Helical Bar Regulatory News (HLCL)

HELICAL'S PREMIUM PORTFOLIO CONTINUES TO ATTRACT NEW TENANTS WITH 244,000 SQ FT OF LETTINGS IN LONDON & MANCHESTER SINCE APRIL 2019

Gerald Kaye, Chief Executive, commented:

"We have made good progress in the first half of the financial year by attracting new tenants to 172,860 sq ft of space, generating £3.9m (our share) of contracted rental income, and since 30 September 2019 have let a further 71,525 sq ft, generating an additional £2.1m of rental income for the Group. As we let the remaining 121,000 sq ft of available space and the 99,000 sq ft of developments due to achieve practical completion by January 2020, we will make significant headway towards capturing the portfolio's see-through ERV of £59.6m. The success we have had since 1 April this year underpins our belief that the enduring quality and location of our buildings will continue to attract tenants, boosting our earnings and dividend cover.

"We remain a Company focused on the creation of capital profits through the development and letting of the high quality office space that today's occupiers are seeking. Our current portfolio will continue to generate such profits as it reaches its fully let and stabilised potential. Further growth is dependent on the Group unearthing new opportunities and management's efforts are focused on achieving this. With our experience and track record, we are confident in our ability to add to our pipeline and to continue the growth of Helical."

Operational Performance

·; Acquisition of a major development opportunity with the purchase of 33 Charterhouse Street, London EC1, a c.200,000 sq ft office development site next to Farringdon station, in a 50:50 joint venture with AshbyCapital.

·; Secured 133,218 sq ft of new London office lettings delivering contracted rent of £9.8m (Helical's share £3.0m at 5.9% above 31 March 2019 ERV).

·; Post half year end, let a further 69,581 sq ft of London office space delivering £5.6m of contracted rents (Helical's share £2.1m at 3.2% above 31 March 2019 ERV).

·; In Manchester, five office lettings achieved on 39,642 sq ft, generating rental income of £0.9m at 1.6% above 31 March 2019 ERV, with a further 1,944 sq ft let post period end in line with 31 March 2019 ERV.

·; Completed the sale of two units in the first phase of residential at Barts Square, EC1 with a further unit completed since the period end, leaving just seven units available for sale. In the final phase, exchanged contracts for the sale of a further seven units and exchanged on one further unit since the period end, taking the total number of units exchanged to 45. These sales are due to complete by February 2020.

·; Sale of Helical's 10% shareholding in One Creechurch Place to our joint venture partner, completing our involvement in the development.

·; We increased and extended our Revolving Credit Facility to £400m, providing an additional £50m of firepower for acquisitions.

Financial Highlights

Earnings

·; IFRS basic earnings per share of 11.7p (2018: 21.8p).

·; IFRS Profit before tax of £13.1m (2018: £29.1m).

·; Total Accounting Return1 of 2.7% (2018: 5.1%).

·; See-through Total Property Return1 of £28.6m (2018: £43.2m):

- Group's share1 of net rental income of £13.0m (2018: £11.7m).

- Development profits of £5.7m (2018: losses of £2.1m), after provisions of £1.2m (2018: £6.2m).

- Net gain on sale and revaluation of investment properties of £9.9m (2018: £33.6m).

·; EPRA earnings per share1 of 5.4p (2018: loss of 4.6p).

·; Interim dividend declared of 2.70p per share (2018: 2.60p), up 3.8%.

Balance Sheet

·; Net asset value up 1.1% to £573.7m (31 March 2019: £567.4m).

·; EPRA net asset value per share1 up 0.8% to 486p (31 March 2019: 482p).

·; EPRA triple net asset value per share1 up 0.2% to 466p (31 March 2019: 465p).

Property Valuations

·; IFRS property portfolio value of £836.1m (31 March 2019: £793.6m).

·; See-through property portfolio1 of £955.8m (31 March 2019: £876.4m).

·; See-through investment property valuation gain, on a like-for-like basis, of 1.5% (1.4% including purchases and gains on sales).

Financing

·; See-through loan to value1 of 35.3% (31 March 2019: 30.6%).

·; See-through net borrowings1 of £337.4m (31 March 2019: £268.6m).

·; Average maturity of the Group's share1 of secured debt of 4.5 years (31 March 2019: 3.4 years), increasing to 5.6 years, on exercise of options to extend current facilities.

·; See-through average cost of borrowings1 of 3.5% (31 March 2019: 4.0%).

·; Group's share1 of cash and undrawn bank facilities at 30 September 2019 of £261m (31 March 2019: £382m).

Portfolio Update

London Portfolio

·; 1.8% valuation increase, on a like-for-like basis, valued at £773.9m at 30 September 2019 (85.9% of investment portfolio) compared to £693.8m at 31 March 2019 (85.0% of investment portfolio).

·; Contracted rents of £30.2m (31 March 2019: £27.5m) growing to an ERV of £50.4m (31 March 2019: £42.4m).

·; WAULT of 7.4 years (31 March 2019: 8.0 years).

Manchester Portfolio

·; Valuation of investment portfolio remained unchanged, on a like-for-like basis, at £127.0m at 30 September 2019 (14.1% of investment portfolio) compared to £122.7m at 31 March 2019 (15% of investment portfolio) after taking into account capital expenditure.

