Helical
Annual Report 2002

Plain-text annual report

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 2 Helical Bar Public Limited Company Report and Accounts 2002 Registered office 11-15 Farm Street London W1J 5RS 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. The Meadows, Camberley Designed and produced by Loewy Group +44 (0)20 7798 2000 Financial Highlights Pre-tax profit £m Ordinary dividend Diluted net asset value Increase in shareholders’ per share Pence per share Pence funds pre-dividend £m . 8 5 2 . 6 2 2 . 0 2 2 . 0 0 2 . 5 8 1 5 7 3 1 . 0 5 2 1 . 5 1 1 1 . 0 0 0 1 . 0 0 9 . 4 5 7 6 6 7 2 8 5 5 6 4 9 5 4 . 9 8 5 . 4 6 4 . 4 7 3 . 4 6 3 . 4 6 3 98 99 00 01 02 98 99 00 01 02 98 99 00 01 02 98 99 00 01 02 Special dividends of 100.0p were declared in respect of the periods ended 31 March 1999 and 31 March 2002. Diluted net asset value per share and shareholders’ funds pre-dividend have been adjusted for the impact of the adoption of FRS19 on Deferred Tax. Contents IFC Corporate Statement 1 4 6 12 18 20 21 23 Financial Highlights Chairman’s Statement Development Programme Investment Portfolio Financial Review Officers and Senior Management Directors’ Report Independent Auditors’ Report 24 25 26 27 28 45 46 48 52 Consolidated Profit and Loss Account Balance Sheets Statement of Total Recognised Gains and Losses Consolidated Cash Flow Statement Notes to Financial Statements Ten Year Review Corporate Governance Report Report on Remuneration Financial Calendar and Advisors HELICAL BAR PLC REPORT AND ACCOUNTS 2002 1 Financial Highlights continued Investment Property Databank Helical has maintained its excellent record in comparison to funds within the Investment Property Databank (“IPD”) with an ungeared total return of 15.6% in the year to 31 March 2002. This compares to the IPD benchmark performance of 7.0%. Helical has compared its ungeared property performance against that of portfolios within the Investment Property Databank for the last twelve years. During this period Helical has consistently outperformed its peers as shown by the tables below. The returns on shareholder capital earned by Helical are higher than those measured by IPD due to the use of gearing. IPD (monthly and quarterly valued funds) ungeared returns Total returns % In year to 31st Helical IPD benchmark Percentile rank Total returns % Annualised over Helical IPD benchmark Percentile rank ‘O’ means the top ranked fund 3.02 15.6 7.0 1 3.01 23.2 9.9 0 3yrs 20.8 10.6 0 3.00 23.6 15.1 2 3.99 20.1 10.9 1 3.98 28.3 16.6 2 5yrs 22.1 11.8 0 10yrs 12yrs 19.0 10.3 0 18.2 7.4 0 2 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 Helical Bar plc – five year summary Rental income Development profits FRS3 profits 31.3.02 £000 31,384 31.03.01 £000 28,642 31.03.00 £000 26,656 31.03.99 £000 21,482 31.03.98 £000 22,009 17,072 29,507 19,345 21,601 16,686 20,305 25,115 17,465 19,629 17,656 Profit on sale of investment properties 2,463 709 4,555 415 838 Pre-tax profits Investment portfolio Shareholders’ funds* 22,573 25,824 22,020 20,044 18,494 439,911 453,607 419,570 332,457 250,718 237,252 233,152 176,636 137,011 134,223 Dividend per ordinary share 13.75p 12.50p 11.15p 10.00p 9.00p Special dividend per ordinary share 100.00p – – 100.00p – Diluted earnings per share* 57.8p 67.7p 68.9p 51.5p 40.3p Diluted net asset value per share* 766p 754p 582p 459p 465p Net asset value per share diluted for FR13 adjustment and unprovided deferred tax* 661p 654p 516p 392p 392p *Adjusted for the impact of the adoption of FRS19 on Deferred Tax. Total shareholder return Total shareholder return measures the return to shareholders from share price movements and dividend income. Helical Bar plc UK Equity Market Listed Real Estate Sector Index Direct property 3 Years from 1999 Total returns pa % 5 Years from 1997 Total returns pa % 10 Years from 1992 Total returns pa % 15 Years from 1987 Total returns pa % 20 Years from 1982 Total returns pa % 25.3 (1.7) 7.1 9.2 24.3 6.7 6.1 10.4 32.6 11.9 13.4 9.9 17.7 11.0 7.6 8.4 37.1 15.4 11.3 10.1 Source: HSBC Research Note 5 April 2002 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 3 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 3 Chairman’s Statement The year to 31 March 2002 was another year of outperformance for Helical culminating in the Company winning the Company of the Year Award at the annual PLC Awards and the declaration of a 100 pence per share special dividend, the second in four years. The Company of the Year Award is sponsored by The year to 31 March 2002 was yet another good Pricewaterhouse Coopers and held in association one for Helical, although profits and revaluation with the London Stock Exchange and the Financial surpluses did not match the quite exceptional levels Times. It is presented each year to a business achieved last year. The good level of profits enables that has demonstrated its success over the short, the Board to recommend to shareholders a final medium and long term and has a professional dividend of 8.25p per share (2001: 7.50p) an management team, a clear and consistent strategy increase of 10%. This proposed dividend, together and sound finances. Helical Bar plc is widely acknowledged by the investment community as a core holding amongst small to mid cap property stocks. The Company has consistently outperformed its peers, sector benchmarks and indices and is ranked 1st against all other funds in the IPD Universe (the main industry sector benchmark) over the past three, five, ten and twelve years. with the interim dividend of 5.50p (2001: 5.00p) paid in December 2001, makes a total of 13.75p per share (2001: 12.50p). This is an increase of 10% on last year not taking into account the special dividend of 100p per share paid in April 2002. The total of 13.75p per share (excluding the special dividend) is covered over four times by profits after tax. 1 2 1. 40 Berkeley Square, London W1 2. 3 Bunhill Row, London EC1 4 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 Net asset value events last Autumn, have had an impact on the Before accruing for the 100p special dividend UK property market. Recent reductions in rental the net asset value per share of the Company rose levels in Central London and a shortage of potential by 14% (2001: restated 31%) to 888p, on an tenants in the Thames Valley are testimony to undiluted basis, and by 13% (2001: restated 30%) that impact. to 854p on a diluted basis. After accruing for the special dividend, paid in April 2002, the net asset value per share of the Company rose by 2% on both an undiluted and diluted basis to 793p (2001: restated 779p) and 766p (2001: restated 754p) respectively. These figures take no credit for any surplus of value in the trading and development stock. However, the net asset value per share figures do reflect the impact of the adoption of FRS19 on Deferred Tax. The effect of adopting FRS19 has been to recognise in the Group’s balance sheet the deferred tax liability relating to capital allowances, the deferred tax asset relating to tax losses and the consequent recognition of negative goodwill arising from the acquisition of a subsidiary company. During the year the Company’s share price rose from 742.5p to a closing 790p (which reflects the ex- dividend adjustment after the 100p special dividend was declared). This share price performance, taken together with the dividends paid in the year by the Company, gave a total shareholder return of 8% in the year to 31 March 2002. This increases to 22% if the special dividend declared in March 2002 and paid in April 2002 is taken into account. The future In June 2000 we noted that we operated in an increasingly volatile world where a stop in the strong growth in the United States economy could impact unfavourably in the UK and particularly in London and the South East. In anticipation of this the Company de-risked its development programme and, where appropriate, sold investment properties All the Company’s schemes under construction are forward funded by institutions. A number of new sites in Central London and the South East under the Company’s control, are proceeding through the planning process before development. In this period of slower tenant demand it is unlikely that the Company will generate the substantial level of profits seen in recent years until these future developments come on stream. On the investment side we are seeing a growing surplus of rental income over finance costs as void space is let up and reversions fall in at rent review. At the same time the reduction in gearing has reduced the finance costs of holding investment properties. Since the year end we have been in discussions with potential purchasers of over £100m of Central London properties. Should these sales proceed our gearing level and our exposure to Central London will reduce accordingly. By de-gearing and, effectively, stepping aside during this cyclical period of uncertainty, the Company is in a strong position to take advantage of opportunities as they arise. Whilst the short term outlook is clouded by weaker tenant demand the Company faces the medium term future with optimism that it will be able to maintain its record of outperformance. reducing gearing in the process. The comments John Southwell proved all too prescient and the downturn in the Chairman US and UK economies, which were exacerbated by 10 June 2002 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 5 Development Programme 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. 1 6 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 2 Development programme – end values Completed Programme: Let and sold 1993-2002 Current Programme: 31 March 2003 31 March 2004 31 March 2005+ Offices Office £m Retail £m Industrial £m 631 125 140 70 335 232 37 12 51 – 63 – – – – Total £m 900 137 191 70 398 The office development programme at Helical continues to provide high quality office Road London W6 and The Meadows Camberley were all completed during the year. New office accommodation to meet the needs of the professional developments were started at 3 Bunhill Row London and service sectors in London and the South East. EC1, The Heights Brooklands Weybridge and The Offices at One Plough Place London EC4, The Saunders Building London W6, 200 Hammersmith Waterfront Fleet. Since the year end we have started work on our prime development, at 40 Berkeley Square London W1. 