H e l i c a l B a r p l c r e p o r t & a c c o u n t s 2 0 0 8 Helical Bar plc Registered Office 11-15 Farm Street London W1J 5RS Tel: 020 7629 0113 Fax: 020 7408 1666 email: info@helical.co.uk www.helical.co.uk Helical Bar plc Report & accounts 2008 Contents 4 Chairman’s statement 5 Chief Executive’s statement 7 Business review 10 Our approach 13 Portfolio statistics 16 Property portfolio 20 Performance and risk 24 Financial review 28 Corporate social responsibility 29 Environmental policy and objectives 30 The Board of Directors and senior management 31 Directors’ report 33 Corporate governance report 36 Directors’ remuneration report 43 Independent auditors report 45 Index to the financial statements 46 Consolidated income statement 47 Group and company balance sheets 49 Group and company statements of recognised income and expense 50 Group and company cash flow statements 51 Notes to the financial statements 77 Ten year review 78 Glossary of terms 79 Financial calendar 79 Advisors Contact details Helical Bar plc, 11-15 Farm Street, London, W1J 5RS Tel: 020 7629 0113 Fax: 020 7408 1666 email: info@helical.co.uk Website: www.helical.co.uk Financial highlights Profit before tax, revaluation and loss on sale of investment properties Diluted EPRA earnings per share Final dividend per share Diluted EPRA net asset value per share £8.5m 11.6p 2.75p 352p This Report was printed by Beacon Press using their pureprint® environmental print technology. The printing inks are made using vegetable based oils. The electricity was generated from renewable sources and 90% of the waste associated with this product will be recycled. Beacon Press is registered to environmental management system ISO 14001 and EMAS (Eco Management Audit Scheme). It is printed on paper made from Elemental Chlorine Free (ECF) pulps from well managed forests. The paper mill is registered to environmental management systems ISO 14001 and EMAS. s s e r p n o c a e b t n i r p | i . ] k u o c . n g s e d g s . w w w - [ i n g s e d g s n g i s e d Helical Bar plc report & accounts 2008 Helical Bar is a property development and investment company. We create shareholder value through a wide variety of high margin activities with property investment at our core. Change of use Mixed use development Office refurbishment Retail refurbishment Industrial development Property investment Asset management Retirement villages Overseas development Outsourcing Office development Retail development 1 Morgan Arcade Cardiff Helical Bar plc report & accounts 2008 Helical has produced a creditable performance in the year to 31 March 2008 against a background of considerable turbulence in the financial markets. Total shareholder return Total Returns Helical Bar plc UK Equity Market Listed Real Estate Sector index Direct Property – monthly data 1 year %pa (11.4) (7.7) (33.3) (10.7) 3 years %pa 19.0 9.5 6.8 7.7 Performance measured over 5 years %pa 10 years %pa 15 years %pa 20 years %pa 28.1 14.7 19.8 10.7 18.3 3.5 7.1 10.6 23.0 8.5 11.0 11.2 14.7 10.1 7.5 10.0 Source: New Bridge Street Consultants/Thomson Financial Total shareholder return measures the return to shareholders from share price movements and dividend income and is used to compare returns between companies listed on the London Stock Exchange. IPD (all monthly and quarterly valued funds) ungeared returns Total Returns Helical IPD Benchmark Helical’s percentile rank Source: Investment Property Databank 1 year %pa 3 years %pa Annualised over 5 years %pa 10 years %pa 18 years %pa (1.6) (8.5) 8 16.4 8.6 4 18.4 11.0 1 17.9 10.5 1 17.5 8.6 0 “0”= top ranked fund Note: excludes the surplus arising from the directors’ valuation of trading and development stock. The Investment Property Databank (“IPD”) produces a number of independent benchmarks which are regarded as the main indices of unleveraged commercial property returns. 3 Helical Bar plc report & accounts 2008 Chairman’s statement Helical has produced a creditable performance in the year to 31 March 2008 against a background of considerable turbulence in the financial markets. The Company is not immune to the impact of global events and these have undoubtedly had an adverse impact on the outlook for UK commercial property. Results Profits before the loss on sale and revaluation of investment properties fell from £19.5m to £8.5m reflecting a reduction in development profits to £6.1m (2007: £13.6m), no trading profits (2007: £2.1m) and a decline in our share of the results of our 50:50 joint ventures which showed a loss of £0.1m (2007: profit £6.2m). Administration costs reduced from £17.5m to £13.7m with performance related bonuses of nil (2007: £4.2m). Net finance costs increased from £0.4m to £1.7m as the consequence of increased borrowings and higher interest rates. Diluted loss per share was 13.5p (2007: earnings 53.7p) and diluted EPRA earnings per share were 11.6p (2007: 16.6p). As referred to in the Chief Executive’s Statement, valuation yields on our investment portfolio rose by 90 basis points, which was in line with the market and this caused a fall in values of 11.3% (2007: increase of 14.4%) reflected as a loss on revaluation of £32.6m (2007: gain £33.2m). A loss on sale of investment properties of £0.2m compares with a profit of £7.4m in the previous year. The Group’s diluted EPRA net asset value per share fell by 6% to 352p (2007: 374p). The directors’ valuation of trading and development stock showed a surplus of £43m (2007: £36m) and excluding this surplus the adjusted diluted net asset value per share fell by 8% to 306p (2007: 334p). In view of the uncertain economic outlook the Board is recommending to shareholders that the final dividend is maintained at the same level as last year at 2.75p per share. Under IFRS dividends are accounted for once approved and, as a consequence, this final dividend is not reflected in these accounts. However, taken with the interim dividend paid in December 2007 of 1.75p (2007: 1.60p) it represents a total dividend of 4.50p (2007: 4.35p), an increase of 3%. 4 Financing During the year we were happy to invest selectively in our development and trading portfolio with particular emphasis on retail warehousing in Poland and change of use. With expenditure of £90m net debt has increased to £205m at 31 March 2008 (2007: £134m). Gearing has increased, as a consequence, to 76% (2007: 47%). As at 17 June 2008, the Company had £14m of cash on deposit, over £65m of undrawn facilities and £170m of uncharged property. The Board During the year we were delighted to welcome Matthew Bonning-Snook and Jack Pitman to the main board in recognition of their contribution to our business over many years. Both have considerable experience in unlocking value through the planning process, working on mixed use projects and managing joint venture partnerships. Michael Brown has moved up to deputy Chief Executive working closely with Chief Executive, Michael Slade, on formulating the company strategy in these challenging times. Helical has a strong culture of personal commitment to the business with the main board executives having a 19% shareholding and between them on average over 15 years of service. I would like to extend my thanks to the tireless contribution of the rest of our staff and our many joint venture partners all of whom will be working hard to ensure Helical’s success during this demanding time. Outlook Whilst the property market is currently on a downward trend we take comfort in the latent potential of our development and trading portfolio. Profits released over the next couple of years from a diverse spread of activity including planning gain, retail warehouse development in Poland and retirement villages should drive our continued relative outperformance. The next 12 months will be a relatively difficult time for the sector and there may well be further setbacks to the economy during that time. However, I am confident that we have the skills, financial resources and diversity of projects to take advantage of whatever opportunities the future brings. Giles Weaver Chairman 17 June 2008 Helical Bar plc report & accounts 2008 Chief Executive’s statement The market The market has suffered a sharp correction as sentiment has finally turned against an overheated investment market. Whilst the pace of decline has slowed in recent months it now seems likely that property is entering a “double dip” as occupational markets weaken in deteriorating economic conditions. At Helical we are braced for a second consecutive year of poor returns in the commercial property market. Whether the market can stabilise in 2009 is entirely dependent on the underlying strength of the economy and whether a recession can be avoided. Helical anticipated the rise in yields by greatly reducing the proportion of its assets held in the investment portfolio and by diversifying its exposure into a broader spread of activities including retail warehouse developments in Poland, planning deals, mixed use developments and retirement villages. This approach has delivered an unleveraged return of 7% above benchmark returns as measured by IPD despite our valuation yields rising 90 basis points, in line with the market. There remains significant latent potential to be unlocked within our development and trading portfolio which should continue to mitigate any underlying slide in market values. With threats come opportunity and Helical has put together many of its best deals in difficult markets. We need to remain patient whilst the major adjustment in prices is unfolding. However, we expect to re-enter the market during 2009 and 2010 and rebuild our investment portfolio at prices that will serve us well during the next upswing in the property cycle. Michael Slade Chief Executive 17 June 2008 Our portfolio Investment Trading and development Total London offices 29.2% 0.5% 29.7% Provincial offices 2.5% 4.7% 7.2% In town retail 15.3% 1.2% 16.5% Out of town retail 4.4% 4.4% 8.8% Industrial 6.1% 12.2% 18.3% Change of use Retirement village 3.8% 12.9% 16.7% – 2.8% 2.8% Total 61.3% 38.7% 100.0% 5 Shepherds Building London W14 Helical Bar plc report & accounts 2008 Business review Our goals We seek to make excellent returns for our shareholders whilst avoiding the pitfalls of the commercial property cycle. We aim to achieve this through a broadly based, diversified property business, which has access to a very wide range of opportunities. We do this with a small, long serving management team who have a significant proportion of their own wealth invested in an 19% stake in the Company and have no competing interests. We try to keep execution risk to a minimum, working with first rate joint venture partners when we move into new areas of property business. R d e e t v a e i l l o p m e n t nt e strial m p elo v e d u d In R etailrefurbish m e nt Office refurbishment Property Property investment investment e O ffic e v e l o d n t e m p Retirement villages develop ment Mixed use O v e r s e a s d e v e l o p m e n t Asset Management O u t s o u r c i n g f o e g n a h C e s u 7 Helical Bar plc report & accounts 2008 Business review Planning We are specialists in unlocking value by obtaining planning consents for more valuable uses. During the year we acquired an office building in Fieldgate Street, London E1 where we believe value will be released by redevelopment as student accommodation. In Vauxhall, London, we are working with National Grid UK Pension Fund to secure a large residential allocation on an industrial estate fronting the Thames. Our biggest project is at White City where on behalf of a consortium of landowners we are master planning 4.5 million sq.ft. of residential and commercial space on 33 acres. During the year we acquired a brownfield site in Exeter to add to our holdings in Cambridge, Horsham and Great Alne (west of Stratford-upon-Avon) where we are seeking retirement village consents. Residential