Helical Bar Regulatory News (HLCL)

Leasing Progress with StRong Rents for Best-in-Class Portfolio

Gerald Kaye, Chief Executive, commented:

"Helical has had a good half year. Lettings were achieved at significant premiums to March ERVs and development gains were generated at The JJ Mack Building, EC1, with these successes offset by yield expansion on our standing investments as a consequence of higher interest rates.

"We are seeing strong demand from tenants for best-in-class office space, as evidenced by the Partners Group letting at The JJ Mack Building, EC1. We believe there is an intrinsic shortage of this top quality space as demand exceeds supply over the short and medium term.

"The bifurcation that has been evident for a few years in the leasing market, between the best-in-class most sustainable buildings and the rest, has now appeared in the investment market, accentuated by rising bond yields and interest rates. We anticipate this will accelerate, with yields stabilising and rents continuing to grow for the best-in-class most sustainable buildings, such as those that comprise the Helical portfolio, and yields moving outwards and rents falling for the rest.

"Price discovery will continue for the poorer quality less sustainable second-hand buildings as they decouple from the rest of the market. In time, these assets will provide Helical with the opportunity to turn these tired office buildings into market leading and highly sustainable new spaces providing amenity rich and technologically enabled offices which will appeal to discerning tenants seeking the best environment for their staff. This will enable us to continue to provide strong returns from our developments over the medium term."

Operational Highlights

Strong Leasing Performance

· We completed four new lettings during the Period totalling 19,642 sq ft, delivering contracted rent of £1.3m (our share £1.2m) at a 2.2% premium to 31 March 2022 ERVs.

· Since the half year, we have let 37,880 sq ft at The JJ Mack Building, EC1, delivering contracted rent of £3.8m (our share £1.9m) at an 11.7% premium to 31 March 2022 ERVs. Two further lettings totalling 4,818 sq ft have completed, delivering contracted rent of £0.2m (our share £0.2m).

Good Progress on Developments

· Practical completion was achieved at The JJ Mack Building, EC1, on 30 September 2022, as scheduled. Two floors are now let in this highly sustainable 205,958 sq ft office development and the remaining space is being marketed.

· At 100 New Bridge Street, EC4, we have submitted a planning application for the sustainable refurbishment of the building, which should be determined soon. Once approved, the redevelopment work is anticipated to commence in late 2023 after vacant possession has been achieved.

Over £200m of Sales during the Period, all above March Book Value

· During the Period we sold over £196m of investment properties, all at premiums to 31 March 2022 valuations, and £5m (our share) of residential apartments at Barts Square, EC1.

Financial Highlights

Earnings and Dividends

· IFRS profit after tax of £17.2m (2021: £22.2m).

· IFRS basic earnings per share of 14.1p (2021: 18.2p).

· EPRA earnings per share1 of 4.8p (2021: 0.9p).

· Interim dividend increased by 5.2% to 3.05p per share (2021: 2.90p).

Balance Sheet

· Net asset value up 0.8% to £692.7m (31 March 2022: £687.0m).

· Total Accounting Return1 on IFRS net assets of 2.3% (2021: 3.9%).

· Total Accounting Return1 on EPRA net tangible assets of -2.5% (2021: 5.1%).

· EPRA net tangible asset value per share1 down 3.3% to 553p (31 March 2022: 572p).

· EPRA net disposal value per share1 up 1.5% to 559p (31 March 2022: 551p).

Financing

· See-through loan to value1 reduced to 26.4% (31 March 2022: 36.4%).

· See-through net borrowings1 of £241.8m (31 March 2022: £402.9m).

· Average maturity of the Group's share1 of secured debt of 3.4 years (31 March 2022: 3.0 years).

· 100% of drawn debt protected by interest rate hedging to expiry of facilities.

· Gain in valuation of derivative financial instruments of £26.6m (2021: £4.6m).

· See-through average cost of secured facilities1 of 3.0% (31 March 2022: 3.2%).

· Group's share1 of cash and undrawn bank facilities of £293.1m (31 March 2022: £132.3m).

Portfolio Update

· IFRS investment property portfolio value of £738.5m (31 March 2022: £938.8m).

· Our see-through investment portfolio, valued at £907.7m (31 March 2022: £1,097.3m), is down 2.2% with like-for-like yield expansion of 22bps offset by 4.3% ERV growth.

· See-through contracted rents1 of £37.0m (31 March 2022: £46.4m) compared to an ERV of £59.7m (31 March 2022: £67.1m).

· See-through portfolio WAULT1 of 4.6 years (31 March 2022: 5.6 years).

· Vacancy rate increased from 6.0% to 7.0% on a like-for-like basis and from 6.7% to 19.2% for the whole portfolio, following practical completion of The JJ Mack Building, EC1.

