Helical Bar Regulatory News (HLCL)

Helical Well positioned with 790,000 SQ FT development pipeline

Gerald Kaye, Chief Executive, commented:

"The central London office market has suffered a fall in capital values over the last year and Helical has not been immune to these market movements, with our portfolio experiencing a valuation decline of 10.1% (on a like-for-like basis).

"While previous valuation falls have been caused by recessions following periods of economic exuberance leading to an oversupply of new office space, the current decline in values reflects a number of differing cyclical and structural factors.

"The impact of all these factors has accelerated the bifurcation in the market. With best-in-class property valuations adjusting to reflect the movement in bond yields, it is the older, poorer quality buildings that are facing what is likely to be a deeper correction, with downward price discovery potentially not reaching an endpoint until a lease ends and the rent stops, or from refinancing events.

"Tenant demand for the best, newly developed or refurbished buildings at the forefront of sustainability with top quality amenities is strong, and seeing rising rental values.

"Against this backdrop, Helical has continued to recycle capital out of its mature, stabilised assets, reduced leverage and cut its ongoing core administration costs by over 13% for the year ahead. As a result, it is well placed to capitalise on any ongoing market dislocation and the structural trends impacting the office sector.

"Being selected by Transport for London ("TfL") as their joint venture partner for the Platinum Portfolio was a significant milestone, boosting our development pipeline by almost 600,000 sq ft, with the potential for additional schemes to be added to the joint venture in the future. This collaboration with TfL, one of London's largest landowners, is an endorsement of the Helical brand and recognises our track record of producing high quality, successful developments across central London over many years.

"With 100 New Bridge Street, EC4, our 192,000 sq ft office scheme, due to start later this year and the three TfL schemes anticipated to start over the period from 2024 to 2026, this pipeline, our most significant for a number of years, is scheduled to deliver best-in-class office space to an undersupplied market from 2025 to 2029.

"London remains a leading world city and, barring economic or geopolitical catastrophe, there will be ongoing demand for best-in-class office buildings from occupiers who require well located, highly sustainable offices with good amenities, which are essential in attracting and retaining the top talent. There remains a shortage of this best-in-class newly refurbished or redeveloped office space in central London, enabling landlords to command premium rents, a dynamic that is likely to persist for the rest of this decade as the market plays catch up.

"With an experienced management team, a substantial development pipeline, no legacy assets and historically low gearing levels, Helical is well positioned to capitalise on the structural trends impacting the office sector."

Operational Highlights

Disposals of £233m (our share £213m) achieved at 3.7% above book value

· On 21 September 2022, we completed the disposal of the single asset company, Farringdon East (Jersey) Limited, which owns the long leasehold interest in Kaleidoscope, EC1, to Chinachem Group. The disposal price of £158.5m, a premium to 31 March 2022 book value, reflected a net initial yield of 4.3% and a capital value of £1,789 psf.

· We also completed the disposal of Trinity in Manchester on 20 May 2022 to clients of Mayfair Capital for £34.6m (£590 psf), reflecting a net initial yield of 5.0%. The sale represented a premium to 31 March 2022 book value, net of rental top ups, and concluded the disposal of our Manchester office portfolio.

· 55 Bartholomew, EC1, an office building located in the Barts Square development, was sold on 14 June 2022 to a private European investor for £16.5m (our share £8.2m), reflecting a net initial yield of 4.5% and a premium to 31 March 2022 book value.

· We completed the sale of 14 apartments at Barts Square for total sale proceeds of £19.7m (our share £9.9m), with the sale of the final apartment in this 236 unit residential scheme completing after the year end. We also completed the sale of the freehold of the entire residential estate to its residents for £3.7m (our share £1.8m).

Continued lettings momentum delivering £5.4m (our share £3.4m) of contracted rent at a 6.9% premium

· In the year, we completed nine new lettings totalling 65,550 sq ft, delivering contracted rent of £5.4m (our share £3.4m) at a 6.9% premium to 31 March 2022 ERVs. Lettings include:

- The sixth and seventh floors at The JJ Mack Building, EC1 to Partners Group, a leading global private markets firm. The 37,880 sq ft letting represents an 11.7% premium to 31 March 2022 ERVs.

- The 12th floor at The Tower, EC1, comprising 9,572 sq ft, to fintech business Stenn at a rent of £80 psf, in line with 31 March 2022 ERVs.

- The 1,880 sq ft ground floor unit at 25 Charterhouse Square, EC1 to natural stone purveyors, SolidNature, in line with 31 March 2022 ERVs.

- Two lettings totalling 6,999 sq ft at The Loom, E1 at rents in line with 31 March 2022 ERVs.

- Four retail units totalling 9,219 sq ft at Barts Square, EC1 to Michelin-starred Restaurant St Barts, LAP Bikes, MyLuthier and Little Farm/Athletic Fitness, leaving only one retail unit remaining available.

Development milestone hit at 100 New Bridge Street, EC4

· At 100 New Bridge Street, EC4, the City of London has resolved to grant planning permission and the formal decision notice will be issued upon signing of the Section 106 Agreement. On completion in Q2 2025, the carbon friendly new building will be one of the most sustainable in London and will provide 192,000 sq ft of net internal area across 10 floors, including two additional new floors which will benefit from exceptional views of St Paul's Cathedral. Construction work is anticipated to commence in Q4 2023 once Baker McKenzie vacate the building.

600,000 sq ft expansion of development pipeline following TfL joint venture selection

· In February 2023, Helical was selected by Transport for London's wholly owned commercial property company, TTL Properties Limited, as the investment partner for its commercial office portfolio joint venture. Contracts are expected to be signed shortly to formalise the joint venture. The portfolio will create well‐connected, highly sustainable and inclusive workspaces across central London and initially will be seeded with three over‐station development sites, namely:

- Bank Over-Station Development - located above the recently opened Bank station entrance on Cannon Street. This eight-storey office development will measure 142,000 sq ft and the joint venture intends to start on site in 2024.

- Southwark Over-Station Development - located above Southwark Tube station. The scheme has consent for a 220,000 sq ft hybrid timber office building over 17 floors. The development is expected to start on site in 2025.

- Paddington Over-Station Development - located on the Grand Union Canal, close to the Elizabeth Line station at Paddington. This 19-storey building will provide 235,000 sq ft of office space and construction is expected to commence in 2026.

Financial Highlights

Earnings and Dividends

· IFRS loss of £64.5m (2022: profit of £88.9m).

· See-through Total Property Return1 of -£51.4m (2022: £89.5m):

- Group's share1 of net rental income increased 7.2% to £33.5m (2022: £31.2m).

- Net loss on sale and revaluation of investment properties of £88.1m (2022: gain of £51.7m).

- Development profits of £3.2m (2022: £6.6m).

· Total Property Return, as measured by MSCI, of -5.6%, compared to the MSCI Central London Offices Total Return Index of -8.6%.

· IFRS basic loss per share of 52.6p (2022: earnings of 72.8p).

· EPRA earnings per share1 of 9.4p (2022: 5.2p).

· Final dividend proposed of 8.70p per share (2022: 8.25p), an increase of 5.5%.

· Total dividend for the year of 11.75p (2022: 11.15p), an increase of 5.4%.

Balance Sheet

· Net asset value down 11.4% to £608.7m (31 March 2022: £687.0m).