use is being sought on industrial sites in Fleet and Whitstable and on a greenfield site acquired during the year in Telford. In Milton Keynes we have gained consent for a 305,000 sq.ft. retail warehouse and leisure scheme and a trade park on separate sites. Change of use trade counter industrial leisure 8 residential hotel car showroom retail warehouse student accommodation retirement accommodation offices retail Residential flats at Morgan Department Store Cardiff Helical Bar plc report & accounts 2008 Business review Our approach Our spread of activities gives us the flexibility to deploy capital rapidly across our business and focus on whatever opportunities offer the best returns at different points of the property cycle 10 Mixed use development Retail development In recent years we have sought to create more sustainable development with a variety of complementary uses. In particular, we have incorporated residential uses into a number of our schemes. These include 440 flats above a supermarket in Milton Keynes, 700 student units above retail in Nottingham and 56 flats above retail in Cardiff. In all these cases we have reduced our market exposure by forward sales. We are working up a variety of projects for future development. In Wolverhampton we are converting a disused railway station into a casino pre-let to BIL and have sold a site for student housing having previously disposed of land parcels for residential, hotel, car showroom and a public house. During the year we were selected by the London Borough of Hammersmith in partnership with residential specialist Grainger to provide a scheme of 120,000 sq.ft. new civic offices, a food store, restaurants and 350 flats. We also signed a joint venture agreement with National Grid at High Wycombe to pursue a 100,000 sq.ft. retail and leisure scheme plus 125 residential units adjoining the new Eden Shopping Centre. At Parkgate, Shirley we continue land assembly for an 80,000 sq.ft. Asda supermarket together with 120,000 sq.ft. of retail and 200 residential units. In Bracknell we are planning a 300,000 sq.ft. office and residential scheme. We are currently focusing on our retail development in Poland where we have over 1 million sq.ft. of development planned in three projects. In Opole a 38,000 sq.m. scheme anchored by Carrefour with funding from Standard Life is due to commence in the Autumn. In Wroclaw a 9,600 sq.m. scheme is due to complete by the end of the year and is 60% preleased. Our largest scheme at Gliwice is 50,000 sq.m. and 60% preleased with commitments from Carrefour and Castorama and is likely to commence in Spring 2009. Office development We have a 20 year track record of building Grade A Central London office buildings, often in partnership with institutions and other landowners. We are managing the development of the new 320,000 sq.ft. Man Group HQ at Riverside House in the City for Pace Investments (City) Ltd and the City of London. In the West End we are refurbishing Clareville House, SW1 which comprises 35,000 sq.ft. of offices and 23,000 sq.ft. of leisure and restaurant space for National Grid Pension Fund. At Mitre House, EC3 we continue to work with the land owners seeking a pre-let for a 350,000 sq.ft. office scheme. Helical Bar plc report & accounts 2008 Business review Office refurbishment lndustrial development In partnership with Chancerygate and Quadrant we are building 140 units totalling over 580,000 sq.ft. for onward sale to owner occupiers at two sites in Oxford and at Southampton, Southall (West London) and Hailsham. In recent years we have completed successful schemes in Slough with Chancerygate and in Cambridge, Edenbridge and Harlow in partnership with Dencora. These schemes often include sales of parcels of land for hotels, car showrooms and self-storage and the development of trade counter schemes. We like to breathe new life into unloved, empty office buildings in and around Central London introducing some design flair and creating new hubs or communities of occupiers. In Battersea we recently converted an empty TV studio into offices with a communal bar and meeting space which is now let to over 20 different businesses. We are now in the process of doubling the floor space, building a second 50,000 sq.ft. on part of the car park which is due to complete in December. Investment properties Rex House, SW1, Shepherds Building, W12 and 61 Southwark Street, SE1 represent over £100m of buildings that we have refurbished in the past and retained for their growth potential. Our London holdings comprise circa 390,000 sq.ft. of offices fully let to 78 tenants generating a reversionary rent roll of £10.6 million, an average of just £27 per sq.ft. Retirement villages As part of our planning business we have obtained retirement village consents and in the past sold off the sites for development. At Cawston, Rugby we retained an interest in the development as a consortium member and following its success have elected to build out the first of three phases of our recently consented 147 unit scheme at Liphook. Construction is proceeding well and we have reservations on 24 units. Outsourcing The Asset Factor, our outsourcing joint venture, has continued to make good progress. NB Entrust, the joint venture between NB Real Estate and the Asset Factor, is a property operator that integrates management and service delivery in multi-let buildings where there are common services delivered under a service charge. The Asset Factor has been a driving force behind an investment in new management and systems with the aim of creating a market leading property and facilities management business. Alongside this operation the Asset Factor has established a number of related ventures. Asset Oncall is a helpdesk and asset management systems business set up to help clients improve the performance of their facilities management. Asset Faculty is a training business focused on developing the skills and performance of people in property support businesses. Asset Space is focused on managing and improving the performance of properties through non-lease income such as advertising, concessions and brand promotions. Governetz Our Helical Governetz venture is seeking to assist Government in securing its long term occupational needs in campus developments where shared facilities improve efficiency and reduce costs and where the new buildings meet all their environmental targets. Helical Governetz has secured agreements with owners of strategic sites in Rotherham, Keele and Newport. The campuses will be built to fit the needs of government organisations and private sector suppliers relocating as a result of the findings of the Lyons, Gershon and Varney reports, all of which call for fundamental changes in the way in which the Public Sector operates and is housed in the future. Quotient In January 2007 we acquired a research facility near Newmarket in a joint venture with the majority shareholder of Quotient who occupy the buildings. As part of the transaction we acquired a stake in Quotient, a fast growing biosciences company. 11 Battersea Studios London, SW8 Helical Bar plc report & accounts 2008 Portfolio statistics Investment portfolio Valuation movements Sector Offices Retail Industrial All Valuation yields Sector Offices Retail Industrial All Sector Offices Retail Industrial All Lease expiries and tenant break options Percentage of rent roll Number of leases Average rent per lease Valuation Movement Weighting Yield increase over 12 months Equivalent Initial Initial 7.2% 4.9% 4.9% 6.1% -5.1% -20.8% -9.8% -11.3% On letting voids 7.3% 5.4% 7.9% 6.8% 2008 5.6% 40 54% 33% 13% On rack rental value 8.2% 6.0% 7.9% 7.4% +100bp +130bp -120bp +90bp +120bp +80bp +40bp +90bp Equivalent True equivalent 7.2% 5.8% 7.8% 6.8% 7.5% 6.0% 8.1% 7.1% Average unexpired lease term 5.2 8.5 5.2 6.1 2011 19.2% 34 Capital value psf Vacancy rate (under offer) £330 £348 £50 £190 2009 10.8% 43 1% (0%) 11% (8%) 33% (10%) 9% (3.5%) 2010 6.8% 38 £25,500 £45,500 £32,500 £102,500 13 Helical Bar plc report & accounts 2008 Portfolio statistics Development and trading portfolio Project Type Change of use Industrial development for freehold sales Retirement village development Office development Retail development (Helical Poland) Others - mainly mixed development Book cost £m Directors’ valuation £m Surplus over book cost £m 57 59 13 20 16 17 80 61 22 20 25 17 23 2 9 0 9 0 43 Basis of valuation current site value current site value current site value current site value current site value current site value Total 182 225 Project Type Change of use Industrial development for freehold sales Retirement village development Office development Retail development (Helical Poland) Others – mainly mixed development Total Potential profit over directors’ valuation at current values £m 68 11 10 6 15 5 115 Basis of potential profit Planning consents gained* Development Development & assignment fees Development Development Development * The change of use portfolio has the potential to provide significant further development profits not included in these figures once planning consents have been obtained. 14 C4.1 Milton Keynes Helical Bar plc report & accounts 2008 Property portfolio Ongoing Projects Mixed use Developments Morgan Department Store, Cardiff Description 160,000 sq.ft. retail – Borders, TK Maxx, Moss Bros., Rossiters 56 flats, all forward sold. Completion 2008. C4.1, Milton Keynes 110,000 sq.ft. Sainsbury’s (forward sold). 440 residential units (forward sold). 35,000 sq.ft. of retail and offices. Completion 2008. Trinity Square, Nottingham 180,000 sq.ft. retail – Borders, TK Maxx, Dixons. 700 student units. Forward sold to Morley for over £100m. Completion 2008. King Street, Hammersmith Selected as Development Partner to Hammersmith & Fulham Borough Council. Joint venture with Grainger plc. Scheme comprises new civic offices (11,000 sq.m.), foodstore, restaurant/retail, and 350+ flats with a bridge linking to the River Thames. Application to be submitted 2008/9. Completion 2013/14. Amen Corner, Bracknell Land and options held for a gateway office/mixed use development off A329M. Bluebrick, Wolverhampton 11 acre site Individual land sales completed for 208 flats, 20,000 sq.ft. showroom, 88 bed hotel, 7,000 sq.ft. pub. Refurbishment ongoing of listed building pre-let for casino. Further 1.5 acres sold for student housing. Leisure Plaza, Milton Keynes Planning consent gained for 165,000 sq. ft. retail store, 65,000 sq. ft. casino, 50,000 sq. ft. ice rink, plus a further 25,000 sq. ft. of leisure. Lily’s Walk, High Wycombe 100,000 sq ft of retail/leisure, 125 residential units. Planning application to be submitted 2008. Parkgate, Shirley, Birmingham 200,000 sq.ft. retail – Asda (80,000 sq.ft.supermarket) and 200 residential units. Hagley Road West, Quinton, Birmingham Site assembly underway. 16,000 sq.ft. retail plus 15 residential units. Construction to commence 2008. Helical share 100%/I 50%/D 65%/D 50%/D 100%/D 75%/D 50%/D 80%/D 50%/D 75%/D Office Developments Riverbank House, London EC4 Description 320,000 sq.ft. pre-let to Man Group. Under construction. Clareville House, London SW1 Battersea Studios, London SW8, (phase 2) Downtown Glasgow Refurbishment of 35,000 sq.ft. offices plus 23,000 sq.ft. of restaurant, nightclub and retail. Construction started. 50,000 sq.ft. of new office development. Completion late 2008. 50,000 sq ft new office development. 30% pre-let to Glasgow School of Art. Completion early 2009. Mitre Square, London EC3 350,000 sq.ft. Site assembly ongoing. Forestgate, Crawley Refurbishment of 24,000 sq.ft. completed. Scheme for two new buildings of 21,000 sq.ft. and 18,000 sq.ft. Industrial Developments Description Scotts Road, Southall, West London 250,000 sq. ft. of industrial units for freehold sales. Construction of Phase 1 of 166,000 sq.ft. commenced 2007. 