash is made up of amounts held by solicitors and amounts in blocked accounts. Included in this amount at 31 March 2015 was £70,166,000 held in a blocked account due to a bank refinancing which was subsequently released during the year.
22. Trade and other payables
| 31.3.16 £000 |
31.3.15 £000 |
|
| Trade payables | 14,463 | 9,868 |
| Social security costs and other taxation | 5,774 | 5,156 |
| Other payables | 2,444 | 3,420 |
| Accruals | 39,425 | 37,834 |
| Deferred income | 8,894 | 9,524 |
| 71,000 | 65,802 |
23. Borrowings
| 31.3.16 £000 |
31.3.15 £000 |
|
| Current borrowings | 885 | 45,428 |
| Borrowings repayable within: | ||
| - one to two years | 3,617 | 136,091 |
| - two to three years | 3,650 | 3,617 |
| - three to four years | 337,098 | 83,608 |
| - four to five years | 219,523 | 175,177 |
| - five to six years | 95,981 | 80,060 |
| - six to ten years | 73,309 | 74,260 |
| Non-current borrowings | 733,178 | 552,813 |
Bank overdrafts and term loans in creditors falling due within one year and after one year are secured against properties held in the normal course of business by subsidiary undertakings to the book value of £1,027,270,000 (2015: £712,569,000). These will be repayable when the underlying properties are sold. Bank overdrafts and term loans exclude the Group's share of borrowings in joint venture companies of £34,626,000 (2015: £44,419,000).
Convertible Bond
On 17 June 2014 the Group issued £100m convertible bonds at par with a 4% coupon rate which are due for settlement on 17 June 2019 (the "Bonds"). The Bonds can be converted from 28 July 2014 up to and including 7 July 2017, if the share price has traded at a level exceeding 130% of the conversion price for a specified period, and from 8 July 2017 to (but excluding) the seventh dealing day before 17 June 2019 at any time. On conversion, the Group can elect to settle the Bonds by any combination of ordinary shares and cash. The Convertible Bond is included at its fair value of £102,747,000 (2015: £103,263,000) in borrowings repayable within three to four years.
Retail Bond
On 24 June 2013 the Group issued an £80m fixed rate retail bond at 6% per annum and with a maturity date of 24 June 2020. Under certain circumstances, the bonds can be repaid early. The Retail Bond is included at its amortised cost of £79,225,000 (2015: £79,042,000) in borrowings repayable within four to five years.
24. Financing and derivative financial instruments
The policies for dealing with liquidity and interest rate risk are noted in the Principle Risks Review in Appendix 5 - Risk Register.
| 31.3.16 £000 |
31.3.15 £000 |
|
| Borrowings maturity | ||
| Due after more than one year | 733,178 | 552,813 |
| Due within one year | 885 | 45,428 |
| 734,063 | 598,241 |
The Group has various undrawn committed borrowing facilities. The facilities available at 31 March 2016 in respect of which all conditions precedent had been met were as follows:
| 31.3.16 £000 |
31.3.15 £000 |
||||||
| Expiring in one year or less | 10,000 | 14,147 | |||||
| Expiring in more than one year but not more than two years | - | 3,982 | |||||
| Expiring in more than two years but not more than three years | - | - | |||||
| Expiring in more than three years but not more than four years | 55,697 | 33,161 | |||||
| Expiring in more than four years but not more than five years | 14,499 | 2,840 | |||||
| Expiring in more than five years | 3,445 | - | |||||
| 83,641 | 54,130 | ||||||
| Interest rates | % | Expiry | 31.3.16 £000 |
% | Expiry | 31.3.15 £000 |
|
| Fixed rate borrowings: | |||||||
| - swap rate plus bank margin | 3.650 | Nov 2019 | 105,000 | - | - | - | |
| - swap rate plus bank margin | 5.650 | Nov 2019 | 44,500 | - | - | - | |
| - fixed rate plus margin | 3.480 | Dec 2024 | 80,005 | 3.480 | Dec 2024 | 80,862 | |
| - fixed rate Retail Bond | 6.000 | Jun 2020 | 80,000 | 6.000 | Jun 2020 | 80,000 | |
| - swap rate plus bank margin | 3.850 | Jan 2020 | 75,000 | 4.500 | Jan 2020 | 75,000 | |
| - swap rate plus bank margin | 4.070 | Jul 2019 | 30,000 | 4.070 | Jul 2019 | 30,000 | |
| - fixed rate Convertible Bond | 4.000 | Jun 2019 | 100,000 | 4.000 | Jun 2019 | 100,000 | |
| - swap rate plus bank margin | 4.025 | Aug 2020 | 74,280 | 4.525 | Feb 2019 | 75,630 | |
| - swap rate plus bank margin | 3.770 | May 2018 | 10,800 | 4.020 | May 2018 | 10,800 | |
| - swap rate plus bank margin | - | - | - | 3.365 | Jan 2016 | 9,172 | |
| - swap rate plus bank margin | 4.070 | Oct 2017 | 20,300 | 4.070 | Jan 2016 | 11,100 | |
| - swap rate plus bank margin | - | - | - | 3.510 | May 2015 | 21,375 | |
| - swap rate plus bank margin | 3.715 | Aug 2020 | 13,000 | - | - | - | |
| Weighted average | 4.226 | Jul 2020 | 632,885 | 4.366 | Mar 2019 | 493,939 | |
| Floating rate borrowings | 3.924 | Sep 2018 | 107,109 | 2.438 | Nov 2016 | 106,291 | |
| Unamortised finance costs | - | - | (8,678) | - | - | (5,252) | |
| Fair value adjustment of Convertible Bond | - | - | 2,747 | - | - | 3,263 | |
| Total borrowings | 4.182 | Sep 2020 | 734,063 | 4.026 | Aug 2019 | 598,241 | |
The year on year changes in fixed borrowing rates are the result of stepped increases/decreases in interest rate swaps rates. Floating rate borrowings bear interest at rates based on LIBOR.