3 4 1-2. The Meadows, Camberley 3-4. The Saunders Building, Hammersmith, London W6 2 4 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 7 Development Programme continued Completed programme Since Helical recommenced its development activity in 1993 it has completed and let new office buildings with a value at completion, of over £630m. The most recent additions to this list have all contributed to the profits for this year and are at: One Plough Place, London EC4 One Plough Place is an office building of 53,000 sq.ft. with 5,000 sq.ft. of restaurant space located at the junction of Plough Place and Fetter Lane in the 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. heart of Midtown, Central London. Forward funded The Saunders Building, Hammersmith Road, London W6 by Henderson Investors on behalf of one of their The Saunders Building is an office development of clients, this building was completed in May 2001. 15,000 sq.ft. newly constructed behind an existing The restaurant space was quickly let to Chez Gerard façade in the heart of Hammersmith in West London. for one of its Livebait seafood restaurants. Shortly Funded using internal resources this development was afterwards the whole of the office space was let completed in October 2001. The Saunders Building to The New Opportunities Fund, a Government was subsequently let to a joint venture between Sony Organisation distributing lottery funding. and Ericsson and then sold to Royal & Sun Alliance. 1 1 | 2 | 3 3 2 1-3. One Plough Place, London EC4 8 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 200 Hammersmith Road, London W6 Next to The Saunders Building is a 65,000 sq.ft. new headquarters office development at 200 Hammersmith Road. This development was forward sold in advance of construction to a Merrill Lynch Investment Managers/HQ Global Offices Limited partnership for operation as a serviced office centre. The building was completed in November 2001. Current programme Helical currently has five office developments either in the course of construction or completed awaiting letting. The Meadows, Camberley The majority of our schemes are forward sold to institutional investors. 3 Bunhill Row, London EC1 3 Bunhill Row is a 95,000 sq.ft. office development due for completion in December 2002. In June 2001 the building was pre-let to solicitors Linklaters. Shortly after the pre-letting Helical forward sold the development for £63.5m, reflecting a yield of 6.65%, This 140,000 sq.ft. office development was completed to a limited partnership formed by Matrix Securities in March 2002 and is currently available to let. Funded on behalf of its investors. Under the terms of the sale by Scottish Widows the development is a joint venture to Matrix Securities the total sale proceeds were paid with Morgan Grenfell Property Unit Trust. Comprising to Helical in advance of construction with certain four distinct buildings the development is close to outstanding contingent liabilities. Consequently, the Blackwater Station, Camberley with views overlooking Company’s cash balances at the year end include a the River Blackwater and adjacent meadows towards sum of £28.3m payable to the construction The Meadows Retail Park. team over the remaining period of construction. 1 2 3 1-3. 200 Hammersmith Road, London W6 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 9 Development Programme continued The Heights, Weybridge, Surrey The Heights, Weybridge, Surrey is a 340,000 sq.ft. office campus development currently under construction next to the UK headquarter buildings of Proctor & Gamble and Sony. Spread over a 22 acre site acquired from Proctor & Gamble the development was forward The forward sale of our developments has a significant effect on our return on capital employed. funded by Prudential Portfolio Managers. The 40 Berkeley Square, London W1 development will comprise five separate buildings 40 Berkeley Square is a prime office development. and is expected to be completed in March 2003. This former London headquarters of advertising agency The Waterfront Business Park, Fleet The Waterfront Business Park, Fleet comprises 40,000 sq.ft. of 1990s built offices and 50,000 sq.ft. of 1960s built industrial buildings all held by Helical as an investment. Adjacent to the Business J. Walter Thompson is to be demolished and replaced by a high specification modern office building overlooking the Square. Comprising eight floors of offices, the site is to be redeveloped in a joint venture with current owners, Morley Fund Management. Park is a 4.5 acre site which is currently being Future programme developed. This development will comprise three Looking to the future we are in discussions on a buildings totalling 56,000 sq.ft. of office space. number of new development opportunities in Central Forward funded by Aberdeen Property Investors, London and the South East in conjunction with some the development is due to be completed in of the leading institutions with whom we have created October 2002. strong relationships in the past. 1 1-2. The Heights, Weybridge, Surrey 2 10 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 Retail Developments During the year Helical Retail concluded negotiations to redevelop Accrington town centre and has now started work on the development. This 60,000 sq.ft. redevelopment of the market square has been pre-sold to Bilsdale, a local investment fund, with 40,000 sq.ft. of the space pre-let to Wilkinsons and JJB Sports. It is expected that the development will be completed in early Spring 2003. We have created one of the largest development programmes in the country. Industrial In Wigan, long running negotiations with land owners During the year the Company completed a 104,300 have now been concluded to enable a site to be sold sq.ft. warehouse at Hayes, near Heathrow, London. with planning permission to B&Q for the construction Pre-let to Allport Limited, the building was forward of a 135,000 sq.ft. superstore. Completion of this funded by Hill Samuel Property Unit Trust. retail warehouse is expected to be in Spring 2003. In addition to these two retail developments which are under construction, negotiations continue in Gerald Kaye respect of developments in Blackburn, Hanley, Development Director Ipswich and Wigston. 10 June 2002 1 1 | 2 | 3 2 1-2. Arcadia, Hayes, London 3. Accrington 3 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 11 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. During the course of the financial year we continued 2000 for just over £7m, it was refurbished, let to to rationalise our portfolio, raising just under £70m seven tenants and sold for £14.55m to show a profit from the sale of 17 of our smallest properties in two of over 50% on cost. portfolios together with a retail park at Nottingham and a City office at 48 Gracechurch Street. All sales were concluded above valuation, producing a net surplus of circa £2.5m or 4%. 48 Gracechurch Street was a notable success. Having been acquired in early Over £42m was invested through a combination of capital expenditure on the existing portfolio and, more significantly, on nine purchases mainly in the industrial and out-of-town retail sectors. Sector weightings f a e d c b Total Central London Offices: a West End Offices b City Offices c Other Central London Offices 71% 36% 15% 20% Other Sectors: d South East Offices e Industrial f Out of Town Retail 29% 5% 18% 6% 12 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 Last year we commented that the process of letting under £10m. The net result of these transactions, up voids and securing reversions at rent review should if all concluded, will be to raise our reversionary yield generate capital uplifts even in a flat market. This towards 10% and move our London weighting nearer proved to be the case during the year as our portfolio to 60% and our industrial weighting up to 25%. produced a 4.4% valuation increase at a time when The intention is to recycle the money raised from the market indices showed no underlying capital growth London office disposals into the industrial and retail in the property market. Until we see stronger economic warehouse sectors, taking our London weighting down activity and a recovery in rental values, the principal to circa 50%. drivers of future performance will continue to be asset management initiatives together with stock selection on new purchases. At a time of little rental growth we are targeting acquisitions that are not dependent on market momentum to deliver attractive returns. These The current valuation yields on the portfolio of 7.2% tend to be “turnaround”’ situations where physical initial with a reversionary yield of 9.2% allow for and planning improvements, lettings and lease notional purchasers’ costs of 5.75%. In practice, restructurings create value. In the meantime, we Helical earns a yield of 7.6%, anticipated to rise to continue to focus on releasing the reversionary 9.7%, which compares favourably against the current potential of our existing portfolio, a process which cost of finance. should continue to deliver further capital uplifts. Since the year end we have entered into a contract to sell 60 Sloane Avenue to Deka for £65.6m. We also have agreed terms to sell two other Central London offices for over £60m. On the acquisition front we Michael Brown have bought two further industrial estates within the Investment Director South East, with asset management potential, for just 10 June 2002 Investment Portfolio – valuation statistics Capital Value Increases Year Ended 31.3.02 West End offices City offices Other Central London offices South East offices Industrial Out of town retail Total portfolio 7% 2% 6% 3% 4% 3% 4.4% Valuation Yields Reversionary Equivalent 8.5% 9.0% 9.8% 9.2% 10.6% 8.1% 7.8% 8.5% 9.2% 8.7% 10.1% 7.9% True equivalent 8.2% 9.0% 9.7% 9.2% 10.7% 8.3% 9.2% 8.6% 9.1% Initial 6.8% 7.2% 6.1% 8.5% 9.0% 6.8% 7.2% Helical actively manages its investment portfolio, rotating between sectors to maximise its exposure to growth stock. HELICAL BAR PLC REPORT AND ACCOUNTS 2002 13 Investment Portfolio continued Properties with value in excess of £8m (92% of investment assets by value) All freehold except Rex House Address Comments Growth Since Acquisition % p.a. Capital Rental Value Value Current Average Passing Rent p.s.f Year Acquired City Offices Cheapside House, Cheapside, 70,000 sq.ft. of multi-let offices refurbished and let in 1998 1997 14.3% 10.9% £33.00 London EC2 plus prime retail. 5-10 Bury Street, London EC3 28,000 sq.ft. of multi-let offices subject to rolling refurbishment. 1997 13.2% 13.0% £29.00 66 Prescot Street, London E1 110,000 sq.ft. top specification office built in 1992. 