Sustainability Highlights

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

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

· Improvements across sustainability measures, with 5 Star GRESB ratings awarded for both our standing investments and our developments, and retention of MSCI ESG AAA and EPRA Sustainability BPR Gold.

Interim Dividend Timetable

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

For further information, please contact:

Results Presentation

Helical will be holding a presentation for analysts and investors starting at 10:30am on Tuesday 22 November 2022 at the offices of Numis. 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://stream.brrmedia.co.uk/broadcast/633d925051e5f558854f51ba

Half Year Results Statement

At Helical, sustainability is at the heart of everything we do and forms one of the key pillars of our strategy. With this in mind, we have taken the decision to cease mailing hard copies of our half year results reports to our Shareholders and other stakeholders unless specifically requested. Should you wish to receive a hard copy of our Results for the Half Year to 30 September 2022 by post, please email your request to companysecretary@helical.co.uk . An electronic version of our Results for the Half Year to 30 September 2022 will be made available on our website (https://www.helical.co.uk/investors/results-and-presentations/) on 22 November 2022.

1. See Glossary for definition of terms. The financial statements have been prepared in accordance with International Accounting Standards ("IAS") in conformity with the Companies Act 2006. In common with usual and best practice in our sector, alternative performance measures have also been provided to supplement IFRS, some of which are based on the recommendations of the European Public Real Estate Association ("EPRA"), with others designed to give additional information about the Group's share of assets and liabilities, income and expenses in subsidiaries and joint ventures.

Chief Executive's Statement

Overview

Helical has had a good half year. Lettings were achieved at significant premiums to March ERVs and development gains were generated at The JJ Mack Building, EC1, with these successes offset by yield expansion on our standing investments as a consequence of higher interest rates.

During the last 14 years of ultra-low interest rates, the UK had become complacent, expecting a gradual return to normal financing levels whenever the Bank of England decided to implement a long-awaited reversal of quantitative easing. The delay in taking such action left the market exposed to events and the post-Covid inflation spike, accentuated by the energy crisis arising out of the invasion of Ukraine, have caused interest rates and bond yields to rise sharply. Property yields have, as a consequence, expanded to reflect this change in the cost of capital.

We are seeing strong demand from tenants for best-in-class office space, as evidenced by the Partners Group letting at The JJ Mack Building, EC1. We believe there is an intrinsic shortage of this top quality space as demand exceeds supply over the short and medium term.

The Bond Street station of the Elizabeth Line opened on 24 October and the entire route is now complete. Almost all of our portfolio is within a 12 minute walk of the Elizabeth Line which will transform journeys across Central London. As investors in London, we are hugely proud of an extraordinary feat of engineering which is a fitting tribute to our late Queen.

Sustainability

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

In May, we published our "Net Zero Carbon Pathway", setting out how we intend to reduce our carbon emissions across our development activities and existing portfolio. More recently, we have been ranked the number one company in the UK Office Listed sector for our standing investment properties, scoring 88%, in the GRESB annual sustainability performance index, with a score of 94% for our developments. Alongside this, we also received a 5 Star GRESB rating for both our Standing Investments and Developments and retained our Green Star status. For our sustainability reporting, we won a Gold Award for the second consecutive year, for reporting in accordance with EPRA's European Sustainability Best Practice Recommendations (sBPR).

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

On 30 September 2022, The JJ Mack Building, EC1 reached practical completion, the UK's first commercial building to be awarded BREEAM "Outstanding" at the design stage under the 2018 assessment criteria. In addition, the building is rated EPC A and is anticipated to receive a NABERS 5 Star for the commitment to achieve excellent energy efficiency in operation. It is intended that The JJ Mack Building, EC1 will be Helical's first net zero carbon building.

Results for the Half Year

The profit after tax for the half year to 30 September 2022 was £17.2m (2021: £22.2m), reflecting a nil tax charge (2021: £8.8m) following the conversion of Helical into a UK REIT on 1 April 2022.

The see-through Total Property Return of £4.0m (2021: £44.9m), incorporating the Group's share of results of its joint ventures, includes see-through net rental income of £18.2m (2021: £14.1m), a 29% increase, while developments generated see-through profits of £0.9m (2021: profit of £1.0m). The see-through net loss on sale and revaluation of the investment portfolio was £15.1m (2021: gain of £29.8m).

Total see-through net finance costs reduced to £7.2m (2021: £7.8m). An increase in expected future interest rates led to a £26.6m gain (2021: £4.6m) in the valuation of the Group's derivative financial instruments. See-through total administration costs, including performance related awards and NIC, were down 19% to £6.0m (2021: £7.4m).

There was an IFRS basic earnings per share of 14.1p (2021: 18.2p) and an EPRA earnings per share of 4.8p (2021: 0.9p).

