Helical Bar Regulatory News (HLCL)

2 Jun 2005 07:01

Helical Bar PLC02 June 2005 2 June 2005 HELICAL BAR PLC ("Helical"/"Company" / "Group") PRELIMINARY RESULTS FOR THE YEAR TO 31 MARCH 2005 HELICAL GROWS BY 30% HIGHLIGHTS * Adjusted diluted net asset value plus trading stock surplus totalling 1148p per share (2004: 884p) - up 30 per cent * Record profit before tax £34.9m (2004: £13.7m) - up 155 per cent * Diluted earnings per share of 110.5p (2004: 39.6p) - up 179 per cent * Substantial increase in development profits and a strong performance in investment portfolio underpin results * Final dividend of 11.00p per share (2004: 10.00p) - up 10 per cent * The Company has returned £102m to shareholders since 1 April 2004 John Southwell, Chairman, commented; "The sale of our industrial estates at Aycliffe & Peterlee generated anexceptional profit for the Company which together with the benefits from the newdiversified programme, put together from 2002, produced an excellent result.This programme, with over 30 projects under way, should continue to produce goodshareholder returns for the next couple of years." Further information: Helical Bar plcNigel McNair Scott (Finance Director)Michael Brown (Investment Director)Tel: 020 7629 0113after 2.00 p.m. Issued by: Financial DynamicsStephanie Highett/Dido LaurimoreTel: 020 7831 3113 FINANCIAL HIGHLIGHTS Year Ended Year Ended 31 March 31 March 2005 2004 Notes £m £m Net rental income 19.7 23.0 Development profits 12.7 0.0 Trading profits 5.8 1.0 Profits on sales of investment properties 16.0 2.0 Other gross profits 0.2 0.6 Profits before tax 34.9 13.7 Adjusted profits before tax 1 18.9 11.7 pence pence Diluted earnings per share 110.5 39.6 Total dividends per share 17.60 16.60 Adjusted diluted net assets per share 2 1078 884 Adjusted diluted "triple net" assets per share 3 992 804 Diluted trading stock surplus per share 70 - £m £m Value of investment portfolio 271.1 334.9Net borrowings 125.0 129.8Shareholders' funds - equity 4 190.3 234.9 - non equity 2.4 - Net gearing 66% 55% Notes 1. Excludes profit on sale of investment properties and loss on sale ofsubsidiary. 2. After adding back additional deferred taxation arising from the clawback ofcapital allowances on sale of investment properties. 3. Adjusted for contingent liabilities of deferred taxation onchargeable gains on investment properties and the market value of financialinstruments but after adding back the deferred taxation referred to in 2 above. 4. Comparative restated for the adoption of UITF 38 - Accounting for ESOPTrusts Chairman's Statement I am delighted that the year to 31 March 2005, my last one as Chairman ofHelical Bar plc, has been such a good one for the Company and its shareholders. The Company made record profits in the year as the development pipeline returnedto profitability. The continuation of the buoyant investment market enabled theCompany to sell £140m of investment properties at prices 14% above March 2004valuation and increase year end values on the remaining investment portfolio by14.2%. In November 2004 the Company announced that it intended returning cash toshareholders and subsequently paid out £97.2m (including costs). This Return ofCash to shareholders has enhanced returns to shareholders with the adjusted netasset value per share at 31 March 2005 estimated to have been boosted by 3% or28p per share, with further enhanced growth to come. Results Profits after tax this year rose to £26.8m from £11.5m, mainly due to anexceptional £16m profit on sale of investment properties and substantiallyincreased development profits of £12.7m (2004: nil). Diluted earnings per shareas a result rose by 179% to 110.5p (2004: 39.6p). The revaluation surplus onthe investment portfolio was £30m (2004: £24m). The Group's adjusted net assetvalue per share rose by 22 per cent to 1078p (2004: 884p) and the adjustedtriple net asset value (taking account of the contingent liabilities of deferredtax and the market value of financial instruments) rose by 23 per cent to 992pper share (2004: 804p). These figures take no account of any surplus on the£96m of trading and development stock which are held in our books, in accordancewith normal practice, at the lower of cost and net realisable value. Thedirectors' valuation of trading and development stock shows a surplus of £13m,the majority of which is attributable to the Unwins portfolio. For shareholders, the Company continued its share buy-back programme, purchasing530,000 ordinary 5p shares for £4.5m at an average of 843p per share. Thesepurchases took the total number of shares bought in since July 2003 to 3,435,951ordinary shares, approximately 11.5% of the company's share capital, at a costof £26.0m and an average cost of 756p per share. This average cost is a 30%discount to the adjusted net asset value per share at 31 March 2005. The encouraging prospects for 2005/2006 enable the Board to recommend toshareholders a final dividend of 11p per share (2004: 10.0p), an increase of 10per cent. This proposed dividend, together with the interim dividend of 6.6p(2004: 6.6p) paid in December 2004 makes a total dividend of 17.6p per share(2004: 16.6p) in addition to the dividend paid as part of the Return of Cash.This is an increase of 6 per cent on last year. The total dividend is coveredover seven times by profits after tax. Outlook The world appears to have an uncertain future with continuing concerns overcrude oil prices, the global economy, the state