50% share. 2001 0% 9.2% £22.00 West End Offices 60 Sloane Avenue, Brompton Cross, 75,000 sq.ft. flagship office building built in 1994, let to Leo 1999 15.3% 7.3% £35.00 London SW3 Burnett plus 32,000 sq.ft. of retail and restaurant accommodation. Capital House, Marylebone Road, 90,000 sq.ft. 1991 built multi-let offices plus 47,000 sq.ft. 1998 10.2% 14.1% £32.00 Paddington, London NW1 let to Marks & Spencer at £0.60 p.s.f. until December 2002. Rex House, Lower Regent Street, 63,000 sq.ft. of of newly refurbished offices plus 28,000 sq.ft. 2000 17.3% 27.3% £57.00 London SW1 retail and gym. Leasehold expiring 2035. 141–143 Drury Lane, Covent Garden, 40,000 sq.ft. multi-let office building scheduled for refurbishment 1998 14.3% 13.3% £23.50 London WC2 or residential conversion after 2002. 71 Kingsway, London WC2 30,000 sq.ft. office building subject to rolling refurbishment. 1998 12.6% 13.9% £34.00 1 3 2 4 1-2. Shepherds Building, London W14 5. 1 & 2 Sprucefield Retail Park, Lisburn 3-4. 61 Southwark Street, London SE1 6. Mill Street, Slough 14 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 Properties with value in excess of £8m continued All freehold except Rex House Address Comments Other Central London Offices 61 Southwark Street, London SE1 65,000 sq.ft. of multi-let offices subject to rolling refurbishment programme. 4 & 5 Paris Gardens, Southwark, London SE1 45,000 sq.ft. offices acquired vacant and simultaneously pre-let to Guardian IT. Refurbished in 2000. The Interchange, Camden Lock, NW1 65,000 sq.ft. of loft offices let to Associated Press Television News. 90% share. Growth Since Acquisition % p.a. Capital Rental Value Value Current Average Passing Rent p.s.f Year Acquired 1998 25.7% 24.5% £17.00 2000 11.0% 17.3% £24.50 1999 14.7% 13.9% £32.00 The Rotunda Complex, Oval Road, 50,000 sq.ft. of multi-let loft office village. 1998 20.3% 18.0% £19.00 Camden NW1 Shepherds Building, London W14 155,000 sq.ft. of loft offices refurbished in 2001. 2000 11.8% 10.7% £25.00 South East Offices Waterfront Business Park, Fleet 40,000 sq.ft. of 1990s offices plus 50,000 sq.ft. of 1960s industrial capable of office redevelopment. 2000 4.5% 7.6% £21.00 Out of Town Retail Weston Retail Park, Weston Super Mare 140,000 sq.ft. anchored by Great Mills, Comet and Carpetright. 75% share. 1 & 2 Sprucefield Retail Park, Lisburn 50,000 sq.ft. Currys and PC World. 50% share. Sainsbury, Wednesfield 70,000 sq.ft. superstore. 75% share. Industrial Aycliffe & Peterlee Mill Street, Slough 2m sq.ft. of industrial assets. 185,000 sq.ft. with refurbishment potential. 6 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. 1999 16.6% 13.3% £6.50 2001 2001 1987 2002 0% 0% 0% £15.00 0% £11.00 4.8% 10.7% £2.50 – – £6.50 5 6 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 15 Investment Portfolio continued 4 3 1. The Rotunda Complex, Oval Road, Camden NW1 2. The Interchange, Camden Lock, London NW1 3. Cheapside House, Cheapside, London EC2 4. The Dining Wall Café, Cheapside House 5. Capital House, Marylebone Road, Paddington, London NW1 6. 71 Kingsway, London WC2 7. 60 Sloane Avenue, Brompton Cross, London SW3 8. 141-143 Drury Lane, Covent Garden, London WC2 16 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 2 1 5 6 7 8 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 17 Financial Review Restated prior year figures dividend of 8.25p per share (2001: 7.50p) to be paid Following the adoption of FRS19 on Deferred Tax the on 25 July 2002 which, with the interim dividend of Group has restated its taxation charge for the year to 5.50p, makes a total of 13.75p. This is an increase 31 March 2001 and the provision for liabilities and of 10% on the previous period’s dividend of 12.50p. charges at that date. The Company has also restated This is covered over four times by profits after tax. a prior year acquisition of a property investment subsidiary, Glenlake Limited. This company was acquired with tax losses with a fair value, under FRS19 principles, of £6.9m. In recognising the value of these tax losses the Company has accounted for negative goodwill of £6.9m. These restated figures have also resulted in changes to prior years net asset values per share and earnings per share. Profits Gross profits for the year were £45.0m. These compare with gross profits for the year to 31 March 2001 of £56.3m and include net rental income after property overheads of £27.8m (2001: £25.5m) and trading profits of £0.2m (2001: £0.9m). Our development programme contributed £17.1m (2001: £29.5m).The share of associated companies profits were £1.0m (2001: £0.1m). The surplus over book value on sale of investment properties was £2.5m (2001: £0.7m) with a loss of £0.2m (2001: nil) on the sale of an investment property holding subsidiary. During the year, a special dividend of 100.00p was declared as payable to shareholders on the Company’s share register on 2 April 2002. This dividend was paid on 26 April 2002. Net assets As noted above, the net assets of the Company reflect the adoption of FRS19 on Deferred Tax and the recognition of negative goodwill in respect of the acquisition of Glenlake Limited in June 1999. An adjustment of £6.9m has been made to the opening reserves at 1 April 2000 which, together with the deferred tax provision of £0.2m at 31 March 2001, reduces net assets at that date to £234.8m from £241.9m previously stated in the financial statements for that year. The increase in value of investment properties of £19.4m (2001: £39.1m) less the retained losses (after special dividend of £28.4m) of £15.3m (2001: restated retained profits £16.7m) led to a rise in net assets to £239.1m (2001: restated £234.8m). Net assets per Interest paid on borrowings, net of interest received share of 793p compare with 779p in 2001. Diluted on cash balances reduced from £19.2m to £14.8m. net assets per share rose from 754p (restated) to This was after capitalisation of £1.0m of interest 766p and, after taking account of the value ascribed (2001: £1.6m). Pre-tax profits fell by 12.4% from £25.8m to £22.6m. to financial instruments under FRS13 and unprovided deferred tax, rose from a restated 654p to 661p. With an effective tax charge of 24% (2001: restated 21%) Borrowings and financial risk and minority interest of £0.2m (2001: £0.1m), profits Net debt fell to £152.4m from £232.8m and, with before dividends fell by 15.7% to £17.1m. Earnings per the rise in net assets, Helical reduced its net gearing share on a diluted basis fell by 15% to 57.8p per share. at 31 March 2002 to 64% from 99% (restated). Dividends The Board is recommending to members at the Annual General Meeting on 24 July 2002 a final 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 18 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 £106m of undrawn bank facilities and cash of deferred tax to be provided on most types of timing £75.5m (2001: £31.8m). differences including accelerated capital allowances. Helical insures against adverse movements in interest In addition to the recognition of negative goodwill rates through the use of a number of interest rate of £6.9m, the adoption of FRS19 has resulted in an hedging instruments. Borrowings of £160m are adjustment to the balance sheet at 31 March 2001 capped until 2004 and £111m until 2006 at interest of £0.2m representing the discounted value of the rates between 6.00% and 7.50%. A further £80m is potential clawback of capital allowances as at that capped at 7.00% from January 2006 until September date, net of the discounted value of the deferred tax 2009. £50m is fixed at a rate of 6.89% until October asset arising in respect of tax losses. 2002 and £9.2m reducing to £5.0m at 9.05% until 2009. The Company has interest rate floors at 4.78% on £160m until January 2006 and on £80m at 4.80% from January 2006 until September 2009. Performance measures In order to evaluate its overall performance against other small to mid size capital companies, both here and abroad, Helical, amongst other measures, looks at FRS13 requires disclosure of financial instruments equity value added and returns on equity. The internal on a fair value basis and at 31 March 2002 an calculations for the last five years are shown in Table adjustment to reflect this basis would reduce net 1 below. assets, after tax relief, by £2.0m (2001: £2.3m) which, if provided for, would reduce diluted net assets by 6p (2001: 7p) per share. FRS19 – deferred tax FRS19, which applies to accounting periods ending Nigel McNair Scott on or after 23 January 2002, has been adopted in Finance Director these financial statements. This new standard requires 10 June 2002 Table 1 – Equity value added and price/value added Equity Value Added Year ended 31 March Capital employed £m Return on capital % Weighted average cost of capital % Spread Equity value added Price/Value added Earnings after tax Revaluation surpluses Value added Market capitalisation Price/value added – times 2002 390 10.5 6.3 4.2 19.6 2002 £m 17.1 19.4 36.5 236.3 6.5 X 2001 466 18.2 5.9 12.3 52.9 2001 £m 20.2 39.5 59.7 222.1 3.7 X 2000 430 19.8 6.0 13.8 43.7 2000 £m 16.0 30.4 46.4 167.6 3.6 X 1999 316 18.6 6.2 12.4 32.2 1999 £m 16.1 19.8 35.9 141.6 3.9 X 1998 260 18.7 8.1 10.6 29.6 1998 £m 14.6 23.6 38.2 152.7 4.0 X The calculautions for the two years to 31 March 2002 reflect the adoption of FRS19 on Deferred Tax. HELICAL BAR PLC REPORT AND ACCOUNTS 2002 19 Officers and Senior Management Board of directors Managing Director Independent non-executive directors Chairman Michael Slade BSc (Est. Man) FRICS FSVA, Aged 55 John Southwell MA (Senior non-executive), Aged 69 Michael Slade joined the Board as executive director John Southwell joined the Board of Helical Bar plc in August 1984 and was appointed Managing Director as non-executive director in 1986 and was appointed in 1986. Finance Director Nigel McNair Scott MA FCA FCT, Aged 56 Nigel McNair Scott joined the Board as non-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 44 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 41 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. 