On a like-for-like basis, the see-through investment portfolio fell in value by 2.2% (1.1% including sales and purchases).

The portfolio was 81% let at 30 September 2022, generating contracted rents of £37.0m, at an average of £58 psf, growing to £48.7m on the letting of currently vacant space and moving towards capturing its ERV of £59.7m (31 March 2022: £67.1m). The Group's contracted rent has a Weighted Average Unexpired Lease Term ("WAULT") of 4.6 years.

The Total Accounting Return ("TAR"), being the growth in the IFRS net asset value of the Group, plus dividends paid in the period, was 2.3% (2021: 3.9%). Based on EPRA net tangible assets, the TAR was-2.5% (2021: 5.1%). EPRA net tangible assets per share were down 3.3% to 553p (31 March 2022: 572p), with EPRA net disposal value per share up 1.5% to 559p (31 March 2022: 551p).

Balance Sheet Strength and Liquidity

The Group has a significant level of liquidity, with see-through cash and unutilised bank facilities of £293.1m (31 March 2022: £132.3m) to fund capital works on its portfolio or future acquisitions.

At 30 September 2022, the Group had £46.1m of cash deposits available to deploy without restrictions and a further £12.8m of rent in bank accounts available to service payments under loan agreements, cash held at managing agents and cash held in joint ventures. Furthermore, the Group had £234.2m of loan facilities available to draw on, with £60.0m expiring in December 2022.

The see-through loan to value ratio ("LTV") reduced to 26.4% at the balance sheet date (31 March 2022: 36.4%) and our see-through net gearing, the ratio of net borrowings to the net asset value of the Group, reduced to 34.9% (31 March 2022: 58.6%) over the same period.

At the Period end, the average debt maturity on secured loans, on a see-through basis, was 3.4 years (31 March 2022: 3.0 years). The average cost of debt, on a see-through basis, at 30 September 2022 was 3.0% (31 March 2022: 3.2%).

Dividends

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

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

In the half year to 30 September 2022, the additional rental income from the purchase of 100 New Bridge Street, EC4 in March 2022 boosted EPRA earnings per share to 4.8p (2021: 0.9p). The sales of over £196m of investment assets during the Period realised £53.4m of capital profits.

In considering the appropriate level of interim dividend to be paid in respect of the half year results, the Board has assessed the financial success of the Period against the economic backdrop that the Company is operating in. Accordingly, the Board has approved a 5.2% increase in the interim dividend to 3.05p per share (2021: 2.90p).

Following its conversion to a UK REIT, dividends payable by Helical will comprise a Property Income Distribution ("PID") from the operations that fall under the REIT regime, and a dividend from those operations that fall outside the REIT regime. None of the interim dividend is to be paid as a PID.

Outlook

The bifurcation that has been evident for a few years in the leasing market, between the best-in-class most sustainable buildings and the rest, has now appeared in the investment market, accentuated by rising bond yields and interest rates. We anticipate this will accelerate, with yields stabilising and rents continuing to grow for the best-in-class most sustainable buildings, such as those that comprise the Helical portfolio, and yields moving outwards and rents falling for the rest.

Price discovery will continue for the poorer quality less sustainable second-hand buildings as they decouple from the rest of the market. In time, these assets will provide Helical with the opportunity to turn these tired office buildings into market leading and highly sustainable new spaces providing amenity rich and technologically enabled offices which will appeal to discerning tenants seeking the best environment for their staff. This will enable us to continue to provide strong returns from our developments over the medium term.

Gerald KayeChief Executive

22 November 2022

Sustainability and Net Zero Carbon

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

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

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

Our portfolio is well placed in terms of energy efficiency, with 99% of our assets (by value) already compliant with the proposed legislative requirement that all rented commercial buildings achieve a minimum EPC rating of B by 2030. Market research suggests that only circa 20% of commercial assets are currently compliant, with significant capital outlay likely to be required to take non-compliant buildings up to the minimum standard. Likewise, 99% of our assets (by value) hold a BREEAM certification, with 87% being "Outstanding" or "Excellent" (excluding 100 New Bridge Street, EC4, which is to be refurbished).

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

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

Our Market

General overview

The past six months have seen a period of intense global macro-economic volatility. Central banks have sought to raise interest rates to combat the increasingly persistent inflation rates seen as economies recover from the impacts of Covid-19 and rising energy costs. Domestically, the volatility has been heightened over recent months. Investors across all asset classes continue to recalibrate return expectations following the end to the period of ultra-low interest rates which has run since 2008.