of the High Street and thehousing market. Inflationary pressures seem to be easing with the next move ininterest rates currently expected to be downwards. Commercial property has delivered excellent returns over the last two years,principally due to yield compression which has lowered the return investors arelikely to earn in future years. Competition for investment stock remainsfierce. Investors need to price bids based on unleveraged target returns of7-8% or less to stand any chance of acquiring property in the mainstreammarkets. Despite these challenging conditions, we believe it is still possible tocontinue to achieve satisfactory returns-but only through effecting change.This may be physical change via refurbishment or redevelopment or throughobtaining more valuable planning consents or active tenant management. Ourflexible acquisition strategy incorporates a willingness to tackle difficult orempty properties in all sectors together with a rapid response time (the 95Unwins properties were acquired in 48 hours) and harnessing a myriad of localcontacts and skills via strong joint venture relationships. This range ofactivities not only provides diversification of risk, but a much increasedchance of sourcing deals at acceptable prices. Once yield shift has run itscourse and property returns decline from 2004's heady levels, we believe thepotential for relative outperformance of this approach should increase. Board I am delighted to welcome the appointment of Wilf Weeks to the Board of HelicalBar plc as a non-executive director. Wilf specialises in Government Relationsand is currently Chairman of European Public Affairs at Weber Shandwick. WithGovernment policy increasingly impacting on the property market through planningintervention and tax rises an experienced approach to local and centralgovernment bodies will become increasingly important. I would like to take this opportunity to thank all of Helical's staff, ourprofessional advisors and our joint venture partners, all of whom work very hardfor the Company. This is my last Chairman's statement as I will be stepping down at the AnnualGeneral Meeting after 17 years in this position. I will continue as anon-executive director but would like to put on record my thanks to my fellowdirectors throughout this period for their support and advice. I would alsolike to wish Giles Weaver, my successor as Chairman, a long and successfulperiod in office. John SouthwellChairman2 June 2005 Development programme Helical's development objective is clear. The Group seeks to recreate theprofit streams achieved from office and retail development over the last tenyears by focusing on large Central London office schemes, major mixed-usedevelopments and retail schemes. As in the last cycle it is anticipated thatthe retail schemes will contribute to development profits before the largeroffice and mixed-use schemes come on stream. Development schemes Completed developments available to let Funding Space Completion Size Institution Tenants LetOffices Sq ft Sq ft West End40 Berkeley Square, London March 2004 75,000 Morley The 32,000W1 Blackstone Group, Caxton Europe 11,900 Asset Management, Multiplex 21,310 Constructions (UK) LimitedThames ValleyThe Heights, Weybridge April 2003 337,000 Prudential Kia Motors, 16,000 Portfolio Managers Alliance Unichem 23,600 Development schemes Current and future programme Approximate Size Start DateOffices Sq ft CityMitre Square, London EC3 2006 350,000Ropemaker Place, London EC2 2006 500,000 Central London - Mixed-useClareville House, London SW1 2006 60,000Wood Lane, White City 2006+ 43 acres Thames ValleyAmen Corner, Bracknell 2007 500,000 Retail/Mixed-useTrinity Square, Nottingham 2005 235,000Commercial Road, Bournemouth 2005 47,000Bluebrick, Wolverhampton 2005 170,000Hatters Retail Park, Luton 2005 105,000Town Centre Shirley, Solihull 2006 155,000Shrub Hill, Worcester 2005 35,000 Completed office developments 40 Berkeley Square, London W1 40 Berkeley Square has been a tremendous success. Developed in a joint venturewith existing owners, Morley Fund Management, the scheme was completed in March2004 with 20,000 sq ft pre-let to The Blackstone Group. Since completion,Blackstone have leased a further 12,000 sq ft and we have let 11,900 sq ft toCaxton Europe Asset Management and 21,310 sq ft to Multiplex Constructions (UK)Ltd. Only the ground floor remains available to let. The Heights, Brooklands, Weybridge A high quality business park development of 337,000 sq ft in 5 separatebuildings. Building 2 has been let to Kia Motors, 16,000 sq ft, and AllianceUnichem, 23,600 sq ft. Marketing efforts continue on the remaining space andthe number of viewings has increased recently. The project was forward fundedwith Prudential Assurance Company, the terms of which limit our financialexposure. Future office development programme Mitre Square, London EC3 A planning application for an office scheme of 350,000 sq ft is due to bedetermined by the City Planning Committee shortly. The proposed development isa joint venture with Ansbacher Property Development Ltd. Once planning has beengranted, the outstanding land acquisitions can be progressed and a pre-letcampaign commenced. Ropemaker Place, London EC2 We are acting as Development Manager for DB Real Estate, Helical has receivedapproval for a new building of approximately 500,000 sq ft. Demolition of theexisting building will be completed in August 2005. Clareville House We are acting as Development