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 56 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 Chairman of Murray Emerging Growth & Income Trust plc, a director of Aberdeen Asset Managers plc, Charter Pan European Trust plc, James Finlay Ltd and Atrium Underwriting Plc. Antony Beevor BA, Aged 62 Antony Beevor was appointed to the Board as non-executive director in 2000. He is a member of the Remuneration, Audit and Nominations and Company secretary and registered office Appointments Committees. Antony Beevor is a Senior Advisor to the London Mergers and Acquisitions business of Société Générale, a Deputy Chairman of the Takeover Panel, the Chairman of Croda International Plc and the Chairman of Nestor Healthcare Group plc. Senior management Matthew Bonning-Snook Development Executive, Aged 34 Michael Butcher Construction Executive, Aged 58 John Inwood Management Executive, Aged 36 Jack Pitman Investment Executive, Aged 33 Company Secretary Tim Murphy ACA Aged 42 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 Investor relations: itruffle.co.uk 20 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 Directors’ Report The directors present their report and financial Auditors statements for the year ended 31 March 2002. Grant Thornton offer themselves for reappointment Principal activities as auditors in accordance with Section 385 of the The principal activity of the Company is that of a Companies Act 1985. holding company and the principal activities of the Substantial shareholdings subsidiaries are property investment, dealing and At 28 May 2002 the shareholders listed in Table A development. A full review of these activities and the on page 24 had notified the Company of a disclosable Group’s future prospects are given on pages 4 to 19. interest of 3% or more in the nominal value of the Trading results ordinary share capital of the Company. The results for the year are set out on page 24. The Directors’ remuneration profit on ordinary activities before taxation amounts Details of directors’ remuneration, share options, to £22,573,000 (2001: £25,824,000). service contracts and pension contributions are noted Share capital in the Report on Remuneration on pages 48 to 51. The detailed movements in share capital are set out Directors and their interests in note 21 to these financial statements. The directors who were in office during the year and At 31 March 2002 there were 29,913,476 ordinary 5p shares in issue. Dividends A final dividend of 8.25p (2001: 7.50p) per share is recommended for approval at the Annual General Meeting on 24 July 2001. The total ordinary dividend, including the special dividend, of 113.75p their interests, all of which were beneficial, in the ordinary shares are listed in Table B on page 22. On 21 June 2001, 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 48 to 51. (2001: 12.50p) per share amount to £32,328,000 There have been no changes in the directors’ interests (2001: £3,570,000). Donations in the period from 31 March 2002 to 7 June 2002. Re-election Donations to charities amounted to £3,685 Messrs J P Southwell and C G H Weaver are due to (2001: £31,000). A contribution of £10,000 retire by rotation and offer themselves for re-election. (2001: £20,000) was made to the Conservative Party. Going concern Creditor payment policy After making enquiries, the directors have a reasonable The Company’s policy is to settle all agreed expectation that the Group has adequate resources to liabilities within the terms established with suppliers. continue in operational existence for the foreseeable At 31 March 2002 there were 26 days’ (2001: 28 future. For this reason, they continue to adopt the going days’) purchases outstanding in respect of the concern basis in preparing the financial statements. Company’s creditors. HELICAL BAR PLC REPORT AND ACCOUNTS 2002 21 Directors’ Report continued Corporate governance The directors are responsible for maintaining proper The Company’s application of the principles of accounting records, for safeguarding the assets of corporate governance is noted in the Corporate the Group and for taking reasonable steps for the Governance Report on page 46. prevention and detection of fraud and other Directors’ responsibilities for the financial statements irregularities. Company law requires the directors to prepare financial Annual general meeting statements for each financial year which give a true The Annual General Meeting of the Company will be and fair view of the state of affairs of the Company held on 24 July 2002 at 11.30am at The Westbury, and the Group and of the profit or loss of the Group Conduit Street at New Bond Street, London W1A 4UH. for that period. In preparing those financial The notice of meeting is set out in the separate circular statements, the directors are required to: to shareholders which accompanies this document. • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent; • state whether applicable accounting standards By Order of the Board have been followed, subject to any material departures disclosed and explained in the financial statements. T.J. Murphy Secretary 10 June 2002 Table A – Substantial shareholdings Michael Slade Schroder Investment Management Fidelity Investments Threadneedle Asset Management Helical Bar Employee Share Ownership Plan Trust TR Property Investment Trust Legal and General Table B – Directors interests No. of ordinary shares 3,014,938 2,544,792 1,905,596 1,747,973 1,491,939 1,300,000 902,980 % 10.1 8.5 6.4 5.8 5.0 4.3 3.0 Ordinary 5p shares 31.03.02 34,750 3,014,938 626,617 18,000 1,477 309,215 186,551 4,191,548 14.0 31.03.01 33,870 3,014,019 625,698 18,000 1,477 308,296 185,632 4,186,992 14.0 J.P. Southwell M.E. Slade N.G. McNair Scott C.G.H. Weaver A.R. Beevor G.A. Kaye P.M. Brown Total directors’ interests Percentage of issued share capital 22 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 Independent Auditors’ Report to the Shareholders of Helical Bar plc We have audited the financial statements of Helical Statement, the Development and Investment Bar plc for the year ended 31 March 2002 which Directors’ Reports, the Financial Review and the comprise the principal accounting policies, the Profit Corporate Governance Statement. We consider the and Loss Account, the Balance Sheet, the Cash Flow implications for our report if we become aware of any Statement, the Statement of Total Recognised Gains apparent misstatements or material inconsistencies and Losses and notes 1 to 30. with the financial statements. Our responsibilities do Respective responsibilities of directors and auditors not extend to any other information. The directors’ responsibilities for preparing the Annual Basis of opinion Report and the financial statements in accordance with We conducted our audit in accordance with United United Kingdom law and accounting standards are set Kingdom Auditing Standards issued by the Auditing out in the Statement of Directors’ Responsibilities. Practices Board. An audit includes examination, on Our responsibility is to audit the financial statements a test basis, of evidence relevant to the amounts and in accordance with relevant legal and regulatory disclosures in the financial statements. It also includes requirements, United Kingdom Auditing Standards and an assessment of the significant estimates and the Listing Rules of the Financial Services Authority. judgements made by the directors in the preparation of 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 1985. the financial statements, and of whether the accounting policies are appropriate to the Group’s circumstances, consistently applied and adequately disclosed. We also report to you if, in our opinion, the directors’ We planned and performed our audit so as to obtain report is not consistent with the financial statements, all the information and explanations which we if the Company has not kept proper accounting records, considered necessary in order to provide us with if we have not received all the information and sufficient evidence to give reasonable assurance that explanations we require for our audit, or if information the financial statements are free from material specified by law or the Listing Rules regarding directors’ misstatement, whether caused by fraud or other remuneration and transactions with the Company and irregularity or error. In forming our opinion we also other members of the Group is not disclosed. evaluated the overall adequacy of the presentation We review whether the Corporate Governance Statement of information in the financial statements. reflects the Company’s compliance with the seven Opinion provisions of the Combined Code specified for our review In our opinion the financial statements give a true and by the Listing Rules, and we report if it does not. We are fair view of the state of affairs of the Group and the not required to consider whether the Board’s statements Company as at 31 March 2002 and of the Group’s on internal control cover all risks and control, or form result for the year then ended and have been properly an opinion on the effectiveness of the Group’s corporate prepared in accordance with the Companies Act 1985. governance procedures or its risk and control procedures. Grant Thornton We read other information contained in the Annual Registered Auditors Report and consider whether it is consistent with the Chartered Accountants audited financial statements. This other information London comprises only the Directors’ Report, the Chairman’s 10 June 2002 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 23 Consolidated Profit and Loss Account Helical Bar plc and subsidiary undertakings for the year ended 31 March 2002 Turnover Cost of sales Gross profit Administrative expenses Operating profit Share of associated company profits Profit on sale of investment properties Loss on sale of subsidiary 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 (loss)/profit for the year By company By subsidiaries By associates Earnings per share Diluted earnings per share The notes on pages 28 to 44 form part of these financial statements. Note 2 2 3 4 28 5 6 7 22 8 9 9 Year Ended 31.3.02 £000 Restated Year Ended 31.3.01 £000 136,632 165,259 (91,646) (108,958) 44,986 (10,888) 56,301 (12,031) 34,098 44,270 986 2,463 (195) 86 709 – 37,352 (14,779) 45,065 (19,241) 22,573 (5,353) 17,220 (164) 17,056 (32,328) 25,824 (5,471) 20,353 (126) 20,227 (3,570) (15,272) 16,657 (4,857) 44,529 (10,457) 42 (27,872) – 60.0p 57.8p 70.0p 67.7p 24 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 24 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 Balance Sheets Helical Bar plc and subsidiary undertakings at 31 March 2002 Fixed assets Intangible assets Tangible assets Investments Investment in associates Current assets Other assets for resale Stock Debtors Investments Cash at bank and in hand 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’ funds Equity minority interests Note 10 11 12 13 14 15 16 17 18 20 21 22 22 