Gerald Kaye Chief Executive

I am pleased to be able to announce the Company’s Half Year Results to 30 September 2016, my first results as Chief Executive Officer of Helical.

Against a background of some uncertainty in the UK Real Estate market and widespread debate as to whether the “property cycle” has peaked or is merely pausing, Helical’s results show growing net rental income, a net gain on sale and revaluation of our investment portfolio, growth in Shareholders’ Funds and an increase in our EPRA net asset value per share.

The results demonstrate:
– our ability to enhance value through our development programme;
– the success of our asset management initiatives for individual assets; and,
– that stock selection is key to performance.

Our business model, using investment, trading and development strategies to acquire assets on an opportunity led basis, continues to have the potential to create value for Shareholders. For a number of years we have sought a balance between a higher yielding regional portfolio providing good cash flow for the business with development and capital profits coming from the London portfolio,  augmented by our retirement and retail development programmes.

In recent years, we have made significant progress in de-risking our development programme, funding our largest two London schemes at One Creechurch Place, EC3 and One Bartholomew Place, EC1, with third party investors. Since 31 March 2016 we have made further progress on de-risking this development programme. These actions have enabled Helical to release equity from those properties where our asset management objectives have been met (One King Street, Hammersmith and two logistics portfolios) and to reduce our loan to value (“LTV”) below our medium to long term target of 50%. As further asset management plans reach their conclusion, and as we continue to focus the business, I would expect additional recycling of equity to provide firepower for future acquisitions or to further reduce LTV levels.

Helical’s portfolio at the half year reflected passing rents of £39m, contracted rents of a further £13m and an ERV of £78m. As this reversionary potential is captured and passing rental income grows, I would expect our EPRA earnings per share to grow proportionately.

In London, where most of this reversionary potential exists, we have an exciting collection of assets under refurbishment and development in locations where we believe demand from occupiers will continue to be robust. Today’s news of a 59,000 sq ft pre-let at The Bower is a good example of this and I am confident that we will continue to attract occupiers to ensure that our schemes become vibrant and dynamic office communities.

Results for the Half Year

The IFRS profit before tax for the half year to 30 September 2016 was £31.1m (2015: £85.9m), Total Property Return was £47.8m (2015: £107.6m) and included growing net rents of £24.6m, an increase of 18.3% on 2015 (£20.8m), offset by development losses of £2.6m (2015: profit of £18.7m). The gain on sale and revaluation of the investment portfolio contributed £25.8m (2015: £68.1m).

Net finance costs of £12.8m were higher than in 2015 (£10.0m), and the Income Statement was adversely affected by falls in expected future interest rates which led to a £5.9m charge (2015: credit of £0.01m) arising from the valuation of the Group’s derivative financial instruments. The valuation of the Group’s Convertible Bond provided a credit of £7.7m (2015: £0.1m). Recurring administration costs were £5.8m (2015: £5.4m) and the provision for performance related remuneration, including associated NIC, was £0.1m (2015: £8.7m).

These results allow the Board to continue its progressive dividend policy and to recommend to Shareholders an interim dividend of 2.40p (2015: 2.30p), an increase of 4.3%.

The London Portfolio

Since 2010 we have steadily acquired property in two “clusters”; the City and Tech Belt districts of Farringdon, Shoreditch, Aldgate through to Whitechapel and the West London districts of Hammersmith, Shepherds Bush and Chiswick.

The London investment and development portfolio contributes capital growth and development profits and, increasingly, rental income. In the half year to 30 September 2016, London provided c. 66% of the total property return of £47.8m (2015: £107.6m).

City and Tech Belt

Helical has a portfolio of six investment assets in the East London districts of Shoreditch, Farringdon and Whitechapel acquired between 2012 and 2015. Five of these assets have been subject to complete or substantial redevelopment / refurbishment programmes. The assets in the Tech Belt comprise 42% of our total property portfolio and have made a substantial contribution to the growth of our current and future rental income stream and to the growth in our net assets.

Phase One of The Bower, comprising The Warehouse and The Studio, is fully let with contracted rents of £8.0m at an average of £53 psf compared to an ERV of £62 psf. Phase Two, The Tower, is being redeveloped, adding 65,000 sq ft to the current building, taking the completed building to 171,200 sq ft of offices and 7,200 sq ft of retail with works due for completion in June 2018. We are pleased to be able to announce today the pre-letting of six floors, comprising c. 59,000 sq ft, to WeWork, the global provider of flexible collaborative co-working space.