·; Contracted rents increased to £6.1m (31 March 2019: £5.7m) growing to an ERV of £9.1m (31 March 2019: £9.0m).

·; WAULT of 4.3 years (31 March 2019: 3.9 years).

Interim Dividend

An Interim Dividend of 2.70 pence per share (2018: 2.60 pence per share) will be paid to Shareholders as follows:

For further information, please contact:

Half Year Results Presentation

Helical will be holding a presentation for analysts and investors starting at 9am on Thursday 21 November 2019 at the offices of FTI Consulting, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD. If you would like to attend, please contact FTI Consulting on 020 3727 1000, or email schelical@fticonsulting.com

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

Webcast Link:

https://webcasting.brrmedia.co.uk/broadcast/5d91c523cbe3ca44a572e3b2

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

Chief Executive's Statement

Overview

The results for the half year to 30 September 2019 reflect continued progress on all fronts.

We are rapidly approaching the completion of the current development programme, which started in March 2011 with the acquisition, in joint venture, of land and buildings at Barts Square, London EC1. On completion of the third and final phase of Barts Square and Kaleidoscope, London EC1, both anticipated by early 2020, we will have built or refurbished 2.3m sq ft of office space and delivered 236 residential units in the last nine years. Of this, we have retained 1.1m sq ft of these offices and added 200,000 sq ft at 33 Charterhouse Street, London EC1 to our investment portfolio, valued at £901.0m and generating £36.4m of contracted rent.

We have made good progress in the first half of the financial year by attracting new tenants to 172,860 sq ft of space, generating £3.9m (our share) of contracted rental income, and since 30 September 2019 have let a further 71,525 sq ft, generating an additional £2.1m of rental income for the Group. As we let the remaining 121,000 sq ft of available space and the 99,000 sq ft of developments due to achieve practical completion by January 2020, we will make significant headway towards capturing the portfolio's see-through ERV of £59.6m. The success we have had since 1 April this year underpins our belief that the enduring quality and location of our buildings will continue to attract tenants, boosting our earnings and dividend cover.

Results for the Half Year

The profit before tax for the half year to 30 September 2019 was £13.1m (2018: £29.1m) with a Total Property Return of £28.6m (2018: £43.2m). The increase in net rents to £13.0m (2018: £11.7m) reflects the impact of our letting success over the period. Developments contributed profits of £6.9m (2018: £4.1m) before provisions of £1.2m (2018: £6.2m). The gain on sale and revaluation of the investment portfolio contributed £9.9m (2018: £33.6m).

Total see-through finance costs were £8.9m (2018: £8.4m), offset by interest receivable of £1.3m (2018: £1.0m) to give net finance costs of £7.6m (2018: £7.4m). A reduction in expected future interest rates led to a charge from the valuation of the Group's derivative financial instruments of £5.0m (2018: credit of £0.3m). Recurring administration costs were £5.3m (2018: £5.6m) with £0.3m (2018: £0.2m) in our joint ventures. The provision for performance related remuneration, including associated NIC, was £1.7m (2018: £2.3m).

A corporation tax charge of £1.2m (2018: £11.2m) has been recognised in the Half Year Results. With a reduction in the Group's deferred tax provision of £2.1m, a net tax credit of £0.9m (2018: charge £3.2m) has been recognised.

The profit for the period, after recognition of this tax credit, was £14.0m (2018: £25.9m) and this result allows the Board to declare an Interim Dividend of 2.70p (2018: 2.60p), an increase of 3.8%.

Finance

The see-through loan to value ratio ("LTV") increased to 35.3% at the half year end (31 March 2019: 30.6%) reflecting the acquisition, in joint venture, of our new scheme at 33 Charterhouse Street, London EC1 and capital expenditure on our portfolio, particularly at Kaleidoscope, London EC1. Our see-through net gearing, the ratio of net borrowings to the net asset value of the Group, increased from 47.3% as at 31 March 2019 to 58.8%.

During the period under review, the average debt maturity on secured loans, on a see-through basis, increased to 4.5 years (31 March 2019: 3.4 years) as we increased and extended our Revolving Credit Facility from £150m to £400m, repaying the £200m development facility on The Bower. The weighted average cost of debt fell from 4.0%, at 31 March 2019, to 3.5% at the period end. Our £100m Convertible Bond was repaid in June 2019. The Group has £261m of cash and unutilised bank facilities available to fund capital works on the portfolio and future acquisitions.

Board Matters

At the 2019 AGM held in July, we said goodbye to Mike Slade, the founder and former Chief Executive of Helical, who stepped down from the Board after 35 years to be replaced as Chairman by Richard Grant. The whole Board congratulates Mike on his remarkable career and wishes him every success with his continued endeavours for charity as well as a happy and relaxing retirement.

During the period we appointed Sue Farr as an independent Non-Executive Director of the Board and a member of the Audit and Risk, Nominations and Remuneration Committees. Sue brings considerable expertise in marketing, branding and consumer issues to the team and I welcome her to the Company.

Sustainability

We have long recognised that our business impacts on the environment and the wider communities in which we operate and we seek to create sustainable buildings through our development and refurbishment activities. During the period we formalised many of our ESG policies, establishing a Sustainability Committee headed by our Property Director, Matthew Bonning-Snook, and incorporating representatives from each of our internal departments. In addition to seeking individual ratings for our portfolio under BREEAM, where we have achieved "Excellent" for all of the redeveloped properties within our London portfolio, we also look to measure and improve our corporate ESG ratings under the assessments made by EPRA, MSCI and the Carbon Disclosure Project ("CDP"). During the period, we added GRESB to the list of measures and benchmarks against which we assess our sustainability achievements.