45,000 sq.ft. presold. Ropemaker Park, Hailsham 70,000 sq.ft. light industrial, 12,000 sq.ft. supermarket and 1,500 sq.ft. restaurant all sold. 30,000 sq.ft. trade park, 12,000 sq.ft. industrial and 7,000 sq.ft. ancillary to let. Millbrook Trading Estate, Southampton Construction of 65,000 sq ft of industrial units, 64,000 sq. ft. of trade counters commenced in 2008. 1 acre sold for self-storage. Phase 2 comprises 4 acres of industrial land. I – Investment D – Development T – Trading 16 Helical share Development management role/D Development management role/D 75%/I 70%/D 50%/D 75%/D Helical share 80%/D 50%/D 80%/D Helical Bar plc report & accounts 2008 Property portfolio Ongoing Projects Industrial Developments Watlington Road, Cowley, Oxford Langford Lane, Kidlington Tiviot Way, Stockport Retail Developments Opole, Poland Wroclaw, Poland Gliwice, Poland Description 71,000 sq.ft. of industrials and offices of which 56,000 sq.ft. sold. Phase 1 of 72,000 sq.ft. of industrial units completed. Phase 2, 15,000 sq. ft. completed and sold. 1 acre site for further sales. A planning application will be submitted in 2008 for 100,000 sq.ft. industrial, 49,000 sq.ft. trade counter, 20,000 sq.ft. self storage, 20,000 sq.ft. builders’ merchant and car showroom. Description 38,000 sq.m. out of town retail. Part pre-let to Carrefour. 50% preleased. Construction to commence 2008. Helical share 80%/D 80%/D 80%/D Helical share 50%/D 9,600 sq.m. out of town retail. 60% preleased. Construction due to complete by end of 2008. 50%/D 50,000 sq.m. out of town retail. 60% preleased to Carrefour and Castorama. Construction to commence 2009. 50%/D Retirement Village Developments Lime Tree Village, Rugby Description 154 bungalows, cottages and apartments being constructed in phases. 128 sold to date. Helical share 33%/D Bramshott Place, Liphook Construction commenced in 2008 of 45 unit Phase 1 of 147 unit scheme. 90%/D Projects with change of use potential White City, London W12 Description Planning consent to be sought for 4.5 m sq.ft. residential on 33 acres. Vauxhall, London SW8 In partnership with National Grid UK Pension Fund we are seeking to gain consent for a large residential led mixed-use development on a Thames-side industrial estate. Helical share Consortium landowner and development manager/D Profit share/D Fieldgate Street, London E1 Planning consent sought for 14,000 sq. ft. of retail and 350 student residential units. St Loye’s College, Exeter 18 acre site currently used as a college. Potential for retirement village use, planning application to be submitted for 225 units in 2008. Ely Road, Milton, Cambridge 32,000 sq.ft. of industrial on 20 acres. Planning application to be submitted in 2008 for 120 unit retirement village. Maudslay Park, Great Alne 314,000 sq.ft. industrial estate on a 20 acre site with potential for up to 175 retirement home units. Cherry Tree Yard, Faygate, Horsham Waterside, Fleet Former sawmill on 15 acres. With potential for 175 retirement home units. 54,000 sq.ft. of industrial property on 5 acres with potential for 207 residential units. Thanet Way, Whitstable 80,000 sq.ft. of industrial on 6 acres with potential for 236 residential units. Arleston, Telford 19 acre greenfield site with residential potential. Winterhill, Milton Keynes 28,000 sq.ft. of warehouses and offices with trade counter consent and retail warehouse potential. Cardiff Royal Infirmary Vacant hospital on a peppercorn lease with residential potential. Cawston, Rugby 32 acre greenfield site with potential retirement village. I – Investment D – Development T – Trading 67%/D 90%/D 90%/D 90%/D 90%/D 75%/I 90%/D 90%/D 50%/I 75%/I 40%/D 17 Helical Bar plc report & accounts 2008 Property portfolio Income producing assets Offices Rex House, Lower Regent Street, London SW1 Description 80,000 sq.ft. office building refurbished in 2001. Short leasehold expiring 2035. Acquired vacant in 2000. Helical share 100%/I Shepherds Building, Shepherds Bush, London W14 150,000 sq.ft. of studio offices refurbished in 2001 and let to over 50 tenants. Acquired vacant in 2000. 61 Southwark Street, London SE1 200 Great Dover Street, London SE1 66,000 sq.ft. of offices that have been subject to a rolling refurbishment plus a penthouse floor addition. Acquired 1998. 36,000 sq. ft. of offices. Acquired 2008. Battersea Studios, London SW8 55,000 sq.ft. of media style offices refurbished in 2006. Acquired vacant in 2005. Quotient HQ, Fordham, Newmarket 70,000 sq.ft. of R&D space and offices on a 32 acre landscaped site. Acquired 2007. Amberley Court, Crawley Partial refurbishment of 31,000 sq.ft. office campus. Retail in-town Morgan & Royal Arcades, Cardiff Description 56 units to be subject to intensive management on completion of the adjoining development at the David Morgan Department Store. Acquired 2005. 1-5 Queens Walk, East Grinstead Glasgow Portfolio 37,000 sq.ft. of retail opposite a proposed new retail scheme. Acquired 2005. Two unit shop investments and part of a multi-let office block, all in Glasgow City Centre. Acquired 2005. Retail out-of-town Otford Road Retail Park, Sevenoaks Description 43,000 sq.ft. with open A1 consent let to Wickes, Currys and Carpetright. Acquired 2003. Stanwell Road, Ashford 32,000 sq.ft. Focus DIY store. Acquired 2004. 215 Brixham Road, Paignton 24,000 sq.ft. Focus store with open A1 consent (including food). Acquired 2005. Industrial Westgate, Aldridge Dales Manor, Sawston, Cambridge Standard Industrial Estate, North Woolwich Description 208,000 sq.ft. 184,000 sq.ft. let during year. Acquired 2006. 70,000 sq.ft. multi-let estate. Acquired 2003. 50,000 sq.ft. estate. Acquired 2002. Hawtin Park, Blackwood 251,000 sq.ft. estate, part vacant. Acquired 2003. Golden Cross, Hailsham 102,000 sq.ft. unit recently vacated. Acquired 2001. Bushey Mill Lane, Watford 24,000 sq.ft. income producing with development potential. Acquired 2006. I – Investment D – Development T – Trading 90%/I 100%/I 100%/I 75%/I 53%/I 90%/I Helical share 100%/I 87%/I 100%/I/T Helical share 75%/I 75%/I 67%/I Helical share 80%/I 67%/I/D 60%/I 100%/I 100%/I 80%/D 19 Total Shareholder Return Total Shareholder Return (“TSR”) measures the return to shareholders from share price movements and dividend income and is used to compare returns between companies listed on the London Stock Exchange. Management is incentivised to exceed the top quartile of the real estate sector. Helical’s TSR for the year to 31 March 2008 was -11.4% (2007: 9.7%) compared to the median of the listed real estate sector of -33.3% (2007: 22.1%). Net asset value Net asset value per share represents the share of net assets attributable to each ordinary share. Whilst the basic and diluted net asset per share calculation provide a guide to performance the property industry prefers to use an adjusted diluted net asset per share. The adjustments necessary to arrive at this figure are shown in note 34 to these accounts. Management is incentivised to exceed 15% p.a. growth in net asset value per share. The adjusted diluted net asset value per share, excluding trading stock surplus, at 31 March 2008 was 306p (2007: 334p). Including the surplus on valuation of trading and development stock, the diluted EPRA net asset value per share at 31 March 2008 was 352p (2007: 374p). Diluted EPRA triple net asset value per share was 335p (2007: 346p). Helical Bar plc report & accounts 2008 Performance and risk A property company’s share price should reflect growth in net assets per share. Our Company’s main objective is to maximise growth in assets from increases in investment portfolio values and from retained earnings from other property related activities. Risk is an integral part of any company’s business activities and Helical’s ability to identify, assess, monitor and manage each risk to which it is exposed is fundamental to its financial stability, current and future financial performance and reputation. Key Performance Indicators and Benchmarks We incentivise management to outperform the Company’s competitors by setting the right levels for performance indicators against which rewards are measured. We also design our remuneration packages to align management’s interests with shareholders’ aspirations. Key to this is the monitoring and reporting against identifiable performance targets and benchmarks. For a number of years we have reported on these, the most important of which are: Investment Property Databank The Investment Property Databank (“IPD”) produces a number of independent benchmarks of property returns which are regarded as the main industry indices. They have compared the ungeared performance of Helical’s total property portfolio against that of portfolios within IPD for the last 18 years. The Company’s annual performance target is to exceed the top quartile of the IPD database. Helical’s ungeared performance for the year to 31 March 2008 was -1.6% (2007: 24.1%) compared to the IPD median benchmark of -8.5% (2007: 15.8%) and upper quartile benchmark of -6.3% (2007: 17.2%). IPD (all monthly and quarterly valued funds) Ungeared returns 31.3.08 31.3.07 31.3.06 % % % Total Returns Helical (1.6) IPD upper quartile (6.3) Percentile rank 8 24.1 17.2 5 25.9 22.8 10 The returns on shareholder capital earned by Helical are generally higher than those measured by IPD due to the use of gearing. The returns noted above take no account of the £43m (2007: £36m) surplus of trading and development stock above book value arising from the directors’ valuation. 20 Helical Bar plc report & accounts 2008 Performance and risk Risk Management Risk governance The responsibility for the governance of the Company’s risk profile lies with the Board of Directors of Helical. The Board is responsible for setting the Company’s risk strategy by assessing risks, determining its willingness to accept those risks and ensuring that the risks are monitored and that the Company is aware of and, if appropriate, reacts to, changes in those risks. The Board is also responsible for allocating responsibility for risk within the Company’s management structure. Strategic risks Strategic risks are those risks that may adversely affect the Company’s financial performance by following an inappropriate strategy or by the failure to execute an appropriate strategy. Strategic risks arise over a long time frame where there are fundamental differences between the business environment in which the Company operates and the environment assumed on the establishment of that strategy. The Company’s reputation is a key component of our ability to achieve its strategic goals and success in meeting these goals depends not only on the effective management of risks but also on the maintenance of its reputation among stakeholders i.e. employees, investors, regulators, business partners, financial institutions and the public. The other main strategic risks identified by the Company include: – long-term under-performance of the real estate sector compared to alternative forms of investment e.g. equities, gilts; – regulatory changes which significantly impact on the attractiveness of real estate as an investment compared to alternative forms of investment, or on the attractiveness of investing in real estate through a listed company; – the effect of global events e.g. oil prices, international conflicts and terrorism, economic impacts of global inflation/ depressions on UK real estate in general and on London, as a financial centre, in particular; – macro-economic changes such as interest rate rises affecting yields achievable on real estate; – overdependence on an inadequate level of business relationships restricting an ability to source opportunities; and, – retention of key senior employees. The principal strategic risks noted above and the underlying drivers of such risks are monitored by management and discussed in the annual update of a five year Business Plan presented by the Company’s Finance Director to the full Board each