Manager for Lattice Group Pension Fund who own thismixed use building comprising offices of 35,000 sq ft, nightclub of 17,000 sqft, restaurant of 4,000 sq ft and retail of 2,000 sq ft. We will be carryingout an extensive refurbishment. We are currently negotiating a pre let on thenightclub and seeking to obtain planning consent. Wood Lane, White City On behalf of a number of landowners, of which Helical is one, we are promotingthe regeneration of 43 acres of land at White City for a major mixed-usedevelopment. The Office of Metropolitan Architecture run by the world renownedarchitect, Rem Koolhaas, has been appointed to carry out a masterplan for thesite. We expect this masterplanning process to be completed by October 2005 atwhich point a planning application can follow. The scheme is likely to involvea high density mix of offices, residential, leisure and other ancillary uses. Amen Corner, Bracknell Having acquired a number of properties and options over land at Amen Corner,Bracknell, Helical is promoting a gateway office development fronting the A329(M) through the Local Development Framework planning process. A small scaleinfill residential scheme is also being pursued. Retail developments Helical's retail development programme has expanded significantly in the lastyear. The joint ventures with Overton Developments and Oswin Developments havemade good progress in respect of a number of promising opportunities. Friary Retail Park, Stafford Friary Retail Park, Stafford was completed in December 2004. This is a 38,500sq ft retail scheme which was pre-let to TK Maxx (20,000 sq ft), PC World(15,000 sq ft) and Choices Video (3,500 sq ft) and funded with Arlington FundManagers representing Tyne and Wear Metropolitan Borough Council. A secondphase involving a unit of 4,000 sq ft, pre-let to Laura Ashley, has obtainedplanning consent and is due to start on site in August 2005. The unit ispre-sold to Arlington as an extension to the main funding deal. Trinity Square, Nottingham Helical completed the site acquisition late last year and has since receiveddetailed planning consent for this major £100m city centre project. Thecompleted buildings which will adjoin the Victoria Centre (Nottingham's primeshopping pitch) will contain 190,000 sq ft of retail space, 700 studentapartments and a multi-storey car park with 470 spaces. Demolition of the redundant buildings is well advanced, and it is anticipatedthe construction work will commence this summer. The development is expected tobe completed in summer 2007. Major pre-lets have been signed up with Borders(26,000 sq ft), TK Maxx (58,000 sq ft) and Dixons (25,000 sq ft) providing acommitted rent roll of £2.1m. Negotiations with a major UK fund to forward sellthe completed investment are well advanced and are expected to be finalisedearly this summer. Commercial Road, Bournemouth Eight of the eleven shops purchased in late 2003 were demolished over Christmas2004 with construction commencing on site in February 2005. The new 51,000 sqft scheme has been substantially pre-let to Hennes, Zara and Republic with oneunit remaining to let (6,000 sq ft). The new development plus the retainedinvestment block let to Dixons, Wallis and Carphone Warehouse have both beenforward sold to a private Irish investor for just over £40m. Future Retail Development Programme Bluebrick, Wolverhampton The former low level station comprising a total of eleven acres was purchased inNovember 2003. The main nine acre site has been marketed as a majorregeneration mixed use scheme and a planning application has now been submittedfor a 20,000 sq ft car showroom, 81 bed hotel, 7,500 sq ft public house, 5restaurants (23,000 sq ft) in the listed station buildings and 208 apartments.Consent is anticipated this summer with a view to starting on site to demolishthe surplus buildings and put in a spine road to provide serviced sites to theoccupiers in the autumn. Reg Vardy have signed up to purchase the car showroom site which will trade as aLand Rover Dealership and discussions are in hand with operators for the Hoteland Public House. The apartments site will be sold following planning consentto a major house builder and the listed building conversion will be developeddirectly once occupiers have been secured. Hatters Retail Park, Luton The 8 acre site had been secured by way of conditional contracts and followingreceipt of planning consent for 80,000 sq ft of bulky goods retail warehousingand 25,000 sq ft of industrial units the contracts have now been triggered sothe site will be bought in two tranches in summer 2005. Marketing of the units is underway and active discussions are in hand with anumber of mainstream retailers. It is envisaged that construction work willcommence early in 2006. Town Centre Scheme, Shirley, Solihull The scheme which comprises 160,000 sq ft of retail, anchored by a 75,000 sq ftfoodstore, and some 250 apartments is being progressed through a 50:50 jointventure with Coltham Developments. A development agreement has been exchangedwith Solihull Metropolitan Borough Council, who own the majority of the site, topromote the "Heart of Shirley" town centre scheme. Site assembly is underwayand it is envisaged that a planning application will be submitted this summerwith a view to start on site early in 2006. Shrub Hill, Worcester A purchase contract has been entered into with First Bus subject to theirrelocation to a new site and once this has been achieved the site, which hasplanning consent for 35,000 sq ft of retail warehousing, can be progressed. Inaddition there is also a one acre site with planning consent for 45 canalsideapartments. Residential Developments The Group has from time to time acquired sites and created value throughobtaining planning consents for retirement villages. Lime Tree Village, Dunchurch, Rugby This development involves the refurbishment of a Victorian country house and theconstruction of 153 bungalows, cottages and apartments for retirement. Thefirst phase of 50 homes and the refurbishment of the house have been completed.Phase two of a further 50 homes is under construction. 