Outlook

We operate in a climate of political uncertainty and we hope that the forthcoming General Election will provide clarity in a manner which is positive for the UK economy.

We remain a Company focused on the creation of capital profits through the development and letting of the high quality office space that today's occupiers are seeking. Our current portfolio will continue to generate such profits as it reaches its fully let and stabilised potential. Further growth is dependent on the Group unearthing new opportunities and management's efforts are focused on achieving this. With our experience and track record, we are confident in our ability to add to our pipeline and to continue the growth of Helical.

Gerald Kaye

Chief Executive

21 November 2019

Our Market

Overview

Helical's core business is developing and owning dynamic, well located office space in London and Manchester. With intelligent stock selection, we aim to maximise returns by development and refurbishment as well as through significant asset management initiatives.

London

In our judgement, the London commercial property market continues to provide the best source of capital profits in the UK. As evidenced by the continued strong tenant demand for Grade A office space, we expect this to remain the case for the foreseeable future, assuming a government supportive of business.

In order for Helical to generate capital profits, the Group needs to identify those areas where it believes tenant demand is, or will become, strong and to source opportunities in those areas at an appropriate entry price. Equally important, we need to provide inspiring working environments suited to the needs of our customers, the tenants. Using the skills, knowledge and expertise gained over many years, the Helical team aims to deliver attractive and exciting office space in our identified locations. In a low growth environment, stock selection needs to reflect the granular characteristics that will attract our target market of occupiers.

Helical has based its investment decisions in London on four continuing major developments in the office market. First, the growth of the London population; second, the continuing and rapid expansion of the creative industries (predominantly in technology and media); third, the migration of occupiers across Central London to the City and East London; and fourth, a fast-growing market in flexible leasing.

London's population is forecast to grow to 9.5m by 2026, a 9% increase since mid-2016. This will present challenges, particularly in terms of infrastructure, but will also provide opportunities, such as the demand for new and refurbished offices. Whilst the Elizabeth Line has again been delayed, its eventual opening will be a boost to travelling in London.

The UK is a global leader in the creative industries, an area we have targeted with our portfolio. Companies involved in media, advertising and marketing, technology and other creative industries now comprise 52% of our tenant base.

The third factor influencing our choice of location for our portfolio is the migration of occupiers from West to East across Central London to the City and East London. The desire to be part of creative hubs, surrounded by like-minded individuals, located a short travelling distance from home are common themes in discussing requirements with tenants. Most obviously, those hubs are in the Tech Belt from King's Cross to Whitechapel.

Finally, the growth of flexible leasing is having a continuing effect on the commercial office letting market in London and has spread to regional cities. At Helical we seek early and continued engagement with customers and look to develop long-standing relationships with them. By offering flexible leases on our multi-let assets, which allow them to occupy space commensurate with their requirements, we target long-term retention of our customers. We continue to evolve our tenant offering to reflect trends in demand, specifically with the recent introduction of fitted "plug and play" solutions on some of the buildings where we have smaller floor plates.

In London, Helical has been building up a portfolio of multi-tenanted office buildings in the Tech Belt locations of Farringdon, the Old Street roundabout and Whitechapel. We also own two assets in Chiswick, West London. By owning these "clusters" or "villages" of office buildings, the Company now has a portfolio of assets with multiple lease events leading to ongoing asset management opportunities with the potential to lock in future rental growth.

The Company is also seeking to expand its portfolio by taking on additional schemes in Central London either on its own balance sheet, or in the case of larger projects, by co-investment or by forward selling/funding them, to create the opportunity for significant profit shares but with reduced balance sheet exposure.

Manchester

Manchester continues to present attractive opportunities for us outside London and its city centre has seen the highest take-up figures on record for the first half of 2019. With 824,021 sq ft let across 124 transactions, it is well on track to exceed the five year rolling average of 1.2m sq ft. Meanwhile, Grade A office supply continues to fall and is currently at its lowest reported level.

Prime rents have risen to £36.50 psf and, with a lack of Grade A supply, it is likely rental growth will continue and it is expected to reach £40.00 psf by the end of 2020. Whilst investment volumes are significantly down in 2019, prime yields have remained steady.

Over the past decade Manchester's population has seen the greatest percentage growth outside London. Urbanisation continues, with city centre living having risen by 185% over the past 15 years. This increase has helped drive significant employment growth and this is expected to continue, predicted to increase by 11.8% over the next five years.

Manchester is well known for having the highest graduate retention rate outside London. The city's young and highly skilled workforce has seen it attract tech businesses which now occupy 35% of commercial property within the city.

As with London, we believe in clustering assets together. Our four offices are all within a ten minute walk of one another, enabling us to offer tenants a choice in design, size and rental tone and aiding in the long term retention of our tenants.

Looking Forward

Our ambition is to have a balanced portfolio that generates sufficient net rental income to firstly, exceed all of our recurring costs and second, provide a surplus significantly greater than our annual dividend to Shareholders. We have a see-through ERV on the portfolio of £59.6m and expect to generate this surplus once all of our current development and asset management activities are complete. We are also seeking a pipeline of opportunities to grow the balance sheet through the creation of development profits and capital surpluses.