year. In addition the Company receives regular updates on the impact of economic scenarios on the real estate sector as well as subscribing to a number of economic journals in order that senior employees are kept up-to-date. The Board has a schedule of matters specifically reserved to it for decision. The Board controls the business but delegates day-to-day responsibility to the executive management. However, there are a number of matters which are required to be or, in the interests of the Company, should only be decided by the Board of Directors as a whole. The Board monitors the financial performance of the Company at quarterly Board meetings where comparisons against budgets and forecasts are made together with a review of key performance indicators. The remuneration packages of senior directors and employees are seen as the key to their retention and motivation. These remuneration packages are designed to provide a basic level of salary at the lower to mid-range of the Company’s peer group but with cash bonuses and share awards at the top end of the peer group rewarding outperformance compared to that peer group. Risks to the Company’s reputation are mitigated by the adoption of an internal Code of Conduct and “whistle-blowing” procedures which are reviewed annually. The most recent annual review of the strategic risks faced by the Company indicate that the business of Helical is appropriate to the business environment in which it competes. Market conditions in the period under review have had an adverse impact on the Company with investment values and the Company’s share price falling. However, the Company anticipated these conditions by greatly reducing its investment portfolio and by diversifying into a broader spread of activities. As a consequence, the Company’s property portfolio outperformed benchmark returns, as measured by IPD, by 7% and the 11.4% fall in Total Shareholder Return for the Company in the year to 31 March 2008 compares to a fall of 33.3% for the Listed Real Estate Sector Index. Operational risks Operational risk is the risk that the Company may suffer a loss from inadequate internal processes, systems, resources, incorrect decision-making or through external events. Losses from operational risk can arise from: – people-related issues such as inadequate resources, skills or departure of key personnel; – software or hardware failure, inadequate IT security, failure of back-up facilities; – incorrect or inappropriate use of valuation models, inappropriate gearing levels, breaches of authorisation levels; – fraud from internal or external sources; – external events leading to a loss of a major provider of services e.g. contractor failure. The Company’s approach is not to eliminate operational risk, but rather to identify the areas in which it might arise and to contain it within acceptable limits through the application of effective controls. Ultimately, the management of operational risk is dependent upon the application of sound management judgement. The close involvement of the executive directors in the day-to-day running of the business is critical to that judgement. The Company has not suffered any material losses arising from exposure to operational risks in the year under review. 21 Liquidity risks Liquidity risks arise from having insufficient financial resources to enable the Company to meet its obligations as they fall due, or can only secure them at an excessive cost. Liquidity risks also arise where the Company has insufficient resources to enable investment decisions, arising from its assessment of market risks, to be executed. The Company finances its operations from the cash flow generated by its operations, bank borrowings, both secured and unsecured and over short-, medium- and long-term periods, and from the capital markets through share issues. The management of cash and debt is monitored daily with medium-term cash flows prepared weekly and long-term cash flows discussed regularly in management meetings and presented to the Board annually. The Company’s overall approach is to provide sufficient liquidity to be able to meet, from cash resources and available facilities, the expected requirements of the business. The guiding principle is to ensure that funding is obtained from diverse providers with a range of maturities, backed up by interest rate protection where appropriate. This is to ensure that a stable flow of financing is available and to provide protection in the event of market disruption. The Company’s cash resources, bank borrowings, interest rate protection and gearing are noted on pages 64 to 69. Credit risks Credit risk is the possibility that the Company may suffer a loss from the failure of its tenants, borrowers, suppliers or other counterparties to meet their financial obligations to the Company, including their failure to meet them in a timely manner. It includes the risks that the Company may suffer a loss as a result of guarantees to third parties. Credit risk in order to earn a return is not a central feature of the Company’s business activities, rather it is a consequence of those activities. The Company is exposed to credit risk in respect of the financial stability of the tenants and potential tenants in its real estate portfolio. It is also exposed to credit risk where cash flows from the sales of real estate, whether investment or trading properties or funded developments, are deferred. The potential failure of major suppliers such as contractors or sub- contractors also exposes the Company to credit risk. Guarantees to third parties, such as banks, where the Company is in joint venture with partners expose the Company to risks that those partners are unable to fulfil their obligations. The financial assessment of tenants, potential tenants, contractors and potential partners are part of the daily routine of the Company. The assessment of these third parties is undertaken by the finance department in discussion with the executive responsible for the real estate decision. In the year under review bad debts constituted less than 1.25% of gross rental income and no other third parties resulted in a loss arising in the Company from their financial position. Helical Bar plc report & accounts 2008 Performance and risk Market risks Market risks arise from the possibility that the Company may suffer reduced income or a loss resulting from fluctuations in the values of, or income from, its real estate portfolio. Market risk is a key component of the Company’s long-term strategy with exposure to the various real estate sectors fluctuating as perceptions of the future performance of each of those sectors change. Net asset value growth, a key performance indicator, is dependent upon an ability to move easily between sectors at the appropriate time. The Company’s directors constantly analyse fluctuations in market movements using evidence gathered from a variety of public and personal sources, using this analysis to determine the future direction of real estate investment. Selecting the most appropriate level of exposure to each sector is fundamental to the success of the Company. Measuring that success is undertaken by comparing the Company’s portfolio returns over short-, medium- and long-term periods with those as reported by Investment Property Databank (IPD), the source of the main real estate sector indices. In the year under review, and over the medium- and long-term, the Company’s performance compares favourably with the rest of the sector as reported by IPD on pages 3 and 20. 22 Helical Bar plc report & accounts 2008 Financial review Consolidated Income Statement Loss before tax The loss before tax was £24.3m (2007: profit £60.1m) resulting principally from a loss on sale and revaluation of investment properties of £32.8m (2007: gain £40.6m), a reduction in development profits to £6.1m (2007: £13.6m) and a lower contribution from the Company’s joint ventures. Adjusted profit before tax, which excludes the loss on sale and revaluation of investment properties, was £8.5m (2007: £19.5m). Loss after tax was £12.3m (2007: profit £52.1m). Rental income Net rental income for the year rose to £16.4m (2007: £14.8m) reflecting constant gross rental income and reduced rental costs of £1.8m (2007: £3.3m). Trading and other profits There were no trading profits in the year (2007: £2.1m). Development profits The development programme generated profits at the office schemes at Riverbank House, London EC3 and Clareville House, London SW1 and the retail schemes at Wolverhampton, Luton and Nottingham. Developments Profits 2008 £000 6,068 2007 £000 13,587 2006 £000 4,594 Share of results of joint ventures During the year profits recognised on the mixed use scheme at C4.1 Milton Keynes were offset by our share of the costs of operating the joint venture with The Asset Factor resulting in a loss of £0.1m (2007: profit £6.2m). Loss on sale and revaluation of investment properties During the year to 31 March 2008 the Group sold investment properties with book values of £6.3m (2007: £45.6m) on which it made a £0.2m loss (2007: £7.5m profit). The properties sold included an industrial unit near Cambridge and a small retail unit in Glasgow. The revaluation deficit for the year was £32.6m (2007: surplus £33.2m). Administrative expenses Administrative expenses decreased to £13.7m (2007: £17.5m) as no directors’ bonuses were paid in respect of the year (2007: £4.2m). Administrative expenses, before impairment of goodwill, share based payments charge and executive bonuses, increased to £6.9m (2007: £6.1m) reflecting a small increase in the number of employees and a rise in accommodation costs. Finance costs, finance income and derivative financial instruments Increases in borrowings and higher interest rates during the year led to an increase in interest costs. However, capitalised interest offset some of the higher interest costs with net finance costs being £3.0m (2007: £2.7m). Finance income earned on cash deposits increased to £2.6m (2007: £1.3m). Net finance costs Interest payable on bank loans Other interest payable Finance arrangement costs Interest capitalised Finance costs Finance income 2008 £000 11,901 265 163 (9,296) 3,033 2,579 2007 £000 8,437 228 114 (6,069) 2,710 1,335 2006 £000 7,638 2,346 234 (2,797) 7,421 1,295 Derivative financial instruments have been valued on a mark to market basis and a deficit of £1.3m (2007: surplus £1.0m) has been recognised in the Income Statement. Foreign exchange gains A foreign exchange gain of £1.9m (2007: nil) has been recognised based on the translation of balances with the Group’s Polish subsidiaries. 