57 of the units havebeen sold or reserved. Bramshott Place, Liphook Planning negotiations continue for a retirement village development comprising144 apartments, cottages and bungalows. Subject to planning, work is due tostart in 2006. Gerald KayeDevelopment Director INVESTMENT The investment and trading portfolio had a good year with a valuation uplift of14.2%, sales of investment properties at 13.6% over March 2004 valuation andtrading profits of £8.4 million (including Helical's share of joint ventureprofits). In all, this produced an unleveraged total return of 27.6%outperforming all 156 quarterly and monthly valued funds as measured by IPD forthe year to 31 March 2005. These figures and those noted below exclude thesurplus arising from the valuation of trading and development stock referred toin the Chairman's statement. Investment portfolio Valuation movement ERV movement Average unexpired term years Offices 16.3% 10.8% 8.8Industrial 9.3% 1.2% 8.6Out of town retail 10.1% 5.9% 14.1In-town retail 13.2% 6.8% 8.9 -------- ------- ------Total 14.2% 7.2% 9.6 Valuation yields Initial Reversionary Equivalent True equivalent Offices 7.6% 7.9% 7.8% 8.2%Industrial 7.5% 8.4% 8.2% 8.6%Out of town retail 5.6% 6.3% 6.2% 6.5%In-town retail 4.1% 7.6% 7.0% 7.3% ------- ------- ------- -------Total 6.3% 7.6% 7.3% 7.7% Retail In March 2005 we completed the £29 million purchase of the 225,000 sq ft MorganDepartment Store and Royal and Morgan Arcades in Cardiff. Planning consent hasbeen obtained to convert the department store into three large retail units, thebiggest of which has been prelet to Sportsworld. Residential development isproposed for the upper floors. This holding is "unworked" having been in familyownership for 124 years and is in an improving pitch directly opposite LandSecurities' and Liberty's proposed St David's 2 Shopping Centre, to be anchoredby John Lewis. Progress continues at our shopping centre in Letchworth where we have createdtwo larger units let to Bon Marche and Millets at £55 and £58 psf Zone A, 60%above rental values at the time of our 2003 purchase. A residential planningconsent to convert an office building above the centre has been obtained andfurther applications made for a mall cafe and small retail extension. Turning to retail warehouses, we have acquired an infill site at ourWeston-Super-Mare Park and obtained planning consent for a 27,000 sq ft unitprelet to Wickes at £14.25 psf, a 19% uplift over previous rental values. Wealso took a surrender of a 19,000 sq ft unit let to Magnet which wassubsequently relet to Next. Retail warehouses of 32,000 sq ft in Ashford nearHeathrow and 27,000 sq ft in Crowborough, East Sussex were acquired during theyear. Both are highly reversionary. Many of our more active retail assets are trading properties, held within ouraccounts at the lower of cost or value and where performance will only becrystallised on sale. These are listed in the Trading Properties table below. In joint venture with local developers Abbeygate, we have a number of ongoingprojects in Milton Keynes. • Construction is due to complete in June of an 80,000 sq ft retail warehouse at Winterhill prelet to Homebase at £17.75 psf and funded with Arlington Investors for £24.5 million. • Our joint venture vehicle, Abbeygate Helical, has been selected by English Partnerships as the developer for the £100 million C4.1 project in central Milton Keynes. A 110,000 sq ft Sainsbury supermarket and 400 residential units are planned with construction due to start later this year. • Discussions with English Partnerships have also commenced to investigate the regeneration of the Leisure Plaza (acquired in 2003) to create a mixed use development encompassing retail, leisure and residential uses of a similar scale to C4.1. Two further acquisitions have been made with Abbeygate. A 28,000 sq ftindustrial property adjoining a retail park in Winterhill was acquired inNovember for medium term retail redevelopment. A 10,000 sq ft retail warehousewas acquired in January in central Sheffield where we are promoting a ten storeyresidential development. In January we acquired a site in Epsom with residential consent which we are nowpromoting with adjoining council land as an 80,000 sq ft supermarketdevelopment. A planning application has been submitted. Just before the financial year end we acquired for £25.5 million a portfolio of95 off licences all in the South East of England and leased back to Unwins.With an average lot size of under £500,000 these properties are likely to proveattractive to private investors and will be traded on during the year atauction. The first auction sale in May 2005 of 26 of the larger units producedgross sales of over £16m. Offices During the first half of the financial year, offices were sold at 5-10 ParisGardens, London SE1 for £18.25 