Helical Bar PUBLIC LIMITED COMPANY H e l i c a l B a r p l c R e p o r t a n d A c c o u n t s 2 0 0 1 Registered office 11-15 Farm Street London W1J 5RS Report and Accounts 2001 0 0 0 2 8 9 7 7 0 2 ) 0 ( 4 4 + p u o r G y w e o L y b d e c u d o r p d n a d e n g i s e D 100 Wood Street, London EC2 Helical Bar plc Report and Accounts 2001 1 Corporate Statement Helical Bar plc is a property development and investment company. Our objective is to maximise growth in assets per share using a recurring stream of development and trading profits to build up the investment portfolio. Pre-tax profit £m Ordinary dividend per share Pence Diluted net asset value per share Pence Increase in shareholders(cid:213) funds pre-dividend £m 8 . 5 2 0 . 2 2 0 . 0 2 5 . 8 1 0 . 2 1 0 5 . 2 1 5 1 . 1 1 0 0 . 0 1 0 0 . 9 0 0 . 8 6 7 7 3 0 6 2 8 4 3 7 4 2 7 3 3 . 0 6 2 . 5 4 2 . 8 3 3 . 5 3 6 . 7 1 97 98 99 00 01 97 98 99 00 01 97 98 99 00 01 97 98 99 00 01 Special dividends of 100.0p and 2.0p were declared in respect of the periods ended 31 March 1999 and 31 March 1997 respectively. Contents 01 Corporate Statement 02 Financial Highlights 04 Chairman(cid:213)s Statement 06 Development Programme 14 Investment Portfolio 20 Financial Review 22 Officers 23 Directors(cid:213) Report 25 Auditors(cid:213) Report 26 Consolidated Profit and Loss Account 27 Balance Sheets 28 Statement of Total Recognised Gains and Losses 29 Consolidated Cash Flow Statement 30 Notes to Financial Statements 48 Ten Year Review 49 Corporate Governance Report 51 Report on Remuneration 56 Financial Calendar and Advisors 2 Helical Bar plc Report and Accounts 2001 Financial Highlights Investment Property Databank ((cid:210)IPD(cid:211)) Helical has maintained its excellent record as a fund within the Investment Property Databank ((cid:210)IPD") with an ungeared total return of 23.9% in the year to 31 March 2001, the best performance of any fund, which compares to an average fund performance of 10.6%. This performance helped keep Helical as the top performer out of all the funds covered by IPD over the last ten years. The returns on shareholder capital earned by Helical are higher than those measured by IPD due to the use of gearing. Share Prices 1 March 1996 to 15 June 2001 1 March 2000 to 15 June 2001 pence 900 800 700 600 500 400 317p 300 870p 1996 1997 1998 1999 2000 2001 pence 900 850 800 750 700 650 600 550 500 569p Mar 2000 870p Apr May Jun Jul Aug Sep Oct Nov Dec Feb Mar Apr May Jun Jan 2001 Total Shareholder Return Total Shareholder Return measures the return to shareholders from share price movements and dividend income. 5 Years 10 Years 15 Years 20 Years 25 Years Rank Total returns pa % Rank Total returns pa % Rank Total returns pa % Rank Total returns pa % Rank Total returns pa % Helical Bar plc UK Equity market Listed Real Estate Sector Index Direct property Companies in Sector 25.6 11.1 11.8 11.2 8 — — — 65 21.8 12.6 9.3 9.5 2 — — — 50 30.4 12.7 10.6 10.4 1 — — — 39 34.7 16.2 10.5 10.5 1 — — — 32 28.3 17.0 14.3 12.8 1 — — — 30 * Source: HSBC Real Estate Research Note 26 April 2001. All periods end on 31 March 2001. The rank shows the relative performance of the company compared to other listed real estate companies shares. Helical Bar plc Report and Accounts 2001 3 Helical Bar plc Five Year Summary Rental income Development profits FRS3 profits Profit/(loss) on sale of investment properties Pre-tax profits Investment portfolio Shareholders’ funds Dividend per ordinary share Special dividend per ordinary share Diluted earnings per share Diluted net asset value per share 31.3.01 £000(cid:213)s 31.03.00 £000(cid:213)s 31.03.99 £000(cid:213)s 31.03.98 £000(cid:213)s 31.03.97* £000(cid:213)s 28,642 29,507 25,115 709 26,656 19,345 17,465 4,555 21,482 21,601 19,629 415 22,009 16,686 17,656 838 22,374 9,152 12,591 (558) 25,824 22,020 20,044 18,494 12,033 453,607 419,570 332,457 250,718 201,570 240,231 183,528 141,524 138,982 105,664 12.50p 11.15p 10.00p 9.00p – 68.3p 776p – 100.00p 53.7p 603p 50.7p 473p – 40.9p 482p 8.00p 2.00p 28.3p 372p * The financial statements to 31 March 1997 were for a 14 month accounting period. Significant events during the year June June April March 3 Bunhill Row, London EC1 sold to Matrix Securities Sale of industrial portfolio 3 Bunhill Row, London EC1 pre-let to Linklaters Joint venture with US insurance company on 66 Prescot Street, London E1 2001 January Pre-let to Endemol Entertainment UK at Shepherds Building December October September July July May 2000 One Bunhill Row, London EC1 completed Appointed partners with NCP on redevelopment of Brewer Street, Soho, London W1 Start of construction on 140,000 sq.ft. offices at The Meadows, Camberley 100 Wood Street, London EC2, fully let Acquisition and funding of The Heights, Weybridge agreed CBXII and Midsummer Court, Milton Keynes sold 4 Helical Bar plc Report and Accounts 2001 Chairman(cid:213)s Statement Chairman(cid:213)s Statement The year to 31 March 2001 was another very good year for Helical Bar plc ((cid:210)Helical(cid:211)) with exceptional profits being generated by the company(cid:213)s development programme leading to record pre-tax profits of £25.8m (2000: £22.0m). Diluted net assets per share continue to grow and have increased by over 135% in the last five years, from 330p to 776p, even after total ordinary dividends of 153p during that period. The Board recommends a final dividend of 7.50p per share (2000: 6.75p), an increase of 11%. This proposed dividend, together with the interim dividend of 5.00p paid in December 2000, makes a total of 12.50p per share (2000: 11.15p). This is an increase of 12% on last year. The total dividend of 12.50p per share is covered over 5 times by profits after tax. basis, net asset value per share rose by 29% to 776p (2000: 603p). These figures take no credit for any surplus of value in the trading and development stock. During the year the company’s share price rose from 569.0p to 742.5p, an increase of 30%. This share price performance contributed to a Total Shareholder Return of 33% in the year to 31 March 2001. The undiluted net asset value per share of the company rose by 30%, for the second consecutive year, to 803p (2000: 620p). On a diluted The last year has seen a substantial reduction in quoted property companies as management teams became frustrated at the continuing disparity between net asset values and share prices and the financial rewards of performing in the private sector became more attractive. Helical has, generally, operated at a sector premium. A highly motivated and incentivised management team is regarded as the key to continued success. The Executive Board, led by Michael Slade and Nigel McNair Scott with Gerald Kaye and Michael Brown running the development and investment divisions, have created an enviable One Plough Place, London EC4 Helical Bar plc Report and Accounts 2001 5 record of performance. Helical’s property portfolio has outperformed all property portfolios in the IPD index (all monthly and quarterly valued funds) over 1 and 10 years. It is this consistency of performance that your Board is looking to repeat in future. Ian Butler It is with deep regret that I must record the recent death of Ian Butler, a non-executive director of the company since 1993. Ian contributed enormously to the running of the company using the knowledge and experience gained as an executive director of many companies over the years. His insight into the development of corporate governance gained as a member of the Cadbury Committee helped the company implement the Cadbury, and subsequently the Greenbury, Hampel and Turnbull recommendations. His contribution to Board and Audit and Remuneration Committee meetings will be missed. Stamp Duty As predicted by the industry, the raising of Stamp Duty to its current level is substantially reducing investment turnover and undermining property as an important asset class. The company continues to support industry moves to bring this to the attention of the authorities. The Future Since the year end, growth in property values has slowed, reflecting the fall in demand for space caused by the slowdown in the high-tech sector. The company has sold its interests in an industrial portfolio and forward sold its office development at 3 Bunhill Row, London EC1. These sales have enabled Helical to further reduce its gearing, building liquidity to take advantage of any opportunities which may be thrown up by the uncertainties in the market. It will continue to aim to make exceptional returns on shareholders’ funds. John Southwell Chairman 20 June 2001 66 Prescot Street, London E1 6 Helical Bar plc Report and Accounts 2001 Development Programme Chairman(cid:213)s Statement It is our objective to provide a continuing flow of development profits from pre-let and speculative office, retail and industrial schemes in partnership with funding institutions. Whilst a small number of schemes are financed with bank funding and, therefore, remain on our balance sheet, the majority of our schemes are forward sold to institutional investors. This policy has a significant effect on our return on capital employed and has enabled us to create and sustain one of the largest development programmes in the country. Development Programme — end values Office £m Retail £m Industrial £m Total £m Completed Programme: Let and sold 1993-2001 563 202 Current Programme: 31 March 2002 31 March 2003 31 March 2004+ 107 225 225 557 31 41 75 147 23 14 — — 14 788 152 266 300 718 Helical Bar plc Report and Accounts 2001 7 Offices During the year the company completed its two largest office buildings to date whilst work continued at a number of office developments which should provide a continuing stream of development profits in the next few years. Completed programme 100 Wood Street, London EC2 Completed at the end of the last financial year this 146,000 sq.ft. office development designed by Foster and Partners and forward funded by Deka Immobilien Investment GmbH (“Deka”) was let within three months. In April 2000 Chase Manhattan leased the top four floors comprising 56,500 sq.ft. In July, Friends Ivory Sime plc leased 38,600 sq.ft. on the first and second floors, Schroder Investment Management 34,600 sq.ft. on the third and fourth and Law Debenture 16,700 sq.ft. on the fifth floor. The successful letting of this development contributed to our exceptional half-year results and to the record pre-tax profits for this year. One Bunhill Row, London EC1 This 260,000 sq.ft. office development, formerly called 25 Chiswell Street, was completed in December 2000. Pre-let to solicitors Slaughter and May and also forward funded by Deka, it is the largest office development completed to date. Further details of this office development are provided on pages 10 and 11. Current programme One Plough Place, London EC4 One Plough Place is a 55,000 sq.ft. office development situated at the junction of Fetter Lane and Plough Place in Holborn, London. Completed in May 2001 this property was forward funded by Henderson Investors and is currently one of very few new office buildings available to let in Central London. 