In addition to the above, the Group has a £50,000,000 interest rate swap at 1.865% starting in June 2020 and expiring in June 2026.
Economic hedging
In addition to the fixed rates, borrowings are also hedged by the following financial instruments:
| Instrument | Value £000 |
Rate % |
Start | Expiry |
| Current: | ||||
| - cap | 25,000 | 4.000 | Apr 2011 | Apr 2016 |
| - cap | 25,000 | 4.000 | Jul 2013 | Jul 2016 |
| - cap | 25,000 - 75,000 | 4.000 | Apr 2015 | Jan 2017 |
| - cap | 7,200 | 4.000 | Jan 2012 | Oct 2016 |
| - cap | 25,000 | 4.000 | Jul 2013 | Jul 2016 |
Where a range in capped values is shown, these reflect stepped increases/decreases over the life of the cap.
| Gearing | 31.3.16 £000 |
31.3.15 £000 |
| Total debt | 734,063 | 598,241 |
| Cash | (74,670) | (120,993) |
| Net debt | 659,393 | 477,248 |
Net debt excludes the Group's share of debt in joint ventures of £34,626,000 (2015: £44,419,000), and cash of £12,177,000 (2015: £13,453,000).
| 31.3.16 £000 |
31.3.15 £000 |
|
| Net assets | 486,189 | 404,363 |
| Gearing | 136% | 118% |
25. Share capital
| 31.3.16 £000 |
31.3.15 £000 |
|
| Authorised | 39,577 | 39,577 |
| 39,577 | 39,577 |
The authorised share capital of the Company is £39,576,626.60 divided into ordinary shares of 1p each and deferred shares of 1⁄8p each.
| 31.3.16 £000 |
31.3.15 £000 |
|
| Allotted, called up and fully paid | ||
| - 118,183,806 (2015: 118,183,806) ordinary shares of 1p each | 1,182 | 1,182 |
| - 212,145,300 (2015: 212,145,300) deferred shares of 1⁄8p each | 265 | 265 |
| 1,447 | 1,447 |
| Shares in issue 31.3.16 Number |
Share capital 31.3.16 £000 |
Shares in issue 31.3.15 Number |
Share capital 31.3.15 £000 |
|
| Ordinary shares | ||||
| At 1 April and 31 March | 118,183,806 | 1,182 | 118,183,806 | 1,182 |
| Deferred shares | ||||
| At 1 April and 31 March | 212,145,300 | 265 | 212,145,300 | 265 |
Capital Management
The Group's capital management objectives are:
- to ensure the Group's ability to continue as a going concern; and,
- to provide an adequate return to shareholders.
The Group sets the amount of capital in proportion to its overall financing structure. It manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt. Capital is defined as being issued share capital, share premium, retained earnings, revaluation reserve and other reserves (2016: £478,711,000; 2015: £396,825,000). The Group continually monitors its gearing level to ensure that it is appropriate. Gearing increased from 118% to 136% in the year as the Group expanded its activities and took advantage of favourable debt market conditions.
The deferred shares were issued on 23 December 2004 to those shareholders electing to receive a dividend, rather than a capital repayment or further shares in the Company, as part of the Return of Cash approved by shareholders on 20 December 2004. The deferred shares carry no voting rights and have no right to a dividend or capital payment in the event of a winding up of the Company.
The Company's Articles of Association give the Company irrevocable authority to purchase all or any of the deferred shares for a maximum aggregate total of 1 penny for all deferred shares in issue on the date of such purchase.
26. Share options
At 31 March 2016 and 31 March 2015 there were no unexercised options over new ordinary 1p shares in the Company. No options over purchased ordinary 1p shares held by the ESOP had been granted to directors and employees under the Company's share option schemes (31 March 2015: none).
The Company uses a stochastic valuation model to value the share options.
| Summary of share options | Number 31.3.16 |
Weighted average exercise Price 31.3.16 |
Number 31.3.15 |
Weighted average exercise price 31.3.15 |
| At 1 April | - | - | 46,284 | 259.25p |
| Options exercised | - | - | (46,284) | (259.25)p |
| At 31 March | - | - | - | - |
27. Share-based payments
The Group provides share-based payments to employees in the form of performance share plan awards and a share incentive plan. The Company uses a stochastic valuation model and the resulting value is amortised through the Income Statement over the vesting period of the share-based payments.
| Performance share plan awards | Awards | 2016 Weighted average award value |
Awards | 2015 Weighted average award value |
| Outstanding at beginning of year | 9,127,153 | 221p | 9,721,375 | 215p |
| Awards vested during year | (4,212,534) | 153p | (1,707,216) | 246p |
| Awards lapsed during the year | - | 153p | (1,021,711) | 246p |
| Awards made during the year | 1,642,997 | 353p | 2,134,705 | 295p |
| Outstanding at end of year | 6,557,616 | 284p | 9,127,153 | 221p |
The performance share plan awards outstanding at 31 March 2016 had a weighted average remaining contractual life of one year and one month.
