Helical Bar Regulatory News (HLCL)

24 May 2016

HELICAL BAR PLC

("Helical" or the "Group" or the "Company")

Unaudited Preliminary Results for the Year to 31 March 2016

HELICAL DELIVERS A RECORD YEAR

Michael Slade, Chief Executive, commented:

"I am extremely proud to announce today's record results which show rental levels, investment gains, pre-tax profits, shareholders' funds and EPRA net asset value per share all at the highest level in Helical's 32 year history as a real estate company. These results clearly demonstrate that our strategy of targeting London for capital growth and development profits and the regions for higher yielding investment assets provides the most appropriate allocation of resources to enable us to meet our long term objectives.

"The greatest proportion of our performance this year has come from London where we have increased our portfolio weighting, primarily with the purchase of The Bower EC1. We also increased our weighting in industrial assets whilst reducing our exposure to retail. We have sold our Polish assets and continue to deliver on our retirement village programme.

"Since 2012, we have targeted an income producing investment portfolio representing at least 75% of our total property assets with our development programme making up the remaining 25% which is capable of producing exceptional profits. We have now exceeded our original targets and, as we complete the current development programme over the next three years, our objectives are clear. We seek to:

· Complete and let our London office schemes at The Bower, One Creechurch Place, One Bartholomew Close and Charterhouse Square;

· Complete the residential scheme at Barts Square and sell the remaining units;

· Capture the reversion in our investment portfolio;

· Maintain and grow a sustainable investment income surplus; and

· Take forward our London schemes in Hammersmith and Drury Lane and at the appropriate time restock the London development pipeline to enable us to continue to create capital growth and development profits.

"We aim to do this against a background of increasing uncertainty, exacerbated by the imminent possibility of the UK voting to leave the European Union. However, with substantially increased contracted rents on our portfolio and having de-risked our two largest London office developments at One Creechurch Place EC3 and One Bartholomew Close EC1, Helical is well placed to deal with any headwinds that may come its way.

"This will be my last Chief Executive's Statement after nearly 32 years with the Company. I joined the Board on the 21 August 1984 when the equivalent share price was around one pence per share giving a market capitalisation of c. £800,000 and with Helical Bar plc a steel company making reinforcement bars for the construction industry. I joined the Company to change things. With a quick sale of the steel business followed by over 30 years as an entrepreneurial property company, Helical has grown to have a current market capitalisation of over £460m having distributed £276m to shareholders during that period. I now look forward to becoming Chairman and leave the Company in the excellent hands of my successor, Gerald Kaye, and the wider executive team who have an average tenure with the Company of a mere 19 years! I look forward to continuing both on the Board and as the Company's largest shareholder and am confident that Helical's outperformance will continue."

Financial Highlights

Record results

· EPRA net asset value per share up 19.7% to 461p (2015: 385p).

· CAGR of EPRA net asset value per share over three years of 20.4% pa (2015: 15.5% pa).

· EPRA earnings per share of 17.1p (2015: 2.4p) - up 613%.

· IFRS Profit before tax of £120.1m (2015: £87.4m) - up 37%.

· Total Property Return of £170.6m (2015: £155.3m) - up 10%.

- Group's share of net rental income of £43.4m (2015: £38.6m) - up 12%.

- Development profits of £27.5m (2015: £17.6m) - up 56%.

- Net gain on sale and revaluation of investment properties of £99.7m (2015: £96.6m).

· Final dividend proposed of 0.72p per share, increasing total dividend per share to 8.17p (2015: 7.25p) - up 12.7%.

Strong capital returns

· Group's share of property portfolio £1,240m (2015: £1,021m) - up 21%.

· Unleveraged return of property portfolio as measured by IPD of 21.7% (2015: 20.4%) compared to 11.4% (2015: 17.5%) for the benchmark index.

· Investment property valuations, on a like-for-like basis, up 14.9% (11.1% including sales and purchases) with London office valuations up 30.8% (18.8% including sales and purchases).

Secure financial position

· See-through loan to value of 40% on a secured basis (2015: 34%) and 55% overall (2015: 52%).

· Average maturity of the Group's share of debt of 4.5 years (2015: 4.3 years) at an average cost of 4.2% (2015: 4.1%).

· Group's share of cash and undrawn bank facilities at 31 March 2016 of £193m (2015: £229m).

Operational Highlights

London portfolio well positioned to provide future development surpluses whilst being highly reversionary - delivering c. 80% of property returns

· 18.8% valuation increase of London investment portfolio (2015: 9.2%), now valued at £593m (56% of total investment portfolio).

· Lettings at The Bower EC1, Shepherds Building W14, C-Space EC1 and One King Street W6 increased contracted gross rents on London portfolio to £23.6m (2015: £8.7m) compared to an ERV of £45.4m (2015: £28.1m).

· Offices at The Bower EC1 acquired for £248m (with Helical reinvesting its existing 1/3rd ownership), Joint venture partner Crosstree acquired the retail parade for £23m and Empire House sold for £20.65m in November 2015, a 38% premium to 31 March 2015 book value.

- First phase 100% let

- Second phase under construction

· At Barts Square EC1, 102 residential units exchanged at 23 May 2016 (31 March 2015: 56 units) and two reserved on phase 1 of 144 units.

· At One Bartholomew Close EC1, the site was sold for £102.4m and the 213,000 sq ft office development forward funded, releasing £34m cash to Helical.

· Major refurbishment commenced at Charterhouse Square EC1, increasing the office space to 38,500 sq ft with 5,100 sq ft of retail, with delivery in early 2017.

· At Drury Lane & Dryden Street WC2 a resolution to grant planning was issued for a residential led scheme of 62 apartments.

· Power Road Studios W4, a 62,000 sq ft office complex of five buildings acquired for £34m.

Regional portfolio

· Contracted gross rents on regional investment portfolio (44% of total investment portfolio) of £32.4m.

· Regional investment portfolio increased with the purchase of £89m of high yielding industrial/logistics warehouses.

· 3.0% valuation increase on regional offices dominated by performance of Churchgate and Lee House in Manchester.

· Regional investment portfolio now comprises 22% offices, 13% in town retail, 17% retail parks, 46% industrial/logistics and 2% other.

· Sale of 16 regional assets comprising eight industrial units, three regional offices and five retail assets for £67m in total.

Succession strategy delivered

· Michael Slade to step down as Chief Executive at 2016 AGM and remain on the Board as Non-Executive Chairman.

· Gerald Kaye to be appointed Chief Executive at 2016 AGM.

· Nigel McNair Scott, Chairman, and Andrew Gulliford, Non-Executive Director, to retire at the 2016 AGM.

· Susan Clayton and Richard Cotton appointed Non-Executive Directors to provide further independence and balance to the Board.

For further information, please contact:

Full Year Results Presentation

Helical will be holding a presentation for analysts and investors at 9:30am (BST), Tuesday 24 May 2016 at FTI Consulting, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD. If you would like to attend, please contact Jenni Nkomo on 020 3727 1000, or jenni.nkomo@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:

Financial Highlights

Notes

1. Includes Group's share of income and gains of its subsidiaries and joint ventures. See Appendix 1.

2. Calculated in accordance with IAS 33 and guidance issued by the European Public Real Estate Association ("EPRA"). EPRA earnings per share exclude the net gain on sale and revaluation of the investment portfolio of £99.7m (2015: £96.6m) but include development profits of £27.5m (2015: £17.6m).

3. Includes the Group's share of assets and liabilities of its subsidiaries and joint ventures. See Appendix 1.

4. See-through loan to value is the ratio of see-through net borrowings to see-through property portfolio. See Appendix 2.

5. See-through net gearing is the ratio of see-through net borrowings to net assets. See Appendix 2.

6. See-through net asset value gearing is the ratio of see-through net borrowing to EPRA net asset value.

See Appendix 2.

