Helical : Report (0.99Mb PDF)

HELICAL PLC

("Helical" or the "Group" or the "Company")

Annual Results for the Year to 31 March 2022

HELICAL, DELIVERING A SUSTAINABLE FUTURE

Gerald Kaye, Chief Executive, commented:

"Today marks the opening to the public of the Elizabeth Line, one of the largest transport infrastructure projects in the UK, increasing Central London's rail capacity by 10% and bringing an additional 1.5 million people within 45 minutes of Central London. Our £1bn portfolio of sustainable, amenity rich London offices, of which 99% by value are situated within a 12 minute walk of a nearby Elizabeth Line station, will continue to benefit from their proximity to this new arterial route through Central London. It is this connection, together with the improving strength of the prime London office market, that has underpinned a strong set of results after emerging from the Covid-19 pandemic following two difficult years.

"Our Total Accounting Return ("TAR") for the year, a key performance indicator for Helical, was 15.0% on our net assets measured under IFRS and 10.2% based on our EPRA net tangible assets. Over the three years to 31 March 2022, the compound annual growth rate of our EPRA TAR was 7.8% pa, an indication of the strength and consistency of the financial performance of the Group, despite the challenges of the period. These results were driven by growing rental income and strong valuation surpluses from both our completed development schemes, now held for long term income growth and future asset management opportunities, and our schemes under development.

"This morning we published our Net Zero Carbon Pathway to becoming a net zero carbon business by 2030, as our contribution, as a responsible business, to the decarbonising of the UK economy by 2050. In continuing this journey, we have identified meaningful ways of reducing both our embodied and operational carbon emissions. As part of this process, we have signed up to the Better Buildings Partnership Climate Commitment, which provides an accountable and transparent framework for delivering net zero carbon for a property portfolio.

"We are a specialist developer and investor in prime Central London real estate, creating inspiring and sustainable, best-in-class office buildings. London is a leading world city, a safe haven, attracting a mix of established and growing businesses seeking a base for their operations and well capitalised investors looking to invest their funds.

"We will continue to see bifurcation between the best-in-class new sustainable buildings and the older less sustainable buildings. This will be reflected in strong rental growth for the former and rental decline for the latter. Helical is well positioned to capitalise upon a period of opportunity within the sector over the next 10-20 years, changing the older "brown" buildings into "green" sustainable buildings.

"In the last year, we have deployed capital to acquire 100 New Bridge Street, EC4, with this exciting redevelopment due to start by the end of 2023, following the expiry of the current tenancies. Along with 33 Charterhouse Street, EC1, due for completion in September 2022, and continuing asset management opportunities in the remaining, completed investment portfolio, we are optimistic that our successful track record of outperforming the market and delivering strong financial returns will continue."

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Annual Results for the Year to 31 March 2022

Operational Highlights

• Major boost to the development pipeline with the acquisition of 100 New Bridge Street, EC4. Delivery of a c.185,000 sq ft office scheme planned for early 2025.
• Practical completion of 33 Charterhouse Street, EC1, a 205,369 sq ft BREEAM "Outstanding" office development, on track for September 2022.
• 14 residential units at Barts Square sold in this 236 unit residential scheme, leaving 14 apartments available at the year end of which one has since been sold and two are under offer.
• 12 new lettings completed across the portfolio, totalling 54,118 sq ft, delivering contracted rent of £3.3m
  (Helical's share £3.0m) at 1.8% above the 31 March 2021 ERV (excluding managed lettings).
• 95.8% of all rent contracted and payable for the financial year collected with 2.2% to be collected following the end of the Government's general moratorium and 2.0% having been written off or agreed concessions.
• Post year end disposals of:
• • Trinity, our last remaining asset in Manchester, for £34.55m, at a net premium of c.£2.0m to our 31 March 2022 book value and representing a net initial yield of 5.0%.
  • 55 Bartholomew, EC1, for £16.5m (our share £7.6m), at a 3% premium to 31 March 2022 book value, reflecting a net initial yield of 4.5%.