The fair value of the awards made in the year to 31 March 2016 was £5,802,000 (2015: £6,305,000).
The inputs into the stochastic model of valuation of the awards made in the year to 31 March 2016 were as follows:
| 2016 | 2015 | 2014 | |
| Weighted average share price | 413.5p | 355.0p | 303.2p |
| Weighted average exercise price | - | - | - |
| Expected volatility | 25.7% | 28.4% | n/a |
| Expected life | 3 years | 3 years | 3 years |
| Risk free rate | 0.79% | 1.24% | n/a |
| Expected dividends | 0.00% | 0.00% | 2.20% |
The Group recognised a charge of £6,666,000 (2015: £6,432,000) during the year in relation to share-based payments.
At the balance sheet date there were no exercisable awards.
28. Own shares held
Following approval at the 1997 Annual General Meeting, the Company established the Helical Bar Employees' Share Ownership Plan Trust (the "Trust") to be used as part of the remuneration arrangements for employees. The purpose of the Trust is to facilitate and encourage the ownership of shares by or for the benefit of employees by the acquisition and distribution of shares in the Company.
The Trust purchases shares in the Company to satisfy the Company's obligations under its Share Option Schemes and Performance Share Plan. For this purpose, 4,488,000 shares (2015: 3,790,000) in the Company were purchased during the year at a cost of £18,857,000 (2015: £13,349,000).
At 31 March 2016, outstanding awards over 6,558,000 (2015: 9,127,000) ordinary 1p shares in Helical Bar plc had been made under the terms of the Performance Share Plan over shares held by the Trust.
At 31 March 2016, the Trust held 3,901,000 shares (2015: 3,625,000).
29. Contingent liabilities
The Company has entered into cross guarantees in respect of the banking facilities of its subsidiaries. These are not considered to have a material value.
There were no other contingent liabilities at 31 March 2016 for the Group (2015: £nil).
30. Capital commitments
The Group has a commitment of £34,054,000 (2015: £86,800,000) in relation to construction contracts, which are due to be completed in the period to September 2018.
31. Net assets per share
| 31.3.16 £000 |
Number of shares 000s |
31.3.16 pence per share |
31.3.15 £000 |
Number of shares 000s |
31.3.15 pence per share |
|
| Net asset value | 486,189 | 118,184 | 404,363 | 118,184 | ||
| Less: own shares held by ESOP | (3,901) | (3,625) | ||||
| deferred shares | (265) | (265) | ||||
| Basic net asset value | 485,924 | 114,283 | 425 | 404,098 | 114,559 | 353 |
| Add: share settled bonuses | 1,197 | 1,016 | ||||
| Add: dilutive effect of the Performance Share Plan | 3,177 | 6,256 | ||||
| Diluted net asset value | 485,924 | 118,657 | 410 | 404,098 | 121,831 | 332 |
| Adjustment for: | ||||||
| - fair value of financial instruments | 14,955 | 8,568 | ||||
| - fair value movement on Convertible Bond | 2,747 | 3,263 | ||||
| - deferred tax | 23,759 | 16,956 | ||||
| Adjusted diluted net asset value | 527,385 | 118,657 | 444 | 432,885 | 121,831 | 355 |
| Adjustment for: | ||||||
| - fair value of trading and development properties | 19,412 | 36,243 | ||||
| EPRA net asset value | 546,797 | 118,657 | 461 | 469,128 | 121,831 | 385 |
| Adjustment for: | ||||||
| - fair value of financial instruments | (14,955) | (8,568) | ||||
| - deferred tax | (23,759) | (16,956) | ||||
| EPRA triple net asset value | 508,083 | 118,657 | 428 | 443,604 | 121,831 | 364 |
The net asset values per share have been calculated in accordance with the best practice recommendations of the European Public Real Estate Association ("EPRA").
The adjustments to the net asset value comprise the amounts relating to the Group and its share in Joint Ventures.
32. Related party transactions
At 31 March 2016 and 31 March 2015 the following amounts were due from the Group's joint ventures:
| At 31.3.16 £000 |
At 31.3.15 £000 |
|
| King Street Developments (Hammersmith) Ltd | 6,231 | 5,280 |
| Shirley Advance LLP | 11,347 | 12,501 |
| Barts Square First Ltd | 77 | 42 |
| Helical Sosnica Sp. Zoo | 1,099 | 6,000 |
| 207 Old Street Unit Trust | - | 2,325 |
| 211 Old Street Unit Trust | - | 1,801 |
| Old St Retail Unit Trust | - | 725 |
| City Road (Jersey) Ltd | - | 738 |
| Old Street Holdings LP Ltd | - | 100 |
| Creechurch Place Ltd | 13,345 | 12,132 |
All movements in joint venture balances related to loans repaid and loans advanced.
Appendix 1 - See-through analysis
This analysis incorporates the separate components of the results of the consolidated subsidiaries and Helical's share of its joint ventures results into a 'See-through' analysis of our property portfolio, debt profile and the associated income streams and financing costs, to assist in providing a comprehensive overview of the Group's activities.