200 Hammersmith Road, London W6 200 Hammersmith Road will be a highly specified headquarters office building situated in the centre of Hammersmith, London. Forward funded with a Merrill Lynch Investment Managers/HQ Global Offices Limited partnership, this 65,000 sq.ft. office development will be run as a serviced offices facility by HQ Global Offices. It is due to be completed in October 2001. The Saunders Building, London W6 The Saunders Building will be a 14,000 sq.ft. self-contained air- conditioned office building newly Left to right: 200 Hammersmith Road, London W6 The Saunders Building, London W6 8 Helical Bar plc Report and Accounts 2001 Development Programme continued Offices continued constructed behind an existing façade. Situated next to 200 Hammersmith Road, its development is internally funded and will be completed in November 2001. The Meadows, Camberley, Surrey The Meadows Business Park is a prime office development of 140,000 sq.ft. comprising four distinct office buildings. Close to junction 4 of the M3 the buildings will be completed in December 2001. This development is a joint venture with Morgan Grenfell Property Unit Trust and is forward funded by Scottish Widows. Future Developments At 3 Bunhill Row, London EC1 we have commenced construction of new offices for solicitors Linklaters. This 95,000 sq. ft. building has been forward sold to Matrix Securities. At 40 Berkeley Square, London W1 we are to redevelop the site for current owners Morley Fund Management. The Heights, Weybridge, Surrey is to be an office campus development of five buildings for Prudential Portfolio Managers. The Waterfront Business Park in Fleet, an investment held by the company, includes land on which three office buildings are to be built, forward funded by Aberdeen Property Investors. Further details of these four proposed developments are provided on pages 12 and 13. In addition, the Company is progressing discussions with the planning authorities, in partnership with owners NCP, of an 80,000 sq.ft. redevelopment of a car park in Brewer Street, London W1 which will also incorporate a residential element. In Chertsey, a site has been acquired with the potential for an office development of 145,000 sq.ft. The Meadows, Camberley Helical Bar plc Report and Accounts 2001 9 Retail Helical Retail, our joint venture with Oswin Developments, is now led by Jonathan Cox following the decision of Jim Kelly to step down from his role as managing director. The company has had a quieter year, completing two developments whilst taking options, agreeing terms for site purchases and negotiating positions to enable its development programme to continue. In Bolton, the largest DIY store in Europe has been developed for B&Q as phase II of the Bolton Gate Retail Park completed in 1998. This store, with a garden centre and building compound, comprises over 175,000 sq.ft. taking the total floor area developed on the 20 acre retail site to over 300,000 sq.ft. Completed in April 2001 this phase II was forward funded by HSBC, an in-house client of LaSalle Investment Management. In Solihull, Helical Retail has just completed an additional phase to an existing retail park. Working in partnership with the Local Authority to relocate an Adult Training Scheme, a retail unit of 12,500 sq.ft. has been built. Let to Daewoo, the scheme was forward sold to Nestlé Pension Fund. In addition to these two developments, the company has sold its remaining interests in Middlesbrough Town Centre to a local developer. Looking forward, a 52,700 sq.ft. redevelopment of Accrington town centre is to start later this year. Forward sold to Bilsdale and pre-let to Wilkinsons, Bass, JJB Sports and others, it will be completed in the summer of 2002. Negotiations continue in respect of developments in Great Yarmouth, Wigan, Dorchester, Blackburn, Ipswich and Hanley. Industrial Since the year end the company has completed its only industrial development, a 104,300 sq.ft. warehouse at Hayes, near to Heathrow, London. Pre-let to Allport Limited, the building was forward funded by Hill Samuel Property Unit Trust. Gerald Kaye Development Director B&Q, Bolton Gate Retail Park 10 Helical Bar plc Report and Accounts 2001 Development Programme One Bunhill Row, London EC1 One Bunhill Row (formerly 25 Chiswell Street) is a 260,000 sq.ft net office development completed in December 2000, pre-let to the leading law firm Slaughter and May and forward funded by Deka Immobilien Investment GmbH (“Deka”). The start of the development process for this building was in early 1998 when terms were agreed to purchase sites from City University and City and Islington College and to pre-let an office building to Slaughter and May. A detailed planning application was submitted to London Borough of Islington for a pre-let building of 260,000 sq.ft. net with 27 car park spaces, a speculative building of 95,000 sq.ft. net (now being developed as 3 Bunhill Row) and a Business School of 95,000 sq.ft. gross (to be built by City University). At the same time terms were agreed with Deka to forward fund the building pre-let to Slaughter and May. Once planning was granted, construction started in April 1999 and continued for 20 months until December 2000 when practical completion was confirmed and the building handed over to Slaughter and May for their fitout. Throughout the site acquisition and construction phase the costs incurred by the company were met by the fund, as set out in the funding agreement, thereby reducing Helical’s cash outlay in the development to a minimum. With the building pre-let and forward funded Helical was able to recognise profits throughout the development of the building. 12 Helical Bar plc Report and Accounts 2001 Future Developments 3 Bunhill Row, London EC1 40 Berkeley Square, London W1 3 Bunhill Row will comprise approximately 95,000 sq.ft. of offices with construction works already underway to achieve completion by December 2002. Linklaters, the solicitors, have agreed to lease 57,600 sq.ft. paying a rent of £44.00 per square foot on the ground floor and £46.00 on the first to fourth floors inclusive, and may take all seven floors. The building, forward sold to Matrix Securities, is adjacent to the new City University Business School, which is under construction and One Bunhill Row, completed by Helical Bar at the end of 2000 and pre-let to Slaughter and May. 40 Berkeley Square, to be redeveloped in a joint venture with the current owners Morley Fund Management, will provide approximately 75,000 sq.ft. of office accommodation on the west side of Berkeley Square. The development is to be started in March 2002 and will comprise eight floors of top quality offices overlooking the Square. Completion date: December 2002 Completion date: March 2004 Helical Bar plc Report and Accounts 2001 13 The Heights, Weybridge, Surrey The Waterfront Business Park, Fleet The Heights, Weybridge, Surrey is to be an office campus development on a 22 acre site acquired from Proctor & Gamble and forward funded with Prudential Portfolio Managers. The development will comprise five buildings with a total of 340,000 sq.ft. of offices and construction is due to commence shortly. The Waterfront Business Park is a 12 acre site comprising 90,700 sq.ft. of existing buildings held as an investment together with 4.5 acres of development land. Benefiting from attractive views over Fleet Pond Nature Reserve the site lies adjacent to Fleet Station, within walking distance of the town centre and within 5 minutes drive of Junction 4A of the M3. The next phase of development will comprise three buildings with net lettable space of 12,000 sq.ft., 17,000 sq.ft. and 25,000 sq.ft. and will include extensive landscaping improvements to the access road from Fleet Road. The scheme is forward funded by Aberdeen Property Investors. Completion date: November 2002 Completion date: June 2002 14 Helical Bar plc Report and Accounts 2001 Investment Portfolio Our investment philosophy is based on four guiding principles. Helical actively manages its investment portfolio, rotating between sectors to maximise its exposure to growth stock. Gearing is used on a tactical basis, being raised to accentuate property performance when property returns are judged to materially outperform the cost of debt. The average number of properties held is kept small to facilitate fast repositioning of the portfolio and encourage management focus on key assets. Finally, there is a preference for multi-let stock where value can be added through refurbishment and lease restructuring. Sector Weightings c d e b f g a 70% Total Central London Offices: 18% a City Offices b West End Offices 34% c Other Central London Offices 18% Other Sectors: d South East Offices e Industrial f Out of Town Retail g Other 30% 5% 16% 6% 3% Investment Portfolio — Valuation Statistics Capital Value Increases Year Ended 31.3.01 Rental Value Increases Year Ended 31.03.01 Valuation Yields Initial 31.3.01 Reversionary 31.03.01 City Offices West End Offices Other Central London Offices South East Offices Industrial Out of town retail Other Total 13% 16% 18% 3% 1% -2% 0% 10% 22% 21% 29% 7% 1% 2% 4% 15% 5.9% 6.6% 7.3% 7.3% 9.1% 6.4% 7.9% 7.0% 9.2% 9.1% 9.8% 8.6% 10.7% 8.1% 8.4% 9.4% Helical Bar plc Report and Accounts 2001 15 Last year our principal focus was to continue to augment our holdings in Central London, the best performing sector of the market, principally by carrying out a number of refurbishment schemes. Highlights across the portfolio are as follows: • Capital values rose on average by 10%, rental values by 15%. • The valuation yields on the portfolio were 7.0% rising to 9.4% on reversion to rack rental values. As valuation yields allow for notional purchasers’ costs of 5.75%, the yields Helical actually earns on its portfolio are 7.4% rising to 9.9%. • £44.5m of properties were sold, all above valuation. The principal sale was our offices at CBXII, Milton Keynes for £26m which showed 45% p.a. capital appreciation during the period of ownership (1998 – 2000). • £52m was spent, principally on refurbishment costs on our Central London offices. However, we also bought and sold at a profit a telehousing site in Madrid and acquired a 49.9% stake in Level 3 House, 66 Prescot Street E1, a top specification City office building at an initial yield of 8% on a very low passing rent of £22 p.s.f. • Helical’s exposure to central London increased to 70% from 59% the previous year. Central London Offices • Capital values grew by 16%, rental values by 23%. • Average rents passing remain low at £29 p.s.f. with average rental values £35 p.s.f. • 100% of Helical’s exposure has been acquired since 1997. • Every building has been built or refurbished within the last 10 years with the exception of Drury Lane where a scheme is envisaged for 2003. • Refurbishment schemes were completed during the year at: - 4 & 5 Paris Gardens, Southwark SE1 – 45,000 sq.ft., 100% prelet to Guardian IT. - 48 Gracechurch Street, EC3 – 20,000 sq.ft., 100% let to 9 tenants. - Rex House, Regent Street, SW1 – 63,000 sq.ft. of offices recently completed, 70% let. - Shepherds Building, Shepherds Bush – a 155,000 sq.ft. refurbish- ment is scheduled for completion in August and is 25% prelet. This scheme is currently held at cost. Our London portfolio is highly reversionary with an initial yield of 6.5% rising to 9.3% on current rental values. The yields Helical actually earns are 6.9% rising to 9.8%. Outlook Both the occupational and invest- ment markets have cooled in recent months albeit from exceptional levels of activity last year. Whilst supply remains tight in Central London and the development pipeline constrained, occupiers are more cautious about committing to new accommodation especially at headline grabbing rents. However, demand is proving resilient for economic, affordable office space and our portfolio is orientated towards this segment of the market. Investment yields have risen to reflect slower growth rates and the more uncertain economic outlook. Investors are also nervous about paying full value for the reversionary potential of low rented properties in case rental values should fall. All these factors have been reflected by our valuers in preparing our year end valuations and explain why the rental values have grown significantly faster than capital values. Our judgement is that even on a downside basis we do not anticipate the rental values of our portfolio to fall. Consequently, as we achieve our rental value at rent review on each property the yield basis should adjust favourably as the risks are removed, releasing considerable value. Further value will also be generated by letting up our scheme at Shepherds Building and the remaining voids at Rex House. It is interesting to note that as interest rates have fallen, yet our reversionary yield has risen, a very substantial cashflow benefit is in prospect. Our reversionary yield of 9.9% is far in excess of our current average cost of debt at 6.8% and if interest rates remain low it seems unlikely that property yields will rise materially further and may indeed start to edge lower. Michael Brown Investment Director 16 Helical Bar plc Report and Accounts 2001 Investment Portfolio 1 48 Gracechurch Street, London EC3 • Acquired with vacant possession in January 2000. Previously NPI’s London headquarters • 15,000 sq. ft. of offices refurbished and let floor by floor at rates of £45 - £52.50 p.s.f. on seven leases • Ground floor converted to retail and let to Starbucks and Chelsea Building Society • Ungeared