CEO Statement
4 June 2020

Gerald Kaye Chief Executive and Chair of the Executive Committee

I am pleased to present the Company’s 2020 Annual Results.

Helical has had another successful year, delivering a Total Property Return of 9.6%, Total Accounting Return on EPRA net assets of 9.3% and an increase in EPRA Net Asset Value per share of 6.0%. This was reflected in a Total Shareholder Return of 8.7%.

The year also saw the completion of a full development cycle which started in March 2011 when we acquired, in joint venture, 3.2 acres of land and buildings at Barts Square, London EC1. By March 2020, we had built or refurbished 2.3m sq ft of office space across 20 buildings in London and Manchester and delivered 236 residential apartments (0.2m sq ft). Today, the Group has a high-quality portfolio of new or recently refurbished Grade A offices in London and Manchester.

However, these results are announced during a period of considerable uncertainty with the timing and strength of the recovery from the Covid-19 pandemic yet to be determined. For the office sector, questions are being asked about the desire to return to previous working practices. As we move through the various stages of the Covid-19 pandemic and arrive at the so-called “new normal”, we shall learn how businesses and their staff view their experiences and the productivity of working from home. What we do know, however, is that people are sociable and prefer to congregate together, both at work and at play.

It is our view that a large majority of businesses will continue to seek space for their employees to gather in a centralised working environment and that the draw of London, as a pre-eminent global city, will remain. It is our challenge to ensure that what we have to offer is attractive to these businesses. We believe they will continue to seek well located and accessible buildings near large and modern transport hubs, served with the latest technology but with an increased focus on health and well-being within sustainable buildings. Our properties, with spacious, light filled floors let on flexible leases and served by multiple transport options, amenity rich with sizeable bike storage and changing facilities, will continue to provide the features of office life that our tenants and their employees are seeking.

We anticipate there will be a growing divergence in the office sector between Grade A buildings and the rest. The response from both occupiers and investors following Covid-19 is likely to accelerate this process and we are confident that the successful delivery of our strategy in recent years means we are positioned on the right side of this gap, with our Grade A buildings offering an appealing environment for businesses seeking high quality space.

The Company has robust finances and will seek to protect Shareholder value and meet the challenges that the coming months will bring. Going forward, Helical has £279m of cash and undrawn bank facilities available to pursue its strategy of growing the business when the opportunities arise.

2020 Performance Highlights

EPRA NET ASSET VALUE PER SHARE

The Group’s main objective is to maximise growth in net asset value per share, which we seek to achieve through increases in investment portfolio values and from retained earnings from other property related activity. EPRA net asset value per share is the property industry’s preferred measure of the proportion of net assets attributable to each share as it includes the fair value of net assets on an ongoing long-term basis. The adjustments to net asset value to arrive at this figure are shown in Note 23 to the financial statements.

The EPRA net asset value per share at 31 March 2020 increased by 6.0% to 511p (31 March 2019: 482p). EPRA triple net asset value per share at 31 March 2020 increased by 3.2% to 480p (31 March 2019: 465p).

EPRA NET ASSET VALUE PER SHARE (P)

MSCI

MSCI produces several independent benchmarks of property returns that are regarded as the main industry indices.

MSCI has compared the ungeared performance of Helical’s total property portfolio against that of portfolios within MSCI for over 20 years. The Group’s annual performance target is to exceed the top quartile of the MSCI UK March-Valued Annual Property Index, which it has consistently achieved. Helical’s ungeared performance for the year to 31 March 2020 was 9.6% (2019: 10.1%). This compares to the MSCI UK March-Valued Annual Property Index of       -1.1% (2019: 3.6%) with an upper quartile return of 2.9% (2019: 7.0%).

The MSCI Central London Offices Total Return Index showed a return of 4.5% (2019: 4.8%) with an upper quartile return of 6.2% (2019: 6.2%).

Helical’s unleveraged portfolio returns to 31 March 2020 were as follows:

Helical
MSCI Annual March All Properties Universe
Helical’s Percentile Rank
MSCI Central London Offices Total Return Index

Source: MSCI

TOTAL SHAREHOLDER RETURN

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

The Total Shareholder Return in the year to 31 March 2020 was 8.7% (2019: 5.2%).

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

1. Growth over all periods to 31/03/19.
2. Growth in FTSE All-Share Return Index over all periods to 31/03/20.
3. Growth in FTSE 350 Real Estate Super Sector Return Index over all periods to 31/03/20. For data prior to 30 September 1999 FTSE All Share Real Estate Sector Index has been used.
4. Growth in Total Return of MSCI UK Monthly Index (All Property) over all years to 31/03/20.

TOTAL ACCOUNTING RETURN

Total Accounting Return is the growth in the net asset value of the Group plus dividends paid in the reporting year, expressed as a percentage of the net asset value at the beginning of the period. The metric measures the growth in Shareholders’ Funds each year and is expressed as an absolute measure.

The Total Accounting Return in the year to 31 March 2020 was 7.7% (2019: 8.4%).

TOTAL ACCOUNTING RETURN (%)

AVERAGE LENGTH OF EMPLOYEE SERVICE (YEARS) AND AVERAGE STAFF TURNOVER

A high level of staff retention remains a key feature of Helical’s business. The Group retains a highly skilled and experienced team. 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 2020 was 10.0 years and the average staff turnover during the year to 31 March 2020 was 10.3%.