The commercial property sector has been impacted by these wider economic forces and yields across all sectors have moved out over the period as investors seek to retain a risk premium over the rising equivalent risk free rate. However, against these negative economic trends we continue to see evidence of an acceleration in the bifurcation of real estate assets, particularly in the Central London office market, which supports our continued belief that our best-in-class, new, sustainable portfolio should prove resilient to current pressures and be well positioned to grow going forward.

Leasing Market

The leasing market continues to show encouraging signs with year to date take-up of 9.0m sq ft, 48% up on the same period in 2021. 3.8m sq ft is also reported to be under offer, which is above the 10 year average. However, demand is not evenly distributed across the market with tenants focusing upon the limited supply of the best-in-class space that delivers extensive tenant amenity and is at the forefront of sustainability. Second-hand space has become increasingly hard to let and now represents 68% of the total availability of 24.7m sq ft in the marketplace at the end of Q3.

These dynamics have resulted in demonstrable rental growth across most Central London sub-markets. Occupiers from the professional services continue to make up the majority of tenant demand as they seek to provide exciting workspaces for their staff who have now returned to predominately office based working. Demand from these sectors is compensating for the reduced demand from the TMT sector which is currently experiencing specific challenges.

Investment Market

After an encouraging start to the year, driven by a number of large lot size transactions, investment activity in Central London has slowed. Investors are having to consider the impacts of cost inflation, rising costs of borrowing and general economic uncertainty on the value of their assets and their future investment strategies.

The rise globally of risk-free rates has had a consequential impact upon property yields, causing a general outward movement. However, this cannot be applied uniformly across all assets and investors must assess the intrinsic value of each property. There remains considerable demand for best-in-class buildings which are designed to satisfy modern occupiers' needs, are well located and are let to a strong mix of tenants. This bifurcation has been demonstrated within the investment market with transactions for best-in-class buildings, such as Kaleidoscope, EC1, showing price resilience.

While we believe pricing for these best-in-class assets will move in a narrow range, at the other end of the spectrum poor quality second-hand space is experiencing a significant repricing as landlords take into account the significant capital expenditure required to ensure buildings are attractive to the discerning tenant. With only circa 20% of the Central London office stock currently achieving the EPC A or B ratings necessary to comply with the proposed regulations for office occupation from 2030, there is a significant amount of capital expenditure required, as well as skill to be deployed, to ensure that this extensive portion of the market does not become obsolete.

There remains a substantial and deep pool of capital seeking to invest into the Central London commercial office market due to its continuing reputation as an innovative and resilient marketplace. In particular, there are significant capital allocations by equity led investors, such as sovereign or private capital, which will not be directly impacted by the current volatility in the debt markets and which can be deployed promptly when opportunities are identified. Furthermore, the continued relative weakness of the Pound has seen overseas investors continue to remain interested, with 82% of all transactions in Central London in Q3 being undertaken by foreign investors. As there remains an inherent lack of best-in-class investment properties there will likely be a depth of demand which should ensure pricing remains competitive when these assets are traded, with yields somewhat decoupled from risk free rate movements.

Supply Constraints

The volatility in the global financial markets and challenges in supply chains are also adversely impacting new developments starting on site, with construction cost inflation and increasing borrowing costs affecting the viability of marginal schemes. In Deloitte's Summer 2022 Crane Survey, these "new starts" fell by one third and more projects are anticipated to have been postponed as the economic environment has worsened over the course of the Autumn. Furthermore, of the planned London office completions in 2025 and 2026 reported by Savills, only 33% of these are currently under construction. This is expected to result in a significant shortfall in new completions in the medium-term and provide an advantage for those who proceed with schemes in this period, such as ourselves at 100 New Bridge Street, EC4. This limited development pipeline is feeding through to the leasing market where tenants are having to make early commitments to the best space, with pre-letting activity increasing.

The recent trends towards developments delivering the highest sustainability credentials has continued, even in light of cost pressures, with 91% of all new starts being on refurbishment projects, whilst new-build construction starts are at their lowest levels since 2015.

Conclusion

There continue to be significant challenges facing the Central London office market with rising borrowing costs, inflationary pressures and global supply chain instability dampening economic growth and consequentially causing pricing adjustments in the market. However, within this turbulence there is clear evidence of an increasing bifurcation with best-in-class assets, those that are well located, offering extensive amenity and which have been sustainably developed, proving to be vastly more resilient in both occupational and investor demand.

Our existing portfolio is well positioned to benefit from growing demand from tenants and investors alike for the limited supply of best-in-class space. We remain focused upon sourcing new opportunities which we expect to arise during this period of dislocation. We continue to be discerning in our asset selection but retain a strong belief that through deploying our extensive experience and skill there is the potential to deliver a significant number of highly sought after, best-in-class assets into a supply constrained market place.