Chief Executive's Statement

Overview

I am extremely proud to announce today's record results which show rental levels, investment gains, pre-tax profits, shareholders' funds and EPRA net asset value per share all at the highest level in Helical's 32 year history as a real estate company. These results clearly demonstrate that our strategy of targeting London for capital growth and development profits and the regions for higher yielding investment assets provides the most appropriate allocation of resources to enable us to meet our long term objectives.

The greatest proportion of our performance this year has come from London where we have increased our portfolio weighting, primarily with the purchase of The Bower EC1. We also increased our weighting in industrial assets whilst reducing our exposure to retail. We sold our Polish assets and continue to deliver on our retirement village programme.

Within the investment portfolio we have a strong and diverse tenant profile. We have increased contracted rents by £12.7m (29% increase) from new lettings and by capturing some of the reversionary potential of the portfolio and expect this growth to continue. Our London investment portfolio remains highly reversionary and its inherent value will be unlocked through the completion of our redevelopment and refurbishment programme and the letting of the vacant and remaining reversionary space. London continues to outperform the rest of the UK and our strategy is to increase our London holdings.

We now have an investment portfolio poised for future earnings growth which, if supported by a benign economic background, should lead to substantial capital appreciation.

Performance

We measure our performance at both portfolio and Company level, seeking to outperform in the medium and long term relevant sector indices and our peer group.

EPRA earnings per share increased from 2.4p to 17.1p, reflecting growing net rental income and increased development profits. On a like-for-like basis, the investment portfolio increased by 14.9% (11.1% including sales and purchases) contributing to an overall growth in the portfolio to £1,240m (2015: £1,021m). The unleveraged return of our property portfolio, as measured by IPD, was 21.7% (2015: 20.4%), compared to 11.4% (2015: 17.5%) for the benchmark index. These investment gains contributed to an increase in EPRA net asset value per share, up 19.7% to 461p (2015: 385p). Since the start of 2016, the listed real estate sector has been affected by concerns over global economic issues and the forthcoming referendum on our membership of the European Union. Despite this, we achieved a positive Total Shareholder Return for the year to 31 March 2016 of 1.0% (2015: 7.6%), compared to the sector index which fell by 6.4% (2015: increase of 22.8%).

Results for the Year

The profit before tax for the year to 31 March 2016 was £120.1m (2015: £87.4m), the highest in the Group's history. Total Property Return increased by 10% to £170.6m (2015: £155.3m) and included growing net rents of £43.4m, an increase of 12% on 2015 (£38.6m), and development profits of £27.5m (2015: £17.6m). The gain on sale and revaluation of the investment portfolio contributed £99.7m (2015: £96.6m) and there were no trading profits (2015: £2.5m).

Net finance costs of £22.6m were lower than in 2015 (£24.8m), however the income statement was adversely affected by falls in expected future interest rates which led to a £6.9m (2015: £8.4m) charge arising from the valuation of the Group's derivative financial instruments. The valuation of the Group's Convertible Bond provided a credit of £0.5m (2015: charge of £3.3m). Recurring administration costs were marginally higher at £10.7m (2015: £10.2m). Performance related awards, reflecting the success of the Group's activities in the year were £13.3m (2015: £13.4m). National Insurance costs on remuneration, including performance related awards, were £2.1m (2015: £3.0m).

These results allow the Board to continue its progressive dividend policy and to recommend to shareholders a final dividend of 0.72p which, together with the two interim dividends paid to date of 7.45p takes the total dividend for the year to 8.17p (2015: 7.25p), an overall increase of 12.7%.

The London Portfolio

The London investment and development portfolio continues to contribute the greater proportion of capital growth and development profits. In the year to 31 March 2016, London provided c. 80% of the total property return of £170.6m (2015: £155.3m).

Since 2010 we have steadily acquired property in two "clusters"; the Tech Belt districts of Farringdon, Shoreditch, Aldgate and through to Whitechapel and the West London districts of Hammersmith, Shepherds Bush and Chiswick.

The East

At The Bower EC1, we have acquired the outstanding 2/3rd interest from our joint venture partner Crosstree Real Estate Partners LLP ("Crosstree"), of the buildings known as The Warehouse (122,858 sq ft of offices, 5,404 sq ft of restaurant use) and The Studio (18,283 sq ft of offices, 4,894 sq ft of restaurant use). Construction work on these two buildings was completed in November 2015 and both are fully let at average office rents of £55.00 psf and £43.85 psf respectively. In addition, we have acquired The Tower at 207 Old Street, a 179,000 sq ft refurbishment and extension of the existing building on which work has commenced and is due for completion Q1 2018. At £248m, this purchase is our largest ever acquisition and strongly reaffirms our belief in the London office market. The remaining buildings at The Bower, being Empire House and the retail parade, were sold by the joint venture to Standard Life and Crosstree respectively.

At Barts Square EC1, our scheme in joint venture with The Baupost Group LLC, we have now exchanged contracts for sale at an average of £1,580 psf on 102 of the 144 residential units with a further two units reserved in phase 1 of the development which is due for completion in summer 2017. The office development of 212,858 sq ft at One Bartholomew Close EC1 has been forward funded with clients of Ashby Capital, is currently under construction and is due for completion in July 2018.

Our 272,426 sq ft office development at One Creechurch Place EC3, equity funded with our joint venture partner HOOPP (Healthcare of Ontario Pension Plan) is expected to complete in September 2016. C-Space EC1 completed its refurbishment in October 2015 and is 75% let at an average rent of £56 psf. At 23-28 Charterhouse Square EC1 we have commenced construction works, due to complete in Q1 2017 on a refurbishment which will comprise 38,500 sq ft of offices and 5,100 sq ft of retail/restaurant use. Our 112,000 sq ft listed building at The Loom, Whitechapel E1 is now undergoing a comprehensive refurbishment and is due for completion in September 2016.

The West

There has been substantial growth in rents at our West London properties. At Shepherd's Building W14 we have completed the lease renewal and increased the space let to our largest tenant Endemol, increasing the rent by £1.25m pa, with average rents for the building now £45.75 psf. At One King Street W6 following the completion of the refurbishment works, we have achieved a benchmark rent for the area of £55.00 psf. We have added to our portfolio with the acquisition of Power Road Studios W4, 62,000 sq ft of offices over five buildings acquired for £34m.

The Regional Portfolio

The regional investment and development portfolio provides a growing stream of net rents from a high yielding investment portfolio while contributing development profits from our retirement village and retail development programmes.

The regional investment portfolio increased to £460m at 31 March 2016 (2015: £420m) with the addition of 13 distribution warehouses and a regional office for an aggregate £94m, offset by the sale of eight distribution warehouses, five retail assets and three regional offices for £67m. Regional assets contributed £31.0m of net rental income during the year (2015: £30.7m) which is expected to continue to grow with contracted rents on the portfolio of £32m and an ERV of £36m. Net gains on the sale and revaluation of the regional portfolio contributed £6.7m (2015: £18.8m).

Our regional development exposure is limited to our retirement village, out-of-town retail development programmes and our Scottish Power project in Glasgow, where balance sheet risk is limited. At our retirement village development programme we continued the construction of units at Durrants Village Horsham, Millbrook Village Exeter and Maudslay Park Great Alne, near Stratford-upon-Avon. During the year we completed the clubhouse at Durrants Village and sold 33 residential units at the three schemes (2015: 25 units). In our retail development programme, we have completed our scheme at Shirley, West Midlands and continue to make progress on our scheme at Truro. Subsequent to the year end we forward funded a 79,750 sq ft out-of-town retail development at Cortonwood with a client of Aberdeen Asset Management. The Scottish Power project is pre-let and pre-sold and due for completion in September 2016. As part of the overall deal Helical takes on three existing Scottish Power sites which are surplus to requirements. One has been sold and good progress is being made on the business plans for the other two.

