Helical Bar Regulatory News (HLCL)

6 Jun 2006 07:03

Helical Bar PLC06 June 2006 6 June 2006 HELICAL BAR PLC ("Helical"/"Company"/"Group") Preliminary Results For the year to 31 March 2006 HELICAL GROWS BY 30% FOR THE SECOND YEAR RUNNING Financial Highlights • Adjusted diluted net asset value plus trading stock surplus totalling 309p per share (2005: 238p) up 30% • Profit before tax of £57.1m (2005: £64.7m) • Gain on sale and revaluation of investment properties of £43.6m (2005: £44.2m) • Valuation of investment properties up 17.3% (2005: 14.2%) • Diluted earnings per share of 51.8p (2005: 53.7p) • Substantial increase in trading profits and a strong performance in investment portfolio underpin results • Final dividend proposed of 2.45p per share (2005: 2.20p) - up 11% Giles Weaver, Chairman, commented: "Helical has demonstrated its ability to outperform in good times and in bad.After a terrific run we believe that the rate of yield compression will slow andproperty returns will not be sustained at the exceptional level of recent years.However, we believe our ability to outperform and provide good returns for ourshareholders will continue." Further information, please contact: Helical Bar plcMichael Slade (Managing Director)Nigel McNair Scott (Finance Director)020 7629 0113 Address: 11-15 Farm Street, London W1J 5RSFax: 020 7408 1666Website: www.helical.co.uk Financial DynamicsStephanie Highett/Dido Laurimore020 7831 3113 FINANCIAL HIGHLIGHTS Year To Year To 31 March 31 March 2006 2005 Notes £m £m Net rental income 16.5 20.4Development profits 4.6 12.7Trading profits 13.4 5.8 Gain on investment properties 43.6 44.2 Profits before tax 57.1 64.7 pence pence Basic earnings per share 2 54.7 56.3 Diluted earnings per share 2 51.8 53.7 Adjusted diluted earnings per share 2 8.5 11.5 Dividends per share (paid in year) - ordinary dividends 2 3.65 3.32 - Return of Cash 2 - 80.00 Adjusted diluted net assets per share 1/2 278 224 £m £m Value of investment portfolio 294.6 271.3 Net borrowings 112.7 125.0 Net assets 230.1 186.2 Net gearing 49% 67% Notes 1. After adding back deferred taxation arising from the clawback ofcapital allowances on sale of investment properties, the deferred taxation onthe revaluation surpluses of the investment portfolio and the fair value offinancial instruments. 2. Comparative figures have been adjusted to reflect the 5 for 1 sharesplit on 1 September 2005. Chairman's Statement In my first statement as Chairman I am pleased to report that for the secondyear running, Helical has produced 30% net asset value per share growth. Thisreflects profits from a wide spread of projects and activities. We havecontinued to increase our diversification, investing in 15 schemes in the UKover the last two years as well as forming new joint ventures in Poland and withThe Asset Factor. We continue to position ourselves towards high margin business and believe, whenthe benign impact of yield compression fades, our approach will continue todeliver outperformance. Results Profits before tax, prepared under International Financial Reporting Standards("IFRS") for the first time, reduced to £57.1m (2005: £64.7m) as lower levels ofnet rental income and development profits exceeded the rise in trading profits.The return of almost £100m to shareholders in December 2004, representing circa40% of shareholder value, contributed to the reduction in profits this year. Asa consequence, diluted earnings per share fell to 51.8p (2005: 53.7p). The gain on sale and revaluation of the investment portfolio was steady at£43.6m (2005: £44.2m) reflecting a like for like valuation increase of 17.3% andsales of investment properties at 16.9% over 2005 book values. The Group's adjusted diluted net asset value per share rose by 24% (2005: 24%)to 278p (2005: 224p). This takes no account of any surplus on the £86m oftrading and development stock which are held in our books, in accordance withnormal practice, at the lower of cost and net realisable value. The directors'valuation of trading and development stock shows a surplus of £29m (2005: £13m)which, if taken into account, would increase adjusted net asset value per shareto 309p (2005: 238p). The Company's prospects for 2006/7 are encouraging and allow the Board torecommend to shareholders a final dividend of 2.45p per share (2005: 2.20p), anincrease of 11%. Under IFRS dividends are accounted for once declared and, as aconsequence, this final dividend is not reflected in these accounts. However,taken with the interim dividend paid in December 2005 of 1.45p (2005: 1.32p) itrepresents a total dividend of 3.90p (2005: 3.52p), an increase of 11%. International Financial Reporting Standards (IFRS) These accounts are the first annual accounts to be prepared in accordance withIFRS. Included in the accounts are restated comparative figures for the year to31 March 2005. Reconciliations to, and explanations of the differences betweenthese figures and those previously reported under UK GAAP, are provided in thenotes to these accounts. The adoption of IFRS has changed the presentation and format of the annualreport. However, it has no impact on the cash flows of the business or itsunderlying performance. Share capital On 31 August 2005 shareholders approved a 5 for 1 share split effective from 1September 2005. As a consequence the 18,424,385 ordinary 5p shares in existenceon 1 September 2005 were divided into 92,121,925 ordinary 1p shares. The netasset value per share and earnings per share calculations for the current andcomparative periods have all been adjusted accordingly. Key performance indicators and benchmarks A property company's share price should reflect growth in net assets per share.Our Company's main objective is to maximise growth in assets from increases ininvestment portfolio values and from retained earnings from other propertyrelated activities. We incentivise management to outperform the Company'scompetitors by setting the right levels for performance indicators against whichrewards are measured. We also design our remuneration packages to alignmanagement's interest with shareholders' aspirations. Key to this is themonitoring and reporting against identifiable performance targets andbenchmarks. For a number of years we have reported on these, the most importantof which are: - Investment Property Databank The Investment Property Databank ("IPD") produces a number of independentbenchmarks of property returns which are regarded as the main industry indices.They have compared the ungeared performance of Helical's total propertyportfolio against that of portfolios within IPD for the last 16 years. Thecompany's annual performance target is to exceed the top quartile of the IPDdatabase. Helical's ungeared performance for the year to 31 March 2006 was25.9% (2005: 28.5%) compared to the IPD median benchmark of 20.6% (2005: 17.2%)and upper quartile of 22.8% (2005: 20.3%). IPD (all monthly and quarterly valued funds) ungeared returns Total Returns % % % % %Annualised over 1 yr 3 yrs 5 yrs 10 yrs 16 yrsHelical 25.9 22.9 17.9 20.3 18.2IPD Benchmark 20.6 16.4 13.0 12.8 9.2Percentile rank 10 1 4 0* 0* * '0' means the top ranked fund The returns on shareholder capital earned by Helical are generally higher thanthose measured by IPD due to the use of gearing. The returns noted above takeno account of the £29m (2005:£13m) surplus of trading and development stockabove book value arising from the directors' valuation. - Total Shareholder Return Total Shareholder Return ("TSR") measures the return to shareholders from shareprice movements and dividend income and is used to compare returns betweencompanies listed on the Stock Exchange. Management is incentivised to exceedthe top quartile of the real estate sector. Helical's TSR for the year to 31March 2006 was 73.5% (2005: 35.6%) compared to the median of the listed realestate sector of 49.3% (2005: 25.4%) Total Total Total Total Total Total Shareholder Shareholder Shareholder Shareholder Shareholder Shareholder Return Return Return Return Return Return Measured Measured Measured Measured Measured Measured over over over over over over 1 year 3 years 5 years 10 years 15 years 20 years From From From From From From 31/03/2005 31/03/2003 31/03/2001 31/03/1996 31/03/1991 31/03/1986 % % % % % % Helical Bar plc 73.5 % 52.6% 26.5% 26.1% 23.3% 29.4% UK equity 28.0% 24.7% 5.7% 8.4% 10.2% 10.9%market Listed real 49.3% 44.6% 19.3% 15.7% 11.6% 11.2%estate sectorindex Direct property 20.9% 17.2% 13.8% 13.0% 11.1% 11.4% Source: New Bridge Street Consultants/Datastream - Net asset value Net asset value per share represents the share of net assets attributable toeach ordinary share. Whilst the basic and diluted net asset per sharecalculation provide a guide to performance the property industry prefers to usean adjusted diluted net asset per share. The adjustments necessary to arrive atthis figure are shown in note 25 to this announcement. Management isincentivised to exceed 15% p.a. growth in net asset value per share. The adjusted diluted net asset value per share, excluding trading stock surplus,at 31 March 2006 was 278p (2005: 224p), an increase of 24.0%. Including thesurplus on valuation of trading and development stock, the adjusted diluted netasset value per share at 31 March 2006 was 309p (2005: 238p) an increase of29.7% (2005: 31.2%). Adjusted triple net asset value per share rose by 29.6%(2005: 33.6%) to 284p (2005: 219p). Real Estate Investment Trust ("REIT") Legislation The real estate sector has welcomed the Government's proposed legislation forthe introduction of REIT's to the UK. This legislation is likely to be enactedin July 2006. Companies