CEO Statement
25 May 2017

Gerald Kaye Chief Executive

I am pleased to present the Company’s 2017 Annual Results, the first since my appointment as Chief Executive of Helical plc at the 2016 AGM. The year to 31 March 2017 has been eventful with the real estate sector proving resilient against a background of both UK and international political change. Looking back 12 months it was clear that the exceptional growth in property values that we experienced over the period from 2012 to 2016, as the market recovered from the 2008 Global Financial Crisis, was coming to an end with yields approaching historic lows, but with some prospect for growth in rental values.

At Helical, we took advantage of the strong recovery in property values during this period by expanding the Company’s business activities, investing in development opportunities in London and higher yielding regional assets to provide a stable flow of rental income. Using the proceeds of our 2013 Retail Bond and our 2014 Convertible Bond, together with additional borrowings, we increased our property portfolio from £626m at 31 March 2013 to over £1.2bn, generating significant surpluses which have more than doubled shareholders’ funds from £254m to £517m at 31 March 2017.

During the year we have sought to recycle some of the capital created in this period into the schemes which we believe will continue to support the future growth of the Company. We have narrowed the focus of the Company to London, offices in Manchester and a portfolio of logistics units. We expect to complete this process during the current year with the sale of the remaining non-core assets, being the retail properties and regional offices outside of Manchester, whilst continuing to work through the retirement village programme.

In the year under review, the majority of our performance has come from the assets we own in London, where we have increased our weighting to 63% of the total portfolio. Sales of regional assets since the year end have increased this London weighting further to 66%. In the investment portfolio we have created buildings which reflect the needs of our tenants, acknowledging that modern lifestyles increasingly merge work and leisure needs. We now have a portfolio of multi-let, flexible and desirable properties which also provide ongoing asset management opportunities to add value. Our London portfolio remains reversionary with further value to be created through the completion of our redevelopment and refurbishment programme, letting vacant space and upcoming rent reviews.

We believe that London will continue to outperform the rest of the UK over the medium and long term and our strategy is to continue to increase our London holdings.

Results for the Year

The profit before tax for the year to 31 March 2017 was £41.6m (2016: £114.0m). Total Property Return reduced to £79.9m (2016: £164.6m) and included growing net rents of £47.0m, an increase of 8.3% on 2016 (£43.4m), and development losses of £5.7m (2016: £27.5m) after deducting provisions of £12.8m (2016: £6.4m). The gain on sale and revaluation of the investment portfolio contributed £38.6m (2016: £93.7m).

Net finance costs of £21.2m were lower than in 2016 (£22.6m) and the Income Statement benefited from the shortening of the maturity period for the Group’s remaining interest rate swaps which led to a £0.8m credit (2016: charge of £6.9m) arising from the valuation of the Company’s derivative financial instruments. The revaluation of the Company’s Convertible Bond provided a credit of £3.0m (2016: £0.5m). Recurring administration costs were marginally higher at £10.8m (2016: £10.7m). Performance related awards were substantially lower at £6.9m (2016: £13.3m) with National Insurance on these awards of £0.7m (2016: £2.1m).

These results allow the Board to continue its progressive dividend policy and to recommend to shareholders a final dividend of 6.20p which, together with the interim dividend of 2.40p paid in December 2016, takes the total dividend for the year to 8.60p (2016: 8.17p), an overall increase of 5.3%.


We measure our performance at both portfolio and Company level, seeking to outperform the relevant sector indices and our peer group in the medium and long term.

EPRA earnings per share fell from 17.1p to 0.5p, reflecting growing net rental income offset by reduced development profits. On a like-for-like basis, the investment portfolio increased by 5.2% (4.5% including sales and purchases). Sales during the year offset this growth in values contributing to an overall reduction in the portfolio value to £1,205m (2016: £1,240m). The unleveraged return of our property portfolio, as measured by IPD, was 9.4% (2016: 21.7%), compared to 4.4% (2016: 11.4%) for the benchmark index. These investment gains contributed to an increase in EPRA net asset value per share, up 3.7% to 473p (2016: 456p).