Financial Review

Overview

The half year has seen continued letting success, particularly at The Tower, London EC1 and One Bartholomew, London EC1. Combined with the development progress made at Kaleidoscope, London EC1 and the recognition of the final profit on exit from One Creechurch Place, London EC3, the resultant valuation gains and development profits recognised have driven the Group's net asset growth.

With the repayment of the £100m Convertible Bond in June 2019 and the completion of the expanded £400m Revolving Credit Facility, the Group has reduced its average cost of debt whilst extending the maturity of its borrowings.

Results for the Half Year

The see-through results for the half year to 30 September 2019 include net rental income of £13.0m, a net gain on sale and revaluation of the investment portfolio of £9.9m and development profits of £5.7m, leading to a Total Property Return of £28.6m (2018: £43.2m). Total administration costs of £7.4m (2018: £8.0m) and net finance costs of £7.6m (2018: £7.4m) contributed to a pre-tax profit of £13.1m (2018: £29.1m). EPRA net asset value per share increased by 0.8% to 486p (31 March 2019: 482p).

The interim dividend, payable on 31 December 2019, will be 2.70p per share, a 3.8% increase on the previous interim period.

The Group's real estate portfolio, including its share of assets held in joint ventures, increased to £955.8m (31 March 2019: £876.4m) as a result of the acquisition, in joint venture, of 33 Charterhouse Street, London EC1, capital expenditure and net revaluation gains on the investment portfolio.

The expenditure on the investment portfolio during the period increased the Group's see-through loan to value to 35.3% (31 March 2019: 30.6%). Repayment of the Convertible Bond and refinancing The Bower into an expanded £400m Revolving Credit Facility reduced the Group's weighted average cost of debt to 3.5% (31 March 2019: 4.0%) and increased the weighted average debt maturity to 4.5 years (31 March 2019: 2.7 years). The average maturity of the facilities would increase to 5.8 years on exercise of the two one-year extension options on the Revolving Credit Facility and on a fully utilised basis.

At 30 September 2019, the Group had unutilised bank facilities of £210m and £51m of cash on a see-through basis. The bank facilities are primarily available to fund the development of Kaleidoscope, London EC1, the construction of the last phase of residential at Barts Square, London EC1 and future property acquisitions.

Total Accounting Return

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

Total Property Return

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

Earnings Per Share

The IFRS earnings per share decreased from 21.8p to 11.7p and are based on the after tax earnings attributable to ordinary Shareholders divided by the weighted average number of shares in issue during the period. 

On an EPRA basis, the loss per share of 4.6p in 2018 improved to a positive earnings per share of 5.4p, reflecting the Group's share of net rental income of £13.0m (2018: £11.7m) and development profits of £5.7m (2018: losses of £2.1m), but excluding gains on sale and revaluation of Investment properties of £9.9m (2018: £33.6m).

Net Asset Value

IFRS diluted net asset value per share increased from 469p to 472p and is a measure of shareholders' funds divided by the number of shares in issue at the period end, adjusted to allow for the effect of all dilutive share awards. 

EPRA net asset value per share increased by 0.8% to 486p per share (31 March 2019: 482p). This movement arose principally from a total comprehensive income (retained profits) of £14.1m (2018: £25.9m), less £9.0m of dividends (2018: £8.3m).

EPRA triple net asset value per share marginally increased to 466p (31 March 2019: 465p).

Income Statement

Rental Income and Property Overheads

Gross rental income receivable by the Group in respect of wholly owned properties increased to £14.5m (2018: £13.5m), reflecting letting success and partial capture of the investment portfolio's reversionary potential, offset by sales of assets during the prior periods. In the joint ventures, gross rents remained steady at £0.4m (2018: £0.4m). Property overheads in respect of wholly owned assets and in respect of those assets in joint ventures fell by 20.8% to £1.9m (2018: £2.4m). After taking account of net rents receivable from our profit share partners of £nil (2018: £0.1m), see-through net rents increased to £13.0m (2018: £11.7m).

Development Profits

In the period under review, from our role as development manager at One Creechurch Place, London EC3, we recognised £0.8m of profit. A further profit of £0.9m was recognised for carrying out a similar role at Barts Square, London EC1.

Project expenditure of £0.4m on potential new opportunities and to satisfy cost indemnities given on the sale of our Retirement Villages in 2017, and provisions of £0.1m against our legacy retail development programme, combined with other net income of £0.2m, contributed to a net development profit of £1.4m (2018: £1.7m).

Share of Results of Joint Ventures

The revaluation of our investment assets held in joint ventures generated a surplus of £0.5m (2018: £1.1m). Under our development management agreement for One Bartholomew, London EC1, we recognised a net development fee of £5.4m as a result of letting progress, but a reassessment of the expected sales proceeds from the remaining units in the first phase of residential at Barts Square resulted in a provision of £1.1m. The sale of the Group's 10% investment in One Creechurch Place, London EC3 resulted in a profit of £1.3m.

Finance, administration, taxation and other sundry items added a further £0.7m of costs. An adjustment to reflect our economic interest in the Barts Square, London EC1 development and to ensure our investment in One Creechurch Place, London EC3 is shown at its recoverable amount, generated surpluses of £2.6m, leaving a net profit from our joint ventures of £8.0m (2018: loss of £3.9m).

