Half year results for the six months to 30 September 2020

Helical recycles equity to redevelop, refurbish and reposition

“We announce these half year results eight months into the Covid-19 pandemic and during a period of lockdown as we await greater clarity on the relaxation of current restrictions prior to Christmas. Whether the Government has struck the right balance between the urgent need for a re-opening of the economy, particularly in London, and the continued protection of the health of the nation is not yet clear. However, the renewed optimism that this crisis will eventually end on the rollout of a number of recently announced and anticipated vaccines and the return to some semblance of normality in 2021 is welcome.

 

Gerald Kaye
Chief Executive

We believe that the enforced “working from home” experiment in 2020 will result in more flexibility being offered to some office workers going forward. However,

 

“We also believe that the disadvantages of working at home with its inadequate ergonomics, lack of divide between work and home life, potential mental health issues caused by isolation from colleagues and, for many, its ever decreasing productivity as collaboration and creativity diminish, will provide the impetus for a return to the office as the place of work.

“Our experience of the pandemic has reinforced our view that our investment in multi-let offices in well-located and accessible Grade A buildings, incorporating the latest in sustainable building design, offering state of the art technology with occupier health and well-being at their core, provides the most resilient defence against adversity and the best opportunity for continued growth. This has been borne out by our strong rent collection figures and robust portfolio valuation.

“We see a divergence between these Grade A buildings and the rest from both a capital value and rental growth perspective; this pattern will accelerate as tenants seek to leave buildings which are not fit for purpose in the search for working environments that match the expectations of their employees.

“Our near term focus remains on letting the available space across the portfolio. At the same time, having sold a portfolio of three properties in Manchester since the half year end and reduced the Group’s gearing levels to an historic low, our efforts are also centred around using our considerable firepower to obtain new projects. These will be a combination of properties acquired for redevelopment and the refurbishment and repositioning of existing buildings, delivering the highest quality, fit for purpose office space, suitable for the post-Covid world.”

OPERATIONAL PERFORMANCE

• 93.2% of all rent contracted and payable for the March and June quarters collected. Of the balance, rent holidays have been granted on 3.5%, mainly to F&B occupiers, leaving 3.3% subject to ongoing discussions with tenants.
• 86.8% of the September quarter rents due to date have been collected. Through further cash receipts from monthly payments, it is anticipated that between 91% and 94% will have been collected by the end of December.
• Three new lettings completed in the period, representing 5,531 sq ft, delivering contracted rent of £0.3m (Helical’s share £0.2m) at 12.4% above 31 March 2020 ERV.
• At 33 Charterhouse Street, London EC1, a new 150 year lease was granted, with a £140m loan facility secured from Allianz to finance the development. Mace has been appointed as principal contractor.
• On 28 April 2020, Helical completed the sale of 90 Bartholomew Close, Barts Square, EC1 to La Francaise Real Estate Partners International, a pan-European investment business acting on behalf of a French collective real estate investment vehicle. The disposal price of £48.5m reflected a net initial yield of 3.92% (£1,594 psf capital value).
• Following the period end, contracts were exchanged for the sale of three Manchester properties, The Tootal Buildings, 35 Dale Street and Fourways, to Pictet Alternative Advisors, SA and XLB Property Limited for a net sale price of £114.8m, at a blended net initial yield of 5.2% and marginally above 30 September 2020 and 31 March 2020 book values.

FINANCIAL HIGHLIGHTS

Earnings

• IFRS basic loss per share of 8.9p (2019: earnings of 11.7p).
• IFRS loss before tax of £12.7m (2019: profit of £13.1m).
• Total Accounting Return¹ of -2.0% (2019: 2.7%).
• See-through Total Property Return¹ of £6.9m (2019: £28.6m):
  • Group’s share¹ of net rental income of £11.9m (2019: £13.0m).
  • Development losses of £0.5m (2019: profits of £5.7m), after provisions of £0.3m (2019: £1.2m).
  • Net loss on sale and revaluation of Investment properties of £4.5m (2019: gain of £9.9m).
• EPRA loss per share¹ of 1.0p (2019: earnings of 5.4p).
• Interim dividend maintained at 2.70p per share (2019: 2.70p).