The Company has expanded its activities significantly in recent years, seeking to increase shareholder funds through the generation and retention of increased net rental streams, development profits and valuation surpluses. This growth has been financed through an increase in secured debt borrowed primarily from UK high street banks and, since 2013, through the use of unsecured debt in the form of a Retail Bond and a Convertible Bond. In assessing the needs of the business the Company is conscious that it needs to manage any risks inherent in this leveraged approach to growing the business. It seeks to do this through the use of unsecured debt (24% of total debt), by maintaining an appropriate debt maturity profile and by hedging its interest rate exposure.

The Company uses gearing on a tactical basis throughout the property cycle, being raised to accentuate property performance when property returns are judged to materially outperform the cost of debt and lowered when seeking to reduce exposure to the property cycle.

At 31 March 2017, the Company’s see-through loan to value (“LTV”), being the ratio of see-through net borrowings to the value of the see-through property portfolio, was 51%. This metric has varied between 45% and 55% in the last five years and, subsequent to the year end, has fallen below 50% following the recent sales of properties in Cardiff and Great Yarmouth.

Looking forward, the Company will seek to operate within an LTV range of 40%-50% for the foreseeable future, subject to being able to maximise opportunities in the market whilst remaining aware of the risks of higher levels of gearing.

During the year, the average debt maturity reduced to 3.6 years (2016: 4.5 years), with no secured loan repayable before November 2019, whilst marginally increasing the average cost of debt at 4.3% (2016: 4.2%). The Company has a significant level of liquidity with cash and unutilised bank facilities of £267m (2016: £193m) to fund capital works on its portfolio.

Board matters

In July 2016, I became CEO of Helical succeeding Michael Slade who became the Company’s Non-Executive Chairman. The Board also consists of three Executive Directors and five Independent Non-Executive Directors. Our Executive team has an average of over 19 years’ experience at Helical and are supported by a strong team of property and finance professionals and administrative staff.

The Future

Helical has a dynamic portfolio with good upside potential through a combination of development, refurbishment and significant asset management opportunities. We believe our concentration on offices and mixed use assets in London, offices in Manchester and well located logistics units will provide capital growth from development gains and rising income streams.

We have ambition to continue to grow the Company and have actively sought to add to our development pipeline with exciting new schemes, particularly in London. Rebalancing the portfolio through the sale of non-core assets enables us to recycle some of the capital we have created in recent years and fully pursue those opportunities that we have identified.

2017 Performance Highlights


Our Group’s main objective is to maximise growth in net asset value which we seek to achieve through increases in investment portfolio values and from retained earnings from other property related activity. EPRA net asset value per share is the property industry’s preferred measure of the share of net assets attributable to each share as it includes the fair value of net assets on an ongoing long term basis.

The diluted net asset value per share, excluding trading stock surplus, at 31 March 2017 increased by 6.4% to 431p (2016: 405p). Including the surplus on valuation of trading and development stock and adjusting for the fair value of derivatives and deferred taxation, the EPRA net asset value per share at 31 March 2017 increased by 3.7% to 473p (2016: 456p).

EPRA NET ASSET VALUE compound annual growth rate (3 years)


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 2017 was 9.4% (2016: 21.7%) compared to the IPD benchmark of 4.4% (2016: 11.4%) and upper quartile benchmark of 6.1% (2016: 13.0%). Helical’s portfolio unleveraged returns to 31 March 2017 were as follows:

Helical’s trading and development portfolio (15.5% 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.


Source: Investment Property Databank
Helical’s trading and development portfolio (15.5% 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.


Total Shareholder Return is a measure of the return on investment for shareholders. It combines share price appreciation and dividends paid to show the total return to the shareholder expressed as an annualised percentage.