See-through net rental income and property overheads
Helical's share of the gross rental income, head rents payable and property overheads from property assets held in subsidiaries and in joint ventures are shown in the table below.
| 2012 £000 |
2013 £000 |
2014 £000 |
2015 £000 |
2016 £000 |
|||
| Gross rental income | -subsidiaries | 23,058 | 25,816 | 29,994 | 38,332 | 45,505 | |
| - joint ventures | 6,645 | 6,193 | 6,601 | 6,098 | 1,828 | ||
| Total gross rental income | 29,703 | 32,009 | 36,595 | 44,430 | 47,333 | ||
| Rents payable | -subsidiaries | (418) | (342) | (476) | (269) | (80) | |
| -joint ventures | (848) | (802) | (625) | (809) | - | ||
| Property overheads | -subsidiaries | (3,938) | (5,186) | (4,328) | (3,489) | (2,728) | |
| -joint ventures | (737) | (510) | (539) | (877) | (558) | ||
| Net rental income attributable to profit share partner | (826) | (710) | (788) | (341) | (533) | ||
| Total property costs | (6,767) | (7,550) | (6,756) | (5,785) | (3,899) | ||
| See-through net rental income | 22,936 | 24,459 | 29,839 | 38,645 | 43,434 | ||
See-through net development profits
Helical's share of development profits from property assets held in subsidiaries and in joint ventures are shown in the table below.
| 2012 £000 |
2013 £000 |
2014 £000 |
2015 £000 |
2016 £000 |
|
| In parent and subsidiaries | 5,166 | 7,616 | 62,273 | 16,126 | 30,700 |
| In joint ventures | - | - | 2,199 | 1,902 | 3,223 |
| Total gross development profit | 5,166 | 7,616 | 64,472 | 18,028 | 33,923 |
| Provision against stock | (4,511) | (660) | 552 | (452) | (6,448) |
| See-through development profits | 655 | 6,956 | 65,024 | 17,576 | 27,475 |
See-through net gain on sale and revaluation of investment properties
| 2012 £000 |
2013 £000 |
2014 £000 |
2015 £000 |
2016 £000 |
|||
| Revaluation surplus on investment properties -subsidiaries | 3,664 | 3,723 | 20,714 | 66,904 | 53,508 | ||
| -joint ventures | 581 | 3,109 | 15,710 | 26,134 | 2,316 | ||
| Total revaluation surplus | 4,245 | 6,832 | 36,424 | 93,038 | 55,824 | ||
| Net gain/(loss) on sale of investment properties -subsidiaries | (376) | (2,388) | 8,611 | 2,480 | 2,385 | ||
| -joint ventures | - | - | (31) | 1,091 | 41,553 | ||
| Total net gain/(loss) on sale of investment properties | (376) | (2,388) | 8,580 | 3,571 | 43,938 | ||
| See-through net gain on sale and revaluation of investment properties | 3,869 | 4,444 | 45,004 | 96,609 | 99,762 | ||
See-through net finance costs
Helical's share of the interest payable, finance charges, capitalised interest and interest receivable on bank borrowings and cash deposits in subsidiaries and in joint ventures are shown in the table below.
| 2012 £000 |
2013 £000 |
2014 £000 |
2015 £000 |
2016 £000 |
|||
| Interest payable on bank loans and overdrafts | -subsidiaries | 10,808 | 10,445 | 14,298 | 21,055 | 25,353 | |
| -joint ventures | 2,223 | 2,269 | 3,051 | 3,644 | 3,673 | ||
| Total interest payable on bank loans and overdrafts | 13,031 | 12,714 | 17,349 | 24,699 | 29,026 | ||
| Other interest payable and similar charges | -subsidiaries | 901 | 1,658 | 2,520 | 6,264 | 3,700 | |
| Interest capitalised | -subsidiaries | (3,300) | (2,526) | (2,835) | (3,641) | (4,940) | |
| Total finance costs | 10,632 | 11,846 | 17,034 | 27,322 | 27,786 | ||
| Interest receivable and similar income | -subsidiaries | (583) | (887) | (4,135) | (2,480) | (5,128) | |
| -joint ventures | (12) | (66) | (539) | (43) | (21) | ||
| See-through net finance costs | 10,037 | 10,893 | 12,360 | 24,799 | 22,637 | ||
See-through property portfolio
Helical's share of the investment, trading and development property portfolio in subsidiaries and joint ventures are shown in the table below.
| 2012 £000 |
2013 £000 |
2014 £000 |
2015 £000 |
2016 £000 |
||||||||
| Investment property | -subsidiaries | 326,876 | 312,026 | 493,201 | 701,521 | 1,041,100 | ||||||
| -joint ventures | 67,187 | 94,962 | 107,504 | 88,305 | 11,552 | |||||||
| Total investment property | 394,063 | 406,988 | 600,705 | 789,826 | 1,052,652 | |||||||
| Trading and development stock -subsidiaries | 99,741 | 92,874 | 98,160 | 92,578 | 92,035 | |||||||
| -joint ventures | *44,324 | *76,698 | *75,368 | *102,715 | 75,904 | |||||||
| Total trading and development stock | 144,065 | 169,572 | 173,528 | 195,293 | 167,939 | |||||||
| Trading and development stock surplus | -subsidiaries | 33,107 | 48,837 | 25,719 | 25,230 | 12,412 | ||||||
| -joint ventures | 1,435 | 1,028 | 1,760 | 11,013 | 7,000 | |||||||
| Total trading and development stock surpluses | 34,542 | 49,865 | 27,479 | 36,243 | 19,412 | |||||||
| Total trading and development stock at fair value | 178,607 | 219,437 | 201,007 | 231,536 | 187,351 | |||||||
| See-through property portfolio | 572,670 | 626,425 | 801,712 | 1,021,362 | 1,240,003 | |||||||
*Trading and development stock of joint ventures includes the Group's share of development stock of Helical Sosnica Sp. Zoo (see note 16).