22 22 22 The financial statements were approved by the Board of Directors on 10 June 2002. M.E. Slade Director N.G. McNair Scott Director The notes on pages 28 to 44 form part of these financial statements. Group Company 31.3.02 £000 Restated 31.3.01 £000 31.3.02 £000 Restated 31.3.01 £000 (6,240) (6,235) 440,685 454,580 – 774 – 972 9,599 1,937 9,546 12,163 11,837 185 – – 445,981 458,076 12,937 12,809 – 29,585 21,289 1 75,514 525 27,861 – 141 – 13 36,439 118,674 128,905 1 31,841 – 39,021 – 22,016 126,389 (107,936) 96,667 (88,331) 157,836 (35,946) 150,934 (24,118) 18,453 8,336 121,890 126,816 464,434 466,412 134,827 139,625 (224,597) (728) (231,395) (187) – (56) – (4) 239,109 234,830 134,771 139,621 1,496 35,271 1,496 1,496 35,264 35,271 142,100 128,468 7,101 291 50,993 7,101 291 60,532 – 7,101 1,987 88,916 1,496 35,264 – 7,101 1,987 93,773 237,252 1,857 233,152 1,678 134,771 – 139,621 – 239,109 234,830 134,771 139,621 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 25 Statement of Total Recognised Gains and Losses Helical Bar plc and subsidiary undertakings for the year ended 31 March 2002 Statement of total recognised gains and losses Profit for the year after taxation Minority interest Revaluation of investment properties – subsidiaries – associates Minority interest in revaluation surplus Total recognised gains and losses Prior year adjustment – negative goodwill – deferred tax Total recognised gains and losses since last financial statements 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 (loss)/profit for the year retained Reconciliation of movements in shareholders’ funds Profit for the year Dividends paid and proposed Revaluation of investment property – subsidiaries – associates Revaluation deficit realised on sale of subsidiary Minority interest in revaluation surplus Issue of shares Net addition to shareholders’ funds Opening shareholders’ funds Closing shareholders’ funds The notes on pages 28 to 44 form part of these financial statements. 26 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 26 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 Year Ended 31.3.02 £000 Restated Year Ended 31.3.01 £000 17,220 20,353 (164) (126) 18,792 1,477 (905) 39,320 147 (385) 36,420 59,309 (6,892) (187) – – 29,341 59,309 31.3.02 £000 Restated 31.3.01 £000 22,573 5,606 25,824 6,315 28,179 32,139 (9,666) 22,972 31.3.02 £000 Restated 31.3.01 £000 17,056 20,227 (32,328) (3,570) (15,272) 19,110 1,477 (318) (905) 8 16,657 39,320 147 – (385) 777 4,100 233,152 56,516 176,636 237,252 233,152 Consolidated Cash Flow Statement Helical Bar plc and subsidiary undertakings for the year ended 31 March 2002 Net cash inflow from operating activities Returns on investment and servicing of finance Taxation Capital expenditure and financial investment Acquisitions and disposals Equity dividends paid Cash flow before management of liquid resources and financing Management of liquid resources Financing Issue of shares (Decrease)/increase in debt Refinancing costs Increase/(decrease) in cash Note 23 24 24 24 25 26 Reconciliation of net cash flow to movement in net debt Increase/(decrease) in cash in the year Cash outflow from management of liquid resources Cash outflow/(inflow) from change in debt Debt arrangement expenses Movement in net debt in the year Net debt 1 April 2001 Net debt 31 March 2002 The notes on pages 28 to 44 form part of these financial statements. Year Ended 31.3.02 £000 Year Ended 31.3.01 £000 65,634 56,615 (16,062) (20,582) (4,967) (5,785) 40,068 (16,779) (178) – (3,694) (3,389) 80,801 10,080 (20,285) (15,553) 8 (37,046) (96) 777 4,141 – 23,382 (555) 31.3.02 £000 23,382 20,285 37,142 (408) 31.3.01 £000 (555) 15,553 (4,141) (572) 80,401 (232,800) 10,285 (243,085) (152,399) (232,800) HELICAL BAR PLC REPORT AND ACCOUNTS 2002 27 Notes to the Financial Statements 1. Principal accounting policies Basis of preparation The financial statements have been prepared in accordance with applicable United Kingdom 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 apart from in respect of the adoption of Financial Reporting Standard 19 (“FRS19”) on Deferred Tax. The effect of adopting FRS19 has been to recognise in the Group’s balance sheet the deferred tax liability relating to accelerated capital allowances, the deferred tax asset relating to unrelieved tax losses and the consequent recognition of negative goodwill arising from a prior year acquisition of a subsidiary company. Basis of consolidation The Group financial statements consolidate those of the Company and its subsidiary undertakings drawn up to 31 March 2002. 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 length of lease – leasehold improvements – vehicles & office equipment 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 The Group’s previous accounting policy was to provide for deferred tax to the extent that it was deemed probable that a liability or asset would crystallise using the tax rates estimated to arise when the timing differences were expected to reverse. Unprovided deferred tax was disclosed as a contingent liability. Under this policy potential tax liabilities arising from revaluation surpluses, accelerated capital allowances and other timing differences, net of tax losses, were normally disclosed as contingent liabilities. FRS19, applied for the first time to these accounts, requires that deferred tax be recognised as a liability or asset if the transactions or events that give the Group an obligation to pay more tax in future or a right to pay less tax in future have occurred by the balance sheet date. Despite this general principle, FRS19 prohibits the recognition of deferred tax on revaluation gains and losses, unless they are recognised in the profit and loss account, and such deferred tax not provided is disclosed in these accounts as a contingent liability. In accordance with FRS19 the Group makes full provision for other timing differences which are primarily in respect of capital allowances on plant and machinery and industrial buildings allowances, both types of allowances derived from assets acquired with, or subsequently purchased for, the Group’s investment property portfolio. Deferred tax assets and liabilities provided for under FRS19 are discounted to reflect the time value of money between the balance sheet date and the dates that it is estimated that the underlying timing differences will reverse. Following the sale of a property, any deferred tax provisions not required will be released to the profit and loss account. 28 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 28 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 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. 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 less provision for any permanent diminution in value. Any deficit arising in the future between the original cost of the shares and their net realisable value will be funded by the Company. 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 those 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. HELICAL BAR PLC REPORT AND ACCOUNTS 2002 29 Notes to the Financial Statements continued 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, profit on sale of investment properties and loss on sale of subsidiary All sales, were within the UK. All turnover is attributable to continuing operations. Turnover Gross profit Year Ended 31.3.02 £000 Year Ended 31.3.01 £000 Year Ended 31.3.02 £000 Year Ended 31.3.01 £000 2,282 31,384 14,552 28,642 102,803 115,176 154 27,827 17,072 163 6,889 (67) 920 25,532 29,507 342 44,986 56,301 (10,888) (12,031) (14,779) 986 (19,241) 86 20,305 25,115 An analysis of property assets can be found in note 11 and the directors do not consider a further analysis of net assets to be appropriate. 3. Administrative expenses Operating profit on ordinary activities is stated after: Staff costs Depreciation and amortisation – tangible fixed assets – goodwill Auditors’ remuneration: – audit services – non-audit services Staff costs during the year: – salaries and other remuneration – social security costs – other pension costs Year Ended 31.3.02 £000 Year Ended 31.3.01 £000 8,294 9,225 267 52 106 58 253 64 85 86 7,590 604 100 8,115 1,026 84 8,294 9,225 Details of directors’ remuneration are included in the Report on Remuneration on pages 48 to 51. 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 31.3.02 31.3.01 25 25 30 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 30 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 4. Sale of investment properties Net proceeds from the sale of investment properties Book value (note 11) Profit on sale of investment properties Year Ended 31.3.02 £000 Year Ended 31.3.01 £000 67,525 30,333 (65,062) (29,624) 2,463 709 Net proceeds from the sale of investment properties and their associated book value include £22,360,000 of properties disposed of at book value on the sale of a subsidiary, Helical (TE) Limited. 5. Net interest payable and similar charges Interest payable on bank loans and overdrafts Finance arrangement costs Other interest payable and similar charges Interest capitalised Interest receivable and similar income 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% (2001: 30%) – Adjustments in respect of prior periods Current tax charge Deferred tax – origination of timing differences (note 20) – reversal of timing differences Tax on profit on ordinary activities 31.3.02 £000 31.3.01 £000 14,804 19,514 408 3,215 (1,006) (2,642) 572 1,343 (1,597) (591) 14,779 19,241 31.3.02 £000 4,811 1 4,812 541 – Restated 31.3.01 £000 5,779 1,005 6,784 187 1,500 5,353 5,471 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% (2001: 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 31.3.02 £000 31.3.01 £000 22,573 25,824 6,772 7,747 102 127 (2,036) (2,964) 787 (109) (100) (605) 1,198 (202) 373 (500) 4,811 5,779 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 31 Notes to the Financial Statements continued 7. Dividends Attributable to equity share capital Ordinary – interim paid 5.50p (2001: 5.00p) per share – final proposed 8.25p (2001: 7.50p) per share Total 13.75p (2001: 12.50p) per share – special payable 100.00p (2001: nil) per share Year Ended 31.3.02 £000 Year Ended 31.3.01 £000 1,563 2,345 3,908 28,420 1,438 2,132 3,570 – 32,328 3,570 The interim dividend of 5.50p was paid on 21 December 2001 to shareholders on the register on 23 November 2001. The special dividend of 100.00p was paid on 26 April 2002 to shareholders on the register on 2 April 2002. The final dividend, if approved at the AGM on 24 July 2002, will be paid on 25 July 2002 to shareholders on the register on 14 June 2002. 