million, a half share of 66 Prescot Street,London E1 for £14.35 million, Westfields in High Wycombe for £5.5 million andSouthfields Road, Dunstable for £3.3 million. We also contracted early in theyear to sell the Interchange in Camden for £21.5 million with completiondeferred to March 2005. The total of £62.9 million of office sales wasmarginally above March 2004 valuation and 37% over historic cost, all havingbeen acquired over the previous five years. Our 150,000 sq ft office refurbishment at Shepherds Bush is now 97% let to over40 tenants, principally from the media sector, including Fox TV, NationalGeographic TV, Endemol and Mulberry. The leasing of the building generated a22% valuation increase this year but much potential for further growth remainswith the average rent passing at under £20 psf. At 61 Southwark Street, half the building by floor area has been subject to rentreview during the year with an average rental increase of 66% driving a 21%valuation increase. Rex House in Regent Street, which was refurbished and let in 2001, is being heldfor cashflow, rental recovery and marriage value potential. The property isleasehold with an unexpired term of just over 30 years. In February we acquired for refurbishment 60,000 sq ft of vacant TV studios andoffices in Battersea in a 50/50 joint venture. The project will follow theconcept developed at Shepherds Bush with multiple suites created around centralsocial facilities including a cafe/bar. Industrial After 17 years of ownership we sold in November our largest asset, ourindustrial holdings at Aycliffe and Peterlee, for £67.6 million. Thisrepresented a 25% premium over our March 2004 valuation and nearly three timeshistoric cost. Industrial units were also sold at Avonmouth for £8 million (26%above valuation) and Sawston for £1.5 million (39% above the 2003 purchaseprice). As with the retail portfolio, many of our more active industrial properties areheld as trading stock. These typically are refurbishments or redevelopmentsdesigned for owner-occupier sales at premium prices. Schemes in progress orcompleted during the year in joint venture with Dencora are 127,000 sq ft inHarlow (100% sold), 46,000 sq ft Sawston, Cambridge (44% sold, 22% under offer)and 36,000 sq ft in Edenbridge (25% sold, 36% under offer) with a new projectacquired in Newmarket (90,000 sq ft). We also completed 135,000 sq ft in Slough(52% sold or let) in joint venture with Chancerygate with whom we also acquireda new project in Oxford (56,000 sq ft). At Dunstable we obtained a planning consent for 148 flats on a five acreindustrial site which has been sold to Kingsoak for £8.2 million (at more thandouble the 2002 purchase price). We also own industrial assets in Fleet (fiveacres) and Great Alne, Warwickshire (20 acres) where we have made planningapplications and are hopeful of obtaining residential or retirement homesconsents. Michael BrownInvestment Director Investment Properties LONDON OFFICES Size Average Vacancy Year Comments (sq ft) passing rate acquired rent (psf) Rex House, SW1 80,000 £56 0% 2000 Leasehold expires 2035 Shepherds Building, W14 151,000 £19 3% 2000 90% interest 61 Southwark Street, SE1 66,000 £20 10% 1998 Rent reviews 2004 on 32,000 sq ft Battersea Studios, SW8 58,000 £16 94% 2005 50% interest ------------ ------------ ----------- 355,000 £27 18% OUT OF TOWN RETAIL Weston Retail Park, 140,000 £12 0% 1999 75% interestWeston-Super-Mare Otford Road Retail Park, 43,000 £14 0% 2003 75% interestSevenoaks Homebase, St Austell 36,000 £8 0% 2002 75% interest Focus, Ashford 32,000 £15 0% 2004 75% interest Focus, Crowborough 27,000 £9 0% 2005 75% interest Wickes, Worthing 26,000 £11 0% 2003 75% interest ------------ ----------- ------- 304,000 £11.75 0% TOWN CENTRE RETAIL Morgans Department Store, Cardiff 160,000 £17 60% 2005 Morgan & Royal Arcades, Cardiff 65,000 £40 ZA 3% 2005 Garden Square, Letchworth 165,000 £40 ZA 10% 2003 New lettings @ £55 psf ZA WH Smiths, Chiswick 5,000 £85 ZA 0% 2000 Residential site at rear ------------ ------------ -------- 395,000 £50ZA 29% INDUSTRIAL Size Average Vacancy Year Comments (sq ft) passing rent rate acquired (psf) Hawtin Park, Blackwood 251,000 £2.85 7% 2003 Sawston, Cambridge 218,000 £4.30 0% 2003 67% interest Walton Summit, Preston 143,000 £4.10 0% 1990 Standard Estate, N Woolwich 105,000 £9.00 29% 2002 60% interest Golden Cross, Hailsham 102,000 £5.00 0% 2001 Waterside, Fleet 54,000 £7.00 9% 1999 -------------- --------- ------ 873,000 £4.66 6% OTHER Cardiff Royal Infirmary - vacant hospital on a peppercorn lease with redevelopment potential TRADING PROPERTIES Address Description Year % interest acquired Unwins Portfolio 95 off licences in South East England 2005 100% Upper High Street, Epsom Residential site with supermarket potential 2005 100% Bus Depot, Milton Keynes Ongoing development pre-let to Homebase (80,000 sq 2001 50% ft) funded with Arlington Leisure Plaza, Milton Keynes 119,000 sq ft leisure scheme with potential for 2003 50% mixed- use development Mailcom, Milton Keynes 28,000 sq ft industrial unit with retail warehouse 2004 50% potential Globus Office World, Sheffield 10,000 sq ft retail warehouse with residential 2005 50% potential Great Alne, Maudslay Park 314,000 sq ft industrial estate on a 20 acre site 2004 100% with potential for a retirement home use Mill Street, Slough 135,000 sq ft industrial in 14 units 2002 90% Fircroft Way, Edenbridge 36,000 sq ft industrial estate refurbished for owner 2004 