Annual Report • May 28, 2015
Annual Report
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Helical Bar PLC
28 May 2015
28 May 2015
HELICAL BAR PLC
("Helical" or the "Group" or the "Company")
Unaudited Preliminary Results for the Year to 31 March 2015
EXCELLENT RETURNS TAKE HELICAL'S PORTFOLIO OVER £1BN
Michael Slade, Chief Executive, commented:
"Our strategy of investing and developing in London whilst maintaining a high yielding regional investment programme continues to bear fruit. We expect our London portfolio to continue to provide significant surpluses over the next few years as rental levels grow and we complete and let our development schemes. In the regions, we have completed our rotation out of secondary shopping centres and into high yielding distribution warehouses, regional offices and out-of-town retail parks. We have seen good demand from occupiers for the assets in our portfolio and strong interest in those types of assets from institutions. This is leading to a rise in both rental and capital values as the UK economy strengthens outside London.
With the General Election behind us we can look forward with confidence to a more stable domestic political situation, which should help the UK economy to grow, and we anticipate providing shareholders with continued strong growth in the value of our business."
Financial Highlights
Another excellent financial performance
· EPRA net asset value per share up 23% to 385p (2014: 313p).
· Profit before tax of £87.4m (2014: £101.7m).
· Total Property Return up 11% to £155.3m (2014: £140.1m).
- Group's share of net rental income up 30% to £38.6m (2014: £29.8m).
- Development profits of £17.6m (2014: £65.0m).
- Trading profits of £2.5m (2014: £0.3m).
- Net gain on sale and revaluation of investment properties of £96.6m (2014: £45.0m).
· Final dividend proposed of 5.15p (2014: 4.75p) per share, increasing the total dividend by 7.4% to 7.25p (2014: 6.75p).
Growing capital returns
· Group's share of property portfolio £1,021m (2014: £802m).
· Unleveraged return of property portfolio as measured by IPD of 20.4% (2014: 23.8%) compared to 17.5% (2014: 13.4%) for the benchmark index.
· Investment property valuations, on a like-for-like basis, up 24.7% (11.7% including sales and purchases) with London office valuations up 34.8% (27.0% including sales and purchases).
Strong financial position
· See-through loan to value of 34% (2014: 36%) on a secured basis and 52% overall (2014: 46%).
· Average maturity of the Group's share of debt of 4.3 years (2014: 3.9 years) at an average cost of 4.1% (2014: 4.5%).
· £100m Convertible Bond issued in June 2014 provided firepower to grow the portfolio.
· Group's share of cash and undrawn bank facilities at 31 March 2015 of £229m (2014: £186m).
Operational Highlights
London portfolio providing engine of growth with much more to come
· 27.0% valuation increase of London investment portfolio (2014: 18.6%), now valued at £370m (47% of total investment portfolio).
· Assignment of our purchase contract on 99 Clifton Street, London EC2 generates £16.4m profit.
· Gross rents on London portfolio of £9.3m compared to ERV of £28.1m.
· Significant rental growth seen at Shepherd's Building, Hammersmith and in the "Creative Halo".
· At The Bower, Old Street, London EC1, The Studio and Empire House are fully let with 45% of offices in The Warehouse let or under offer.
· At Barts Square, London EC1, 64 residential units exchanged on phase 1 out of 92 released.
· 23-28 Charterhouse Square, London EC1 acquired for refurbishment to comprise 38,600 sq ft of offices and 5,350 sq ft of retail/restaurant use, to be completed in early 2017.
· 271,000 sq ft of offices at Creechurch Place, London EC3 under construction.
· Contracts exchanged on the sale of Artillery Lane, E1 for £15.1m.
· The current office development programme comprises c. 1.24m sq ft. Of this c. 365,000 sq ft is pre-let or pre-sold.
Regional portfolio switch completed with further purchases to come
· Gross rents on regional investment portfolio of £27.3m, a yield of 6.5% on £420m (53% of total investment portfolio).
· Regional investment portfolio successfully switched from secondary shopping centres to high yielding distribution warehouses, regional offices and retail parks.
· 12.2% valuation increase on regional offices dominated by performance of Churchgate and Lee House in Manchester.
· Regional investment portfolio now comprises 25% offices, 14% in town retail, 24% retail parks, 35% industrial/logistics and 2% other.
· Trading profits of £2.5m (2014: £0.3m) made on the sale of £34m of regional assets.
For further information, please contact:
| Helical Bar plc | 020 7629 0113 | |
| Michael Slade (Chief Executive) | ||
| Tim Murphy (Finance Director) | ||
| Address: | 5 Hanover Square, London W1S 1HQ | |
| Website: | www.helical.co.uk | |
| FTI Consulting | 020 3727 1000 | |
| Dido Laurimore/Tom Gough/Clare Glynn | ||
Full Year Results Presentation
Helical will be holding a presentation for analysts and investors at 9:30am (BST), Thursday 28 May 2015 at FTI Consulting, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD. If you would like to attend, please contact Clare Glynn at FTI +44 (0) 20 3727 1883 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 1901 |
| Confirmation Code: | 7890662 |
Financial Highlights
| See-through Income Statement | Notes 1 |
Year To 31 March 2015 £m |
Year To 31 March 2014 £m |
Year To 31 March 2013 £m |
| Net rental income | 38.6 | 29.8 | 24.5 | |
| Development property profits | 17.6 | 65.0 | 7.0 | |
| Trading property profits | 2.5 | 0.3 | - | |
| Gain on revaluation of investment properties | 93.0 | 36.4 | 6.8 | |
| Gain/(loss) on sale of investment properties | 3.6 | 8.6 | (2.4) | |
| Total property return | 155.3 | 140.1 | 35.9 | |
| Profit before tax | 87.4 | 101.7 | 5.0 | |
| EPRA earnings | 2.8 | 38.9 | 2.8 | |
| Earnings Per Share and Dividends | pence | pence | pence | |
| Basic earnings per share | 2 | 64.6 | 75.0 | 5.0 |
| Diluted earnings per share | 2 | 60.8 | 73.2 | 5.0 |
| EPRA earnings per share | 2 | 2.4 | 33.3 | 2.4 |
| Adjusted earnings per share | 3 | 16.0 | 43.3 | 6.2 |
| Dividends per share paid in period | 6.85 | 5.70 | 5.25 | |
| See-through Balance Sheet | 4 | At 31 March 2015 £m |
At 31 March 2014 £m |
At 31 March 2013 £m |
| See-through property portfolio | 1,021.4 | 801.7 | 626.4 | |
| See-through net borrowings | 531.9 | 365.1 | 283.4 | |
| Net assets | 404.4 | 340.5 | 253.8 | |
| Net assets per share, gearing and loan to value | ||||
| EPRA Net Asset Value per share | 385p | 313p | 264p | |
| See-through loan to value | 5 | 52% | 46% | 45% |
| See-through net gearing | 6 | 132% | 107% | 112% |
| See-through Net Asset Value gearing | 7 | 113% | 99% | 90% |
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"). Earnings per share exclude the net gain on sale and revaluation of the investment portfolio of £96.6m (2014: £45.0m) but include development profits of £17.6m (2014: £65.0m).
3. EPRA earnings per share adjusted for performance related awards.
4. Includes the Group's share of assets and liabilities of its subsidiaries and joint ventures. See Appendix 1.
5. See-through loan to value is the ratio of see-through net borrowings to see-through property portfolio. See Appendix 2.
6. See-through net gearing is the ratio of see-through net borrowings to net assets. See Appendix 2.
7. 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
It has been another good year for Helical with returns from its portfolio reaffirming the Group's multi-sectoral and multi-disciplined approach to the property cycle. This involves identifying opportunities across the property spectrum which contribute to a regular and increasing flow of rental income as well as creating capital growth and development profits throughout the cycle. We seek a balance between an investment portfolio that provides income for the Group and a development programme that, through the use of limited equity, seeks to maximise returns. This balance currently targets, and has achieved, an investment portfolio representing at least 75% of our total property assets and a development programme covering the remaining 25% which is capable of producing exceptional profits. The portfolio is primarily targeted towards London for capital growth and development profits and the regions for high yielding investment assets and trading profits.
Results for the year
The profit before tax for the year to 31 March 2015 was £87.4m, the second highest in the Group's history following last year's record pre-tax profits of £101.7m. Total property return increased by 10.8% to £155.3m (2014: £140.1m) and included growing net rents of £38.6m (up 30% on 2014) and development profits of £17.6m (2014: £65.0m). The gain on sale and revaluation of the investment portfolio contributed £96.6m (2014: £45.0m) and there were trading profits of £2.5m (2014: £0.3m).
Net finance costs of £21.2m were significantly higher than in 2014 (£12.7m), with the Income Statement also adversely affected by falls in expected future interest rates which led to an £8.4m charge arising from valuing the Group's derivative financial instruments (2014: a gain of £5.3m) and a £3.3m charge from valuing the £100m Convertible Bond issued in June 2014. Recurring administration costs were higher at £10.2m (2014: £8.8m) with increased numbers of head office employees reflecting the growth of the Group's portfolio and the acceleration of the delivery phase of its development programme. Performance related awards, before national insurance costs, reflecting the success of the Group's activities in the year were £13.4m, down from £15.7m in 2014.
The growth in rents and the surpluses on the investment portfolio contributed to an increase in the EPRA net asset value per share to 385p, up 23% from 313p at 31 March 2014. EPRA earnings per share were 2.4p (2014: 33.3p) reflecting the exclusion of the £96.6m (2014: £45.0m) investment portfolio gain from this measure. These results allow the Board to continue its progressive dividend policy and to recommend to shareholders a final dividend of 5.15p, an increase of 8.4% on 2014 (4.75p), taking the total for the year to 7.25p (2014: 6.75p), an overall increase of 7.4%.
The London Portfolio
The London investment and development portfolio continues to combine exceptional contributions from individual schemes with significant progress in delivering the Group's programme of new and refurbished properties.
At 99 Clifton Street, London EC2, we have forward sold an office development of 45,000 sq ft which is due to complete this summer, for £38.25m, having committed to purchase it on completion for £21.0m. At Barts Square, London EC1, our scheme in joint venture with The Baupost Group LLC, we have exchanged contracts for sale, at an average of £1,574 psf, on 64 of the 92 residential units released in September 2014 from phase one of the development, which commenced in January 2015 and is due for completion in summer 2017. Subsequent phases will commence in 2016.
At The Bower, Old Street, London EC1, we expect to complete phase one, the refurbishment and extension of The Warehouse (122,000 sf ft NIA of offices, 5,300 sq ft of restaurant use) and The Studio (18,363 sq ft of offices, 3,746 of restaurant use) by summer 2015 having pre-let Empire House (20,726 sq ft) to Z Hotels and restaurant Ceviche who carried out their own refurbishment works. The second phase, a complete refurbishment of The Tower at 207 Old Street, is due to commence summer 2015. At C-Space, London EC1 we expect to complete the refurbishment in August 2015 and are confident that the whole building will be let by the end of this year.
Our 271,000 sq ft office development at One Creechurch Place, London EC3, equity funded with our joint venture partner HOOPP (Healthcare of Ontario Pension Plan), is under construction and due for completion in September 2016. At 23-28 Charterhouse Square, London EC1 we have acquired an existing office building which will comprise 38,600 sq ft of offices and 5,350 sq ft of retail/restaurant on completion of refurbishment works in late 2016.
At Shepherds Building, London W14, having completed the refurbishment of the common parts, we have recently let space at £47.50 psf which compares to a current average passing rent of £30.50 psf. At New Loom House, London E1, we continue to refurbish space as it becomes available and are achieving rents of £37.50 psf compared to an average rent on acquisition of this building in 2013 of £18 psf. In 2015 we shall be embarking on a substantial refurbishment programme which will provide a new entrance and refresh many of the common parts of the building. At Artillery Lane, London E1 we expect to complete the comprehensive refurbishment of this 17,000 sq ft office building in September 2015, following which we will complete the sale of the building at an agreed price of £15.1m.
This level of asset management activity has contributed to a 27% valuation increase of the London investment portfolio, which is now valued at £370m (47% of the total investment portfolio). Passing rents on the portfolio are £9.3m, but will grow over the next few years towards its ERV, now estimated to be £28.1m.
The Regional Portfolio
The regional investment and development portfolio provides a growing stream of net rents from a high yielding investment portfolio whilst contributing development surpluses from the retirement village and retail development programmes. The investment portfolio has seen a major switch out of secondary retail assets, acquired in 2010 and 2011, into high yielding distribution warehouses, regional offices and out-of-town retail parks. We have sold our shopping centres at Corby Town Centre; Clyde Shopping Centre; The Guineas, Newmarket; Idlewells Shopping Centre, Sutton-in-Ashfield and Town Square Basildon. We now retain just one in-town retail investment asset at The Morgan Quarter, Cardiff, a prime retail asset opposite the St David's Shopping Centre. We have reinvested the proceeds into 44 new regional assets, primarily distribution warehouses throughout the country but also offices in Manchester, Bristol, Cobham and out-of-town retail park units in Harrogate, Stockport, Great Yarmouth, Southend, Stoke-on-Trent and other locations.
The regional portfolio also includes our retirement village development programme where we have continued construction works at Durrants Village Horsham, Millbrook Village Exeter and Maudslay Park Great Alne near Stratford-upon-Avon. During the year we sold 36 residential units and look forward to the opening of the Clubhouse at Durrants Village later this year. Our retail development programme, with partners Oswin Developments, continues to progress schemes at Truro, Cortonwood, Kingswinford and Evesham having completed its scheme at Shirley, West Midlands.
Finance
The £100m 4% Convertible Bond, issued in June 2014, continued the move away from the use of secured borrowings which started in 2013 with the issue of the £80m 6% Retail Bond. The issue of these two financing instruments allowed the Group to increase its investment in the property market without significant dilution of existing shareholders and without putting pressure on the Group's loan covenants. We draw a distinction between secured borrowings, on which we have a net LTV (loan to value) of 34% and unsecured forms of debt i.e. our Retail and Convertible Bonds, which increase our overall LTV to 52%. During the year we agreed a 10 year facility with Aviva Commercial Finance and extended our revolving credit facilities with Barclays and, since the year end, with RBS, whilst taking advantage of the low interest rates to arrange medium to long term interest rate hedging. The effect of these financial arrangements has been to extend the average debt maturity to 4.3 years (2014: 3.9 years) whilst reducing our average cost of debt to 4.1% (2014: 4.5%). The Group continues to have a significant level of cash and unutilised bank facilities at the year end of £229m (2014: £186m) to fund any additional purchases and capital works on its portfolio.
Outlook
Our strategy of investing and developing in London whilst maintaining a high yielding regional investment programme continues to bear fruit. We expect our London portfolio to continue to provide significant surpluses over the next few years as rental levels grow and we complete and let our development schemes. In the regions, we have completed our rotation out of secondary shopping centres and into high yielding distribution warehouses, regional offices and out-of-town retail parks. We have seen good demand from occupiers for the assets in our portfolio and strong interest in those types of assets from institutions. This is leading to a rise in both rental and capital values as the UK economy strengthens outside London.
With the General Election behind us we can look forward with confidence to a more stable domestic political situation, which should help the UK economy to grow, and we anticipate providing shareholders with continued strong growth in the value of our business.
Michael Slade
Chief Executive
28 May 2015
Strategies
Overview
Helical is a UK focused property company investing in London for capital growth and the regions for income.
Investment strategy
The investment portfolio, which is mainly let and income producing, has two main purposes:
• To provide a steady stream of rental income for the Group; and,
• To produce above average capital growth over the cycle to contribute to growth in the Group's net
asset value.
We seek to achieve this through careful, disciplined selection of properties which currently include multi-let offices in London, distribution warehouses, regional offices and mixed-use portfolios. Our key aim, when undertaking this selection process, is to ensure that there is sustainable demand from potential occupiers for all of our assets. We look to have a blend of London properties, where yields are lower but the potential for capital growth higher, and properties outside London where surplus cash flow is greater.
We acquire properties where good management can enhance value rather than relying simply on market improvements.
We frequently refurbish and/or extend our properties to create value. We also work closely with tenants with the aim of maintaining maximum occupancy in our properties. Our relationship with tenants can lead to opportunities to increase value through re-gearing leases or moving tenants within a building as their respective businesses expand or contract.
Development strategy
The Group aims to limit the amount of equity that it deploys into development situations through a variety of different structures. The intention is to maximise the Group's share of profits in a development by leveraging the capital employed by the Group and with a view to managing the risks inherent in the development process. The Group's approach to development activities includes:
• Co-investment alongside a larger partner where we have a minority equity stake, 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, The Bower and Creechurch Place.
• Reduce up-front equity required by entering into conditional contracts or options. We are using this approach at Creechurch Place and for our out-of-town retail development programme, for example Cortonwood (where land is optioned or put under contract which is conditional upon achieving planning permission and pre-lets to retailers), thereby mitigating the risks of the developments.
• Participation in profit share situations where little or no equity investment is required, seeking to minimise any fixed base fee to maximise our profit share so that our interests are completely aligned with our partners. In this way, for a minimal equity commitment, we can benefit from a significant profit share if we contribute to a project's success by using our skills and experience throughout the entire development process.
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 risks faced by the Group do not change significantly from year to year but their importance and the Group's response to them vary in accordance with changes in the internal and external environment. The Board considers not only the current situation but also potential future scenarios and how these might impact our business.
