Helical plc Annual Results for the Year to 31st March 2021
This content has been sourced from: https://www.investegate.co.uk/helical-plc/rns/annu...
Gerald Kaye, Chief Executive, commented:
"We announce these annual results as the country emerges from the Covid-19 pandemic with businesses re-opening and employees returning to their usual places of work. It is hoped all remaining restrictions are lifted on 21 June in accordance with the Government roadmap. Removing these restrictions is vital to the recovery of the economy so that businesses can operate efficiently and effectively in a post-Covid world.
"The office sector is on the cusp of considerable change and we believe there are four key trends that will shape the use of offices going forward and provide a clear differentiation across the sector.
"First, sustainability is at the top of corporate agendas. This is exemplified by the 2021 annual letter to CEOs from Larry Fink, the CEO of BlackRock. He wrote of a tectonic shift in the reallocation of capital to sustainable assets. Tenants will want to occupy the most sustainable and environmentally favourable buildings to achieve both their own net zero carbon targets and those of their stakeholders. For the same reasons, investors will actively seek to acquire these buildings. We believe there will be a "green" rental and yield premium for the most sustainable assets.
"The second trend is wellness. In a post-Covid environment, tenants will require the most efficient and up to date air conditioning systems to minimise the risk from airborne viruses. Sensors showing air quality in a building will be essential and office density per worker will decrease so employees will benefit from a more comfortable environment.
"Third, buildings will see greater use of technology to optimise their environment and the workplace experience. Sensors that record occupation levels will improve energy efficiency and the management of buildings.
"The fourth and final trend is enhanced amenity. There will be greater demand for secure bike parking and high-quality "club style" changing facilities. Buildings should provide an attractive working environment with food and beverage facilities close at hand. As part of this enhanced amenity, we will see an increasing "hotelification" of office buildings, with five-star management a necessity. Assets are moving from passive, low risk, long lease investments to intensively managed shorter leased buildings where maximising tenant retention, rental growth and building performance will be the priorities.
"There will be bifurcation in the office sector as the "real" Grade A buildings, which incorporate these facilities and amenities, diverge from the rest in both capital value and rental growth. I would expect this pattern to accelerate as tenants seek working environments that match the expectations of their employees.
"We believe Helical's current portfolio already incorporates the attributes identified by these trends and, for that reason, both our rental and capital values have performed well. With our see-through LTV at 22.6%, we have considerable firepower at our disposal and our main focus is now on identifying and acquiring new projects. These will be a combination of repositioning, refurbishment or redevelopment opportunities, delivering best-in-class office space commensurate with a more sustainable post-Covid world."
Strong Operational Performance
· At Kaleidoscope, London EC1, successful letting of the whole of the 88,581 sq ft office building to TikTok Information Technologies UK Limited on a 15 year lease term. The letting achieved an annual rent of £7.6m, reflecting a 5.4% premium to the 31 March 2020 ERV.
· At The Bower, the first rent review has been completed, achieving a 31% uplift on the previous contracted rent.
· Completion of a further 11 new lettings in the year, representing 35,002 sq ft, delivering contracted rent of £1.3m (Helical's share £1.2m) at 5.5% above 31 March 2020 ERV. The new lettings have been partially offset by rent lost on sales, lease breaks and expiries, resulting in an overall increase in contracted rent by £0.2m to £37.8m.
· Sale of 90 Bartholomew Close, London EC1, completed for £48.5m, reflecting a net initial yield of 3.92% (£1,594 psf capital value) and The Powerhouse Portfolio (three properties in Manchester) for £114.8m, reflecting a net initial yield of 5.2% on the contracted rent and a capital value of £329 psf.
· Good progress at 33 Charterhouse Street, London EC1, with the grant of a new 150 year lease, a £140m "Green Loan" facility secured from Allianz to finance the development and the appointment of Mace as principal contractor. The development, which has achieved the UK's first BREEAM 2018 New Construction "Outstanding" rating at the design stage, is due to achieve practical completion in September 2022.
· 93.3% of all rent contracted and payable for the March, June, September and December 2020 quarters has been collected, with a further 1.8% subject to ongoing discussion. 84.5% of the March 2021 quarter rents due to date has been collected and the Company anticipates, through further cash receipts from agreed payment plans, to have collected between 91% and 95% by the end of June 2021.
Earnings and Dividends
· IFRS Profit before tax of £20.5m (2020: £43.0m).
· See-through Total Property Return1 of £48.6m (2020: £83.9m):
- Group's share1 of net rental income of £25.0m (2020: £28.5m).
- Development losses of £0.3m (2020: profits of £9.9m), after provisions of £0.1m (2020: £0.3m).
- Net gain on sale and revaluation of investment properties of £23.9m (2020: £45.5m).
· Total Property Return, as measured by MSCI, of 7.0% compared to the MSCI Central London Offices Total Return Index of -1.7%.
· IFRS basic earnings per share of 14.8p (2020: 32.3p).
· EPRA loss per share1 of 1.8p (2020: earnings of 7.6p).
· Final dividend proposed of 7.40p per share (2020: 6.00p), an increase of 23.3%.
· Total dividend for the year of 10.10p (2020: 8.70p), an increase of 16.1%, returning to pre-Covid level in 2019.
· Net asset value up 1.6% to £608.2m (31 March 2020: £598.7m).
· Total Accounting Return1 on EPRA net tangible assets of 4.5% (2020: 9.3%).
· EPRA net tangible asset value per share1 up 1.7% to 533p (31 March 2020: 524p).
· EPRA net asset value per share1 up 0.6% to 514p (31 March 2020: 511p).
· EPRA net disposal value per share1 up 1.0% to 485p (31 March 2020: 480p).
· Change in fair value of derivative financial instruments credit of £2.9m (2020: charge of £7.7m).
· See-through loan to value1 decreased to 22.6% (31 March 2020: 31.4%).
· See-through net borrowings1 of £193.9m (31 March 2020: £298.5m).
· Average maturity of the Group's share1 of secured debt of 3.2 years (31 March 2020: 4.1 years), increasing to 4.7 years on exercise of options to extend current facilities and on a fully utilised basis.
· See-through average cost of secured facilities1 of 3.5% (31 March 2020: 3.5%).
· Group's share1 of cash and undrawn bank facilities of £423m (31 March 2020: £279m).
· IFRS property portfolio value of £740.2m (31 March 2020: £819.6m).
· 3.4% valuation increase, on a like-for-like basis1, of our see-through investment portfolio, valued at £857.0m, compared to £949.3m at 31 March 2020.
· Contracted rents of £37.8m (31 March 2020: £37.6m) compared to an ERV1 of £52.1m (31 March 2020: £60.0m).
· See-through portfolio WAULT1 of 6.9 years (31 March 2020: 6.1 years).
· Vacancy rate reduced from 17.2% to 10.5%.
· In April, Helical launched "Designing for Net Zero", a guide to assist our transition to a low carbon business, following on from our new Sustainability Strategy, "Built for the Future", launched in 2020.
· Improvements across all sustainability measures and ratings with a 3* Green GRESB rating, MSCI ESG of AAA, EPRA Sustainability BPR of Silver and CDP score of B.
· 96% of the space in our buildings has been recently developed or refurbished with 99% of our investment portfolio, by value, having an A or B EPC rating.