· Total Accounting Return1 on IFRS net assets of -9.4% (2022: 15.0%).

· Total Accounting Return1 on EPRA net tangible assets of -12.1% (2022: 10.2%).

· EPRA net tangible asset value per share1 down 13.8% to 493p (31 March 2022: 572p).

· EPRA net disposal value per share1 down 11.1% to 490p (31 March 2022: 551p).

Financing

· See-through loan to value1 decreased to 27.5% (31 March 2022 restated2: 35.0%).

· See-through net borrowings1 of £231.4m (31 March 2022 restated2: £388.3m).

· Average maturity of the Group's share1 of secured debt of 2.9 years (31 March 2022: 3.0 years).

· Change in fair value of derivative financial instruments credit of £12.8m (2022: £18.0m).

· See-through average cost of secured facilities1 of 3.4% (31 March 2022: 3.2%).

· Group's share1 of cash and undrawn bank facilities of £244.2m (31 March 2022 restated2: £147.0m).

· Helical elected to become a REIT, effective 1 April 2022, and is exempt from UK corporation tax on relevant property activities.

Portfolio Update

· IFRS investment property portfolio value of £681.7m (31 March 2022: £938.8m).

· 10.1% valuation decrease, on a like-for-like basis1 (7.7% including sales and purchases), of our see-through investment portfolio, valued at £839.5m (31 March 2022: £1,097.3m).

· Contracted rents of £39.0m (31 March 2022: £46.4m), compared to an ERV1 of £60.4m (31 March 2022: £67.1m).

· See-through portfolio WAULT1 of 5.0 years (31 March 2022: 5.6 years).

· Vacancy rate increased from 6.7% to 16.1%, primarily due to The JJ Mack Building, EC1 achieving practical completion during the year, excluding which the vacancy rate was 6.2% (31 March 2022: 6.1% on a like-for-like basis).

Sustainability Highlights

· Net Zero Carbon Pathway published in May 2022, setting out our commitment to becoming a net zero carbon business by 2030. Signatory to the BPF Net Zero Pledge and the Better Build Partnership Climate commitment.

· The JJ Mack Building, EC1 achieved 2018 BREEAM "Outstanding" at the design stage and an EPC A rating following practical completion. A NABERS 5 Star rating is anticipated, reflecting our commitment to achieving excellent energy efficiency in operation.

· Improvements across sustainability measures, with 5 Star GRESB ratings awarded for both our standing investments and our developments and a CDP Score of B (up from C). We have also retained MSCI ESG AAA and EPRA Sustainability BPR Gold.

Dividend Timetable

Equiniti were appointed the Company's Registrar on 31 October 2022.

For further information, please contact:

Results Presentation

Helical will be holding a presentation for analysts and investors starting at 09:00 am on Tuesday 23 May 2023 at The JJ Mack Building, 33 Charterhouse Street, London EC1M 6HA. If you would like to attend, please contact FTI Consulting on 020 3727 1000, or email schelical@fticonsulting.com

The presentation will be on the Company's website www.helical.co.uk and a live webcast and Q&A will also be available.

Webcast Link:

https://brrmedia.news/Helical_FY23

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 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 additional information about the Group's share of assets and liabilities, income and expenses in subsidiaries and joint ventures ("see-through").

2. See Note 29.

Chief Executive's Statement

Overview

The central London office market has suffered a fall in capital values over the last year and Helical has not been immune to these market movements, with our portfolio experiencing a valuation decline of 10.1% (on a like-for-like basis).

While previous valuation falls have been caused by recessions following periods of economic exuberance leading to an oversupply of new office space, the current decline in values reflects a number of differing cyclical and structural factors.

The economy has been affected by multiple geopolitical and economic events which have generated high levels of inflation and a steep rise in interest rates. We have had ultra-low interest rates since 2009 and with the base rate rising from 0.10% in December 2021 to the current 4.50%, the financing of real estate has become significantly more expensive. The rise in interest rates has also led to a repricing of government bonds across the market. Consequently, valuation yields have risen.

In addition, structural changes are impacting the office market, with the latest sustainability criteria challenging the suitability of older office buildings.

Around 75% of buildings in the central London office market do not meet the MEES (Minimum Energy Efficiency Standards) rating of EPC A or B rating required by 2030 and these buildings will need significant capex to bring them up to the necessary standard when leases end and tenants vacate. Previously, these less sustainable buildings could have remained in the market with a low cost refurbishment and a reletting at a significantly lower rent than for the better buildings. For buildings below an EPC rating of B this will no longer be an option. The additional costs of bringing these older buildings up to the required standard is exacerbated by the significant build cost inflation we have seen in the last year.

The impact of all these factors has accelerated the bifurcation in the market. With best-in-class property valuations adjusting to reflect the movement in bond yields, it is the older, poorer quality buildings that are facing what is likely to be a deeper correction, with downward price discovery potentially not reaching an endpoint until a lease ends and the rent stops, or from refinancing events.

Tenant demand for the best, newly developed or refurbished buildings at the forefront of sustainability with top quality amenities is strong, and seeing rising rental values.

Against this backdrop, Helical has continued to recycle capital out of its mature, stabilised assets, reduced leverage and cut its ongoing core administration costs by over 13% for the year ahead. As a result, it is well placed to capitalise on any ongoing market dislocation and the structural trends impacting the office sector.

Our Pipeline

The Group seeks to grow the business by realising surpluses from its recently developed investment assets, and reinvesting that recycled equity into new opportunities.

In the year to 31 March 2023, the judicious sales of Kaleidoscope, EC1 and Trinity, Manchester realised revaluation surpluses of over £53m and reduced our gearing level from an LTV at 31 March 2022 of 35.0% to 27.5% at 31 March 2023.

Being selected by Transport for London ("TfL") as their joint venture partner for the Platinum Portfolio was a significant milestone, boosting our development pipeline by almost 600,000 sq ft, with the potential for additional schemes to be added to the joint venture in the future. This collaboration with TfL, one of London's largest landowners, is an endorsement of the Helical brand and recognises our track record of producing high quality, successful developments across central London over many years.

With 100 New Bridge Street, EC4, our 192,000 sq ft office scheme, due to start later this year and the three TfL schemes anticipated to start over the period from 2024 to 2026, this pipeline, our most significant for a number of years, is scheduled to deliver best-in-class office space to an undersupplied market from 2025 to 2029.

Results for the Year

The loss for the year to 31 March 2023 was £64.5m (2022: profit of £88.9m) with a see-through Total Property Return of -£51.4m (2022: +£89.5m). See-through net rental income increased by 7.2% to £33.5m (2022: £31.2m) while developments generated see-through profits of £3.2m (2022: £6.6m). The see-through net loss on sale and revaluation of the investment portfolio was £88.1m (2022: net gain of £51.7m).

Total see-through net finance costs reduced to £12.0m (2022: £19.7m), reflecting a lower level of debt and much lower debt cancellation costs of £0.1m (2022: £5.9m). An increase in expected future interest rates led to a £12.8m credit (2022: £18.0m) from the valuation of the Group's derivative financial instruments. Recurring see-through administration costs were 4.2% higher at £10.3m (2022: £9.9m), with performance related awards, reflecting the results for the year, reduced to £2.7m (2022: gain of £6.0m) and National Insurance on these awards of £0.3m (2022: £1.2m).