The Total Shareholder Return in the year to 31 March 2017 was -18.0% (2016: 1.0%). Over five, ten, fifteen, twenty and twenty five years Helical’s Total Shareholder Return exceeded that of the Listed Real Estate Sector Index.

Helical Bar Plc
UK Equity Market
Listed real estate sector index
Direct property - monthly data


High levels of staff retention remain a key feature of Helical’s business. The Group retains a highly skilled and experienced team. We assess our success based on two key metrics, the average length of service of the Group’s head office employees and average staff turnover.

The average length of service of the Group’s head office employees at 31 March 2017 was eight years and the average staff turnover during the year to 31 March 2017 was 5.7%.

Average employee numbers
Staff turnover during the year

2017 Operational Highlights

London Portfolio

Strong valuation performance supported by ongoing lettings progress and the completion of refurbishments.

  • 9.8% valuation increase, on a like-for-like basis, of see-through London investment portfolio, valued at £666m at 31 March 2017 (65.5% of investment portfolio) compared with £593m at 31 March 2016 (56.4%).
  • Contracted rents on our see-through London portfolio at 31 March 2017, including pre-lets at The Bower, increased to £27.9m (2016: £23.6m) compared to an ERV of £45.0m (2016: £45.4m).
  • At 25 Charterhouse Square EC1, refurbishment works on this 43,600 sq ft building were completed in March 2017 with 50% of the office space (18,725 sq ft) let at £75 psf.
  • At The Loom E1, a major repositioning of the building was completed in September 2016 and 19,275 sq ft is currently available with 2,750 sq ft under offer. Average contracted rents of £37.50 psf compare to lettings during the year of up to £54 psf.
  • Planning permission granted at Power Road Studios, Chiswick W4 for 42,500 sq ft of new office space.
  • At The Bower EC1, 58,907 sq ft of Phase 2, The Tower, was pre-let to WeWork in November 2016.
  • At Barts Square EC1, 118 (82%) of the 144 residential units in Phase One had exchanged by 24 May 2017 (31 March 2016: 102 units) at an average of £1,570 psf, with a further three reserved.

Regional Portfolio

Asset recycling providing stronger focus on Manchester offices and logistics units.

  • 2.1% valuation decrease, on a like-for-like basis, in the see-through Regional investment portfolio, valued at £351m at 31 March 2017 (34.5% of investment portfolio) compared with £460m at 31 March 2016 (43.6%).
  • Contracted gross rents on see-through Regional investment portfolio at 31 March 2017 of £24.3m (2016: £32.4m) compared to an ERV of £26.6m (2016: £35.6m).
  • Regional investment portfolio comprised 9.3% offices, 5.0% in town retail, 2.8% retail parks, 15.4% logistics and 2.0% other (percentages of whole investment portfolio at year end).
  • Sales of 22 regional assets during the period comprising 13 logistics units, three offices and six retail assets for £117m at a 1.5% premium to March 2016 values.
  • The Morgan Quarter, Cardiff and a retail park at Great Yarmouth sold post year end for a total of £59m.
  • Trinity Court, a 47,500 sq ft office building in Manchester, acquired for £12.9m post year end.
  • 39,047 sq ft let at Churchgate House, Manchester at average rents of £17.27 psf, 12.7% above March 2016 ERV.
  • 92,672 sq ft logistics unit let in Burton-on-Trent at £5.50 psf, 5% above March 2016 ERV.
  • Since 31 March 2016, 96 retirement village units sold for £39.3m with 53 reserved or exchanged for £27.4m.
  • Land at Liphook sold for £3.7m at a profit of £3.1m.


  • See-through loan to value reduced to 51% (31 March 2016: 55%).
  • Average maturity of the Group’s share of debt of 3.6 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 31 March 2017 of £267m (31 March 2016: £193m).

2018 Half Year Highlights

Profit before tax
EPRA Net asset value
Share of property portfolio
Half year review

2017 annual report & Accounts

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