Financial Highlights

Earnings and Dividends

• IFRS profit after tax increased to £88.9m (2021: £17.9m).
• See-throughTotal Property Return1 of £89.5m (2021: £48.6m):
• • Group's share1 of net rental income of £31.2m (2021: £25.0m) - up 24.8%.
  • Net gain on sale and revaluation of investment properties of £51.7m (2021: £23.9m).
  • Development profits of £6.6m (2021: losses of £0.3m).
• Total Property Return, as measured by MSCI, of 10.7%, compared to the MSCI Central London Offices Total Return Index of 7.9%.
• IFRS basic earnings per share of 72.8p (2021: 14.8p).
• EPRA earnings per share1 of 5.2p (2021: loss of 1.8p).
• Final dividend proposed of 8.25p per share (2021: 7.40p), an increase of 11.5%.
• Total dividend for the year of 11.15p (2021: 10.10p), an increase of 10.4%.

Balance Sheet

• Net asset value up 13.0% to £687.0m (31 March 2021: £608.2m).
• Total Accounting Return1 on IFRS net assets of 15.0% (2021: 3.3%).
• Total Accounting Return1 on EPRA net tangible assets of 10.2% (2021: 4.5%).
• EPRA Total Accounting Return CAGR1 for the three years to 31 March 2022 of 7.8% (2021: 7.2%).
• EPRA net tangible asset value per share1 up 7.3% to 572p (31 March 2021: 533p).
• EPRA net disposal value per share1 up 13.6% to 551p (31 March 2021: 485p).

Financing

• See-throughloan to value1 increased to 36.4% (31 March 2021: 22.6%).
• See-throughnet borrowings1 of £402.9m (31 March 2021: £193.9m).
• Average maturity of the Group's share1 of secured debt of 3.0 years (31 March 2021: 3.2 years), increasing to 3.7 years on exercise of options to extend current facilities and on a fully utilised basis.
• Change in fair value of derivative financial instruments credit of £18.0m (2021: £2.9m).
• See-throughaverage cost of secured facilities1 of 3.2% (31 March 2021: 3.5%).
• Group's share1 of cash and undrawn bank facilities of £132m (31 March 2021: £423m).
• Helical elected to become a REIT, effective 1 April 2022, and will be exempt from UK corporation tax on relevant future property activities.

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Annual Results for the Year to 31 March 2022

Portfolio Update

• IFRS investment property portfolio value of £938.8m (31 March 2021: £740.2m).
• 7.0% valuation increase, on a like-for-like basis1 (5.6% including sales and purchases), of our see-through investment portfolio, valued at £1,097.3m, compared to £839.4m at 31 March 2021.
• Contracted rents of £46.4m (31 March 2021: £37.8m) compared to an ERV1 of £67.1m (31 March 2021: £52.1m).
• See-throughportfolio WAULT1 of 5.6 years (31 March 2021: 6.9 years).
• Vacancy rate reduced from 10.5% to 6.7%.

Sustainability Highlights

• Helical's "Net Zero Carbon Pathway" published today setting out our commitment to becoming a net zero carbon business by 2030.
• Better Building Partnership's Climate Commitment adopted, providing an accountable and transparent framework for delivering net zero carbon for a property portfolio.
• Improvements across sustainability measures and ratings with a 4* Green GRESB rating (85/100), MSCI ESG of AAA and an EPRA Sustainability BPR rating of Gold.
• 96% of the space in our buildings has been recently developed or refurbished (excluding 100 New Bridge Street, EC4) with 99% of our investment portfolio, by value, having an A or B EPC rating.

For further information, please contact:

Helical plc	020 7629 0113
Gerald Kaye (Chief Executive)
Tim Murphy (Chief Financial Officer)
Address:	5 Hanover Square, London W1S 1HQ
Website:	www.helical.co.uk
Twitter:	@helicalplc
FTI Consulting	020 3727 1000
Dido Laurimore/Richard Gotla/Andrew Davis
[e-mail]

Results Presentation

Helical will be holding a presentation for analysts and investors starting at 08:30am on Tuesday 24 May 2022 at the offices of FTI Consulting, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD. If you would like to attend, please contact FTI Consulting on 020 3727 1000, or email [e-mail]