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 2015 was 20.4% (2014: 23.8%) compared to the IPD median benchmark of 17.5% (2014: 13.4%) and upper quartile benchmark of 19.6% (2014: 15.4%). Helical's portfolio unleveraged returns to 31 March 2015 were as follows:
| 1 yr % pa |
3 yrs % pa |
5 yrs % pa |
10 yrs % pa |
20 yrs % pa |
|
|---|---|---|---|---|---|
| Helical | 20.4 | 17.4 | 11.9 | 10.9 | 14.9 |
| IPD | 17.5 | 11.4 | 10.5 | 6.3 | 8.9 |
| Helical's Percentile Rank | 19 | 5 | 13 | 3 | 1 |
Source: Investment Property Databank.
Helical's trading and development portfolio (23% 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 (pence)
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 2015 increased by 15.3% to 332p (2014: 288p). Including the surplus on valuation of trading and development stock, the EPRA net asset value per share at 31 March 2015 increased by 23.0% to 385p (2014: 313p). EPRA triple net asset value per share increased by 17.0% to 364p (2014: 311p).
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 three, ten, fifteen, twenty and twenty five years Helical's Total Shareholder Return exceeded that of the Listed Retail Estate Sector Index and the IPD Monthly 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 | 7.6 | 30.6 | 5.2 | 7.3 | 11.4 | 13.8 | 13.4 |
| UK Equity Market | 2 | 6.6 | 10.6 | 8.3 | 7.7 | 4.5 | 7.9 | 8.7 |
| Listed Real Estate Sector Index | 3 | 22.8 | 24.0 | 15.7 | 4.7 | 8.1 | 8.3 | 6.8 |
| Direct Property - monthly data | 4 | 18.3 | 11.4 | 10.3 | 5.9 | 7.7 | 8.6 | 7.8 |
1 Growth to 31/03/15.
2 Growth in FTSE All-Share Return Index to 31/03/15.
3 Growth in FTSE 350 Real Estate Super Sector Return Index over 1 year, 3 years, 5 years and 10 years to 31/03/15. 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) to 31/03/15.
Financial Review
Review of the year
The main areas that we focused on in the year to 31 March 2015 were to drive growth in rents through asset management, to increase our exposure to London assets where we see continued growth in rental and capital values, to grow the overall size of our regional portfolio and to switch out of secondary shopping centres and into high yielding distribution warehouses, out-of-town retail parks and offices.
The results for the year, having delivered on these initiatives, have created growing rental surpluses, significant revaluation gains on the investment portfolio and profits from the development programme in London and are reflected in pre-tax profits of £87.4m (2014: £101.7m) and shareholders' funds which increased by 19% in the year to 31 March 2015. The Group's portfolio, including its share of property held in joint ventures, increased to £1,021m (2014: £802m), largely the result of investment property acquisitions during the year funded by a £100m Convertible Bond plus substantial revaluation surpluses. This expansion of the Group's activities has resulted in an increase in its loan to value to 52% (2014: 46%) and an increase in balance sheet gearing to 132% (2014: 107%).
During the year the Group continued to lengthen and diversify its borrowings profile. New secured borrowings included an £81m 10 year fixed rate investment facility, supplemented by the issue of a five year unsecured Convertible Bond, raising a further £100m. These new sources of funding enabled the Group to extend its overall debt maturity profile to 4.3 years (2014: 3.9 years), with a reduced weighted average cost of debt of 4.1% (2014: 4.5%).
At 31 March 2015, the Group had unutilised bank facilities of £93m and £136m of cash. These facilities are available to fund the Group's retirement village development programme, refurbishment works at C-Space, London EC1, The Bower, Old Street EC1 and the phase 1 construction works at Barts Square, London EC1.
EPRA Earnings
EPRA Earnings is a measure of operational performance representing the net income generated from a company's operational activities. These activities exclude gains on the sale and revaluation of investment properties, trading property gains and losses and fair value movements of assets and liabilities, most notably in respect of derivative financial instruments, net of associated tax. The measure, as defined by the European Public Real Estate Association, does not make any adjustment for additional costs associated with such excluded gains, the most notable of which are performance related awards. At Helical such awards derive from all sources of profits and gains and, accordingly, to provide a more meaningful comparison, an Adjusted Earnings per share is noted below, which is calculated on earnings before the charge for performance related awards relating to those items excluded from this measure.
EPRA Earnings per share were 2.4p (2014: 33.3p), reflecting the Group's share of net rental income of £38.6m (2014: £29.8m), development profits of £17.6m (2014: £65.0m) and excluding gains on sale and revaluation of investment properties of £96.6m (2014: 45.0m) and trading profits of £2.5m (2014: £0.3m). After adding back performance related awards of £15.6m (2014: £11.6m), Adjusted Earnings per share were 16.0p (2014: 43.3p).
| EPRA Earnings | 31.03.15 £000 |
31.03.14 £000 |
|---|---|---|
| EPRA earnings as per note 12 | 2,805 | 38,934 |
| Add: performance related awards | 15,647 | 11,613 |
| Adjusted earnings | 18,452 | 50,547 |
| EPRA Earnings per share | 2.4p | 33.3p |
| Adjusted Earnings per share | 16.0p | 43.3p |
EPRA Net Asset Value
EPRA net asset value per share increased by 23.0% to 385p per share (2014: 313p). This rise was principally due to a total comprehensive income of £74.9m (2014: £86.7m), plus an increase in the surplus on valuation of the trading and development stock to £36.2m (2014: £27.5m).
| EPRA Net Asset Value | 31.03.15 £000 |
31.03.15 per share p |
31.03.14 £000 |
31.03.14 per share p |
|---|---|---|---|---|
| Net asset value | 404,098 | 332 | 340,382 | 288 |
| EPRA Adjustments for: | ||||
| Fair value of trading and development stock, including in joint ventures | 36,243 | 27,479 | ||
| Fair value of financial instruments | 8,568 | (243) | ||
| Fair value of Convertible Bond | 3,263 | - | ||
| Associated deferred tax | 16,956 | 2,444 | ||
| EPRA net asset value | 469,128 | 385 | 370,062 | 313 |
Income Statement
Rental income and property overheads
Gross rental income receivable by the Group in respect of wholly owned properties increased by 27.7% to £38.3m (2014: £30.0m). The Group's share of gross rents receivable in joint ventures reduced to £6.1m (2014: £6.6m) reflecting the termination of leases at Barts Square where the phase one residential development has commenced. See-through gross rents totalled £44.4m, an increase of 21.4% on 2014. After taking account of head rents payable on those properties held on long leases, and the costs of managing the assets, void costs and letting costs, see-through net rents increased by 29.5% to £38.6m (2014: £29.8m). Bad debts from tenant administrations and failures fell below 0.1% of gross rents (2014: 0.4%).
Development programme
Development profits were down on last year, which had seen exceptional profits at 200 Aldersgate London and White City of £62m. This year we have recognised 95% of the profit on the Clifton Street forward sale to UBS (Triton), amounting to £16.4m and development management fees on our Barts Square, The Bower and Creechurch Place developments, totalling £1.1m. In addition, our development management role in building the new Scottish Power headquarters in Glasgow has generated fees of £1.3m. In our joint ventures we have recognised £1.9m of development profit on our schemes at Leisure Plaza and C4.1, both in Milton Keynes. Our retirement village programme contributed £1.0m of profits. Set against these profits is an impairment of £3.0m against our retail development at Europa Centralna, Poland and a provision against a site in Telford of £1.0m.
Share of results of joint ventures
As mentioned above, Helical has increasingly sought to acquire larger assets in joint ventures with property funds that provide the majority of the equity required to purchase the assets, who in turn rely on Helical to provide the asset management or development expertise. These joint ventures include our share of the investment properties at Clyde Shopping Centre, Clydebank (sold in March 2015) and The Bower, 207 Old Street, London EC1, and our development schemes at Barts Square, London EC1; Creechurch Place, London EC3; Europa Centralna, Gliwice, Poland; Shirley Town Centre, West Midlands; Leisure Plaza, Milton Keynes and King Street, Hammersmith, London W6. Detailed analysis of the financial position of our share of these joint ventures is provided in note 16 to this report and the see-through analysis in Appendix 1. In the year under review, net rents of £4.4m (2014: £5.4m) were received, offset by net finance costs of £3.6m (2014: £2.5m). A gain on revaluation of the investment portfolio of £26.1m (2014: £15.7m), primarily arose in respect of Barts Square, London EC1 and The Bower, London EC1. Net of taxes, our joint ventures contributed £27.5m (2014: £16.4m).
Administration costs
Administration costs, before performance related awards, increased by 16%, from £8.8m to £10.2m. This reflects an increase in the number of asset managers and development executives within the Group as it expands its investment portfolio and moves through the delivery phase of its development portfolio as well as from costs incurred in connection with the move of the Company's head office to Hanover Square, London W1.
Performance related share awards and bonus payments, before National Insurance costs, reduced to £13.4m (2014: £15.7m) for the year. Of this amount, the £6.4m (2014: £6.3m) charge for share awards under the Performance Share Plan is expensed through the Income Statement but added back to Shareholders Funds through the Statement of Changes in Equity. The £6.9m (2014: £9.4m) accrual for bonus payments comprises £5.5m (2014: £5.1m) which will be paid in June 2015, £nil (2014: £2.9m) which will be carried forward to next year in accordance with the terms of the Annual Bonus Scheme 2012 and £1.4m (2014: £1.4m) which will be paid in deferred shares to be held for a minimum of three years. In addition, National Insurance of £3.0m (2014: £2.2m) has been accrued in the year.
| 2015 £000 |
2014 £000 |
|
|---|---|---|
| Administration costs | 10,156 | 8,816 |
| Share awards | 6,432 | 6,333 |
| Directors and senior executives bonuses | 6,920 | 9,357 |
| NIC on share awards and bonuses | 3,022 | 2,170 |
| Total | 26,530 | 26,676 |
Finance costs, finance income and derivative financial instruments
Interest payable on bank loans including our share of loans on assets held in joint ventures but before capitalised interest increased to £24.7m (2014: £17.3m), reflecting the increased debt taken on to finance the expansion of the Group's investment activities.
The fall in medium and long term interest rate projections since 31 March 2014 contributed to a charge of £8.4m (2014: credit of £5.3m) on the derivative financial instruments which have been valued on a mark to market basis.
Capitalised interest increased from £2.8m to £3.6m as development schemes progressed. Other interest payable increased from £2.5m to £6.3m as the Group wrote off £2.8m of costs incurred in issuing the £100m Convertible Bond. As a consequence of these movements, total finance costs increased by £10.3m from £17.0m to £27.3m. Finance income earned was £2.5m (2014: £1.2m).
Taxation
The deferred tax charge for the year is principally derived from the revaluation surpluses recognised in the year offset by tax losses which the Group believe will be utilised against profits in the foreseeable future.
Investment portfolio
The issue of the £100m Convertible Bond in June 2014, together with sales of over £170m of investment assets, mainly shopping centres where our asset management initiatives were completed, provided funds, net of loan repayments, for £246m of acquisitions and £41m of further value enhancing capital expenditure. Revaluation surpluses of £68m (£1m attributable to our profit share partners) in our main portfolio and £26m in our joint venture assets, increased the overall size of the investment portfolio on a see-through basis to £790m (2014: £601m). The sales of investment assets generated profits of £2.5m (2014: £8.6m) in the main portfolio and £1.1m (2014: £nil) in our joint ventures.
Debt and financial risk
Since 31 March 2014, the Group has raised £100m through the issue of a five year Convertible Bond with a 4.00% coupon and £81m of long term debt repayable in December 2024 with a fixed interest rate of 3.48%. The composition of the Group's debt structure has significantly changed since 31 March 2014 with unsecured debt now representing 27% of debt drawn at 31 March 2015.
In total, Helical's outstanding debt at 31 March 2015 of £674.6m had an average maturity of 4.3 years (2014: 3.9 years) and a weighted cost of 4.1% (2014: 4.5%).
Debt profile at 31 March 2015 - excluding the effect of arrangement fees
| Facility Type | Total Facility £000's |
Total Utilised £000's |
Available Facility £000's |
Net LTV* % |
Weighted Average Interest Rate % |
Average Maturity Years |
|
|---|---|---|---|---|---|---|---|
| Secured debt - investment facilities | 395,127 | 372,198 | 22,929 | 58.2 | 3.7 | 4.6 | |
| - development and sites | 68,300 | 47,365 | 20,935 | 53.2 | 3.7 | 2.0 | |
| Total wholly owned | 463,427 | 419,563 | 43,864 | 35.9 | 3.7 | 4.3 | |
| In joint ventures | 109,936 | 71,158 | 38,778 | 27.0 | 4.5 | 3.0 | |
| Total secured debt | 573,363 | 490,721 | 82,642 | 34.1 | 3.8 | 4.1 | |
| Unsecured debt - Retail Bond | 80,000 | 80,000 | - | - | 6.0 | 5.2 | |
| - Convertible Bond | 100,000 | 100,000 | - | - | 4.0 | 4.2 | |
| - working capital | 10,666 | 666 | 10,000 | - | |||
| Fair value adjustment of Convertible Bond | 3,263 | 3,263 | - | - | - | - | |
| Total unsecured debt | 193,929 | 183,929 | 10,000 | - | 4.9 | 4.6 | |
| Total see-through debt | 767,292 | 674,650 | 92,642 | 52.1 | 4.1 | 4.3 | |
*Net LTV is the ratio of gross borrowings less cash deposits to the fair value of the property portfolio.
The Group arranges its borrowings to suit its investment and development intentions as follows:
Investment facilities
These are typically for four to five years, financing the Group's investment portfolio and a fully let retail development at Wroclaw in Poland with loan to value and income covenants. The value of the Group's properties secured on these facilities at 31 March 2015 was £638,999,000 (2014: £486,280,000) with a corresponding loan to value of 58% (2014: 53%). The average maturity of the Group's investment facilities at 31 March 2015 was 4.6 years (2014: 3.7 years).
Development and site holding facilities
These facilities finance the construction of the retirement villages at Durrants Village, Horsham; Maudslay Park, Great Alne and Millbrook Village, Exeter. They also include a site holding facility at Telford. The average maturity of the Group's development and site holding facilities at 31 March 2015 was 2.0 years (2014: 3.0 years).
Joint venture bank facilities
As noted above, we hold a number of investment and development properties in joint venture with third parties and include, in the above table, our share, in proportion to our economic interest, of the debt associated with each asset. During the year we agreed a new five year facility to December 2019 providing finance for the first phase of the redevelopment of Barts Square, London EC1. The average maturity of the Group's share of bank facilities in joint ventures at 31 March 2015 was 3.0 years (2014: 2.5 years).
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 an unsecured Convertible Bond with a 4.00% coupon, repayable in June 2019 or, subject to certain conditions, convertible at the option of the bondholders 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.
Short term working capital facilities
These facilities provide working capital for the Group.Cash and cash flow
At 31 March 2015, the Group had over £229m (2014: £186m) of cash and agreed, undrawn, committed bank facilities including its share in joint ventures as well as £131m (2014: £82m) of uncharged property on which it could borrow funds.
Net borrowings and gearing
Net borrowings held by the Group have increased during the year from £312.8m to £477.2m. Including the Group's share of net debt of its joint ventures the Group's share of total net debt has increased from £365.1m to £531.9m. There has been a corresponding increase from 99% to 113% in see-through net asset value gearing. This gearing measure, which is the ratio of see-through net borrowings to EPRA net asset value, represents a longer term view than the standard gearing measure.
| Net borrowings and gearing | 2015 | 2014 |
|---|---|---|
| Net borrowings - including joint ventures | £531.9m | £365.1m |
| Net assets | £404.4m | £340.5m |
| Gearing - Group | 118% | 92% |
| Gearing - including joint ventures | 132% | 107% |
| See-through net asset value gearing | 113% | 99% |
Hedging
At 31 March 2015 the Group had £496.9m (2014: £291.5m) of fixed rate debt with an average effective interest rate of 4.4% (2014: 4.8%) and £98.1m (2014: £84.6m) of floating rate debt with an average effective interest rate of 2.4% (2014: 3.50%). In addition, the Group had £143.2m of interest rate caps at an average of 4.0% (2014: £132m at 4.0%). In the joint ventures, the Group's share of fixed rate debt was £49.6m (2014: £29.6m) with an average effective interest rate of 5.0% (2014: 6.0%), and £21.6m (2014: £43.6m) of floating rate debt with an effective rate of 3.4% (2014: 3.3%). In addition, the joint ventures benefited from £35.0m (2014: £49.0m) of interest rate caps at an average of 5.0% (2014: 5.0%).
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 2015, this interest cover was 2.5 times (2014: 8.3 times).
| 2015 | 2014 | |
| £000 | £000 | |
| See-through net operating income | 62,747 | 103,143 |
| See-through net finance costs | 24,799 | 12,360 |
| Interest cover | 2.5x | 8.3x |
Tim Murphy
Finance Director
28 May 2015
Helical's Property Portfolio - 31 March 2015
Helical's Portfolio by Fair Value
| Investment £m |
% | Development £m |
% | Total £m |
% | |
| London | 370.2 | 36.2 | 53.3 | 5.2 | 423.5 | 41.5 |
| Regional offices | 103.5 | 10.1 | 2.6 | 0.3 | 106.1 | 10.4 |
| Industrial/logistics | 145.7 | 14.3 | - | - | 145.7 | 14.3 |
| Retail | 159.1 | 15.6 | 26.3 | 2.6 | 185.4 | 18.2 |
| Retirement villages | 11.3 | 1.1 | 87.7 | 8.6 | 99.1 | 9.7 |
| Change of use | - | - | 8.3 | 0.8 | 8.3 | 0.8 |
| Poland | - | - | 53.3 | 5.2 | 53.2 | 5.1 |
| Total | 789.8 | 77.3 | 231.6 | 22.7% | 1,021.4 | 100.0 |
Investment Portfolio (Helical's share)
Portfolio yields
| EPRA net Initial yield % |
Reversionary % |
EPRA 'topped-up' net initial yield % |
|
| London offices | 2.9 | 6.2 | 5.7 |
| Regional offices | 5.2 | 7.6 | 5.9 |
| Industrial/logistics | 7.3 | 7.3 | 7.4 |
| Retail | 6.2 | 6.5 | 6.5 |
| Total portfolio | 4.9 | 6.7 | 6.3 |
Note: this analysis excludes Barts Square, London EC1 and The Bower, 207 Old Street, London EC1
Valuation movements, portfolio weighting and changes to rental values
| Weighting % |
Valuation increase % |
ERV change since Mar 2014 % |
|
| London offices | 46.9 | 27.0 | 20.4 |
| Regional offices | 13.1 | 12.2 | -0.9 |
| Industrial/logistics | 18.5 | 1.3 | 0.6 |
| Retail | 20.1 | 2.6 | 4.4 |
| Other | 1.4 | 4.2 | - |
| Total | 100.0 | 11.7 | 8.6 |
Note: includes sales, purchases and capex.