24 Helical Bar plc report & accounts 2008 Financial review Taxation The Group corporation tax charge for the year is less than the standard rate of 30% due to the use of capital allowances, tax relief on share awards and tax losses. The deferred tax credit for the year reflects a reduction in the provision for tax on revaluation surpluses as a result of the decline in the value of the investment portfolio and a reduction in the provision for tax on temporary differences between the carrying amount of assets and liabilities in the financial statements and their corresponding tax bases in accordance with IFRS. Dividends The Board is recommending to shareholders at the Annual General Meeting on 23 July 2008 a final dividend of 2.75p per share (2007: 2.75p) to be paid on 25 July 2008 to shareholders on the register on 27 June 2008. This final dividend, amounting to £2.4m (2007: £2.5m) has not been included as a liability at 31 March 2008, in accordance with IFRS. Dividends Interim Prior period final Total 2008 pence 1.75 2.75 4.50 2007 pence 1.60 2.45 4.05 (Loss)/earnings per share Loss per share in the year to 31 March 2008 was 13.5p (2007: earnings 58.0p) per share and on a diluted basis was a loss of 13.5p (2007: earnings 53.7p) per share. (Loss)/earnings per share (Loss)/earnings per share Diluted (loss)/earnings per share Diluted EPRA earnings per share 2008 pence (13.5) (13.5) 11.6 2007 pence 58.0 53.7 16.6 2006 pence 1.45 2.20 3.65 2006 pence 54.7 51.8 12.2 (Loss)/earnings per share calculations are based on the weighted average number of shares held in the year. This is a different basis to the net asset value per share calculations which are based on the number of shares at 31 March 2008. In accordance with IAS 33 on Earnings per Share, no weighting adjustments have been made for share awards in existence during the year to 31 March 2008 as a loss was made during that year making the adjustment anti-dilutive. Accordingly, the basic and diluted loss per share for the year are the same. Diluted EPRA earnings per share excludes from earnings the IFRS effects of including the loss on sale and revaluation of investment properties (net of tax) and fair value movement on derivative financial instruments. Consolidated Balance Sheet Investment portfolio During the year investment properties with a book value of £6.3m were sold and £12.2m of new properties were acquired. In addition, around £19.4m of capital expenditure was spent on refurbishing various office, industrial and retail buildings. At 31 March 2008 there was a revaluation deficit of £32.6m (2007: surplus of £33.2m) on the investment portfolio. Investment portfolio Cost or valuation at 1 April Additions at cost Disposals Joint venture share of revaluation Revaluation Amortisation of finance lease Cost or valuation at 31 March 2008 £000 316,025 31,603 (6,250) (2,044) (32,554) (2) 2007 £000 294,583 28,965 (45,638) 4,938 33,180 (3) 2006 £000 271,315 40,231 (57,565) 4,869 35,733 – 306,778 316,025 294,583 25 Helical Bar plc report & accounts 2008 Financial review Net asset values The performance of the Company in the year to 31 March 2008 has decreased equity shareholders funds, on which the net asset value per share is calculated, by £13.7m. This has led to a 6% decrease in diluted net assets per share to 289p (2007: 307p). Taking into account the surplus arising from the directors’ valuation of trading and development stock of £43m (2007: £36m), the diluted EPRA net assets per share decreased by 6% to 352p (2007: 374p). Net asset values per ordinary share Diluted – 1 Adjusted diluted – 2 Diluted EPRA – 3 Diluted EPRA triple net asset value – 4 2008 pence 289 306 352 335 2007 pence 307 334 374 346 2006 pence 253 278 309 284 1 – net asset value diluted for share options. 2 – net asset value as per 1, but after adding back deferred tax on revaluation surpluses and capital allowances and the fair value of financial instruments. 3 – net asset value as per 2, but after adding surplus from fair value of trading and development properties. 4 – net asset value as per 3, less the deferred tax on revaluation surpluses and capital allowances and the fair value of financial instruments. Borrowings and financial risk The Group’s purchases of development sites have increased debt and, at 31 March 2008, net debt had increased from £134.0m to £205.5m. Taken with a decrease in net assets of £13.5m, the increase in net debt combined to increase the Group’s net gearing from 47% to 76%. The value of the Group’s investment, trading and development portfolio at 31 March 2008 was £532.3m (2007: £463.2m). With net borrowings of £205.5m (2007: £134.0m) the ratio of net borrowings to the value of the property portfolio was 38.6% (2007: 28.9%). At 31 March 2008, the Group had £87.7m (2007: £40.9m) of fixed rate borrowings with an average effective interest rate of 6.33% (2007: 6.19%) and an average length of 3.4 years (2007: 2.7 years), and £80m of interest rate caps at 7% (2007: £80m at 7%). Net debt and gearing Net debt Gearing £m % 2008 205.5 76 2007 134.0 47 2006 112.7 49 The Group 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 £76m of undrawn bank facilities and cash of £17.1m (2007: £3.4m). In addition it had £179m (2007: £195m) of uncharged property on which the Group could borrow funds. As at 17 June 2008, Helical’s average interest rate was 6.5%. Performance Measures In order to evaluate its overall performance against other small to mid-size capital companies, both in the UK and abroad, Helical looks at equity value added. Equity value added Year ended 31 March Capital employed Return on capital Weighted average cost of capital Spread Equity value (lost)/added Nigel McNair Scott Finance Director 17 June 2008 26 £m % % % £m 2008 427 1.3 7.1 5.8 (24.8) 2007 411 21.6 7.7 13.9 46.7 2006 336 19.7 7.0 12.7 44.1 Helical Bar plc report & accounts 2008 Corporate social responsibility Helical Bar plc recognises and acknowledges that the conduct of its business has an impact on its employees, its partners, its customers and suppliers and the economy, community and environment of its property portfolio. An indication of the Company’s commitment to good corporate social responsibility is its inclusion on the FTSE4Good UK Benchmark Index, a benchmark index of companies which meet criteria set down by EIRIS (Ethical Investment Research Service) on environmental, social and ethical performance. The criteria established by EIRIS encompass corporate governance, environment, human rights, stakeholder issues, employee issues and customers and suppliers. The Company’s corporate governance policies are noted on pages 33 to 35 and on the environment on page 29. The Company has no business activities in any countries which have unacceptable human rights records. The Company’s relationship with its key stakeholders, its shareholders, is noted on page 35. Employees Helical Bar plc is committed to non-discrimination in all its forms and actively supports the training and development of all its employees. The Company’s Code of Conduct, which all employees are required to follow, is designed to ensure that the Company complies with laws and regulations, acts fairly in dealing with customers and suppliers, maintains integrity in financial reporting and treats employees fairly and equally. The Company actively encourages participation in the ownership of the business through the operation of a Share Incentive Plan authorised by shareholders at the 2002 AGM. This Plan replaced the Profit Sharing Scheme which had operated since 1997. All employees are eligible to benefit from Company contributions into personal pension plans or into the Company’s Stakeholder Pension Plan. The Company employs 24 staff including executive Directors. The average length of service (broken down in the table below) reflects the Company’s ongoing commitment to attract and retain the best people who add value to the business, through competitive remuneration and benefits packages. Total People Average Period of Service (years) Directors & Management Finance Administration 9 6 9 13 8 5 The Company has introduced a Cycle to Work Scheme during the year in which all permanent employees are entitled to participate. Statement of General Health and Safety Policy Helical Bar’s policy is to develop a culture throughout its organisation that is committed to the prevention of injuries and ill health to its employees or others that may be affected by its activities. 28 The Board of Directors and senior staff are responsible for implementing this policy throughout the Company and must ensure that health and safety considerations are always given priority in planning and in day-to-day activities. Helical Bar recognises its legal responsibility for health and safety. The Chief Executive has overall responsibility for policy formulation, development and implementation. The Company shall liaise and co-operate with the appropriate authorities and will obtain expert advice where necessary to determine the risks to health and safety in its activities. Facilities are provided for employer/employee consultation on health and safety matters. All employees are expected to co-operate with the Company to achieve the objectives of this policy and must ensure that their own work, so far as is reasonably practicable, is carried out without risk to themselves or others. The Company is committed to providing relevant information and necessary ongoing training to employees in respect of risks to health and safety, which may arise out of their activities or at their workplace. This policy statement will be displayed prominently at all Company offices and the organisation and arrangements for implementing this policy will be available at all Company offices for reference. The policy will be reviewed and updated as necessary and any revisions will be communicated to those affected by the changes. Community involvement Helical Bar plc has for many years joined in efforts to raise money for charitable causes. In 2007, the Company organised an entry under the Helical banner into the London to Brighton Bike Ride and was awarded the prize for top fundraisers at the event, raising over £110,000 for the British Heart Foundation. In 2008 employees of the Company took part in the Land Aid fun run in Battersea Park. The Company’s Chief Executive, Mr Michael Slade, is President of the Land Aid Charitable Trust, a charity established in 1985 to focus the fundraising efforts of the property industry. Land Aid’s mission is to support the homeless and vulnerable by raising funds to help provide accommodation, assist in refurbishment projects and give financial assistance where needed. The Charity organises several fundraising events each year. The Company also makes charitable donations in its own right and in the year under review the donations amounted to £28,850 (2007: £45,485), which includes donations to Royal Marsden Cancer and the Reform Research Trust. Ethical concerns The Company has adopted a Code of Ethics which sets out its approach to its business principles and provides details of good business practices promoted by the Company. It includes a clear policy statement that the Company does not condone any form of corrupt behaviour in its business dealings. The Company has also adopted an Equal Opportunities Policy which sets out its determination to treat all employees in accordance with that policy. Helical Bar plc report & accounts 2008 Environmental policy and objectives Helical Bar plc is a property development and investment company. Our activities comprise the development of commercial and industrial property and the management of a portfolio of offices, retail and industrial properties in the UK. We recognise our responsibility to reduce any adverse environmental impacts arising from our business activities and we will try to improve the environment wherever possible. Working within the existing regulatory framework and complying with all the environmental legislation that applies to our activities, we also seek to continuously improve our environmental performance by moving beyond compliance, wherever practicable, and achieving good environmental standards in both our developed and managed properties. In order to do so, we engage proactively with our numerous contractors, suppliers and agents in order to ensure that they are aware of our environmental commitments and have the necessary skills to deliver them. We will implement this policy throughout our development and management activities, including the important stages of design and construction. This policy will be delivered through the following set of broad environmental objectives. (cid:129) In acquiring new properties, we will investigate pollution and other environmental risks as part of our due diligence procedures. (cid:129) We will limit our consumption of natural resources, including energy and water in an attempt to maximise efficiency and minimise waste. (cid:129) We will pay particular attention to good waste management practices, seeking to reduce, re-use and recycle before disposing of the rest according to the best practicable environmental option. (cid:129) We will