50% occupier sales Watlington Road, Oxford 56,000 sq ft offices/industrial to be refurbished/ 2005 80% redeveloped for owner occupier sales Willie Snaith Road, Newmarket Site for 80,000 sq ft trade counter/industrial/office 2005 50% development 2/6 Curtain Road, 7,000 sq ft office forming part of a 700,000 sq ft 2001 50%London EC2 development site ENTIRE PORTFOLIO CASHFLOW YIELDS(YIELDS EARNED BY HELICAL - EXCLUDE NOTIONAL PURCHASER'S COSTS) Initial Reversionary Equivalent Investment 6.7% 8.0% 7.7%Trading 5.0% 8.1% 7.8%Development 0.2% 7.9% 7.5% ------- ------- -------Total 5.7% 8.0% 7.7% PORTFOLIO BALANCE London Retail Retail Industrial Other Total offices In town Out of town Investment 28.3% 17.5% 14.5% 12.4% 0.1% 72.8%Trading 0.6% 8.3% 1.2% 5.5% 0.9% 16.5%Development 2.3% 5.3% 1.5% 0.0% 1.6% 10.7% -------- -------- -------- -------- -------- ---------Total 31.2% 31.1% 17.2% 17.9% 2.6% 100.0% Financial Review Profits Adjusted profits before tax, excluding exceptional items and loss on sale ofsubsidiary increased to £18.9m (2004: £11.7m). Profits after tax and minorityinterest increased to £26.8m (2004: £11.2m). Rental income Net rental income for the year fell to £19.7m (2004: £23.0m) as the Group soldfurther investment and trading properties. During the year £124.2m ofinvestment properties, yielding £10.4m of rental income were sold. £22.3m wasused to add to the investment portfolio and £41.4m was used to purchase incomeproducing properties to be re-developed or traded. Together these produce apassing rent of £3.2m. Rent reviews and new lettings, net of lease expiries andrent free periods, added rental income of £1.7m on the remaining portfolio. Rental costs increased from £2.3m to £2.8m, mainly from letting fees onpreviously vacant space. Trading and other profits Trading profits of £5.8m were up on last year (2004: £1.0m) and arose from thesale of a number of small industrial units in Aycliffe & Peterlee, Harlow,Slough, Sawston and Edenbridge and a site in Dunstable. Development profits The development programme started to generate significant profits again with theoffice development at 40 Berkeley Square and the retail schemes at Stafford andBournemouth being the main contributors. 2005 2004 2003 2002 2001Developments £ 000 £ 000 £ 000 £ 000 £ 000 Profits 12,664 38 4,630 17,072 29,507 Administrative expenses Administrative expenses increased from £8.0m to £15.8m due to an increased levelof performance related bonuses. Administrative expenses, before goodwill andexecutive bonuses, fell to £5.6m (2004: £6.0m). Profit on sale of investment properties - exceptional items During the year to 31 March 2005 the Group sold £124.2m (2004: £82.2m) ofinvestment property on which it made £16.0m (2004: £2.0m) of profit over 31March 2004 book value and sale costs. The properties sold included theindustrial estates at Aycliffe & Peterlee and Avonbridge, offices in Southwark,Camden and High Wycombe and a Sainsbury's store in Wednesfield. Net interest payable Despite higher interest rates and a higher level of gearing in the second halfof the year the cash surpluses arising from the sale of investment propertieskept net interest payable to £6.8m (2004: £6.6m). Interest received increasedfrom £1.1m to £1.9m as surplus cash from investment sales was placed on depositprior to the Return of Cash. Interest of £2.3m (2004: £1.8m) was capitalisedreflecting the much increased holding of non-income producing development sites. 2005 2004 2003 2002 2001Net interest payable £ 000 £ 000 £ 000 £ 000 £ 000 Interest payable on bank 8,330 7,548 9,543 14,804 19,514 loansOther interest payable 2,243 1,741 2,351 3,215 1,343Finance arrangement costs 457 170 783 408 572Interest capitalised (2,296) (1,817) (795) (1,006) (1,597)Interest receivable (1,948) (1,070) (2,244) (2,642) (591) ----------- ----------- ----------- ----------- ----------- 6,786 6,572 9,638 14,779 19,241 ----------- ----------- ----------- ----------- ----------- Taxation The corporation tax charge for the year is less than the standard rate of 30%due to the use of capital allowances and tax losses. The deferred tax credit for the year reflects a full provision for capitalallowances claimed in previous years which is more than offset by a reduction inprevious years' provisions where investment properties have been sold and thereis no longer a potential for the clawback of the allowances claimed to date. Dividends The Board is recommending to shareholders at the Annual General Meeting on 20July 2005 a final dividend of 11p per share (2004: 10.00p) to be paid on 22 July2005 to shareholders on the register on 10 June 2005. This, with the interimdividend of 6.60p, makes a total of 17.60p. This is an increase of 6 per centon the previous year's dividend of 16.60p. This is covered over seven times byprofits after tax. 2005 2004 2003 2002 2001Dividends pence pence pence pence pence Interim 6.60 6.60 6.00 5.50 5.00Final 11.00 10.00 9.00 8.25 7.50 ----------- ----------- ----------- ----------- ----------- 17.60 16.60 15.00 13.75 12.50Special - - - 100.00 - ----------- ----------- ----------- ----------- ----------- 17.60 16.60 15.00 113.75 12.50 ----------- ----------- ----------- ----------- ----------- In the year to 31 March 2005 a 400p per share dividend was paid to shareholdersholding 14,143,020 A shares as part of the Return of Cash on 23 December 2004. Earnings per share Earnings per share in the year to 31 March 2005 were 115.2p (2004: 40.9p) pershare and on a diluted basis were 110.5p (2004: 39.6p) per share. 