The election to become a REIT from 1 April 2022 has resulted in a £nil (2022: credit of £16.0m) tax charge for the year.

The IFRS basic loss per share was 52.6p (2022: earnings of 72.8p) and EPRA earnings per share were 9.4p (2022: 5.2p).

On a like-for-like basis, the investment portfolio fell in value by 10.1% (7.7% including purchases and gains on sales). The see-through total portfolio value reduced to £839.5m (31 March 2022: £1,097.3m), reflecting the revaluation loss and the sales of Kaleidoscope, EC1, 55 Bartholomew, EC1 and Trinity, Manchester in the year.

The total return of our property portfolio, as measured by MSCI, was -5.6% (2022: 10.7%), which outperformed the Central London Offices Total Return Index of -8.6%.

The portfolio was 83.9% let at 31 March 2023 and generated contracted rents of £39.0m (2022: £46.4m), equating to an average of £60 psf. This increases to £48.9m on the letting of currently vacant space as we move towards capturing the portfolio ERV of £60.4m (2022: £67.1m). The Group's contracted rent has a Weighted Average Unexpired Lease Term ("WAULT") of 5.0 years.

The Total Accounting Return ("TAR"), being the growth in the IFRS net asset value of the Group, plus dividends paid in the year, was -9.4% (2022: 15.0%). Based on EPRA net tangible assets, the TAR was-12.1% (2022: 10.2%). EPRA net tangible assets per share fell by 13.8% to 493p (31 March 2022: 572p), with EPRA net disposal value per share falling by 11.1% to 490p (31 March 2022: 551p).

Balance Sheet Strength and Liquidity

The Group has a significant level of liquidity with see-through cash and unutilised bank facilities of £244.2m (31 March 2022: £147.0m) to fund capital works on its portfolio and future acquisitions.

At 31 March 2023, the Group had £31.9m of cash deposits available to deploy without restrictions and a further £13.7m of rent in bank accounts available to service payments under loan agreements, cash held at managing agents and cash held in joint ventures. In addition, the Group held rental deposits from tenants of £9.1m. Furthermore, the Group had £189.5m of loan facilities available to draw on.

The see-through loan to value ratio ("LTV") reduced to 27.5% at the Balance Sheet date (31 March 2022: 35.0%) and our see-through net gearing, the ratio of net borrowings to the net asset value of the Group, reduced to 38.0% (31 March 2022: 56.5%) over the same period.

At the year end, the average debt maturity on secured loans, on a see-through basis, was 2.9 years (31 March 2022: 3.0 years). The average cost of debt, on a see-through basis, was 3.4% (31 March 2022: 3.2%).

Dividends

Helical is a capital growth stock, seeking to maximise value by successfully letting comprehensively refurbished and redeveloped property. Once stabilised, these assets are either retained for their long-term income and reversionary potential or sold to recycle equity into new schemes.

This recycling leads to fluctuations in our EPRA earnings per share, as the calculation of these earnings excludes capital profits generated from the sale and revaluation of assets. As such, both EPRA earnings and realised capital profits are considered when determining the payment of dividends.

In the year to 31 March 2023, EPRA earnings per share increased by 80% from 5.2p last year to 9.4p this year. The sales of Kaleidoscope, EC1, 55 Bartholomew, EC1 and Trinity, Manchester, during the year realised capital profits of £53.4m, transferred into distributable retained earnings.

In the light of the increased EPRA earnings and the capital profits realised in the year, the Board will be recommending to Shareholders a final dividend of 8.70p per share, an increase of 5.5% on last year. If approved by Shareholders at the 2023 AGM, the total dividend for the year will be 11.75p, up 5.4% on 2022.

This final dividend, if approved, will be paid out of distributable reserves generated from the Group's activities. Following its conversion to a UK REIT, dividends payable by Helical will comprise a Property Income Distribution ("PID") from the operations that fall under the REIT regime, and a dividend from those operations that fall outside the REIT regime. The PID, for the year to 31 March 2023, will be 5.70p, with the balance of the final dividend of 3.00p representing an additional ordinary dividend.

Sustainability

Sustainability remains at the heart of our business, both at a corporate and asset level.

We have made good progress in the year and continue to perform strongly against the targets we have set. Despite increasing occupancy levels, energy intensity across our like-for-like portfolio fell by 8% during the year to an average of 129 kWh/m2, on track for our 2030 net zero carbon target of 90kwh/m2.

The JJ Mack Building, EC1 completed in September 2022, at which point we have accounted for 100% of the associated upfront embodied carbon emissions in our reporting. The building achieved an embodied carbon intensity of 741 kgCO2e/m2, on track for our 2030 net zero carbon target of 600 kgCO2e/m2. This considerable reduction was achieved through a combination of using materials with a high recycled content, adopting modern methods of construction and embedding circular economy principles into the design and delivery of the project. The building received an EPC A rating and is anticipated to achieve a NABERS 5 Star for the commitment to excellent energy efficiency in operation. Furthermore, the building received BREEAM "Outstanding" at the Design Stage, which is expected to be retained upon final certification.

We continue to perform well across the industry benchmarks we participate in. We received a 5 Star GRESB rating for both our Standing Investments and Developments and retained our Green Star status. For our sustainability reporting, we were granted a Gold Award for the second consecutive year, for reporting in accordance with EPRA's European Sustainability Best Practice Recommendations (sBPR). We were also pleased to receive an improved CDP score of B, further demonstrating our commitment to best practice disclosure and enhanced climate change risk assessment.

Our portfolio is market leading in terms of energy efficiency, with 99% of our assets (by value) already compliant with the proposed legislative requirement that all rented commercial buildings achieve a minimum EPC rating of B by 2030.

Looking forward, we plan to define our approach to carbon offsetting and uphold our commitment to deliver all future developments as net zero carbon.

The Opportunity

London remains a leading world city and, barring economic or geopolitical catastrophe, there will be ongoing demand for best-in-class office buildings from occupiers who require well located, highly sustainable offices with good amenities, which are essential in attracting and retaining the top talent. There remains a shortage of this best-in-class newly refurbished or redeveloped office space in central London, enabling landlords to command premium rents, a dynamic that is likely to persist for the rest of this decade as the market plays catch up.

With an experienced management team, a substantial development pipeline, no legacy assets and historically low gearing levels, Helical is well positioned to capitalise on the structural trends impacting the office sector.

Finally

It is with great sadness that we record the death on 7 April of Nigel MacNair-Scott. Nigel was Finance Director of Helical Bar plc from 1986 to 2013 after which he became Chairman, retiring in 2016. Nigel was the other half of the duo with Michael Slade who jointly turned Helical from producing steel rebar for the construction industry into a highly successful property company. Nigel's financial acumen and general shrewdness, coupled with Mike's property skills, enabled Helical to survive the major downturns of the early 1990s and the Global Financial Crisis in 2008-2009 and prosper in subsequent years, becoming a well-known brand in the property sector.

Gerald KayeChief Executive

23 May 2023

Our Market

The past year has seen significant headwinds impact the central London office market. The macro-economic landscape has been altered by multiple geopolitical and economic events which have weakened the economic outlook; this and the recent rapid paradigm shift in monetary policy have combined to present a difficult environment for real estate.