Helical's Property Portfolio - 30 September 2022

Property Overview

Helical's portfolio comprises income producing multi-let offices, office refurbishments and developments and a mixed use commercial/residential scheme, all located in Central London. Our strategy is to continue to increase our Central London holdings, focusing on areas where we see strong tenant demand and growth potential for our best-in-class office schemes.

The JJ Mack Building, 33 Charterhouse Street, EC1

The development of the 205,958 sq ft office building, in 50:50 joint venture with AshbyCapital, reached practical completion in line with the original programme on 30th September 2022. The JJ Mack Building, EC1, named after the market trader who occupied the site in the 1940s, is one of London's smartest and most sustainable new office buildings.

The building is situated in vibrant Farringdon, just 150m from the Elizabeth Line, providing occupiers with unparalleled connectivity and cultural offerings. The building has adopted market leading technologies and design and operational practices to provide highly sustainable premises. This commitment to sustainability has been recognised by a BREEAM 2018 New Construction "Outstanding" rating at design stage which is currently being certified, an EPC A rating and an anticipated NABERS 5 Star rating. It also provides a technologically pioneering environment for occupiers, with smart building systems and a fully integrated building management app for tenants.

Since the Period end, we have let two floors, comprising 37,880 sq ft of offices, to Partners Group, a leading global private markets firm, with rent at an 11.7% premium to 31 March 2022 ERVs.

100 New Bridge Street, EC4

We have submitted a planning application for the substantial refurbishment of this 1990s building which, when approved, will enable the prominently located building to be significantly enhanced to ensure it delivers a best-in-class occupier experience. The major refurbishment will involve recladding the facades and incorporating the latest technology into the building, as well as providing high quality tenant amenities to create a new office building, which will operate to the highest standards of sustainability. We have also proposed to the City of London that we will undertake significant public realm improvements around the site.

Work is anticipated to commence in late 2023 once existing tenants, Baker McKenzie, vacate the building. The completed building should be available for occupation in Spring 2025.

Kaleidoscope, EC1

Helical completed the sale of the single asset company which held the long leasehold interest in Kaleidoscope, EC1 to Chinachem Group on 21 September 2022. The 88,581 sq ft office building, which was let in its entirety to TikTok Information Technologies UK Limited on a 15 year lease term at an annual rent of £7.6m was sold for a headline disposal price of £158.5m. The sale reflected a premium to the 31 March 2022 book value and represented a record capital value per square foot for the sub-market of £1,789 psf.

The Bower, EC1

The Bower, EC1 is a landmark estate comprising 312,573 sq ft of innovative, high quality office space along with 21,059 sq ft of restaurant and retail space. The estate is located adjacent to the Old Street roundabout where the significant public realm works are due to complete shortly providing a better experience for occupiers and a much improved access to Old Street Station.

The Warehouse and The Studio

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

The Tower

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

We have let the 12th floor, previously occupied by Brilliant Basics, to Stenn on a five year lease for a rent which is in line with the 31 March 2022 ERV.

Barts Square, EC1

Residential

At Barts Square, EC1, we exchanged contracts for the sale of the ground rent investment asset for £3.7m (Helical share £1.8m) to the residents of Barts Square prior to the Period end and have subsequently completed the sale.

We have also completed the sale of a further six apartments during the Period and one further apartment sale has completed following the Period end. This leaves eight apartments available in this 236 unit residential scheme, of which two are reserved.

Retail

The retail space in Phase One is fully let to Stem + Glory and Halfcup. We have let one unit in Phase Two to the award winning restaurateurs behind London restaurants NEST and FENN who opened Restaurant St Barts in early October. Since the Period end, one further unit has been let to LAP Bikes and another is under offer which, if let, would leave just two remaining vacant retail units.

55 Bartholomew

At 55 Bartholomew, EC1 we sold the comprehensively refurbished 10,976 sq ft office building during the Period to a private European investor for £16.5m (Helical share £8.25m). The sale price reflected a net initial yield of 4.5% and represented a premium to book value, net of rental top ups.

The Loom, E1

At this 107,404 sq ft former Victorian wool warehouse, all units within the building have now been refurbished and we have recently launched a marketing campaign for the vacant units. We have completed a letting of 3,495 sq ft, and have let a further unit of 3,504 sq ft since the Period end.

25 Charterhouse Square, EC1

25 Charterhouse Square, EC1 comprises 42,921 sq ft of offices adjacent to the newly operational Farringdon East Elizabeth Line station and overlooking the historic Charterhouse Square.

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

The Power House, W4

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

Trinity, Manchester

We simultaneously exchanged and completed contracts in May for the sale of Trinity, to clients of Mayfair Capital, for £34.55m (£590 psf), reflecting a net initial yield of 5.0%. The sale represented a premium to book value, net of rental top ups. Helical acquired the property in May 2017 for £12.9m and undertook a comprehensive remodelling and refurbishment to deliver 58,533 sq ft of modern office space across ground and seven upper floors, which was 76% let to eight occupiers upon disposal. Its sale concludes the disposal of Helical's Manchester office portfolio.