Finance

The Group has expanded its activities significantly in the last three years, seeking to increase shareholder funds through the generation and retention of increased net rental streams, development profits and valuation surpluses. This growth has been financed through an increase in secured debt borrowed primarily from UK high street banks and, since 2013, through the use of unsecured debt in the form of a retail bond and a convertible bond. In assessing the needs of the business the Company is conscious that it needs to manage any risks inherent in this leveraged approach to growing the business. It seeks to do this through the use of unsecured debt (23% of total debt), by increasing the maturity of its debt profile and by hedging its interest rate exposure. In addition, the Group's debt profile includes borrowings in respect of residential and retirement village developments which are expected to be repaid as sales complete.

In pursuing this strategy, the Group has increased the average debt maturity to 4.5 years (2015: 4.3 years), with no secured loan repayable before November 2019, whilst marginally increasing the average cost of debt at 4.2% (2015: 4.1%). The Group continues to retain a significant level of liquidity with cash and unutilised bank facilities of £193m (2015: £229m) to fund capital works on its portfolio.

Board Changes

As previously announced with our half year results, I will be handing over the reins of the Company to Gerald Kaye, our senior development director for the last 22 years, and I will stand to be re-elected as Non-Executive Chairman, at the 2016 Annual General Meeting. At that AGM, Nigel McNair Scott, our current Chairman, former Finance Director and my close friend and confidant, will retire after 30 years on the Board. Nigel has proved to be a constant source of advice, support and wisdom during his time at Helical and I wish him a long and happy retirement.

The AGM will also see the retirement of Andrew Gulliford, a Non-Executive director for the last ten years. Andrew has also proved to be a tremendous support to the Board and his contribution is greatly appreciated. With these two planned departures we have sought to strengthen the Board with the addition of two new independent Non-Executive Directors and were delighted to be able to announce the appointments of Susan Clayton and Richard Cotton earlier this year.

Outlook

Since 2012, we have targeted an income producing investment portfolio representing at least 75% of our total property assets and a development programme of the remaining 25% which is capable of producing exceptional profits. We have now exceeded our original targets and, as we complete the current development programme over the next three years, our objectives are clear. We seek to:

· Complete and let our London office schemes at The Bower, One Creechurch Place, One Bartholomew Close and 23-28 Charterhouse Square;

· Complete the residential scheme at Barts Square and sell the remaining units;

· Take forward our London schemes in Hammersmith and Drury Lane and at the appropriate time restock the London development pipeline to enable us to continue to create capital growth and development profits;

· Capture the reversion in our investment portfolio; and,

· Maintain and grow a sustainable investment income surplus.

We aim to do this against a background of increasing uncertainty, exacerbated by the imminent possibility of the UK voting to leave the European Union. However, with substantially increased contracted rents on our portfolio and having de-risked our two largest London office developments at One Creechurch Place EC3 and One Bartholomew Close EC1, Helical is well placed to deal with any headwinds that may come its way.

Finally, this will be my last Chief Executive's Statement after nearly 32 years with the Company. I joined the Board on the 21 August 1984 when the equivalent share price was around one pence per share giving a market capitalisation of circa £800,000 and with Helical Bar plc a steel company making reinforcement bars for the construction industry. I joined the Company to change things. A quick sale of the steel business followed by over 30 years as an entrepreneurial property company, Helical has grown to have a current market capitalisation of over £460m having distributed £276m to shareholders during that period. I now look forward to becoming Chairman and leave the Company in the excellent hands of my successor, Gerald Kaye, and the wider executive team who have an average tenure with the Company of a mere 19 years! I look forward to continuing both on the Board and as the Company's largest shareholder and am confident that Helical's outperformance will continue.

Michael Slade

Chief Executive

24 May 2016

Our Strategy

Overview

Helical is a UK focused property company investing in London for capital growth and development profits and the regions for income.

Locate assets with significant potential

We use our knowledge of the market and our extensive network of contacts to seek out assets where we see the potential to add significant value. Our development schemes are focused on delivering innovative and modern space, whilst retaining local character. We target areas where we anticipate strong growth. Our asset management opportunities focus on maximising income through attracting and maintaining a balanced and diverse portfolio of tenants and driving increases in the rental value through refurbishment programmes that make intelligent use of space and deliver high yielding assets.

Structure and funding

When the Group identifies assets that it intends to develop or asset manage and hold for the longer term, it uses its own capital combined with appropriate external debt.

Where we see significant potential to create profit in the short to medium term and are keen to limit our equity commitment and risk exposure, we look to bring in a partner. Our approach to working with our partners includes:

• Co-investing alongside a larger partner where we have a minority equity stake, whilst receiving a "waterfall" payment whereby we obtain a greater profit share than the percentage of our investment, depending upon the profitability of the project. This strategy is used for the developments at Barts Square, London EC1 and One Creechurch Place, London EC3.

• Managing the development process from site acquisition, through construction to letting or sale. In these structures we do not own the asset, committing no or minimum equity. Our return is linked to the profitability of the development, allowing us to potentially benefit from a significant profit that reflects our contribution to the project's success. We are using this strategy in the development of the office at One Bartholomew Close, London EC1.

Develop, let and asset manage

We actively manage our developments from inception to completion. Our close involvement allows us to continue to develop and improve the design whilst being able to rapidly respond to challenges as they arise. Key to this is working closely with trusted contractors who share our values and are focused on quality, health and safety, sustainability and consideration for the local community.

Building strong relationships with our tenants and having a good understanding of their business, combined with a detailed knowledge of the market, is fundamental to our approach to maximising rental value and maintaining a high level of occupancy. We actively look to redevelop space where we can see the opportunity to better meet market demands, allowing us to drive rental value and help secure the future of the asset.

Exit

Determining the most appropriate time to sell an asset is critical in crystallising value. We look to dispose of a property when we believe future market growth is limited, where we have limited opportunity to add further value, or when we see greater value elsewhere. Our view of the market and the availability of other opportunities determines whether we reinvest the equity into new properties, repay debt or return capital to shareholders.

Our risk strategy

Risk is an integral part of any group's business activities and Helical's ability to identify, assess, monitor and manage each risk to which it is exposed is fundamental to its financial stability, current and future financial performance and reputation. As well as seeing changes in our internal and external environment as potential risks, we also see them as being opportunities which can drive performance.

Risk management starts at Board level where the Directors set the overall risk appetite of the Group and the risk management strategies. Helical's management runs the business within these guidelines and part of its role is to act within these strategies and to report to the Board on how they are being operated.

The Group's risk appetite and risk management strategies are continually assessed by the Board to ensure that they are appropriate and consistent with the Group's overall strategy and with external market conditions. The effectiveness of the Group's risk management strategy is reviewed every six months by the Audit Committee and by the full Board.

The Board has ultimate responsibility for risk within the business. However the small size of our team and our flat management structure allows the Executive Directors to have close contact with all aspects of the business and allows us to ensure that the identification and management of risks and opportunities is part of the mindset of all decision makers at Helical.

The principal risks faced by the Group, and the steps taken by the Group to mitigate these risks, can be found in Appendix 5.

Performance

We measure our performance using a number of financial and non-financial key performance indicators ("KPIs").

We incentivise management to outperform the Group's competitors by setting appropriate levels for performance indicators against which rewards are measured. We also design our remuneration packages to align management's interests with shareholders' aspirations. Key to this is the monitoring and reporting against identifiable performance targets and benchmarks.

Investment Property Databank

The Investment Property Databank ("IPD") produces a number of independent benchmarks of property returns which are regarded as the main industry indices.

IPD has compared the ungeared performance of Helical's total property portfolio against that of portfolios within IPD for the last 20 years. The Group's annual performance target is to exceed the top quartile of the IPD database, which it has consistently achieved. Helical's ungeared performance for the year to 31 March 2016 was 21.7% (2015: 20.4%) compared to the IPD median benchmark of 11.4% (2015: 17.5%) and upper quartile benchmark of 13.0% (2015: 19.7%). Helical's portfolio unleveraged returns to 31 March 2016 were as follows:

Source: Investment Property Databank

Helical's trading and development portfolio (15% of gross assets) is shown in IPD at the lower of book cost or fair value and uplifts are only included on the sale of an asset.  