Capital values, vacancy rates and unexpired lease terms
| Capital value psf £ |
Vacancy rate by area % |
Average unexpired lease term (years) | |
| London offices | 331 | 26.8 | 7.0 |
| Industrial/logistics | 59 | 0.3 | 4.8 |
| Regional offices | 189 | 7.9 | 5.8 |
| Retail | 189 | 2.2 | 7.9 |
| Total portfolio | 146 | 5.1 | 7.0 |
Trading and development portfolio (Helical's share)
| Project Type | Book Value £m |
Fair Value £m |
Surplus £m |
% of Development Portfolio (fair value) |
|---|---|---|---|---|
| London - offices | 8.0 | 14.9 | 6.9 | 6.5 |
| - residential | 26.3 | 33.3 | 7.0 | 14.4 |
| - mixed use | 5.2 | 5.2 | - | 2.2 |
| Regional offices | 0.7 | 2.6 | 1.9 | 1.1 |
| Retail | 26.0 | 26.3 | 0.3 | 11.4 |
| Retirement Villages | 72.4 | 87.7 | 15.3 | 37.9 |
| Poland | 52.2 | 53.3 | 1.1 | 23.0 |
| Change of Use | 4.5 | 8.3 | 3.8 | 3.5 |
| Total | 195.3 | 231.6 | 36.3 | 100.0 |
Note: the table above includes the Group's share of development properties held in joint ventures.
Investment Portfolio Overview
Our £789.8m investment portfolio provides income for the Group. We have a strong focus on asset management, maximising net operating income and working closely with our tenants.
Our aim is to have at least 75% of our portfolio in investment properties and 25% in development properties, blending stable recurring income with exposure to potentially superior profitability in developments. We currently have 77% of our assets in investment properties and, having realised our stated goal, we will look to broadly retain this balance going forward.
Our income stream is diverse and secure with no tenant accounting for more than 6.2% of the rent roll. Our average weighted unexpired lease term is 7.0 years (2014: 7.2 years).
The income stream has grown steadily since 2010 and is highly reversionary. The passing rent from our investment portfolio is £36.7m (2014: £37.7m) and the estimated rental value of our portfolio is £59.5m (2014: £45.6m). This reversionary income will be captured through letting vacant units and rent reviews.
The marginal fall in passing rent at 31 March 2015 reflects the impact of the sale of the majority of our in-town retail portfolio, including Corby Town Centre, Clyde Shopping Centre, the Guineas Newmarket and Idlewells in Sutton-in-Ashfield. These assets have been replaced with a number of logistics purchases.
Furthermore, through judicious buying of under-rented buildings in growth areas, securing lettings and undertaking refurbishments, we aim to generate substantial capital growth in our property values.
Investment Property Portfolio Values
At 31 March 2015, the investment property portfolio was valued at £789.8m (31 March 2014: £600.7m), with £701.5m (31 March 2014: £493.2m) held in wholly owned subsidiaries and £88.3m (31 March 2014: £107.5m) held in joint ventures, as set out below.
| Wholly Owned |
In Joint Venture |
See-Through | |
| £000 | £000 | £000 | |
| Valuation at 31 March 2014 | 493,201 | 107,504 | 600,705 |
| Acquisitions | 245,656 | - | 245,656 |
| Capital Expenditure | 25,437 | 15,698 | 41,135 |
| Disposals | (130,729) | (40,515) | (171,244) |
| Transfer to stock | - | (20,516) | (20,516) |
| Revaluation Surplus - Helical | 66,904 | 26,134 | 93,038 |
| - Profit Share Partners | 1,052 | - | 1,052 |
| Valuation at 31 March 2015 | 701,521 | 88,305 | 789,826 |
Acquisitions and Sales
It has been another extremely active year of buying and selling. During the year we have acquired 58 properties, the equivalent of one purchase every six days. In aggregate, we have acquired £276.7m of assets (including costs) with £245.7m added to our investment portfolio and £31.0m traded out of portfolios, either on acquisition or shortly afterwards. Net sales values totalled £211.2m with £133.8m of net proceeds from the sale of investment properties, £41.4m being our share of the net proceeds of the sale of Clyde Shopping Centre and £36.0m being the net proceeds from the sale of trading properties. Including capital expenditure of £41.1m, this represents a net investment in investment assets of £106.6m.
During the year we acquired five portfolios of industrial/logistics, out-of-town retail and office investments. In April 2014 we acquired The Constellation Portfolio, a mixed-use portfolio for £40.2m reflecting an 8.35% net initial yield. In August we acquired a portfolio of eleven industrial and distribution warehouse assets, known as the Boss Portfolio, for £29.7m, reflecting a net initial yield of 8.0% (excluding a vacant property at Rugby which was subsequently sold). In December we acquired the Sun and Mint Portfolios for £46.6m, reflecting a net initial yield of 7.9%. The Sun Portfolio comprised three single let units and two multi let industrial estates of eight units. We also acquired the 4:2 Portfolio for £22.1m reflecting a net initial yield of 8.3%. This comprised three office properties and two industrial properties (excluding an office in Southampton which was sold on completion of the purchase). In addition we have purchased two retail warehouses in Harrogate and Stockport for £12.1m at a net initial yield of 6.95% and a regional distribution warehouse in Yate, Bristol, for £11.5m at a net initial yield of 10.1%. We have also acquired a distribution facility in Leighton Buzzard for £9.9m at a net initial yield of 7.85% and a distribution warehouse in Hinckley, Leicestershire for £9.5m at a net initial yield of 7.75%, as well as a number of smaller assets.
The most significant sales have been of our shopping centres, including Corby for £71.7m, Clydebank for £69.7m (Helical's share 60%), Newmarket for £18.2m and Sutton-in-Ashfield for £16.1m. This has concluded our move out of in-town retail.
Capital Expenditure
We have a refurbishment and redevelopment programme upgrading and increasing space at a number of our investment properties.
| Property | Capex Budget (Helical Share) £m |
Current Total Space Sq ft |
Refurbished Space Sq ft |
New Space Sq ft |
Completion Date |
| The Bower, Old St, London EC1 |
15.9 | 285,000 | 116,000 | 53,000 | July 2015 |
| New Loom House, London E1 |
4.7 | 112,000 | 20,000 | - | April 2016 |
| Churchgate & Lee House, Manchester | 1.5 | 248,000 | 66,000 | - | October 2015 |
| One King Street, Hammersmith, London W6 | 2.9 | 35,000 | 5,000 | 4,000 | August 2015 |
| C Space, London EC1 |
12.5 | 50,000 | 50,000 | 12,000 | August 2015 |
| Artillery Lane, London E1 |
3.2 | 17,000 | 17,000 | 2,000 | September 2015 |
Asset management
During the year contracted income increased by £1.1m as a result of new lettings and rent reviews, net of any losses from breaks and expiries (2014: £0.4m).
There was significant activity within the investment portfolio with a lease event on over 200 leases.
We concluded £5.1m of new lettings and uplifts at renewal (12.2% rent roll) and benefitted from uplifts at rent review of £0.1m (0.3% rent roll), offsetting the loss of rent at lease end or break (£4.0m, 9.6% rent roll) and a further £0.1m through tenant administrations (0.3% rent roll).
| Rent lost at break/expiry | -£4.0m |
| Rent lost to administrations | -£0.1m |
| Rent reviews | £0.1m |
| Lease renewals and new lettings | £5.1m |
| Total change | £1.1m |
Overall we have seen good letting demand across the portfolio, maintaining our vacancy rate around 5.0% (31 March 2014: 4.6%). Circa £1m of rent has deliberately been forgone as properties are vacated for redevelopment and refurbishment. We have seen strong take up and rental growth in our London office portfolio with estimated rental values increasing by 20.4% in the year for our London portfolio (excluding Barts Square, London EC1 which will be redeveloped).
Lease expiries or tenant break options
| Year to March | 2016 | 2017 | 2018 | 2019 | 2020 |
| % of rent roll | 9.0 | 14.0 | 10.7 | 12.6 | 11.4 |
| Number of leases | 76 | 86 | 68 | 37 | 34 |
| Average rate per lease (£) | 49,100 | 67,400 | 65,000 | 141,000 | 139,000 |
We have a strong rental income stream and a diverse tenant base, with no single tenant accounting for more than 6.2% of the rent roll. The top 10 tenants account for 33% of the total rent roll and the tenants come from diverse industries.
| Rank | Tenant | Tenant Industry | Rent (Helical) £m |
Rent Roll % |
| 1 | Endemol UK | Media | 2.3 | 6.2 |
| 2 | Network Rail Infrastructure | Infrastructure | 2.0 | 5.5 |
| 3 | DSG Retail | Retail | 1.3 | 3.5 |
| 4 | Homebase | Retail | 1.3 | 3.5 |
| 5 | Sainsbury's Supermarkets | Retail | 1.3 | 3.5 |
| 6 | Economic Solutions | Government | 1.0 | 2.6 |
| 7 | B&Q | Retail | 0.8 | 2.1 |
| 8 | Triumph Motorcycles | Manufacturing | 0.8 | 2.1 |
| 9 | Nicholl Food Packaging | Manufacturing | 0.8 | 2.1 |
| 10 | Capita Life & Pensions Regulated Services | Professional Services | 0.8 | 2.1 |
| TOTAL | 12.4 | 33.2 |
The London Portfolio
The Bower, 207 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 (Helical interest 33.3%). 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.
Since acquisition, a planning consent has been obtained 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.
Phase One
Building work started on Phase one (211 Old Street) in January 2014 comprising The Warehouse, 127,300 sq ft and The Studio, 22,109 sq ft, and is due for completion in July 2015. During this process rental income is still being received on the retail parade and the office building at 207 Old Street. The basement area under the retail parade has been let to Gym Box at a rent of £150,000 pa.
The current letting position on Phase one is as follows:-
| Total sq ft |
Let sq ft |
Rent psf |
Tenants | ||||
| The Warehouse | |||||||
| Offices | 122,000 | 24,434 | £50.25 | Farfetch | |||
| Restaurants | 5,300 | 4,682 | Bone Daddies, The Draft House | ||||
| 127,300 | 29,116 | ||||||
| The sixth, eighth and ninth floors of The Warehouse are under offer (29,601 sq ft). | |||||||
| The Studio | |||||||
| Offices | 18,363 | 18,363 | £40.00-£45.00 | John Brown Media | |||
| Restaurants | 3,746 | 3,746 | Honest Burger, Enoteca da Luca | ||||
| 22,109 | 22,109 | ||||||
| Empire House | £ pa | ||||||
| Hotel | 17,315 | 17,315 | 650,000 | Z Hotels | |||
| Restaurant | 3,411 | 3,411 | 140,000 | Ceviche | |||
| 20,726 | 20,726 | 790,000 |
Phase Two
Comprising The Tower (207 Old Street), planning has been obtained to comprehensively refurbish the existing building of 114,900 sq ft NIA, increasing the building to 170,000 sq ft NIA of office and 7,300 sq ft of retail/A3. Works are due to commence in July 2015.
Barts Square, EC1
In joint venture with The Baupost Group LLC (Baupost 66.7%, Helical 33.3%), 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 obtained for a comprehensive redevelopment of 19 buildings to provide a total of 236 residential apartments, three office buildings of 211,000 sq ft, 23,485 sq ft and 10,200 sq ft, 16,300 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 One - Residential/offices/retail
Phase one of the redevelopment of Barts Square, comprising 144 residential units, 10,200 sq ft of retail space, 23,485 sq ft of new offices behind retained facades, the refurbishment of offices at 54-58 Bartholomew Close 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 one is expected in summer 2017. 92 residential units were launched in September 2014 and 64 have been sold for a total sales value of c. £87m at an average £1,574 psf.
Phase Two - One Bartholomew Close
Demolition of the existing buildings and the construction of a new 12 storey office block of c. 211,000 sq ft, to be called One Bartholomew Close, will commence in 2016, once vacant possession of the building is achieved. The building is due to be completed in 2018.
Phase Three - Residential/retail
Phase three of the redevelopment of the site, involving the demolition of Queen Elizabeth II House, 62 Bartholomew Close and 45-47 Little Britain is expected to commence after vacant possession of these buildings is obtained at the end of 2016. In their place, 92 residential units and 10,700 sq ft of retail space will be constructed.
Clifton Street, Shoreditch EC2
In November 2013, we committed to forward purchase a new 45,000 sq ft (NIA) office building in Clifton Street, London EC2 for £21m. Since contracting to acquire the building, Helical has worked with the developer to achieve a revised planning consent and to refine the building's specifications to ensure it meets the demands of the Shoreditch tech occupiers. It was intended that the Group would complete the freehold purchase upon practical completion of the construction in summer 2015. However, on 30 September 2014, Helical exchanged contracts on the forward sale of 99 Clifton Street for £38.25m, allowing the Group to recognise development profits of £16.4m in the year.
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. Demolition and ground works have been completed to facilitate the construction of a new building comprising 271,000 sq ft NIA of offices and 2,227 sq ft of retail, which is expected to be completed in September 2016.
C-Space, 37-45 City Road, EC1
Helical acquired C-Space in June 2013. Planning consent has been obtained for a complete refurbishment of the building which will increase the previous existing 50,000 sq ft office building to 62,000 sq ft. The works involve 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. Works have commenced and are expected to complete by August 2015. Significant interest is being shown by prospective tenants and we expect to let c. 75% of the new space before completion.
23-28 Charterhouse Square, Smithfield EC1
In December 2014, Helical exchanged contracts to acquire a new 155 year leasehold interest in 23-28 Charterhouse Square, London EC1 from the Governors of Sutton's Hospital in Charterhouse for £16m. The Group plan to carry out a major refurbishment of the existing building, increasing the current 34,000 sq ft to 38,600 sq ft NIA of offices and 5,350 sq ft of retail/restaurant use with the addition of a new sixth floor. Works are due to commence in December 2015 and the completed building is expected to be delivered in late 2016.
King Street,Hammersmith W6
King Street, Hammersmith W6 is a mixed use scheme, in joint venture with Grainger plc, for the regeneration of the west end of King Street. Planning permission for the scheme was granted in April 2014 for 196 apartments, a three screen cinema to be operated by Curzon, new retail, restaurant and café space and replacement offices for the Council with a new public square. During the period the joint venture acquired the existing cinema which is now let on a short term basis to the current operator. Work is expected to commence in late 2015.
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 seven consecutive years. The refurbishment of the common parts including new receptions and a café/bar is now complete. These works have given the building a refresh and have been positively received by occupiers. Significant rental growth is beginning to be seen with ERV now c. £50 psf compared to an average passing rent of £30.50 psf. The most recent significant letting in the building in February 2015 was at £47.50 psf.
New Loom House, 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.15,000 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 early 2016. Strong rental growth is already being achieved with new lettings being done at £37.50 psf compared to an average passing rent of £22.00 psf. Further increases in rents are anticipated as the opening of Crossrail approaches.
Enterprise House, Paddington W2
Enterprise House, Paddington W2 is a freehold investment adjacent to Paddington Station in London comprising 45,000 sq ft of offices. The building was acquired 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.
Artillery Lane, Bishopsgate E1
Artillery Lane, Bishopsgate, E1 is an office building in the City of London. The building is undergoing work to provide 17,000 sq ft of newly refurbished offices. Acquired for £6.8m in 2013 the property has been sold to Standard Life for £15.1m once the refurbishment works which will cost £3.2m are completed in September 2015. A new 25 year lease with Manicomio has been signed on the ground and lower ground floor to operate a restaurant.
One King Street, Hammersmith, London W6
One King Street, Hammersmith W6 is a 35,000 sq ft building acquired in 2012 comprising 22,000 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 is expected to be completed by August 2015 providing 3,500 sq ft of extra space.
Chart House, Islington N1
Chart House is a 10,500 sq ft office building in Islington which was acquired during the year. There is currently planning consent for an additional floor of residential on top of the building. It is our intention to renegotiate the planning consent and add an extra floor of office accommodation in place of the planned residential upon getting vacant possession in 2018.
The Regional Portfolio
Our regional portfolio provides significant income for the Group. We have a broad spread of income providing diversity between tenants and sectors of the market. Our £419.6m regional investment portfolio comprises £103.5m of offices (13.0% of the investment portfolio), £145.7m of industrial/logistics (18.5%) £159.1m of retail comprising £97.9m of retail warehousing and £61.2m of in town retail, largely Cardiff (in aggregate 20.2%) and £11.3m of retirement village investment assets (1.4%).