converting to REIT status will benefit from a tax free status on theirqualifying property activities, subject to meeting certain conditions. There isfurther consultation to be finalised before the new legislation is enacted, butit would appear unlikely that the Helical 'model', which has generated tradingand development profits equal to investment income, will qualify. Helical'sconsistent success throughout the last 22 years since inception suggests that weshould not alter our modus operandi solely to reduce tax liabilities. We are confident that our model is strong enough to continue to outperform ourpeers on a net of tax basis. The Board After serving the Company for almost 25 years, first as consultant with Laing &Cruickshank and, since 1984, as non-executive director and Chairman, JohnSouthwell will step down from the Board at the 2006 AGM. In his time with theCompany, John Southwell has been an instrumental part of a management team thathas seen the share price increase from an equivalent 1p level to today's shareprice of 407p having paid out special dividends of 120p per share along the way.The Board would like to express its gratitude to John for his guidance,leadership and wise counsel over this long period at the helm of the Company. During the year the Board was strengthened by two appointments. As mentioned inlast year's accounts, on 14 April 2005 Wilf Weeks joined as a non-executivedirector. Wilf specialises in Government Relations and is Chairman of EuropeanPublic Affairs at Weber Shandwick. On 1 March 2006 Andrew Gulliford joined as anon-executive director. Andrew is a former Deputy Senior Partner of Cushman &Wakefield Healey & Baker where he headed up their Investment Group. I believe that these two appointments improve the strength of the Board fromboth an operational and a corporate governance viewpoint. Outlook Commercial property continues to deliver excellent returns as a result of yieldcompression. At some stage this will cease. In what will become a morechallenging climate we will continue to obtain good results by adding valuewhether by refurbishment, redevelopment, active management or change of use viathe planning process. We have increased the number of our joint ventures enabling us to tap intospecialist skills whether geographical or sectorial. All of this activitydiversifies our risk and enables us to find deals at reasonable prices. Helical has demonstrated its ability to outperform in good times and in bad.After a terrific run we believe that the rate of yield compression will slow andproperty returns will not be sustained at the exceptional level of recent years.However, we believe our ability to outperform and provide good returns for ourshareholders will continue. Giles WeaverChairman6 June 2006 DEVELOPMENT PROGRAMME Helical's development objective is to create profit streams by focusing on largeCentral London office schemes, major mixed-use developments and retail schemes.As in the last cycle it is anticipated that the retail schemes will contributeto development profits before the larger office and mixed-use schemes come onstream. Development schemes Current and future programme Approximate Start Date SizeOffices Sq ft CityMitre Square, London EC3 2008 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 2010 500,000 Retail/Mixed-useTrinity Square, Nottingham 2005 235,000Commercial Road, Bournemouth 2005 48,000Bluebrick, Wolverhampton 2006 170,000Hatters Retail Park, Luton 2006 105,000Town Centre Shirley, Solihull 2007 200,000Shrub Hill, Worcester 2007 35,000 In the year under review the major components of development profits recognisedhave come from the retail development at Commercial Road, Bournemouth and themixed-use retail and student accommodation scheme at Trinity Square, Nottingham,with a contribution from a second phase at Stafford. On the offices side, the Company continues to work on schemes at Ropemaker PlaceEC2, Mitre Square EC3, Clareville House, SW1 as well as other Central Londonopportunities and in the longer term at White City and Amen Corner, Bracknell. OFFICE DEVELOPMENTS Mitre Square, London EC3 At Mitre Square we are planning a 350,000 sq ft office scheme in a joint venturewith Ansbacher Property Development Ltd. In July 2005 the City resolved togrant detailed planning consent for the scheme subject to completion of a S.106agreement, which is currently being negotiated. Completing the site acquisitionis underway and the design is being worked up. The project is planned tocommence on site in 2007 or 2008. Ropemaker Place, London EC2 Demolition of the previous building was completed last September. Helical wereacting as Development Manager for DB Real Estate. DB Real Estate sold the siteto British Land in March and the Development Management Agreement has beenassigned to British Land who are planning to start on site this year. TheAgreement provides for a fixed fee and a profit share dependent upon outcome. Wood Lane, White City, London W12 Working on behalf of the consortium of Landowners the Company has, with RemKoolhaas of The Office of Metropolitan Architecture, produced a masterplanscheme for the 43 acre site. We will be looking to obtain formal adoption ofthis masterplan within the next few months. We are already proceeding with the production of an Environmental ImpactAssessment with the intention of submitting, in early 2007, an outline planningapplication for a high density mixed-use scheme of 5 million sq ft plus. Clareville House, London SW1 We are acting as Development Manager for Lattice Group Pension Scheme withregard to the proposed refurbishment of the existing listed building. Aplanning application has been submitted for a scheme involving 35,000 sq ft ofoffices, bar/nightclub of 17,000 sq ft, restaurant of 4,000 sq ft and 2,000 sqft of retail space. We are hoping to achieve planning consent shortly to allowa start on site at the beginning of 2007. Amen Corner, Bracknell We hold a number of properties and options over land at Amen Corner, Bracknelland are promoting a gateway office development off the A329(M). JOINT VENTURES Helical Poland A joint venture vehicle has been established with Jonathan Tinker and PeterEvans both of whom are based in Warsaw and who have considerable experienceacquired over a number of years of the Polish Property Market. The joint ventureis concentrating exclusively on out-of-town retail developments. Currentlythree sites are under contract comprising circa 1 million sq ft of retail space. The Asset Factor The Company announced during the year a new outsourcing joint venture called TheAsset Factor. The Asset Factor is a joint venture with Matthew Punshon, OliverJones and Keith Perry all of whom have considerable experience of outsourcing.The venture will offer organisations integrated property asset managementsolutions with the aim of reducing costs, increasing efficiency and making theiraccommodation work for their business. Retail Developments 56-76 Commercial Road, Bournemouth This £40m scheme was completed during the year and the units handed over to theretailers at the end of 2005 for fitting out. The redeveloped section,comprising 48,000 sq ft was let to Hennes, Zara, Republic and Ann Summers. Thescheme was pre-sold to Irish investors, and also includes three retained shopslet to Wallis, Dixons and Carphone Warehouse. Helical's share of the profit wascirca £5.5 million. Trinity Square, Nottingham The £45m building contract was awarded to Shepherd Construction in 2005, andwork is now well under way on this 10 storey scheme divided into two blocks.Completion of the works and trading by retailers is expected by the summer of2007. The development comprises nearly 200,000 sq ft of retail accommodation,plus 700 student units and a multi storey car park. Nearly 60% of the retailaccommodation has been pre-let to Borders, TK Maxx and Dixons. The entirescheme has been pre-sold to Morley for over £100m and their Beech Fund willoperate the student accommodation. Friary Retail Park, Stafford Phase 2 of this retail park was successfully completed in March of this yearwith the construction of a 4,000 sq ft unit for Laura Ashley Home Furnishings atthe entrance to the scheme. The entire development of 42,400 sq ft is fully letto PC World, T K Maxx, Choices and Laura Ashley with rents now reaching £20 persq ft reflecting the strong trading location. The park was funded by ArlingtonInvestment Managers last year for £12m. Bluebrick, Wolverhampton Building work has commenced on the first phase of the 11 acre site which is amajor mixed-use regeneration scheme. Planning consent was received in spring2006 and an infrastructure contract is underway to prepare the sites that havebeen pre-sold to Reg Vardy for a 20,000 sq ft car showroom and Whitbread for an88 bed hotel and a 7,000 sq ft public house. The three acre residential site of208 apartments is being marketed for sale and the listed Low Level Stationbuildings are under offer to a casino operator subject to obtaining a gaminglicence. A further two phases are under discussion with potential tenants andwith planning authorities. Hatters Retail Park, Luton This former brownfield site of approx. 