The fundamentals of the office occupier market remain robust and aligned to our strategy. Occupiers continue to seek to provide best-in-class working environments for their employees.

The Economic Environment

Over the course of the past year the Bank of England's Monetary Policy Committee has pursued an agenda of sustained, rapid interest rate rises to moderate the inflationary pressures experienced across the economy. At 1 April 2022 the Bank Rate stood at 0.75% and it has subsequently increased nine times to 4.50%. The impact of this adjustment to monetary policy has been felt throughout the economy and within the central London office market it has been most keenly felt in two areas: outward yield shift and increased cost of debt.

Investment Market

After an encouraging rebound in investment volumes in 2021 and early 2022, the investment market was subdued in the second half of 2022 as the market paused to assess the impact of interest rate rises upon yields. At £0.7bn, the volume of investment transactions in Q4 2022 represented the lowest quarterly figure since 1996 and illustrated the impact of the increasing cost of debt and economic uncertainty. Transaction volumes increased in Q1 2023 to £1.7bn, albeit this is still below the long-term average and there remains limited transactional evidence to fully substantiate pricing.

The MSCI London City Equivalent Yield, which includes both prime and non-prime office buildings, has moved to 6.40% in April 2023 from 5.31% in April 2022. However, best-in-class yields have been less impacted, with our portfolio adjusting by 79bps over the same period.

The limited transactions that have taken place demonstrated the focus on best-in-class assets, which experienced less dramatic outward movements in pricing. In contrast, poorer quality assets, characterised by significant vacancy, short unexpired lease terms and weak sustainability credentials resulting in the imminent need to invest significant capital expenditure, have seen significant downward repricing, further illustrating the bifurcation within the market.

The volatility in swap rates and the rapid increase in the Bank Rate have had significant adverse implications for the cost of external debt which has also suppressed investment volumes. Yet the debt markets remain open, with an increasingly diverse lender pool seeking opportunities to deploy significant amounts of capital. Undoubtedly, the challenges presented in the current market are making lenders more discerning in their choice of counterparty, but leverage is still available for experienced borrowers delivering credible business plans. The rise in the all-in cost of debt has required a reassessment of the composition of capital structures, with external debt no longer being as accretive to value but continuing to enable equity to be spread across new opportunities.

The past year has seen best-in-class assets continue to outperform. Record rents continue to be achieved for the limited best-in-class space available, as tenants demonstrate a willingness to pay a premium to occupy these buildings, as seen at The JJ Mack Building, EC1. In contrast, secondary buildings are becoming increasingly obsolete as tenant demand for these assets shrinks and tenant controlled secondary supply remains high. New build vacancy remains low at 1.4% whilst overall vacancy remains above the long term average at 8.5%, driven by second-hand space which represents 67% of total availability in the central London market.

Occupational Market

Following the Covid-19 related lockdowns, we have seen an extended period of stability enabling businesses to refine their workplace practices to reflect lower occupational densities and, while more flexible ways of working exist, there is still the need to accommodate peak occupancy. These trends have resulted in generally similar space requirements compared to pre-pandemic levels, with certain sectors expanding their footprint to accommodate growth and increasing amenity offerings to employees.

Increasingly businesses are encouraging employees to work primarily in the office and the sustained return to office working has exceeded the predictions of the more negative commentators. Employers and employees alike are experiencing the benefits to culture and innovation the office environment brings and this is apparent with take-up for 2022 up 28% on 2021 levels at 12.3m sq ft. Occupiers remain focused upon providing their employees with the optimal workplace environment and continue to seek buildings with the highest levels of amenity, connectivity, service and sustainability, which aligns with our portfolio characteristics. These trends manifest in variable demand across central London, with those sub-markets with newer stock and greater access to transport nodes experiencing greater levels of demand.

The current macro-economic turbulence has had contrasting impacts on sectors throughout the economy. While the technology sector has experienced a year of rebalancing, the banking, finance and professional services sectors have demonstrated their resilience and make up 61% of the 9.0m sq ft of active demand in the market as at February 2023, according to global real estate consultancy JLL.

Occupiers are not immune to cost pressures, with rising fit-out costs and operational energy price increases impacting the all-in cost of occupation, and this may slow the pace of rental growth in the short term. However, in the long term the benefits of investment in best-in-class space should translate into continued and strong demand from occupiers across a variety of sectors.

Development Pipeline

The past year has seen significant construction cost inflation, peaking within the London market at over 10% in 2022. The impact of energy price rises and imbalances in supply and demand dynamics for key materials as well as labour shortages have all contributed to persistently high inflation. The effect of rising building costs upon the sector is nuanced with the broad headline rate only partially articulating the wider picture, with specific areas of the construction sector including steel, rebar and structural timber seeing greater levels of inflation. Furthermore, energy intensive materials, such as concrete and plasterboard, remain exposed to future volatility as energy price protections are slowly released.

Moving forward, the expectation is for inflationary pressures to moderate, with property consultancy, Arcadis, predicting a more stable 3% building cost inflation forecast over the medium term, although uncertainty remains.

While we remain of the view that the opportunity exists to deliver best-in-class product into a supply constrained market, some investors will be reassessing business plans in light of significant rises in material and debt costs alongside an increasingly complex planning environment.

Deloitte's latest Crane Survey highlights new starts have begun to increase, with 4.4m sq ft of new sites commencing in the six months to 31 March 2023, across 50 schemes. Of these new starts, the trend towards refurbishment is also illustrated, with 37 of the 50 schemes recorded as refurbishment projects. These levels of development, while encouraging, will be insufficient to accommodate the 23.5m sq ft of lease expiries occurring up to 2027 on office space over 20,000 sq ft in London identified by Knight Frank, where tenants are likely to look for best-in-class alternative space.

Alongside new starts, work will be required across central London to upgrade the existing unsustainable occupied buildings ahead of 2030, with c.75% of space currently below EPC B. With many assets facing obsolescence upon upcoming lease events, owners will be required to invest considerable capital to bring these assets back to the market in a manner which will be both sustainable and attractive to occupiers. At present a disparity continues to exist between the value expectations of buyers and sellers, driven partly by the mispricing of the costs of refurbishment. However, once the gap has sufficiently closed there will be good opportunity to acquire and reposition these assets, allowing us to take advantage of our skillset and track record.

Overall

Our portfolio of best-in-class, sustainable buildings remains optimally placed to outperform the market in the current environment. Furthermore, Helical's expertise is well suited to take advantage of the challenges that face the sector and seize upon the undoubted opportunities that exist within the central London market.

Sustainability and Net Zero Carbon

We continue to make good progress against the targets we set out in our sustainability strategy "Built for the Future" and our aim to become a net zero carbon business by 2030. With the publication of our "Net Zero Carbon Pathway" in May 2022, our progress towards rapidly decreasing our emissions across our development activities and existing portfolio has been recognised by our improved GRESB status.

We have been ranked the number one company in the UK Office Listed sector, scoring 88% and receiving a 5 Star GRESB rating in the annual sustainability performance index for our standing investment properties. Alongside this, we have also received a 5 Star GRESB rating for our developments, scoring 94%.

For our sustainability reporting, we achieved a Gold Award for the second consecutive year, for reporting in accordance with EPRA's European Sustainability Best Practice Recommendations (sBPR). The EPRA sBPR is intended to raise the standards and consistency of sustainability reporting for listed real estate companies across Europe.