Gain on Sale and Revaluation of Investment Properties

The valuation of our investment portfolio, on a see-through basis, continued to reflect the benefit of our refurbishment activities in London where we generated a valuation surplus of 1.7% (including purchases and gains on sales) and 1.8% on a like-for-like basis. In Manchester, the portfolio remained unchanged on a like-for-like basis. In total, the see-through investment portfolio showed a valuation surplus of 1.4% (including purchases and gains on sales), or 1.5% on a like-for-like basis.

The total impact on our results of the gain on sale and revaluation of our investment portfolio, including in joint ventures, was a net gain of £9.9m (2018: £33.6m). 

Administrative Expenses

Administration costs in the Group, before performance-related awards, reduced from £5.6m to £5.3m.

Performance related share awards and bonus payments, including National Insurance costs, were £1.7m (2018: £2.3m). Of this amount, £0.9m (2018: £0.9m), being the charge for share awards under the Performance Share Plan, is expensed through the Income Statement but added back to Shareholders' Funds through the Statement of Changes in Equity.

Finance Costs, Finance Income and Derivative Financial Instruments

Interest payable on secured bank loans, including our share of loans on assets held in joint ventures, but before capitalised interest, reduced to £6.1m (2018: £6.3m). Interest payable in respect of the unsecured bonds was £0.9m (2018: £2.0m). Bank charges, commitment fees, sundry interest and the amortisation of refinancing costs increased to £3.0m (2018: £2.4m) due to the early repayment of The Bower facility upon the transfer of the property into the expanded Revolving Credit Facility. Capitalised interest reduced from £2.3m to £1.1m as development schemes progressed and as a result of the completion of The Tower, London EC1 in August 2018. Total finance costs, including in joint ventures, increased to £8.9m (2018: £8.4m).

Finance income earned, including in joint ventures, was £1.4m (2018: £1.1m). The movement in medium and long-term interest rate projections during the period contributed to a charge of £5.0m (2018: credit of £0.3m) on their mark-to-market valuation. The repayment of the £100m Convertible Bond resulted in a credit of £0.5m (2018: £1.0m) on the reversal of the 31 March 2019 mark-to-market valuation.

Taxation

Helical pays corporation tax on its UK sourced net rental income, trading and development profits and realised chargeable gains, after offsetting administration and finance costs.

The decrease in current tax charge for the period to £1.2m from £11.2m is primarily a result of the tax charge on the capital gain on the sale of The Shepherds Building, London W14 in the prior period.

Dividends

Helical follows a progressive dividend policy of increasing its dividends whilst retaining the majority of funds generated for investment to grow the business. As the Group completes and lets its current development programme, it expects to be able to reflect the growth in earnings in increased dividends paid to Shareholders. The Company has proposed an interim dividend of 2.70p, an increase of 3.8% on the previous period (2018: 2.60p).

Balance Sheet

Shareholders' Funds

Shareholders' Funds at 1 April 2019 were £567.4m. The Group's results for the period added £14.1m (2018: £25.9m), net of tax, representing the total comprehensive income for the period. Movements in reserves arising from the Group's share schemes increased funds by £1.2m. The Company paid dividends to Shareholders amounting to £9.0m leaving a net increase in Shareholders' Funds from Group activities during the period of £6.3m to £573.7m.

Investment Portfolio

In the period to 30 September 2019, the Group acquired 33 Charterhouse Street, London EC1 in joint venture for £37.1m (our share). The Group spent £34.7m on capital works on the investment portfolio, mainly at Kaleidoscope, London EC1 (£20.6m), The Tower, London EC1 (£6.6m), Barts Square, London EC1 (£1.7m), The Tootal Buildings (formally called Churchgate and Lee), Manchester (£3.2m) and Fourways House, Manchester (£0.9m). Revaluation gains added £12.6m to increase the see-through value of the portfolio, before lease incentives, to £901.0m (31 March 2019: £816.6m). The accounting for head leases and lease incentives resulted in a book value of the see-through investment portfolio of £885.7m (31 March 2019: £804.0m).

Debt and Financial Risk

In total, Helical's outstanding debt at 30 September 2019 of £395.2m (31 March 2019: £479.2m) had a weighted interest cost of 3.5% (31 March 2019: 4.0%) and a weighted average debt maturity of 4.5 years (31 March 2019: 2.7 years). The average maturity of the facilities would increase to 5.8 years following exercise of the two one-year extensions of the Group's £400m Revolving Credit Facility on a fully utilised basis.

Debt Profile at 30 September 2019 - Including Commitment Fees but Excluding the Amortisation of Arrangement Fees

* Calculated on a fully utilised basis with the two one-year extensions of the Revolving Credit Facility included.

Secured Debt

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

- Investment Facilities

We have a £400m Revolving Credit Facility that enables the Group to acquire, refurbish, reposition and hold significant parts of our investment portfolio with the remaining London investment assets held in a £93m term loan secured facility. The value of the Group's properties secured in these facilities at 30 September 2019 was £717m (31 March 2019: £698m) with a corresponding loan to value of 43.8% (31 March 2019: 44.4%). The average maturity of the Group's investment facilities at 30 September 2019 was 4.9 years (31 March 2019: 3.5 years), increasing to 6.5 years on a fully utilised basis and following the two one-year extensions of the Revolving Credit Facility. The weighted average interest rate was 3.2% (31 March 2019: 3.9%). The marginal cost of fully utilising the undrawn Revolving Credit Facility was 2.2% (31 March 2019: 2.1%).