Portfolio Analytics

See-through Total Portfolio by Fair Value

See-through Land and Development Portfolio

Capital Expenditure

We have a committed and planned development and refurbishment programme.

Asset Management

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

Investment Portfolio

Valuation Movements

Portfolio Yields

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

See-through Lease Expiries or Tenant Break Options

Top 15 Tenants

We have a strong rental income stream and a diverse tenant base. The top 15 tenants account for 80.9% of the total rent roll.

Letting Activity - New Leases Completed During the Period

* 100% (Helical's share: 2,347 sq ft).

Financial Review

Overview

In a challenging economic environment with high inflation and rising interest rates, the Group sold over £200m of properties above 31 March 2022 book values, strengthening its balance sheet by reducing its loan to value to 26.4% (31 March 2022: 36.4%) and increasing cash and undrawn bank facilities.

Net rental income increased by 29% compared to the corresponding period last year, largely due to the acquisition of 100 New Bridge Street, EC4 in March, and rent collection remained strong. Finance costs are protected to the expiry of current loan facilities and this protection, through a combination of interest rate swaps in the main Group and a fixed rate in joint ventures, has given rise to a significant gain in the fair value of the Group's derivative financial instruments.

The valuation of the Group's investment portfolio reflected a yield expansion on the main portfolio, offset by valuation gains at the recently completed The JJ Mack Building, EC1 which achieved practical completion in September.

Results for the Period

The IFRS profit after tax for the Period of £17.2m (2021: £22.2m) includes revenue from rental income and development management fees of £23.5m, offset by direct costs of £4.6m. The net loss on sale and revaluation of investment properties of £30.4m was partially offset by profit from joint venture activities of £15.1m, including a £15.3m gain on revaluation of investment properties held in joint venture. A gain in the fair value of derivatives of £26.6m (2021: £4.6m) was offset by administration expenses of £5.6m (2021: £7.1m) and net finance costs of £7.3m (2021: £7.5m).

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

The see-through results for the Period to 30 September 2022 include net rental income of £18.2m, a net loss on sale and revaluation of the investment portfolio of £15.1m and development profits of £0.9m, leading to a Total Property Return of £4.0m (2021: £44.9m). Total see-through administration costs of £6.0m (2021: £7.4m), see-through net finance costs of £7.2m (2021: £7.8m) and see-through gains from the mark-to-market valuation of derivative financial instruments of £26.6m (2021: £4.6m) contributed to an IFRS pre-tax profit of £17.2m (2021: £31.0m).

The interim dividend, payable on 13 January 2023, will be 3.05p per share (2021: 2.90p), an increase of 5.2%.

The EPRA net tangible asset value per share decreased by 3.3% to 553p (31 March 2022: 572p).

The Group's real estate portfolio, including its share of assets held in joint ventures, decreased to £914.8m (31 March 2022: £1,108.1m) primarily due to the sales of Kaleidoscope, EC1, Trinity, Manchester and 55 Bartholomew, EC1, residential apartment sales at Barts Square, EC1 and the net loss on sale and revaluation of the investment portfolio of £15.1m, offset by capital expenditure on the investment portfolio of £16.5m.

The sale of investment properties allowed the Group to repay debt during the Period which resulted in a decrease in the Group's see-through loan to value to 26.4% (31 March 2022: 36.4%). The Group's weighted average cost of debt at 30 September 2022 was 3.0% (31 March 2022: 3.2%) and the weighted average debt maturity was 3.4 years (31 March 2022: 3.0 years).

At 30 September 2022, the Group had unutilised bank facilities of £234.2m (of which £60m expires in December 2022) and cash of £58.9m on a see-through basis. These are primarily available to fund future property acquisitions and the completion of works at The JJ Mack Building, EC1.

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. 

See-through Total Accounting Return

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

Earnings Per Share

The IFRS earnings per share is based on the after tax earnings attributable to ordinary Shareholders divided by the weighted average number of shares in issue during the Period and it reduced to 14.1p for the half year to 30 September 2022 (2021: 18.2p).

On an EPRA basis, the earnings per share is 4.8p compared to 0.9p in 2021, reflecting an increase in the Group's share of net rental income to £18.2m (2021: £14.1m) plus development profits of £0.9m (2021: £1.0m), but excluding losses on sale and revaluation of investment properties of £15.1m (2021: gains of £29.8m).