Our strategy is to acquire multi-tenanted properties where there is significant opportunity to increase net operating income and capital values. We acquire properties with rents which are low compared to equivalent buildings, providing scope for rental growth. We spend a considerable amount of time talking to our tenants both prior to acquiring properties and during the course of our ownership to ensure that the space they occupy continues to be fit for their purpose.
Distribution Warehouses
Helical has 36 distribution and light industrial units located around major UK transport networks. These units generally have very few bespoke features making them straightforward to re-let if vacancies occur. In the majority the assets are single let with a few multi-let estates. Significant assets within the portfolio include a 250,000 sq ft distribution warehouse let to Sainsbury's in Yate, Bristol, a 200,000 sq ft facility in Leighton Buzzard, Bedfordshire, a 190,000 sq ft distribution warehouse in Hinckley, Leicestershire let to Triumph Motorcycles and a 150,000 sq ft distribution warehouse let to Polypipe in Doncaster, Yorkshire.
Regional Offices
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 fourth floor of Churchgate House and continue to reposition the asset. Projects are underway to refurbish the first floor of Lee House and the Courtyard Suite where we hope to attract the TMT Sector. We are also remodelling the reception of Lee House. Since acquisition we have let in excess of 30,000 sq ft and have a further 10,000 sq ft under offer.
Dale House, Manchester
Dale House is a 43,000 sq ft office building situated in the Northern Quarter of Manchester. It is fully 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 moving rents upwards as the location improves.
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 circa 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 in February 2016. As part of the overall deal, Helical is taking on three existing Scottish Power sites which are surplus to requirements. At Cathcart we have received planning permission for a change of use of the grounds of Cathcart House to 158 residential units and will look to sell the site. At Yoker, we have agreed heads of terms with a supermarket operator to sell the site and at Falkirk we have agreed a sale of the site with completion expected in October 2015.
Retail Warehousing
We have acquired a number of retail warehouse assets during the year including properties in Harrogate, Stockport, Southend-on-Sea, Scarborough, Ellesmere Port and Stoke-on-Trent. We see good occupational demand in this sector with vacancy levels at a long term low.
Retail Developments
Parkgate, Shirley, West Midlands
The Shopping Centre at Parkgate, Shirley, where Helical has a 50% interest has completed on site and the 80,000 sq ft Asda together with a number of other retailers have opened successfully for trade. The space beyond the food-store is 80% pre-let to occupiers such as Peacocks, 99p Stores, Pizza Express, Wetherspoons, Prezzo, Shoe Zone and Shirley Library. Two residential sites have been sold to provide 97 private and extra-care units, six apartments and eight townhouses which are being built out directly. The food-store has been pre-sold to Asda and the retail units will be marketed for sale once the remaining units are let.
A second phase high density residential led scheme is being considered on a ten acre site of 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.
Truro
In Truro Helical has entered into a Conditional Purchase Agreement on the six acre Truro City Football Club site and have submitted a Planning Application for a 78,000 sq ft non-food retail park. The scheme proposals provide for the relocation of the football club and, if approved, we anticipate starting on site in May 2016.
Cortonwood
Planning consent has been secured at appeal and marketing is in hand for an 80,000 sq ft Open A1 non-food retail park. Negotiations are proceeding with a number of leading fashion retailers and a start on site in anticipated in January 2016, once funding has been obtained.
Park Handlowy Mlyn, Wroclaw
Wroclaw is a large city in West Poland, some 100km from the German border and 470km south of Warsaw. This 9,600 sq m (103,000 sq ft) out-of-town retail development was completed in December 2008 and is fully let to a number of domestic and international retailers including Sports Direct, T K Maxx, Media Expert, Makro, Deichmann, Smyk, Komfort and others. We have agreed terms to sell the development at a price marginally above book value and expect to complete the sale by July 2015.
Europa Centralna, Gliwice
This retail park and shopping centre was built in 50:50 joint venture with clients of Standard Life. The scheme is situated to the south of Gliwice at the intersection of the A4 and A1 motorways. This highly visible scheme has good accessibility and is becoming a major regional shopping destination. It comprises approximately 66,000 sq m (720,000 sq ft) of retail space, incorporating three distinct parts; being a foodstore, DIY and household goods and fashion outlets. The scheme is now over 85% let to Tesco, Castorama, H & M, Media Saturn, Sports Direct, Jula and others. Construction was completed in February 2013 and the scheme opened on 1 March 2013. Helical's sale of 50% in 2011 includes a provision that we will sell the remaining ownership stake two years after the date of completion of the development to the same clients of Standard Life. This is now expected to complete in June 2015.
Retirement Villages
A retirement village is a private residential community in which active over-55s are able to live independently in retirement. Residents have typically down-sized from a larger family home into a cottage or apartment which ensures no maintenance or security issues.
With access to a central clubhouse containing a bar and restaurant facilities, health and fitness rooms and surrounded by maintained grounds, this retirement option is proving increasingly popular. We have four retirement village developments.
Bramshott Place, Liphook, Hampshire
The original Bramshott Place Village was an Elizabethan mansion built in 1580, although now only the original Grade II listed Tudor Gatehouse remains which Helical has fully restored. The land and buildings were derelict when we acquired the site in 2001. Changing planning from its previously designated employment use to a retirement village took several years but was eventually achieved in 2006.
The development of 151 cottages and apartments, and the new clubhouse, has completed. To date, we have sold 147 units with one reserved and just three units, all apartments, left to sell.
Durrants Village, Faygate, Horsham, West Sussex
Durrants Village, a 30 acre site, had operated as a saw-mill with outside storage for many years. Helical was granted planning permission, at appeal, in May 2009 where the Inspector allowed a development comprising a retirement village of 148 units, eight affordable housing units, a 50 bed residential care home and a central facilities clubhouse building. Following changes to the scheme the development will now comprise 173 units. The first phase started in May 2012 for the construction of the retirement village and clubhouse and we have sold 28 units, exchanged on one further sale and have reservations on 10 additional units in the first two phases.
Maudslay Park, Great Alne, Warwickshire
This is a Green Belt site which has 320,000 sq ft of built footprint and benefits from Major Development Site planning policy. Covering 82 acres, this site received outline planning permission in April 2011 for a retirement village of 164 units. Demolition and enabling works have completed but construction has been delayed by the receivership of the contractor. We have reservations on three units.
Millbrook Village, Exeter
This 19 acre site was acquired in 2007 from the St Loye's Foundation, a long established rehabilitation college in the City of Exeter. Resolution to grant planning permission was obtained in October 2009 for a retirement village of 206 units, a 50 bed residential care home, an affordable extra-care block of 50 units and a central facilities clubhouse building. Demolition, site clearance and archaeological survey work have been completed. In 2011 we received planning consent for 63 open market housing units on part of the site and sold this in summer 2012. Construction of a 164 unit retirement village and clubhouse in phases on the remainder of the site commenced in October 2013. We have sold seven units, have exchanged contracts on a further four units and have reservations on 22 other units.
Consolidated Income Statement
| For the year ended 31 March 2015 | Note | Year ended 31.3.15 £000 |
Year ended 31.3.14 £000 |
|---|---|---|---|
| Revenue | 2 | 106,341 | 123,637 |
| Net rental income | 3 | 34,233 | 24,402 |
| Development property profit | 4 | 15,674 | 62,825 |
| Trading property gain | 5 | 2,503 | 252 |
| Share of results of joint ventures | 16 | 27,497 | 16,448 |
| Other operating income | 368 | 230 | |
| Gross profit before net gain on sale and revaluation of investment properties | 80,275 | 104,157 | |
| Net gain on sale and revaluation of investment properties | 6 | 69,384 | 29,325 |
| Impairment of available for sale assets | 19 | (773) | (88) |
| Gross profit | 148,886 | 133,394 | |
| Administrative expenses | 7 | (26,530) | (26,676) |
| Operating profit | 122,356 | 106,718 | |
| Finance costs | 8 | (23,678) | (13,983) |
| Finance income | 8 | 2,480 | 4,135 |
| Change in fair value of derivative financial instruments | (8,389) | 5,312 | |
| Change in fair value of convertible bond | (3,263) | - | |
| Foreign exchange losses | (2,061) | (501) | |
| Profit before tax | 2 | 87,445 | 101,681 |
| Taxation on profit on ordinary activities | 9 | (12,669) | (14,126) |
| Profit after tax | 74,776 | 87,555 | |
| - attributable to equity shareholders | 74,489 | 87,603 | |
| - attributable to non-controlling interests | 287 | (48) | |
| Profit for the year | 74,776 | 87,555 | |
| Basic earnings per share | 12 | 64.6p | 75.0p |
| Diluted earnings per share | 12 | 60.8p | 73.2p |
Consolidated Statement of Comprehensive Income
| For the year ended 31 March 2015 | Note | Year ended 31.3.15 £000 |
Year ended 31.3.14 £000 |
|---|---|---|---|
| Profit for the year | 74,776 | 87,555 | |
| Impairment of available-for-sale investments | 19 | - | (936) |
| Exchange difference on retranslation of net investments in foreign operations | 149 | 51 | |
| Total comprehensive income for the year | 74,925 | 86,670 | |
| - attributable to equity shareholders | 74,638 | 86,718 | |
| - attributable to non-controlling interests | 287 | (48) | |
| Total comprehensive income for the year | 74,925 | 86,670 |
Consolidated and Company Balance Sheets
| As at 31 March 2015 | Note | Group 31.3.15 £000 |
Group 31.3.14 £000 |
Company 31.3.15 £000 |
Company 31.3.14 £000 |
|---|---|---|---|---|---|
| Non-current assets | |||||
| Investment properties | 13 | 701,521 | 493,201 | - | - |
| Owner occupied property, plant and equipment | 15 | 2,361 | 1,050 | 2,292 | 949 |
| Investment in subsidiaries | - | - | 36,585 | 36,584 | |
| Investment in joint ventures | 16 | 71,585 | 62,980 | 15 | 15 |
| Derivative financial instruments | 1 | 1,867 | - | 315 | |
| Trade and other receivables | 20 | 1,555 | 7,673 | - | - |
| Deferred tax asset | 10 | - | 8,458 | 1,233 | 749 |
| Total non-current assets | 777,023 | 575,229 | 40,125 | 38,612 | |
| Current assets | |||||
| Land, developments and trading properties | 17 | 92,578 | 98,160 | - | - |
| Property derivative financial asset | 18 | 16,388 | - | - | - |
| Available-for-sale investments | 19 | 4,342 | 4,973 | - | - |
| Corporate tax receivable | 1,418 | - | 1,418 | - | |
| Trade and other receivables | 20 | 65,216 | 33,337 | 777,728 | 491, 437 |
| Cash and cash equivalents | 21 | 120,993 | 63,237 | 13,942 | 30,376 |
| 300,935 | 199,707 | 793,088 | 521,813 | ||
| Total assets | 1,077,958 | 774,936 | 833,213 | 560,425 | |
| Current liabilities | |||||
| Trade and other payables | 22 | (65,802) | (49,230) | (416,696) | (235,578) |
| Corporate tax payable | - | (5,370) | - | (2,908) | |
| Borrowings | 23 | (45,428) | (1,275) | (6,120) | - |
| (111,230) | (55,875) | (422,816) | (238,486) | ||
| Non-current liabilities | |||||
| Trade and other payables | 22 | - | (2,150) | - | - |
| Borrowings | 23 | (552,813) | (374,811) | (169,109) | (82,399) |
| Derivative financial instruments | (8,096) | (1,573) | (11,080) | (192) | |
| Deferred tax liability | 10 | (1,456) | - | - | - |
| (562,365) | (378,534) | (180,189) | (82,591) | ||
| Total liabilities | (673,595) | (434,409) | (603,005) | (321,077) | |
| Net assets | 2 | 404,363 | 340,527 | 230,208 | 239,348 |
| Group 31.3.15 £000 |
Group 31.3.14 £000 |
Company 31.3.15 £000 |
Company 31.3.14 £000 |
||
|---|---|---|---|---|---|
| Equity | |||||
| Called-up share capital | 25 | 1,447 | 1,447 | 1,447 | 1,447 |
| Share premium account | 98,798 | 98,678 | 98,798 | 98,678 | |
| Revaluation reserve | 108,060 | 33,106 | - | - | |
| Capital redemption reserve | 7,478 | 7,478 | 7,478 | 7,478 | |
| Other reserves | 291 | 291 | 1,987 | 1,987 | |
| Retained earnings | 188,229 | 200,455 | 120,498 | 129,758 | |
| Own shares held | - | (950) | - | - | |
| Equity attributable to equity holders of the parent company | 404,303 | 340,505 | 230,208 | 239,348 | |
| Non-controlling interests | 60 | 22 | - | - | |
| Total equity | 404,363 | 340,527 | 230,208 | 239,348 |
Consolidated and Company Cash Flow Statements
| For the year to 31 March 2015 | Group 31.3.15 £000 |
Group 31.3.14 £000 |
Company 31.3.15 £000 |
Company 31.3.14 £000 |
|---|---|---|---|---|
| Cash flows from operating activities | ||||
| Profit/(loss) before tax | 87,445 | 101,681 | (1,780) | 29,549 |
| Depreciation | 544 | 719 | 517 | 653 |
| Revaluation gain on investment properties | (66,904) | (20,714) | - | - |
| Gain on sales of investment properties | (2,480) | (8,611) | - | - |
| Profit on sale of plant and equipment | (23) | - | - | - |
| Net financing costs | 20,806 | 9,529 | 6,260 | 1,121 |
| Change in value of derivative financial instruments | 8,389 | (5,312) | - | (1,098) |
| Profit on forward property contract | (16,388) | - | - | - |
| Change in fair value of Convertible Bond | 3,263 | - | - | - |
| Share based payment charge | 6,432 | 6,333 | - | - |
| Share of results of joint ventures | (27,497) | (16,448) | - | - |
| Impairment of available for sale assets | 773 | 88 | - | - |
| Foreign exchange movement | 2,213 | 109 | 3,014 | - |
| Other non-cash items | - | (10) | (23) | (10) |
| Cash inflow from operations before changes in working capital | 16,573 | 67,364 | 7,988 | 30,215 |
| Change in trade and other receivables | (25,975) | 3,680 | (286,291) | (165,193) |
| Change in land, developments and trading properties | 4,125 | (11,306) | - | - |
| Change in trade and other payables | 13,162 | 16,096 | 182,976 | 87,763 |
| Cash inflow/(outflow) generated from operations | 7,885 | 75,834 | (95,327) | (47,215) |
| Finance costs | (22,277) | (17,645) | (12,216) | (6,087) |
| Finance income | 2,480 | 1,236 | 5,157 | 1,810 |
| Tax paid | (7,064) | (6,903) | (6,841) | (6,903) |
| (26,861) | (23,312) | (13,900) | (11,180) | |
| Cash flows from operating activities | (18,976) | 52,522 | (109,227) | (58,395) |
| Cash flows from investing activities | ||||
| Purchase of investment property | (271,093) | (199,944) | - | - |
| Sale of investment property | 133,209 | 56,914 | - | - |
| Cost of cancelling interest rate swap | - | 8 | - | - |
| Investment in subsidiaries | - | - | (1) | (150) |
| Investment in joint ventures | (10,141) | (650) | - | - |
| Return of investment in joint ventures | 11,778 | 2,668 | - | - |
| Dividends from joint ventures | 17,013 | 1,350 | - | - |
| Available for sale asset additions | (144) | - | - | - |
| Sale of plant and equipment | 23 | 34 | 23 | 34 |
| Purchase of leasehold improvements, plant and equipment | (1,859) | (646) | (1,859) | (646) |
| Net cash used in investing activities | (121,214) | (140,266) | (1,837) | (762) |
| Cash flows from financing activities | ||||
| Borrowings drawn down | 375,503 | 274,369 | 104,200 | 80,000 |
| Shares Issued | 120 | - | 120 | - |
| Borrowings repaid | (156,381) | (152,636) | (1,746) | (7,842) |
| Purchase of own shares | (13,349) | (950) | - | - |
| Equity dividends paid | (7,944) | (6,660) | (7,944) | (6,660) |
| Net cash generated from financing activities | 197,949 | 114,123 | 94,630 | 65,498 |
| Net increase/(decrease) in cash and cash equivalents | 57,759 | 26,379 | (16,434) | 6,341 |
| Exchange losses on cash and cash equivalents | (3) | (5) | - | - |
| Cash and cash equivalents at 1 April | 63,237 | 36,863 | 30,376 | 24,035 |
| Cash and cash equivalents at 31 March | 120,993 | 63,237 | 13,942 | 30,376 |
Consolidated and Company Statements of Changes in Equity
For the year to 31 March 2015
| Group | Share capital £000 |
Share premium £000 |
Revaluation reserve £000 |
Capital redemption reserve £000 |
Other reserves £000 |
Retained earnings £000 |
Own shares held |
Non- controlling interests £000 |
Total £000 |
|||
| At 31 March 2013 | 1,447 | 98,678 | 10,593 | 7,478 | 291 | 135,211 | - | 70 | 253,768 | |||
| Total comprehensive income/(expense) | - | - | - | - | - | 86,718 | - | (48) | 86,670 | |||
| Revaluation surplus | - | - | 20,714 | - | - | (20,714) | - | - | - | |||
| Realised on disposals | - | - | 1,799 | - | - | (1,799) | - | - | - | |||
| Performance share plan | - | - | - | - | - | 6,333 | - | - | 6,333 | |||
| Share settled bonus | - | - | - | - | - | 1,366 | - | - | 1,366 | |||
| Purchase of own shares | - | - | - | - | - | - | (950) | - | (950) | |||
| Dividends paid | - | - | - | - | - | (6,660) | - | - | (6,660) | |||
| 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 | |||
For a breakdown of Total comprehensive income/expense, see the Consolidated Statement of Comprehensive Income.