8.5 acres received planning consent lastyear for a mixed retail and industrial scheme. The site was acquired in twostages with the final purchase completing in October 2005. Phase 1 willcomprise a bulky goods retail park of 80,000 sq ft and so far lettings have beensecured with anchor tenants DFS, SCS, Carpetright and P Simon Furnishings. Twofurther units are under offer to Harveys and Pizza Hut. Enabling works on sitewere completed in April 2006 and the main contract will commence in the autumnwith completion due April 2007. Phase 2 will comprise approx 25,000 sq ft ofindustrial space split into small starter units with completion estimated forApril 2008. Parkgate, Shirley, Solihull The scheme which comprises 200,000 sq ft of retail anchored by an 80,000 sq ftAsda foodstore and some 200 apartments is being progressed through a 50:50 jointventure with Coltham Developments Ltd. Development agreements have beenexchanged with Solihull Metropolitan Borough Council and Asda and a planningapplication has been submitted. Marketing of the retail units will commence inthe summer 2006 with a view to starting on site in summer 2007. A further phaseoffers the opportunity for a major leisure/residential project. Shrub Hill, Worcester A purchase contract has been exchanged with First Bus on the four acre siteclose to the centre of Worcester which has the benefit of planning consent for35,000 sq ft of retail warehousing and 45 apartments. A relocation site hasbeen identified for the bus depot and vacant possession of the site should beachieved in spring 2007. RESIDENTIAL DEVELOPMENTS Lime Tree Village, Dunchurch, Rugby At Lime Tree Village, Dunchurch, Rugby we have refurbished, with our jointventure partners, a Victorian country house and are substantially through aprogramme constructing a retirement village of 153 bungalows, cottages andapartments. Phase 1 and 2 are complete and only a few units remain unoccupied.Work on the third phase commenced early in the new year and the first units havebeen released for sale. These have been well received at prices well in advanceof phase 1 and 2. A fourth phase is being planned to commence 2008/2009. Bramshott Place, Liphook At Bramshott Place, Liphook two resolutions to grant planning permission, onefor a retirement village of 144 units and one for 150 open market units weregranted by the local authority on 6 April subject to entering a S.106 Agreement. The site has already been adopted by East Hampshire District Council in itsLocal Plan. We anticipate the final consent to be granted around June 2006, whereupon thesite will be sold to a housebuilder. Maudsley Park, Great Alne Maudsley Park, Great Alne is a 314,000 sq ft industrial estate on a 20 acre sitewith potential for a retirement village development use. Stratford District Council has accepted the Local Plan Inspector'srecommendation and this site is now in policy terms a major development site inthe green belt upon which new forms of development are appropriate. A planningbrief is being prepared promoting a mixed-use scheme of a nursing home, smallnursery units to let and a retirement village of circa 230,000 sq ft togetherwith a Country Club facility. It is anticipated that the outcome of this planning application will be known inthe autumn of 2006. OTHER DEVELOPMENTS Future Opportunities The Company is currently working on several new large projects in London whichwe hope to announce over the next few months. Gerald KayeDevelopment Director Investment The investment and trading portfolio had another good year with a like for likevaluation increase of 17.3%, sales of investment properties at 16.9% over 2005valuation and trading profits of £13.4 million. In all, this produced anunleveraged total return of 27.2% as against 27.6% in the previous year. Allfigures exclude the surplus arising from the valuation of trading anddevelopment stock referred to in the Chairman's Statement. Retail The first phase of our refurbishment of the 225,000 sq ft Morgan DepartmentStore in Cardiff is due to complete in the autumn. Prelets to Borders andSportsWorld make up over 60% of the anticipated new income with two furtherlettings in solicitors' hands increasing this to 80%. The conversion of the topfloors to 55 flats will complete next year. The Royal and Morgan Arcades, whichform the final part of this holding, comprise 55 retail units which forge a linkbetween the main public transport nodes and the proposed St David's 2 ShoppingCentre. Further growth was secured at our shopping centre in Letchworth with five newlettings setting rentals at double the level pertaining at the time of ourpurchase in 2003. Meanwhile, our retail holding at Chiswick was sold at circa150% over original purchase cost having obtained a residential consent at therear of the site and regeared the retail lease. A portfolio of 95 small off-licences acquired for £25.5 million in 2005 wastraded out at auction over the year to show a profit of circa £9 million, over30% on cost. Our retail warehouse park in Weston-Super-Mare was sold during the year for£42.65 million. This price included the forward purchase of a new 29,000 sq ftunit, currently under construction and prelet to Wickes. The transaction showeda profit of circa 200% on 1999 purchase cost plus capital expenditure. At Crowborough, a property acquired last year, we regeared the occupationallease to Focus and sold on at a 30% profit on cost. Our retail warehouse inSheffield, also acquired last year, was traded on to a residential developer atover 50% above purchase cost. In joint venture with local developers Abbeygate we have recently commencedconstruction of the £100 million C4.1 mixed-use project in Milton Keynes. Theretail element, a 110,000 sq ft supermarket, has been forward sold toSainsbury's and the social element of the 440 unit residential scheme pre-soldto Genesis. We have also recently submitted a planning application in MiltonKeynes for a 300,000 sq ft retail and leisure scheme anchored by furnitureretailer ILVA on the site of our existing 120,000 sq ft Leisure Plaza. Offices At Shepherds Building we have in recent years converted a large 150,000 sq ftoffice building in an unconventional location in Shepherds Bush into a thrivingmedia related hub. Over 50 tenants occupy units from 200 sq ft to 35,000 sq ftanchored around a communal bar cafe. We have a waiting list of tenants seekingto move into the building and lettings recently agreed show a 25% increase inrental value. We have now rolled this format out in Battersea where we havejust finished converting a 60,000 sq ft disused TV studios. Ten lettings havebeen secured to date and after the year end planning consent was granted for afurther 50,000 sq ft of floorspace on site. Our 80,000 sq ft Rex House in St James's, which was refurbished and let in 2001,has been enjoying a strong underlying rental recovery and has considerablemarriage value potential - comprising a 30 year leasehold interest. At 61 Southwark Street the location of our holding continues to improve with theimminent completion of the Bankside development nearby, adding to theSouthbank's renaissance. Industrials During the year, sites have been acquired for schemes at Southall, West London(250,000 sq ft), Kidlington, Oxford (140,000 sq ft) and Southampton (135,000 sqft) in joint venture with Chancerygate to develop small units for freeholdsales. Final sales were completed at our existing schemes in Slough and Edenbridge andgood progress made on sales in Sawston, Cambridge (65,000 sq ft / 73% sold) andCowley, Oxford (73,000 sq ft / 43% sold). Our site in Newmarket, acquired in2005, was sold on to an owner occupier at a 25% profit on cost. All theseprojects are held as trading stock. From within the investment portfolio we sold our holdings in Preston at 12% overvaluation and 150% over historic purchase cost. We also sold just over half ofour Woolwich estate at more than the whole cost of purchase in 2002 andsubsequent refurbishment. We are hopeful of securing this year a retirement village consent on our twentyacre industrial holding in Great Alne, Warwickshire. We also continue to makeprogress in pursuing a residential consent for our industrial estate in Fleet,having recently acquired an amenity site to overcome objections by EnglishNature. Over the year we assembled a site in Sandiacre, Nottingham acquiringthree separate interests which is now under offer to be sold to a supermarketoperator. Michael BrownInvestment Director Investment portfolio Like for like valuation increase Average unexpired term years In-town retail 22.1% 9.5Out-of-town retail 28.7% 11.4Offices 14.9% 7.8Industrial 6.1% 8.3 -------- ------Total 17.3% 8.7 Valuation yields Initial Reversionary Equivalent True equivalent In-town retail 3.4% 6.3% 6.0% 6.2%Out-of-town retail 4.4% 5.4% 5.3% 5.5%Offices 6.8% 7.2% 6.6% 6.9%Industrial 5.7% 7.8% 7.7% 8.1% ------- ------- ------- -------Total 5.3% 6.8% 6.4% 6.7% Investment Properties Average OwnershipTOWN CENTRE RETAIL Size passing rent Year interest/ (sq ft) (psf) Vacancy rate acquired Comments Morgans Department 160,000 £14 37% 2005 Prelets toStore, Cardiff Borders & SportsWorld Morgan & Royal 65,000 £40 ZA 3% 2005Arcades, Cardiff Garden Square, 165,000 £45ZA 6% 2003 New lettingsLetchworth @ £65 psf ZA East Grinstead 37,000 £9 0% Adjoins proposed developmentGlasgow Portfolio 23,000 £30 10% 450,000 16% OUT-OF-TOWN RETAIL Otford Road Retail 43,000 £14 0% 2003 75% interestPark, Sevenoaks Homebase, St Austell 36,000 £8 0% 2002 75% interest Focus, Ashford 32,000 £15 0% 2004 75% interest Focus, Paignton 24,000 £12 0% 2005 67% interest Wickes, Worthing 26,000 £11 0% 2003 75% interest 161,000 £12 0% OFFICES Rex House, SW1 80,000 £56 0% 2000 Leasehold expires 2035 Shepherds Building, 151,000 £20 0% 2000 90% interestW14 61 Southwark 66,000 £20 10% 1998Street, SE1 Battersea Studios, 53,000 £17 73% 2005 50% interestSW8 Amberley Court, 31,000 £11 43% 2006 90% interestCrawley 381,000 £28 16% INDUSTRIAL Hawtin Park, 251,000 £2.85 63% 2003Blackwood Aldridge, Walsall 208,000 £2.40 29% 2006 90% interest Sawston, Cambridge 188,000 £4.40 0% 2003 67% interest Golden