- Development Facilities

This facility finances the over-station development at Kaleidoscope, London EC1. The maturity of the Group's development facility at 30 September 2019 was 3.9 years (31 March 2019: 4.4 years) with a weighted average interest rate of 4.9% (31 March 2019: 6.3%). Excluding the impact of commitment fees, the weighted average interest rate of this facility is 4.2% (31 March 2019: 4.2%).

- Joint Venture Facilities

We hold a number of investment and development properties in joint venture with third parties and include in our reported figures our share, in proportion to our economic interest, of the debt associated with each asset. The average maturity of the Group's share of bank facilities in joint ventures at 30 September 2019 was 2.3 years (31 March 2019: 2.8 years) with a weighted average interest rate of 3.9% (31 March 2019: 4.0%).

Unsecured Debt

The Group's unsecured debt, following the repayment of the £100m Convertible Bond in June 2019, is £nil (31 March 2019: £100.5m), as follows:

- Short-term Working Capital Facilities

These undrawn facilities provide access to additional working capital for the Group.

Cash and Cash Flow

At 30 September 2019, the Group had £261m (31 March 2019: £382m) of cash and agreed, undrawn, committed bank facilities including its share in joint ventures, as well as £62m (31 March 2019: £25m) of uncharged property on which it could borrow funds.

Net Borrowings and Gearing

Total gross borrowings of the Group, including in joint ventures, have decreased from £479.2m to £395.2m during the six month period to 30 September 2019. After deducting cash balances of £51.3m (31 March 2019: £205.2m) and unamortised refinancing costs of £6.6m (31 March 2019: £5.4m), net borrowings increased from £268.6m to £337.4m. The see-through gearing of the Group, including in joint ventures, increased from 47.3% to 58.8%.

Hedging

At 30 September 2019, the Group had £243.0m (31 March 2019: £363.0m) of fixed rate debt with an average effective interest rate of 3.0% (31 March 2019: 3.7%) and £103.8m (31 March 2019: £67.2m) of floating rate debt with an average effective interest rate of 4.4% (31 March 2019: 5.7%). In addition, the Group had £200m of interest rate caps at an average of 1.75% (31 March 2019: £240m at 1.69%). In our joint ventures, the Group's share of fixed rate debt was £nil (31 March 2019: £nil) and £48.4m (31 March 2019: £49.0m) of floating rate debt with an effective rate of 3.9% (31 March 2019: 4.0%), with interest rate caps set at 1.5% plus margin on £32.9m (31 March 2019: £11.0m at 0.5%).

¹ This includes commitment fees on undrawn facilities. Excluding these would reduce the effective rate to 3.1% (31 March 2019: 3.7%).

Tim Murphy

Finance Director

21 November 2019

Helical's Property Portfolio - 30 September 2019

Property Overview

Helical divides its property activities into two core markets: London and Manchester offices. London represents 87% and Manchester 13% of the total see-through property portfolio. Whilst there are structural differences in these markets, Helical has found that its business model can be applied successfully to each, driving capital growth, development profits and rental income.

The London Portfolio

Our strategy is to continue to increase our London holdings, focusing on areas where we see strong tenant demand and growth potential, such as the "Tech Belt" that runs from King's Cross through Old Street and Shoreditch to Whitechapel. Our London portfolio comprises income-producing multi-let offices, office refurbishments and developments and a mixed use commercial/residential scheme.

33 Charterhouse Street, EC1

In May 2019 we acquired the rights to a long leasehold interest in 33 Charterhouse Street, a major development site located in Farringdon, in a 50:50 joint venture with AshbyCapital. The site is situated on the corner of Charterhouse Street and Farringdon Road, adjacent to Farringdon Station and immediately opposite the future Museum of London site at Smithfield General Market.

Since acquisition, extensive work has been undertaken to refine the existing planning consent such that the building is now expected to provide for c.190,000 sq ft of offices across ten floors and c.10,000 sq ft of ground floor retail. Work on site will commence shortly and completion is anticipated in Spring 2022.

The Bower, EC1

The Bower is a landmark estate immediately adjacent to the Old Street roundabout and features 312,575 sq ft of innovative, high quality office space along with 21,280 sq ft of restaurant and retail space.

The Warehouse and The Studio

The Warehouse comprises 122,858 sq ft of offices and The Studio 18,283 sq ft of offices with 10,298 sq ft of retail space at the two buildings. The repositioning of The Warehouse entailed a complete refurbishment of the building whilst retaining its original 1960s characteristics. The Studio was a ground up development on the former car park site. The buildings were fully pre-let when they completed in November 2015.

The Tower

The Tower offers 171,434 sq ft of office space with a contemporary façade and innovatively designed interconnecting floors, along with 10,982 sq ft of restaurant space let to Albion & East (trading as Serata Hall) and Wagamama.

In the period we have let the 14th floor on a fitted basis to Snowflake Computing, the cloud-built data warehouse solutions provider, and the 16th floor to Incubeta, a global digital marketing performance group. Since the period end the 12th floor has also been let, on a fitted basis, to an existing tenant, Brilliant Basics, an Infosys company and the 13th floor to OpenPayd, a banking and payments platform for businesses. Following these lettings, The Tower is now 93% let with only the 15th floor available.