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 £27,471,000 (2001: restated £48,099,000). 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 exercise of all dilutive options. Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below. Year Ended 31.3.02 Weighted Per share amount pence average no. of shares Year Ended 31.3.01 Weighted average no. of shares Restated per share amount pence Restated earnings £ Earnings £ 17,056,000 28,419,782 60.0 20,227,000 28,903,697 70.0 1,090,450 980,781 17,056,000 29,510,232 57.8 20,227,000 29,884,478 67.7 Goodwill £000 Negative goodwill £000 Total £000 720 – 47 767 593 52 645 122 127 654 1,374 (6,892) – – 47 (6,238) (5,471) 124 – 124 717 52 769 (6,362) (6,240) (6,362) (6,235) Basic earnings per share Dilutive effect of share options Diluted earnings per share 10. Intangible fixed assets Group Cost at 1 April 2001 Prior year adjustment Additions Cost at 31 March 2002 Amortisation at 1 April 2001 Provision for the year Amortisation at 31 March 2002 Net book amount at 31 March 2002 Net book amount at 31 March 2001 32 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 32 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 10. Intangible fixed assets continued Negative goodwill arises of a consequence of the adoption of FRS19 and represents the excess of the value of the restated assets of Glenlake Limited over the consideration paid for those assets in June 1999. The restated assets include a sum of £6,892,000 representing the fair value of tax losses acquired with Glenlake Limited. The net asset value per share of Helical has been reduced at 31 March 2001 by 24p to 779p and, on a fully diluted basis, by 22p to 754p. 11. Tangible fixed assets Group Cost or valuation at 1 April 2001 Additions at cost Transfers Transfer from stock Disposals Revaluation Cost or valuation at 31 March 2002 Depreciation at 1 April 2001 Provision for the year Eliminated on disposals Depreciation at 31 March 2002 Investment Properties In course of development Short leasehold property & Freehold improvements £000 £000 Vehicles & office equipment £000 Total £000 Freehold £000 Leasehold £000 391,872 40,610 24,600 26,883 1,657 (64,452) 16,501 823 – – (610) 2,027 397,061 42,850 – – – – – – – – 21,125 5,758 (26,883) – – – – – – – – – 646 932 455,185 – – – – – 646 272 47 – 319 327 374 82 31,263 – – – 1,657 (46) – (65,108) 18,528 968 441,525 333 220 (32) 521 605 267 (32) 840 447 440,685 599 454,580 Short leasehold property & improvements £000 Vehicles & office equipment £000 Total £000 646 – – 646 272 47 – 319 327 374 916 82 (30) 1,562 82 (30) 968 1,614 318 220 (17) 521 447 598 590 267 (17) 840 774 972 Net book amount at 31 March 2002 397,061 42,850 Net book amount at 31 March 2001 391,872 40,610 21,125 Company Cost at 1 April 2001 Additions at cost Disposals Cost at 31 March 2002 Depreciation at 1 April 2001 Provision for the year Eliminated on disposals Depreciation at 31 March 2002 Net book amount at 31 March 2002 Net book amount at 31 March 2001 Interest capitalised in respect of the development of investment properties is included in tangible fixed assets to the extent of £2,244,000 (2001: £1,995,000). Interest capitalised during the year, at LIBOR plus 21⁄2%, in respect of investment properties in the course of development was £365,000 (2001: £672,000). Included in disposals is £22,360,000 of investment properties disposed of on the sale of Helical (TE) Limited. HELICAL BAR PLC REPORT AND ACCOUNTS 2002 33 Notes to the Financial Statements continued 11. Tangible fixed assets continued The investment properties have been valued on an open market basis at 31 March 2002 as follows: Healey & Baker, International Real Estate Consultants Allsop & Co, Chartered Surveyors DTZ Debenham Tie Leung, International Property Advisors Knight Frank, Chartered Surveyors Directors’ valuation The net surplus arising of £18,528,000 (2001: £39,320,000) has been transferred to the revaluation reserve. The historical cost of investment property is £299,435,000 (2001: £325,139,000). £000 306,630 40,500 22,165 2,810 67,806 439,911 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 2001 Acquired during year Provisions released At 31 March 2002 Group Company 31.3.02 £000 9,599 – 31.3.01 £000 9,546 – 31.3.02 £000 9,599 2,564 31.3.01 £000 9,546 2,291 9,599 9,546 12,163 11,837 31.3.02 £000 31.3.01 £000 31.3.02 £000 31.3.01 £000 9,546 – 53 3,656 5,890 – 11,837 273 53 5,908 5,929 – 9,599 9,546 12,163 11,837 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 2002 the Trust held 1,491,939 (2001: 1,262,102) ordinary shares in Helical Bar plc over which options had been granted. At 31 March 2002 the Trust held nil (2001: 229,837) ordinary shares over which no options had been granted. Interests in associates At 31 March 2002 the Group and the Company had interests in the following associated companies: Prescot Street Investments Ltd Grosvenor Hill (Sprucefields) Ltd Country of incorporation Class of share capital held United Kingdom United Kingdom Ordinary Ordinary Proportion held Group 50% 50% Company 50% 50% Nature of business Property investment Property investment 34 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 34 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 12. Fixed asset investments continued The Company’s principal subsidiary undertakings, all of which have been consolidated, are: Name of undertaking 48 Gracechurch Street Ltd 61 Southwark Street Ltd* Aycliffe and Peterlee Development Company Ltd Aycliffe and Peterlee Investment Company Ltd* Chancerygate (Albion) Ltd Chancerygate (Mill Street) Ltd Baylight Developments Ltd Glenlake Ltd* Harbour Developments (Bracknell) Ltd Helical Bar (Berkeley Square) Ltd Helical Bar (Bunhill Row) Ltd Helical Bar (Chiswell Street) Ltd* Helical Bar (City Developments) Ltd* Helical Bar (CL) Investments Ltd* Helical Bar (CL) Ltd* Helical Bar Developments Ltd Helical Bar Developments (South East) Ltd Helical Bar (Rex House) Ltd Helical Bar Services Ltd Helical Bar Trustees Ltd Helical Bar (Wales) Ltd* Helical Bar (Wood Street) Ltd Helical Properties Ltd Helical Properties (Basingstoke) Ltd* Helical Properties Investment Ltd Helical Properties Retail Ltd Helical (Fleet) Ltd Helical (HIS) Ltd Helical (Liphook) Ltd Helical (SA) Ltd Helical (Wednesfield) Ltd Helical (Westfields) Ltd Nature of business Investment Investment Development and trading Investment Trading Trading Investment Investment Development Development Development Development Development Investment Investment Development Development and trading Investment Management Services Trustee of Profit Sharing Scheme Development and trading Development Investment development and trading Investment Investment Investment Investment Investment Development (Jersey) Investment Investment Investment Intercontinental Land and Development Co. Ltd* Investment development and trading Networth Ltd* Helical (Interchange) Ltd Helical Properties (WSM) Ltd* Helical Retail Ltd Helical Retail (RBS) Ltd* Investment Investment Investment Development and trading Development and trading Percentage of ordinary share capital held 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% 100% 100% 90% 75% 75% 75% All principal subsidiary undertakings 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 2002 35 Notes to the Financial Statements continued 13. Stock Development sites Properties held as trading stock Group Company 31.3.02 £000 15,464 14,121 31.3.01 £000 22,249 5,612 29,585 27,861 31.3.02 £000 31.3.01 £000 141 – 141 13 – 13 Interest capitalised in respect of the development of sites is included in stock to the extent of £633,000 (2001: £443,000). Interest capitalised during the year in respect of development sites amounted to £641,000 (2001: £925,000). Group Company 31.3.02 £000 31.3.01 £000 31.3.02 £000 5,155 17,338 – 21 – – 31.3.01 £000 24 646 6,487 4,684 6,487 4,684 – 151 895 9,496 13,501 – 111,892 121,574 85 210 922 1,055 21,289 36,439 118,674 128,905 Group Company 31.3.02 £000 31.3.01 £000 31.3.02 £000 31.3.01 £000 1 1 1 1 – – – – Group Company 31.3.02 £000 3,247 28,300 43,967 31.3.01 £000 2,314 – 31.3.02 £000 31.3.01 £000 – – – – 29,527 39,021 22,016 75,514 31,841 39,021 22,016 14. Debtors Trade debtors Taxation Amounts owed by associated undertakings Amounts owed by subsidiary undertakings Other debtors Prepayments and accrued income 15. Current asset investments UK listed investments at cost The market value of listed investments at 31.3.02 was £1,000 (2001: £1,000). 16. Cash at bank and in hand Rent deposits and cash secured against debt repayable within one year Cash held to fund future development costs Free cash On 26 April 2002 the special dividend of £28,420,000 was paid, reducing the free cash balances. 36 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 36 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 17. Creditors: amounts falling due within one year Bank overdrafts and term loans Trade creditors Corporation tax 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 31.3.02 £000 3,316 11,021 4,053 207 30,765 4,820 53,754 31.3.01 £000 33,246 15,639 4,289 3,789 2,132 3,976 25,260 31.3.02 £000 – 568 3,961 – 30,765 112 540 31.3.01 £000 20,427 142 – – 2,237 255 1,057 107,936 88,331 35,946 24,118 Group Company 31.3.02 £000 31.3.01 £000 31.3.02 £000 31.3.01 £000 3,438 124,261 16,602 87,187 98,382 129,402 226,081 (1,484) 233,191 (1,796) 224,597 231,395 – – – – – – – – – – – – 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 £378,416,000 (2001: £410,098,000). These will be repayable when the underlying properties are sold. Bank overdrafts and term loans exclude the Groups’ share of borrowings in associated companies of £13,575,000 (2001: £9,496,000). HELICAL BAR PLC REPORT AND ACCOUNTS 2002 37 Notes to the Financial Statements continued 19. Financing and financial instruments The policies for dealing with liquidity and interest rate risk are noted in the Financial Review on pages 18 and 19. Short-term debtors and creditors Short-term debtors and creditors have been excluded from the following disclosures. Bank overdraft and loans – maturity Due after more than one year Due within one year Group 31.3.02 £000 31.3.01 £000 224,597 231,395 3,316 33,246 227,913 264,641 The Group has various undrawn committed borrowing facilities. The facilities available at 31.3.02 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 Interest rates Fixed rate borrowings – fixed – fixed – swap rate plus bank margin – swap rate plus bank margin Weighted average Floating rate borrowings Total borrowings Deferred arrangement costs Floating rate borrowings bear interest at rates based on LIBOR. Group 31.3.02 £000 10,000 10,000 86,233 31.3.01 £000 54,618 13,498 50,717 106,233 118,833 % 31.3.02 Expiry £000 % 31.3.01 Expiry £000 9.050 Feb. 2009 9,231 9.050 Feb. 2009 – – – 8.625 Sept. 2001 6.890 Oct. 2002 6.450 July 2002 50,000 49,000 6.890 Oct. 2002 6.450 July 2002 7.550 Dec. 2002 8.090 Mar. 2003 108,231 121,166 229,397 (1,484) 227,913 9,598 20,000 50,000 49,000 128,598 137,839 266,437 (1,796) 264,641 38 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 38 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 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 Future – collar Gearing Total borrowings Cash Net borrowings Net assets Gearing Value £000 Rate % Start Expiry 49,000 6.000-6.500 31,000 4.730-6.500 49,000 4.730 80,000 4.830-7.500 July 2004 Jan. 2006 Jan. 2006 Jan. 2006 80,000 4.800-7.000 Jan. 2006 Sept. 2009 31.3.02 £000 227,913 (75,514) 152,399 Restated 31.3.01 £000 264,641 (31,841) 232,800 239,109 234,830 64% 99% If the payment of the special dividend on 26 April 2002 were to be taken into account, the Group’s gearing level at 31 March 2002 would have been 76%. Fair value of financial assets and financial liabilities Borrowings Interest rate swaps Other financial instruments 31.3.02 31.3.01 Book Value £m Fair Value £m Book Value £m Fair Value £m 229,383 230,256 266,002 267,152 – (223) 1,242 565 – (223) 825 1,051 229,160 232,063 265,779 269,028 The fair value of financial assets and financial liabilities represents the mark to market valuations at 31 March 2002 and 31 March 2001. The adjustment to net assets from a recognition of these values, net of tax relief, would be to reduce diluted net asset value per share by 6p (2001: restated 7p). HELICAL BAR PLC REPORT AND ACCOUNTS 2002 39 Notes to the Financial Statements continued 20. Provision for liabilities and charges – deferred taxation Deferred taxation provided for in the financial statements is set out below: Accelerated capital allowances Other timing differences Less: – tax losses carried forward – discount Discounted provision for deferred tax Group Company 31.3.02 £000 5,822 754 6,576 (5,684) (164) 31.3.01 £000 5,112 745 5,857 (5,628) (42) 728 187 31.3.02 £000 31.3.01 £000 69 – 69 – (13) 56 46 25 71 (66) (1) 4 The Group has applied the provisions of FRS19 Deferred Tax, which requires that deferred tax be recognised as a liability or asset if the transactions or events that give the Group an obligation to pay more or less tax in the future have occurred by the balance sheet date. In accordance with FRS19, the Group makes full provision for timing differences other than revaluation gains and losses, which are primarily in respect of capital allowances on plant and machinery, industrial buildings allowances and tax losses. The adoption of FRS19 has resulted in an adjustment to the balance sheet at 31 March 2001 of £187,000 representing the discounted value of the potential clawback of capital allowances, net of available tax losses, as at that date. The amounts previously provided as at 31 March 2001 were nil. Amounts unprovided are: Unrealised capital gains Group Company 31.3.02 £000 31.3.01 £000 31.3.02 £000 31.3.01 £000 32,102 29,970 32,102 29,970 – – – – The amounts unprovided for as at 31 March 2001 have been restated to exclude those relating to accelerated capital allowances and other timing differences. The amounts previously unprovided as at 31 March 2001 were £25,923,000. 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 diluted net asset value per share by 99p (2001: restated 93p). 40 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 40 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 21. Share capital Authorised – 688,954,752 (2001: 688,954,752) ordinary shares of 5p each Allotted, called up and fully paid Attributable to equity interests: – 29,913,476 (2001: 29,911,697) ordinary shares of 5p each 31.3.02 £000 31.3.01 £000 34,448 34,448 34,448 34,448 1,496 1,496 1,496 1,496 Share options At 31 March 2002 options over 2,489,221 (2001: 2,491,000) new ordinary shares in the Company and 1,491,939 (2001: 1,262,102) purchased shares held by the ESOP had been granted to directors and employees under the Company’s share option schemes. During the year an option over 1,779 new shares with a nominal value of £89 was exercised. The increase in share premium account arising from this exercise was £7,783. Exercise price per share pence Number of shares Date from which exercisable Expiry date of options Senior Executive 1988 Share Option Scheme Subscription options Options granted: – 11 July 1997 – 29 September 1997 – 27 November 1997 Purchase options Options granted: – 27 November 1997 – 10 July 1998 Helical Bar 1999 Share Option Scheme Subscription options Options granted: – 8 March 1999 – 8 January 2001 Purchase options Options granted: – 8 March 1999 – 18 December 2000 – 8 January 2001 – 15 November 2001 Helical Bar 1999 Approved Share Option Scheme Subscription options Options granted: – 8 March 1999 412.5 467.5 452.5 452.5 565.0 365,000 11 July 2002 10 July 2007 100,000 29 September 2002 28 September 2007 394,000 27 November 2002 26 November 2007 206,000 27 November 2001 26 November 2004 400,000 10 July 2002 9 July 2005 442.5 1,547,768 8 March 2004 7 March 2009 780.0 30,000 8 January 2006 8 January 2011 442.5 750.0 780.0 766.5 93,000 8 March 2004 7 March 2009 529,000 18 December 2005 17 December 2010 34,102 8 January 2006 7 January 2011 229,837 15 November 2006 14 November 2011 442.5 52,453 8 March 2002 7 March 2009 3,981,160 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 41 Notes to the Financial Statements continued 22. Share premium and reserves Group At 1 April 2001 as previously stated Prior year adjustment At 1 April 2001 – restated Loss retained Revaluation of investment property – subsidiaries – joint ventures Disposal of subsidiary Minority interest in revaluation of investment property Realised on disposals Exercise of share options At 31 March 2002 Company At 1 April 2001 as previously stated Prior year adjustment At 1 April 2001 – restated Loss retained Exercise of shares options At 31 March 2002 Non-distributable Distributable Share premium account £000 Capital redemption reserve £000 Other reserves £000 Revaluation reserve £000 35,264 7,101 291 128,468 – – – – Profit & loss account £000 67,611 (7,079) 35,264 7,101 291 128,468 60,532 – – – – – – 7 – – – – – – – – – – – – – – – (15,272) 18,528 1,477 (444) (323) (5,606) – – – 127 – 5,606 – 35,271 7,101 291 142,100 50,993 35,264 – 7,101 – 1,987 – 35,264 7,101 1,987 – 7 – – – – 35,271 7,101 1,987 – – – – – – 93,777 (4) 93,773 (4,857) – 88,916 23. Reconciliation of operating profit to net cash inflow from operating activities Year Ended 31.3.02 £000 Year Ended 31.3.01 £000 34,098 44,270 267 (53) 7 52 179 – 10,429 22,212 (1,557) 253 – 16 64 – (1,144) 20,770 (6,766) (848) 65,634 56,615 Operating profit Depreciation of fixed assets Release of provision Loss on sale of fixed assets Amortisation of goodwill Dividends from associates Profit on sale of investments Decrease in debtors Increase/(decrease) in creditors Increase in stocks Net cash inflow from operating activities 42 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 42 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 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 in short-term deposits 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 Year Ended 31.3.02 £000 Year Ended 31.3.01 £000 2,632 591 (18,567) (20,881) (127) (292) (16,062) (20,582) 106 (5,073) 397 (6,182) (4,967) (5,785) (30,816) (43,739) 70,535 26,967 (76) 525 (100) – (547) 89 (6,327) 6,778 40,068 (16,779) 31.3.02 £000 31.3.01 £000 (20,285) (15,553) (20,285) (15,553) At 1.4.01 £000 Other non Cash Flow cash changes £000 £000 At 31.3.02 £000 31,841 23,388 20,285 75,514 (9) (6) – (15) 31,832 23,382 20,285 75,499 (33,237) 29,936 – (3,301) (233,191) 1,796 7,110 – – (312) (226,081) 1,484 (264,632) 37,046 (312) (227,898) (232,800) 60,428 19,973 (152,399) 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 £80m at 4.83% from January 2001 to January 2006, and on a further £80m 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 2002 (2001: nil). HELICAL BAR PLC REPORT AND ACCOUNTS 2002 43 Notes to the Financial Statements continued 28. Disposals During the year, the Group disposed of its interest in Helical (TE) Limited, a property investment company. Group profits include £163,000 earned by Helical (TE) Limited up to its date of disposal on 17 July 2001. Net assets disposed of were: Investment properties Debtors Intra-group loans Trade creditors Rental accrued, rent deposits and sinking fund Taxation Proceeds of sale Disposal costs Loss on sale of subsidiary 29. Capital commitments At 31 March 2002 nil (2001: nil). 30. Related party transactions At 31 March 2002 there is an amount due from Prescot Street Investments Ltd of £4,721,000 (2001: £4,684,000) and an amount due from Grosvenor Hill (Sprucefields) Ltd of £1,517,000 (2001: nil). £000 22,360 205 (22,069) (26) (412) (8) 50 (245) (195) 44 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 44 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 Ten Year Review Turnover Rental income Gross profit Profit before taxation Profit after taxation Ordinary dividends (Loss)/profit retained 31.3.02 £000 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 £000 136,632 165,259 149,922 121,244 214,416 100,529 22,374 21,482 26,656 22,009 28,642 31,384 65,948 50,521 24,982 24,816 19,186 16,294 12,118 13,810 44,986 22,573 17,220 32,328 56,301 43,482 39,004 38,775 29,284 21,697 16,475 12,713 16,895 25,824 22,020 20,044 18,494 12,033 20,353 20,501 16,392 14,436 3,570 3,223 31,338 1,552 7,811 9,032 1,666 3,564 (15,272) 16,657 17,201 (18,414) 9,200 7,892 1,189 3,666 8,187 7,655 1,058 3,785 6,578 6,049 944 5,882 5,632 783 3,451 3,951 Dividend per ordinary share 13.75p 12.50p 11.15p 10.0p 9.0p 8.0p 7.3p 6.5p 5.8p 4.8p Special dividend per ordinary share Diluted earnings per ordinary share Investment portfolio Shareholders’ funds 100.0p – – 100.0p – 2.0p – – – – 57.8p 67.7p 68.9p 51.5p 40.3p 28.3p 26.6p 26.3p 24.3p 29.0p 439,911 453,607 419,570 332,457 250,718 201,570 180,765 156,579 118,690 120,048 46,180 237,252 233,152 176,636 137,011 134,223 101,080 92,662 91,429 83,747 Diluted net assets per share 766p 754p 582p 459p 465p 372p 330p 326p 299p 224p *The financial statements to 31 March 1997 were for a 14 month accounting period. The financial statements for the years to 31 March 1998 and subsequently have been restated to reflect the impact of the adoption of FRS19 on Deferred Tax. HELICAL BAR PLC REPORT AND ACCOUNTS 2002 45 Corporate Governance Report The Company is committed to applying the highest principles of corporate governance. The Board is accountable to the Company’s shareholders for good corporate governance. This report and the Report on Remuneration describe how it complies with the provisions of the Combined Code. 