Balance Sheet

• Net asset value down 3.2% to £579.2m (31 March 2020: £598.7m).
• EPRA net tangible asset value per share1 down 3.6% to 505p (31 March 2020: 524p).
• EPRA net asset value per share1 down 2.2% to 500p (31 March 2020: 511p).

Property Valuations

• IFRS property portfolio value of £815.7m (31 March 2020: £819.6m).
• See-through property portfolio1 of £918.2m (31 March 2020: £949.3m).
• See-through Investment property valuation loss, on a like-for-like basis, of 0.5% (0.6% including purchases and gains/losses on sales).

Financing 

• See-through loan to value1 of 32.2% (31 March 2020: 31.4%).
• See-through net borrowings1 of £295.3m (31 March 2020: £298.5m).
• Average maturity of the Group’s share1 of secured debt of 3.7 years (31 March 2020: 4.1 years), increasing to 5.1 years, fully utilised and upon exercise of options to extend current facilities.
• See-through average cost of borrowings1 of 3.5% (31 March 2020: 3.5%).
• Group’s share1 of cash and undrawn bank facilities at 30 September 2020 of £323m (31 March 2020: £279m).

Pro forma² Financing post Manchester Sales

• See-through property portfolio¹ of £804.8m.
• See-through loan to value¹ of 22.4%.
• See-through net borrowings¹ of £180.5m.
• Group’s share¹ of cash and undrawn bank facilities of £438m.

PORTFOLIO UPDATE

London Portfolio

• 0.5% valuation decrease, on a like-for-like basis, with a portfolio valued at £760.3m (85% of Investment portfolio) at 30 September 2020 compared to £776.9m (85% of Investment portfolio) at 31 March 2020.
• Contracted rents of £29.9m (31 March 2020: £31.1m) growing to an ERV of £49.9m (31 March 2020: £50.6m).
• WAULT of 6.2 years (31 March 2020: 6.6 years).

Manchester Portfolio

• 0.4% valuation decrease on a like-for-like basis, with a portfolio valued at £138.0m (15% of Investment portfolio) at 30 September 2020 compared to £136.7m (15% of Investment portfolio) at 31 March 2020 after taking into account capital expenditure.
• Contracted rents increased to £6.8m (31 March 2020: £6.5m) growing to an ERV of £9.3m (31 March 2020: £9.3m).
• WAULT of 4.3 years (31 March 2020: 3.9 years).

Sustainability Highlights

• New Sustainability Strategy announced, “Built for the Future”, setting out the Company’s long-term vision and objectives.
• Achieved the UK’s first BREEAM 2018 New Construction “Outstanding” rating for the design stage at 33 Charterhouse Street, London EC1 office development.
• Received a Silver award (2019: Bronze) under the EPRA Sustainability Best Practice Recommendations and 3* Green ratings from GRESB (2019: 2*).

Interim Dividend

An Interim Dividend of 2.70 pence per share (2019: 2.70 pence per share) will be paid to Shareholders as follows:

Ex-dividend date – 3 December 2020
Record date – 4 December 2020
Payable date – 31 December 2020

HALF YEAR RESULTS PRESENTATION

Helical will be holding an audio webcast with a live Q&A for analysts and investors starting at 9:00 am on Wednesday 25 November 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:

Participants, Local – London, United Kingdom: +44 (0)330 336 9411

Confirmation Code: 1285777

 

Webcast Link:

https://webcasting.brrmedia.co.uk/broadcast/5f7ed93bc4d0076f2b93d5a2

 

1. See Glossary for definition of terms. The half year condensed unaudited consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). In common with usual and best practice in our sector, alternative performance measures have also been provided to supplement IFRS, some of which are based on the recommendations of the European Public Real Estate Association (“EPRA”), with others designed to give more relevant information about the Group’s share of assets and liabilities, income and expenses in subsidiaries and joint ventures.

2. Pro forma measures adjusted to reflect the impact of the post period end sale of The Tootal Buildings, 35 Dale Street and Fourways for a net sale price of £114.8m.