Annual Results for the Year to 31 March 2024

Helical announces the results of a business review and a change in leadership 

Richard Cotton, Chairman, Commented: 

“These results reflect a period of economic volatility, with the higher interest rate backdrop negatively impacting on investment yields and structural challenges in the occupational market.

“Looking forward, with inflation returning to normal levels at 2.3% and interest rates forecast to decline, the investment market is expected to strengthen with rental growth continuing for “best-in-class” office space.

“We have today announced that Gerald Kaye has informed the Board that he will be handing over his executive duties and stepping down from the Board at the AGM in July, with Matthew Bonning-Snook succeeding him. I am pleased that Gerald will continue in a consultancy role to deliver our next two projects, at 100 New Bridge Street, EC4 and Brettenham House, WC2.

“Matthew has an extensive track record of delivering highly profitable schemes over nearly three decades at Helical and he is the right choice to maximise the opportunities at the Company. During the year he secured the joint venture with Transport for London (“TfL”)’s property company, Places for London, and the three new schemes added to our pipeline, with the potential for additional opportunities, will form the cornerstone of our exciting development pipeline for the rest of this decade. 

“In recent months I have been leading a comprehensive business review, the details of which can be found in my Chairman’s Statement below. In summary, we have an exciting pipeline of committed developments, which due to the quality of the schemes and anticipated supply shortages, are well placed to attract premium rents and achieve strong returns. At the same time, in order to optimise the value of our investment properties, we need to complete our asset management plans, principally through leasing up vacancy, and be ready to realise value as and when liquidity returns to the investment market. 

“We are confident that we have a coherent strategy in place to deliver Shareholder value. In the meantime, there are very clear priorities for our experienced team of investment and development professionals, centred on reducing the portfolio vacancy in our completed buildings and maximising the potential in our development pipeline, all at a lower operational cost.

“The Board is therefore unanimous in its view that, given current market conditions and outlook, the potential returns on a three year view far exceed the likely returns from alternative strategies to return capital to Shareholders. To this end, it has signed off on a detailed three year plan, also encompassing business cost reduction and management incentives, which provides a clear blueprint for future growth.”

Operational Highlights

Good letting momentum with progress at our “best-in-class” assets
•    During the year we completed 13 new lettings, comprising 136,660 sq ft (our share: 86,237 sq ft), delivering contracted rent of £11.7m per annum (our share: £7.1m), 1.1% above 31 March 2023 ERVs.
-    At The JJ Mack Building, EC1, we let 100,847 sq ft at a 1.8% premium to 31 March 2023 ERVs. Post year end, we let the ground floor office space to J Sainsbury and have placed the fourth floor, 10th floor and remaining ground floor retail unit under offer. On completion of these lettings 90% of the building will be let at an average office rent of £95, with just one floor remaining.
-    At The Bower, EC1, we forfeited the leases for six floors let to WeWork at The Tower, taking back control of the space. Since then we have re-let one floor back to them until June 2024 and have entered into a management agreement for infinitSpace to provide serviced offices on two floors. The remaining vacant fourth, fifth and sixth floors are being refurbished to be let on a Cat A+ basis. 

Sales
•    Shortly before the year end, we exchanged on the £43.5m sale of 25 Charterhouse Square, EC1, with completion of the sale in April 2024. 
•    As announced a few days ago, we entered into a joint venture arrangement for the redevelopment of 100 New Bridge Street, EC4, selling a 50% interest in the site for £55m structured on a preferred equity basis to a vehicle led by Orion Capital Managers. Simultaneous to the joint venture being signed, the parties entered into a development financing arrangement with NatWest and an institutional lender, and a building contract with Mace to deliver the scheme.

Portfolio Valuation
•    Primarily driven by the impact of the higher interest rate environment on market sentiment, there was an outward yield adjustment of 95bps in the year to 31 March 2024, increasing the true equivalent yield for the portfolio to 6.34% (31 March 2023: 5.39%) and reducing the investment portfolio valuation to £660.6m (31 March 2023: £839.5m). 