Cross, Hailsham 102,000 £5.50 0% 2001 Waterside, Fleet 54,000 £7.00 9% 1999 Residential potential Standard Estate, N 50,000 £9.00 35% 2002 60% interestWoolwich Mailcom, Milton Keynes 28,000 £6 0% 2004 Retail Warehouse potential 881,000 £4.10 27% OTHERCardiff Royal Infirmary - vacant hospital on a peppercorn lease with redevelopment potential TRADING PROPERTIES Address Description Year % acquired interest C4.1, Milton Keynes 110,000 sq ft supermarket + 440 residential 2006 50% units under construction Leisure Plaza, Milton Keynes 119,000 sq ft leisure scheme with potential for 2003 50% retail warehouse use Upper High Street, Epsom Residential site with supermarket potential 2005 100% Sandiacre, Nottingham 145,000 sq ft industrial with supermarket 2005 75% 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 Aycliffe & Peterlee Industrial sites with residential or retail 1987 100% potential Sawston, Cambridge 65,000 sq ft offices/industrial developed for 2003 67% owner occupier sales Watlington Road, Oxford 73,000 sq ft offices/industrial in course of 2005 80% refurbishment/ redevelopment for owner occupier sales Kidlington, Oxford 140,000 sq ft industrial to be developed for 2006 80% owner occupier sales Southall, West London 250,000 sq ft industrial to be developed for 2006 80% owner occupier sales Millbrook, Southampton 135,000 sq ft industrial to be developed for 2006 80% owner occupier sales ENTIRE PORTFOLIO CASHFLOW YIELDS(YIELDS EARNED BY HELICAL - EXCLUDE NOTIONAL PURCHASER'S COSTS) Initial Reversionary Equivalent Investment 5.6% 7.1% 6.7%Trading 0.8% 8.1% 7.5%Development 0.2% 7.3% 6.7% ------- ------- -------Total 4.4% 7.3% 6.8% PORTFOLIO BALANCE Offices Retail Offices South Retail Out-of- London East In-town town Industrial Other TotalInvestment 31.4% 1.2% 24.1% 9.4% 10.0% - 76.1%Trading 0.5% - - - 7.8% 3.4% 11.7%Development 0.4% 2.9% - 5.8% 1.4% 1.7% 12.2% -------- -------- -------- -------- -------- --------- ---------Total 32.3% 4.1% 24.1% 15.2% 19.2% 5.1% 100.0% Financial Review International Financial Reporting Standards ("IFRS") In common with all companies listed on European Union Stock exchanges, Helicaladopted IFRS with effect from 1 April 2004, although for practical purposesthese Reports and Accounts are the first to be prepared in accordance with IFRS.Included in these accounts are restated comparative figures for the year to 31March 2005. Prior to the adoption of IFRS, the financial statements of the Company had beenprepared in accordance with the United Kingdom accounting standards ("UK GAAP").UK GAAP differs in certain respects from IFRS and certain accounting valuationand consolidation methods have been amended, when preparing these financialstatements, to comply with IFRS. Reconciliations to, and explanations of thedifferences between these figures and those previously reported under UK GAAPare provided in the notes to these accounts. The adoption of IFRS has changed the presentation and format of the annualreport. However, it has no impact on the cash flows of the business or itsunderlying performance. The principal changes arising from the presentation of these accounts under IFRSare as follows: Disclosure of financial information under IFRS A Consolidated Income Statement replaces the Consolidated Profit and LossAccount. This Income Statement provides a more detailed sectional analysis ofgross profit and includes revaluation movements where previously they had beenshown through the revaluation reserve. The impact on deferred tax associatedwith the revaluation movements are taken to the Income Statement whereaspreviously they were shown as unprovided contingent liabilities or assets.Movements in the fair value of financial instruments, previously disclosed ascontingent assets and liabilities, are now taken to the Income Statement andBalance Sheet. The Consolidated Balance Sheet under IFRS analyses assets and liabilitiesbetween current and non-current. The Consolidated Cash Flow Statement is restated to reconcile opening andclosing cash balances, reconciling cash from operating activities with cashgenerated from investing and financial activities. Changes in accounting policies under IFRS In addition to the change in disclosure relating to investment propertyrevaluation surpluses, their associated deferred tax liabilities and the fairvalue of financial instruments, the adoption of IFRS has resulted in changes tothe accounting policies on goodwill, amortisation of rent free periods and otherlease incentives and letting costs. In addition the provisions of IFRS2 onShare Based Payments have been applied in respect of equity settled awardsgranted since 7 November 2002 where those awards had not been vested by 1January 2005. Details of the accounting policies adopted by the Company under IFRS areincluded in Note 2. Consolidated Income Statement Profits Profits before tax fell to £57.1m (2005: £64.7m) as reduced levels of net rentalincome and developments profits exceeded the increase in trading profits. Adjusted profits before tax, which excludes the gain on sale and revaluation ofinvestment properties, fell to £13.6m (2005: £20.5m). Profits after tax andminority interest fell to £47.6m (2005: £65.5m). Rental income Net rental income for the year fell to £16.5m (2005: £20.4m) reflecting the saleof let investment and trading properties and their replacement with vacant orpartially let properties with refurbishment and rental growth prospects. Duringthe year £110m of investment and trading properties, yielding £5.3m of rentalincome were sold. £40m was used to add to the investment portfolio and £37m wasused to purchase income producing properties to be re-developed or traded.Together these currently produce a passing rent of £2.0m. Rent reviews and newlettings, net of lease expiries and rent free periods, added rental income of£1.4m on the remaining portfolio. Rental costs increased from £2.3m to £3.6m, reflecting the costs of vacant spaceat properties undergoing refurbishment. Trading and other profits Trading profits of £13.4m were up on last year (2005: £5.8m) and arose from thesale of number of properties at Harlow, Sawston, Edenbridge, Newmarket,Dunstable, Oxford, Slough and Sheffield, as well as a portfolio of Unwins retailoutlets. Development profits The development programme produced profits at the retail schemes at Bournemouth,Nottingham and Stafford. IFRS IFRS UK GAAP UK GAAP UK GAAP 2006 2005 2004 2003 2002Developments £ 000 £ 000 £ 000 £ 000 £ 000 Profits 4,594 12,664 38 4,630 17,072 Share of results of joint ventures The major contributor to the results of the joint ventures during the period wasthe recognition of the remaining profit (net of tax) at the Homebase developmentat Winterhill, Milton Keynes. Administrative expenses Administrative expenses increased from £15.8m to £16.6m due to an increasedcharge for share based payments offsetting a lower level of performance relatedcash bonuses. Administrative expenses, before impairment of goodwill andexecutive bonuses, increased to £6.1m (2005: £5.6m). Gain on sale and revaluation of investment properties During the year to 31 March 2006 the Group sold investment properties with bookvalues of £57.6m (2005: £124.2m) on which it made £7.8m (2005: £14.1m) ofprofit. The properties sold included the retail park at Weston-Super-Mare, aFocus DIY store at Crowborough, a retail unit in Chiswick and a number ofindustrial units at Woolwich, Sawston and Preston. Finance costs and finance income Lower levels of debt throughout the year reduced finance costs to £7.4m (2005:£8.7m), after capitalising £2.8m (2005: £2.3m) of interest. Finance incomeearned on cash deposits reduced from £1.9m to £1.3m. IFRS IFRS UK GAAP UK GAAP UK GAAP 2006 2005 2004 2003 2002Net finance costs £ 000 £ 000 £ 000 £ 000 £ 000 Interest payable on bank 7,638 8,330 7,548 9,543 14,804loansOther interest payable 2,346 2,243 1,741 2,351 3,215Finance arrangement 234 457 170 783 408costsInterest capitalised (2,797) (2,296) (1,817) (795) (1,006)Interest receivable (1,295) (1,948) (1,070) (2,244) (2,642) 6,126 6,786 6,572 9,638 14,779 Taxation The tax charge for the year is less than the standard rate of 30% due to the useof capital allowances and tax losses. It is expected that the tax charge in theyear to 31 March 2007 will be less than the standard rate of 30% due to the useof capital allowances. The deferred tax charge for the year reflects a provision for tax on revaluationsurpluses and on temporary differences between the carrying amount of assets andliabilities in the financial statements and their corresponding tax bases inaccordance with IFRS. Dividends The Board is recommending to shareholders at the Annual General Meeting on 20July 2006 a final dividend of 2.45p per share (2005: 2.20) to be paid on 21 July2006 to shareholders on the register on 23 June 2006. This final dividend,amounting to £2.2m (2005: £1.8m) has not been included as a liability at 31March 2006, in accordance with IFRS. IFRS IFRS UK GAAP UK GAAP UK GAAP 2006 2005 2004 2003 2002Dividends pence pence pence pence pence Interim 1.45 1.32 1.32 1.20 1.10Prior period 2.20 2.00 2.00 1.80 1.65finalTotal 3.65 3.32 3.32 3.00 2.75Special - - - - 20.0 3.65 3.32 3.32 3.00 22.75 In the year to 31 March 2005 a 400p per share dividend was paid to shareholdersholding 14,143,020 A ordinary 5p shares as part of the Return of Cash on 23December 2004. Earnings per share Earnings per share in the year to 31 March 2006 were 54.7p (2005: 56.3p) pershare and on a diluted basis were 51.8p (2005: 53.7p) per share. IFRS IFRS UK GAAP UK GAAP UK GAAP 2006 2005 2004 2003 2002Earnings per share pence pence pence pence