EPRA Net asset value per share

A property company's share price should reflect growth in net assets per share. Our Group's main objective is to maximise growth in assets from increases in investment portfolio values and from retained earnings from other property related activities. Net asset value per share represents the share of net assets attributable to each ordinary share. Whilst the basic and diluted net asset per share calculations provide a guide to performance, the property industry prefers to use an EPRA adjusted net asset per share to represent the fair value of net assets on an ongoing long term basis. The adjustments necessary to arrive at this figure are shown in note 31 to these results.

Management is incentivised to exceed 15% pa growth in net asset value per share.

The diluted net asset value per share, excluding trading stock surplus, at 31 March 2016 increased by 23.5% to 410p (2015: 332p). Including the surplus on valuation of trading and development stock, the EPRA net asset value per share at 31 March 2016 increased by 19.7% to 461p (2015: 385p). EPRA triple net asset value per share increased by 17.6% to 428p (2015: 364p).

Total Shareholder Return

Total Shareholder Return is a measure of the return on investment for shareholders. The table below demonstrates this return compared to various indices. Over one, three, ten, fifteen, twenty and twenty five years, Helical's Total Shareholder Return exceeded that of the Listed Retail Estate Sector Index.

1. Growth over all periods to 31/03/16

2. Growth in FTSE All-Share Return Index over all periods to 31/03/16

3. Growth in FTSE 350 Real Estate Super Sector Return Index over all periods 31/03/16. For data prior to 30

September 1999 FTSE All Share Real Estate Sector Index has been used

4. Growth in Total Return of IPD UK Monthly Index (All Property) over all periods to 31/03/16 

Financial Review

Helical Business Model

Helical aims to deliver market leading returns by committing to projects with the potential for substantial capital growth and by deploying limited equity into development situations which have the potential to be highly profitable. Risks associated with our development programme are mitigated through limited equity exposure, options, forward funding, conditional contracts and joint ventures with major UK and global institutions. We have an active asset management programme for the investment portfolio with a clear strategy of increasing net operating income. Our aim is to have a stable platform with all recurring operational and finance costs and dividends fully covered by revenue streams from our investment portfolio. Gearing is used on a tactical basis throughout the property cycle, being raised to accentuate property performance when property returns are judged to materially outperform the cost of debt and lowered when seeking to reduce exposure to the property cycle.

See-through analysis

Since 2010 Helical has held a significant proportion of its property assets in joint ventures with partners that provide the majority of the equity required to purchase the assets, whilst relying on the Group to provide asset management or development expertise. Accounting convention requires Helical to account under IFRS for our share of the net results and net assets of joint ventures in limited detail in the income statement and balance sheet. Net asset value per share, a key performance measure used in the real estate industry, as reported in the financial statements under IFRS, does not provide stakeholders with the most relevant information on the fair value of assets and liabilities within an ongoing real estate company with a long term investment strategy.

In this review and elsewhere in this statement, we have incorporated the separate components into a more detailed "see-through" analysis of our property portfolio and debt profile and the associated income streams and financing costs to assist in providing a more comprehensive overview of the Group's activities. This see-through analysis can be found in Appendix 1.

Results for the year

For the third year running we are delighted to be able to report on excellent results with record pre-tax profits of £120m in the year to 31 March 2016 (2015: £87m). Continued rental growth, good development profits and strong valuation surpluses arose from of the implementation of our London development and asset management strategies.

The Group's real estate portfolio, including its share of assets held in joint venture, increased to £1,240m (2015: £1,021m) largely the result of acquiring the remaining 2/3rd share of The Bower, London EC1, plus substantial gains on sales and revaluation of the investment portfolio.

The continued expansion of the Group's activities has resulted in an increase in its loan to value to 55% (2015: 52%) and an increase in see-through net gearing to 140% (2015: 132%). The Group lengthened its borrowings profile, repaying short term facilities and extending existing secured loans. These actions enabled the Group to extend its overall debt maturity profile to 4.5 years (2015: 4.3 years) with a weighted average cost of debt marginally increasing to 4.2% (2015: 4.1%).

At 31 March 2016, the Group had unutilised bank facilities of £106m and £87m of cash. These facilities are primarily available to fund phase 2 of the Group's redevelopment of The Bower, London EC1, its retirement village development programme and the phase 1 construction works at Barts Square, London EC1.

EPRA Earnings per Share

EPRA earnings per share were 17.1p (2015: 2.4p), reflecting the Group's share of net rental income of £43.4m (2015: £38.6m) and development profits of £27.5m (2015: £17.6m) but excluding gains on sale and revaluation of investment properties of £99.7m (2015: £96.6m) and trading profits of £nil (2015: £2.5m).

EPRA Net Asset Value

EPRA net asset value per share increased by 19.7% to 461p per share (2015: 385p). This increase arose principally from a total comprehensive income (retained profits) of £110.3m (2015: £74.9m) less dividends paid of £14.4m (2015: £7.9m) and reflecting a reduction in the surplus on valuation of the trading and development stock to £19.4m (2015: £36.2m).

Income Statement

Rental income and property overheads

Gross rental income receivable by the Group in respect of wholly owned properties increased by 19% to £45.5m (2015: £38.3m) reflecting the growth in the investment portfolio and the partial capture of its reversionary potential. In the joint ventures, gross rents fell from £6.1m to £1.8m reflecting the sale of Clyde Shopping Centre in March 2015. Property overheads in respect of wholly owned assets and in respect of those assets in joint ventures fell significantly from £5.4m to £3.4m reflecting the rotation out of management intensive secondary shopping centres to high yielding distribution warehouses, regional offices and out-of-town retail parks. After taking account of net rents payable to our profit share partners of £0.5m (2015: £0.3m), see-through net rents increased by 12.4% to £43.4m (2015: £38.6m).

Development profits

Developments profits increased by 56% from £17.6m to £27.5m on a see-through basis. The main contributor was in respect of the development management fees of £23.2m crystallised by the acquisition of The Bower, London EC1. We also received development management fees of £3.7m in respect of the development at the Scottish Power headquarters in Glasgow and at One Creechurch Place, London EC3. Our retirement village programme contributed £0.4m of profits. In our joint ventures we recognised £3.2m of development profit on our schemes at Leisure Plaza and Shirley. Set against these profits was a write-down of £0.9m against a site in Telford and £1.8m against our retail development programme.

Share of Results of Joint Ventures

The results of the joint ventures include our share of The Bower, London EC1 until it was acquired and fully consolidated in January 2016; our development schemes at Barts Square, London EC1; One Creechurch Place, London EC3; Shirley Town Centre, West Midlands; Leisure Plaza and C.4.1, both Milton Keynes; and King Street, London W6. Detailed analysis of our share of these joint ventures is provided in note 16 to this report and in the see-through analysis in Appendix 1. In the year under review, net rents of £1.3m (2015: £4.4m) were received, offset by net finance costs of £3.7m (2015: £3.6m). Gains on the sale or revaluation of the investment assets of £43.9m (2015: £27.2m) arose primarily in respect of The Bower, London EC1 and Barts Square, London EC1. Net of taxes, our joint ventures contributed £50.5m (2015: £27.5m).

Gain on sale and revaluation of investment properties

During the year we sold two London assets, Enterprise House W2, a 45,000 sq ft office building let to Network Rail for 20 years and Artillery Lane E1, a 17,000 sq ft refurbished office building, for total gross proceeds of £57m, a small premium to book value. In the regions we sold eight industrial units, three offices and five retail assets, a total of 16 regional assets, for £67m at a small net premium to book value.

The valuation of our investment portfolio reflected our increased exposure to London offices where we generated an increase of 18.8% overall and 30.8% on a like-for-like basis. The regions contributed 1.1% overall and 1.2% on a like-for-like basis. In total, the investment portfolio showed a valuation increase of 11.1%, or 14.9% on a like-for-like basis.