Included within changes in equity are net transactions with owners of £10,840,000 (2014: £89,000) made up of: the performance share plan charge of £6,432,000 (2014: £6,333,000) and related deferred tax of £2,477,000 (2014: £nil), dividends paid of £7,944,000 (2014: £6,660,000), the purchase of own shares of £13,349,000 (2014: £950,000), new share capital issued of £120,000 (2014: £nil) and the share settled bonuses of £1,424,000 (2014: £1,366,000).
The adjustment to retained earnings of £6,432,000 adds back the performance share plan charge (2014: £6,333,000), in accordance with IFRS 2 Share-Based Payments.
| Company | Share capital £000 |
Share premium £000 |
Revaluation reserve £000 |
Capital redemption reserve £000 |
Other reserves £000 |
Retained earnings £000 |
Total £000 |
|---|---|---|---|---|---|---|---|
| At 31 March 2013 | 1,447 | 98,678 | - | 7,478 | 1,987 | 113,346 | 222,936 |
| Total comprehensive income | - | - | - | - | - | 23,072 | 23,072 |
| Dividends paid | - | - | - | - | - | (6,660) | (6,660) |
| At 31 March 2014 | 1,447 | 98,678 | - | 7,478 | 1,987 | 129,758 | 239,348 |
| Total comprehensive income | - | - | - | - | - | (1,316) | (1,316) |
| Dividends paid | - | - | - | - | - | (7,944) | (7,944) |
| Shares issues | - | 120 | - | - | - | - | 120 |
| At 31 March 2015 | 1,447 | 98,798 | - | 7,478 | 1,987 | 120,498 | 230,208 |
Total comprehensive income is made up of the loss after tax of £1,316,000 (2014: gain of £23,072,000).
Included within changes in equity are net transactions with owners of £7,824,000 (2014: £6,660,000) made up of dividends paid of £7,944,000 (2014: £6,660,000) and new share capital issued of £120,000 (2014: £nil).
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 preliminary results
1. Basis of preparation
These financial statements have been prepared in accordance with applicable International Financial Reporting Standards ("IFRS"), including International Financial Reporting Interpretations Committee ("IFRIC") interpretations as adopted by the European Union and as issued by the International Accounting Standards Board ("IASB").
The Directors have taken advantage of the exemption offered by Section 408 of the Companies Act 2006 not to present a separate income statement for the parent company.
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 and derivative financial instruments.
The principal accounting policies of the Group are set out in the Group's 2014 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.
Responsibility statement
The Statement of Directors' responsibilities below has been prepared in connection with the Group's full Annual Report for the year ended 31 March 2015. Certain parts of the Annual Report have not been included in the announcement. We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and
• the annual review, which is incorporated into the Report of Directors, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
Approved by the Board on 28 May 2015 and signed on its behalf by:
Tim Murphy
Director
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 interest in third party developments.
| Revenue | Investment and trading Year ended 31.3.15 £000 |
Developments Year ended 31.3.15 £000 |
Total Year ended 31.3.15 £000 |
Investment and trading Year ended 31.3.14 £000 |
Developments Year ended 31.3.14 £000 |
Total Year ended 31.3.14 £000 |
|
| Rental income | 37,246 | 1,086 | 38,332 | 27,994 | 2,000 | 29,994 | |
| Development property income | - | 30,416 | 30,416 | - | 82,457 | 82,457 | |
| Trading property sales | 37,394 | - | 37,394 | 8,230 | - | 8,230 | |
| Other revenue | 199 | - | 199 | 2,956 | - | 2,956 | |
| Total revenue | 74,839 | 31,502 | 106,341 | 39,180 | 84,457 | 123,637 | |
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 (2014: £nil), revenue from the sale of goods of £63,953,000 (2014: £62,965,000), revenue from services of £4,056,000 (2014: £30,678,000), and rental income of £38,332,000 (2014: £29,994,000).
All revenues are within the UK other than rental income from development properties in Poland of £1,086,000 (2014: £1,065,000) and £630,000 (2014: £835,000) of development income derived from the Group's operations in Poland.
| Profit before tax | Investment and trading Year ended 31.3.15 £000 |
Developments Year ended 31.3.15 £000 |
Total Year ended 31.3.15 £000 |
Investment and trading Year ended 31.3.14 £000 |
Developments Year ended 31.3.14 £000 |
Total Year ended 31.3.14 £000 |
|||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Net rental income | 33,270 | 963 | 34,233 | 22,764 | 1,638 | 24,402 | |||||
| Development property profit | - | 15,674 | 15,674 | - | 62,825 | 62,825 | |||||
| Trading property profit | 2,503 | - | 2,503 | 252 | - | 252 | |||||
| Share of results of joint ventures | 27,398 | 99 | 27,497 | 18,882 | (2,434) | 16,448 | |||||
| Gain on sale and revaluation of investment properties | 69,384 | - | 69,384 | 29,325 | - | 29,325 | |||||
| 132,555 | 16,736 | 149,291 | 71,223 | 62,029 | 133,252 | ||||||
| Impairment of available for sale assets | (773) | (88) | |||||||||
| Other operating income | 368 | 230 | |||||||||
| Gross profit | 148,886 | 133,394 | |||||||||
| Administrative expenses | (26,530) | (26,676) | |||||||||
| Finance costs | (23,678) | (13,983) | |||||||||
| Finance income | 2,480 | 4,135 | |||||||||
| Change in fair value of derivative financial instruments | (8,389) | 5,312 | |||||||||
| Change in fair value of Convertible Bond | (3,263) | - | |||||||||
| Foreign exchange losses | (2,061) | (501) | |||||||||
| Profit before tax | 87,445 | 101,681 | |||||||||
| Net assets | Investment and trading Year ended 31.3.15 £000 |
Developments Year ended 31.3.15 £000 |
Total Year ended 31.3.15 £000 |
Investment and trading Year ended 31.3.14 £000 |
Developments Year ended 31.3.14 £000 |
Total Year ended 31.3.14 £000 |
||||
| Investment properties | 701,521 | - | 701,521 | 493,201 | - | 493,201 | ||||
| Land, development and trading properties | 28 | 92,550 | 92,578 | 2,528 | 95,632 | 98,160 | ||||
| Investment in joint ventures | 57,209 | 14,376 | 71,585 | 58,460 | 4,520 | 62,980 | ||||
| Property derivative financial asset | - | 16,388 | 16,388 | - | - | - | ||||
| 758,758 | 123,314 | 882,072 | 554,189 | 100,152 | 654,341 | |||||
| Owner occupied property, plant and equipment | 2,361 | 1,050 | ||||||||
| Derivative financial instruments | 1 | 1,867 | ||||||||
| Deferred tax assets | - | 8,458 | ||||||||
| Available-for-sale investments | 4,342 | 4,973 | ||||||||
| Trade and other receivables | 66,771 | 41,010 | ||||||||
| Corporation tax receivable | 1,418 | - | ||||||||
| Cash and cash equivalents | 120,993 | 63,237 | ||||||||
| Total assets | 1,077,958 | 774,936 | ||||||||
| Liabilities | (673,595) | (434,409) | ||||||||
| Net assets | 404,363 | 340,527 | ||||||||
3. Net rental income
| Year ended 31.3.15 £000 |
Year ended 31.3.14 £000 |
|
|---|---|---|
| Gross rental income | 38,332 | 29,994 |
| Rents payable | (269) | (476) |
| Property overheads | (3,489) | (4,328) |
| Net rental income | 34,574 | 25,190 |
| Net rental income attributable to profit share partner | (341) | (788) |
| Group share of net rental income | 34,233 | 24,402 |
Property overheads include lettings costs, vacancy costs and bad debt provisions.
The amounts above include gross rental income from investment properties of £37,246,000 (2014: £27,994,000) and net rental income from investment properties of £33,270,000 (2014: £22,764,000).
No contingent rental income was received in the year (2014: £nil).
4. Development property profit
| Year ended 31.3.15 £000 |
Year ended 31.3.14 £000 |
|
|---|---|---|
| Development property income | 30,416 | 82,457 |
| Profit on forward property contract | 16,388 | - |
| Cost of sales | (30,136) | (15,613) |
| Sales expenses | (542) | (4,571) |
| Provision against book values | (452) | 552 |
| Development property profit | 15,674 | 62,825 |
5. Trading property gain
| Year ended 31.3.15 £000 |
Year ended 31.3.14 £000 |
|
|---|---|---|
| Trading property sales | 37,394 | 8,230 |
| Cost of sales | (33,512) | (7,945) |
| Sales expenses | (1,379) | (33) |
| Trading property gain | 2,503 | 252 |
6. Net gain on sale and revaluation of investment properties
| Year ended 31.3.15 £000 |
Year ended 31.3.14 £000 |
|
|---|---|---|
| Net proceeds from the sale of investment properties | 133,782 | 57,971 |
| Book value (note 13) | (130,729) | (48,303) |
| Tenants incentives on sold investment properties | (573) | (1,057) |
| Gain on sale of investment properties | 2,480 | 8,611 |
| Revaluation surplus on investment properties | 66,904 | 20,714 |
| Gain on sale and revaluation of investment properties | 69,384 | 29,325 |
7. Administrative expenses
| Year ended 31.3.15 £000 |
Year ended 31.3.14 £000 |
|||
|---|---|---|---|---|
| Administrative expenses | (26,530) | (26,676) | ||
| Administrative expenses include salaries paid to Directors of £2,515,000 (2014: £2,430,000), cash bonuses accrued of £4,847,000 (2014: £4,732,000), deferred bonuses of £nil (2014: £2,926,000), a charge for deferred shares awarded of £1,424,000 (2014: £1,366,000) and a share-based payments charge of £5,815,000 (2014: £5,799,000). | ||||
| Operating profit is stated after the following items that are contained within administrative expenses: | ||||
| Depreciation | ||||
| - owner occupied property, plant and equipment | 544 | 719 | ||
| Share-based payments charge | 6,432 | 6,333 | ||
| Auditor's remuneration: | ||||
| Audit fees | ||||
| - audit of parent company and consolidated financial statements | 154 | 150 | ||
| - audit of Company's subsidiaries | 62 | 52 | ||
| - audit of interim consolidated financial statements | 68 | 42 | ||
| - audit of Company's subsidiaries by affiliate of Group auditor | 3 | 12 | ||
| Operating lease costs | 730 | 574 | ||
8. Finance costs and finance income
| Year ended 31.3.15 £000 |
Year ended 31.3.14 £000 |
|
|---|---|---|
| Interest payable on bank loans and overdrafts | (21,055) | (14,298) |
| Other interest payable and similar charges | (6,264) | (2,520) |
| Interest capitalised | 3,641 | 2,835 |
| Finance costs | (23,678) | (13,983) |
| Interest receivable and similar income | 2,480 | 1,236 |
| Gain on purchase of loan | - | 2,899 |
| Finance income | 2,480 | 4,135 |
During the year to 31 March 2014, the Group purchased a loan from one of its lenders, realising a gain of £2,899,000. On projects where specific third party loans have been arranged, interest has been capitalised in accordance with IAS23 - Borrowing costs, at the rate for the individual loan. The weighted average capitalised interest rate of such loans was 3.68% (2014: 3.57%). 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 4.62% (2014: 4.60%).
9. Taxation on profit on ordinary activities
| Year ended 31.3.15 £000 | Year ended 31.3.14 £000 |
|
|---|---|---|
| The tax charge is based on the profit for the year and represents: | ||
| United Kingdom corporation tax at 21% (2014: 23%) | ||
| - Group corporation tax | (215) | (11,687) |
| - adjustment in respect of prior periods | (22) | (403) |
| - overseas tax | (39) | (113) |
| Current tax charge | (276) | (12,203) |
| Deferred tax at 20% (2014: 20%) | ||
| - capital allowances | (297) | 1,157 |
| - tax losses | 3,033 | (1,746) |
| - unrealised chargeable gains | (15,096) | (1,598) |
| - other temporary differences | (33) | 264 |
| Deferred tax charge | (12,393) | (1,923) |
| Tax charge on profit on ordinary activities | (12,669) | (14,126) |
10. Deferred tax
Deferred tax provided for in the financial statements is set out below:
| Group 31.3.15 £000 |
Group 31.3.14 £000 |
Company 31.3.15 £000 |
Company 31.3.14 £000 |
|
|---|---|---|---|---|
| Capital allowances | (1,561) | (1,264) | 60 | 99 |
| Tax losses | 12,021 | 8,988 | 1,173 | 363 |
| Unrealised chargeable gains | (16,687) | (1,598) | - | - |
| Other temporary differences | 4,771 | 2,332 | - | 287 |
| Deferred tax (liability)/asset | (1,456) | 8,458 | 1,233 | 749 |
Other temporary differences represent deferred tax assets arising from the recognition of the fair value of derivative financial instruments, unrestricted gains and future tax relief available to the Group from capital allowances and when share awards vest.
The Group contains entities with tax losses for which no deferred tax asset is recognised. The total unrecognised losses amount to approximately £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 the sale of the investment properties the Group retained all the capital allowances, the deferred tax provision in respect of capital allowances of £1,561,000 (2014: £1,264,000) would be released and further capital allowances of £18,031,000 (2014: £11,400,000) would be available to reduce future tax liabilities.
11. Dividends paid and payable
| Year ended 31.3.15 £000 |
Year ended 31.3.14 £000 |
|
|---|---|---|
| Attributable to equity share capital | ||
| Ordinary | ||
| - interim paid of 2.10p (2014: 2.00) per share | 2,406 | 2,337 |
| - prior period final paid of 4.75p (2014: 3.70p) per share | 5,538 | 4,323 |
| Total dividends paid and payable in year - 6.85p (2014: 5.70p) per share | 7,944 | 6,660 |
An interim dividend of 2.10p was paid on 30 December 2014 to shareholders on the register on 12 December 2014. The final dividend of 5.15p, if approved at the AGM on 24 July 2015, will be paid on 31 July 2015 to shareholders on the register on 3 July 2015. This final dividend, amounting to £5,899,000, has not been included as a liability as at 31 March 2015, 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 31.3.15 000 |
Year ended 31.3.14 000 |
|---|---|---|
| Ordinary shares in issue | 118,184 | 118,138 |
| Weighting adjustment | (2,897) | (1,323) |
| Weighted average ordinary shares in issue for calculation of basic earnings per share | 115,287 | 116,815 |
| Weighted average ordinary shares issued on exercise of share options | - | 46 |
| Weighted average ordinary shares to be issued on share settled bonuses | 1,016 | 451 |
| Weighted average ordinary shares to be issued under performance share plan | 6,182 | 2,389 |
| Weighted average ordinary shares in issue for calculation of diluted earnings per share | 122,485 | 119,701 |
| £000 | £000 | |
| Earnings used for calculation of basic and diluted earnings per share | 74,489 | 87,603 |
| Basic earnings per share | 64.6p | 75.0p |
| Diluted earnings per share | 60.8p | 73.2p |
| Year ended 31.3.15 £000 |
Year ended 31.3.14 £000 |
|
| Earnings used for calculation of basic and diluted earnings per share | 74,489 | 87,603 |
| Net gain on sale and revaluation of investment properties | (69,384) | (29,325) |
| Share of net gain on revaluation of investment properties in the results of joint ventures | (27,225) | (15,710) |
| Tax on profit on disposal of investment properties | - | 1,981 |
| Trading property gain | (2,503) | (252) |
| Fair value movement on derivative financial instruments | 8,389 | (5,312) |
| Fair value movement on Convertible Bond | 3,263 | - |
| Share of fair value movements on derivative financial instruments in the results of joint ventures | 578 | (1,001) |
| Impairment of available-for-sale investment | 773 | 88 |
| Deferred tax | 14,425 | 862 |
| Earnings used for calculation of EPRA earnings per share | 2,805 | 38,934 |
| Performance related awards | 15,647 | 11,613 |
| Earnings used for calculation of adjusted earnings per share | 18,452 | 50,547 |
| EPRA earnings per share | 2.4p | 33.3p |
| Adjusted earnings per share | 16.0p | 43.3p |
The earnings used for calculation of EPRA earnings per share includes net rental income and development property profits but excludes trading property losses.
13. Investment properties
| Freehold 31.3.15 £000 |
Leasehold 31.3.15 £000 |
Total 31.3.15 £000 |
Freehold 31.3.14 £000 |
Leasehold 31.3.14 £000 |
Total 31.3.14 £000 |
|
|---|---|---|---|---|---|---|
| Group | ||||||
| Fair value at 1 April | 450,276 | 42,925 | 493,201 | 288,076 | 23,950 | 312,026 |
| Property acquisitions | 191,280 | 79,813 | 271,093 | 183,357 | 16,587 | 199,944 |
| Transfer from land, developments, and trading properties | - | - | - | - | 8,600 | 8,600 |
| Disposals | (112,089) | (18,640) | (130,729) | (41,870) | (6,433) | (48,303) |
| Revaluation surplus | 61,376 | 5,528 | 66,904 | 20,493 | 221 | 20,714 |
| Revaluation surplus attributable to profit share partner | 1,027 | 25 | 1,052 | 220 | - | 220 |
| Fair value at 31 March | 591,870 | 109,651 | 701,521 | 450,276 | 42,925 | 493,201 |
Interest capitalised during the year in respect of the refurbishment of investment properties amounted to £667,000 (2014: £nil).
Interest capitalised in respect of the refurbishment of investment properties is included in investment properties to the extent of £5,449,000 (2014: £4,782,000).
Investment properties with a total fair value of £628,621,000 (2014: £474,200,000) were held as security against borrowings.