Development Pipeline
•    With a joint venture partner secured, development finance in place and a construction contract signed, the 194,000 sq ft redevelopment of 100 New Bridge Street, EC4, our latest “best-in-class” scheme, has commenced and is expected to be completed by March 2026. 
•    Contracts were signed in July 2023, confirming Helical as Places for London’s commercial office joint venture partner. The long-term partnership will see the delivery of new high quality and sustainable space predominantly above or adjacent to key transport hubs.
-    10 King William Street, EC4 (formerly Bank OSD) – An eight-storey office development on an island site, located above the recently opened Bank station entrance on Cannon Street, delivering 140,000 sq ft of office and retail space. This development is due to commence in Q4 2024 with completion due by December 2026.
-    Southwark Over Station Development, SE1 – Located over Southwark tube station, the site benefits from planning for a 222,000 sq ft NIA office scheme. We are now having detailed pre-application discussions with Southwark Borough Council regarding an alternative purpose-built student accommodation scheme. We aim to submit a planning application during Summer 2024, commence on site in July 2025 and complete in Summer 2027. 
-    Paddington Over Station Development, W2 - Situated close to the Elizabeth Line station at Paddington, this 19-storey building will provide 235,000 sq ft of office space. The site will be acquired by the joint venture in January 2026 and the intention is to deliver the scheme in 2029.
•    Terms have been agreed, and contracts will shortly be signed, with the long leasehold owner of the existing building at Brettenham House, WC2 for the wholesale refurbishment of the 120,000 sq ft office building with Helical acting as development manager and contributing towards construction costs. This transaction is an example of the “equity-light” model that we seek to pursue in the future with ownership remaining with the long leaseholder and our equity contribution limited. Work has already commenced and we expect to deliver the completed scheme in Q1 2026. 

Financial Highlights

Earnings and Dividends
•    IFRS loss of £189.8m (2023: £64.5m). 
•    See-through Total Property Return1 of -£162.7m (2023: -£51.4m):
-    Group’s share1 of net rental income decreased 23.8% to £25.5m (2023: £33.5m).
-    Net loss on sale and revaluation of investment properties of -£188.6m (2023: -£88.1m).
-    Development profits of £0.4m (2023: £3.2m).
•    Total Property Return, as measured by MSCI, of -20.3%, compared to the MSCI Central London Offices Total Return Index of -5.7%.
•    IFRS basic loss per share of 154.6p (2023: 52.6p).
•    EPRA earnings per share1 of 3.5p (2023: 9.4p).
•    Final dividend proposed of 1.78p per share (2023: 8.70p).
•    Total dividend for the year of 4.83p (2023: 11.75p).

Balance Sheet
•    Net asset value down 34.1% to £401.1m (31 March 2023: £608.7m).
•    Total Accounting Return1 on IFRS net assets of -31.7% (2023: -9.4%).
•    Total Accounting Return1 on EPRA net tangible assets of -31.4% (2023: -12.1%).
•    EPRA net tangible asset value per share1 down 32.9% to 331p (31 March 2023: 493p).
•    EPRA net disposal value per share1 down 33.3% to 327p (31 March 2023: 490p).

Financing
•    See-through loan to value1 increased to 39.5% (31 March 2023: 27.5%) with a pro-forma LTV2, post year-end sales, of 28.7%.
•    See-through net borrowings1 of £261.6m (31 March 2023: £231.4m), pro-forma £163.8m.
•    Average maturity of the Group’s share1 of secured debt of 2.1 years (31 March 2023: 2.9 years).
•    Change in fair value of derivative financial instruments charge of £5.6m (2023: credit of £12.8m).
•    See-through average cost of secured facilities1 reduced to 2.9% (31 March 2023: 3.4%).
•    Group’s share1 of cash and undrawn bank facilities of £115.5m (31 March 2023: £244.2m). 

Portfolio Update 

•    IFRS investment property portfolio value of £472.5m (31 March 2023: £681.7m).
•    22.4% valuation decrease, on a like-for-like basis1 (22.6% including sales and purchases), of our see-through investment portfolio, valued at £660.6m (31 March 2023: £839.5m).
•    Contracted rents of £33.0m (31 March 2023: £39.0m), compared to an ERV1 of £60.8m (31 March 2023: £60.4m). Following the sale of 25 Charterhouse Steet, EC1, and 50% of 100 New Bridge Street, EC4 post year end, the ERV falls to £48.1m.
•    See-through portfolio WAULT1 of 6.6 years (31 March 2023: 5.0 years).
•    Vacancy rate on completed assets decreased to 17.6% at 31 March 2024 (2023: 19.8%), primarily due to the lettings at The JJ Mack Building, EC1.

Sustainability Highlights

•    The JJ Mack Building, EC1 received its final BREEAM certificate achieving an Outstanding with a score of 96.4%, making it the highest rated commercial building in the UK. 
•    Photovoltaic panels installed at The Bower, EC1 generating over 37,000 kWhs of energy once fully commissioned, for the exclusive use of our building. 
•    Retention of EPRA Sustainability BPR Gold rating and CDP B rating with a GRESB 4 Green Star status. 

Dividend and Annual General Meeting Timetable

Announcement date    23 May 2024
Ex-dividend date    27 June 2024
Record date    28 June 2024
Last date for DRIP election     12 July 2024
Annual General Meeting    17 July 2024
Dividend payment date    2 August 2024

A Dividend Reinvestment Plan (“DRIP”) is provided by Equiniti Financial Services Limited. The DRIP enables the Company’s Shareholders to elect to have their cash dividend payments used to purchase the Company’s shares. More information can be found at www.shareview.co.uk/info/drip