IRR of 33% since purchase 2 Rex House, Regent Street, London SW1 • The previous owner obtained planning consent and stripped out the building for redevelopment but was unable to re-gear the headlease with the freeholder • Helical acquired the remaining 351⁄2 year headlease and carried out a comprehensive refurbishment to produce 63,000 sq. ft. of air conditioned offices plus restaurant and gym accommodation • Two thirds of the offices have been let to Russell Systems Ltd and Robert Half Ltd at rents of £55 – £65 p.s.f. whilst LA Fitness have taken the gym • Ungeared IRR of 66% since purchase 3 61 Southwark Street, London SE1 • Improving location near Tate Modern and new Southwark Jubilee Line tube station • Acquired January 1998 showing an initial yield of 12.3% on an average passing rent of £7.24 p.s.f. • 65,000 sq. ft. let on 9 leases • Each lease on every floor has been surrendered and re-let with two thirds of the space refurbished • Passing rents now average £17 p.s.f. with most recent lettings at £25 p.s.f. • Planning consent obtained for a penthouse floor with views of St. Pauls • Ungeared IRR of 54% since purchase 1 2 1. Gracechurch Street 2. Rex House 3. Southwark Street 1 2 3 3 18 Helical Bar plc Report and Accounts 2001 Investment Portfolio Chairman(cid:213)s Statement continued Properties with value in excess of £10m (87% of investment assets) Address Comments Growth Since Acquisition % p.a. Rental Capital Value Current Average Passing Value Rent p.s.f Year Acquired 1997 18.2% 13.4% £28.00 2000 26.3% 30.8% £48.00 2001 – – £22.00 City Offices Cheapside House, Cheapside, London EC2 48 Gracechurch Street, London EC3 66 Prescot Street, London E1 West End Offices 60 Sloane Avenue, Brompton Cross, London SW3 70,000 sq.ft. of multi-let offices refurbished and let in 1998 plus prime retail 20,000 sq.ft. of multi-let offices refurbished and let in 2000 including retail 110,000 sq.ft. top specification office built in 1992. 50% share. Acquired at financial year end 75,000 sq.ft. flagship office building built in 1994, let to Leo Burnett plus 32,000 sq.ft. of retail and restaurant accommodation 1999 12.9% 8.2% £31.50 Capital House, Marylebone Road, Paddington, London NW1 90,000 sq.ft. 1991 built multi-let offices plus 47,000 sq.ft. let to Marks & Spencer at £0.60 p.s.f. until December 2002 1998 13.8% 17.0% £32.00 Rex House, Lower Regent Street, London SW1* 63,000 sq.ft. of of newly refurbished offices (19,000 sq.ft. vacant) plus 28,000 sq.ft. restaurant and gym Leasehold expiring 2035 2000 45.4% 66.4% £57.00 141–143 Drury Lane, Covent Garden, London WC2 40,000 sq.ft. multi-let office building scheduled for refurbishment or residential conversion after 2002 1998 19.7% 18.1% £23.50 71 Kingsway, London WC2 30,000 sq.ft. office building subject to rolling refurbishment 1998 16.5% 18.9% £29.00 * All freehold except Rex House 1. Cheapside House 2. 60 Sloane Avenue 3. Capital House 4. 141-143 Drury Lane 1 2 3 4 Helical Bar plc Report and Accounts 2001 19 Properties with value in excess of £10m continued Address Comments Other Central London Offices 61 Southwark Street, London SE1 65,000 sq.ft. of multi-let offices subject to rolling refurbishment programme Growth Since Acquisition % p.a. Rental Capital Value Current Average Passing Value Rent p.s.f Year Acquired 1998 37.3% 44.8% £17.00 4 & 5 Paris Gardens, Southwark, London SE1 45,000 sq.ft. offices acquired vacant and simultaneously pre-let to Guardian IT. Refurbished in 2000 2000 24.9% 46.5% £24.50 The Interchange, Camden Lock, NW1 65,000 sq.ft. of loft offices let to Associated Press Television News 50,000 sq.ft. of multi-let loft office village 1999 1998 18.0% 32.3% 24.9% 25.6% £23.00 £16.00 Vacant 155,000 sq.ft. loft offices in course of refurbishment. 35,000 sq.ft. pre-let 2000 25.0% –* £25.00 40,000 sq.ft. of 1990s offices plus 50,000 sq.ft. of 1960s industrial capable of office redevelopment 2000 5.6% 8.3% £19.00 Sold during financial year 1998 17.3% 44.9% – The Rotunda Complex, Oval Road, Camden NW1 Shepherds Building, London W14 South East Offices Waterfront Business Park, Fleet CBXII & Midsummer Court, Milton Keynes Out of Town Retail Castle Retail Park, Nottingham Weston Retail Park, Weston Super Mare 140,000 sq.ft. anchored by Great Mills, Comet and Carpetright 75% share 112,000 sq.ft. anchored by PC World 1997 1999 3.3% 1.7% £10.00 17.2% 16.9% £6.50 Industrial Aycliffe & Peterlee 1.9m sq.ft. of industrial assets 1987 5.2% 11.3% £2.50 * Shepherds Building is held at cost being in the course of refurbishment. The rent passing figure of £25 p.s.f. is based on the pre-let rent. 5. 71 Kingsway 6. Paris Gardens 7. Shepherds Building 8. The Interchange 5 6 7 8 20 Helical Bar plc Report and Accounts 2001 Financial Review Profits Gross profits for the year were £56.3m. These compare with gross profits for the year to 31 March 2000 of £43.5m and include net rental income after property over- heads of £25.5m (2000: £23.7m) and trading profits of £0.9m (2000: £0.4m). Our development programme contributed £29.5m (2000: £19.3m). The surplus over book value on sale of investment properties was £0.7m (2000: £4.6m). Interest paid on borrowings, net of interest received on cash balances increased from £16.3m to £19.2m. This was after capitalisation of £1.6m of interest (2000: £2.7m). Pre-tax profits rose by 17% from £22.0m to £25.8m. With an effective tax charge of 20% (2000: 27%) and minority interest of £0.1m (2000: £0.1m), profits before dividends increased by 28% to £20.4m. Earnings per share on a diluted basis rose by 27% to 68.3p per share. Dividends The Board is recommending to members at the Annual General Meeting on 25 July 2001 a final dividend of 7.50p per share (2000: 6.75p) to be paid on 26 July 2001 which, with the interim dividend of 5.00p, makes a total of 12.50p. This is an increase of 12% on the previous period’s dividend of 11.15p. This is covered over five times by profits after tax. Net assets The increase in value of investment properties of £39.3m (2000: £30.4m) and the retained profits of £16.8m (2000: £12.7m) led to a rise in Helical’s net assets to £241.9m (2000: £184.9m). Net assets per share of 803p compare with 620p in 2000. Diluted net assets per share rose from 603p to 776p and, after taking account of the value ascribed to financial instruments under FRS13 and unprovided deferred tax, rose from 564p to 686p, a 22% increase. Borrowings and financial risk Net debt fell to £232.8m from £243.0m and with the rise in net assets Helical reduced its net gearing at 31 March 2001 to 96% from 131%. The company seeks to manage financial risk by ensuring that there is sufficient financial liquidity to meet foreseeable needs and to invest surplus cash safely and profitably. At the year end Helical had £120m of undrawn bank facilities and cash of £31.8m (2000: £17.0m). Table 1 IPD (monthly and quarterly valued funds) ungeared returns (cid:212)0(cid:213) means the top ranking fund Total Returns %: In year to 31st Helical IPD Percentile rank Total Returns %: Annualised over Helical IPD Percentile rank 3.01 23.9 10.6 0 1 yr 23.9 10.6 0 3.00 24.7 15.6 1 2 yrs 24.3 13.0 1 3.99 22.7 11.3 2 3 yrs 23.7 12.4 1 3.98 26.4 16.5 2 4 yrs 24.4 13.4 1 3.97 19.9 11.2 1 5 yrs 23.5 13.0 1 3.96 13.2 4.2 1 6 yrs 21.7 11.5 0 3.95 13.2 5.8 0 7 yrs 20.5 10.7 0 3.94 19.4 25.8 85 8 yrs 20.3 12.4 0 3.93 14.4 -0.6 0 9 yrs 19.7 10.9 0 3.92 9.7 -1.4 4 10 yrs 18.6 9.6 0 Helical Bar plc Report and Accounts 2001 21 Helical insures against adverse movements in interest rates. It has insured against such interest rate movements through the use of a number of interest rate hedging instruments. Borrowings of £160m are capped until 2004 and £111m until 2006 at interest rates between 6.00% and 7.50%. £20m is fixed at 8.625% until September 2001, a further £99m at an average rate of 6.72% until Autumn 2002 and £9.6m reducing to £5.0m at 9.05% until 2009. Using interest rate floors the company is able to benefit from the reduction of rates down to 4.73% and 4.83% on £160m until January 2006. The average cost of debt is 6.8%. FRS13 requires financial instruments to be valued on a fair value basis, and at 31 March 2001 an adjustment to reflect this basis would reduce net assets by £3.2m (2000: increase of £2.4m) which, if provided for, would reduce diluted net assets by 10p (2000: increase by 7p) per share. Performance measures Helical uses various measures to evaluate its returns. It compares its ungeared property performance against that of portfolios within the Investment Property Databank. Table 1 on page 20 shows the results. In order to evaluate its overall performance against other small to mid size capital companies, both here and abroad, the company looks at equity value added and returns on equity. The internal calculations for the last four years are shown in Table 2 below. after 23 January 2002, has not been adopted in these financial statements. This new standard requires deferred tax to be provided on most types of timing differences including accelerated capital allowances. Note 20 on page 43 includes, as a contingent liability, the impact of a clawback of industrial buildings allowances on the sale of the group’s industrial buildings. It does not include the impact of a clawback of plant and machinery allowances claimed in respect of the group’s investment portfolio amounting to a potential tax liability of £4,759,000. The group believes that these allowances will not be clawed back as it seeks to agree disposal values for plant and machinery at or below their tax written down value. FRS19 — Deferred Tax FRS 19, which applies to accounting periods ending on or Nigel McNair Scott Finance Director Table 2 Equity value added and price/value added Equity Value Added Year ended 31 March 2001 2000 1999 1998 Price/Value Added Capital employed £m 475.7 430.3 316.1 260.3 Earnings after tax Return on capital Weighted average cost of capital Spread % % % Equity value added £m 18.4 19.8 18.6 18.7 Revaluation surpluses Value added 5.9 12.5 51.7 6.0 13.8 43.7 6.2 12.4 32.2 8.1 10.6 29.6 Market capitalisation 222.1 167.6 141.6 152.7 Price/value added — times 3.7 X 3.6 X 5.5 X 4.0 X 2001 £m 20.5 39.5 60.0 2000 £m 16.0 30.4 46.4 1999 £m 16.1 19.8 35.9 1998 £m 14.6 23.6 38.2 22 Helical Bar plc Report and Accounts 2001 Officers Board of directors Managing director Michael Slade BSc (Est.Man) FRICS FSVA, Aged 54 Michael Slade joined the Board as executive director in August 1984 and was appointed Managing Director in 1986. Finance director Nigel McNair Scott MA FCA FCT, Aged 55 Nigel McNair Scott joined the Board as executive director in 1985 and was appointed Finance Director in 1986. A former director of Johnson Matthey plc, he is Chairman of Avocet Mining Plc and a director of Govett Strategic Investment Trust. Development director Gerald Kaye BSc (Est.Man) FRICS, Aged 43 Gerald Kaye was appointed to the Board as executive director in 1994 and is responsible for the company’s development activities. He is a former director of London & Edinburgh Trust PLC. Investment director Michael Brown BSc (Est.Man) MRICS, Aged 40 Michael Brown was appointed to the Board as executive director in 1998 and is responsible for the company’s property investment activities. He is a former director of Threadneedle Property Fund Managers. Independent non-executive directors Chairman John Southwell MA (Senior non-executive), Aged 68 John Southwell joined the Board of Helical Bar plc as non-executive director in 1986 and was appointed non-executive Chairman in 1988. He is the senior non-executive director and Chairman of the Remuneration, Audit and Nominations and Appointments Committees. A former director of Laing & Cruickshank, Corporate Finance, he currently acts as a consultant to Credit Lyonnais Securities Europe (UK). John Southwell is Chairman of Lochain Patrick Holdings Ltd and director of James Cropper plc. Giles Weaver FCA, Aged 55 Giles Weaver was appointed to the Board as non-executive director in 1993. He is a member of the Remuneration, Audit and Nominations and Appointments Committees. A recent Chairman of Murray Johnstone Limited, he is a director of Aberdeen Asset Managers plc, Charter European Trust plc, James Finlay Plc and Atrium Underwriting Plc. Antony Beevor BA, Aged 61 Antony Beevor was appointed to the Board as non-executive director in 2000. He is a