See-through net borrowings
Helical's share of borrowings and cash deposits in its parent and subsidiaries and joint ventures are shown in the table below.
| 2012 £000 |
2013 £000 |
2014 £000 |
2015 £000 |
2016 £000 |
|||
| In parent and subsidiaries -gross borrowings less than one year | 59,203 | 39,295 | 1,275 | 45,428 | 885 | ||
| -gross borrowings more than one year | 203,992 | 220,446 | 374,811 | 552,813 | 733,178 | ||
| Total | 263,195 | 259,741 | 376,086 | 598,241 | 734,063 | ||
| In joint ventures | -gross borrowings less than one year | 1,500 | 720 | 12,453 | - | - | |
| -gross borrowings more than one year | *54,342 | *72,509 | *60,134 | *69,997 | 34,626 | ||
| Total | 55,842 | 73,229 | 72,587 | 69,997 | 34,626 | ||
| In parent and subsidiaries -cash and cash equivalents | (35,411) | (36,863) | (63,237) | (120,993) | (74,670) | ||
| In joint ventures | -cash and cash equivalents | *(4,024) | *(12,757) | *(20,377) | *(15,348) | (12,177) | |
| See-through net borrowings | 279,602 | 283,350 | 365,059 | 531,897 | 681,842 | ||
*Gross borrowings in joint ventures include the Group's share of borrowings of Helical Sosnica Sp. Zoo (see note 16).
Appendix 2 - See-through Analysis Ratios
| Interest cover | 31.03.12 £000 |
31.03.13 £000 |
31.03.14 £000 |
31.03.15 £000 |
31.03.16 £000 |
| Net rental income | 22,936 | 24,459 | 29,839 | 38,645 | 43,434 |
| Trading profits/(losses) | - | (1) | 252 | 2,503 | - |
| Development profits (before provisions) | 5,166 | 7,616 | 64,472 | 18,028 | 33,923 |
| Gain/(loss) on sale of investment properties | (376) | (2,388) | 8,580 | 3,571 | 43,938 |
| Net operating income | 27,726 | 29,686 | 103,143 | 62,747 | 121,295 |
| Finance costs | 10,037 | 10,893 | 12,360 | 24,799 | 22,637 |
| Interest cover | 2.8x | 2.7x | 8.3x | 2.5x | 5.4x |
| Balance sheet | |||||
| Property portfolio | 572,670 | 626,425 | 801,712 | 1,021,362 | 1,240,003 |
| Net borrowings | 279,602 | 283,350 | 365,059 | 531,897 | 681,842 |
| Shareholders' funds | 253,730 | 253,768 | 340,527 | 404,363 | 486,189 |
| EPRA net asset value | 294,398 | 313,733 | 370,062 | 469,128 | 546,797 |
| Loan to value | 49% | 45% | 46% | 52% | 55% |
| Gearing | 110% | 112% | 107% | 132% | 140% |
| Gearing based on EPRA net asset value | 95% | 90% | 99% | 113% | 125% |
Appendix 3 - Five Year Review
Income Statements
| 31.3.12 £000 |
31.3.13 £000 |
31.3.14 £000 |
31.3.15 £000 |
31.3.16 £000 |
|
| Revenue | 52,968 | 65,439 | 123,637 | 106,341 | 116,500 |
| Net rental income | 17,876 | 19,578 | 24,402 | 34,233 | 42,164 |
| Development profit | 5,166 | 7,616 | 62,273 | 16,126 | 30,700 |
| Provisions against stock | (4,511) | (660) | 552 | (452) | (6,448) |
| Trading profit/(loss) | - | (1) | 252 | 2,503 | - |
| Share of results of joint ventures | 2,472 | 3,854 | 16,448 | 27,497 | 50,469 |
| Other income/(expense) | 113 | (547) | 230 | 368 | 20 |
| Gross profit before gain/(loss) on investment properties | 21,116 | 29,840 | 104,157 | 80,275 | 116,905 |
| Gain/(loss) on sale of investment properties | (376) | (2,388) | 8,611 | 2,480 | 2,385 |
| Revaluation surplus on investment properties | 3,664 | 3,723 | 20,714 | 66,904 | 53,508 |
| Impairment of available-for-sale investments | - | - | (88) | (773) | (1,370) |
| Administrative expenses excluding performance related awards | (7,385) | (8,092) | (8,816) | (10,156) | (10,716) |
| Performance related awards | (415) | (6,828) | (17,860) | (16,374) | (15,387) |
| Finance costs | (8,409) | (9,577) | (13,983) | (23,678) | (24,113) |
| Finance income | 583 | 887 | 4,135 | 2,480 | 5,128 |
| Movement in fair value of derivative financial instruments | (306) | (2,573) | 5,312 | (8,389) | (6,860) |
| Convertible Bond adjustment | - | - | - | (3,263) | 516 |
| Foreign exchange gains/(losses) | (1,064) | 17 | (501) | (2,061) | 100 |
| Profit before tax | 7,408 | 5,009 | 101,681 | 87,445 | 120,096 |
| Tax | 158 | 815 | (14,126) | (12,669) | (9,745) |
| Profit after tax | 7,566 | 5,824 | 87,555 | 74,776 | 110,351 |
Balance Sheets
| 31.3.12 £000 |
31.3.13 £000 |
31.3.14 £000 |
31.3.15 £000 |
31.3.16 £000 |
|
| Investment portfolio | 326,876 | 312,026 | 493,201 | 701,521 | 1,041,100 |
| Land, developments and trading properties | 99,741 | 92,874 | 98,160 | 92,578 | 92,035 |
| Group's share of investment properties held by joint ventures | 67,187 | 94,962 | 107,504 | 88,305 | 11,552 |
| Group's share of land, trading and development properties held by joint ventures | 15,709 | 23,797 | 27,165 | 61,782 | 75,904 |
| Group's share of land, trading and development stock surpluses | 34,542 | 49,685 | 27,479 | 36,243 | 19,412 |
| Group's share of total properties at fair value | 572,670 | 626,425 | 801,712 | 1,021,362 | 1,240,003 |
| Net debt | 227,784 | 222,878 | 312,849 | 477,248 | 659,393 |
| Group's share of net debt of joint ventures | 36,409 | 38,521 | 27,050 | 30,966 | 22,449 |
| Group's share of net debt | 279,602 | 283,350 | 365,059 | 531,897 | 681,842 |
| Shareholders' funds | 253,730 | 253,768 | 340,527 | 404,363 | 486,189 |
| EPRA shareholders' fund | 294,398 | 313,733 | 370,062 | 469,128 | 546,797 |
| Dividend per ordinary share paid/payable | 4.90p | 5.25p | 5.70p | 6.85p | 12.6p |
| Dividend per ordinary share declared | 5.15p | 5.55p | 6.75p | 7.25p | 8.17p |