The total impact on our financial statements of the gain on sale and revaluation of our investment portfolio was a net gain of £99.7m (2015: £96.6m).

Administration Costs

Administration costs, before performance related awards, increased by 5% from £10.2m to £10.7m. This increase arose from employing a greater number of asset managers, development executives and in the finance team as the portfolio increased and we move through the delivery phase of the development programme.

Performance related share awards and bonus payments, before National Insurance costs, were £13.3m (2015: £13.4m). Of this amount, the £6.7m (2015: £6.4m) charge for share awards under the Performance Share Plans is expensed through the Income Statement but added back to Shareholders Funds through the Statement of Changes in Equity. The £6.6m (2015: £6.9m) charge for bonus payments comprises £5.5m (2015: £5.8m) which will be paid in June 2016 and £1.1m (2015: £1.1.m) which will be paid in deferred shares to be held for a minimum of three years. In addition, National Insurance of £2.1m (2015: £3.0m) has been accrued in the year.

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, increased to £20.2m (2015: £16.7m). Interest payable in respect of the unsecured Retail and Convertible Bonds was £8.8m (2015: £8.0m). The continued fall in medium and long term interest rate projections at 31 March 2016 contributed to a charge of £6.9m (2015: £8.4m) on the derivative financial instruments which have been valued on a mark to market basis. Capitalised interest increased from £3.6m to £4.9m as development schemes progressed. Other interest payable reduced to £3.7m from £6.3m (which includes £2.8m of costs incurred in issuing the Convertible Bond). Total finance costs increased from £27.3m to £27.8m. Finance income earned was £5.1m (2015: £2.5m).

Taxation

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

The deferred tax charge for the year is principally derived from the revaluation surpluses recognised in the year offset by the recognition of tax losses which the Group believes will be utilised against profits in the foreseeable future.

Dividends

Helical follows a progressive dividend policy increasing its dividends in line with its results, whilst retaining the majority of funds generated for investment in growing the business. The interim dividend paid on 30 December 2015 of 2.30p was an increase of 9.5% on the previous interim dividend of 2.10p. On 4 April 2016, the Company paid a second interim of 5.15p and together with the final dividend of 0.72p payable on 29 July 2016, this is an increase of 14.0% on the previous year (2015: 5.15p). In total, the dividend paid or payable in respect of the results for the year to 31 March 2016 is 8.17p (2015: 7.25p), an increase of 12.7%. Since 2013 the compound annual growth rate of the Company's dividends has been 13.8%

Balance Sheet

Investment portfolio

Sales of £55m of London assets and £64m of regional assets provided funds, net of loan repayments, for £377m of acquisitions. Included in these acquisitions was the purchase of The Bower EC1, from the joint venture with Crosstree, where the existing cash equity and share of profits to date remained invested in the scheme. The acquisition was funded through new bank finance of £200m, of which £149.5m was drawn down to complete the purchase with the remaining facility available to fund the redevelopment of The Tower at 207 Old Street EC1. Revaluation surpluses of £53.5m (£0.3m attributable to our profit share partners) and £2.3m in our joint ventures contributed to an increase in the overall size of the investment portfolio on a see-through basis to £1,053m (2015: £790m).

Debt and Financial Risk

In seeking to finance Helical's recent expansion, the Group has used a combination of new secured facilities, whose purpose and terms reflect the nature of the assets charged to the lenders, and unsecured bonds which have provided the firepower to acquire many of the assets which have contributed to the recent growth in shareholders' funds. The composition of the Group's debt structure has significantly changed since 31 March 2014 with unsecured debt now representing 23% of debt drawn at 31 March 2016.

In total, Helical's outstanding debt at 31 March 2016 of £778m (2015: £675m) had an average maturity of 4.5 years (2015: 4.3 years) and a weighted interest cost of 4.2% (2015: 4.1%).

Debt profile at 31 March 2016 - excluding the effect of arrangement fees

Secured debt

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

- Investment facilities

We have £190m of revolving credit facilities which enable the group to acquire, refurbish, reposition and hold significant parts of our investment portfolio. We have used these facilities to finance our regional portfolio. Our London investment assets are primarily held in £380m of term loan secured facilities which, where appropriate, allow us to finance refurbishment projects. The value of the Group's properties secured in these facilities at 31 March 2016 was £945m (2015: £639m) with a corresponding loan to value of 54% (2015: 58%). The average maturity of the Group's investment facilities at 31 March 2016 was 5.0 years (2015: 4.6 years) with a weighted average interest rate of 3.8% (2015: 3.7%).

- Development facilities

These facilities finance the redevelopment of The Tower at The Bower, Old Street, London EC1 and the construction of the retirement villages at Durrants Village, Horsham; Maudslay Park, Great Alne; and Milbrook Village, Exeter. The average maturity of the Group's development facilities at 31 March 2016 was 4.0 years (2015: 2.0 years) with a weighted average interest rate of 5. 5% (2015: 3.7%).

- 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 31 March 2016 was 3.7 years (2015: 3.0 years) with a weighted average interest rate of 3.4% (2015: 4.5%).

Unsecured debt

The Group's unsecured debt, including the convertible bond at its mark to market valuation, is £182.7m (2015: £183.9m) as follows:

- Retail Bond

In June 2013, the Group raised £80m from the issue of an unsecured Retail Bond with a 6.00% coupon. This bond is repayable in June 2020.

- Convertible Bond

In June 2014, the Group raised £100m from the issue of a listed unsecured Convertible Bond with a 4.0% coupon, repayable in June 2019, or, subject to certain conditions, convertible at the option of the bond holders into ordinary shares, unless a cash settlement option is exercised by the Company. The initial conversion price has been set at £4.9694 per share, representing a 35% premium above the price on the day of the issue and a premium of 59% above the Company's EPRA net asset value per share at 31 March 2014. The value of the Bond at 31 March 2016, as determined by the listed market price, was £102.7m (2015: £103.3m).

- Short term working capital facilities

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

Cash and cash flow

At 31 March 2016, the Group had £193m (2015: £229m) of cash and agreed, undrawn, committed bank facilities including its share in joint ventures as well as £153m (2015: £131m) of uncharged property on which it could borrow funds.

Net borrowings and gearing

Total gross borrowings of the Group, including in joint ventures, have increased from £674.6m to £777.9m during the year to 31 March 2016. After deducting cash balances of £86.8m (2015: £136.3m) and unamortised refinancing costs of £9.3m (2015: £6.4m), net borrowings increased from £531.9m to £681.8m. The gearing of the Group, including in joint ventures, increased from 132% to 140%. Including EPRA adjustments to IFRS shareholders funds, the see-through net asset value gearing increases from 113% to 125%. This gearing measure, the ratio of see-through net borrowings to EPRA net asset value, represents a longer term view of gearing than the standard measure.

Hedging

At 31 March 2016, the Group had £635.5m (2015: £500.2m) of fixed rate debt with an average effective interest rate of 4.2% (2015: 4.4%) and £107.1m (2015: £103.4m) of floating rate debt with an average effective interest rate of 3.9% (2015: 2.8%). In addition, the Group has £157m of interest rate caps at an average of 4.0% (2015: £143.2m at 4%), all of which expire within 12 months. In our joint ventures, the Group's share of fixed rate debt was £nil (2015: £23.3m) with an effective rate of nil% (2015: 6.8%) and £35.3m (2015: £47.9m) of floating rate debt with an effective rate of 3.4% (2015: 3.3%).

Interest cover

In assessing the results of the Group for each financial year, Helical considers its interest cover as a measure of its performance and its ability to finance its annual interest payments from its net operating income, before revaluation gains or losses on the investment portfolio and net realisable provisions on the trading and development stock. In the year to 31 March 2016, this interest cover was 5.4 times (2015: 2.5 times).