The presentation will be on the Company's website www.helical.co.ukand a conference call facility will be available. The dial-in details are as follows:

Participants, Local - London, United Kingdom:	0330 165 4012
Participation Code:	5156706

Webcast Link: https://webcasting.brrmedia.co.uk/broadcast/624c2069e1d0d456b32a283b

1. See Glossary for definition of terms. The financial statements have been prepared in accordance with International Accounting Standards ("IAS") in conformity with the Companies Act 2006. 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

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Annual Results for the Year to 31 March 2022

recommendations of the European Public Real Estate Association ("EPRA"), with others designed to give additional information about the Group's share of assets and liabilities, income and expenses in subsidiaries and joint ventures.

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Annual Results for the Year to 31 March 2022

Chief Executive's Statement

Overview

Today marks the opening to the public of the Elizabeth Line, one of the largest transport infrastructure projects in the UK, increasing Central London's rail capacity by 10% and bringing an additional 1.5 million people within 45 minutes of Central London. Our £1bn portfolio of sustainable, amenity rich London offices, of which 99% by value are situated within a 12 minute walk of a nearby Elizabeth Line station, will continue to benefit from their proximity to this new arterial route through Central London. It is this connection, together with the improving strength of the prime London office market, that has underpinned a strong set of results after emerging from the Covid-19 pandemic following two difficult years.

Our Total Accounting Return ("TAR") for the year, a key performance indicator for Helical, was 15.0% on our net assets measured under IFRS and 10.2% based on our EPRA net tangible assets. Over the three years to 31 March 2022, the compound annual growth rate of our EPRA TAR was 7.8% pa, an indication of the strength and consistency of the financial performance of the Group, despite the challenges of the period. These results were driven by growing rental income and strong valuation surpluses from both our completed development schemes, now held for long term income growth and future asset management opportunities, and our schemes under development.

Sustainability

This morning we published our Net Zero Carbon Pathway to becoming a net zero carbon business by 2030, as our contribution, as a responsible business, to the decarbonising of the UK economy by 2050. In continuing this journey, we have identified meaningful ways of reducing both our embodied and operational carbon emissions. As part of this process, we have signed up to the Better Buildings Partnership Climate Commitment, which provides an accountable and transparent framework for delivering net zero carbon for a property portfolio.

With our commitment to sustainability reporting, we measure our performance against industry-wide benchmarks, and I am pleased again to be able to report significant progress against these measures during the year.

We have improved our GRESB score from a 3* to a 4* Green rating, increasing our score from 76 to 85, and have maintained our MSCI ESG rating at AAA, the top rating. Further, we have been awarded a Gold rating under the EPRA Sustainability BPR, up from Silver.

At a portfolio level, 99% by value of our completed portfolio has an EPC rating of A or B (the remaining 1% has a C rating) and each of our refurbished or redeveloped office buildings has a BREEAM rating of "Excellent", with BREEAM "Outstanding" targeted for 33 Charterhouse Street, EC1 and 100 New Bridge Street, EC4.

Overall, the Group has continued to respond decisively to the climate change challenge, achieving its sustainability targets and, importantly, has a clear path to continue this journey.

Results for the Year

The profit after tax for the year to 31 March 2022 was £88.9m (2021: £17.9m) with a see-through Total Property

Return of £89.5m (2021: £48.6m). Following the letting of Kaleidoscope, EC1 in March 2021 and the recent purchase of 100 New Bridge Street, EC4, see-through net rental income increased by 24.8% to £31.2m (2021: £25.0m) while developments generated see-through profits of £6.6m (2021: loss of £0.3m). The see-through net gain on sale and revaluation of the investment portfolio was £51.7m (2021: £23.9m).

Total see-through net finance costs increased to £19.7m (2021: £14.8m), including £5.9m loan cancellation costs.

An increase in expected future interest rates led to an £18.0m credit (2021: £2.9m) from the valuation of the Group's derivative financial instruments. Recurring see-through administration costs were 2% higher at £9.9m (2021: £9.7m), with performance related awards increasing to £6.0m (2021: £4.3m) and National Insurance on these awards of £1.2m (2021: £0.8m).

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