The fair value of the Group's investment property as at 31 March 2015 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 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 2015 as follows:
| 31.3.15 £000 | 31.3.14 £000 |
|
|---|---|---|
| Cushman & Wakefield LLP | 697,521 | 493,200 |
| Directors' valuation | 4,000 | 1 |
| 701,521 | 493,201 |
The historical cost of investment property is £590,965,000 (2014: £457,781,000).
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:
| Group 31.3.15 £000 |
Group 31.3.14 £000 |
|
|---|---|---|
| Not later than one year | 39,393 | 29,065 |
| Later than one year but not more than five years | 104,268 | 81,237 |
| More than five years | 159,001 | 104,240 |
| 302,662 | 214,542 |
The Company has no operating lease arrangements as lessor.
At the balance sheet date, the Group and Company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
| Group 31.3.15 £000 |
Group 31.3.14 £000 |
|
|---|---|---|
| Not later than one year | 281 | - |
| Later than one year but not more than five years | 3,273 | 2,735 |
| More than five years | 7,773 | 8,592 |
| 11,327 | 11,327 |
15. Owner occupied property, plant and equipment
Group
| Short leasehold improvements 31.3.15 £000 |
Plant and equipment 31.3.15 £000 |
Total 31.3.15 £000 |
Short leasehold improvements 31.3.14 £000 |
Plant and equipment 31.3.14 £000 |
Total 31.3.14 £000 |
|
|---|---|---|---|---|---|---|
| Cost at 1 April | 2,373 | 935 | 3,308 | 2,071 | 825 | 2,896 |
| Additions at cost | 1,695 | 164 | 1,859 | 302 | 344 | 646 |
| Disposals | (2,061) | (91) | (2,152) | - | (234) | (234) |
| Cost at 31 March | 2,007 | 1,008 | 3,015 | 2,373 | 935 | 3,308 |
| Depreciation at 1 April | 1,811 | 447 | 2,258 | 1,283 | 460 | 1,743 |
| Provision for the year | 361 | 183 | 544 | 528 | 187 | 715 |
| Eliminated on disposals | (2,061) | (87) | (2,148) | - | (200) | (200) |
| Depreciation at 31 March | 111 | 543 | 654 | 1,811 | 447 | 2,258 |
| Net book amount at 31 March | 1,896 | 465 | 2,361 | 562 | 488 | 1,050 |
Plant and equipment include vehicles, fixtures and fittings and other office equipment.
All short leasehold improvements, plant and equipment relate to the Company except for plant and equipment with a net book value of £69,000 as at 31 March 2015 (2014: £101,000).
16. Investment in joint ventures
| Investment & trading 31.3.15 £000 |
Development 31.3.15 £000 |
Total 31.3.15 £000 |
Investment & trading 31.3.14 £000 |
Development 31.3.14 £000 |
Total 31.3.14 £000 |
|
|---|---|---|---|---|---|---|
| Summarised statements of consolidated income | ||||||
| Revenue | 5,523 | 575 | 6,098 | 6,351 | 250 | 6,601 |
| Gross rental income | 5,523 | 575 | 6,098 | 6,351 | 250 | 6,601 |
| Rents payable | (809) | - | (809) | (625) | - | (625) |
| Property overheads | (683) | (194) | (877) | (671) | 132 | (539) |
| Net rental income | 4,031 | 381 | 4,412 | 5,055 | 382 | 5,437 |
| Development profits | - | 1,902 | 1,902 | - | 2,199 | 2,199 |
| Profit/(Loss) on sale of property | 1,087 | 4 | 1,091 | (31) | - | (31) |
| Gain on revaluation of investment properties | 26,134 | - | 26,134 | 15,710 | - | 15,710 |
| Impairment of held for sale investment | - | - | - | - | (4,792) | (4,792) |
| Other operating income/(expense) | (1) | 294 | 293 | 302 | 70 | 372 |
| Administrative expenses | (291) | (660) | (951) | (94) | - | (94) |
| Finance costs | (2,254) | (1,390) | (3,644) | (3,027) | (24) | (3,051) |
| Finance income | 4 | 39 | 43 | 369 | 170 | 539 |
| Change in fair value movement of derivative financial instruments | (578) | - | (578) | 1,001 | - | 1,001 |
| Profit/(loss) before tax | 28,132 | 570 | 28,702 | 19,285 | (1,995) | 17,290 |
| Tax | (734) | (471) | (1,205) | (403) | (439) | (842) |
| Profit/(loss) after tax | 27,398 | 99 | 27,497 | 18,882 | (2,434) | 16,448 |
| Investment & trading 31.3.15 £000 |
Development 31.3.15 £000 |
Total 31.3.15 £000 |
Investment & trading 31.3.14 £000 |
Development 31.3.14 £000 |
Total 31.3.14 £000 |
|
|---|---|---|---|---|---|---|
| Summarised balance sheets | ||||||
| Non-current assets | ||||||
| Investment properties | 88,205 | 100 | 88,305 | 107,504 | - | 107,504 |
| Owner occupied property, plant and equipment | - | 42 | 42 | 21 | - | 21 |
| Deferred tax | 256 | 278 | 534 | 139 | 27 | 166 |
| 88,461 | 420 | 88,881 | 107,664 | 27 | 107,691 | |
| Current assets | ||||||
| Land, development and trading properties | - | 61,782 | 61,782 | - | 27,165 | 27,165 |
| Trade and other receivables | 1,468 | 1,258 | 2,726 | 1,937 | 1,256 | 3,193 |
| Cash and cash equivalents | 7,030 | 6,423 | 13,453 | 4,292 | 11,500 | 15,792 |
| 8,498 | 69,463 | 77,961 | 6,229 | 39,921 | 46,150 | |
| Current liabilities | ||||||
| Trade and other payables | (3,947) | (20,749) | (24,696) | (3,649) | (35,428) | (39,077) |
| Borrowings | - | - | - | (12,453) | - | (12,453) |
| (3,947) | (20,749) | (24,696) | (16,102) | (35,428) | (51,530) | |
| Non-current liabilities | ||||||
| Trade and other payables | (5,590) | (19,842) | (25,432) | (8,464) | - | (8,464) |
| Borrowings | (29,503) | (14,916) | (44,419) | (30,389) | - | (30,389) |
| Derivative financial instruments | (473) | - | (473) | (51) | - | (51) |
| Deferred tax | (237) | - | (237) | (427) | - | (427) |
| (35,803) | (34,758) | (70,561) | (39,331) | - | (39,331) | |
| Net assets | 57,209 | 14,376 | 71,585 | 58,460 | 4,520 | 62,980 |
The cost of the Company's investment in joint ventures was £15,000 (2014: £15,000).
The Directors' valuation of the trading and development stock shows a surplus of £11,013,000 above book value (2014: £1,760,000).
At 31 March 2015 the Group and the Company had interests in the following joint venture companies:
| Country of incorporation |
Class of share capital held | Proportion held Group |
Proportion held Company |
Nature of business | |
| Barts Two Investment Property Ltd | Jersey | Ordinary | 33% | 33% | Investment |
| Barts Close Office Limited | Jersey | Ordinary | 33% | 33% | Investment |
| Barts Square First Office Limited | Jersey | Ordinary | 33% | 33% | Investment |
| Barts Square Active One Limited | Jersey | Ordinary | 33% | 33% | Investment |
| Barts Square First Limited | United Kingdom | Ordinary | 33% | 33% | Development |
| Barts Square Land One Limited | United Kingdom | Ordinary | 33% | 33% | Development |
| 207 Old Street Unit Trust | Jersey | n/a | 33% | - | Investment |
| 211 Old Street Unit Trust | Jersey | n/a | 33% | - | Investment |
| Old Street Retail Unit Trust | Jersey | n/a | 33% | - | Investment |
| City Road (Jersey) Ltd | Jersey | Ordinary | 33% | - | Investment |
| Old Street Holdings LP | Jersey | n/a | 33% | - | Investment |
| Helical Sosnica Sp. zoo. | Poland | Ordinary | 50% | - | Development |
| Abbeygate Helical (Leisure Plaza) Ltd | United Kingdom | Ordinary | 50% | 50% | Development |
| Abbeygate Helical (Winterhill) Ltd | United Kingdom | Ordinary | 50% | 50% | Development |
| Abbeygate Helical (C4.1) LLP | United Kingdom | n/a | 50% | 50% | Development |
| Shirley Advance LLP | United Kingdom | n/a | 50% | - | Development |
| King Street Developments (Hammersmith) Ltd | United Kingdom | Ordinary | 50% | - | Development |
| Creechurch Place Limited | Jersey | Ordinary | 10% | - | Development |
The Group's investment in Helical Sosnica Sp. zoo. has been accounted for as an investment held for sale due to a commitment to sell the Group's share within the next year. At 31 March 2015 Helical Sosnica Sp. zoo. held a development property, the fair value of which the Directors believe to be £81,866,000 (of which Helical's share is £40,933,000) and a bank loan of £51,156,000 (of which Helical's share is £25,578,000) repayable in September 2017.
17. Land, developments and trading properties
| Group | Development properties 31.3.15 £000 |
Trading stock 31.3.15 £000 |
Total 31.3.15 £000 |
Development properties 31.3.14 £000 |
Trading stock 31.3.14 £000 |
Total 31.3.14 £000 |
|---|---|---|---|---|---|---|
| At 1 April | 95,632 | 2,528 | 98,160 | 90,346 | 2,528 | 92,874 |
| Acquisitions and construction costs | 21,131 | 31,012 | 52,143 | 32,863 | - | 32,863 |
| Interest capitalised | 3,381 | - | 3,381 | 2,835 | - | 2,835 |
| Transfer to investment properties | - | - | - | (8,600) | - | (8,600) |
| Disposals | (25,685) | (33,512) | (59,197) | (22,109) | - | (22,109) |
| Foreign exchange movements | (1,457) | - | (1,457) | (255) | - | (255) |
| Provision | (452) | - | (452) | 552 | - | 552 |
| At 31 March | 92,550 | 28 | 92,578 | 95,632 | 2,528 | 98,160 |
The Company had no land, developments or trading properties (2014: none)
The Directors' valuation of trading and development stock shows a surplus of £25,230,000 above book value (2014: £25,719,000).
Interest capitalised in respect of the development of sites is included in stock to the extent of £9,788,000 (2014: £7,743,000).
Land, developments and trading properties with carrying values totalling £83,948,000 (2014: £77,676,000) were held as security against borrowings.
18. Forward property contract
| Group 31.3.15 £000 |
Group 31.3.14 £000 |
Company 31.3.15 £000 |
Company 31.3.14 £000 |
|
| Forward property contract | 16,388 | - | - | - |
| 16,388 | - | - | - |
The Group has assigned its forward purchase contract on 99 Clifton Street to a third party. The agreement to assign the forward purchase contract is considered to be a derivative financial instrument. As such, under IAS 39, it is carried at its fair value with gains and losses taken to the Income Statement. The fair value inputs represent Level 2 fair value measurements as defined by IFRS 13 Fair Value Measurement. The fair value of this assignment contract at 31 March 2015 is £16,388,000, being the contracted cash receipt of £17.3m discounted for risk and the time value of money. The gain of £16,388,000 has been taken to the Income Statement as a development profit.
19. Available-for-sale investments
| Group | 31.3.15 £000 |
31.3.14 £000 |
|---|---|---|
| At 1 April | 4,973 | 5,997 |
| Additions | 144 | - |
| Disposals | (2) | - |
| Impairment in the year | (773) | (1,024) |
| At 31 March | 4,342 | 4,973 |
Included within current available-for-sale investments is an amount lent to a company promoting a mainly residential mixed-use development and a holding of 20% of the equity of this company.
The loan and the equity are classed as an available-for-sale investment and held at fair value. They are considered to be Level 3 of the IFRS 13 fair value hierarchy. The Group has determined its fair value by considering both the loan and the equity element separately. The loan element is valued at the fair value of the expected consideration to be received including anticipated future costs of recovering this loan. This amount has been impaired in the year due to a revision in the expected receipt. The value of the available-for-sale investment is 100% sensitive to changes in the expected repayment proceeds. The equity element is given a £nil value with the Group valuing the underlying company on a break up basis at £nil as it is believed that this is the most probable outcome. This £nil valuation is derived because the Group believe that the value of the property and any other of the company's assets, after the repayment of the loan payable to the Group, would be required to repay the outstanding creditors leaving negligible value to the shareholders.
The Group does not consider that it has significant influence over this company despite having 20% of the equity as another party owns a majority shareholding and the Group does not have a representative on the Board of the company.
The decline in value of £773,000 has been recognised in the Income Statement.
20. Trade and other receivables
| Group 31.3.15 £000 |
Group 31.3.14 £000 |
Company 31.3.15 £000 |
Company 31.3.14 £000 |
|
|---|---|---|---|---|
| Trade receivables | 13,987 | 9,390 | 97 | 356 |
| Amounts owed by joint venture undertakings | 42,220 | 25,347 | 40 | 20,451 |
| Amounts owed by subsidiary undertakings | - | - | 776,550 | 470,119 |
| Other receivables | 879 | 231 | 853 | 337 |
| Prepayments and accrued income | 9,685 | 6,042 | 188 | 174 |
| 66,771 | 41,010 | 777,728 | 491,437 |
Included within Trade receivables of the Group at 31 March 2015 is £1,555,000 (2014: £6,673,000) due in 2016 which is shown as a non-current asset in the Balance Sheet. Included within Prepayments and accrued income of the Group is a prepayment of £1,000,000 (2014: £1,000,000) for the purchase of a property due to complete later in 2015.
21. Cash and cash equivalents
| Group 31.3.15 £000 |
Group 31.3.14 £000 |
Company 31.3.15 £000 |
Company 31.3.14 £000 |
|
|---|---|---|---|---|
| Rent deposits and cash held at managing agents | 3,049 | 4,107 | 3 | - |
| Restricted cash | 91,955 | 12,721 | 2 | - |
| Cash deposits | 25,989 | 46,409 | 13,937 | 30,376 |
| 120,993 | 63,237 | 13,942 | 30,376 |
Restricted cash is made up of amounts held by solicitors and amounts in blocked accounts. Of this balance, £70,166,000 was held in a blocked account due to a bank refinancing of assets and is expected to be released in June 2015.
22. Trade and other payables
| Group 31.3.15 £000 |
Group 31.3.14 £000 |
Company 31.3.15 £000 |
Company 31.3.14 £000 |
|
|---|---|---|---|---|
| Trade payables | 9,868 | 11,074 | 440 | 323 |
| Social security costs and other taxation | 5,156 | 4,615 | - | - |
| Amounts owed to subsidiary undertakings | - | - | 412,690 | 232,788 |
| Other payables | 3,420 | 3,699 | 44 | - |
| Accruals | 37,834 | 24,302 | 3,522 | 2,467 |
| Deferred income | 9,524 | 7,690 | - | - |
| 65,802 | 51,380 | 416,696 | 235,578 |
Included within Deferred income is £nil (2014: £2,150,000) which is due after more than one year.
23. Borrowings
| Group 31.3.15 £000 |
Group 31.3.14 £000 |
Company 31.3.15 £000 |
Company 31.3.14 £000 |
|
|---|---|---|---|---|
| Current borrowings | 45,428 | 1,275 | 6,120 | - |
| Borrowings repayable within: | ||||
| - one to two years | 136,091 | 13,904 | - | 3,540 |
| - two to three years | 3,617 | 102,403 | - | - |
| - three to four years | 83,608 | 100,562 | - | - |
| - four to five years | 175,177 | 79,083 | 90,067 | - |
| - five to six years | 80,060 | - | 79,042 | - |
| -six to ten years | 74,260 | 78,859 | - | 78,859 |
| Non-current borrowings | 552,813 | 374,811 | 169,109 | 82,399 |
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 value of £712,569,000 (2014: £551,876,000). 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 £44,419,000 (2014: £42,842,000).
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 135% of the exchange 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 carrying amount of £103,263,000 in borrowings repayable within four to five 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 £79,042,000 in borrowings repayable within five to six years.
24. Financing and derivative financial instruments
The policies for dealing with liquidity and interest rate risk are noted in Appendix 5 - Risk Register.
| Group 31.3.15 £000 | Group 31.3.14 £000 |
|
|---|---|---|
| Borrowings - maturity | ||
| Due after more than one year | 552,813 | 374,811 |
| Due within one year | 45,428 | 1,275 |
| 598,241 | 376,086 |
The Group has various undrawn committed borrowing facilities. The facilities available at 31 March 2015 in respect of which all conditions precedent had been met were as follows:
| Group 31.3.15 £000 | Group 31.3.14 £000 |
|
|---|---|---|
| Expiring in one year or less | 14,147 | 10,000 |
| Expiring in more than one year but not more than two years | 3,982 | 6,335 |
| Expiring in more than two years but not more than three years | - | 37,735 |
| Expiring in more than three years but not more than four years | 33,161 | - |
| Expiring in more than four years but not more than five years | 2,840 | 36,481 |
| 54,130 | 90,551 |
| Interest rates - Group | % | Expiry | 31.3.15 £000 |
% | Expiry | 31.3.14 £000 |
| Fixed rate borrowings: | ||||||
| - swap rate plus bank margin | 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 | 4.500 | Jan 2020 | 75,000 | - | - | - |
| - swap rate plus bank margin | 4.070 | Jul 2019 | 30,000 | - | - | - |
| - fixed rate Convertible Bond | 4.000 | Jun 2019 | 100,000 | - | - | - |
| - swap rate plus bank margin | 4.525 | Feb 2019 | 75,630 | 4.525 | Feb 2019 | 75,630 |
| - swap rate plus bank margin | 4.020 | May 2018 | 10,800 | 4.020 | May 2018 | 10,800 |
| - swap rate plus bank margin | 3.365 | Jan 2016 | 9,172 | 4.015 | Jan 2016 | 9,172 |
| - swap rate plus bank margin | 4.070 | Jan 2016 | 11,100 | - | - | - |
| - swap rate plus bank margin | 3.510 | May 2015 | 21,375 | 4.160 | May 2015 | 21,375 |
| - swap rate plus bank margin | - | - | - | 3.958 | Jan 2015 | 50,000 |
| - swap rate plus bank margin | - | - | - | 5.957 | Jan 2015 | 11,429 |
| - swap rate plus bank margin | - | - | - | 5.645 | Oct 2014 | 6,690 |
| - swap rate plus bank margin | - | - | - | 4.240 | Nov 2017 | 26,400 |
| Weighted average | 4.366 | Mar 2019 | 493,939 | 4.766 | Dec 2016 | 291,496 |
| Floating rate borrowings | 2.438 | Nov 2016 | 101,039 | 3.476 | Mar 2017 | 84,590 |
| Fair value adjustment of Convertible Bond | 3,263 | - | ||||
| Total borrowings | 4.026 | Aug 2019 | 598,241 | 4.462 | May 2018 | 376,086 |
Changes in fixed borrowing rates are the result of stepped increases in interest rate swaps rates. Floating rate borrowings bear interest at rates based on LIBOR.