AVERAGE LENGTH OF EMPLOYEE SERVICE (YEARS)
Staff turnover during the year

2020 Operational Highlights

Operational Performance

  • Practical completion achieved at Kaleidoscope, 55 Bartholomew and the last phase of residential at Barts Square, all in Farringdon, London EC1, marking the conclusion of a 2.5m sq ft development programme.
  • Planning permission granted to enhance the ground floor configuration and add an additional floor of 13,175 sq ft within the envelope of the existing design at 33 Charterhouse Street, Farringdon, London EC1. The new c.200,000 sq ft office development, in JV with AshbyCapital, should complete during Summer 2022.
  • 23 new office lettings completed in London, representing 203,857 sq ft, delivering contracted rent of £15.4m (Helical’s share £3.6m) at 5.0% above 31 March 2019 ERV.
  • Five additional new office lettings completed in London on a “Plug & Play” basis, representing 35,268 sq ft, generating £3.0m of contracted rent (Helical’s share £2.7m).
  • In Manchester, eight office lettings (including one on a “Plug & Play” basis) and a retail letting completed, comprising 50,324 sq ft in total, generating rental income of £1.2m at 2.9% above 31 March 2019 ERV.
  • Successful equity recycling with the sale of Power Road Studios, a 57,164 sq ft multi-let office campus in Chiswick for £41.6m, reflecting a net initial yield of 4.8%.
  • Subsequent to the year-end, and during the lockdown period, the Company has achieved a further disposal with the sale of 90 Bartholomew Close, London EC1, held in joint venture, to La Francaise Real Estate Partners International for £48.5m, reflecting a net initial yield of 3.92%.

Financial Highlights

Earnings and Dividends

  • See-through Total Property Return1 of £83.9m (2019: £81.4m):
    • Group’s share1 of net rental income of £28.5m (2019: £25.2m).
    • Development profits of £9.9m (2019: losses of £4.4m), after provisions of £0.3m (2019: £13.7m).
    • Net gain on sale and revaluation of investment properties of £45.5m (2019: £60.6m).
  • Total Property Return, as measured by MSCI, of 9.6% compared to the MSCI Central London Offices Total Return Index of 4.5%.
  • IFRS Profit before tax of £43.0m (2019: £43.5m).
  • IFRS basic earnings per share of 32.3p (2019: 35.8p).
  • EPRA earnings per share1 of 7.6p (2019: loss of 8.4p).
  • Final dividend proposed of 6.00p per share (2019: 7.50p), a decrease of 20% as part of action taken to reduce outgoings and preserve the Group’s cash resources in the current uncertain environment.
  • Total dividend for the year of 8.70p (2019: 10.10p), a decrease of 13.9%.

Balance Sheet

  • Net asset value up 5.5% to £598.7m (31 March 2019: £567.4m).
  • Total Accounting Return1 on EPRA net assets of 9.3% (2019: 8.0%).
  • EPRA net asset value per share1 up 6.0% to 511p (31 March 2019: 482p).
  • EPRA triple net asset value per share1 up 3.2% to 480p (31 March 2019: 465p).

Property Valuations

  • IFRS property portfolio value of £819.6m (31 March 2019: £778.8m).
  • See-through property portfolio1 of £949.3m (31 March 2019: £876.4m).
  • See-through investment property valuation gain, on a like-for-like basis, of 5.9% (5.8% including purchases and gains on sales).

Financing

  • See-through loan to value1 marginally increased to 31.4% (31 March 2019: 30.6%).
  • See-through net borrowings1 of £298.5m (31 March 2019: £268.6m).
  • Average maturity of the Group’s share1 of secured debt of 4.1 years (31 March 2019: 3.4 years), increasing to 5.5 years on exercise of options to extend current facilities.
  • See-through average cost of secured facilities1 of 3.5% (31 March 2019: 4.1%).
  • Group’s share1 of cash and undrawn bank facilities of £279m (31 March 2019: £382m).

Portfolio Update

London Portfolio

  • 4% valuation increase, on a like-for-like basis, of our see-through London investment portfolio, valued at £776.9m at 31 March 2020 (85% of investment portfolio) compared to £693.8m at 31 March 2019 (85% of investment portfolio).
  • Contracted rents of £31.1m (31 March 2019: £27.5m) compared to an ERV of £50.6m (31 March 2019: £42.4m).
  • WAULT of 7.8 years (31 March 2019: 8.0 years).

Manchester Portfolio

  • 9% valuation increase, on a like-for-like basis, to £136.7m at 31 March 2020 (15% of investment portfolio) compared to £122.7m at 31 March 2019 (15% of investment portfolio).
  • Contracted rents increased to £6.5m (31 March 2019: £5.7m) compared to an ERV of £9.3m (31 March 2019: £9.0m).
  • WAULT of 3.9 years (31 March 2019: 3.9 years).

Covid-19 Update

  • 92% of March quarter rents collected, with a further 3% being paid in instalments, however, letting progress on Kaleidoscope, London EC1 and Trinity, Manchester has slowed.
  • All the Group’s buildings have remained open, whilst complying with Government guidelines on providing safe office space.
  • Helical became one of the first Founding Partners to donate to the LandAid Emergency Fund. Our donation of £20,000 is enabling frontline charities across the country to provide vital support to young homeless people during the Covid-19 pandemic.

2020 Key Highlights

£43.0m
Profit before tax
511p
EPRA Net asset value
£83.9m
Total property return

2020 annual report & Accounts

View our current and historic reports and presentations.