member of the Remuneration, Audit and Nominations and Appointments Committees. Antony Beevor is a Senior Advisor to S G Hambros, a Deputy Chairman of the Takeover Panel, the Chairman of Croda International Plc and a director of Nestor Healthcare Group plc. Company secretary and registered office Company secretary Tim Murphy ACA Aged 41 Appointed March 1994 Registered office 11-15 Farm Street, London W1J 5RS Telephone 020 7629 0113 Fax 020 7408 1666 Investor relations Email: info@helical.co.uk Web-site: www.helical.co.uk Public relations: Financial Dynamics Helical Bar plc Report and Accounts 2001 23 Directors(cid:213) Report The directors present their report and financial statements for the year ended 31 March 2001. £10,000) was made to the Conservative Party. Principal activities The principal activity of the company is that of a holding company and the principal activities of the subsidiaries are property investment, dealing and development. A full review of these activities and the group’s future prospects are given on pages 4 to 21. Trading results The results for the year are set out on page 26. The profit on ordinary activities before taxation amounts to £25,824,000 (2000: £22,020,000). Share capital The detailed movements in share capital are set out in note 21 to these financial statements. At 31 March 2001 there were 29,911,697 ordinary 5p shares in issue. Dividends A final dividend of 7.50p (2000: 6.75p) per share is recommended for approval at the Annual General Meeting on 25 July 2001. The total ordinary dividends of 12.50p (2000: 11.15p) per share amount to £3,570,000 (2000: £3,223,000). Donations Donations to charities amounted to £31,000 (2000: £9,403). A contribution of £20,000 (2000: Creditor payment policy The company’s policy is to settle all agreed liabilities within the terms established with suppliers. At 31 March 2001 there were 28 days’ (2000: 21 days’) purchases outstanding in respect of the company’s creditors. Auditors Grant Thornton offer themselves for reappointment as auditors in accordance with Section 385 of the Companies Act 1985. Substantial shareholdings At 1 June 2001 the shareholders listed in Table A on page 24 had notified the company of a disclosable interest of 3% or more in the nominal value of the ordinary share capital of the company. Directors’ remuneration Details of directors’ remuneration, share options, service contracts and pension contributions are noted in the Report on Remuneration on pages 51 to 55. Directors and their interests The directors who were in office during the year and their interests, all of which were beneficial, in the ordinary shares are listed in Table B on page 24. On 7 April 2000, shares acquired by the Helical Bar Profit Sharing Scheme were allocated to directors and staff. The number of shares allocated to directors is disclosed in the Report on Remuneration on pages 51 to 55. There have been no changes in the directors’ interests in the period from 31 March 2001 to 20 June 2001. Re-election Messrs G. A. Kaye and P. M. Brown are due to retire by rotation and offer themselves for re-election. Going concern After making enquiries, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements. Corporate governance The company’s application of the principles of corporate governance is noted in the Corporate Governance Report on page 49. Directors’ responsibilities for the financial statements Company law requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the company and the group and of the profit or loss of the group for that period. In 24 Helical Bar plc Report and Accounts 2001 Directors(cid:213) Report continued preparing those financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements. Table A Substantial shareholdings The directors are responsible for maintaining proper accounting records, for safeguarding the assets of the group and for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Westbury, Conduit Street at New Bond Street, London W1A 4UH. The notice of meeting is set out in the separate circular to shareholders which accompanies this document. Annual General Meeting The Annual General Meeting of the company will be held on 25 July 2001 at 11.30 a.m. at By Order of the Board T.J. Murphy Secretary 20 June 2001 Schroder Investment Management Ltd Fidelity Investments TR Property Investment Trust Jupiter Asset Management Helical Bar Employee Share Ownership Plan Trust Zurich Scudder Investments Ltd No. of ordinary shares 2,892,842 2,042,696 1,750,000 1,536,500 1,491,939 1,086,950 % 9.7 6.8 5.9 5.1 5.0 3.6 The interests of Michael Slade (3,014,019 – 10.1%) are noted below. Table B Directors(cid:213) interests J.P. Southwell M.E. Slade N.G. McNair Scott A.R. Beevor C.G.H. Weaver G.A. Kaye P.M. Brown Total directors(cid:213) interests Percentage of issued share capital 31.03.01 33,870 3,014,019 625,698 1,477 18,000 308,296 185,632 4,186,992 14.0 Ordinary 5p shares 31.03.00 33,870 3,012,604 624,284 — 18,000 230,514 117,584 4,036,856 13.5 Helical Bar plc Report and Accounts 2001 25 Auditors(cid:213) Report To the members of Helical Bar plc We have audited the financial statements on pages 26 to 47 which have been prepared under the accounting policies set out on pages 30 and 31. Respective responsibilities of directors and auditors The directors are responsible for preparing the Annual Report, including as described on pages 23 and 24, the financial statements in accordance with applicable United Kingdom law and accounting standards. Our responsibilities, as independent auditors, are established by statute, the Auditing Practices Board, the Listing Rules of the Financial Services Authority, and by our profession’s ethical guidance. We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Act. We also report to you if, in our opinion, the directors’ report is not consistent with the financial statements, if the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law or the Listing Rules regarding directors’ remuneration and transactions with the group is not disclosed. We review whether the statement on pages 49 and 50 reflects the company’s compliance with those provisions of the Combined Code specified for our review by the Financial Services Authority, and we report if it does not. We are not required to form an opinion on the effectiveness of the group’s corporate governance procedures or its risk and control procedures. We read the other information contained in the Annual Report, including the corporate governance statement, and consider whether it is consistent with the audited financial statements. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Basis of opinion We conducted our audit in accordance with United Kingdom Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the group’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Opinion In our opinion the financial statements give a true and fair view of the state of the affairs of the company and the group as at 31 March 2001 and of the profit of the group for the year then ended and have been properly prepared in accordance with the Companies Act 1985. Grant Thornton Registered Auditors Chartered Accountants London 20 June 2001 26 Helical Bar plc Report and Accounts 2001 Consolidated Profit and Loss Account Helical Bar plc and subsidiary undertakings for the year ended 31 March 2001 Turnover Cost of sales Gross profit Administrative expenses Operating profit Share of associated company profits Profit on sale of investment properties Profit on ordinary activities before interest Net interest payable and similar charges Profit on ordinary activities before taxation Tax on profit on ordinary activities Profit on ordinary activities after taxation Equity minority interests Profit for the year Dividends paid and proposed Retained profit for the year By company By subsidiaries Earnings per share Diluted earnings per share The notes on pages 30 to 47 form part of these financial statements. Note 2 2 3 4 5 6 7 22 8 9 9 Year Ended 31.3.01 £000 Year Ended 31.3.00 £000 165,259 (108,958) 149,922 (106,440) 56,301 (12,031) 43,482 (9,669) 44,270 86 709 33,813 – 4,555 45,065 (19,241) 38,368 (16,348) 25,824 (5,284) 20,540 (126) 20,414 (3,570) 22,020 (6,032) 15,988 (77) 15,911 (3,223) 16,844 12,688 44,533 (27,689) 1,829 10,859 70.6p 68.3p 55.0p 53.7p Helical Bar plc Report and Accounts 2001 27 Balance Sheets Helical Bar plc and subsidiary undertakings for the year ended 31 March 2001 Fixed assets Intangible assets Tangible assets Investments Investment in associate Current assets Other assets for resale Stock Debtors Investments Cash Creditors: amounts falling due within one year Net current assets Total assets less current liabilities Creditors: amounts falling due after more than one year Provisions for liabilities and charges Capital and reserves Called-up share capital Share premium account Revaluation reserve Capital redemption reserve Other reserves Profit and loss account Equity shareholders(cid:213) funds Equity minority interests Note 10 11 12 13 14 15 16 17 18 20 21 22 22 22 22 22 Group Company 31.3.01 £000 31.3.00 £000 31.3.01 £000 31.3.00 £000 657 454,580 9,546 185 683 420,354 3,656 – – 972 11,837 – 464,968 424,693 12,809 – 770 5,908 – 6,678 525 27,861 36,439 1 31,841 525 22,020 54,786 5,236 16,991 – 13 128,905 – 22,016 – 48 104,393 2,088 9,076 96,667 (88,331) 99,558 (80,515) 150,934 (24,118) 115,605 (8,033) 8,336 19,043 126,816 107,572 473,304 (231,395) – 443,736 (257,384) (1,500) 139,625 – – 114,250 (19,935) – 241,909 184,852 139,625 94,315 1,496 35,264 128,468 7,101 291 67,611 240,231 1,678 1,481 34,502 95,701 7,101 291 44,452 1,496 35,264 – 7,101 1,987 93,777 183,528 1,324 139,625 – 1,481 34,502 – 7,101 1,987 49,244 94,315 – 241,909 184,852 139,625 94,315 The financial statements were approved by the Board of Directors on 20 June 2001. M.E. Slade – Director N.G. McNair Scott – Director The notes on pages 30 to 47 form part of these financial statements. 28 Helical Bar plc Report and Accounts 2001 Statement of Total Recognised Gains and Losses Helical Bar plc and subsidiary undertakings for the year ended 31 March 2001 Statement of total recognised gains and losses Profit for the year after taxation Minority interest Surplus on revaluation of investment properties – subsidiaries – associates Minority interest in revaluation surplus Total recognised gains and losses relating to the year Notes on historical cost profits and losses Reported profit on ordinary activities before taxation Realisation of property revaluation gains of previous years Historical cost profit on ordinary activities before taxation Historical cost profit for the year retained Reconciliation of movements in shareholders(cid:213) funds Profit for the year Dividends paid and proposed Revaluation of investment property – subsidiaries – associates Minority interest in revaluation surplus Issue/(redemption) of shares Net addition to shareholders’ funds Opening shareholders’ funds Closing shareholders(cid:213) funds The notes on pages 30 to 47 form part of these financial statements. Year Ended 31.3.01 £000 Year Ended 31.3.00 £000 20,540 (126) 39,320 147 (385) 15,988 (77) 30,404 – (1,068) 59,496 45,247 31.3.01 £000 31.3.00 £000 25,824 6,315 22,020 12,583 32,139 34,603 23,159 25,271 31.3.01 £000 31.3.00 £000 20,414 (3,570) 15,911 (3,223) 16,844 12,688 39,320 147 (385) 777 30,404 – (1,068) (20) 56,703 183,528 42,004 141,524 240,231 183,528 Helical Bar plc Report and Accounts 2001 29 Consolidated Cash Flow Statement Helical Bar plc and subsidiary undertakings for the year ended 31 March 2001 Net cash inflow from operating activities Returns on investment and servicing of finance Taxation Capital expenditure and financial investment Acquisitions Equity dividends paid Cash flow before management of liquid resources and financing Management of liquid resources Financing Issue/(redemption) of shares Increase/(decrease) in debt (Decrease)/increase in cash Note 23 24 24 24 25 26 Reconciliation of net cash flow to movement in net debt (Decrease)/increase in cash in the year Cash outflow/(inflow) from management of liquid resources Cash (inflow)/outflow from change in debt Debt arrangement expenses Liability acquired with subsidiary Movement in net debt in the year Net debt 1 April 2000 Net debt 31 March 2001 The notes on pages 30 to 47 form part of these financial