Tim MurphyFinance Director

24 May 2016

Helical's Property Portfolio - 31 March 2016

Total Portfolio by Fair Value

Investment portfolio by asset status

Income producing assets are those assets where the majority of the space is let. Major projects are those assets that are being substantially developed or refurbished.

Trading and development portfolio

The London Portfolio

London's economy continues to outperform the rest of the UK and the proportion of our assets located in the Capital now represents 56% of our investment portfolio. London's population is expected to grow by one million in the next ten years and 175,000 new office jobs are expected to be created by 2020. London is a leading technology centre and there is a "war for talent" which is driving demand for high quality office space. London continues to attract overseas capital as it has a liquid and transparent property market with a long established rule of law.

Our strategy is to increase our London holdings, focusing on select areas where we see strong tenant demand and growth potential, such as the "Tech Belt" that runs from Kings Cross through Old Street and Shoreditch to Whitechapel and in West London, in particular Hammersmith, Shepherds Bush and Chiswick. Our London portfolio comprises income producing multi-let offices, office refurbishments and developments and residential development schemes.

The East

The Bower, Old Street EC1

This 3.12 acre asset was acquired in November 2012 for £60.8m in joint venture with Crosstree Real Estate Partners LLP. The site is in the heart of an area which has become a "creative halo", a district of London which is a hub for technology, media and telecommunications companies and which is benefitting from substantial investment in infrastructure. A planning consent has been implemented to increase the floor space on the site by 116,000 sq ft, to refurbish existing areas and significantly upgrade the public realm with the creation of a new pedestrian street.

On 20 January 2016, Helical acquired The Warehouse and The Studio (211 Old Street) and The Tower (207 Old Street) from the joint venture for £248m.

- 211 Old Street EC1

Building work started on phase 1 in January 2014 comprising The Warehouse, 128,262 sq ft, and The Studio, 23,177 sq ft, and was completed in November 2015.

Phase 1 is fully let:-

- 207 Old Street EC1

Comprising The Tower, phase 2 of the redevelopment of The Bower commenced in January 2016 and will deliver 171,000 sq ft of office space and 7,500 sq ft of retail/restaurant. It is due for completion in Q1 2018.

- 183-213 Old Street EC1

This retail parade comprises 55,724 sq ft fully let to tenants including Gymbox, Co-op Food Store, Argos, Peacock and the Post Office generating c. £915,000 rents. The parade was acquired from the joint venture by Crosstree for £23m in January 2016.

- Empire House, City Road EC1

Empire House, fully let to Z Hotels and restaurant Ceviche, was sold during the year to Standard Life Investments for £20.65m, a premium of 38% to the 31 March 2015 value.

Barts Square EC1

In joint venture with The Baupost Group LLC we own the freehold interest in land and buildings at Bartholomew Close, Little Britain and Montague Street, a 3.2 acre site adjacent to the new Barts Hospital and just south of Smithfield Market. Existing buildings are let to the NHS on a number of short term leases that expire in 2016.

Planning consent has been implemented for a comprehensive redevelopment of 19 buildings to provide a total of 236 residential apartments, three office buildings of 213,000 sq ft, 23,000 sq ft and 10,200 sq ft, 20,600 sq ft of retail/A3 at ground floor as well as major public realm improvements, which will be incorporated into the wider Smithfield Area Strategy being worked up by the City of London.

- Phase 1 - Residential/offices/retail

Phase 1 of the redevelopment of Barts Square comprises 144 residential units, 8,800 sq ft of retail space, 23,000 sq ft of new offices behind retained facades and public realm improvements. The demolition of buildings in Bartholomew Close and Little Britain commenced in January 2015, with the retention of various facades behind which the buildings are being demolished. Completion of phase 1 is expected in summer 2017. Contracts have been exchanged for the sale of 102 residential units for a total value of c. £132m at an average £1,580 psf, with a further two units under offer.

- Phase 2 - One Bartholomew Close - Offices

One Bartholomew Close was sold to clients of Ashby Capital LLP ("Ashby") for £102.4m in August 2015, releasing £34m of cash to Helical. The demolition of the existing building and the construction of a new 12 storey office block of 212,858 sq ft, commenced in January 2016. The building is due to be completed in July 2018. Ashby's clients finance the development costs and when the building is completed and successfully let the joint venture will be entitled to receive a profit share payment. Helical Bar is the development manager for delivery of the project.

- Phase 3 - Residential/retail

Phase 3 of the redevelopment of the site, involving the demolition of Queen Elizabeth II Building, 62 Bartholomew Close, 42-44 Little Britain and 45-47 Little Britain, is expected to commence after vacant possession of these buildings is obtained in November 2016. In their place, 92 residential units and 11,800 sq ft of retail space will be constructed, with completion due in early 2019.

C-Space, 37-45 City Road EC1

Helical acquired C-Space in June 2013. Planning consent was obtained for a complete refurbishment of the building which increased the previous existing 50,000 sq ft office building to 62,000 sq ft. The works, which were completed in October 2015, involved an additional floor and extensions to the third floor, a landscaped courtyard and entrance "pavilion" to the rear and full height glazing to the raised ground floor. 75% of the space was pre-let to MullenLowe (formerly DLKW Lowe) the creative agency, and only the top floor and half of the third floor remain available.

One Creechurch Place, City of London EC3

One Creechurch Place, London EC3, is a landmark City office scheme in the heart of the insurance sector in London. In May 2014, Helical signed a joint venture agreement with HOOPP (Healthcare of Ontario Pension Plan) to redevelop the site. Under the terms of the joint venture, HOOPP and Helical will jointly fund the project on a 90:10 split, with Helical acting as development manager for which it will receive a promote payment depending on the successful outcome of the scheme. It is anticipated the completed development will have a capital value of c. £250m. The new building, comprising 272,000 sq ft NIA of offices and 2,227 sq ft of retail, is expected to be completed in September 2016.

23-28 Charterhouse Square, Smithfield EC1

In January 2016, Helical was granted a new 155 year leasehold interest in 23-28 Charterhouse Square, London EC1, from the Governors of Sutton's Hospital in Charterhouse for £16m. Helical has received planning for and commenced a major refurbishment of the existing building, which will increase the current 34,000 sq ft to 38,500 sq ft of offices, with the addition of a new sixth floor, and add 5,100 sq ft of retail/restaurant. The completed building is expected to be delivered in early 2017.

The Loom, Whitechapel E1

This 112,000 sq ft listed building was acquired in 2013 and Helical has secured planning consent for a comprehensive refurbishment/reconfiguration of the common parts to include a new entrance/reception, showers, bike store, refurbishment of c. 25,000 sq ft of offices, including the creation of a single 11,000 sq ft unit and 4,000 sq ft of café and restaurants. The works are underway and are due for completion in July 2016. Tenant demand in the area is extremely strong and we anticipate achieving rents of c. £45 psf compared to an average passing rent in the building of £24.50.

Chart House, Islington N1

Chart House is a 10,500 sq ft office building in Islington. There is currently planning consent for an additional floor of residential on top of the building. This building is 100% let.

In addition to our holdings in East London we have one scheme in Covent Garden WC2.

Drury Lane & Dryden Street, Covent Garden WC2

The existing buildings, which are in office and retail use, sit on an island site of approximately 0.5 acres. Approximately half of the site, adjacent to Dryden Street, sits within the Covent Garden Conservation Area. In July 2015, contracts were exchanged with Diageo Pension Fund (a fund managed by Savills Investment Management) for the conditional acquisition of the Drury Lane site. The contract is conditional on Helical securing planning consent. A planning application for the residential led scheme of 68 apartments was submitted in August 2015 and resolution to grant consent was issued at a planning committee in April 2016.