Barts Square, EC1

In a joint venture with The Baupost Group LLC, Helical owns the freehold interest of Barts Square, a 3.2 acre site between St Paul's and Smithfield Market, situated a short walk from the Farringdon East Elizabeth Line station.

Barts Square provides a new quarter in the City, consisting of 236 residential apartments, three office buildings of 214,434 sq ft, 24,013 sq ft and 10,187 sq ft together with 21,122 sq ft of retail/A3 at ground floor as well as major public realm improvements.

Phase One

Residential/Retail

Phase One of Barts Square comprises 144 residential units, 3,101 sq ft of retail space and extensive public realm improvements. In the period we completed the sales of two residential units taking the total sales to 136 residential units, with a total value of £173.9m at an average price of £1,555 psf. Following the completion of one further sale after the period end, seven apartments remain available. The landscaping of the new public square has been completed with the restaurant space let to Stem + Glory and Halfcup.

90 Bartholomew Close - Office/Restaurant

The 24,013 sq ft office building, with 6,414 sq ft of restaurant space, completed in March 2018. In the period we let the fourth and fifth floors to Sia Partners, taking the building to 61% let. Since the end of the period, we have let all of the remaining floors with the second floor let as expansion space to an existing Helical tenant on a fitted basis, the third floor to Constantine Cannon and the sixth floor to Eric Salmon.

Phase Two

One Bartholomew - Offices

One Bartholomew was sold to clients of AshbyCapital for £102.4m in August 2015. The demolition of the existing building and the construction of a new 12 storey Grade A office block of 214,434 sq ft commenced in January 2016 and completed in December 2018. AshbyCapital's clients financed the development costs and now that the building is completed and successfully let, the joint venture is entitled to receive a profit share payment.

During the period, we have let the ground, first and second floors to The University of Chicago Booth School of Business, the sixth floor to Sopra Steria and the seventh floor to InfraRed Capital Partners, taking the building to 73% let. Since the period end the third and fourth floors have been let to BDB Pitmans taking the building to 91% let, with only the fifth floor available.

Phase Three

Residential/Retail

Construction works on Phase Three of Barts Square are nearing completion with the first block having reached practical completion in November 2019 and the remaining two due to complete in January and February 2020. This phase comprises 92 apartments and 11,607 sq ft of retail space. During the period, contracts were exchanged on seven units, taking the total number of units exchanged to 44, at a value of £69.7m and an average price of £1,793 psf. Following exchange on one further unit since the period end, 46 units are available for sale and one additional unit that will be released at a later date.

55 Bartholomew

With completion of this refurbishment project due in December 2019 we have commenced marketing of the newly created 10,187 sq ft of office space spread over five floors. The works comprised the substantial refurbishment and extension of the original building and the addition of a new fifth floor.

Kaleidoscope, EC1

The over-station development at the Farringdon East Elizabeth Line station, which will comprise a six storey 86,183 sq ft office building, with a 2,497 sq ft restaurant unit on the ground floor, is due to complete in January 2020. The building sits immediately east of Smithfield Market with views over Charterhouse Square and towards St Paul's Cathedral. The building is being marketed with good interest being expressed by potential tenants.

The Loom, E1

This 108,610 sq ft building is one of London's few remaining former Victorian wool warehouses and was acquired in 2013. Works to transform this asset completed in September 2016 and included a new entrance and reception onto Gowers Walk, a café, showers and a bike store. The Loom has won both a RIBA London and National Award as well as an Architects Journal Retrofit Award.

Since 1 April 2019, we have let three units at a premium to 31 March 2019 ERVs taking the building to 97% let.

25 Charterhouse Square, EC1

In January 2016, Helical was granted a new 155 year leasehold interest in 25 Charterhouse Square from the Governors of Sutton's Hospital in Charterhouse for £16m. The building is a Grade A office adjacent to the new Farringdon East station on the Elizabeth Line and overlooks the historic Charterhouse Square. Helical carried out a major refurbishment of the existing building, which increased the previous 34,000 sq ft to 38,355 sq ft of offices with the addition of a new sixth floor, and 5,138 sq ft of retail space. The building achieved practical completion on 28 March 2017 and was fully let to Anomaly, Peakon, Hudson Sandler and Senator International by December 2017, less than two years after it was acquired.

Power Road Studios, W4

The site comprises 57,164 sq ft of offices across four studio buildings and is multi-let to a wide range of predominantly media tenants. In October 2017 we completed the refurbishment of Studio 1, a project comprising c.16,000 sq ft of Grade A space, refurbished common parts and added two new lift shafts to accommodate a consented future roof extension of 13,000 sq ft. We have also secured planning consent for a new 30,000 sq ft building.

In the period we have completed five lettings representing 16,160 sq ft, at a 10.8% average premium to 31 March 2019 ERVs taking the building to 88% let.

The Powerhouse, W4

Helical acquired this 24,288 sq ft office and recording studios by way of sale and leaseback in 2013. The Powerhouse is a listed building on Chiswick High Road and is fully let on a long lease to Metropolis Music Group.

One Creechurch Place, EC3

The sale of our 10% shareholding in One Creechurch Place to our joint venture partner, HOOPP, took place in September 2019, completing our involvement in the development.