pence Earnings per share 54.7 56.3 8.2 12.2 12.0Diluted earnings per share 51.8 53.7 7.9 11.8 11.6Adjusted diluted earnings per 8.5 11.5 - - -share Adjusted diluted earnings per share excludes from earnings the IFRS effects ofincluding the gain on sale and revaluation of investment properties and fairvalue movement on derivative financial instruments. Consolidated balance sheet Investment portfolio During the year investment properties with a book value of £57.6m were sold andpartly replaced by £30.8m of new properties. In addition around £9.4m ofcapital expenditure was spent on refurbishing various office, industrial andretail buildings. At 31 March 2006 there was a revaluation surplus of £35.7m(2005: £30.1m) on the investment portfolio. IFRS IFRS UK GAAP UK GAAP UK GAAP 2006 2005 2004 2003 2002Investment portfolio £ 000 £ 000 £ 000 £ 000 £ 000 Cost or valuation at 1 April 271,315 334,114 342,484 439,911 453,607Additions at cost 40,230 26,957 50,464 47,175 32,838Disposals (57,564) (124,210) (82,178) (131,168) (65,062)Joint venture share of 4,869 3,357 - - -revaluationRevaluation 35,733 30,097 24,162 (13,434) 18,528Cost or valuation at 31 March 294,583 271,315 334,932 342,484 439,911 Net asset values The adoption of IFRS, with effect from 1 April 2004, reduced net assets at thatdate by £15.9m and by £10.5m as at 31 March 2005. The individual adjustmentsare included in note 3 d) to this announcement. The performance of the Company in the year to 31 March 2006 has increased equityshareholders funds, on which the net asset value per share is calculated, by£47.6m and this has led to a 23% increase in diluted net assets per share to253p and a 24% increase in adjusted diluted net assets per share to 278p.Taking into account the directors' valuation of trading and development stock of£29m (2005: £13m) the adjusted diluted net assets per share increase by 30% to309p (2005: 238p). IFRS IFRS IFRS UK GAAP UK GAAP 2006 2005 2004 2003 2002Net asset values per ordinary share pence pence pence pence pence Diluted - 1 253 205 164 155 155Adjusted diluted - 2 278 224 182 141 133Adjusted diluted plus stock - 3 309 238 n/a n/a n/a 1 - net asset value diluted for share options. 2 - net asset value diluted for share options and adding back deferred tax on revaluation surpluses and capital allowances and fair value of financial instruments. 3 - net asset value as per 2. plus the surplus on directors' valuation of trading and development stock. Borrowings and financial risk The Group's increased trading activity and net sales of investment property havecontinued the reduction in debt and, at 31 March 2006, net debt had fallen from£125.0m to £112.7m. Taken with an increase in net assets of £47.6m, the reduction in net debtcombined to reduce the Group's net gearing from 67% to 49%. IFRS IFRS IFRS UK GAAP UK GAAP 2006 2005 2004 2003 2002Net debt and gearing Net debt £112.7m £125.0m £129.8m £140.9m £152.4m Gearing 49% 67% 55% 62% 67% 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 £56m of undrawn bank facilitiesand cash of £10.1m (2005: £28.2m). In addition it had £158m (2005: £130m) ofuncharged property on which the Group could borrow funds. As at 6 June 2006 Helical's average interest rate was 5.83%. 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. Equity value addedYear ended 31 March 2006 2005 2004 2003 2002 Capital employed £m 336 347 348 377 390Return on capital % 21.7 22.1 11.5 3.9 10.5Weighted average cost of capital % 6.9 6.7 7.0 6.1 6.3Spread % 14.8 15.4 4.5 (2.2) 4.2Equity value added/(lost) £m 49.6 53.4 15.6 (8.5) 19.6 Nigel McNair ScottFinance Director Unaudited Consolidated Income Statement Year To Year To 31 March 31 March 2006 2005 Notes £000 £000 Revenue 4 119,274 101,469 Net rental income 5 16,524 20,440Trading profits 13,441 5,771Development profits 4,594 12,664Share of operating profit of joint ventures after tax 437 2,699Other operating income 235 235 Gross profit before gain on investment properties 35,231 41,809 Gain on investment properties 6 43,551 44,204 Gross profit 78,782 86,013 Administrative expenses 7 (16,582) (15,757) Operating profit 62,200 70,256 Finance costs 8 (7,421) (8,734)Finance income 1,295 1,948Change in fair value of derivative financialinstruments 1,046 1,225 Profit before tax 57,120 64,695Tax 9 (9,676) 844 Profit after tax 47,444 65,539 - attributable to minority interests (124) 17- attributable to equity shareholders 47,568 65,522Profit for the year 47,444 65,539 Earnings per 1p share 10- basic 54.7p 56.3p- fully diluted 51.8p 53.7p Unaudited Consolidated Balance SheetAt 31 March 2006 At At 31 March 31 March 2006 2005 Notes £000 £000 Non-current assetsInvestment properties 11 294,583 271,315Owner occupied property, plant and 12equipment 489 540Investment in joint ventures 295 2,195Goodwill 13 68 182 295,435 274,232Current assetsLand, developments and tradingproperties 14 86,076 95,568Available for sale investments 15 66 161Trade and other receivables 16 33,925 41,528 Cash and cash equivalents 17 10,135 28,203 130,202 165,460 Total assets 425,637 439,692 Current liabilitiesTrade and other payables 18 (49,506) (75,833)Taxation (3,394) (5,787)Redeemable preference shares - (2,451)Borrowings 19 (42,683) (21,136) (95,583) (105,207) Non-current liabilitiesBorrowings 19 (80,160) (132,043)Derivative financial instruments (610) (1,657)Deferred tax provision 9 (19,005) (14,438)Obligations under finance leases 20 (182) (182) (99,957) (148,320) Total liabilities (195,540) (253,527) Net assets 230,097 186,165 Unaudited Consolidated Balance SheetAt 31 March 2006 At At 31 March 31 March 2006 2005 Notes £000 £000 Equity Called up share capital 21 1,209 1,170Share premium account 24 42,490 39,110Revaluation reserve 24 64,820 54,530Capital redemption reserve 24 7,478 7,467Other reserves 24 291 291Profit and loss account 24 120,948 86,822Investment in own shares 23 (7,139) (6,893) Equity shareholders' funds 230,097 182,497 Minority interests - 3,668 Total equity 230,097 186,165 Net assets per share Basic 25 259p 215pDiluted 25 253p 205pAdjusted diluted 25 278p 224p Unaudited Consolidated Cash Flow Statement Year To Year To 31 March 2006 31 March 2005 £000 £000Cash flows from operating activitiesOperating profit 62,200 70,256Depreciation 179 190Gain on investment properties and other non-cash items (44,005) (47,632)Cash flows from operations before changes in working capital 18,374 22,814 Change in trade and other receivables 3,232 (14,375)Change in land, developments and trading properties 11,989 (21,366)Change in trade and other payables (30,779) 42,188Cash generated from operations 2,816 29,261 Finance costs (10,256) (10,408)Finance income 1,295 1,942Minority interest dividends paid (3,545) (1,249)Dividends from joint ventures 2,337 846Tax paid (4,743) (42) (14,912) (8,911) Cash flows from operating activities (12,096) 20,350 Cash flows from investing activitiesPurchase of investment property (39,055) (54,515)Sale of investment property 65,991 138,305Purchase of own shares (85) (4,078)Acquisitions - (124)Sale of plant and equipment 47 47Purchase of plant and equipment (140) (231) 26,758 79,404Cash flows from financing activitiesIssue of shares 3,418 3,965Borrowings drawn down 35,146 51,114Borrowings repaid (65,647) (46,255)Equity dividends paid (3,127) (60,798)Repurchase of shares - (4,467)Return of cash- B share repurchase (2,451) (32,465)- expenses - (709)Refinancing costs (69) (220) (32,730) (89,835) Net (decrease)/ increase in cash and cash equivalents (18,068) 9,919Cash and cash equivalents at 1 April 2005 28,203 18,284 Cash and cash equivalents at 31 March 2006 10,135 28,203 Unaudited Consolidated Statement of Recognised Income and ExpenseFor the year to 31 March 2006 Year To Year To 31 March 31 March 2006 2005 £000 £000 Profit for the period after taxation 47,444 65,539Minority interest 124 (17)Fair value movements on available for sale investments (14) 38 Total recognised income and expense 47,554 65,560 Unaudited Notes to the Preliminary Announcement 1. Financial Information The financial information contained in this report does not constitute statutoryaccounts within the meaning of section 240 of the Companies Act 1985. The fullaccounts for the year ended 31 March 2005, which were prepared under UK GAAP andwhich received an unqualified report from the Auditors, and did not contain astatement under s237(2) or (3) of the Companies Act 1985, have been filed withthe Registrar of Companies. Financial statements for the year ended 31 March 2006 will be presented to theMembers at the Annual General Meeting on 20 July 2006. The auditors haveindicated that their report on these Financial Statements will be unqualified. 