| EPRA earnings per ordinary share | 3.4p | 2.4p | 33.3p | 2.4p | 17.1p |
| EPRA net assets per share | 250p | 264p | 313p | 385p | 461p |
Appendix 4 - Property Portfolio
London Portfolio
| Address | Held As | Major Projects or Income Producing | Description | Area sq ft (NIA) |
Vacancy rate |
| Shepherds Building, London W14 | Investment | IP | Multi let office building. Let to media companies | 150,389 | 3% |
| The Bower (Ph 1), London EC1 |
Investment | IP | Office and retail buildings | 151,439 | - |
| The Bower (Ph 2), London EC1 |
Investment | MP | Office and retail buildings undergoing refurbishment and extension | 179,000 | n/a |
| The Loom, London E1 |
Investment | MP | Multi let office building with refurbishment underway | 112,229 | 25% |
| C-Space, London EC1 |
Investment | IP | Office refurbishment scheme completed in October 2015 | 61,880 | 25% |
| One King Street, London W6 |
Investment | IP | Recently refurbished office and retail building adjacent to Hammersmith Broadway | 39,222 | - |
| The Powerhouse, London W4 | Investment | IP | Single let recording studios/office building | 43,325 | - |
| Power Road Studios, London W4 | Investment | IP | Multi let office building with redevelopment potential | 61,990 | 2% |
| Charterhouse Square, London EC1 | Investment | Office building with scope for extension and refurbishment | 43,600 | n/a | |
| Chart House, London N1 |
Investment | IP | Single let office building with refurbishment and extension potential | 10,505 | - |
| Barts Square, London EC1 |
Investment/ Development |
MP | 236,000 sq ft offices, 236 residential apartments and 21,000 sq ft retail/leisure development under construction | 459,000 | n/a |
| Creechurch Place, London EC3 | Development | New building due for completion September 2016 | 273,000 | n/a | |
| Drury Lane, London WC1 |
Development | Planning consent for comprehensive refurbishment scheme comprising 68 apartments and retail | 16,000 | n/a | |
| King Street, London W6 |
Development | Planning permission received for residential, office, retail and leisure scheme. Due to start on site early 2017 | 300,000 | n/a | |
| 1,901,579 |
Regional Portfolio
| Address | Held As | Major Works or Income Producing | Description | Area sq ft (NIA) |
Vacancy rate |
|---|---|---|---|---|---|
| In Town Retail | |||||
| Cardiff, The Hayes | Investment | IP | Prime retail parade and listed retail arcades | 290,394 | 6.6% |
| Leicester | Investment | IP | Town centre shop | 6,060 | - |
| 296,454 | |||||
| Out-of-town Retail | |||||
| Ellesmere Port | Investment | IP | Single let retail park | 36,258 | - |
| Great Yarmouth | Investment | IP | Single let retail park | 38,771 | - |
| Harrogate | Investment | IP | Single let retail park | 25,290 | - |
| Huddersfield | Investment | IP | Retail park | 101,491 | - |
| Scarborough | Investment | IP | Retail park | 28,970 | - |
| Sevenoaks, Kent | Investment | IP | Retail park | 42,490 | - |
| Southend on Sea | Investment | IP | Retail park | 74,954 | - |
| Stockport | Investment | IP | Single let retail park | 31,803 | - |
| 380,027 | 0% | ||||
| Industrial/Logistics | |||||
| Alfreton | Investment | IP | Single let distribution centre | 167,954 | - |
| Bedford | Investment | IP | Single let distribution centre | 36,023 | - |
| Bolton | Investment | IP | Single let cash and carry | 73,433 | - |
| Bristol, Portbury | Investment | IP | Single let industrial centre | 64,003 | - |
| Brownhills, Birmingham | Investment | IP | Single let distribution centre | 52,368 | - |
| Burton-on-Trent | Investment | IP | Single let distribution centre | 92,715 | 100% |
| Cannock | Investment | IP | Single let distribution centre | 153,665 | - |
| Cannock | Investment | IP | Single let distribution centre | 103,050 | - |
| Cardiff, Heol Billingsley | Investment | IP | Single let distribution centre | 50,684 | - |
| Chester | Investment | IP | Single let distribution centre | 183,119 | - |
| Daventry | Investment | IP | Single let distribution centre | 44,658 | - |
| Doncaster, Aspect Way | Investment | IP | Single let distribution centre | 122,591 | 100% |
| Doncaster, Kirk Sandalls | Investment | IP | Single let distribution centre | 153,547 | - |
| Gloucester Quedgley | Investment | IP | Multi let industrial estate | 43,239 | - |
| Halesowen | Investment | IP | Single let industrial centre | 73,088 | - |
| Havant | Investment | IP | Single let distribution centre | 38,914 | - |
| Hinckley | Investment | IP | Single let distribution centre | 188,242 | - |
| Jarrow | Investment | IP | Single let industrial centre | 101,476 | |
| Leighton Buzzard | Investment | IP | Multi let industrial estate | 202,674 | - |
| Milton Keynes, Mailcom | Investment | IP | Multi let industrial estate | 25,282 | - |
| Northampton | Investment | IP | Multi let industrial estate | 210,383 | - |
| Northampton | Investment | IP | Single let distribution centre | 45,356 | - |
| Peterborough | Investment | IP | Single let industrial centre | 158,000 | - |
| Rugby | Investment | IP | Single let distribution centre | 45,045 | - |
| Salford | Investment | IP | Single let industrial centre | 52,726 | - |
| Stevenage | Investment | IP | Single let distribution centre | 74,373 | - |