The West

Shepherds Building, Shepherds Bush W14

This 151,000 sq ft multi-let office building close to the Westfield London shopping centre maintains an occupancy approaching 100%, as it has for eight consecutive years. We have completed a renewal of existing leases to Endemol, who have also taken additional space and are the largest tenant in the building, increasing the total contracted rent roll by £1.27m and securing their occupation of the building until December 2026, with a tenant break option in 2021. The average contracted rent for the building is now £45.75 psf with total contracted net rent of £6.68m compared to a passing net rent of £4.38m.

Power Road Studios, Chiswick W4

Helical acquired this asset in December 2015 for £34.2m at a NIY of 4.4%. The site comprises 62,000 sq ft of offices across five buildings and is multi let to a wide range of predominantly media tenants. Recent lettings have been concluded at a rent of £38 psf compared to an average rental of £24 psf at acquisition. Studies are currently underway to determine how best to add further office space to the site which at two acres has substantial potential.

One King Street, Hammersmith W6

One King Street, Hammersmith W6, is a 39,000 sq ft building acquired in 2012 comprising 26,000 sq ft of offices and 13,000 sq ft of retail. Refurbishment of the fourth floor and the addition of a fifth floor of offices on top of the building has completed, providing 3,500 sq ft of space. The fourth and fifth floors have been let to Orion Healthcare at a headline rent of £52.50 psf and £55.00 psf and the building is now fully let with total contracted rent of £1.8m.

King Street, Hammersmith W6

King Street, Hammersmith W6, is a Council led regeneration project which is being carried out in a 50/50 joint venture with Grainger plc. Planning permission for the scheme has been granted for 196 apartments, a three-screen cinema, new retail and restaurant space and replacement offices for the Council. A minor amendment to the existing planning approval has been submitted and work is expected to commence in 2017.

The Powerhouse, Chiswick W4

Helical acquired this 43,325 sq ft office and recording studios by way of sale and leaseback. The Powerhouse is a listed building on Chiswick High Road and is fully let on a long lease to Metropolis Music Group.

Sales

Enterprise House, Paddington W2

Enterprise House, Paddington W2, is a freehold building adjacent to Paddington Station in London comprising 45,000 sq ft of offices. The building was acquired in 2013 on a sale and lease-back agreement from Network Rail, which holds a 20 year lease without breaks, for c. £31m representing a 5.7% yield generating annual rental income of £1.8m. In October 2015, the asset was sold to a private overseas buyer for £43m, a premium of 10% to the 31 March 2015 valuation, crystallising an IRR in excess of 100%.

Artillery Lane, Bishopsgate E1

Artillery Lane, Bishopsgate, E1, is an office building in the City of London. Acquired for £6.8m in 2013 the property was sold to Standard Life in October 2015 for £15.1m following the completion of works which provided 17,000 sq ft of newly refurbished offices.

The Regional Portfolio

Our regional portfolio contributed 71% of our net rental income from tenants in diverse sectors and geographical locations. The £568.8m regional portfolio comprises £210.5m of industrial/logistics (37% of the portfolio), £103.5m of offices (18%), £142.6m of retail comprising £76.9m of retail warehousing and £65.7m of in-town retail, mainly the Morgan Quarter, Cardiff (in aggregate 25%), £103.5m in our retirement village development programme (18%) and £8.7m of land (2%).

Our approach to regional investment is to acquire assets where occupational demand is robust throughout the property cycle and the barriers to new supply are high. Successfully picking the sectors and assets with these attributes will ensure strong cash flows and rental growth. In general, yields for regional assets are higher than those in London and these assets are acquired to provide significant cash flow for the Group. We anticipate that income will become an increasingly important part of total returns as yield compression slows and, as such, we focus our attention on areas where we believe the occupational market remain robust.

Distribution Warehouses

Helical has 36 distribution and light industrial units located around major UK transport networks, a net increase of five units with 13 acquisitions (£89m) being offset by sales of eight units with (£28m) at a small premium to book value. These units generally have few bespoke features making them straightforward to re-let if vacancies occur with minimal capital expenditure required. The majority of the assets are single let. Significant assets within the portfolio include a 256,000 sq ft distribution warehouse let to Sainsbury's in Yate, Bristol, a 203,000 sq ft facility in Leighton Buzzard, Bedfordshire, a 210,000 sq ft distribution warehouse in Northampton and a 183,000 sq ft distribution warehouse let to the Royal Mail in Chester.

Regional Offices

Our regional office investment portfolio comprises nine assets valued at £102.5m, with over 60% of value in Manchester. Other assets are located in Crawley, Glasgow, Reading, Cobham, Castle Donington and Cheadle. During the year we sold three assets for £11.2m, a 16% premium to book value.

We now have three offices in Manchester having acquired Fountain Court, 31 Booth Street earlier this year. Manchester is a city with a diverse, thriving and growing economy and is widely regarded as England's second city and the centre of the "Northern Powerhouse".

Churchgate and Lee House, Manchester

Helical acquired Churchgate and Lee House, two interlinked office buildings comprising 248,000 sq ft of offices, in March 2014. We have refurbished the reception, café and a number of office floors and continue to reposition the asset as floors become vacant. We have concluded 14,000 sq ft of new lettings in the year, including letting a refurbished second floor Churchgate suite at £16.50 psf, with a further 19,300 sq ft since year end. The building is now 92% occupied.

Dale House, Manchester

Dale House is a 42,000 sq ft office building situated in the Northern Quarter of Manchester. It is 85% let to a number of tenants with an average rent of £12.00 psf and was acquired in March 2015 for £7.4m. The property is a long term hold with plans to refurbish the building over time and move rents upwards as the location improves.

Fountain Court, 31 Booth Street, Manchester

This vacant office located in the prime city core was acquired in January 2016 for £4.7m. Refurbishment of this 25,349 sq ft building is underway and we anticipate having it available to let before the end of 2016.

St Vincent Street, Glasgow

In partnership with local development partner, Dawn Developments Ltd, Helical is the development manager for the construction of the new headquarters building for Scottish Power at St Vincent Street, Glasgow. The completed building will comprise c. 220,000 sq ft of prime office space in the heart of the City's commercial district. Funded by M&G Investments, the scheme is under construction and all works, including Scottish Power's fit out, are due to be completed by Autumn 2016. As part of the overall deal, Helical took on three existing Scottish Power sites which are surplus to requirements. We have received planning permission for a change of use of the grounds of Cathcart House to 158 residential units and are in discussions with a number of parties in relation to a sale. At Yoker, we have exchanged contracts, subject to planning, with a supermarket operator to sell the site, and we sold the site at Falkirk during the year.

Retail

Our retail assets total £142.6m, 11.5% of our portfolio (31 March 2015: £171.7m). This part of the portfolio includes a prime retail asset in Cardiff, eight retail parks (one of which has been sold since year end), one retail unit and a number of pre let and/or prefunded retail developments. During the year we sold five assets for £27.0m, marginally below book value.

The retail market is undergoing major structural changes with high profile companies going into administration. There is a continued migration of customers and retailers to prime centres where the leisure offer and quality of environment are a big driver of footfall.

During the year, five retail properties were sold for a total of £27.0m. At the year end the portfolio consisted of assets in Cardiff, Ellesmere Port, Great Yarmouth, Harrogate, Huddersfield, Leicester, Scarborough, Sevenoaks, Southend and Stockport. Harrogate has been sold since the year end at its book value.

The Morgan Quarter and Royal Arcades, Cardiff

Tenant demand for the property is strong and rents are steadily increasing. The creative quarter office refurbishment is now largely complete generating £116,000 of rent from previously unusable space, with a further c. £80,000 of rent to follow as the remainder of the new space is let.

The Morgan Quarter was originally purchased in 2005 and comprised the David Morgan Department Store and two Victorian Arcades. The main ground floor retail units fronting The Hayes, a prime fashion pitch in Cardiff, have been completely reconfigured and they are now let to tenants such as White Stuff, Urban Outfitters, Molton Brown, Jack Wills and Fred Perry.