statements. Year Ended 31.3.01 £000 Year Ended 31.3.00 £000 56,615 45,569 (20,582) (19,486) (5,785) (4,560) (16,779) (4,886) – (9,028) (3,389) (31,910) 10,080 (24,301) (15,553) 30,347 777 4,141 (20) (3,086) (555) 2,940 31.3.01 £000 31.3.00 £000 (555) 15,553 (4,141) (572) – 2,940 (30,347) 3,086 (365) (43,910) 10,285 (243,085) (68,596) (174,489) (232,800) (243,085) 30 Helical Bar plc Report and Accounts 2001 Notes to the Financial Statements 1. Accounting policies The financial statements have been prepared in accordance with applicable accounting standards and under the historical cost convention, as modified by the revaluation of investment properties. The principal accounting policies of the group are set out below. The policies have remained unchanged from the previous year. Basis of consolidation The group financial statements consolidate those of the company and its subsidiary undertakings drawn up to 31 March 2001. Profits or losses on intra group transactions are eliminated in full. Turnover Turnover represents rental income and the proceeds from the sale of trading properties and developments. For funded developments, turnover comprises the increase in the valuation of work during the year and profit recognised on each development. Income from the sale of trading properties is included in the profit and loss account when in the opinion of the directors a binding contract of sale exists. Depreciation Depreciation is calculated to write down the cost to residual value of all fixed assets, excluding investment properties, by equal annual instalments over their expected useful economic lives. The annual rates generally applicable are: – short leasehold property – leasehold improvements – vehicles & office equipment length of lease 10% 25% Developments The attributable profit on developments is recognised once their outcome can be assessed with reasonable certainty. In the case of developments funded by institutions this profit is recognised on the letting of the developments. Stock Stock is stated at the lower of cost and net realisable value. Long-term contract balances included in stock are stated at cost, after provision has been made for any foreseeable losses and the deduction of applicable payments on account. Deferred taxation Deferred tax is provided for using the tax rates estimated to arise when the timing differences reverse and is accounted for to the extent that it is probable that a liability or asset will crystallise. Unprovided deferred tax is disclosed as a contingent liability. Interest capitalised on development properties Interest costs incurred on development properties are capitalised until the earliest of: – the date when the development becomes fully let; – the date when the income exceeds outgoings; and, – the date of completion of the development. Helical Bar plc Report and Accounts 2001 31 Investment property Completed investment properties are included in the balance sheet at their open market values. Any surplus arising is credited to the revaluation reserve and any temporary deficits are netted off against the remaining balance on the reserve. Permanent diminutions in value below original cost are reflected through the profit and loss account. In accordance with the Statement of Standard Accounting Practice No. 19 – Accounting for Investment Properties, freehold investment properties and leasehold investment properties where the unexpired term is over twenty years are not depreciated but are valued by an external valuer at least every three years. In years where an external valuation is not commissioned, a valuation is undertaken by a suitably qualified member of the company’s staff. This policy represents a departure from statutory accounting principles which require depreciation to be provided on all fixed assets. The directors consider that this policy is necessary in order that the financial statements may give a true and fair view because current values and changes in current values are of prime importance rather than the calculation of systematic annual depreciation. Depreciation is only one of many factors affecting annual valuation. Financing costs The group uses derivative financial instruments to manage exposure to fluctuations in interest rates. Financial assets are recognised in the balance sheet at the lower of cost and net realisable value. Provision is made for diminution in value where appropriate. The costs of arranging finance for the group, including financial instruments entered into to protect against the effects of interest rate movements, are written off to the profit and loss account over the terms of, and in proportion to, the associated finance. Goodwill Goodwill arising on acquisition is treated as an intangible asset and the cost written off in equal instalments over its useful economic life, estimated to be fifteen years. Employees share ownership plan trust (the “Trust”) Shares in Helical Bar plc owned by the Trust are stated at cost. Any deficit arising in the future between the original cost of the shares and their net realisable value will be funded by the company. 32 Helical Bar plc Report and Accounts 2001 Notes to the Financial Statements continued 1. Accounting policies continued Associated company Undertakings other than subsidiary undertakings, in which the group has an investment of at least 20% of the shares and over which it exerts significant influence, are treated as associates. The group’s share of the profits or losses and other recognised gains or losses of the associates are included in the group profit and loss account and statement of total recognised gains and losses, respectively. Where the accounting periods covered by audited financial statements are not coterminous with that of the group, the share of profits or losses of the associates has been arrived at from the last audited financial statements available and unaudited management accounts to the group’s balance sheet date. The group balance sheet includes the investment in the associates at the group’s share of net assets and the goodwill arising on the acquisition of the interest in so far as it has not already been amortised. The company balance sheet shows the investment in the associates at cost less amounts written off. Liquid Resources Liquid resources are managed by the group by investing as short term cash deposits at prevailing deposit rates whilst ensuring appropriate access to such funds to meet foreseeable needs. 2. Turnover and gross profit on ordinary activities before taxation The analysis of turnover and gross profit by function is as follows: Trading property sales Rental income Developments Other income and provisions Gross profit Central overheads Interest payable less receivable Share of associated company profits Profit before taxation and profit on sale of investment properties Turnover Gross profit Year Ended 31.3.01 Year Ended 31.3.00 Year Ended 31.3.01 Year Ended 31.3.00 £000 £000 £000 £000 14,552 28,642 115,176 6,889 3,890 26,656 116,243 3,133 920 25,532 29,507 342 372 23,652 19,345 113 56,301 (12,031) (19,241) 86 43,482 (9,669) (16,348) – 25,115 17,465 All sales, excluding trading property sales, were within the UK. Trading property sales were mainly within Europe, but outside the UK. All turnover is attributable to continuing operations. An analysis of property assets can be found in notes 11 and 12 and the directors do not consider a further analysis of net assets to be appropriate. Helical Bar plc Report and Accounts 2001 33 3. Administrative expenses Operating profit on ordinary activities is stated after: Staff costs Depreciation and amortisation – tangible fixed assets – goodwill Deficit in ESOP Auditors’ remuneration: – audit services – non-audit services Staff costs during the year: – salaries – social security costs – other pension costs Year Ended 31.3.01 £000 Year Ended 31.3.00 £000 9,225 6,280 253 64 – 85 86 8,115 1,026 84 9,225 226 612 703 76 53 5,009 857 414 6,280 Details of directors’ remuneration are included in the Report on Remuneration on pages 51 to 55. With the exception of the pension contributions referred to in the Report on Remuneration, other pension costs relate to payments to individual pension plans. The average number of employees of the group during the year was: Management and administration 4. Sale of investment properties Net proceeds from sale of investment properties Book value (note 11) Profit on sale of investment properties 5. Net interest payable and similar charges On bank loans and overdrafts Finance arrangement costs Other interest and similar charges Interest capitalised Loan termination costs Interest receivable and similar income 31.3.01 31.3.00 25 24 31.3.01 £000 31.3.00 £000 30,333 (29,624) 110,875 (106,320) 709 4,555 31.3.01 £000 31.3.00 £000 19,514 572 1,343 (1,597) – (591) 17,893 365 2,350 (2,661) (36) (1,563) 19,241 16,348 34 Helical Bar plc Report and Accounts 2001 Notes to the Financial Statements continued 6. Taxation on profit on ordinary activities The tax charge is based on the profit for the year and represents: – United Kingdom corporation tax at 30% (2000: 30%) – Adjustments in respect of prior periods Current tax charge Deferred tax – reversal and origination of timing differences Tax on profit on ordinary activities Year Ended 31.3.01 £000 Year Ended 31.3.00 £000 5,779 1,005 6,784 (1,500) 5,284 4,595 (63) 4,532 1,500 6,032 Factors affecting tax charge for period The tax assessed for the period is lower than the standard rate of corporation tax in the UK (30%). The differences are explained below: Profit on ordinary activities before tax Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 30% (2000: 30%) Effect of: – Expenses not deductible for tax purposes – Capital allowances for period in excess of depreciation – Chargeable gain in excess of profit on sale of investment property – Capitalised interest – Other timing differences – Utilisation of losses Current tax charge for period 7. Dividends Attributable to equity share capital Ordinary – interim paid 5.00p (2000: 4.40p) per share – final proposed 7.50p (2000: 6.75p) per share Total ordinary dividends 12.50p (2000: 11.15p) per share 31.3.01 £000 31.3.00 £000 25,824 22,020 7,747 6,606 127 (2,964) 1,198 (202) 373 (500) (135) (2,590) 646 (436) 620 (116) 5,779 4,595 31.3.01 £000 31.3.00 £000 1,438 2,132 3,570 1,272 1,951 3,223 Helical Bar plc Report and Accounts 2001 35 8. Parent company The company has taken advantage of section 230 of the Companies Act 1985 and has not included its own profit and loss account in the financial statements. The financial profit for the year of the company was £48,103,000 (2000: £5,052,000). 9. Earnings per share The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year. Shares held by the ESOP, which has waived its entitlement to receive dividends, are treated as cancelled for the purposes of this calculation. The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares and the post tax effect of dividends on the assumed conversion of all dilutive options. Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below. Earnings £ 20,413,627 Year Ended 31.3.01 Weighted average no. of shares 28,903,697 980,781 Per share amount pence Earnings £ 70.6 15,911,018 Year Ended 31.3.00 Weighted average no. of shares 28,903,697 750,164 Per share amount pence 55.0 Basic earnings per share Dilutive effect of share options Diluted earnings per share 20,413,627 29,884,478 68.3 15,911,018 29,653,861 53.7 10. Intangible fixed assets — goodwill Cost at 1 April 2000 Additions Cost at 31 March 2001 Depreciation at 1 April 2000 Provision for the year Depreciation at 31 March 2001 Net book amount at 31 March 2001 Net book amount at 31 March 2000 Additions represent the costs of acquisition of Helical (Liphook) Ltd. Group £000 1,336 38 1,374 653 64 717 657 683 36 Helical Bar plc Report and Accounts 2001 Notes to the Financial Statements continued 11. Tangible fixed assets Investment Properties Freehold £000 Leasehold £000 In course of development Freehold £000 In course of development Short leasehold property & Leasehold improvements £000 £000 Group Cost or valuation at 1.4.00 Additions at cost Transfers Disposals Revaluation 379,801 5,166 9,000 (29,624) 27,529 6,160 15 22,644 – 11,791 20,659 9,466 (9,000) – – 12,950 9,694 (22,644) – – Cost or valuation at 31.3.01 391,872 40,610 21,125 Depreciation at 31.3.01 Provision for the year Eliminated on disposals Depreciation at 31.3.01 – – – – – – – – – – – – Net book amount at 31.3.01 391,872 40,610 21,125 – – – – – – Net book amount at 31.3.00 379,801 6,160 20,659 12,950 646 – – – – 646 225 47 – 272 374 421 Investment Properties Freehold £000 Leasehold £000 In course of development Freehold £000 In course of development Short leasehold property & Leasehold improvements £000 £000 Company Cost at 1.4.00 Additions at cost Disposals Cost at 31.3.01 Depreciation at 1.4.00 Provision for the year Eliminated on disposals Depreciation at 31.3.01 Net book amount at 31.3.01 Net book amount at 31.3.00 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 646 – – 646 225 47 – 272 374 421 Vehicles & office equipment £000 Total £000 1,013 547 – (628) – 421,229 24,888 – (30,252) 39,320 932 455,185 650 206 (523) 333 875 253 (523) 605 599 454,580 363 420,354 Vehicles & office equipment £000 990 554 (628) Total £000 1,636 554 (628) 916 1,562 641 200 (523) 318 598 349 866 247 (523) 590 972 770 Interest capitalised in respect of the development of investment properties is included in tangible fixed assets to the extent of £1,995,000 (2000: £1,735,000). Interest capitalised during the year, at LIBOR plus 21⁄2%, in respect of investment properties in the course of development was £672,000 (2000: £1,603,000). Helical Bar plc Report and Accounts 2001 37 11. Tangible fixed assets continued The investment properties have been valued on an open market basis at 31 March 2001 as follows: Healey & Baker, International Real Estate Consultants Jones Lang LaSalle, International Real Estate Consultants Allsop & Co, Chartered Surveyors DTZ Debenham Tie Leung, International Property Advisors Knight Frank, Chartered Surveyors Directors’ valuation £000 248,625 59,000 53,250 39,070 17,450 36,212 453,607 The net surplus arising of £39,320,000 (2000: £30,404,000) has been transferred to the revaluation reserve. The historical cost of investment property is £325,139,000 (2000: £322,807,000). 12. Fixed asset investments Employees’ Share Ownership Plan Trust – own shares Shares in subsidiary undertakings at cost The movement in the year was as follows: At 1 April 2000 Acquired during year Deficit in ESOP written off At 31 March 2001 Group Company 31.3.01 £000 9,546 – 9,546 31.3.00 £000 3,656 – 31.3.01 £000 9,546 2,291 3,656 11,837 31.3.00 £000 3656 2,252 5,908 31.3.01 £000 31.3.00 £000 31.3.01 £000 31.3.00 £000 3,656 5,890 – 9,546 4,359 – (703) 5,908 5,929 – 6,545 66 (703) 3,656 11,837 5,908 Following approval at the 1997 Annual General Meeting the Company established the Helical Bar Employees’ Share Ownership Plan Trust (the “Trust”) to be used as part of the remuneration arrangements for employees. The purpose of the Trust is to facilitate and encourage the ownership of shares by or for the benefit of employees by the acquisition and distribution of shares in the Company. At 31 March 2001 the Trust held 1,262,102 (2000: 699,000) ordinary shares in Helical Bar plc over which options had been granted. At 31 March 2001 the Trust held 229,837 (2000: 9,000) ordinary shares over which no options had been granted. 38 Helical Bar plc Report and Accounts 2001 Notes to the Financial Statements continued 12. Fixed asset investments continued Interests in associates At 31 March 2001 the group and the company had a 49.9% (2000: nil) interest in the ordinary £1 shares in Prescot Street Investments Limited, a property investment company incorporated in the United Kingdom. The financial year end of this company is 31 December. The company’s principal subsidiary undertakings, all of which have been consolidated, are: Name of undertaking Nature of business Percentage of ordinary share capital held Aycliffe and Peterlee Development Company Ltd Aycliffe and Peterlee Investment Company Ltd* Helical Bar (CL) Investments Ltd* Helical Bar Developments (South East) Ltd Helical Bar (Wales) Ltd* Helical Properties Ltd Helical Properties Investment Ltd Intercontinental Land and Development Co. Ltd* Helical Bar Developments Ltd Helical Bar (City Developments) Ltd* Helical Bar Trustees Ltd Helical Bar (Wood Street) Ltd 61 Southwark Street Ltd* Helical Bar (Oxford) Ltd Helical Properties Retail Ltd Helical Bar (CL) Ltd* Helical Bar (Chiswell Street) Ltd* Baylight Developments Ltd Helical Bar (City Investments) Ltd* Networth Ltd* Helical Properties (Basingstoke) Ltd* CBX II Ltd* Glenlake Ltd* Helical (SA) Ltd Helical Bar (Rex House) Ltd Helical (Fleet) Ltd 48 Gracechurch Street Ltd Helical (TE) Ltd Helical Bar Services Ltd Helical Bar (Bunhill Row) Ltd Helical (Liphook) Ltd Samanar Europea SL Helical (Interchange) Ltd Helical Retail Ltd Helical Retail (RBS) Ltd* Helical Properties (WSM) Ltd* Development and trading Investment Investment Development and trading Development and trading Investment development and trading Investment Investment development and trading Development Development Trustee of Profit Sharing Scheme Development Investment Trading Investment Investment Development Investment Investment Trading Investment Investment Investment Investment Investment Investment Investment Investment Management Services Development Development (Jersey) Trading (Spain) Investment Development and trading Development and trading Investment 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 90% 75% 75% 75% All principal subsidiary undertakings, except for Samanar Europea SL, operate in the United Kingdom and, unless otherwise indicated, are incorporated and registered in England and Wales. *Ordinary capital is held by a subsidiary undertaking. Helical Bar plc Report and Accounts 2001 39 13. Stock Development sites Properties held as trading stock Group Company 31.3.01 £000 22,249 5,612 31.3.00 £000 16,621 5,399 27,861 22,020 31.3.01 £000 31.3.00 £000 13 – 13 48 – 48 Interest capitalised in respect of the development of sites is included in stock to the extent of £443,000 (2000: £572,000). Interest capitalised during the year in respect of development sites amounted to £925,000 (2000: £1,058,000). 14. Debtors Trade debtors Taxation Amounts owed by associated undertaking Amounts owed by subsidiary undertakings Other debtors Prepayments and accrued income Group Company 31.3.01 £000 17,338 21 4,684 – 895 13,501 31.3.00 £000 25,805 964 – – 1,253 26,764 31.3.01 £000 31.3.00 £000 24 646 4,684 121,574 922 1,055 1,527 496 – 100,650 202 1,518 36,439 54,786 128,905 104,393 Included in group prepayments and accrued income is an amount of £nil (2000: £2,460,000) due after more than one year. 15. Current asset investments UK Listed investments at cost Group Company 31.3.01 £000 1 1 31.3.00 £000 5,236 5,236 31.3.01 £000 – – 31.3.00 £000 2,088 2,088 The market value of listed investments at 31.3.01 was £1,000 (2000: £5,019,000). 16. Cash at bank and in hand Cash secured against debt repayable within one year Free cash Group Company 31.3.01 £000 2,314 29,527 31.3.00 £000 4,761 12,230 31.3.01 £000 – 22,016 31,841 16,991 22,016 31.3.00 £000 505 8,571 9,076 40 Helical Bar plc Report and Accounts 2001 Notes to the Financial Statements continued 17. Creditors: amounts falling due within one year Bank overdrafts and term loans Trade creditors Taxation Social security costs and other taxation Dividends payable Other creditors Accruals and deferred income 18. Creditors: amounts falling due after more than one year Bank loans repayable within: – 1-2 years – 2-5 years – after 5 years Deferred arrangement costs Group Company 31.3.01 £000 33,246 15,639 4,289 3,789 2,132 3,976 25,260 31.3.00 £000 2,692 42,887 4,233 594 1,951 1,894 26,264 31.3.01 £000 20,427 142 – – 2,237 255 1,057 88,331 80,515 24,118 31.3.00 £000 – 134 1,213 442 2,055 – 4,189 8,033 Group Company 31.3.01 £000 31.3.00 £000 31.3.01 £000 31.3.00 £000 16,602 87,187 129,402 30,397 53,548 175,807 233,191 (1,796) 259,752 (2,368) 231,395 257,384 – – – – – – 20,000 – – 20,000 (65) 19,935 Bank overdrafts and term loans in creditors falling due within one year and after one year are secured against properties held in the normal course of business by subsidiary undertakings to the value of £410,098,000 (2000: £402,026,000). These will be repayable when the underlying properties are sold. Helical Bar plc Report and Accounts 2001 41 19. Financing and financial instruments The policies for dealing with liquidity and interest rate risk are noted in the Financial Review on pages 20 and 21. Short-term debtors and creditors Short-term debtors and creditors have been excluded from the following disclosures. Bank overdraft and loans – maturity After 5 years From 2-5 years From 1-2 years Deferred arrangement costs Due after more than one year Due within one year Group 31.3.01 £000 31.3.00 £000 129,402 87,187 16,602 175,807 53,548 30,397 233,191 (1,796) 259,752 (2,368) 231,395 33,246 257,384 2,692 264,641 260,076 The group has various undrawn committed borrowing facilities. The facilities available at 31.3.01 in respect of which all conditions precedent had been met were as follows: Expiring in one year or less Expiring in more than one year but not more than two years Expiring in more than two years 31.3.01 £000 54,618 13,498 50,717 Group 31.3.00 £000 50,000 – 74,398 118,833 124,398 Interest rates Fixed rate borrowings – fixed – fixed – swaps – swaps – swaps – swaps Weighted average Floating rate borrowings Total borrowings Deferred arrangement costs % 31.3.01 Expiry £000 % 31.3.00 Expiry – 9.050 Feb. 2009 8.625 Sept. 2001 – 5.990 Oct. 2002 July 2002 5.450 – – 6.960 Dec. 2002 9,598 20,000 – – 50,000 49,000 5.220/5.450 9.050 Feb. 2009 8.625 Sept. 2001 8.335 June 2000 – July 2002 6.600 June 2001 6.809 July 2002 – 128,598 137,839 266,437 (1,796) 264,641 £000 9,933 20,000 14,200 – 49,000 11,625 104,758 157,686 262,444 (2,368) 260,076 Floating rate borrowings bear interest at rates based on LIBOR. 42 Helical Bar plc Report and Accounts 2001 Notes to the Financial Statements continued 19. Financing and financial instruments continued Hedging In addition to the fixed rates, borrowings are also hedged by the following financial instruments: Instrument Current – cap – collar – floor – collar Gearing Total borrowings Cash Net borrowings Net assets Gearing Fair value of financial assets and financial liabilities Borrowings Interest rate swaps Other financial instruments Value £000 49,000 31,000 49,000 80,000 Rate % 6.000-6.500 4.730-6.500 4.730 4.830-7.500 31.3.01 £000 264,641 (31,841) 232,800 241,909 96% Expiry July 2004 Jan. 2006 Jan. 2006 Jan. 2006 31.3.00 £000 260,076 (16,991) 243,085 184,852 131% 31.3.01 31.3.00 Book Value £m Fair Value £m Book Value £m Fair Value £m 266,002 – (223) 267,152 825 1,051 262,444 – (223) 263,668 (1,551) (2,299) 265,779 269,028 262,221 259,818 The fair value of financial assets and financial liabilities represents the mark to market valuations at 31 March 2001 and 31 March 2000. The adjustment to net assets from a recognition of these values would be to reduce net asset value per share by 10p (2000: increase by 7p). Helical Bar plc Report and Accounts 2001 43 20. Provision for liabilities and charges — deferred taxation Amounts provided for: – unrealised capital gains Amounts unprovided are: – unrealised capital gains – accelerated capital allowances – other timing differences – tax losses Group Company 31.3.01 £000 31.3.00 £000 31.3.01 £000 31.3.00 £000 – – 1,500 1,500 31,386 1,174 147 (6,784) 21,548 1,210 163 (7,812) 25,923 15,109 – – – – 25 – 25 – – – – 31 – 31 Amounts provided for represent the anticipated corporation tax payable on properties sold since the year end for which revaluation surpluses have been recognised. The amounts unprovided for represent contingent liabilities at the balance sheet date and are calculated using a tax rate of 30%. No provision has been made for taxation which would accrue if the investment properties were sold at their revalued amounts. The adjustment to net assets resulting from a recognition of these amounts would be to reduce net asset value per share by 80p (2000: 46p). 