We also improved our CDP score to B, up from C, demonstrating our rigorous approach to assessing climate change risks and opportunities and our transparent disclosures.

Our portfolio is well placed in terms of energy efficiency, with 99% of our assets (by value) already compliant with the proposed legislative requirement that all rented commercial buildings achieve a minimum EPC rating of B by 2030. Market research suggests that only c.25% of commercial assets are currently compliant, with significant capital outlay likely to be required to take non-compliant buildings up to the minimum standard. Likewise, 99% of our assets (by value) hold a BREEAM certification, with 88% being "Outstanding" or "Excellent" (excluding 100 New Bridge Street, EC4 which is to be refurbished).

The JJ Mack Building, EC1 was the UK's first commercial building to be awarded BREEAM "Outstanding" at the design stage under the 2018 regulations. On 30 September 2022, the building achieved practical completion and we anticipate the "Outstanding" rating will be retained at the post construction assessment stage. Through the use of recycled materials, Earth Friendly Concrete and modern methods of construction, we have reduced embodied carbon to 42% below the current "Business as Usual" RIBA target. Operationally, it is estimated that carbon emissions will be c.53% lower than the regulated Targeted Emissions Rate as defined by Part L of the Building Regulations (2013). This reduction is a result of sustainable, intelligent and renewable technologies designed into the building alongside connection to the Citigen District Energy Network. Our embodied carbon from construction is in the process of being offset and, once completed, will provide us with our first net zero carbon building.

Going forward, we will continue to focus on minimising embodied carbon in our new buildings and, where we can, delivering "carbon friendly new build" schemes, such as the planned redevelopment of 100 New Bridge Street, EC4 where we will re-use or recycle large portions of the existing building and look to incorporate the existing structural frame to minimise the carbon impact.

Performance Measurements

We measure our performance against our strategic objectives, using several financial and non-financial Key Performance Indicators ("KPIs").

The KPIs have been selected as the most appropriate measures to assess our progress in achieving our strategy, successfully applying our business model and generating value for our Shareholders.

Total Accounting Return

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

The Group targets a Total Accounting Return of 5-10%.

The Total Accounting Return on IFRS net assets in the year to 31 March 2023 was -9.4% (2022: 15.0%).

EPRA Total Accounting Return

Total Accounting Return on EPRA net tangible assets is the growth in the EPRA net tangible asset value of the Group plus dividends paid in the period, expressed as a percentage of the EPRA net tangible asset value at the beginning of the period.

The Group targets an EPRA Total Accounting Return of 5-10%.

The Total Accounting Return on EPRA net assets in the year to 31 March 2023 was -12.1% (2022: 10.2%).

* Calculated using EPRA net assets.

EPRA Net Tangible 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 tangible 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 22 to the financial statements.

The Group targets increasing its net assets, of which EPRA net tangible asset growth is a key component.

The EPRA net tangible asset value per share at 31 March 2023 decreased by 13.8% to 493p (31 March 2022: 572p).

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 Shareholders expressed as an annualised percentage.

The Group targets being in the upper quartile when compared to its peers.

The Total Shareholder Return in the year to 31 March 2023 was -24.8% (2022: 1.7%).

1. Growth over all years to 31/03/23.

2. Growth in FTSE All-Share Return Index over all years to 31/03/23.

3. Growth in FTSE 350 Real Estate Super Sector Return Index over all years to 31/03/23.

MSCI Property Index

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. Helical's ungeared performance for the year to 31 March 2023 was -5.6% (2022: 10.7%). This compares to the MSCI Central London Offices Total Return Index of-8.6% (2022: 7.9%) and the upper quartile return of -5.4% (2022: 9.9%).

Helical's share of the development portfolio (1% of gross property assets) is included in its performance, as measured by MSCI, at the lower of book cost or fair value.

Helical's unleveraged portfolio returns to 31 March 2023 were as follows:

Source: MSCI

Average Length of Employee Service 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 with an increasing length of service.

The Group targets staff turnover to be less than 10% per annum.

The average length of service of the Group's employees at 31 March 2023 was 13.2 years and the average staff turnover during the year to 31 March 2023 was 7.7%.

BREEAM and EPC Ratings

BREEAM is an environmental impact assessment methodology for commercial buildings. It sets out best practice standards for the environmental performance of buildings through their design, specification, construction and operational phases. Performance is measured across a series of ratings, "Pass", "Good", "Very Good", "Excellent" and "Outstanding".

The Group targets a BREEAM rating of "Excellent" or "Outstanding" on all major refurbishments or new developments.

At 31 March 2023, five of our seven (31 March 2022: seven of our ten) office buildings had achieved, or were targeting, a BREEAM certification of "Excellent" or "Outstanding". These five buildings account for 88% of the portfolio by value.

1. Certified at design stage.

2. Targeted.

At The Loom, E1, it was not possible to obtain a BREEAM certification at the design or development stage, however, during the year the building achieved a BREEAM In Use rating of "Very Good", a high accolade given the listed status of the building.

Energy Performance Certificates ("EPC") provide ratings on a scale of A-G on a building's energy efficiency and are required when a building is constructed, sold or let. All but one of our completed buildings (99% by portfolio value) have an EPC rating of A or B.

Helical's Property Portfolio - 31 March 2023

Property Overview

Helical's portfolio is comprised of income-producing multi-let offices and office refurbishments and developments, all located in central London within 12 minutes of the Elizabeth Line. Our strategy is to continue to increase our central London holdings, focusing on areas where we see strong tenant demand and growth potential for our best-in-class office led schemes.

The JJ Mack Building, EC1

The development of our 206,050 sq ft office building, in 50:50 joint venture with AshbyCapital, achieved practical completion on 30 September 2022. The JJ Mack Building, named after the market trader who occupied the site in the 1940s, is one of London's smartest and most sustainable new office buildings.

The building is situated in vibrant Midtown, just 100m from Farringdon Station and the Elizabeth Line, which provides occupiers with unparalleled connectivity. The building has adopted market leading technologies, design and operational practices so that it is highly sustainable. This commitment to market leading sustainability has been recognised by a BREEAM 2018 New Construction "Outstanding" rating at the design stage which is currently being reconfirmed post completion, an EPC A rating and an anticipated NABERS 5 Star rating. It also provides a technologically pioneering environment for occupiers with smart building systems and a fully integrated building management app for tenants.

In November 2022, we completed the first letting of the sixth and seventh floors, comprising 37,880 sq ft, to Partners Group, a leading global private markets firm, for its new London office.

100 New Bridge Street, EC4

The City of London has resolved to grant planning permission and the formal decision notice will be issued upon signing of the Section 106 Agreement for the substantial redevelopment of this 1990s office building, located adjacent to City Thameslink and a short walk from Farringdon and Blackfriars stations. Work to deliver the scheme will commence in November 2023 when vacant possession of the building, currently occupied by Baker McKenzie, is achieved. The building is targeted for completion in spring 2025.

This major refurbishment will achieve the highest standards of sustainability through the retention of the existing structure, with three facades reclad, and the reuse of materials wherever possible. The new building will provide high-quality tenant amenities, including extensive cycle parking and changing facilities, and will be equipped with the latest technology to create a new best-in-class office building. We are targeting BREEAM "Outstanding", EPC A, NABERS 5 Star and WELL Platinum.