At The Loom, E1 we completed a major repositioning in September and recently announced two separate lettings totalling 4,750 sq ft at rents of £52.50 psf, a 17% premium to March 2016 ERV. A further 29,000 sq ft of this 110,000 sq ft building is available to let with 9,250 sq ft currently under offer.

We have let the remaining 15,387 sq ft at C-Space, EC1 and at 25 Charterhouse Square, EC1 we have made good progress on the redevelopment and expect works at this 43,674 sq ft building to complete in March 2017.

In the City we have completed and launched our 272,555 sq ft new office building at One Creechurch Place, EC3, funded with our joint venture partner HOOPP (Healthcare of Ontario Pension Plan). Several potential tenants are showing interest in taking space in the building and we hope that we shall be able to announce lettings by the end of our financial year.

At Barts Square, EC1, our mixed use scheme in joint venture with The Baupost Group LLC, we have now exchanged contracts on 108 of the 144 residential units with a further two units reserved in Phase One of the development. Phased completion of these units is expected to commence in Q2 2017. Demolition of the existing buildings for the second phase of residential is due to commence in December 2016 for 92 additional units with completion expected in 2019. Terms have been agreed with HSBC for the financing of these works. The office development of 213,000 sq ft at One Bartholomew Close, forward funded by clients of Ashby Capital, is under construction with completion due in August 2018.

The West

We had five assets in West London at 30 September 2016 comprising c. 17% of our total property portfolio. At One King Street, Hammersmith we have completed our asset management programme, having refurbished the building, adding a fifth floor to create 26,000 sq ft of offices with retail units on the ground floor. Having delivered on the business plan we sold the building in November 2016 for its March 2016 book value of £34.5m, a net initial yield of 4.85%. At Shepherd’s Building, Shepherds Bush, W14 we have grown contracted rents to £6.3m with the most recent lettings at £54 psf. At Power Road Studios, W4 we have taken 17,000 sq ft of space back and are shortly to start on refurbishment works which is partly funded by dilapidations receipts and will increase rents from £22 psf to £42.50 psf. A planning application to add further office space is expected to be submitted in December 2016.

The Regional Portfolio

The regional portfolio provides a rental stream from a high yielding investment portfolio while contributing development profits from our retirement village and out-of-town retail development programmes.

The regional investment portfolio reduced to £408m at 30 September 2016 (31 March 2016: £460m) following the sale of two distribution warehouses, five retail assets and two regional offices for total proceeds of £56m. Subsequent to the half year end we have sold a further ten distribution warehouses and one retail asset for c. £55m, a 3.3% premium to 30 September 2016 book values and a 6.7% premium to March 2016 book values. Regional assets contributed £17.8m of net rental income during the period (2015: £15.6m).

Our regional development exposure is limited to our retirement villages, out-of-town retail development programmes and our Scottish Power project in Glasgow, where balance sheet risk is limited. In our retirement village development programme we continued the construction of units at Bramshott Place Liphook, Durrants Village Horsham, Millbrook Village Exeter and Maudslay Park Great Alne, near Stratford-upon-Avon. Since March we have sold 56 residential units at the three schemes (14 since 30 September 2016) and land at Liphook for £3.7m (£2.5m since 30 September 2016). In our retail development programme, we have forward funded our 79,750 sq ft retail park in Cortonwood, which is 95% pre-let and due for completion in June 2017. Scottish Power’s new headquarters building in Glasgow is due to be completed by the end of this month.


In recent years, the Group has expanded its activities significantly, seeking to increase Shareholder Funds through the generation and retention of increased net rental streams, development profits and valuation surpluses. This growth has been financed through an increase in secured debt borrowed primarily from UK high street banks and, since 2013, through the use of unsecured debt in the form of a retail bond and a convertible bond.

At 31 March 2016, the growth in the activities took the LTV up to 55%. Since 31 March 2016, we have sold five of our eight out-of-town retail assets, two of our regional offices, 12 of our distribution warehouses (ten since 30 September 2016), one of our Central London offices and our 50% share of a shopping centre (both post half year end), reducing LTV to 53% at 30 September 2016 and to c. 49% on a pro-forma basis, taking into account the recent sales. With the first phase of our major residential scheme at Barts Square completing in mid 2017 and our retirement village development programme expected to be cash positive going forward, we expect to see further reductions in net debt levels and LTV in the foreseeable future, notwithstanding the planned capital expenditure on the portfolio.

As our individual asset management initiatives on our investment portfolio complete, driving rental income upwards and maximising value, we would expect to see equity recycled and cash resources boosted, enabling the Group to finance new acquisitions with potential for growth.