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. 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. 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 supplies 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, and who 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 Board members are described on page 20. 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 48 to 51. It sets out the Company’s policy in detail and the full details of all elements in the remuneration package of each individual director. 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, and presentations to, its institutional shareholders to discuss objectives. The AGM is used to communicate with private investors and they are encouraged to participate. The members 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. The Company communicates with all shareholders through the issue of regular press releases and through its website at www.helical.co.uk. Shareholders may also keep informed of developments at the Company through the investor relations service at www.itruffle.co.uk. 46 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 46 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 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 senior 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. Such a system is designed to manage, but not eliminate, the risk of failure to achieve business objectives. There are inherent limitations in any control system and accordingly even the most effective system can provide only reasonable, and not absolute, assurance against material misstatement or loss. 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 end 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 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 2002 47 Report on Remuneration Directors’ 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 to determine 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 All members are independent non-executive directors. 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’ 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; long-term incentives; share option 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. 48 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 48 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 Remuneration in respect of directors was as follows: Chairman J. P. Southwell Non-executive directors C.G.H. Weaver A.R. Beevor Former non-executive director I.G. Butler Executive directors M.E. Slade N.G. McNair Scott G.A. Kaye P.M. Brown Salary/ Fees £000 Benefits in kind £000 Cash bonuses £000 Incentive plan £000 2002 Total £000 2001 Total £000 2002 Total £000 2001 Total £000 Pensions 45 25 25 – 510 190 225 190 15 – – – 26 18 18 26 – – – – – – 1,600 1,000 – – – – 60 25 25 – 58 25 24 23 1,370 456 456 456 1,906 664 2,299 1,672 2,334 808 3,735 1,809 1,210 103 2,600 2,738 6,651 8,816 – – – – 2 35 – – 37 – – – – 2 35 – – 37 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 of £2,299,000. (2001: Gerald Kaye, including the profit on exercise of share options during the year, £3,735,000). 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. Long term incentive plan At last year’s AGM, the Company obtained shareholder approval to introduce a new 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 previous Executive Bonus Scheme. Under the terms of the Incentive Plan awards will vest only if there is an increase in the net asset value of the Company and that increase is greater than that achieved by the upper quartile of the Investment Property Databank Index for capital growth of all properties, an ungeared benchmark. Awards are calculated in bands with the amount of the award increasing with the level of outperformance. Among other constraints, the Committee could restrict the awards if payment would affect the financial or trading position of the Group. The 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. For disclosure purposes the vesting value of awards has been included in remuneration. 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. Under this scheme options only vest if the increase in the net asset value per share is greater than that achieved by the upper quantile of the Investment Property Databank index for capital growth of all funds over a five year period. 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. HELICAL BAR PLC REPORT AND ACCOUNTS 2002 49 Report on Remuneration continued 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 require 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. 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 Type At Start of year Options granted in year At end of year Exercise price Date from which exercisable Expiry date Purchase 6,000 Purchase 400,000 Subscription 394,000 Subscription 493,221 Purchase Subscription 148,000 6,779 – – – – – – 6,000 452.5p 27.11.01 26.11.04 400,000 394,000 493,221 148,000 6,779 565.0p 10.07.02 09.07.05 452.5p 27.11.02 26.11.07 442.5p 08.03.04 07.03.09 750.0p 442.5p 18.12.05 08.03.02 17.12.10 07.03.09 1,448,000 – 1,448,000 Purchase Purchase 50,000 43,000 Subscription 250,000 Subscription 235,221 Purchase Subscription 72,000 6,779 657,000 Purchase 50,000 Subscription 393,221 Purchase 127,000 – – – – – – – – – – 452.5p 27.11.01 26.11.04 442.5p 08.03.04 07.03.09 412.5p 11.07.02 10.07.07 442.5p 08.03.04 07.03.09 750.0p 442.5p 18.12.05 08.03.02 17.12.10 07.03.09 50,000 43,000 250,000 235,221 72,000 6,779 657,000 50,000 442.5p 08.03.04 07.03.09 393,221 127,000 129,419 6,779 442.5p 08.03.04 07.03.09 750.0p 18.12.05 17.12.10 766.5p 442.5p 15.11.06 08.03.02 14.11.11 07.03.09 Helical Bar 1999 Share Option Scheme Helical Bar Approved 1999 Share Option Scheme Purchase Subscription – 6,779 129,419 – 577,000 129,419 706,419 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 Purchase 100,000 Subscription 100,000 Subscription 293,221 Purchase 106,000 – – – – Helical Bar 1999 Share Option Scheme Helical Bar Approved 1999 Share Option Scheme Purchase Subscription – 6,779 100,418 – 100,000 100,000 293,221 106,000 100,418 6,779 452.5p 27.11.01 26.11.04 467.5p 29.09.02 28.09.07 442.5p 08.03.04 07.03.09 750.0p 18.12.05 17.12.10 766.5p 442.5p 15.11.06 08.03.02 14.11.11 07.03.09 606,000 100,418 706,418 The market price of the ordinary shares at 31 March 2002 was 790.0p (2001: 742.5p). This market price varied between 690.0p and 887.5p during the year. 50 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 50 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 Special dividend In order to compensate option holders for the payment of a special dividend or a distribution of capital, the Board has, under the terms of the Senior Executive 1988 Option Scheme and the Helical Bar 1999 Share Option Scheme (‘the Schemes’), the authority to adjust the number of shares subject to option or the exercise price of those options. The Company is currently unable to increase the number of shares under option as the maximum number permitted has been reached. Accordingly, the Board has considered an adjustment to the exercise price equal to the amount of the special dividend per share. Such an adjustment would result in an increased national insurance cost to the Company. Accordingly, the Board has considered alternative ways of compensating option holders and, as a result, the Company is to establish a fund which will compensate holders of options at the time the special dividend was declared, on the dates they exercise their options by 100p a share, equivalent to the special dividend. At 31 March 2002 the amount provided for was nil. At the current share price the Company will benefit by a sum of £1.4m by using this route rather than reducing exercise prices. 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 21 June 2001, under the rules of the Scheme 14,171 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 21 June 2001 No. of shares 919 919 919 919 Price 870.0p 870.0p 870.0p 870.0p Subject to the approval of shareholders at the AGM on 24 July 2002 the Company intends seeking Inland Revenue approval for a Share Incentive Plan (“Plan”). This Plan will replace the Helical Bar Profit Sharing Scheme which is unable to allocate any further shares to employees. Further details of the Plan may be found in resolution 9 of the Notice of Meeting of the AGM. Service contracts The service contracts of each of the executive directors noted in table B on page 22 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. HELICAL BAR PLC REPORT AND ACCOUNTS 2002 51 Financial Calendar Year ended 31 March 2002 Annual General Meeting to be held Final ordinary dividend payable 24 July 2002 25 July 2002 Half year ending 30 September 2002 Results and interim ordinary dividend announced Interim ordinary dividend payable November 2002 December 2002 Year ending 31 March 2003 Results and final dividend announced Final ordinary dividend payable June 2003 July 2003 Advisors Registrars Capita IRG Plc Bourne House Joint stockbrokers Cazenove & Co 12 Tokenhouse Yard Merchant bankers Lazard Bros & Co Ltd 21 Moorfields 34 Beckenham Road London EC2R 7AN London EC2P 2HT Beckenham Kent BR3 4TU Credit Lyonnais Securities Europe (UK) Solicitors Ashurst Morris Crisp Broadwalk House 5 Appold Street London EC2A 2DA Clifford Chance Dechert Lawrence Graham Mishcon de Reya Norton Rose Olswang Auditors Grant Thornton Grant Thornton House Melton Street Euston Square London NW1 2EP Bankers Barclays Bank plc Credit Lyonnais HVB Real Estate National Westminster Bank plc The Royal Bank of Scotland plc Aareal Bank AG 52 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 52 HELICAL BAR PLC REPORT AND ACCOUNTS 2002 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. The Meadows, Camberley Designed and produced by Loewy Group +44 (0)20 7798 2000 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 2 Helical Bar Public Limited Company Report and Accounts 2002 Registered office 11-15 Farm Street London W1J 5RS 

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