At 31 March 2015 the Company had £30,000,000 and £11,000,000 interest rate swaps, both at 4.07% and expiring in July 2019 and January 2016 respectively. Interest is fixed on the Retail Bond and Convertible Bond as shown above, with the remaining borrowings being at floating rate.
At 31 March 2015 the Company had no fixed rate borrowings (2014: £6,690,000 at 5.645%).
In addition to the borrowings above, the Group has a £50,000,000 interest rate swap at 1.865% starting in June 2016 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 | 50,000 | 4.000 | Apr 2011 | Apr 2015 |
| - 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 | 11,037-10,613 | 4.000 | Jan 2015 | Jan 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 | Group 31.3.15 £000 |
Group 31.3.14 £000 |
|---|---|---|
| Total debt | 598,241 | 376,086 |
| Cash | (120,993) | (63,237) |
| Net debt | 477,248 | 312,849 |
Net debt excludes the Group's share of debt in joint ventures of £44,419,000 (2014: £42,842,000), and cash of £13,453,000 (2014: £15,792,000).
| Group 31.3.15 £000 |
Group 31.3.14 £000 |
|
|---|---|---|
| Net assets | 404,363 | 340,527 |
| Gearing | 118% | 92% |
25. Share capital
| 31.3.15 £000 |
31.3.14 £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.
| 31.3.15 £000 |
31.3.14 £000 |
|||||
|---|---|---|---|---|---|---|
| Allotted, called up and fully paid | ||||||
| - 118,183,806 ordinary shares of 1p each | 1,182 | 1,182 | ||||
| - 212,145,300 deferred shares of 1⁄8p each | 265 | 265 | ||||
| 1,447 | 1,447 | |||||
| Shares in issue 31.3.15 Number |
Share capital 31.3.15 £000 |
Shares in issue 31.3.14 Number |
Share capital 31.3.14 £000 |
|||
| Ordinary shares | ||||||
| At 1 April and 31 March | 118,183,806 | 1,182 | 118,137,522 | 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 (2015: £396,825,000; 2014: £333,977,000). The Group continually monitors its gearing level to ensure that it is appropriate. Gearing increased from 92% to 118% in the year as the Group 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 2015 there were nil (2014: 46,284) 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 2014: nil).
The Company uses a stochastic valuation model to value the share options.
| Summary of share options | Number 31.3.15 |
Weighted average exercise Price 31.3.15 |
Number 31.3.14 |
Weighted average exercise Price 31.3.14 |
|---|---|---|---|---|
| At 1 April | 46,284 | 259.25 | 34,713 | 259.25 |
| Options granted in prior years not previously recognised | - | - | 11,571 | 259.25 |
| Options exercised | (46,284) | (259.25) | - | - |
| At 31 March | - | - | 46,284 | 259.25 |
The share price at the date of exercise was 344.25p.
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 Group 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 | 2015 Weighted average award value |
Awards | 2014 Weighted average award value |
|---|---|---|---|---|
| Outstanding at beginning of year | 9,721,375 | 215p | 9,310,162 | 211p |
| Awards vested during year | (1,707,216) | 246p | - | - |
| Awards lapsed during the year | (1,021,711) | 246p | (2,368,701) | 276p |
| Awards made during the year | 2,134,705 | 335p | 2,779,914 | 244p |
| Outstanding at end of year | 9,127,153 | 221p | 9,721,375 | 215p |
The performance share plan awards outstanding at 31 March 2015 had a weighted average remaining contractual life of one year.
The inputs into the stochastic model of valuation of the PSP awards made in the year to 31 March 2015 were as follows:
| 2015 | 2014 | 2013 | |
|---|---|---|---|
| Weighted average share price | 355.0p | 303.2p | 203.4p |
| Weighted average exercise price | - | - | - |
| Expected volatility | n/a | n/a | n/a |
| Expected life | 3 years | 3 years | 3 years |
| Risk free rate | n/a | n/a | n/a |
| Expected dividends | 1.90% | 2.20% | 3.07% |
The Group recognised a charge of £6,432,000 (2014: £6,333,000) 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 Group's obligations under its Share Option Schemes and Performance Share Plan. For this purpose, 3,790,000 shares (2014: 250,000) in the Company were purchased during the year at a cost of £13,349,000 (2014: £951,000).
At 31 March 2015, unexercised options over nil (2014: nil) ordinary 1p shares in Helical Bar plc had been granted over shares held by the Trust.
At 31 March 2015, outstanding awards over 9,127,000 (2014: 9,721,000) 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 2015, the Trust held 3,625,000 shares (2014: 1,542,000).
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.
Other than these contingent liabilities there were no contingent liabilities at 31 March 2015 for the Group or the Company (2014: £nil).
30. Capital commitments
The Group has a commitment to purchase a property for £19.8m in 2015, discussed in further detail in note 18. A prepayment of £1m is included in prepayments and accrued income. The Group has a commitment of £86.8m in relation to construction contracts, which are due to be completed over the period to September 2018.
31. Net assets per share
| 31.3.15 £000 |
Number of shares 000s |
31.3.15 pence per share |
31.3.14 £000 |
Number of shares 000s |
31.3.14 pence per share |
|
|---|---|---|---|---|---|---|
| Net asset value | 404,363 | 118,184 | 340,527 | 118,138 | ||
| Less: own shares held by ESOP | (3,625) | (1,542) | ||||
| deferred shares | (265) | (265) | ||||
| Basic net asset value | 404,098 | 114,559 | 353 | 340,262 | 116,596 | 292 |
| Add: share settled bonus | 1,016 | 451 | ||||
| Add: unexercised share options | - | - | 120 | 46 | ||
| Add: dilutive effect of the Performance Share Plan | 6,256 | 1,121 | ||||
| Diluted net asset value | 404,098 | 121,831 | 332 | 340,382 | 118,214 | 288 |
| Adjustment for: | ||||||
| - fair value of financial instruments | 8,568 | (243) | ||||
| - fair value movement on Convertible Bond | 3,263 | - | ||||
| - deferred tax | 16,956 | 2,444 | ||||
| Adjusted diluted net asset value | 432,885 | 121,831 | 355 | 342,583 | 118,214 | 290 |
| Adjustment for: | ||||||
| - fair value of trading and development properties | 36,243 | 27,479 | ||||
| EPRA net asset value | 469,128 | 121,831 | 385 | 370,062 | 118,214 | 313 |
| Adjustment for: | ||||||
| - fair value of financial instruments | (8,568) | 243 | ||||
| - deferred tax | (16,956) | (2,444) | ||||
| EPRA triple net asset value | 443,604 | 121,831 | 364 | 367,861 | 118,214 | 311 |
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 2015 and 31 March 2014 the following amounts were due in respect of the Group's joint ventures.
| At 31.3.15 £000 |
At 31.3.14 £000 |
|
| King Street Developments (Hammersmith) Ltd | 5,280 | 3,050 |
| Shirley Advance LLP | 12,501 | 4,723 |
| Barts Two Investment Property Ltd | - | 146 |
| Barts Square First Ltd | 42 | - |
| Helical Sosnica Sp. Zoo | 6,000 | 11,900 |
| 207 Old Street Unit Trust | 2,325 | 1,792 |
| 211 Old Street Unit Trust | 1,801 | 1,701 |
| Old St Retail Unit Trust | 725 | 719 |
| City Road (Jersey) Ltd | 738 | 710 |
| Old Street Holdings LP Ltd | 100 | 100 |
| Creechurch Place Ltd | 12,132 | - |
All movements in joint venture balances related to loans repaid and loans advanced.
At 31 March 2015, there was an amount due to the Group of £347,000 (2014: £nil) by a company under common control.
At 31 March 2015 and 31 March 2014 there were the following balances between the Company and its subsidiaries.
| 31.3.15 £000 |
31.3.14 £000 |
|
| Amounts due from subsidiaries | 776,550 | 470,119 |
| Amounts due to subsidiaries | 412,690 | 232,788 |
During the years to 31 March 2015 and 31 March 2014 there were the following transactions between the Company and its subsidiaries:
| Year ended 31.3.15 £000 |
Year ended 31.3.14 £000 |
|
| Management charges receivable | 10,795 | 8,372 |
| Management charges payable | - | 6,116 |
| Interest receivable | 2,294 | 2,837 |
| Interest payable | 3,125 | - |
Management charges relate to the performance of management services for the Company or its subsidiaries. Interest receivable relates to interest on loans made by the Company to its subsidiaries. All of these transactions, and the year-end balance sheet amounts arising from these transactions were conducted on an arm's length basis and on normal commercial terms. Amounts owed by subsidiaries to the Company are identified in note 20. Amounts owed to subsidiaries by the Company are identified in note 22.
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.
| 2011 £000 |
2012 £000 |
2013 £000 |
2014 £000 |
2015 £000 |
||
|---|---|---|---|---|---|---|
| Gross rental income | - subsidiaries | 18,590 | 23,058 | 25,816 | 29,994 | 38,332 |
| - joint ventures | 5,531 | 6,645 | 6,193 | 6,601 | 6,098 | |
| Total gross rental income | 24,121 | 29,703 | 32,009 | 36,595 | 44,430 | |
| Rents payable | - subsidiaries | (24) | (418) | (342) | (476) | (269) |
| - joint ventures | (1,000) | (848) | (802) | (625) | (809) | |
| Property overheads | - subsidiaries | (3,662) | (3,938) | (5,186) | (4,328) | (3,489) |
| - joint ventures | (941) | (737) | (510) | (539) | (877) | |
| Net rental income attributable to profit share partner | (717) | (826) | (710) | (788) | (341) | |
| See-through net rental income | 17,777 | 22,936 | 24,459 | 29,839 | 38,645 |
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.
| 2011 £000 |
2012 £000 |
2013 £000 |
2014 £000 |
2015 £000 |
||
|---|---|---|---|---|---|---|
| In parent and subsidiaries | (1,729) | 5,166 | 7,616 | 62,273 | 16,126 | |
| In joint ventures | - | - | - | 2,199 | 1,902 | |
| Total gross development profit | (1,729) | 5,166 | 7,616 | 64,472 | 18,028 | |
| Provision against stock | (14,913) | (4,511) | (660) | 552 | (452) | |
| See-through development profits | (16,642) | 655 | 6,956 | 65,024 | 17,576 |
See-through net gain on sale and revaluation of investment properties
| 2011 £000 |
2012 £000 |
2013 £000 |
2014 £000 |
2015 £000 |
||
|---|---|---|---|---|---|---|
| Revaluation surplus on investment properties | - subsidiaries | 2,670 | 3,664 | 3,723 | 20,714 | 66,904 |
| - joint ventures | 798 | 581 | 3,109 | 15,710 | 26,134 | |
| Total revaluation surplus | 3,468 | 4,245 | 6,832 | 36,424 | 93,038 | |
| Net gain/(loss) on sale of investment properties | - subsidiaries | 4,842 | (376) | (2,388) | 8,611 | 2,480 |
| - joint ventures | - | - | - | (31) | 1,091 | |
| Total net gain/(loss) on sale of investment properties | 4,842 | (376) | (2,388) | 8,580 | 3,571 | |
| See-through net gain on sale and revaluation of investment properties | 8,310 | 3,869 | 4,444 | 45,004 | 96,609 |
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.
| 2011 £000 |
2012 £000 |
2013 £000 |
2014 £000 |
2015 £000 |
|||
|---|---|---|---|---|---|---|---|
| Interest payable on bank loans and overdrafts | - subsidiaries | 9,690 | 10,808 | 10,445 | 14,298 | 21,055 | |
| - joint ventures | 1,704 | 2,223 | 2,269 | 3,051 | 3,644 | ||
| Total interest payable on bank loans and overdrafts | 11,394 | 13,031 | 12,714 | 17,349 | 24,699 | ||
| Other interest payable and similar charges | - subsidiaries | 1,481 | 901 | 1,658 | 2,520 | 6,264 | |
| Interest capitalised | - subsidiaries | (4,179) | (3,300) | (2,526) | (2,835) | (3,641) | |
| Total finance costs | 8,696 | 10,632 | 11,846 | 17,034 | 27,322 | ||
| Interest receivable and similar income | - subsidiaries | (652) | (583) | (887) | (4,135) | (2,480) | |
| - joint ventures | (11) | (12) | (66) | (539) | (43) | ||
| See-through net finance costs | 8,033 | 10,037 | 10,893 | 12,360 | 24,799 | ||
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.
| 2011 £000 |
2012 £000 |
2013 £000 |
2014 £000 |
2015 £000 |
|||||
|---|---|---|---|---|---|---|---|---|---|
| Investment property | - subsidiaries | 271,876 | 326,876 | 312,026 | 493,201 | 701,521 | |||
| - joint ventures | 65,870 | 67,187 | 94,962 | 107,504 | 88,305 | ||||
| Total investment property | 337,746 | 394,063 | 406,988 | 600,705 | 789,826 | ||||
| Trading and development stock | - subsidiaries | 147,542 | 99,741 | 92,874 | 98,160 | 92,578 | |||
| - joint ventures | 14,434 | 44,324* | 76,698* | 75,368* | 102,715* | ||||
| Total trading and development stock | 161,976 | 144,065 | 169,572 | 173,528 | 195,293 | ||||
| Trading and development stock surplus | - subsidiaries | 32,436 | 33,107 | 48,837 | 25,719 | 25,230 | |||
| - joint ventures | - | 1,435 | 1,028 | 1,760 | 11,013 | ||||
| Total trading and development stock surpluses | 32,436 | 34,542 | 49,865 | 27,479 | 36,243 | ||||
| Total trading and development stock | 194,412 | 178,607 | 219,437 | 201,007 | 231,536 | ||||
| See-through property portfolio | 532,158 | 572,670 | 626,425 | 801,712 | 1,021,362 | ||||
*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 parent and subsidiaries and joint ventures are shown in the table below.