Retail Developments

Parkgate, Shirley, West Midlands

The shopping centre at Parkgate, Shirley, where Helical has a 50% interest, was completed in 2014 and the 80,000 sq ft Asda, which had been pre-sold to the food-store, together with a number of other retailers have all opened successfully for trade. The space beyond the food-store is let to occupiers such as B&M, Peacocks, Poundland, Pizza Express, JD Wetherspoon, Prezzo, Shoe Zone and Shirley Library.

A second phase of high density residential is being progressed on a 10 acre site opposite the Parkgate scheme. Terms have been agreed with a care home provider, a residential developer and a supermarket operator for a petrol filling station. Planning consent has been achieved subject to a S106 Agreement.

Truro

Helical has entered into a Conditional Purchase Agreement on the six acre Truro City Football Club site which has planning consent, subject to a s106 Agreement, for a 78,000 sq ft non-food retail park. The scheme proposals provide for the relocation of the football club and we anticipate starting on site in summer 2017.

Cortonwood

This 79,750 sq ft retail park has been 95% pre-let to tenants including Outfit, H&M, New Look, River Island and Marks and Spencer. The scheme has been forward funded with clients of Aberdeen Asset Management and construction on site has started with completion due in June 2017.

Poland

During the year, we completed the sale of our 50% share in the 720,000 sq ft retail development at Europa Centralna, Gliwice, Poland, to our joint venture partners, clients of Standard Life, in accordance with a pre-arranged contractual exit two years post completion of the scheme. The sale, at book value, reduced gross property assets by £41m and reduced net debt by £26m. In July 2015, we also completed the sale of our 103,000 sq ft retail development at Wroclaw, Poland at €17m, a small premium to book value. The sale of these two assets completed the exit of our joint venture in Poland.

Retirement Villages

Our retirement village portfolio consists of four villages. We design each of the villages with an active, independent retirement in mind and the communities that we create are the ideal place to live a social and varied lifestyle. Each private, age-exclusive retirement community is centred around a residents' clubhouse, and feature many amenities including an indoor pool and gym, landscaped gardens, bar, restaurant and library. With an increasing UK population over 65 years old, and a severe under supply in retirement housing, this sector creates significant opportunities for investors and developers. This year has seen us bring the management of this portfolio entirely in house and early results have shown an increase in sales rates.

Bramshott Place, Liphook, Hampshire

This village is situated amongst natural parkland near the village of Liphook on the border of Hampshire, West Sussex and Surrey. The village features a selection of two and three bedroom cottages and one, two and three bedroom apartments arranged around a residents' clubhouse. All construction works to Phases 1-3 are completed. 151 units in total are constructed and sold. Phase 4 will commence in 2016 with the construction of 40 additional cottages. Enabling works have commenced on site with completion due in June 2018.

Durrants Village, Faygate, West Sussex

Durrants Village is set within 30 acres of private parkland in the hamlet of Faygate, near Horsham in West Sussex. The village features a selection of cottages and apartments. Phase 2 of the construction completed in January 2016 with 105 units located around the residents' clubhouse. Phase 3 consists of an additional 50 units towards the front of the site and construction is due to commence in late 2016 with completion in early 2019. Sales are progressing at a good rate with 51 units sold and an additional 24 reserved.

Millbrook Village, Exeter, Devon

Millbrook Village is nestled close to the river in the heart of the historic cathedral city of Exeter. The village will feature a selection of two and three bedroom cottages and one, two and three bedroom apartments. The site will comprise 164 units once completed. The clubhouse will include a restaurant and bar, games room, gym, cinema and a swimming pool. The build programme is well advanced with 43 units currently completed with more stock now coming online at regular three month intervals. We anticipate that the village will be fully constructed by early 2018. Contracts have been exchanged on 14 units with an additional 13 units reserved.

Maudslay Park, Great Alne, Warwickshire

Maudslay Park is set in 90-acres of parkland in the Warwickshire village of Great Alne, near Stratford-upon-Avon. The village will comprise 150 units with a mixture of cottages and apartments built around the central clubhouse facility. Following the administration of our main contractor, progress was delayed last year. We have now appointed a new main contractor and we anticipate the first units will be available for sale at the end of 2017.

Asset management

Asset management is a critical component in driving Helical's performance. Through having intelligent business plans and by maximising the combined skills of our management team, we are able to create value in our assets without relying on market movements.

During the year contracted income increased by £12.7m as a result of new lettings and rent reviews, net of any losses from breaks and lease expiries (2015: £1.1m). With notable contributions from some regional assets, in particular Churchgate House in Manchester, the majority of these rental increases come from our London assets. The completion and letting of phase 1 at The Bower EC1 and C-Space EC1 contributed £10.5m of new lettings, while the renewal of the Endemol lease in the Shepherds Building added a further £1.3m to the rent roll. The London portfolio remains highly reversionary and this value will continue to be unlocked through refurbishment and leasing activities.

There was significant activity within the investment portfolio with 165 lease events.

Capital expenditure

We have a planned development and refurbishment programme to drive the rental value and secure the future of our assets.

Retirement Villages

Portfolio yields

Capital values, vacancy rates and unexpired lease terms

Valuation movements

Lease expiries or tenant break options

We have a strong rental income stream and a diverse tenant base, with the largest tenant in the portfolio accounting for only 7.1% of the rent roll. The top 10 tenants account for 30.4% of the total rent roll and the tenants come from a variety of industries.

Consolidated Income Statement

For the year ended 31 March 2016

Consolidated Statement of Comprehensive Income

For the year ended 31 March 2016

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

Consolidated Balance Sheet

As at 31 March 2016

Consolidated cash flow statement

For the year to 31 March 2016

Consolidated statement of changes in equity

For the year to 31 March 2016

For a breakdown of Total Comprehensive Income, see the Consolidated Statement of Comprehensive Income.

Included within changes in equity are net transactions with owners of £28,509,000 (2015: £10,840,000) made up of: the performance share plan charge of £6,666,000 (2015: £6,432,000) and related deferred tax of credit of £3,002,000 (2015: charge of £2,477,000), dividends paid of £14,437,000 (2015: £7,944,000), the purchase of own shares of £18,857,000 (2015: £13,349,000), new share capital issued of £nil (2015: £120,000) and the share settled bonuses of £1,121,000 (2015: £1,424,000).

The adjustment to retained earnings of £6,666,000 adds back the performance share plan charge (2015: £6,432,000), in accordance with IFRS 2 Share-Based Payments.

Notes:

Share capital - represents the nominal value of issued share capital.

Share premium - represents the excess of value of shares issued over their nominal value.Revaluation reserve - represents the surplus/deficit of fair value of investment properties over their historic cost.

Capital redemption reserve - represents amounts paid to purchase issued shares for cancellation at their nominal value.

Retained earnings - represents the accumulated retained earnings of the Group.

Notes to the financial statements

1. Basis of preparation

These financial statements have been prepared using the recognition and measurement principles of International Financial Reporting Standards ("IFRS"), including International Financial Reporting Interpretations Committee ("IFRIC") interpretations as adopted by the European Union.

The financial statements have been prepared in Sterling (rounded to the nearest thousand) under the historical cost convention as modified by the revaluation of investment properties, available-for-sale investments, convertible bonds and derivative financial instruments.

The principal accounting policies of the Group are set out in the Group's 2015 annual report and financial statements. There has been no significant change to these since the previous annual report.

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The Group Annual Report and Financial Statements for 2015 are available at Companies House. The auditor's opinion on the 2015 accounts was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

2. Segmental information

IFRS 8 requires the identification of the Group's operating segments, which are defined as being discrete components of the Group's operations whose results are regularly reviewed by the Chief Operating Decision Maker (being the Chief Executive) to allocate resources to those segments and to assess their performance. The Group divides its business into the following segments:

· Investment properties, which are owned or leased by the Group for long-term income and for capital appreciation, and Trading properties which are owned or leased with the intention to sell; and,

· Developments, which include sites, developments in the course of construction, completed developments available for sale, pre-sold developments and interests in third party developments.