Annual results for the year to 31 March 2020

Well positioned with high quality portfolio and robust balance sheet

“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.”

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

• 6.4% 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

• 2.9% 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.

RESULTS PRESENTATION

Helical will be holding an audio webcast with a live Q&A for analysts and investors starting at 9am on Thursday 4 June 2020.

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:

Webcast Link:

https://webcasting.brrmedia.co.uk/broadcast/5e665db99672d83b98777cbb