The Manchester Portfolio

Manchester is a city with a diverse, thriving and growing economy that is widely regarded as England's second city and the centre of the "Northern Powerhouse". Helical has found that the approach it applies to development and asset management in London is equally well received by the tenants in Manchester.

The Tootal Buildings, Manchester

The buildings, formally referred to as Churchgate and Lee, comprise 243,666 sq ft of multi-let offices. The assets were 64% let when acquired in March 2014. Since their purchase, we have refurbished the Churchgate House reception and 94,493 sq ft of office space, with a further 46,739 sq ft currently being refurbished as expansion space for an existing tenant. In the period we have completed the lettings of the recently refurbished third floor in Churchgate House and the sixth and seventh floors in Lee House to Capita Business Services. Following the completion of these lettings the building is now fully let. We continue to actively manage the buildings, with a recently completed full refurbishment of the reception at Lee House.

35 Dale Street, Manchester

35 Dale Street is a 56,124 sq ft office building situated in the Northern Quarter of Manchester, acquired in March 2015. The building underwent a comprehensive refurbishment which completed in June 2018. During the period Couchbase have taken occupation of the newly reconfigured former loading bay for office use.

Trinity, Manchester

Trinity, purchased in May 2017 for £12.9m, underwent a full redevelopment which completed in January 2019. The repositioned building comprises 54,651 sq ft of office space and 4,300 sq ft of retail/restaurant space, both of which are available to let.

Fourways House, Manchester

This 58,369 sq ft brick built Grade 2 listed former packing warehouse was acquired in July 2018 for £16.5m, representing a net initial yield of 5.3%. We have begun our management programme and have let two units in the period at a 12.7% premium to 31 March 2019 ERVs and have let a further unit since the period end. We have recently obtained planning permission to undertake a significant refurbishment of the atrium and common parts and works will commence shortly, with completion expected in July 2020.

Portfolio Analytics

See-through Valuation Movements

See-through Total Portfolio by Fair Value

See-through Trading and Development Portfolio

Capital Expenditure

We have a committed and planned development and refurbishment programme.

1. Includes deferred consideration payment due in April 2020.

Asset Management

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

During the period, total contracted income increased by £3.2m as a result of new lettings and rent reviews.

Investment Portfolio

Portfolio Yields

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

See-through Lease Expiries or Tenant Break Options

Top 10 Tenants

We have a strong rental income stream and a diverse tenant base. The top 10 tenants account for 47.6% of the total rent roll and the tenants come from a variety of industries.

Principal Lettings During the Period

Letting Activity

1. Excludes leases on a fitted basis.

Statement of Directors' Responsibilities

We confirm that to the best of our knowledge:

a) The condensed unaudited consolidated financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting';

b) The interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events and their impact during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

c) The interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

Balances with related parties at 30 September 2019, 30 September 2018 and 31 March 2019 are disclosed in Note 25.

A list of current Directors is maintained at 5 Hanover Square, London, W1S 1HQ and at www.helical.co.uk.

The half year statement was approved by the Board on 21 November 2019 and is available from the Company's registered office at 5 Hanover Square, London, W1S 1HQ and on the Company's website at www.helical.co.uk.

On behalf of the Board

Tim MurphyFinance Director

21 November 2019

Independent Review Report to the Members of Helical plc

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2019 which comprises the Unaudited Consolidated Income Statement, Unaudited Consolidated Statement of Comprehensive Income, Unaudited Consolidated Balance Sheet, Unaudited Consolidated Cash Flow Statement and Unaudited Consolidated Statement of Changes in Equity, the cash flow statement and related notes 1 to 29. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in Note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2019 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Deloitte LLPStatutory Auditor

London, United Kingdom 21 November 2019

Unaudited Consolidated Income Statement

For the Half Year to 30 September 2019

Unaudited Consolidated Statement of Comprehensive Income

For the Half Year to 30 September 2019

The exchange differences on retranslation of net investments in foreign operations will be reclassified to the Income Statement on disposal.

Unaudited Consolidated Balance Sheet

At 30 September 2019

Unaudited Consolidated Cash Flow Statement

For the Half Year to 30 September 2019

Unaudited Consolidated Statement of Changes in Equity

At 30 September 2019

For a breakdown of total comprehensive income see the Unaudited Consolidated Statement of Comprehensive Income.

The credit adjustment to retained earnings of £920,000 (31 March 2019: £2,274,000) is the contra to the share based payments charge recognised in the Unaudited Consolidated Income Statement, in accordance with IFRS 2 'Share Based Payments'.

There were net transactions with owners of £7,303,000 (31 March 2019: £9,038,000) made up of the Performance Share Plan credit of £920,000 (31 March 2019: £2,274,000) and related deferred tax credit of £355,000 (31 March 2019: £94,000), dividends paid of £8,980,000 (31 March 2019: £11,406,000), the issue of share capital of £6,000 (31 March 2019: £8,000) and corresponding share premium of £2,158,000 (31 March 2019: £2,506,000), share settled Performance Share Plan awards charge of £1,349,000 (31 March 2019: £1,837,000) and the share settled bonus awards charge of £413,000 (31 March 2019: £677,000).

The credit adjustment to retained earnings of £898,000 is the contra to the share based payments charge recognised in the Unaudited Consolidated Income Statement, in accordance with IFRS 2 'Share Based Payments'.