| Stone, Bibby | Investment | IP | Single let industrial centre | 122,301 | - |
| Stone, Opal Way | Investment | IP | Single let industrial centre | 130,537 | - |
| Sunderland, Doxford | Investment | IP | Single let industrial centre | 139,130 | - |
| Telford | Investment | IP | Single let distribution centre | 65,225 | - |
| Thetford | Investment | IP | Single let distribution centre | 127,256 | - |
| Warrington, Calver Quay | Investment | IP | Multi let industrial estate | 70,594 | - |
| Warrington, Raglan Court | Investment | IP | Single let distribution centre | 81,342 | - |
| Wellingborough | Investment | IP | Single let industrial centre | 67,570 | - |
| Wolverhampton | Investment | IP | Single let distribution centre | 119,600 | - |
| Yate | Investment | IP | Single let distribution centre | 255,714 | - |
| 3,735,877 | 5.85% |
| Address | Held As | Major Works or Income Producing | Description | Area sq ft (NIA) |
Vacancy rate |
| Regional Offices | |||||
| Castle Donington | Investment | IP | Offices let to National Grid | 25,471 | - |
| Cheadle | Investment | IP | Single let office building | 16,470 | - |
| Cobham | Investment | IP | Single let office building | 21,837 | - |
| Crawley | Investment | IP | Single let office building | 48,131 | - |
| Glasgow | Investment | IP | Multi let office building | 57,388 | 2% |
| Manchester, 31 Booth St | Investment | MP | Multi let office building to be refurbished | 25,349 | n/a |
| Manchester, Churchgate & Lee House | Investment | IP | Multi let city centre office building with refurbishment and asset management potential | 248,342 | 15% |
| Manchester, Dale House | Investment | IP | Multi let city centre office building with refurbishment and asset management potential | 42,282 | 8% |
| Reading | Investment | IP | Office building let to Thames Water | 35,847 | - |
| 521,117 | 6.47% | ||||
| Regional Office Development | |||||
| Glasgow | Development | Pre-let to Scottish Power plc. Pre-sold to M&G | 220,000 | n/a | |
| 220,000 | |||||
| Land | |||||
| Bracknell | Development | Residential land | n/a | n/a | |
| Hailsham | Development | Commercial development site | n/a | n/a | |
| Telford, Dawley Road | Development | Residential land | n/a | n/a | |
| Crawley, Tilgate | Development | Commercial development site | n/a | n/a | |
| Retail Development | |||||
| Cortonwood Retail Park | Development | Pre-let retail park | 79,750 | n/a | |
| Shirley, Birmingham | Development | Shopping centre | 195,000 | n/a | |
| 274,750 |
| Address | Held As | Major Works or Income Producing | Description | Units | Vacancy rate |
| Retirement Villages | |||||
| Millbrook, Exeter | Development | Retirement village development | 164 | n/a | |
| Durrants Village, Faygate | Development | Retirement village development | 156 | n/a | |
| Maudslay Park, Great Alne | Development | Retirement village development | 150 | n/a | |
| Bramshott Place, Liphook | Development | Retirement village development | 151 | n/a | |
| Penally Farm, Liphook | Development | Retirement village development | 40 | n/a | |
| Bramshott Place Clubhouse | Investment | IP | Clubhouse at retirement village | n/a | n/a |
| Durrants Village, Clubhouse | Investment | IP | Clubhouse at retirement village | n/a | n/a |
| 661 |
Appendix 5 - Risk Register
| Risk | Risk Description | Mitigation/Action |
| STRATEGIC RISKS | ||
| Strategic risks are external risks that could prevent the Group delivering its strategy. These risks principally impact our decision to purchase or exit from a property asset. | ||
| The Group's strategy is inconsistent with the market. | Changing market conditions could hinder the Group's ability to buy and sell properties envisioned in its strategy. The location, size or mix of properties in Helical's portfolio determine the impact of the risk. If the Group's chosen markets underperform, the impact on the Group's liquidity, investment property revaluations and rental income is greater. The Group carries out significant development projects over several years and is therefore exposed to fluctuations in the market over time. |
Management constantly monitors the market and makes changes to the Group's strategy in the light of market shifts. The Group's management is highly experienced and has a good track record of calling the property market. Due to the Group's small management team, changes in strategy can be implemented quickly. Management carefully reviews the risk profile of individual developments and builds properties in several phases to minimise the exposure to reduced demand for particular asset classes or geographical locations over time. The Group limits the number of speculative developments it does on its own balance sheet. |
| Property values decline/reduced tenant demand for space. | The property portfolio is at risk of revaluation falls through changes in market conditions, including under-performing sectors or locations and lack of tenant demand. | The Group's property portfolio is diverse in asset type, location and tenant industries, reducing over-exposure to one sector. Management reviews external data, seeks the advice of industry experts and monitors the performance of individual assets and sectors in order to dispose of non-performing assets and rebalance the portfolio for the changing market. |