2. Principal Accounting Policies Basis of preparation The preliminary announcement has been prepared in accordance with InternationalFinancial Reporting Standards ("IFRS") but does not contain sufficientinformation to comply fully with IFRS. The Financial Statements to be presentedto Members at the 2006 AGM are expected to fully comply with IFRS. The preliminary announcement has been prepared under the historical costconvention as modified by the revaluation of investment properties, availablefor sale investments and derivative financial instruments. The measurement andprincipal accounting policies are set out below. The policies have changed from the previous year when financial statements wereprepared under applicable United Kingdom Generally Accepted AccountingPrinciples ("UK GAAP"). The comparative information has been restated inaccordance with IFRS. The disclosures required by IFRS1 concerning thetransition from UK GAAP to IFRS are provided in note 3. The date of transitionto IFRS was 1 April 2004. The Group has taken advantage of certain exemptions available under IFRS1 Firsttime adoption of International Financial Reporting Standards. The exemptionsare explained under the respective accounting policy. Basis of consolidation The Group financial statements consolidate those of the Company and all of itssubsidiary undertakings drawn up to 31 March 2006. Subsidiary undertakings arethose entities over which the Group has the ability to govern the financial andoperating policies through the exercise of voting rights. Unrealised gains on transactions between the Company and its subsidiaries andbetween subsidiaries are eliminated. Unrealised losses are also eliminatedunless the transaction provides evidence of impairment of the asset transferred. Revenue recognition Property revenue consists of gross rental income on an accruals basis, togetherwith sales of trading and development properties, excluding sales of investmentproperties. Rental income receivable in the period from lease commencement tothe earlier of lease expiry and any tenant option to break is spread evenly overthat period. Any incentive for lessees to enter into a lease agreement and anycosts associated with entering into the lease are spread over the same period. Revenue in respect of investment and other income represents investment income,fees and commissions earned on an accruals basis and profits or lossesrecognised on investments held for the short-term. Dividends are recognisedwhen the shareholders' right to receive payment has been established. Interestincome is accrued on a time basis, by reference to the principal outstanding andthe effective interest rate. A property is regarded as sold when the significant risks and returns have beentransferred to the buyer. For conditional exchanges, sales are recognised asthe conditions are satisfied. Income tax The charge for current taxation is based on the results for the year as adjustedfor items which are non-assessable or disallowed. It is calculated using ratesthat have been enacted or substantively enacted by the balance sheet date. Taxpayable upon realisation of revaluation gains recognised in prior periods isrecorded as a current tax charge with a release of the associated deferredtaxation. Deferred tax is provided using the balance sheet liability method in respect oftemporary differences between the book value and tax base of relevant assets andliabilities. Deferred tax is provided on all temporary differences. Deferred tax is determined using tax rates that have been enacted orsubstantively enacted by the balance sheet date and are expected to apply whenthe related deferred tax asset is realised or the deferred tax liability issettled. It is recognised in the Income Statement except when it relates toitems credited or charged directly to equity, in which case the deferred tax isalso dealt with in equity. Investments Investments are classified as available-for-sale investments or tradinginvestments dependent on the purpose for which they were acquired.Available-for-sale investments, being investments intended to be held for anindefinite period, are revalued to fair value at the balance sheet date. Forlisted investments, fair value is the bid market listed value ruling at thebalance sheet date. Gains or losses arising from changes in fair value areincluded in the revaluation reserve except to the extent that losses areattributable to impairment, in which case they are recognised in the incomestatement. Upon disposal, accumulated fair value adjustments are included inthe income statement. Trading investments, acquired principally for the purpose of generating a profitfrom short-term fluctuations in price, are included in current assets andrevalued to fair value. Realised and unrealised gains or losses arising fromchanges in fair value are included in the income statement in the period inwhich they arise. Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. For thepurposes of the cash flow statement, cash and cash equivalents comprise cash inhand, deposits with banks, other short term, highly liquid investments withoriginal maturities of three months or less, net of bank overdrafts. Investment in joint ventures Entities whose activities are jointly controlled by the Group and by otherventures independent of the Group are accounted for using the equity method ofaccounting. Under IFRS the Group's share of the results and of the net assetsof the joint ventures are shown in the Consolidated Income Statement andConsolidated Balance Sheet respectively. Goodwill Goodwill representing the excess of the cost of acquisition over the fair valueof the Group's share of indentifiable net assets acquired, is capitalised andreviewed annually for impairment. Goodwill is carried at cost less accumulatedimpairment losses. Negative goodwill is recognised immediately afteracquisition in the income statement. Depreciation In accordance with IAS 40 on Investment Property depreciation is not providedfor on freehold investment properties or on leasehold investment properties. The Group does not own the freehold land and buildings which it occupies. Costsincurred in respect of leasehold improvements to the Group's head office at11-15 Farm Street, London W1J 5RS are capitalised and held as short termleasehold improvements. Leasehold improvements, plant and equipment are statedat cost less accumulated depreciation and any recognised impairment loss.Residual values are re-assessed annually. Depreciation is charged so as to write off the cost of assets less residualvalue over their estimated useful lives, using the straight line method, on thefollowing basis: Short leasehold improvements - 10% or length of lease if shorter Plant and equipment - 25%. Investment properties Investment properties are properties owned or leased by the Group which are heldfor long-term rental income and for capital appreciation. Investment propertiesare initially recognised at cost and revalued at the balance sheet date to fairvalue as determined by professionally qualified external valuers. In accordancewith IAS 40, investment properties held under the leases are stated gross of therecognised finance lease liability. Gains or losses arising from changes in the fair value of investment propertiesare included in other operating income in the income statement of the period inwhich they arise. In accordance with IAS 40, as the Group uses the fair value model, nodepreciation is provided in respect of investment properties including integralplant. When the Group redevelops an existing investment property for continued futureuse as investment property, the property remains an investment property measuredat fair value and is not reclassified. Interest is capitalised before taxrelief until the date of practical completion. Leases Leases are classified according to the substance of the transaction. A leasethat transfers substantially all the risks and rewards of ownership to thelessee is classified as a finance lease. All other leases are classified asoperating leases. In accordance with IAS 40, finance and operating leases of investment propertyare accounted for as finance leases and recognised as an asset and an obligationto pay future minimum lease payments. The investment property asset is includedin the balance sheet at fair value, gross of the recognised finance leaseliability. Lease payments are allocated between the liability and financecharges so as to achieve a constant financing rate. Assets leased out under operating leases are included in investment property,with rental income recognised on a straight-line basis over the lease term. Land, developments and trading properties Land, developments and trading properties held for sale are inventory and areincluded in the balance sheet at the lower of cost and net realisable value. Derivative financial instruments Derivative financial assets and financial liabilities are recognised on theGroup's balance sheet when the Group becomes a party to the contractualprovisions of the instrument. The Group enters into derivative transactionssuch as interest, caps and floors in order to manage the risks arising from itsactivities. Derivatives are initially recorded at fair value and aresubsequently re-measured to fair value based on market prices, estimated futurecash flows and forward rates as appropriate. Any change in the fair value ofsuch derivatives is recognised immediately in the income statement as a financecost. Share based payments The Company provides share-based payments in the form of share options,performance share plan awards and a share incentive plan. All share-based payment arrangements granted after 7 November 2002 that had notvested prior to 1 January 2005 are recognised in the financial statements. TheCompany uses the Stochastic valuation model and the resulting value is amortisedthrough the Income Statement over the vesting period of the share-basedpayments. For the performance share plan and share incentive plan awards, where non-marketconditions apply, the expense is allocated over the vesting period, to theIncome Statement based on the best available estimate of the number of awardsthat are expected to vest. Estimates are subsequently revised if there is anyindication that the number of awards expected to vest differs from previousestimates. Borrowing and borrowing costs Interest bearing loans and overdrafts are recorded at fair value, net of financeand other costs yet to be amortised. Finance and other costs incurred inrespect of the obtaining and maintenance of borrowings are accounted for on anaccruals basis and written-off to the Income Statement over the length of theassociated borrowings. Borrowing costs directly attributable to the acquisition and construction of newdevelopment and investment properties are added to the costs of such propertiesuntil the earliest of: • the date when the development or investment becomes fully let; • the date when the income exceeds the outgoings; and, • the date of completion of the development or investment. All other borrowing costs are recognised in the income statement in the periodin which they are incurred. Trade receivables Trade receivables do not carry any interest and are initially recognised at fairvalue and subsequently at amortised cost as reduced by appropriate allowancesfor estimated irrecoverable amounts. Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. For thepurposes of the cash flow statement, cash and cash flow equivalents comprisecash in hand, deposits with banks, other short-term, highly liquid investmentswith original maturities of three months or less, net of bank overdrafts. Trade and other payables Trade and other payables are not interest bearing and are initially recognisedat fair value and subsequently at amortised cost. Use of estimates and judgements To be able to prepare accounts according to generally accepted accountingprinciples, management must make estimates and assumptions that affect the assetand liability items and revenue expense amounts recorded in the financialaccounts. These estimates are based on historical experience and various otherassumptions that management and the Board of Directors believe are reasonableunder the circumstances. The results of this form the basis for makingjudgements about the carrying value of assets and liabilities that are notreadily available from other sources. Areas requiring the use of estimates and critical judgement that maysignificantly impact on the Group's earnings and financial position are revenueand cost recognition on developments, valuation of investment properties,calculation of deferred tax liabilities, calculation and assessment ofrecoverability of deferred tax assets and the recognition of share-based paymentcharges. Dividends Dividend distributions to the Company's shareholders are recognised as aliability in the financial statements in the period in which dividends aredeclared. 3. Reconciliation between UK GAAP and IFRS The principal changes arising from the presentation of the 31 March 2004 and 31March 2005 results under IFRS are: (a) Profit after tax Year To 31 March 2005 £000 As previously reported under UK GAAP 26,814IFRS adjustments to profit before taxation 29,844IFRS adjustments to taxation 8,881IFRS profit after tax 65,539 (b) Profit before tax Year To 31 March 2005 £000 As previously reported under UK GAAP 34,851 Goodwill amortisation 86Amortisation of rent free periods and other lease incentives (1,029)Amortisation of letting costs (82)Share based payments (75)Joint venture share of taxation (570)Revaluation gains on investment properties reported as income - subsidiaries 30,098 - associated companies 191Movement in fair value of derivative financial instruments 1,225IFRS adjustments 29,844 IFRS profit before tax 64,695 (c) Taxation Current tax Year To 31 March 2005 £000 As previously reported under UK GAAP 8,583Joint venture share of current tax (570)As restated under IFRS 8,013 Deferred tax As previously reported under UK GAAP (546)Investment property surpluses (5,825)Capital allowances (93)Financial instruments 368Tenants incentives (309)Letting costs (24)Performance share plan award (303)Share option gains (2,125)IFRS adjustments (8,311)As restated under IFRS (8,857) Taxation as restated under IFRS (844) (d) Net assets At At 31 March 1 April 2005 2004 £000 £000 As previously reported under UK GAAP 196,712 238,615 Amortisation of rent free periods and other lease incentives 3,240 4,269Amortisation of letting costs 1,606 1,687Fair value of financial instruments (1,657) (2,882)Tax effect of the above (957) (922)Goodwill impairment (491) (576)Share based payment (24) 51Fair value of available for sale investments 38 -Preference shares (2,451) -Exclusion of provision for proposed dividend 1,831 2,524Provision for contingent tax liability - on revaluation surplus (14,684) (20,509) - on capital allowances (306) (399) - other timing differences 3,308 880IFRS adjustments (10,547) (15,877)As at 31 March under IFRS 186,165 222,738 (e) Adjusted net asset value per share At At 31 March 1 April 2005 2004 pence pence As previously reported 216 177Amortisation period of lease incentives (net of tax) 2 2Amortisation of letting costs (net of tax) 1 1Dividend adjustment 2 2Deferred tax on other timing differences 3 -Restated under IFRS 224 182 4. Revenue Year To Year To 31 March 31 March 2006 2005 £000 £000 Trading property sales 72,101 25,432Rental income 20,102 22,745Developments 26,756 52,916Other income 315 376 119,274 101,469 5. Net rental income Year To Year To 31 March 31 March 2006 2005 £000 £000 Gross rental income 20,102 22,745Rents payable (489) (396)Other property outgoings (3,089) (1,909) Net rental income 16,524 20,440 6. Gain on investment properties Year To Year To 31 March 31 March 2006 2005 £000 £000 Net proceeds from the sale of investment properties 65,992 140,183 Book value (57,565) (124,210)Lease incentive and letting costs adjustment (609) (1,867)Profit on sale of investment properties 7,818 14,106Revaluation gains on investment properties 35,733 30,098Gain on investment properties 43,551 44,204 7. Administrative expenses Year To Year Ended 31 March 31 March 2006 2005 £000 £000Total administrative expenses 16,582 15,757Operating profit on ordinary activities is stated after:Staff costs 9,488 11,471Share based payments charge 3,458 1,010Depreciation 179 190Auditors remuneration 137 110 Administrative expenses includes salaries and cash bonuses in respect of thedirectors of £5,666,000 (2005: £7,426,000) plus cash bonuses payable todirectors arising out of their exercise of share options of £693,000 (2005:£854,000). 8. Finance costs Year To Year To 31 March 31 March 2006 2005 £000 £000 Interest payable on bank loans and overdrafts 7,638 8,330Other interest payable and similar charges 2,346 2,243Finance arrangement costs 234 457Interest capitalised (2,797) (2,296)Finance costs 7,421 8,734 9. Taxation Year To Year To 31 March 31 March 2006 2005 £000 £000 The tax charge is based on the profit for theperiod and represents:United Kingdom corporation tax at 30% (2005: 30%)- group corporation tax 5,983 6,100- adjustments in respect of prior periods - 1,913Current tax charge 5,983 8,013 Deferred tax- capital allowances (804) (639) other timing differences (872) (2,393) revaluation surpluses 5,369 (5,825)Deferred tax 3,693 (8,857)Tax on profit 9,676 (844) Deferred tax Capital gains 20,927 14,684Capital allowances 1,301 2,105Other temporary differences (3,223) (2,351)Deferred tax provision 19,005 14,438 10. Earnings per share The calculation of the basic earnings per share is based on the earningsattributable to ordinary shareholders divided by the weighted average number ofshares in issue during the year. Shares held by the ESOP, which has waived itsentitlement to receive dividends, are treated as cancelled for the purposes ofthis calculation. The calculation of diluted earnings per share is based on the basic earnings pershare, adjusted to allow for the issue of shares and the post tax effect ofdividends on the assumed exercise of all dilutive options. Reconciliations of the earnings and weighted average number of shares used inthe calculations are set out below. 31.03.06 31.03.05 000's 000'sOrdinary shares in issue 90,506 135,740Weighting adjustment (3,540) (19,430)Weighted average ordinary shares in issue for calculation of basic earnings per 86,966 116,310shareWeighted average ordinary shares issued on exercise of share options 1,087 1,250Weighted average ordinary shares to be issued on exercise of share options 2,535 4,185Weighted average ordinary shares to be issued under performance share plan 1,296 250Weighted average ordinary share in issue for calculation of diluted earnings 91,884 121,995per share 31.03.06 31.03.05 000's 000'sEarnings used for calculation of basic diluted earnings per share 47,568 65,522 Basic earnings per share 54.7p 56.3pDiluted earnings per share 51.8p 53.7p Earnings used for calculation of basic and diluted earnings per share 47,568 65,522Less gain on sale and revaluation of investment properties (43,551) (44,204)Less fair value movement on derivative financial instruments (1,046) (1,225)Add back deferred tax in respect of investment properties 4,565 (6,463)Add back deferred tax in respect of derivative financial instruments 314 368Earnings used for calculation of adjusted earnings per share 7,850 13,998 Adjusted earnings per share 9.0p 12.0pAdjusted diluted earnings per share 8.5p 11.5p 11. Investment properties Freehold Leasehold Total Freehold Leasehold Total 31.03.06 31.03.06 31.03.06 31.03.05 31.03.05 31.03.05 £000 £000 £000 £000 £000 £000GroupFair value at 1 203,683 67,632 271,315 270,182 64,932 335,114AprilAdditions at cost 39,799 5,300 45,099 29,324 990 30,314Disposals (57,564) - (57,564) (117,853) (6,357) (124,210)Revaluation 25,533 10,200 35,733 22,030 8,067 30,097surplusFair value at 31 211,451 83,132 294,583 203,683 67,632 271,315March Interest capitalised during the year in respect of the refurbishment ofinvestment properties amounted to £300,000 (2005: £nil). Interest capitalised during the year in respect of the refurbishment ofinvestment properties is included in investment properties to the extent of£1,313,000 (2005: £1,013,000). 