| 2011 £000 |
2012 £000 |
2013 £000 |
2014 £000 |
2015 £000 |
|||||
|---|---|---|---|---|---|---|---|---|---|
| In parent and subsidiaries | - gross borrowings less than one year | 37,500 | 59,203 | 39,295 | 1,275 | 45,428 | |||
| - gross borrowings more than one year | 199,917 | 203,992 | 220,446 | 374,811 | 552,813 | ||||
| Total | 237,417 | 263,195 | 259,741 | 376,086 | 598,241 | ||||
| In joint ventures | - gross borrowings less than one year | 3,100 | 1,500 | 720 | 12,453 | - | |||
| - gross borrowings more than one year | 36,936 | 54,342* | 72,509* | 60,134* | 69,997* | ||||
| Total | 40,036 | 55,842 | 73,229 | 72,587 | 69,997 | ||||
| In parent and subsidiaries | Cash and cash equivalents | (31,327) | (35,411) | (36,863) | (63,237) | (120,993) | |||
| In joint ventures | Cash and cash equivalents | (4,138) | (4,024) * | (12,757) * | (20,377) * | (15,348)* | |||
| See-through net borrowings | 241,988 | 279,602 | 283,350 | 365,059 | 531,897 | ||||
*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 | 31.03.11 £000 |
31.03.12 £000 |
31.03.13 £000 |
31.03.14 £000 |
31.03.15 £000 |
| Net rental income | 17,777 | 22,936 | 24,459 | 29,839 | 38,645 |
| Trading profits/(losses) | (367) | - | (1) | 252 | 2,503 |
| Development profits (before provisions) | (1,729) | 5,166 | 7,616 | 64,472 | 18,028 |
| Gain/(loss) on sale of investment properties | 4,842 | (376) | (2,388) | 8,580 | 3,571 |
| Net operating income | 20,523 | 27,726 | 29,686 | 103,143 | 62,747 |
| Finance costs | 8,033 | 10,037 | 10,893 | 12,360 | 24,799 |
| Interest cover | 2.6x | 2.8x | 2.7x | 8.3x | 2.5x |
| Balance sheet | |||||
| Property portfolio | 532,158 | 572,670 | 626,425 | 801,712 | 1,021,362 |
| Net borrowings | 241,988 | 279,602 | 283,350 | 365,059 | 531,897 |
| Shareholders' funds | 255,397 | 253,730 | 253,768 | 340,527 | 404,363 |
| EPRA net asset value | 295,356 | 294,398 | 313,733 | 370,062 | 469,128 |
| Loan to value | 45% | 49% | 45% | 46% | 52% |
| Gearing | 95% | 110% | 112% | 107% | 132% |
| Gearing based on EPRA net asset value | 82% | 95% | 90% | 99% | 113% |
Appendix 3 - Five Year Review
Income Statements
| 31.3.11 £000 |
31.3.12 £000 |
31.3.13 £000 |
31.3.14 £000 |
31.3.15 £000 |
|||
| Revenue | 119,059 | 52,968 | 65,439 | 123,637 | 106,341 | ||
| Net rental income | 14,187 | 17,876 | 19,578 | 24,402 | 34,233 | ||
| Development profit/(loss) | (1,729) | 5,166 | 7,616 | 62,273 | 16,126 | ||
| Provisions against stock | (14,913) | (4,511) | (660) | 552 | (452) | ||
| Trading profit/(loss) | (367) | - | (1) | 252 | 2,503 | ||
| Share of results of joint ventures | 2,886 | 2,472 | 3,854 | 16,448 | 27,497 | ||
| Other income/(expense) | (358) | 113 | (547) | 230 | 368 | ||
| Gross profit/(loss) before gain/(loss) on investment properties | (294) | 21,116 | 29,840 | 104,157 | 80,275 | ||
| Gain/(loss) on sale of investment properties | 4,842 | (376) | (2,388) | 8,611 | 2,480 | ||
| Revaluation surplus on investment properties | 2,670 | 3,664 | 3,723 | 20,714 | 66,904 | ||
| Impairment of available-for-sale investments | (1,817) | - | - | (88) | (773) | ||
| Administrative expenses excluding performance related awards | (7,312) | (7,385) | (8,092) | (8,816) | (10,156) | ||
| Performance related awards | 262 | (415) | (6,828) | (17,860) | (16,374) | ||
| Finance costs | (6,992) | (8,409) | (9,577) | (13,983) | (23,678) | ||
| Finance income | 652 | 583 | 887 | 4,135 | 2,480 | ||
| Movement in fair value of derivative financial instruments | 1,776 | (306) | (2,573) | 5,312 | (8,389) | ||
| Convertible Bond adjustment | - | - | - | - | (3,263) | ||
| Foreign exchange (losses)/gains | (67) | (1,064) | 17 | (501) | (2,061) | ||
| Profit/(loss) before tax | (6,280) | 7,408 | 5,009 | 101,681 | 87,445 | ||
| Tax | 2,391 | 158 | 815 | (14,126) | (12,669) | ||
| Profit/(loss) after tax | (3,889) | 7,566 | 5,824 | 87,555 | 74,776 | ||
Balance Sheets
| 31.3.11 £000 |
31.3.12 £000 |
31.3.13 £000 |
31.3.14 £000 |
31.3.15 £000 |
||
| Investment portfolio | 271,876 | 326,876 | 312,026 | 493,201 | 701,521 | |
| Land, developments and trading properties | 147,542 | 99,741 | 92,874 | 98,160 | 92,578 | |
| Group's share of investment properties held by joint ventures | 65,870 | 67,187 | 94,962 | 107,504 | 88,305 | |
| Group's share of land, trading and development properties held by joint ventures | 14,434 | 15,709 | 23,797 | 27,165 | 61,782 | |
| Group's share of total properties | 499,722 | 509,513 | 523,659 | 726,030 | 944,186 | |
| Net debt | 206,090 | 227,784 | 222,878 | 312,849 | 477,248 | |
| Group's share of net debt of joint ventures | 35,898 | 36,409 | 38,521 | 27,050 | 30,966 | |
| Shareholders' funds | 255,397 | 253,730 | 253,768 | 340,527 | 404,363 | |
| Dividend per ordinary share | 2.00p | 4.90p | 5.25p | 5.70p | 6.85p | |
| EPRA earnings/(loss) per ordinary share | (6.4p) | 3.4p | 2.4p | 33.3p | 2.4p | |
| EPRA net assets per share | 253p | 250p | 264p | 313p | 385p | |
Appendix 4 - Property Portfolio
London Portfolio
| Address | Held As | Description | Area sq ft (NIA) |
Vacancy rate |
|---|---|---|---|---|
| Shepherds Building, London W14 | Investment | Multi let office building. Let to media companies | 151,000 | 6% |
| The Bower, London EC1 |
Investment | Office and retail buildings undergoing refurbishment and extension | 414,000 | n/a |
| New Loom House, London E1 | Investment | Multi let office building with refurbishment underway | 112,000 | 18% |
| C-Space, London EC1 |
Investment | Office refurbishment scheme due for completion in August 2015 | 62,000 | 100% |
| Artillery Lane, London E1 |
Investment | 17,000 sq ft office building undergoing refurbishment | 17,000 | n/a |
| Enterprise House, London W2 | Investment | Office building let to Network Rail for 20 years | 45,000 | - |
| One King Street, London W6 |
Investment | Recently refurbished office and retail building adjacent to Hammersmith Broadway | 35,000 | 14% |
| The Powerhouse, London W4 | Investment | Single let recording studios/office building | 43,000 | - |
| Charterhouse Square, London EC1 | Investment | Office building with scope for extension and refurbishment | 34,000 | - |
| Chart Street, London N1 |
Investment | Single let office building with refurbishment and extension potential | 10,500 | - |
| Barts Square, London EC1 |
Investment/ Development |
244,685 sq ft offices, 236 residential apartments and 16,300 sq ft retail/leisure development under construction | 466,000 | n/a |
| Creechurch Place, London EC3 | Development | New building due for completion September 2016 | 273,000 | 100% |
| Clifton Street, London EC2 |
Development | Contract to buy a newly constructed office building following completion in summer 2015 | 45,000 | n/a |
| King Street, London W6 |
Development | Planning permission received for residential, office, retail and leisure scheme. Due to start on site early 2016. | 500,000 | n/a |
| 2,207,500 |
Regional Portfolio
| Address | Held As | Description | Area sq ft (NIA) |
Vacancy rate | ||
|---|---|---|---|---|---|---|
| In Town Retail | ||||||
| Birkenhead | Investment | Convenience supermarket | 15,855 | - | ||
| Cardiff, The Hayes | Investment | Prime retail parade and listed retail arcades with residential above | 290,394 | 6.6% | ||
| Lancaster | Investment | Town centre bank branch | 10,405 | - | ||
| Leicester | Investment | Town centre shop | 6,060 | - | ||
| 322,714 | - | |||||
| Out-of-town Retail | ||||||
| Cardiff, Ty Glas Road | Investment | Single let DIY store | 42,469 | - | ||
| Ellesmere Port | Investment | Single let retail park | 36,258 | - | ||
| Great Yarmouth | Investment | Single let retail park | 38,771 | - | ||
| Harrogate | Investment | Single let retail park | 12,645 | - | ||
| Huddersfield | Investment | Retail park | 101,491 | - | ||
| Leigh | Investment | Retail park | 41,099 | - | ||
| Scarborough | Investment | Retail park | 28,970 | - | ||
| Sevenoaks, Kent | Investment | Retail park | 42,490 | - | ||
| Southend on Sea | Investment | Retail park | 74,954 | - | ||
| Stockport | Investment | Single let retail park | 31,803 | - | ||
| Stoke on Trent | Investment | Retail park | 68,973 | - | ||
| 519,923 | - | |||||
| Industrial/Logistics | ||||||
| Barking | Investment | Multi let industrial estate | 25,783 | - | ||
| Bedford | Investment | Multi let industrial estate | 26,407 | 23% | ||
| Bedford | Investment | Single let distribution centre | 36,023 | - | ||
| Bolton | Investment | Single let cash and carry | 73,433 | - | ||
| Brownhills, Birmingham | Investment | Single let distribution centre | 52,368 | - | ||
| Burton-on-Trent | Investment | Single let distribution centre | 92,715 | - | ||
| Cannock | Investment | Single let distribution centre | 153,665 | - | ||
| Cannock | Investment | Single let distribution centre | 103,050 | - | ||
| Cardiff, Heol Billingsley | Investment | Single let distribution centre | 50,684 | - | ||
| Chichester | Investment | Multi let industrial estate | 43,685 | - | ||
| Daventry | Investment | Single let distribution centre | 44,658 | - | ||
| Doncaster, Aspect Way | Investment | Single let distribution centre | 122,591 | - | ||
| Doncaster, Kirk Sandalls | Investment | Single let distribution centre | 153,547 | - | ||
| Gloucester Quedgley | Investment | Multi let industrial estate | 43,239 | - | ||
| Gloucester IO | Investment | Multi let industrial estate | 63,316 | - | ||
| Gravesend | Investment | Multi let industrial estate | 32,101 | - | ||
| Havant | Investment | Single let distribution centre | 38,914 | - | ||
| Hinckley | Investment | Single let distribution centre | 188,242 | - | ||
| Leighton Buzzard | Investment | Multi let industrial estate | 202,674 | - | ||
| Maidenhead | Investment | Multi let industrial estate | 25,434 | - | ||
| Milton Keynes, Fingle Drive | Investment | Multi let industrial estate | 21,814 | - | ||
| Milton Keynes, Mailcom | Investment | Multi let industrial estate | 25,282 | - | ||
| Northampton | Investment | Multi let industrial estate | 46,562 | - | ||
| Northampton | Investment | Single let distribution centre | 45,356 | - | ||
| Rugby | Investment | Single let distribution centre | 45,045 | - | ||
| Telford | Investment | Single let distribution centre | 65,225 | - | ||
| Thetford | Investment | Single let distribution centre | 127,256 | - | ||
| Warrington, Calver Quay | Investment | Multi let industrial estate | 70,594 | - | ||
| Warrington, Raglan Court | Investment | Single let distribution centre | 81,342 | - | ||
| Wolverhampton | Investment | Single let distribution centre | 119,600 | - | ||
| Yate | Investment | Single let distribution centre | 255,714 | - | ||
| 2,476,319 | ||||||
| Regional Offices | ||||||
| Bristol | Investment | Multi let office building | 18,453 | 27% | ||
| Castle Donnington | Investment | Offices let to National Grid | 25,471 | - | ||
| Cheadle | Investment | Single let office building | 16,470 | - | ||
| Cobham | Investment | Single let office building | 21,837 | - | ||
| Crawley | Investment | Single let office building | 48,131 | - | ||
| Glasgow | Investment | Multi let office building | 57,388 | 5% | ||
| Manchester, Churchgate & Lee | Investment | Multi let city centre office building with refurbishment and asset management potential | 248,342 | 15% | ||
| Manchester, Dale House | Investment | Multi let city centre office building with refurbishment and asset management potential | 42,282 | - | ||
| Reading | Investment | Office building let to Thames Water | 35,847 | - | ||
| Sawston | Investment | Industrial and office park | 19,151 | 13% | ||
| Sheffield | Investment | Single let office building | 14,503 | - | ||
| 547,875 | ||||||
| Regional Office Development | ||||||
| Glasgow | Development | Pre-let to Scottish Power plc. Pre-sold to M&G | 220,000 | n/a | ||
| 220,000 | ||||||
| Change of Use | ||||||
| Aycliffe and Peterlee | Investment | Restrictive covenants | 0 | n/a | ||
| Bracknell | Development | 0 | n/a | |||
| Hailsham | Development | 0 | n/a | |||
| Rugby, Cawston Abbey | Development | Residential land | 0 | n/a | ||
| Telford, Dawley Road | Development | Residential land | 0 | n/a | ||
| 0 | ||||||
| Polish Development | ||||||
| Gliwice | Development | 720,000 | 15% | |||
| Wroclaw | Development | 103,486 | - | |||
| 823,486 | ||||||
| Retail Development | ||||||
| Helical Retail | Development | 0 | - | |||
| Milton Keynes C.4.1 | Development | Ground rents | 2,628 | - | ||
| Milton Keynes Leisure Plaza | Development | Ice rink and development site | 118,873 | - | ||
| Shirley, Birmingham | Development | 161,255 | - | |||
| 282,256 | ||||||
| Address | Held As | Description | Units | Vacancy rate | ||
| Retirement Villages | ||||||
| Millbrook, Exeter | Development | Retirement village development | 164 | n/a | ||
| Durrants Village, Faygate | Development | Retirement village development | 173 | n/a | ||
| Maudsley Park, Great Alne | Development | Retirement village development | 164 | n/a | ||
| Bramshott Place, Liphook | Development | Retirement village development | 151 | n/a | ||
| Penally Farm, Liphook | Development | Retirement village development | 0 | n/a | ||
| Bramshott Place Clubhouse | Investment | Clubhouse at retirement village | 0 | n/a | ||
| Durrants Village, Clubhouse | Investment | Clubhouse at retirement village | 0 | n/a | ||
| 652 | ||||||
Appendix 5 - Risk Register
STRATEGIC RISK
Strategic risk includes the risk that the Group's business strategy or capital structure results in the Group underperforming the rest of the property sector, or being unable to take advantage of opportunities that may arise.
| Risk description | Mitigation/action |
| Group's strategy is inconsistent with market conditions, for example: - Asset concentration/lot size impacts on liquidity (e.g. if investments become difficult to sell, does this affect our liquidity?) - Asset concentration/mix creates excessive volatility in property revaluation movements |
Management constantly monitors and considers changes to the Group strategy in the light of any changes to market conditions. The management team is very experienced and has a good track record in the property market Due to the small size of the Group and the management team, changes to the strategy can be effected quickly |
MARKET RISK
Market risks are risks specific to the economy as a whole and to the property sector.
| Risk description | Mitigation/action |
| Property values decline | Helical management reviews external data Helical has been active in disposing of non-performing assets and rebalancing its portfolio for the changing market Helical keeps a diversified portfolio to prevent being over-exposed to one sector |
| Reduced tenant demand for space | Our focus is on buying well let investment properties in good locations We continue to ensure that vacant space is kept to a minimum |
| Appropriate timing of investment and divestment decisions | Our management team is highly experienced |
| Market conditions result in difficulties in divestment of properties at a time when the proceeds are required for new investments | Management constantly reviews the market conditions |
FINANCIAL RISK
The Group is subject to a number of financial risks due to the way in which it is funded.
| Risk description | Mitigation/action |
| Accuracy of property valuations | Helical uses external independent valuers and/or members of executive management with extensive experience in the industry. Management maintains regular contact with valuers to understand movements in valuations |
| Inability to roll over loans | Good relationship with several established lending institutions Borrowing is spread between a number of different institutions We arrange debt repayment dates to spread the maturity profile of bank loans over several years |
| Availability of bank lending | Funding requirements are regularly reviewed |
| Increase in cost of borrowing | Interest rates on 82% of loans are hedged Hedging is regularly monitored to ensure that it remains at an appropriate level Use of interest rate swaps and caps where appropriate |
| Breaching loan covenants | Adherence to loan covenants is closely monitored with reference to both current and forecast compliance |
| Breaching covenants of the retail bond | Adherence to the retail bond covenants is closely monitored |
| Insufficient liquidity to take advantage of opportunities | The Group maintains a sufficient level of cash resources or undrawn committed bank facilities Management ensures that cash resources do not fall below current forecast requirements |
| Maintaining income streams/tenant default | Tenant covenant strength is considered when making property decisions Management maintains dialogue with managing agents and tenants to reduce the risk of unexpected non-payment Management ensures there is no over reliance on individual tenants |
| Inappropriate capital structure (i.e. too highly geared) | The Group's capital structure and gearing is constantly monitored to ensure that they reflect investment/development intentions and the Board's view on the property cycle |
| Loss of deposits due to banking counterparty failure | Management ensures that all deposits remain at well capitalised institutions Regular monitoring of financial institutions |
PEOPLE RISK
The Group's continued success is reliant on our management and staff and successful relationships with our joint venture partners.
| Risk description | Mitigation/action |
| Succession planning | The Nominations Committee and the Board regularly review succession planning issues |
| Lack of the right personnel to ensure the Group's strategy is adhered to | Senior management team is very experienced The Directors monitor staff resources to ensure they are appropriate to any changes in the business |
| Retention and incentivisation of key personnel | Remuneration is set to attract, motivate and retain high calibre staff Employee turnover is low |
| Health & safety issues | The Group's Health and Safety policy is updated annually by the Board and reports are reviewed monthly by the Executive Committee and at every Board meeting Use of specialist professional advice Not involved in high risk activities No significant issues reported in the year |
| Bribery and corruption risk | Anti-bribery policy and procedures are in place which are distributed to all staff. The Board is firmly behind the Group's anti-bribery stance Management identify and monitor projects with a greater exposure to bribery and corruption We avoid doing business in high risk territories |
DEVELOPMENT RISK
The Group derives a significant part of its results from development activity. Development profits are more likely to be subject to fluctuation due to external factors as they are more opportunistic in nature.
| Risk description | Mitigation/Action |
| Inability to add to the current development pipeline | Experienced development team with an excellent track record Good reputation in the property sector |
| Inability to manage current developments | Experienced development team recently expanded to ensure adequate resources available |
| Changes in legislation leading to delays in receiving planning permission | Good relationships with planning consultants and local authorities Management keeps up to date with planning legislation Use of specialist professional advisors |
| Lack of demand for new property | The Group's strategy is to avoid doing speculative developments on its own balance sheet |
| Inability to find suitable contractors/JV partners | Well established network of contractors, joint venture partners and professional advisors As Helical nears the construction of key projects this risk increases |
| Counterparty risk (contractors, joint venture partners, contract parties) | Management monitors counterparties to review their ability to meet their obligations and to monitor the likelihood that they will become insolvent |
This information is provided by RNS
The company news service from the London Stock Exchange
END
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