| Political risk | There is a risk that regulatory and tax changes could adversely affect the market in which the Group operates and changes in legislation could lead to delays in receiving planning permission. | Management seeks advice from experts to ensure continued monitoring of upcoming regulatory and tax changes and to understand the potential impact on the Group. It maintains good relationships with planning consultants and local authorities. |
| Risk | Risk Description | Mitigation/Action |
| FINANCIAL RISKS | ||
| Financial risks are those that could prevent the Group from funding its chosen strategy, both in the long and short term. | ||
| Availability of bank borrowing and cash resources | The inability to roll over existing facilities or take out new borrowing would impact on the Group's ability to maintain its current portfolio and purchase new properties. The Group may forego opportunities if it does not maintain sufficient cash to take advantage of opportunities as they arise. | The Group maintains a good relationship with many well established lending institutions and borrowings are spread across a number of these. Funding requirements are regularly reviewed by management, who ensure that the maturity dates of borrowings are spread over several years. Management monitors the cash levels of the Group on a daily basis and maintains sufficient levels of cash resources and undrawn committed bank facilities to fund opportunities as they arise. |
| Breach of loan and bond covenants | If the Group breaches debt covenants, lending institutions may require the early repayment of borrowings. | Covenants are closely monitored throughout the year. Management carries out sensitivity analysis to assess the likelihood of future breaches based on significant changes in property values or rental income. |
| Increase in cost of borrowing | The Group is at risk of increased interest rates on unhedged borrowings. | The Group hedges the interest rates on the majority of its borrowings, effectively fixing the rates over several years. |
| Risk | Risk Description | Mitigation/Action |
| OPERATIONAL RISKS | ||
| Operational risks are internal risks that could prevent the Group from delivering its strategy. | ||
| Employment and retention of key personnel | The Group's continued success is reliant on its management and staff and successful relationships with its joint venture partners. | The senior management team is very experienced and the average length of service is high. The Nominations Committee and Board regularly review succession planning issues and remuneration is set to attract and retain high calibre staff. The Group has well established relationships with joint venture partners. |
| Inability to asset manage, develop and let property assets | The Group relies on external parties when asset managing, developing and letting its properties, including planning consultants, contractors, architects, project managers, marketing agencies, lawyers and managing agents. | The Group has a highly experienced team managing its properties. It seeks to maintain excellent relationships with its specialist professional advisors. Management actively monitors these parties to ensure they are delivering the required level of quality on time. |
| Health and safety/Bribery and corruption risk | The nature of the Group's operations and markets expose it to potential health and safety and bribery and corruption risks. | The Group updates its Health and Safety policy annually, which is approved by the Board. The Group engages an external health and safety consultant to review contractor agreements prior to appointment to ensure they have appropriate policies and procedures in place, then monitors the adherence to policies throughout the project. The Executive Committee reviews the report by the external consultant every month and the Board reviews them at every meeting. The internal asset managers carry out regular site visits. The Group's Anti-bribery policy is updated annually and projects with greater exposure to bribery and corruption are monitored closely. The Group avoids doing business in high risk territories. |
| Risk | Risk Description | Mitigation/Action |
| REPUTATIONAL RISKS | ||
| Reputational risks are those that could affect the Group in all aspects of its strategy | ||
| Poor management of stakeholder relations | The Group risks suffering from reputational damage resulting in a loss of credibility with key stakeholders including shareholders, analysts, banking institutions, contractors, managing agents, tenants, property purchasers/sellers and employees. | The Group believes that by successfully delivery its strategy and mitigating its strategic, financial and operational risks its strong reputation will be protected. The Group regularly reviews its strategy and risks to ensure it is acting in the interests of its stakeholders. The Group maintains a strong relationship with investors and analysts through regular meetings. |
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR LIFFIEDISFIR
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