Net Asset Value

IFRS diluted net asset value per share increased by 1.3% to 558p per share (31 March 2022: 551p) 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. This movement arose principally from a total comprehensive income (retained profits) of £17.2m (2021: £22.2m), less £10.1m of dividends (2021: £9.0m). EPRA net tangible asset value per share decreased by 3.3% to 553p per share (31 March 2022: 572p).

EPRA net disposal value per share increased by 1.5% to 559p per share (31 March 2022: 551p).

Income Statement

Rental Income and Property Overheads

Gross rental income for the Group in respect of wholly owned properties increased to £19.2m (2021: £15.7m), with gross rents in joint ventures increasing to £0.3m (2021: £0.1m). Property overheads in respect of wholly owned assets and in respect of those assets in joint ventures decreased to £1.3m (2021: £1.8m). Overall, see-through net rents increased by 29% to £18.2m (2021: £14.1m).

Included within gross rental income is £2.5m (30 September 2021: £3.1m, 31 March 2022: £5.8m) of accrued income for rent free periods.

The table below demonstrates the movement of the see-through accrued income balance for rent free periods granted and the respective rental income adjustment over the period to 31 March 2026, based on the tenant leases as at 30 September 2022. The actual adjustment will vary depending on lease events such as new lettings and early terminations and future acquisitions or disposals.

Rent Collection

At 21 November 2022, the Group had collected 97.7% of all rent contracted and payable for the March, June and September 2022 quarters.

Development Profits

In the Period, from our role as development manager at The JJ Mack Building, EC1, we recognised £0.7m of fee income. Additional fees of £0.1m were recognised for carrying out accounting and corporate services at Barts Square, EC1 and The JJ Mack Building, EC1. Further development income on closing out legacy projects of £0.2m, offset by other costs of £0.3m, contributed to a net development profit in the Group of £0.7m (2021: £1.0m).

Share of Results of Joint Ventures

The revaluation of our investment properties held in joint ventures generated a surplus of £15.3m (2021: £10.0m). A profit of £0.2m (2021: loss of £0.1m) was recognised in respect of apartment sales at our Barts Square, EC1 residential development.

Finance, administration and other sundry costs totalling £0.3m (2021: £0.5m) were incurred and after a tax charge of £0.1m (2021: £3.2m), there was a net profit from our joint ventures of £15.1m (2021: £6.2m).

Loss on Sale and Revaluation of Investment Properties

The loss on valuation, partially offset by the gain on sales, of our investment portfolio on a see-through basis resulted in an overall loss on sale and revaluation, including in joint ventures, of £15.1m (2021: gain of £29.8m).

Administrative Expenses

Administration costs in the Group, before performance related awards, increased from £4.7m to £5.3m.

Performance related share awards and bonus payments, before National Insurance costs, reduced to £0.2m (2021: £1.9m). Of this amount, £0.1m (2021: £1.1m), 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 and Derivative Financial Instruments

Total finance costs after cancellation of loans, including in joint ventures, reduced to £7.3m (2021: £7.8m).

The significant movement upwards in medium and long-term interest rate projections during the Period contributed to a gain of £26.6m (2021: £4.6m) on the mark-to-market valuation of the derivative financial instruments.

Taxation

The Group elected to become a REIT, effective from 1 April 2022, and is now exempt from UK corporation tax on the profit of its property activities that fall within the REIT regime. Helical will continue to pay corporation tax on its profits that are not within this regime.

As a consequence, the tax charge for the Period was £nil (2021: £8.8m).

Dividends

The Board has declared an interim dividend for the Period of 3.05p (2021: 2.90p), an increase of 5.2%. None of this dividend is to be paid as a PID.

Balance Sheet

Shareholders' Funds

Shareholders' Funds at 31 March 2022 were £687.0m. The Group's results for the Period added £17.2m (2021: £22.2m), net of tax, representing the total comprehensive income for the Period. Movements in reserves arising from the Group's share schemes decreased funds by £1.4m. The Company paid dividends to Shareholders during the Period of £10.1m. The net increase in Shareholders' Funds from Group activities during the Period was £5.7m to £692.7m.

Investment Portfolio

The Group expended £16.5m on capital works across the investment portfolio, at The JJ Mack Building, EC1 (£11.9m), 100 New Bridge Street, EC4 (£3.5m), The Bower, EC1 (£0.2m), The Loom, E1 (£0.5m), 25 Charterhouse Square, EC1 (£0.1m), Barts Square, EC1 (£0.2m) and Trinity, Manchester (£0.1m).

Revaluation losses resulted in a £20.4m decrease in the see-through fair value of the portfolio, before lease incentives, to £907.7m (31 March 2022: £1,097.3m). The accounting for head leases and lease incentives resulted in a book value of the see-through investment portfolio of £899.2m (31 March 2022: £1,078.8m).