In pursuing this strategy, the Group operates with an average debt maturity of 4.0 years (31 March 2016: 4.5 years) with no secured loan repayable before November 2019, and with an average cost of debt of 4.3% (31 March 2016: 4.2%). The Group continues to retain a significant level of liquidity with cash and unutilised bank facilities of £220m (31 March 2016: £193m) to fund capital works and potential future additions to its portfolio.


We stated in May that Helical is well placed to deal with any headwinds that may come its way and we reiterate that statement in the knowledge that we have made good progress on our development programme:

  • we have completed One Creechurch Place, EC3 on time and on budget and are encouraged with the level of interest being shown by potential tenants;
  • we have agreed a fixed price building contract on the second phase of The Bower and have pre-let one third of the space at rents in line with our latest valuation;
  • we have let the remaining space at C Space, EC1 at 31 March 2016 ERV levels;
  • construction works continue at One Bartholomew Close, EC1, a scheme forward sold and wholly funded by clients of Ashby Capital;
  • we are on track to complete the redevelopment work at Charterhouse Square, EC1 in March 2017 and initial interest from potential tenants is encouraging; and,
  • we have exchange contracts on over 75% of Phase One of our residential scheme at Barts Square, well in advance of completion and have agreed terms for the financing of the final phase of residential.

In addition, we have a robust investment portfolio where we have demonstrated value through lettings above ERV and sales above book value.

When considering our strategy, we remain of the view that our portfolio, balanced between investments and redevelopment schemes in central London and high yielding regional investment assets, provides investors with access to a growing income stream and potential future capital growth.

Looking ahead, the UK faces a continued period of uncertainty as it seeks its place in a post Brexit world. However, I believe the UK will remain resilient and London will continue to be a World City attracting people, businesses and investors.

2016 Half Year Performance Highlights


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 the Half Year Results.

Management is incentivised to exceed 15% pa growth in net asset value per share.

See-Through Portfolio Value

See-Through Loan to Value

2016 Half Year Operational Highlights

London Portfolio

  • 3% valuation increase of London investment portfolio now valued at £651m (61.5% of investment portfolio) – 31 March 2016: £593m (56.4%).
  • Contracted rents on our London portfolio at 30 September 2016 were £23.4m compared to an ERV of £46.9m.
  • At Barts Square EC1, 108 of the 144 residential units in Phase One had exchanged at 23 November 2016 (31 March 2016: 102 units), with a further two reserved.
  • One King Street, Hammersmith, W6 was sold post 30 September 2016 for £34.5m, its March value, at a net initial yield of 4.85%.
  • Completion of a major refurbishment at The Loom, E1 with 13,750 sq ft subsequently let at rents in excess of £50 psf and a further 9,250 sq ft under offer.

Regional Portfolio

  • 0% valuation increase in the Regional investment portfolio, on a like for like basis, now valued at £408m (38.5% of investment portfolio) – 31 March 2016: £460m (43.6%).
  • Contracted gross rents on regional investment portfolio of £28.5m (31 March 2016: £32.4m).
  • Regional investment portfolio now comprises 9.5% offices, 5.4% in town retail, 3.0% retail parks, 19.5% logistics and 1.1% other (percentages of whole investment portfolio)
  • Sales of nine regional assets during the period comprising two logistics units, two offices and five retail assets for £56m at a 3.6% discount to March values.
  • Sales of ten logistics units and one retail asset post 30 September 2016 for £55m at a 6.7% premium to March values.
  • 23,735 sq ft let at Churchgate House, Manchester at average rents of £16.50 psf, 7.7% above March ERV.
  • 92,672 sq ft logistics unit let in Burton-on-Trent at £5.50 psf, 5% above March ERV.
  • Since March 2016, 56 retirement village units sold for £22.7m with 44 reserved for £22.3m.
  • Land at Liphook sold for £3.7m (of which £2.5m was subsequent to half year end).


  • See-through loan to value of 39% on a secured basis (31 March 2016: 40%) and 53% overall (31 March 2016: 55%). Post 30 September 2016 sales reduce pro forma loan to value to 34% on a secured basis and 49% overall.
  • Average maturity of the Group’s share of debt of 4.0 years (31 March 2016: 4.5 years) at an average cost of 4.3% (31 March 2016: 4.2%).
  • Group’s share of cash and undrawn bank facilities at 30 September 2016 of £220m (31 March 2016: £193m).

2016 Half year Highlights

Profit before tax
EPRA Net asset value
Share of property portfolio

2016 Half Year Results

View our Half Year results, reports and presentations.