21. Share capital Authorised – 688,954,752 (2000: 45,000,000) ordinary shares of 5p each – nil (2000: 45,996,768) 5.25p convertable cumulative redeemable preference shares 2012 of 70p each Allotted, called up and fully paid at 31 March 2001 Attributable to equity interests: – 29,911,697 (2000: 29,611,697) ordinary shares of 5p each 31.3.01 £000 31.3.00 £000 34,448 2,250 – 32,198 34,448 34,448 1,496 1,496 1,481 1,481 44 Helical Bar plc Report and Accounts 2001 Notes to the Financial Statements continued 21. Share capital continued Share options At 31 March 2001 options over 2,491,000 (2000: 2,761,000) new ordinary shares in the company and 1,262,102 (2000: 699,000) purchased shares held by the ESOP had been granted to directors and employees under the company’s share option schemes. During the year options over 300,000 new shares with a nominal value of £15,000 were exercised. The increase in share premium account arising from these exercises was £762,000. Senior Executive 1988 Share Option Scheme Subscription options Option period ending: – 10 July 2007 – 28 September 2007 – 26 November 2007 Purchase options Option period ending: – 26 November 2004 – 9 July 2005 Helical Bar 1999 Share Option Scheme Subscription options Option period ending: – 7 March 2009 – 7 January 2011 Purchase options Option period ending: – 7 March 2009 – 17 December 2010 – 7 January 2011 Helical Bar 1999 Approved Share Option Scheme Subscription options Option period ending: – 7 March 2009 Exercise price per share pence Number of shares 412.5 467.5 452.5 365,000 100,000 394,000 452.5 565.0 206,000 400,000 442.5 1,547,768 30,000 780.0 442.5 750.0 780.0 93,000 529,000 34,102 442.5 54,232 3,753,102 Helical Bar plc Report and Accounts 2001 45 22. Share premium and reserves Non-distributable Distributable Group At 1 April 2000 Profit retained Revaluation of investment property – subsidiaries – associates Minority interest in revaluation of investment property Realised on disposals Exercise of share options At 31 March 2001 Company At 1 April 2000 Profit retained Exercise of shares options At 31 March 2001 Share Capital premium redemption reserve £000 account £000 34,502 – – – – – 762 7,101 – – – – – – Other reserves £000 Revaluation reserve £000 291 – – – – – – 95,701 – 39,320 147 (385) (6,315) – Profit & loss account £000 44,452 16,844 – – – 6,315 – 35,264 7,101 291 128,468 67,611 34,502 – 762 35,264 7,101 – – 7,101 1,987 – – 1,987 – – – – 49,244 44,533 – 93,777 23. Reconciliation of operating profit to net cash inflow from operating activities Operating profit Depreciation of fixed assets Deficit in ESOP Loss/(profit) on sale of fixed assets Amortisation of goodwill Profit on sale of investments Decrease/(increase) in debtors (Decrease)/increase in creditors (Increase)/decrease in stocks Net cash inflow from operating activities Year Ended 31.3.01 £000 Year Ended 31.3.00 £000 44,270 253 – 16 64 (1,144) 20,770 (6,766) (848) 33,813 226 703 (7) 612 – (12,819) 7,346 15,695 56,615 45,569 46 Helical Bar plc Report and Accounts 2001 Notes to the Financial Statements continued 24. Analysis of cash flows for headings netted in the cash flow statement Return on investments and servicing of finance Interest received Interest paid Minority interest dividends paid Taxation Tax received Tax paid Capital expenditure and financial investment Purchase of property Sale of property Purchase of tangible fixed assets Sale of tangible fixed assets Purchase of investments Sale of investments 25. Management of liquid resources (Increase)/decrease in short term deposits Year Ended 31.3.01 £000 Year Ended 31.3.00 £000 591 (20,881) (292) 1,564 (20,702) (348) (20,582) (19,486) 397 (6,182) 266 (4,826) (5,785) (4,560) (43,739) 26,967 (547) 89 (6,327) 6,778 (109,104) 109,541 (111) 23 (5,235) – (16,779) (4,886) 31.3.01 £000 31.3.00 £000 (15,553) (30,347) (15,553) (30,347) Helical Bar plc Report and Accounts 2001 47 26. Analysis of net debt Cash at bank and in hand Bank overdraft Debt due within one year Debt due after more than one year Less: arrangement expenses Total At 1.4.00 £000 Other non Cash Flow cash changes £000 £000 At 31.3.01 £000 16,991 (157) (703) 148 15,553 – 31,841 (9) 16,834 (555) 15,553 31,832 (2,535) (259,752) 2,368 (10,702) 6,561 – (20,000) (33,237) 20,000 (233,191) 1,796 (572) (259,919) (4,141) (572) (264,632) (243,085) (4,696) 14,981 (232,800) 27. Contingent liabilities The company has entered into cross guarantees in respect of the banking facilities of its subsidiaries. The company has also entered into interest rate floors on £80 million at 4.83% from January 2001 to January 2006, and on a further £80 million at 4.73% from July 1999 to January 2006. Other than these contingent liabilities and the deferred tax referred to in note 20 there were no contingent liabilities at 31 March 2001 (2000: nil). 28. Capital commitments At 31 March 2001 nil (2000: nil). 29. Related party transactions At 31 March 2001 there is an amount due from Prescot Street Investments Ltd of £4,684,000 (2000: £nil). 48 Helical Bar plc Report and Accounts 2001 Ten Year Review 31.3.01 £000 31.3.00 £000 31.3.99 £000 31.3.98 £000 31.3.97 * £000 31.1.96 £000 31.1.95 £000 31.1.94 £000 31.1.93 £000 31.1.92 £000 Turnover Rental income Gross profit Profit/(loss) before taxation Profit/(loss) after taxation Ordinary dividends Profit/(loss) retained Dividend per ordinary share Special dividend per ordinary share Diluted earnings per ordinary share Investment portfolio Shareholders’ funds Diluted net assets per share 165,259 149,922 121,244 214,416 100,529 22,374 21,482 29,284 39,004 12,033 20,044 9,032 16,145 1,666 31,338 3,564 (18,661) 8.0p 10.0p 26,656 43,482 22,020 15,988 3,223 12,688 11.15p 22,009 38,775 18,494 14,610 1,552 7,985 9.0p 28,642 56,301 25,824 20,540 3,570 16,844 12.50p 65,948 19,186 21,697 9,200 7,892 1,189 3,666 7.3p 50,521 16,294 16,475 8,187 7,655 1,058 3,785 6.5p 24,982 12,118 12,713 6,578 6,049 944 3,451 5.8p 24,816 13,810 16,895 5,882 5,632 783 3,951 4.8p 31,091 16,547 11,627 (7,557) (6,288) 655 (7,718) 4.0p – – 100.0p – 2.0p – – – – – 68.3p 50.7p 53.7p 29.0p 453,607 419,570 332,457 250,718 201,570 180,765 156,579 118,690 120,048 46,180 240,231 183,528 141,524 138,982 105,664 224p 372p 83,747 299p 91,429 326p 92,662 330p 26.3p 26.6p 24.3p 40.9p 28.3p 482p 603p 473p 776p (43.2p) 88,650 45,634 220p *The financial statements to 31 March 1997 were for a 14 month accounting period. Helical Bar plc Report and Accounts 2001 49 Corporate Governance Report The company is committed to applying the highest principles of corporate governance commensurate with its size. Compliance The company has complied throughout the year with the Code provisions set out in Section 1 of the Combined Code except in respect of A2.1. Provision A2.1 of the Combined Code states that a non-executive director other than the chairman should be the senior non-executive director. The Board considers that, in this instance, the most appropriate person to act in this capacity is the Chairman of the company and have, therefore, named John Southwell as the senior independent non-executive director. The Board members are described on page 22. Application of principles The company has applied the principles of good governance contained in the Combined Code appended to the Listing Rules of the Financial Services Authority. Directors The company supports the concept of an effective board leading and controlling the company. The Board is responsible for approving company policy and strategy. It meets three monthly and has a schedule of matters specifically reserved to it for decision. Management supply the Board with appropriate and timely information and the directors are free to seek any further information they consider necessary. All directors have access to advice from the company secretary and independent professionals at the company’s expense. Training is available for new directors and other directors as necessary. The Board consists of four executive directors who hold the key operational positions in the company and three non-executive directors, who bring a breadth of experience and knowledge, of whom all are independent of management and any business or other relationship which could interfere with the exercise of their independent judgement. This provides a balance whereby the Board’s decision making cannot be dominated by an individual or small group. The Chairman of the Board is John Southwell and the company’s business is run by Michael Slade, the Managing Director. The Nomination Committee meets as required to select and recommend to the Board suitable candidates for both executive and non-executive appointments to the Board. It comprises John Southwell, Chairman of the Board, and the two other non-executive directors, Giles Weaver and Antony Beevor. All directors are subject to re-election every three years and, on appointment, at the first AGM after appointment. The Board’s report on remuneration is on pages 51 and 55. It sets out the company’s policy in detail and the full details of all elements in the remuneration package of each individual director. 50 Helical Bar plc Report and Accounts 2001 Corporate Governance Report continued Relations with shareholders The company values the views of its shareholders and recognises their interest in the company’s strategy and performance, Board membership and quality of management. It therefore holds regular meetings with its institutional shareholders to discuss objectives. The company communicates with all shareholders through the issue of regular press releases and through its website at www.helical.co.uk. The AGM is used to communicate with investors and they are encouraged to participate. The Chairmen of the Audit, Remuneration and Nomination Committees are available to answer questions. Separate resolutions are proposed on each issue so that they can be given proper consideration and there is a resolution to approve the annual report and accounts. The company counts all proxy votes and will indicate the level of proxies lodged on each resolution, after it has been dealt with by a show of hands. Accountability and audit The Board presents a balanced and understandable assessment of the company’s position and prospects in all interim and price-sensitive reports and reports to regulators as well as in the information required to be presented by statutory requirements. The Audit Committee comprises Giles Weaver and Antony Beevor, both of whom are independent non-executive directors, and John Southwell, who is Chairman of the Board and a non-executive director. The terms of reference of the Committee include keeping under review the scope and results of the external audit and its cost effectiveness. The Committee reviews the independence and objectivity of the external auditors. This includes reviewing the nature and extent of non audit services supplied by the external auditors to the company, seeking to balance objectivity and value for money. Internal control The Board is responsible for maintaining a sound system of internal control to safeguard shareholders’ investment and the company’s assets. The Board has considered the need for an internal audit function but has decided the size of the company does not justify it at present. However, it will keep the decision under annual review. In accordance with the guidance of the Turnbull Committee on Internal Control, an ongoing process has been established for identifying, evaluating and managing risks faced by the company. This process has been in place for the full financial year and up to the date the financial statements were approved. As part of this process the Board has identified key risks faced by the company. The risks have been prioritised and a strategy has been set out to deal with them. These risks are considered regularly and papers on these areas are reviewed at Board meetings. The system of internal controls is designed to manage rather than eliminate the risk of failure of the achievement of business objectives. In pursuing these objectives, internal controls can only provide reasonable and not absolute assurance against material misstatement or loss. The key features of the group’s system of internal control are as follows: – clearly defined organisational responsibilities and limits of authority; – financial controls and review procedures; – financial information systems including cash flow, profit and capital expenditure forecasts; – an Audit Committee which meets with the Auditors at least twice a year and deals with any significant internal control matter. Helical Bar plc Report and Accounts 2001 51 Report on Remuneration Directors(cid:213) remuneration The Board recognises