Debt and Financial Risk

In total, the see-through outstanding debt at 30 September 2022 of £305.7m (31 March 2022: £440.9m) had a weighted average interest cost of 3.0% (31 March 2022: 3.2%) and a weighted average debt maturity of 3.4 years (31 March 2022: 3.0 years).

Debt Profile at 30 September 2022 - Including Commitment Fees but Excluding the Amortisation of Arrangement Fees

Secured Debt

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

- £400m Revolving Credit Facility

The Group has a £400m Revolving Credit Facility in which all of its wholly owned investment assets are secured. The value of the Group's properties secured in this facility at 30 September 2022 was £736m (31 March 2022: £870m) with a corresponding loan to value of 34.0% (31 March 2022: 46.0%). The average maturity of the facility at 30 September 2022 was 3.8 years (31 March 2022: 3.1 years).

- £60m Revolving Credit Facility

The Group has a £60m Revolving Credit Facility to provide short-term liquidity to acquire new property opportunities. The maturity of this undrawn facility was 0.2 years.

- Joint Venture Facilities

The Group has a number of investment and development properties in joint venture with third parties and includes our share, in proportion to our economic interest, of the debt associated with each asset. The average maturity of the Group's share of bank facilities in joint ventures at 30 September 2022 was 1.8 years (31 March 2022: 2.3 years) with a weighted average interest rate of 4.2% (31 March 2022: 5.6%). The average interest rate will fall as The JJ Mack Building, EC1 development facility is drawn down and would be 4.00% on a fully utilised basis, reducing to 2.25% once the building is let.

Unsecured Debt

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

Cash and Cash Flow

At 30 September 2022, the Group had £293.1m (31 March 2022: £132.3m) of cash and agreed, undrawn, committed bank facilities (of which £60m expires in December 2022) including its share in joint ventures.

Net Borrowings and Gearing

Total gross borrowings of the Group, including in joint ventures, have decreased from £440.9m to £305.7m during the Period to 30 September 2022. After deducting cash balances of £58.9m (31 March 2022: £33.3m) and unamortised refinancing costs of £5.0m (31 March 2022: £4.7m), net borrowings decreased from £402.9m to £241.8m. The see-through net gearing of the Group, including in joint ventures, decreased from 58.6% to 34.9%.

Hedging

At 30 September 2022, the Group had £250.0m (31 March 2022: £300.0m) of borrowings protected by interest rate swaps, with an average effective interest rate of 2.2% (31 March 2022: 2.8%) and average maturity of 2.8 years (31 March 2022: 3.3 years). The Group had £nil floating rate debt (31 March 2022: £100.0m) with an effective rate of nil (31 March 2022: 3.5%). In addition, the Group had £105m of interest rate caps at an average rate of 1.75% (31 March 2022: £145m at 1.75%) and with an average maturity of 0.8 years. In our joint ventures, the Group's share of fixed rate debt was £55.7m (31 March 2022: £40.9m) at 0.5% plus margin with an effective rate at 30 September 2022 of 4.2% and no floating rate debt (31 March 2022: none).

1. The impact of interest rate hedging above the level of outstanding borrowings was to reduce the effective interest rate to 2.2%. Following a restructure of the hedging post Period end, to ensure all current borrowings were protected against interest rate rises to the end of the Group's bank facilities, the effective interest rate increased to 2.8%.

2. This includes commitment fees on undrawn facilities. Excluding these would reduce the effective rate to 2.7%.

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

Tim Murphy

Chief Financial Officer

22 November 2022

Unaudited Consolidated Income Statement

For the Half Year to 30 September 2022

Unaudited Consolidated Statement of Comprehensive Income

For the Half Year to 30 September 2022

Unaudited Consolidated Balance Sheet

At 30 September 2022

Unaudited Consolidated Cash Flow Statement

For the Half Year to 30 September 2022

Unaudited Consolidated Statement of Changes in Equity

At 30 September 2022

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

The adjustment to retained earnings of £54,000 (31 March 2022: £3,223,000) adds back 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 £11,573,000 (31 March 2022: £10,012,000) made up of the Performance Share Plan credit of £54,000 (31 March 2022: £3,223,000) and related deferred tax charge of £nil (31 March 2022: £1,325,000), dividends paid of £10,092,000 (31 March 2022: £12,582,000), the issued share capital of £10,000 (31 March 2022: £10,000) and corresponding share premium of £3,965,000 (31 March 2022: £4,610,000), purchase of own shares charge of £1,535,000 (31 March 2022: £nil), share settled Performance Share Plan awards charge of £3,536,000 (31 March 2022: £3,591,000), the share settled bonus awards charge of £439,000 (31 March 2022: £1,031,000), deferred bonus shares of £nil (31 March 2022: £620,000) and the profit on the sale of shares of £nil (31 March 2022: £54,000).