Two new floors will be added to the building, increasing the net internal area from 167,026 sq ft to 192,000 sq ft. Extensive outdoor space will be incorporated, including an impressive 5,000 sq ft terrace on the eighth floor overlooking St Paul's Cathedral and St Bride's Church. We will also undertake significant public realm improvements around the site in conjunction with the City of London to enhance the arrival experience and benefit the wider community.

Kaleidoscope, EC1

Helical completed the sale of the single asset company which held the long leasehold interest in Kaleidoscope to Chinachem Group on 21 September 2022. The 88,581 sq ft office building, which was let in its entirety to TikTok Information Technologies UK Limited on a 15-year lease term at an annual rent of £7.6m, was sold for a headline disposal price of £158.5m. The sale reflected a net initial yield of 4.3% and a premium to the 31 March 2022 book value and represented a record capital value per square foot for the sub-market at £1,789 psf.

The Bower, EC1

The Bower is a landmark estate comprising 312,573 sq ft of innovative, high quality office space along with 21,059 sq ft of restaurant and retail space. The estate is located adjacent to the Old Street roundabout where the significant remodelling works are due to complete shortly, providing extensive additional public realm to occupiers.

The Warehouse and The Studio

The Warehouse comprises 122,858 sq ft of offices and The Studio 18,283 sq ft of offices, both fully let, with 10,298 sq ft of retail space across the two buildings.

The Tower

The Tower offers 171,432 sq ft of office space with a contemporary façade and innovatively designed interconnecting floors, along with 10,761 sq ft of retail space, across two units, let to food and beverage occupiers Serata Hall and Wagamama.

We have let the 12th floor, previously occupied by Brilliant Basics, to Stenn on a five year lease at a rent which is in line with the 31 March 2022 ERV. We expect the 14th floor to be returned in May 2023 when existing tenants, Snowflake, vacate to take expansion space elsewhere and the floor will be marketed as a fitted option for tenants.

Barts Square, EC1

Residential/Retail

At Barts Square, EC1, we have completed the sale of 14 apartments in the year and post year end completed the sale of the last remaining unit in this 236 unit residential scheme. We also completed the sale of the ground rent investment to the residents of Barts Square.

We have completed four new retail lettings comprising 9,219 sq ft in the year. These lettings to Michelin-starred Restaurant St Barts, Lap Bikes, MyLuthier and Athletic Fitness/Little Farm have enhanced the extensive amenity across the 3.2 acre Barts Square estate. One retail unit remains available.

55 Bartholomew

At 55 Bartholomew, EC1 we completed the sale of the comprehensively refurbished 10,976 sq ft office building to a private European investor for £16.5m (Helical share £8.2m). The sale price reflected a net initial yield of 4.5% and represents a premium to book value, net of rental top ups.

The Loom, E1

At this 106,838 sq ft former Victorian wool warehouse, we have completed two new lettings, totalling 6,999 sq ft, and have continued our active asset management with existing tenants moving units to accommodate business changes.

25 Charterhouse Square, EC1

25 Charterhouse Square comprises 42,921 sq ft of offices adjacent to the newly operational Farringdon East Elizabeth Line station and overlooking the historic Charterhouse Square.

The newly refurbished ground floor unit has been let to natural stone purveyors SolidNature. The comprehensive refurbishment of the fourth floor has been completed and the floor is now available to let.

The Power House, W4

The Power House is a listed building, providing 21,268 sq ft of office and recording studio space, on Chiswick High Road, and is fully let on a long lease to Metropolis Music Group. The significant capital works to improve the roof, undertaken on behalf of the tenants, have now been completed.

Trinity, Manchester

We simultaneously exchanged and completed contracts in May 2022 for the sale of Trinity, to clients of Mayfair Capital, for £34.6m (£590 psf), reflecting a net initial yield of 5.0%. The sale represented a premium to book value, net of rental top ups. Helical acquired the property in May 2017 for £12.9m and undertook a comprehensive remodelling and refurbishment to deliver 58,533 sq ft of modern office space across ground and seven upper floors, which was 76% let to eight occupiers upon disposal. Its sale concluded the disposal of Helical's Manchester office portfolio.

The Platinum Portfolio, London

Helical was selected in February 2023 by Transport for London's wholly owned commercial property company, TTL Properties Limited, as the preferred investment partner for its commercial office portfolio joint venture. Contracts are expected to be signed shortly to formalise the joint venture. The portfolio will create well‐connected, sustainable and inclusive workspaces across central London and initially will be seeded with three over‐station development sites, namely:

· Bank Over-Station Development - located above the recently opened Bank station entrance on Cannon Street. This eight-storey office development will measure 142,000 sq ft and the joint venture intends to start on site in 2024 with practical completion expected in late 2026.

· Southwark Over-Station Development - located above Southwark Tube station. The scheme has consent for a 220,000 sq ft hybrid timber office building over 17 storeys. The joint venture is expected to start on site in 2025 with practical completion expected in 2028.

· Paddington Over-Station Development - located on the Grand Union Canal, close to the Elizabeth Line station at Paddington. This 19-storey building will provide 235,000 sq ft of office space and construction is expected to commence in 2026, with practical completion expected in 2029.

The joint venture company will purchase leasehold interests in the sites from TfL and establish individual property companies for each of the sites. The sites will then be developed directly by the companies, which are to be funded with equity and debt. Other properties and development opportunities may in the future be acquired by the joint venture, expanding the partnership's portfolio, subject to feasibility and assessment.

Portfolio Analytics

See-through Total Portfolio by Fair Value

See-through Land and Development Portfolio

Capital Expenditure

We have a committed and planned development and refurbishment programme.

Asset Management

Asset management is a critical component in driving Helical's performance. Through having well considered business plans and maximising the combined skills of our management team, we are able to create value in our assets.

Investment Portfolio

Valuation Movements

Portfolio Yields

See-through Capital Values, Vacancy Rates and Unexpired Lease Terms

See-through Lease Expiries or Tenant Break Options - Excluding Development Pipeline

Top 15 Tenants

We have a strong rental income stream and a diverse tenant base. The top 15 tenants account for 79.4% of the total rent roll.

Letting Activity - New Leases

Financial Review

Overview

In the year to 31 March 2023, the Group made significant progress across the board against its targets for the year. With growth in net rental income, a good level of development profits, reduced administration costs (with savings in core administration costs to come next year) and lower finance costs as the Group continues to benefit from its hedging strategy, EPRA earnings grew to £11.5m, or 9.4p per share compared to £6.4m or 5.2p last year. In addition, the Group disposed of £233m (our share £213m) of properties at 3.7% above book value, reducing its LTV to 27.5% (2022 restated: 35.0%) and increasing cash and undrawn bank facilities.

However, the overall results for the year reflect the impact on the London office market of the challenging environment we have faced over the last 12 months, with the UK experiencing persistently high inflation and rising finance costs, as well as political instability. These factors have impacted on bond yields with a consequent outward shift in valuation yields and significant valuation declines across the portfolio, partially offset by a revaluation gain at The JJ Mack Building, EC1. These net valuation losses have turned what would have been a profitable year into a net loss.