12. Owner occupied property, plant and equipment Short Vehicles Short Vehicles leasehold and Leasehold and office improvements office Total Improvements equipment Total 31.03.06 Equip- 31.03.06 31.03.05 31.03.05 31.03.05 £000 ment £000 £000 £000 £000 31.03.06 £000 Cost at 1 April 646 853 1,499 646 820 1,466Additions at cost - 142 142 - 232 232Disposals - (129) (129) - (199) (199)Cost at 31 March 646 866 1,512 646 853 1,499Depreciation at 1 April 458 501 959 412 551 963Provision for the year 47 132 179 46 144 190Eliminated on disposals - (115) (115) - (194) (194)Depreciation at 31 505 518 1,023 458 501 959MarchNet book amount at 31 141 348 489 188 352 540March 13. Intangible fixed assets At At 31 March 2006 31 March 2005 £000 £000Cost at 1 April 1,515 1,391 Additions - 124Cost at 31 March 1,515 1,515Impairment at 1 April 1,333 1,095 Impairment for the year 114 238Impairment at 31 March 1,447 1,333 Fair value at 31 March 68 182 14. Land, developments and trading properties At At 31 March 31 March 2006 2005Cost £000 £000Development sites 40,568 34,711Properties held as trading stock 45,508 60,857 86,076 95,568 The directors' valuation of trading and development stock showed a surplus of£29m above book value at 31 March 2006 (2005: £13m). Interest capitalised in respect of the development of sites is included in stockto the extent of £2,867,000 (2005: £2,185,000). Interest capitalised during theperiod in respect of development sites amounted to £2,497,000 (2005:£2,296,000). 15. Available for sale investments At At 31 March 31 March 2006 2005 £000 £000UK listed investments at fair value 66 161 66 161 16. Trade and other receivables At At 31 March 31 March 2006 2005 £000 £000Trade receivables 13,156 16,056Other receivables 5,999 11,979Prepayments and accrued income 14,770 13,493 33,925 41,528 17. Cash and cash equivalents At At 31 March 31 March 2006 2005 £000 £000Rent deposits and cash held at managing agents 1,980 2,612Cash secured against debt and cash held at solicitors 189 2,368Cash held to fund future development costs 382 364Free cash 7,584 22,859 10,135 28,203 18. Trade and other payables At At 31 March 31 March 2006 2005 £000 £000 Trade payables 8,424 32,149Other payables 7,372 8,910Accruals 33,710 34,774 49,506 75,833 19. Borrowings At At 31 March 31 March 2006 2005 £000 £000Bank overdraft and loans - maturityDue within one year 42,683 21,136Due after more than one year 80,160 132,043 122,843 153,179 31 March 31 March 2006 2005 £000 £000Undrawn committed bank facilitiesExpiring in one year or less 45,000 30,578Expiring in more than one year but not more than two years 2,011 -Expiring in more than two years 8,691 20,625 55,702 51,203 Interest Rates 31 March % Expiry 2006 £000Fixed rate borrowings- fixed 9.050 Feb 2009 7,388- swap rate plus bank margin 5.939 Sep 2009 14,324- swap rate plus bank margin 6.329 Feb 2008 5,800- swap rate plus bank margin 4.965 Mar 2007 5,925- swap rate plus bank margin 5.846 Jun 2006 3,500- swap rate plus bank margin 5.819 Sep 2007 3,460- swap rate plus bank margin 5.439 Jun 2011 4,536- swap rate plus bank margin 5.759 Nov 2010 5,200Weighted average 6.279 Feb 2009 50,133 Floating rate borrowings 72,953Total borrowings 123,086 Deferred arrangement costs (243) 122,843 Floating rate borrowings bear interest at rates based on LIBOR. Hedging In addition to the fixed rates, borrowings are also hedged by the followingfinancial instruments. Instrument Value Rate Start Expiry £000 % Current- cap 80,000 7.000 Jan 2006 Sept 2009 Gearing At Restated 31 March At 31 March 2006 2005 £000 £000Total borrowings 122,843 153,179Cash (10,135) (28,203)Net borrowings 112,708 124,976 Net assets 230,097 186,165 Gearing 49% 67% Net borrowings exclude the Group's share of borrowings in joint ventures of£11,718,000 (2005: £2,483,000). 20. Obligations under finance leases At At 31 March 31 March 2006 2005 £000 £000 Lease payments under finance leases fall due:Not later than one year 14 14Later than one year and not later than five years 46 46Later than five years 122 122Present value of finance lease obligations 182 182 21. Share capital At At 31 March 31 March 2006 2005 £000 £000Authorised- the authorised share capital of the Company is £39,576,626.60 39,577 39,577divided into ordinary shares of 1p each, 5.25p convertible cumulativeredeemable preference shares 2012 of 70p each and deferred shares of 1/8p each 39,577 39,577 Allotted, called up and fully paid- 94,371,925 ordinary shares of 1p each 944 905- 212,145,300 deferred shares of 1/8 p each 265 265 1,209 1,170 As at 1 April 2005 the Company had 18,101,164 ordinary 5p shares in issue. On17 June 2005 options over 323,221 ordinary 5p shares were exercised increasingthe issued share capital of the Company to 18,424,385 ordinary 5p shares. On 1September 2005, following approval by shareholders at an EGM on 31 August 2005,each 5p share was split into five 1p shares. Following this share split therewere 92,121,925 ordinary 1p shares in issue. On 7 September options over1,750,000 ordinary 1p shares were exercised. On 16 December options over300,000 ordinary 1p shares were exercised. On 6 January options over 102,173ordinary 1p shares were exercised. On 13 January 2006 options over 97,827ordinary 1p shares were exercised. At 31 March 2006 there were 94,371,925ordinary 1p shares in issue. Share options At 31 March 2006 unexercised options over 3,655,510 (31 March 2005: 7,521,615)new ordinary 1p shares in the Company and 6,234,695 (31 March 2005: 6,484,695)purchased ordinary 1p shares held by the ESOP had been granted to directors andemployees under the Company's share option schemes. During the period no newoptions were granted. Options over 323,221 new ordinary 5p shares and 2,250,000new ordinary 1p shares were exercised and 250,000 purchased ordinary 1p shareswere exercised. 22. Dividends Year To Year To 31 March 31 March 2006 2005 £000 £000 Attributable to equity share capital Ordinary interim paid of 1.45p (2005: 1.32p) per share 1,296 1,702 prior period final paid 2.20p (2005: 2.00p) per share 1,831 2,524A Shares - Return of Cash - 56,572 3,127 60,798 The interim dividend of 1.45p was paid on 22 December 2005 to shareholders onthe register on 2 December 2005. The final dividend, if approved by shareholders at the AGM on 20 July 2006,amounting to £2,174,000, representing 2.45 pence per share, will be paid on 21July 2006 and has not been included as a liability as at 31 March 2006. 23. Investment in own shares Following approval at the 1997 Annual General Meeting the Company establishedthe Helical Bar Employees' Share Ownership Plan Trust (the "Trust") to be usedas part of the remuneration arrangements for employees. The purpose of theTrust is to facilitate and encourage the ownership of shares by or for thebenefit of employees by the acquisition and distribution of shares in theCompany. The Trust purchases shares in the Company to satisfy the Company's obligationsunder its Share Option Schemes and Performance Share Plan. At 31 March 2006 the Trust held 5,648,080 (31 March 2005: 5,695,580) ordinaryshares in Helical Bar plc. At 31 March 2006 options over 6,234,695 (31 March 2005: 6,484,695) ordinaryshares in Helical Bar plc had been granted through the Trust. At 31 March 2006awards over 4,514,380 (31 March 2005: 2,549,760) ordinary shares in Helical Barplc had been made under the terms of the Performance Share Plan. Provision for ESOP share purchase 24. Statement of Changes in Equity Capital Profit Investment Share Share Revaluation redemption Other and loss in own Capital premium reserve reserve reserves account shares Total £000 £000 £000 £000 £000 £000 £000 £000 At 1 April 2004 1,357 35,900 68,814 7,246 291 115,538 (10,106) 219,040 Issue of 45 3,210 3,255shares Purchase of (26) 221 (46,802) (3,776) (50,383)shares Revaluation 36,114 (36,114) -surplus Realised on (49,438) 49,438 -disposals Return of cash (206) 7,431 7,225 Provision (442) (442)released Total 65,560 65,560 Recognisedincome Dividends (60,798) (60,798)paid Minority (960) (960)interestin revaluationsurplus Performance 707 707share plan Provision for (707) (707)ESOP sharepurchase As at 31 1,170 39,110 54,530 7,467 291 86,822 (6,893) 182,497March 2005 Issue of 39 3,380 3,419shares Revaluation 30,364 (30,364) -surplus Realised on (20,074) 20,074 -disposals Total 47,554 47,554recognisedincome Dividends (3,127) (3,127)paid Purchase of 11 (11) (472) (472)shares Share options 226 226exercised Performance 3,128 3,128share plan Provision for (3,128) (3,128)ESOP sharepurchase As at 31 1,209 42,490 64,820 7,478 291 120,948 7,139 230,097March 2006 25. Net assets per share At At 31 March 31 At 2006 At March 31 Number 31 2005 March Of Pence March Number Pence 2006 Shares Per 2005 Of Per £000 000's share £000 Shares share 000'sNet assets 230,097 88,724 182,497 84,810Less deferred shares (265) (265)Basic 229,832 88,724 259 182,232 84,810 215Unexercised share options 3,506 3,655 6,925 7,522Diluted 233,338 92,379 253 189,157 92,332 205 Adjustment for:- Deferred tax on capital allowances 2,175 2,105- Deferred tax on chargeable gains 20,927 14,684- Fair value of financial 427 1,160instrumentsAdjusted diluted net asset value 256,867 92,379 278 207,106 92,332 224Adjusted for: - Directors valuation of trading 28,704 12,884stockAdjusted diluted net asset valueplus stock surplus 285,571 92,379 309 219,990 92,332 238 Adjustment for:- Deferred tax on capital allowances (2,175) (2,105)- Deferred tax on capital gains (20,927) (14,684)- Fair value of financial statements (427) (1,160)- Adjusted diluted triple NAV 262,042 92,379 284 202,041 92,332 219 This information is provided by RNS The company news service from the London Stock Exchange