that directors’ remuneration is of legitimate concern to the shareholders and is committed to following current best practice. The company operates within a competitive environment and its performance depends on the individual contributions of the directors and employees. The Remuneration Committee (“Committee”) has responsibility for making recommendations to the Board on the company’s general policy on remuneration and also specific packages for individual directors. It carries out the policy on behalf of the Board and meets at least twice a year. The membership of the committee is as follows: J.P. Southwell (Chairman) C.G.H. Weaver A.R. Beevor (appointed 11 April 2000) None of the committee has any personal financial interest in the matters to be decided (other than as shareholders), potential conflicts of interest arising from cross-directorships nor any day-to-day involvement in running the business. The committee consults the Managing Director and Finance Director about its proposals and has access to professional advice from inside and outside the company. Policy on executive directors(cid:213) remuneration Executive remuneration packages are designed to attract, motivate and retain directors of the calibre necessary to maintain the group’s position as a market leader and to reward them for enhancing shareholder value and return. The performance measurement of the executive directors and the determination of their annual remuneration package is undertaken by the committee which consists solely of non-executive directors. The remuneration packages of individual directors are structured so that the performance related elements form a significant proportion of the total and are designed to align their interests with those of the shareholders. Share options are designed so that they recognise the long term growth of the company. No director has a service contract of more than one year. There are four main elements of their remuneration package: i ii iii iv basic annual salary and benefits in kind; annual bonus payments; share option incentives; long term incentives. Basic annual salary and benefits in kind Basic annual salaries for executive directors are reviewed having regard to individual performance and market practice. Executive directors’ basic salaries were last reviewed in September 1999. Benefits in kind provided to executive directors include the provision of a company car and health insurance. 52 Helical Bar plc Report and Accounts 2001 Report on Remuneration continued Remuneration in respect of directors was as follows: Salary/ Fees £000 Benefits in kind £000 Profit on exercise of Bonus share options £000 £000 Chairman J. P. Southwell Non-executive directors I.G. Butler C.G.H. Weaver A.R. Beevor Executive directors M.E. Slade N.G. McNair Scott G.A. Kaye P.M. Brown 45 23 25 24 511 190 225 190 1,233 13 – – – 23 18 18 19 91 2001 Total £000 58 23 25 24 – – – – – – – – 1,800 600 2,267 1,600 6,267 – – 1,225 – 1,225 2,334 808 3,735 1,809 8,816 Pensions 2000 Total £000 2001 Total £000 2000 Total £000 53 17 17 – 1,487 185 1,736 1,169 4,664 – – – – 2 35 – – 37 – – – – 2 367 – – 369 The pension contributions were paid into a Small Self Administered Scheme. The assets of this money purchase scheme are administered by trustees in a fund independent from the assets of the group. Gerald Kaye was the highest paid director during the year with a total remuneration, excluding pension contributions but including the profit on exercise of share options during the year, of £3,735,000 (2000: Gerald Kaye £1,736,000). Annual bonus payments The Committee establishes the objectives which must be met for annual cash bonuses to be paid. Performance related cash bonuses, which recognise the relative success of the different parts of the business for which the executive directors are responsible, have been paid to Gerald Kaye, Development Director, and Michael Brown, Investment Director. In the year to 31 March 2001 an Executive Bonus Scheme operated in respect of the Executive Directors. Under the terms of this scheme bonuses were payable only if there was an increase in the net asset value of the company and that increase was greater than that achieved by the upper quartile of the Investment Property Databank Index for capital growth of all properties, an ungeared benchmark. If achieved the bonus was payable in cash and calculated in bands, the amount of the bonus increasing with the level of outperformance. Among other constraints, the Committee could restrict the bonus if payment would affect the financial or trading position of the group. In the year to 31 March 2001 all the performance conditions of the scheme were met and bonuses were paid to all the Executive Directors. Helical Bar plc Report and Accounts 2001 53 The Committee has reviewed the Executive Bonus Scheme and has decided (subject to shareholder approval) to replace it with a new scheme, the Incentive Plan. This Incentive Plan is designed to align the long term motivations of the senior management team with the interests of shareholders and to link their remuneration to the performance of the group’s property portfolio. The Incentive Plan will operate over a five year period and awards will vest annually subject to the achievement of similar challenging performance targets to those which applied under the Executive Bonus Scheme. These targets will be compared with the ungeared and geared performance of the group’s property portfolio. Awards will only vest if the group’s performance, geared and ungeared, is in the top quartile. Further details of the Incentive Plan are included in the circular provided with this Report and Accounts regarding business to be conducted at the Annual General Meeting on 25 July 2001. Share options The company operated three share option schemes during the year. The Senior Executive 1988 Share Option Schemes ceased to be able to grant options over new shares and shares held by the Helical Bar Employees Share Ownership Plan Trust on 7 June 2001. Share options granted in respect of this scheme are included in note 21. The Helical Bar 1999 Share Option Scheme received shareholder approval on 16 February 1999. Under this scheme the aggregate market value of shares issued or issuable to an individual under this and other option schemes may not exceed eight times his annual earnings. Share options granted in respect of this scheme are included in note 21. The Helical Bar 1999 Approved Share Option Scheme also received shareholder approval on 16 February 1999 and Inland Revenue approval in March 1999. Under this scheme options up to a maximum value of £30,000 per individual may be granted and options granted in respect of this scheme are included in note 21. The performance criteria of the two 1999 schemes requires total shareholder return over a set period to exceed a certain percentile of the aggregate performance of companies in the Property Sector Index of the FTSE All Share Index. For the approved scheme the relevant period is three years and the 50th percentile. For the unapproved scheme the relevant period is five years and 25th percentile. 54 Helical Bar plc Report and Accounts 2001 Report on Remuneration continued The directors’ interests in these Share Option Schemes during the year were as follows: M.E. Slade Senior Executive 1988 Share Option Scheme Senior Executive 1988 Share Option Scheme Senior Executive 1988 Share Option Scheme Helical Bar 1999 Share Option Scheme Helical Bar 1999 Share Option Scheme Helical Bar Approved 1999 Share Option Scheme N.G. McNair Scott Senior Executive 1988 Share Option Scheme Helical Bar 1999 Share Option Scheme Senior Executive 1988 Share Option Scheme Helical Bar 1999 Share Option Scheme Helical Bar 1999 Share Option Scheme Helical Bar Approved 1999 Share Option Scheme G.A. Kaye Helical Bar 1999 Share Option Scheme Helical Bar 1999 Share Option Scheme Helical Bar 1999 Share Option Scheme Helical Bar Approved 1999 Share Option Scheme P.M. Brown Senior Executive 1988 Share Option Scheme Senior Executive 1988 Share Option Scheme Helical Bar 1999 Share Option Scheme Helical Bar 1999 Share Option Scheme Helical Bar Approved 1999 Share Option Scheme At start and end of year Exercise price Date from which exercisable Type Expiry date Purchase Purchase Subscription Subscription Purchase Subscription 6,000 400,000 394,000 493,221 148,000 6,779 1,448,000 452.5p 565.0p 452.5p 442.5p 750.0p 442.5p 26.11.01 10.07.02 26.11.02 08.03.04 18.12.05 08.03.02 26.11.04 09.07.05 26.11.07 07.03.09 17.12.10 07.03.09 Purchase Purchase Subscription Subscription Purchase Subscription Purchase Subscription Purchase Subscription Purchase Subscription Subscription Purchase Subscription 50,000 43,000 250,000 235,221 72,000 6,779 657,000 50,000 393,221 127,000 6,779 577,000 100,000 100,000 293,221 106,000 6,779 606,000 452.5p 442.5p 412.5p 442.5p 750.0p 442.5p 26.11.01 08.03.03 10.07.02 08.03.04 18.12.05 08.03.02 26.11.04 07.03.06 10.07.07 07.03.09 17.12.10 07.03.09 442.5p 442.5p 750.0p 442.5p 08.03.03 08.03.04 18.12.05 08.03.02 07.03.06 07.03.09 17.12.10 07.03.09 452.5p 467.5p 442.5p 750.0p 442.5p 26.11.01 29.09.02 08.03.04 18.12.05 08.03.02 26.11.04 28.09.07 07.03.09 17.12.10 07.03.09 On 2 August 2000 Mr G.A. Kaye exercised an option over 100,000 ordinary 5p shares at an exercise price of 273.0p, and a second option over 200,000 ordinary 5p shares at an exercise price of 252.0p. The prevailing market price on the date of exercise was 667.5p providing a notional gain on the exercise of the share options of £1,225,500. The market price of the ordinary shares at 31 March 2001 was 742.5p (2000: 569.0p). This market price varied between 545.0p and 852.5p during the year. Helical Bar plc Report and Accounts 2001 55 Helical Bar Profit Sharing Scheme The Helical Bar Profit Sharing Scheme is open to all employees and has operated since 1997. Under the terms of the scheme the Trustees purchase shares in the company and allocate them to all employees in accordance with the rules of the scheme. On 7 April 2000, under the rules of the Scheme 19,295 shares were allocated to directors and employees of the company. The shares allocated to the directors of the company were as follows: M.E. Slade N.G. McNair Scott G.A. Kaye P.M. Brown On 7 April 2000 No. of shares 1,415 1,415 1,415 1,415 Price 565.0p 565.0p 565.0p 565.0p Service contracts The service contracts of each of the executive directors noted in table B on page 24 have a one year notice period. Pension contributions The company makes annual contributions into a Small Self Administered Pension Scheme on behalf of Michael Slade and Nigel McNair Scott. Non-executive directors The remuneration of the non-executive directors is determined by the Board within the limits set out in the Articles of Association and was last increased in April 2000. Non-executive directors do not participate in any of the company’s share option schemes. Non-executive directors do not have a contract of service. 56 Helical Bar plc Report and Accounts 2001 Financial Calendar Year ended 31 March 2001 Annual General Meeting to be held Final ordinary dividend payable 25 July 2001 26 July 2001 Half year ending 30 September 2001 Results and interim ordinary dividend announced Interim ordinary dividend payable November 2001 December 2001 Year ending 31 March 2002 Results and final dividend announced Final ordinary dividend payable June 2002 July 2002 Advisors Registrars Capita IRG Plc Bourne House 34 Beckenham Road Beckenham Kent BR3 4TU Joint stockbrokers Cazenove & Co 12 Tokenhouse Yard London EC2R 7AN Merchant bankers Lazard Bros & Co Ltd 21 Moorfields London EC2P 2HT Credit Lyonnais Securities Europe (UK) Broadwalk House 5 Appold Street London EC2A 2DA Solicitors Ashurst Morris Crisp Clifford Chance Dechert Laurence Graham Mishcon de Reya Norton Rose Olswang Bankers Barclays Bank plc Credit Lyonnais HVB Real Estate National Westminster Bank plc The Royal Bank of Scotland plc DePfa Bank AG Auditors Grant Thornton Grant Thornton House Melton Street Euston Square London NW1 2EP 0 0 0 2 8 9 7 7 0 2 ) 0 ( 4 4 + p u o r G y w e o L y b d e c u d o r p d n a d e n g i s e D 100 Wood Street, London EC2 Helical Bar PUBLIC LIMITED COMPANY H e l i c a l B a r p l c R e p o r t a n d A c c o u n t s 2 0 0 1 Registered office 11-15 Farm Street London W1J 5RS Report and Accounts 2001