Results for the Year

The loss for the year of £64.5m (2022: profit of £88.9m) includes revenue from rental income and development management of £49.8m, offset by direct costs of £13.6m. The profit from joint venture activities added £3.5m and the net loss on sale and revaluation of investment properties was £93.3m. Administration expenses of £12.8m and net finance costs of £10.9m were offset by a gain in fair value of derivatives of £12.8m.

The Group holds a significant proportion of its property assets in joint ventures. As the risk and rewards of ownership of these underlying properties are similar to those it wholly owns, Helical supplements its IFRS disclosure with a "see-through" analysis of alternative performance measures, which looks through the structure to show the Group's share of the underlying business.

The see-through results for the year to 31 March 2023 include net rental income of £33.5m, a net loss on sale and revaluation of the investment portfolio of £88.1m and development profits of £3.2m, leading to a Total Property Return of -£51.4m (2022: £89.5m). Total see-through administration costs of £13.3m (2022: £17.1m) and see-through net finance costs of £12.0m (2022: £19.7m) were partially offset by see-through derivative financial instrument gains of £12.8m (2022: £18.0m) and contributed to an IFRS pre-tax loss of £64.5m (2022: profit of £72.9m).

The election to become a REIT from 1 April 2022 has resulted in a £nil (2022: credit of £16.0m) tax charge for the year.

The loss for the year was £64.5m (2022: profit of £88.9m) and the EPRA net tangible asset value per share decreased by 13.8% to 493p (31 March 2022: 572p).

The Company has proposed a final dividend of 8.70p per share (2022: 8.25p) which, if approved by Shareholders at the 2023 AGM, will be payable on 28 July 2023. The total dividend paid or payable in respect of the year to 31 March 2023 will be 11.75p (2022: 11.15p), an increase of 5.4%.

The Group's real estate portfolio, including its share of assets held in joint ventures, decreased to £840.4m (31 March 2022: £1,108.1m) primarily due to the sales of Kaleidoscope, EC1, Trinity, Manchester, 55 Bartholomew, EC1, the freehold of the estate at Barts Square, EC1, residential apartment sales at Barts Square, EC1 and the net loss on revaluation of the investment portfolio of £92.8m, offset by capital expenditure on the investment portfolio of £24.0m.

The sale of investment properties allowed the Group to repay debt during the year which resulted in a decrease in the Group's see-through loan to value to 27.5% (31 March 2022 restated: 35.0%). The Group's weighted average cost of debt at 31 March 2023 was 3.4% (31 March 2022: 3.2%) and the weighted average debt maturity was 2.9 years (31 March 2022: 3.0 years).

At 31 March 2023, the Group had unutilised bank facilities of £189.5m and cash of £54.7m on a see-through basis. These are primarily available to fund future property acquisitions.

Total Property Return

We calculate our Total Property Return to enable us to assess the aggregate of income and capital profits made each year from our property activities. Our business is primarily aimed at producing surpluses in the value of our assets through asset management and development, with the income side of the business seeking to cover our annual administration and finance costs. 

The net rental income, development profits and net gains on sale and revaluation of our investment portfolio, which contribute to the Total Property Return, provide the inputs for our performance as measured by MSCI.

See-through Total Accounting Return

Total Accounting Return is the growth in the net asset value of the Group plus dividends paid in the reporting period, 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.

Total Accounting Return on EPRA net tangible assets is the growth in the EPRA net tangible asset value of the Group plus dividends paid in the period, expressed as a percentage of the EPRA net tangible asset value at the beginning of the period.

* Calculated using EPRA Net Assets.

Earnings/(Loss) Per Share

The IFRS earnings/(loss) per share decreased from earnings of 72.8p to a loss of 52.6p and is based on the after tax (loss)/earnings attributable to ordinary Shareholders divided by the weighted average number of shares in issue during the year. 

On an EPRA basis, the earnings per share was 9.4p compared to an earnings per share of 5.2p in 2022, reflecting the Group's share of net rental income of £33.5m (2022: £31.2m) and development profits of £3.2m (2022: £6.6m), but excluding losses on sale and revaluation of investment properties of £88.1m (2022: gains of £51.7m).

Net Asset Value

IFRS diluted net asset value per share decreased by 11.3% to 489p per share (31 March 2022: 551p) and is a measure of Shareholders' Funds divided by the number of shares in issue at the year end, adjusted to allow for the effect of all dilutive share awards. 

EPRA net tangible asset value per share decreased by 13.8% to 493p per share (31 March 2022: 572p). This movement arose principally from a total comprehensive expense (retained losses) of £64.5m (2022: income of £88.9m), less £13.8m of dividends (2022: £12.6m).

EPRA net disposal value per share decreased by 11.1% to 490p per share (31 March 2022: 551p).

Income Statement

Rental Income and Property Overheads

Gross rental income for the Group in respect of wholly owned properties increased to £36.6m (2022: £35.3m), with gross rents in joint ventures remaining at £0.3m (2022: £0.3m). Property overheads in respect of wholly owned assets and in respect of those assets in joint ventures reduced to £3.4m (2022: £4.4m). Overall, see-through net rents increased by 7.2% to £33.5m (2022: £31.2m).

Included within gross rental income is £1.7m (31 March 2022: £5.8m) of accrued income for rent free periods.

The table below demonstrates the movement of the accrued income balance for rent free periods granted and the respective rental income adjustment over the four years to 31 March 2026, based on the tenant leases as at 31 March 2023. The actual adjustment will vary depending on lease events such as new lettings and early terminations and future acquisitions or disposals.

Rent Collection

At 23 May 2023, the Group had collected 98.9% of all rent contracted and payable for the March, June, September and December 2022 quarters.

Development Profits

In the year, from our role as development manager at The JJ Mack Building, EC1, we recognised £0.7m of income. Additional fees of £0.1m were recognised for carrying out accounting and corporate services at Barts Square, EC1 and The JJ Mack Building, EC1.

A profit of £1.0m on a retail scheme at East Ham and deferred consideration of £0.4m from the previous sale of the retirement villages portfolio added to development profits. Further development income on closing out legacy projects of £0.2m, offset by other costs of £0.4m, contributed to a net development profit in the Group of £2.0m (2022: £5.8m).

Share of Results of Joint Ventures

The revaluation of our investment assets held in joint ventures generated a surplus of £5.1m (2022: £18.5m). A profit of £1.3m (2022: £0.7m) was recognised in respect of sales at our Barts Square, EC1 residential development.

Finance, administration and other sundry costs totalling £2.3m (2022: £0.5m) were incurred. An adjustment to reflect our economic interest in the Barts Square, EC1 development to its recoverable amount generated a loss of £0.6m (gain of £0.8m), and after a tax charge of £nil (2022: credit of £1.2m), there was a net profit from our joint ventures of £3.5m (2022: £20.7m).

Loss on Sale and Revaluation of Investment Properties

The loss on valuation, partially offset by the gain on sales, of our investment portfolio on a see-through basis resulted in an overall loss on sale and revaluation, including in joint ventures, of £88.1m (2022: gain of £51.7m).

Administrative Expenses

Administration costs in the Group, before performance related awards, increased from £9.6m to £9.9m, marginally above budget for the year.