take care to protect landscape and biodiversity and try to improve the quality of these wherever practical. (cid:129) We will be mindful of the transport associated impacts of our developments and investments and attempt to promote more sustainable forms of travel to and from properties. (cid:129) We will integrate environmental considerations into the design of new and refurbished buildings, seeking wherever possible to achieve good practice standards. (cid:129) We will prohibit the use of materials that have potentially hazardous effects, as well as tropical hardwood that has not come from sustainably managed sources. (cid:129) We will minimise the risks of pollution or contamination arising from our activities and seek to operate a ‘good neighbours’, policy, particularly during construction or demolition. (cid:129) We will seek to reduce the adverse environmental impacts associated with our own office management practices and procurement policies. (cid:129) We will communicate effectively with our contractors, consultants and agents, as well as our tenants wherever practical, in order to help and encourage them to meet our environmental standards and improve their own environmental performance. (cid:129) We will monitor and review our performance against our environmental objectives on a regular basis in order to demonstrate that we are achieving the standards that we set ourselves and ensure their ongoing appropriateness. Helical recognises the importance of pro-actively managing environmental impacts arising from our property management and development activities. Our environmental policy can be found on the company website www.helical.co.uk. We remain committed to the environmental objectives outlined in this policy. Legislative standards are becoming increasingly stringent in the markets in which we operate. We work with all of our contractors and consultants in order to achieve compliance with these standards, striving to go beyond them where possible. We believe that consistent delivery of projects that meet and exceed these standards minimises risk, future proofs the projects for owners and occupiers alike, reduces ongoing operational costs and ultimately delivers enhanced value to our shareholders. Environment target review: 2007/08 As in previous years we set measurable targets in 2007/08 to focus our efforts on tangible goals which provide demonstrable environmental benefits at both a corporate and project level. A detailed review of our progress against these targets is conducted by our independent advisors annually. The 2007/08 review can be found on the company website. Some of our key environmental achievements during the year are listed below. Building Design and Construction “Very good” BREEAM certification at design stage for Riverbank House, London EC4 and 80 Silverthorne Road, Battersea, London SW8. Property Management Energy audit undertaken for a property in Southwark to determine areas where future energy savings can be made. The outcomes of the audit are to be implemented in the forthcoming financial year and where feasible rolled out to other managed properties. Own Occupation 36% waste recycling rate achieved at Helical’s head office. Implementation of a ‘Cycle to work’ scheme providing a tax exempt loan scheme of bicycles and cycling equipment to the company’s employees. Environment target review: 2008/09 We are undertaking a comprehensive review of our environmental strategy for the coming year. Annual targets for 2008/09 and the outcomes of this strategic review will be available on our website by mid-summer 2008. Michael Slade 17 June 2008 29 Helical Bar plc report & accounts 2008 The Board of Directors and senior management The Board of Helical Bar plc is collectively responsible for providing the entrepreneurial leadership of the Company within a framework of controls and reporting structures which assist the Company in pursuing its strategic aims and business objectives. The Board of Helical Bar plc comprises six executive directors and four non-executive directors. Board of Directors and other officers Executive directors Chief Executive Michael Slade, BSc (Est Man) FRICS FSVA, joined the Board as an executive director in 1984 and was appointed Chief Executive in 1986. Aged 61. Deputy Chief Executive Michael Brown, BSc (Est Man) MRICS, was appointed to the Board as an executive director in 1998 and made Deputy Chief Executive on 1 August 2007. He is responsible for the Company’s property investment activities. He is a former director of Threadneedle Property Fund Managers. Aged 47. Finance Director Nigel McNair Scott, MA FCA FCT, joined the Board as a non- executive director in 1985 and was subsequently appointed Finance Director in 1987. A former director of Johnson Matthey plc and Govett Strategic Investment Trust plc, he is Chairman of Avocet Mining Plc. Aged 62. Director Gerald Kaye, BSc (Est Man) FRICS, was appointed to the Board as an executive director in 1994 and is responsible for the Company’s development activities. He is a former director of London & Edinburgh Trust Plc. Aged 50. Director Matthew Bonning-Snook, BSc (Urb Est Surveying) MRICS, was appointed to the Board as an executive director on 1 August 2007. Prior to joining Helical in 1995 he worked for Richard Ellis (now CBRE), and oversees many of Helical’s office and mixed use developments. Aged 40. Director Jack Pitman, MA (Cantab) MRICS, was appointed to the Board as an executive director on 1 August 2007. Before joining the Company in 2001 he worked for Chester Properties Ltd. He is responsible for many of Helical’s change of use projects and for a number of joint venture relationships. Aged 39. Non-executive directors Chairman Giles Weaver, FCA, was appointed to the Board as a non-executive director in 1993 and was appointed Chairman following the 2005 AGM. He is Chairman of the Remuneration and Nominations and Appointments Committees. A recent Chairman of Murray Johnstone Ltd, he is Chairman of Kenmore European Industrial Fund Limited and AH Medical Properties PLC and a director of Aberdeen Asset Management plc and ISIS Property Trust 2 Ltd as well as being Chairman or a director of a number of investment companies. Aged 62. Antony Beevor, BA, was appointed to the Board as a non-executive director in 2000. He is the Senior Independent Director and Chairman of the Audit Committee. He is also a member of the Remuneration and Nominations and Appointments Committees. A former Head of Corporate Finance at Hambros Bank and former Chairman of Croda International Plc, he is Deputy Chairman of the Takeover Panel and Chairman of the Trustees of Croda International’s pension funds. He is also Chairman of the charity Fairbridge. Aged 68. Wilf Weeks, OBE, was appointed to the Board as a non-executive director in 2005. He is a member of the Audit, Remuneration and Nominations and Appointments Committees. Founder and Chairman of GJW Government Relations, he is now the Chairman of European Public Affairs at Weber Shandwick. He was awarded an OBE in June 2006 for his services to the arts in London. Aged 60. Andrew Gulliford, BSc(Est.Man), FRICS, was appointed to the Board as a non-executive director in 2006. He is a member of the Audit, Remuneration and Nominations and Appointments Committees. A former Deputy Senior Partner of Cushman & Wakefield Healey & Baker, he is a non-executive director of McKay Securities PLC, ISIS Property Trust 2 Ltd and various other companies. Aged 61. Company Secretary Tim Murphy, ACA, was appointed Company Secretary in 1994. Aged 48. Senior management John Inwood joined the Company as a management executive in 1995. Aged 42. Duncan Walker joined the Company as a development executive in August 2007. Aged 29. 30 Helical Bar plc report & accounts 2008 Directors’ report The directors’ present their report and financial statements for the year ended 31 March 2008. Principal activities Corporate governance The Company’s application of the principles of corporate governance is noted in the Corporate Governance Report on pages 33 to 35. The principal activity of the Company is that of a holding company and the principal activities of the subsidiaries are property investment, dealing and development. A full review of these activities and the Group’s future prospects are given in the Business Review on pages 7 to 26. Appointment and replacement of directors The Nominations and Appointments Committee controls the process for Board appointments and details of the operation of this committee may be found in their report on pages 34 and 35. Trading results The results for the year are set out on page 46. The loss after tax amounts to £12,314,000 (2007 profit: £52,088,000). Share capital The detailed movements in share capital are set out in note 28 to these financial statements. At 31 March 2008 and 17 June 2008 there were 95,732,457 ordinary 1p shares in issue. Dividends A final dividend of 2.75p (2007: 2.75p) per share is recommended for approval at the Annual General Meeting on 23 July 2008. The total ordinary dividend paid in the year of 4.50p (2007: 4.05p) per share amounts to £4,081,000 (2007: £3,615,000). Charitable donations Donations to charities amounted to £28,850 (2007: £45,485). Creditor payment policy The Company’s policy is to settle all agreed liabilities within the terms established with suppliers. At 31 March 2008 there were 75 days’ (2007: 85 days’) purchases outstanding in respect of the Company’s creditors. Auditors Grant Thornton UK LLP offer themselves for re-appointment as auditors in accordance with Section 489 of the Companies Act 2006. Amendment of articles of association The company’s articles of association can be amended only by a special resolution of the members, requiring a majority of not less than 75% of such members voting in person or by proxy. Directors’ powers The Annual General Meeting to be held on 23rd July 2008 will resolve to give the directors’ the following powers: - To allot unissued shares in the Company up to a nominal value of £319,108, representing approximately one third of the current issued ordinary share capital. Other than in respect of the Company’s obligations under its employee share schemes, the directors currently have no intention of issuing any shares pursuant to this authority. - To allot shares for cash. Apart from the issue of equity securities in connection with rights issues, this power is limited to the issue of equity securities up to a nominal amount of £47,866, representing approximately 5% of the current issued ordinary share capital. - To make market purchases of up to 9,563,672 ordinary shares representing 9.99% of the Company’s current issued ordinary share capital. The directors’ will only exercise this authority if they are satisfied that a purchase would lead to an increase in the net asset value of the remaining shares and would be in the interests of Shareholders generally. Substantial shareholdings Financial risk At 5 June 2008 the shareholders listed in Table A on page 32 had notified the Company of a disclosable interest of 3% or more in the nominal value of the ordinary share capital of the Company. Directors’ remuneration Details of directors’ remuneration, share awards, service contracts and pension contributions are noted in the Directors’ Remuneration Report on pages 36 to 42. Directors and their interests The directors who were in office during the year and their interests, all of which were beneficial, in the ordinary shares of the Company are listed in Table B on page 32. Share awards made to directors under the terms of the share option schemes and Performance Share Plan and shares purchased on behalf of directors under the terms of the Share Incentive Plan are disclosed in the Directors’ Remuneration Report on pages 36 to 42. There have been no changes in the directors’ interests in the period from 31 March 2008 to 17 June 2008. Financial risk policies and objectives are discussed in the Performance and Risk report on pages 20 to 22. Directors’ responsibilities for the financial statements The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and International Financial Reporting Standards as adopted by the European Union. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare financial statements in accordance with International Financial Reporting Standards as adopted by the European Union. 31 Helical Bar plc report & accounts 2008 Directors’ report The financial statements are required by law to give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group for that period. In preparing these financial statements, the directors are required to: – select suitable accounting policies and then apply them consistently; – make judgements and estimates that are reasonable and prudent; – state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; – prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business. The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Acts 1985 and 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Table A – Substantial shareholdings Michael Slade – Chief Executive Helical Bar Share Ownership Plan Trust Fidelity Aberdeen Asset Management Legal & General F&C Asset Management Dimensional Fund Advisors Standard Life Investments Table B – Directors’ interests Giles Weaver – Chairman Michael Slade – Chief Executive Michael Brown Nigel McNair Scott Gerald Kaye Matthew Bonning-Snook* Jack Pitman* Antony Beevor Wilf Weeks Andrew Gulliford Total directors’ interests Issued share capital Percentage of issued share capital * Appointed on 1 August 2007 32 In so far as the directors are aware: – there is no relevant audit information of which the Company’s auditors are unaware; and, – the directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Annual general meeting The Annual General Meeting of the Company will be held on 23 July 2008 at 11.30 a.m. at The Westbury Hotel, Bond Street, London W1S 2YF. The notice of meeting and the resolutions to be proposed at that meeting are set out in the enclosed circular. Number of ordinary shares at 5 June 2008 13,130,209 5,170,868 5,053,823 4,940,370 4,474,999 4,160,765 3,968,082 3,374,800 % 13.7 5.4 5.3 5.2 4.7 4.3 4.1 3.5 Ordinary 1p shares 31 March 2008 Ordinary 1p shares 1 April 2007 96,250 96,250 13,130,209 12,686,000 1,132,437 2,238,370 1,203,232 124,214 150,919 8,750 – – 909,478 2,015,411 980,273 13,704 45,517 8,750 – – 18,084,381 95,732,457 18.9% 16,755,383 95,719,432 17.5% By Order of the Board T.J. Murphy Secretary 17 June 2008 Helical Bar plc report & accounts 2008 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 Directors’ Remuneration Report describe how the Company complies with the provisions of the Combined Code (2006) (the “Code”). Compliance With the exception of Code provision A.3.2 requiring at least half the board to be comprised of independent non-executive directors, the Company has complied throughout the year with the Code provisions set out in Section 1 of the Combined Code (2006). On 1 August 2007, the Company appointed two additional executive directors increasing the Board to six executive and four non-executive directors. The Company considers that the current non-executive directors are able to discharge their duties without additional support, but will keep this under review in future periods. Application of the principles The Board consists of six executive directors who hold the key operational positions in the Company and four non-executive directors, who bring a breadth of experience and knowledge to their roles. Two of the executive directors were appointed by the Board during the year. Chairman and Chief Executive The Chairman of the Board is Giles Weaver. The Company’s business is run by Michael Slade, the Chief Executive. Board balance and independence As noted above, two of the six executive directors were appointed by the Board during the year and bring fresh thinking to the board process. The Chairman, Giles Weaver, has been a non-executive director of Helical since 1993. In the Company’s view, the experience gained as a chairman or director of several listed companies in the financial sector provides him with the necessary skills of leadership and guidance that the role of Chairman of this Company requires. These skills together with his detachment from day-to-day issues within the Company, and his robustly independent approach to the role of Chairman provide the Board with the necessary comfort that despite his time as a non-executive director he could properly be regarded as independent at the time of his appointment as Chairman. The Chairman of the Company, Giles Weaver, is also Chairman of the Remuneration Committee because the Company regards the setting of remuneration policy to be an integral and critical function of the Board in a small, people-orientated business such as Helical. The senior independent director is Antony Beevor. The remaining non-executive directors are Wilf Weeks and Andrew Gulliford. The breadth of experience provided by the non-executive directors allied to the management information provided by the Company enable the non-executive Board members to assess and advise the full Board on the major risks faced by the Company. In view of this we continue to believe that all the non-executive directors are independent and for the purposes of this report are referred to below as independent directors. The Board of Directors The Company supports the concept of an effective Board leading and controlling the Company. The Board provides entrepreneurial leadership of the Group within a framework of prudent and effective controls which enables risk to be assessed and managed. The Board sets the Group’s strategic aims, ensures that the necessary financial and human resources are in place for the Group to meet its objectives and reviews management performance. The Board sets the Group’s values and standards and ensures that the Company’s obligations to its shareholders and others are understood and met. The members of the Board, and the roles of each director are given in the biographical details of the directors on page 30. All directors take decisions objectively in the interests of the Company. As part of their role as members of the Board, non-executive directors constructively challenge and help develop proposals on strategy. Non-executive directors scrutinise the performance of management in meeting agreed goals and objectives and monitor the reporting of performance. They satisfy themselves on the integrity of financial information and that financial controls and systems of risk management are robust and defensible. They are responsible for determining appropriate levels of remuneration of executive directors and have a prime role in appointing and, where necessary, removing executive directors, and in succession planning. In addition to ad hoc meetings arranged to discuss particular transactions and events and the 2007 AGM, the full Board met on six occasions during the year under review. The attendance record of the directors is shown in the table below. Mr. C.G.H. Weaver Mr. M.E. Slade Mr. N.G. McNair Scott Mr. G.A. Kaye Mr. P.M. Brown Mr M.C. Bonning- Snook Mr J.S. Pitman Mr. A.R. Beevor Mr. W. Weeks Mr. A. Gulliford Meetings Full Board Audit Committee Remuneration Committee Nominations and Appointments Committee 6 n/a 5 2 6 n/a n/a n/a 6 n/a n/a n/a 5 n/a n/a n/a 6 n/a n/a n/a 4 n/a n/a n/a 4 n/a n/a n/a 6 3 5 2 6 3 5 2 * Matthew Bonning-Snook and Jack Pitman were appointed to the Board on 1 August 2007 5 3 5 2 33 Helical Bar plc report & accounts 2008 Corporate governance report The Board has a schedule of matters specifically reserved to it for decision. The Board controls the business but delegates day-to-day responsibility to the executive management. However, there are a number of matters which are required to be or, in the interests of the Company, should only be decided by the Board of Directors as a whole. A summary of the decisions reserved for the Board is set out below: Schedule of matters reserved for the Board: (cid:129) Strategy and management – responsibility for the overall management of the Group; approval of the Group’s long-term objectives and commercial strategy; approval of annual administration budgets; oversight of the Group’s operations; extension of the Group’s activities into new business areas; any decision to cease to operate all or any material part of the Group’s business. (cid:129) Structure and capital – changes to the Group’s capital structure; major changes to the Group’s corporate structure; changes to the Group’s management and control structure; changes to the Company’s listing or plc status. (cid:129) Financial reporting and controls – approval of interim and preliminary announcements; approval of annual report and accounts, including the corporate governance statement and the directors’ remuneration report; approval of dividend policy; approval of significant changes in accounting policies or practices; approval of treasury policies. (cid:129) Internal controls – ensuring maintenance of a sound system of internal control and risk management. (cid:129) Communication – approval of resolutions and documentation to be put to shareholders in general meeting; approval of press releases concerning matters decided by the Board. (cid:129) Board membership and other appointments to senior management. (cid:129) Both the appointment and removal of the Company Secretary. (cid:129) Corporate governance matters including directors’ performance evaluations. (cid:129) Approval of policies including code of conduct; share dealing code; health and safety policy; environmental and corporate social responsibility policy and equal opportunity policy. Nominations and Appointments Committee The terms of reference of the Nominations and Appointments Committee are available by request and are included on the Company’s website at www.helical.co.uk. The membership of the Committee is as follows: Giles Weaver (Chairman) Antony Beevor Wilf Weeks Andrew Gulliford Directors – appointments to the Board Appointments are made on merit and against objective criteria. Care is taken to ensure that appointees have enough time available to devote to the job. The Nominations and Appointments Committee controls the process for Board appointments and makes recommendations to the Board. A majority of the Committee are independent non-executive Directors. 