2005 2004 2003 2002 2001Earnings per share pence pence pence pence pence Earnings per share 115.2 40.9 61.2 60.0 70.0Diluted earnings per share 110.5 39.6 59.2 57.8 67.7 Investment portfolio During the year investment properties with a book value of £124.2m were sold andpartly replaced by £22.3m of new properties. In addition around £5.6m ofcapital expenditure was spent on refurbishing various office, industrial andretail buildings. At 31 March 2005 there was a revaluation surplus of £30.1m(2004: £24.2m) on the investment portfolio. 2005 2004 2003 2002 2001Investment portfolio £ 000 £ 000 £ 000 £ 000 £ 000 Cost or valuation at 1 April 334,932 342,484 439,911 453,607 419,570Additions at cost 30,314 50,464 47,175 32,838 24,341Disposals (124,210) (82,178) (131,168) (65,062) (29,624)Revaluation 30,097 24,162 (13,434) 18,528 39,320 ----------- ----------- ----------- ----------- -----------Cost or valuation at 31 March 271,133 334,932 342,484 439,911 453,607 ----------- ----------- ----------- ----------- ----------- Net asset values The net asset values of Helical Bar plc have been affected by three main areas -the performance of the Company, the payment of £97.2m in the Return of Cash andthe adoption of UITF 38 - Accounting for ESOP Trusts. In the year to 31 March 2005 the Company generated a retained profit, beforepayment of the A share dividend under the Return of Cash reorganisation, of£23.3m (2004: £7.0m). A revaluation surplus of £30.1m (2004: £24.2m) wasrecognised. Payments under the Return of Cash proposals totalled £97.2m with a further£2.45m to be paid in June 2005. In addition the Company purchased 530,000ordinary 5p shares for £4.5m. The adoption of UITF 38 - Accounting for ESOP Trusts has resulted in a reductionin shareholders funds at 31 March 2005 of £6.9m (2004 restated: £10.1m). In calculating the net assets per share a provision has been made for thedeferred tax which would become payable should all the capital allowancesclaimed to date be clawed back as a taxable adjustment in the Group's taxcomputations. The Group believes this clawback is unlikely and accordingly, hascalculated the diluted net asset value assuming this not to be the case in linewith current industry practice. Adjusted diluted net assets per share of 1078pcompare to 884p in 2004. After allowing for the unprovided deferred tax onrevaluation surpluses and the value ascribed to financial instruments, theadjusted diluted triple net asset value of the Group has increased from 804p to992p at 31 March 2005. 2005 2004 2003 2002 2001Net asset values per ordinary pence pence pence pence penceshare Diluted net asset value - 1 1078 884 775 775 754Diluted net asset value - 2 992 804 704 664 651 1 - net asset value diluted for share options but adding back the provision ofdeferred tax on clawback of capital allowances. 2 - net asset value diluted for share options and adjusted for unprovideddeferred tax, FRS 13 value of financial instruments but adding back theprovision of deferred tax on clawback of capital allowances. Net asset values for the year to 31 March 2001 and subsequently have beenrestated to reflect the impact of the adoption of UITF 38 - Accounting for ESOPTrusts, regarding the disclosure of the investment in the Company's shares heldby its Employee Share Ownership Plan Trust. Borrowings and financial risk The Group's ongoing reduction in its exposure to the Central London officemarket has continued the reduction in debt and, at 31 March 2005, net debt hadfallen to £125.0m from £129.8m. The Group's net gearing increased to 66% from55% at 31 March 2004. 2005 2004 2003 2002 2001Net debt and gearing Net debt £125.0m £129.8m £140.9m £152.4m £232.8m Gearing 66% 55% 62% 67% 104% The Group seeks to manage financial risk by ensuring that there is sufficientfinancial liquidity to meet foreseeable needs and to invest surplus cash safelyand profitably. At the year end, Helical had £51m of undrawn bank facilitiesand cash of £28.2m (2004: £18.3m). In addition it had £130m of unchargedproperty on which the Group could borrow funds. As at 2 June 2005 Helical's average interest rate was 6.01%. FRS13 requires disclosure of financial instruments on a fair value basis and at31 March 2005 an adjustment to reflect this basis would reduce net assets, aftertax relief, by £1.2m (2004: £2.0m) which, if provided for, would reduce dilutednet assets by 6p per share (2004: 7p). Shares purchased for cancellation Using the authority granted at the 2003 AGM, the Company continued its sharepurchase programme and, in May and June 2004, purchased 530,000 ordinary 5pshares for cancellation at an average price of 843p per share and a total costof £4.5m. The total number of shares purchased since July 2003 is 3,435,951, approximately11.5% of the share capital in issue prior to the start of the purchases, at atotal cost of £26.0m and an average cost of 756p per share. This average costis at a 30% discount to adjusted net asset value of 1078p per share and a 24%discount to "triple net" asset value of 992p per share. Return of Cash On 18 November 2004 the Company announced that it intended returning £4.00 perexisting ordinary share to shareholders in conjunction with a reorganisation ofthe Company's share capital. This Return of Cash was structured to giveshareholders a choice between receiving it in the form of capital or income or,alternatively, to receive new ordinary shares in lieu of the entitlement