In setting the administration budget for the year to 31 March 2024, the Group has reviewed staffing levels and all categories of expenditure, seeking efficiencies and cost reductions where available. The budget for the new financial year is set at £8.5m, a 13% reduction on the year to 31 March 2023.

Performance related share awards and bonus payments, before National Insurance costs, decreased to £2.7m (2022: £6.0m). Of this amount, £1.1m (2022: £3.2m), being the charge for share awards under the Performance Share Plan, is expensed through the Income Statement but added back to Shareholders' Funds through the Statement of Changes in Equity. NIC incurred in the year on performance related awards was £0.3m (2022: £1.2m).

In joint ventures, administrative expenses increased from £0.3m to £0.5m.

Finance Costs, Finance Income and Change in Fair Value of Derivative Financial Instruments

Total finance costs, finance income and change in fair value of derivative financial instruments, including joint ventures, reduced to £1.0m (2022: £3.8m).

Taxation

The Group elected to become a REIT, effective from 1 April 2022, and will be exempt from UK corporation tax on the profit of its property activities that fall within the REIT regime. Helical will continue to pay corporation tax on its profits that are not within this regime. As a result, the previously recognised deferred tax liability of £13.5m in the Group (£1.7m in joint ventures) was released in the prior year, with a credit of £14.9m in the Income Statement and a charge of £1.4m recognised directly in the Statement of Changes in Equity. There is no deferred tax charge in the current year.

The current tax charge for the year was £nil (2022: credit of £1.1m), resulting in no tax charge or credit on the loss on ordinary activities (2022: total credit of £16.0m).

Dividends

The interim dividend paid on 13 January 2023 of 3.05p was an increase of 5.2% on the previous interim dividend of 2.90p. The Company has proposed a final dividend of 8.70p, an increase of 5.5% on the previous year (2022: 8.25p), for approval by Shareholders at the 2023 AGM. If approved, the total dividend paid or payable in respect of the results for the year to 31 March 2023 will be 11.75p (2022: 11.15p), an increase of 5.4%.

The final dividend, if approved by Shareholders, will partly be paid as a PID (5.70p) in respect of the Group's REIT property business and partly as an ordinary dividend (3.00p), paid out of distributable reserves generated from the Group's activities prior to its conversion into a REIT.

Balance Sheet

Shareholders' Funds

Shareholders' Funds at 1 April 2022 were £687.0m. The Group had a loss of £64.5m (2022: profit of £88.9m), net of tax, representing the total comprehensive expense for the year. Movements in reserves arising from the Group's share schemes had a net effect of £nil. The Company paid dividends to Shareholders during the year of £13.8m. The net decrease in Shareholders' Funds from Group activities during the year was £78.3m to £608.7m.

Investment Portfolio

The Group expended £24.0m on capital works across the investment portfolio, at The JJ Mack Building, EC1 (£13.1m), 100 New Bridge Street, EC4 (£8.7m), The Bower, EC1 (£0.3m), The Loom, E1 (£1.3m), 25 Charterhouse Square, EC1 (£0.1m), Barts Square, EC1 (£0.4m) and Trinity, Manchester (£0.1m).

Revaluation losses resulted in a £94.3m decrease in the see-through fair value of the portfolio, before lease incentives, to £839.5m (31 March 2022: £1,097.3m). The accounting for head leases and lease incentives resulted in a book value of the see-through investment portfolio of £831.8m (31 March 2022: £1,078.8m).

Debt and Financial Risk

In total, the see-through outstanding debt at 31 March 2023 of £290.4m (31 March 2022: £440.9m) had a weighted average interest cost of 3.4% (31 March 2022: 3.2%) and a weighted average debt maturity of 2.9 years (31 March 2022: 3.0 years).

Debt Profile at 31 March 2023 - Including Commitment Fees but Excluding the Amortisation of Arrangement Fees

Secured Debt

The Group arranges its secured investment and development facilities to suit its business needs as follows:

- £400m Revolving Credit Facility

The Group has a £400m Revolving Credit Facility in which all of its wholly owned investment assets are secured. The value of the Group's properties secured in this facility at 31 March 2023 was £693m (31 March 2022: £870m) with a corresponding loan to value of 33.2% (31 March 2022: 46.0%). The average maturity of the facility at 31 March 2023 was 3.3 years (31 March 2022: 3.1 years). During the year, this facility was converted into a Sustainability Linked Loan.

- Joint Venture Facilities

The Group has a number of investment and development properties in joint venture with third parties and includes our share, in proportion to our economic interest, of the debt associated with each asset. The average maturity of the Group's share of bank facilities in joint ventures at 31 March 2023 was 1.3 years (31 March 2022: 2.3 years) with a weighted average interest rate of 4.2% (31 March 2022: 5.6%). The average interest rate will fall as The JJ Mack Building, EC1 facility is drawn down and would be 4.00% on a fully utilised basis, reducing to 2.25% once the building is let. There is a one-year extension option in this facility.

Unsecured Debt

The Group's unsecured debt is £nil (31 March 2022: £nil).

Cash and Cash Flow

At 31 March 2023, the Group had £244.2m (31 March 2022 restated: £147.0m) of cash and agreed, undrawn, committed bank facilities including its share in joint ventures.

Net Borrowings and Gearing

Total gross borrowings of the Group, including in joint ventures, have decreased from £440.9m to £290.4m during the year to 31 March 2023. After deducting cash balances of £54.7m (31 March 2022 restated: £47.9m) and unamortised refinancing costs of £4.3m (31 March 2022: £4.7m), net borrowings decreased from £388.3m to £231.4m. The see-through gearing of the Group, including in joint ventures, decreased from 56.5% to 38.0%.

1. Trade and other receivables and cash and cash equivalents have been restated as at 31 March 2022 following the IFRIC agenda decision in respect of demand deposits with restrictions on use arising from a contract with a third party (see Note 29).

Hedging

At 31 March 2023, the Group had £230.0m (31 March 2022: £300.0m) of borrowings protected by interest rate swaps, with an average effective interest rate of 2.6% (31 March 2022: 2.8%) and average maturity of 3.3 years. The Group had £nil floating rate debt (31 March 2022: £100.0m) with an effective rate of nil (31 March 2022: 3.5%). In addition, the Group had £nil interest rate caps (31 March 2022: £145m at an average rate of 1.75%). In our joint ventures, the Group's share of fixed rate debt was £60.4m (31 March 2022: £40.9m) at 0.5% plus margin with an effective rate at 31 March 2023 of 4.2% and no floating rate debt (31 March 2022: none).

1. This includes commitment fees on undrawn facilities. Excluding these would reduce the effective rate to 2.6%.

2. This includes commitment fees on undrawn facilities. Excluding these would reduce the effective rate to 4.00% (31 March 2022: 4.95%).

Tim Murphy

Chief Financial Officer

23 May 2023

Consolidated Income Statement

For the year to 31 March 2023

There were no items of comprehensive income in the current or prior year other than the (loss)/profit for the year and, accordingly, no Statement of Comprehensive Income is presented.

Consolidated Balance Sheet

At 31 March 2023

1. Trade and other receivables and cash and cash equivalents have been restated as at 31 March 2022 and 31 March 2021 following the IFRIC agenda decision in respect of demand deposits with restrictions on use arising from a contract with a third party (see Note 29).

Consolidated Cash Flow Statement

For the year to 31 March 2023