to acash payment. The Return of Cash was approved by shareholders at an Extraordinary GeneralMeeting held on 20 December 2004. Shareholders holding 14,143,020 ordinary shares elected, or were deemed to haveelected, for A shares which entitled the holders of these shares to a £4.00dividend per share and, accordingly, on 23 December 2004 a total dividend of£56,572,080 was paid. Shareholders holding 10,586,829 ordinary shares elected to receive B shares. Bshareholders were entitled to have those shares repurchased for £4.00 each, orto retain the B shares pending receipt of an offer to purchase the shares for£4.00 after 5 April 2005. The Company received notification that shareholdersrepresenting 9,974,125 B shares had accepted the repurchase offer. Accordingly,on 23 December 2004 and 5 January 2005 payments totalling £39,896,500 were made.It is anticipated that the remaining 612,704 B shares will be repurchased inJune 2005. Shareholders holding 2,426,676 ordinary shares elected to receive C shares whichentitled the holders of these shares to convert them into new ordinary shares ata conversion rate of 1 new share for every 3.2 C shares held. Accordingly,758,336 new ordinary shares were issued at an effective 20% premium to theprevailing share price at the date the Return of Cash was announced. International Financial Reporting Standards International Financial Reporting Standards (IFRS) will first apply to thefinancial statements of Helical Bar plc for the year to 31 March 2006 and willbe adopted when we report our interim results for the period to 30 September2005. Our preparations for this are well advanced. The main effects of IFRS for Helical Bar will be: • Recognition of investment property revaluation surplusesand deficits in the income statement and the associated deferred tax liabilityin the tax charge and balance sheet; • Mark to market valuation of financial instruments. • Dividends will be recognised effectively when paid, ratherthan when proposed. Accounting Standards - Adoption of UITF 38 The adoption of UITF38 - Accounting for ESOP Trusts in these financialstatements has resulted in the value of the shares in the Company held by theESOP Trust being treated as a deduction from Shareholders' Funds and not as afixed asset investment. A corresponding adjustment has been made to the balancesheet at 31 March 2004 and a number of comparative figures at that date and forprevious years have been restated. Performance measures In order to evaluate its overall performance against other small to mid-sizecapital companies, both here and abroad, Helical looks at equity value added andtotal shareholder return ("TSR"). The performance of the property portfolio asmeasured by the Investment Property Databank ("IPD") is also noted below. Equity value addedYear ended 31 March 2005 2004 2003 2002 2001 Capital employed £m 347 348 377 390 466Return on capital % 22 11.5 3.9 10.5 18.2Weighted average cost of capital % 6.7 7.0 6.1 6.3 5.9Spread % 15.4 4.5 (2.2) 4.2 12.3Equity value added/(lost) £m 53.4 15.6 (8.5) 19.6 52.9 Total shareholder return Total shareholder return measures the return to shareholders from share pricemovements and dividend income. The returns were as follows: 1 year 3 years 5 years 10 years 15 years 19 years from from from from from from31 March 2004 2002 2000 1995 1990 1986 % pa % pa % pa % pa % pa % pa Helical Bar plc 35.6 14.8 20.0 20.7 17.7 27.4UK equity market 15.6 2.0 (1.7) 8.1 9.3 10.1Listed real estate sector 25.4 16.4 15.8 12.2 8.3 9.5indexDirect property 18.0 13.7 11.5 11.4 9.1 -* Source: New Bridge Street Consultants/Datastream *1 Information not available Investment Property Databank ("IPD") Helical has compared its ungeared property performance against that ofportfolios within the Investment Property Databank for the last 15 years. Helical has been in the top percentile or above over 1, 5, 10 and 15 years. Thereturns on shareholder capital earned by Helical are generally higher than thosemeasured by IPD due to the use of gearing. IPD (all monthly and quarterly valued funds) ungeared returns Total Returns %Annualised over 1 yr 5 yrs 10 yrs 15 yrsHelical 28.5 17.3 19.1 17.7IPD benchmark 17.2 11.3 11.4 8.5Percentile rank 0 1 0 0 '0' means the top ranked fund The returns noted above take no account of the £13m surplus of trading anddevelopment stock above book value arising from the directors' valuation. HELICAL BAR PLC GROUP PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH 2005 UNAUDITED Notes Year Ended Year Ended 31 March 2005 31 March £000 2004 £000Turnover (including share of joint ventures' turnover) 105,808 55,984Less: share of joint ventures' turnover (4,647) (1,418) ----------- -----------Turnover 1 101,161 54,566Cost of sales (62,807) (29,916) ----------- -----------Gross profit 1 38,354 24,650Administrative expenses 2 (15,768) (8,037) ----------- -----------Operating profit 22,586 16,613 Share of operating profit in joint ventures 3,078 1,636Profit on sale of investment properties 3 15,973 2,035Loss on sale of subsidiary - (59)Net interest payable 4 (6,786) (6,572) ----------- -----------Profit before tax 34,851 13,653Taxation 5 (8,037) (2,199)Minority interest (17) (232) ----------- -----------Profit for the year 26,797 11,222Dividends - interim paid 6 (1,702) (1,739) - final proposed 6 (1,831) (2,524) - A share paid (56,572) - ----------- -----------Transfer (from)/to reserves (33,308) 6,959 ----------- ----------- Earnings per share - Basic 7 115.2p 40.9p