34 The work of the Nominations and Appointments Committee in the year The Committee met twice during the period. A record of attendance at this meeting is shown on page 33. During these meetings the Committee resolved that Matthew Bonning-Snook and Jack Pitman be appointed to the Board and that Giles Weaver, Gerald Kaye and Michael Brown be recommended to shareholders for re-appointment as directors at the 2007 AGM. Directors – information and professional development The Board is supplied in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties and its directors are free to seek any further information they consider necessary. Under the direction of the Chairman, the Company Secretary’s responsibilities include ensuring good information flows within the Board and its Committees and between senior management and non-executive directors, as well as facilitating induction and assisting with professional development as required. The Company Secretary is responsible for advising the Board through the Chairman on all governance matters. The Board ensures that directors, especially non-executive directors, have access to independent professional advice at the Company’s expense where they judge it necessary to discharge their responsibilities as directors. Training is available for new directors and other directors as necessary. All directors have access to the advice and services of the Company Secretary, who is responsible to the Board for ensuring that board procedures are complied with. The Company has arranged appropriate insurance cover in case of legal action against its directors. Directors – performance evaluation During the year the Board undertook a formal evaluation of its own performance and that of its Committees and individual directors in the period. The Chairman is responsible for the annual evaluation process, and will act on its outcome. This process involves each director submitting an appraisal to the Chairman in respect of the performance of the main Board, and in respect of each Board Committee of which they are a member. The non-executive directors, led by the senior independent non- executive director, are responsible for performance evaluation of the Chairman, taking into account views of executive directors. Each director completed an evaluation of the Chairman’s performance and provided this evaluation to the senior independent non-executive director. There were no significant matters arising out of the annual evaluation process which required action by the Board. Directors re-election All directors are subject to re-election, after receiving the recommendation of the Nominations and Appointments Committee, every three years and, on appointment, at the first AGM after appointment. The Nominations and Appointments Committee have recommended the re-appointment of the following directors at the 2008 AGM: – Giles Weaver has served more than nine years on the Board and in accordance with the Code offers himself for re-election; Helical Bar plc report & accounts 2008 Corporate governance report – Wilf Weeks is due to retire by rotation and offers himself for re-election; – Matthew Bonning-Snook was appointed to the Board on 1 August 2007 and offers himself for re-election; and, – Jack Pitman was appointed to the Board on 1 August 2007 and offers himself for re-election. Biographical details of the directors are given on page 30. 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 its objectives. The Company also regularly meets, with the help of its brokers, institutions that do not currently hold shares in the Company to inform them of its objectives. The Chairman and Senior Independent Director are available to shareholders, should they wish to discuss matters relating to the Company. The AGM is used to communicate with private investors and they are encouraged to participate. The members of the Audit, Remuneration and Nominations and Appointments 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 consider 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. The Company receives regular reports from sector analysts and its investor relations advisors on how it is viewed by its shareholders. Accountability and audit Financial reporting The Board presents a balanced and understandable assessment of the Company’s position and prospects. It seeks to do so in all published information and in particular in interim and preliminary announcements and other price-sensitive reports and reports to regulators as well as in the information required to be presented by statutory requirements. Going concern After making enquiries, the directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the financial statements. Audit Committee and auditors The terms of reference of the Audit Committee are available by request and are included on the Company’s website at www.helical.co.uk. The membership of the Committee is as follows: Antony Beevor (Chairman) Wilf Weeks Andrew Gulliford The Committee endorses the principles set out in the Smith Guidance for Audit Committees. The Board has formal and transparent arrangements for considering how it applies the financial reporting and internal control principles and for maintaining an appropriate relationship with the Company’s auditors. Whilst all directors have a duty to act in the interests of the Company, the Audit Committee has a particular role, acting independently from the executive, to ensure that the interests of shareholders are properly protected in relation to financial reporting and internal control. Appointments to the Audit Committee are made by the Board on the recommendation of the Nominations and Appointments Committee in consultation with the Audit Committee Chairman. The work of the Audit Committee in the year The Audit Committee met three times during the year. A record of attendance at these meetings is shown on page 33. The Audit Committee met the external auditors three times to discuss matters arising from the annual and interim audits. In addition to matters discussed in relation to the annual and interim audits, the Committee reviewed the Company’s system of internal control following receipt of the auditors review of the design effectiveness of internal controls in March 2006. The key findings and recommendations of this report, which cover governance, operational controls and financial reporting were considered and, where appropriate, were implemented. Those recommendations not immediately implemented will continue to be kept under consideration in future years. 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 cannot 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 key features of the Company’s system of internal control are as follows: – clearly defined organisational responsibilities and limits of authority. The day-to-day involvement of the executive directors in the running of the business ensures that these responsibilities and limits are adhered to; – financial controls and review procedures; – financial information systems including cash flow, profit and capital expenditure forecasts. The Board receives regular and comprehensive reports on the day-to-day running of the business; – an Audit Committee which meets with the auditors and deals with any significant internal control matter. In the year under review the Committee met with the Auditors on three occasions. Internal audit The Board reviewed its position during 2007/08 and reaffirmed its stance that in view of the relatively small size of the Company it does not consider that an Internal Audit function would provide any significant additional assistance in maintaining a system of internal controls. Audit independence A policy of reviewing audit independence has been adopted whereby non-audit services undertaken by the auditors is approved prior to work being carried out. During the year under review non-audit services comprised VAT advice, financial assistance review and remuneration advice. 35 Helical Bar plc report & accounts 2008 Directors’ remuneration report Directors’ remuneration The Board recognises that directors’ remuneration is of legitimate concern to shareholders and is committed to following current best practice. In accordance with Section 241A of the Companies Act 1985, as amended by the Directors’ Remuneration Report Regulations 2002, the Board presents the directors’ remuneration report for shareholder approval. Information not subject to audit Remuneration Committee The terms of reference of the Remuneration Committee are available on request and are included on the Company’s website at www.helical.co.uk. The Remuneration Committee (“Committee”) has responsibility for making recommendations to the Board to determine the Company’s framework or broad policy on salary, bonuses, pensions and other remuneration issues for individual directors. The Committee approves all salary increases, bonus payments and share awards to all directors and employees. It carries out the policy on behalf of the Board and in the year under review the Committee met five times. A record of attendance at these meetings is shown on page 33. The membership of the Committee is as follows: Giles Weaver (Chairman) Antony Beevor Wilf Weeks Andrew Gulliford All the members of the Committee 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 Chief Executive and Finance Director about its proposals and has access to professional advice from inside and outside the Company. During the year under review the Committee were advised by New Bridge Street Consultants in relation to the performance criteria of the Company’s share option schemes and Performance Share Plan and Grant Thornton in respect of the Performance Share Plan. Policy on executive directors’ remuneration The Company operates within a competitive environment and its performance depends on the individual contributions of the directors and employees. Executive remuneration packages are designed to attract, motivate and retain directors of the calibre necessary to maintain the Company’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. 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 incentives are designed so that they recognise the long-term growth of the Company. No director has a service contract of more than one year. 36 There are four main elements to the executive directors’ remuneration packages: i basic annual salary and benefits-in-kind; ii annual sector bonus payments; iii Executive Bonus Plan; and, iv share incentives. Basic annual salary and benefits-in-kind Basic annual salaries for executive directors are reviewed having regard to individual performance and market practice and were last reviewed in July 2007. Benefits-in-kind provided to executive directors include the provision of a company car and health insurance. Annual sector 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, may be paid to the executive directors responsible for their parts. Michael Brown, Gerald Kaye, Matthew Bonning-Snook and Jack Pitman are eligible for sector bonuses. The maximum amount payable in each year is a total of £5m. Payment of annual sector bonuses is at the discretion of the Committee. No annual sector bonuses have been paid in respect of the year to 31 March 2008 (2007: £1,142,000). Executive Bonus Plan The Company operates an Executive Bonus Plan (“2006 Plan”) designed to align the motivations of the senior management team with the interests of shareholders and to link their remuneration to the performance of the Company’s property portfolio. The Plan operates over a five year period from 1 April 2006 and cash bonuses will be paid annually subject to the achievement of challenging performance targets. Michael Slade and Nigel McNair Scott are eligible for Executive Bonus Plan bonuses. Performance conditions The Committee may, at its discretion, award bonuses in respect of a financial year subject to performance conditions, the aim of which is to link the size of bonuses paid to financial growth of the Group over that financial year. No bonus will be payable unless the following conditions are satisfied: i Increase in net asset value; increase in net asset value at the end of the financial year exceeds net asset value at the beginning of the financial year; ii Absolute performance of the portfolio – ungeared total return; the percentage increase in the total return on property assets of the Group over the financial year (the “Performance Period”) is greater than the percentage increase achieved by the portfolio ranked nearest to three-quarters up the performance table (taken in ascending order of return) (the “Upper Quartile”) of the portfolios of all quarterly valued funds measured by the Investment Property Databank at the beginning of the relevant Performance Period and compounded monthly during the Performance Period (the “IPD Total Return Benchmark”); and, Helical Bar plc report & accounts 2008 Directors’ remuneration report iii Performance of the net asset value per share; the percentage increase in net asset value per share for the Performance Period must be greater than the percentage increase achieved by the Upper Quartile of the portfolios of all quarterly valued funds measured by the Investment Property Databank at the beginning of the relevant Performance Period and compounded monthly during the Performance Period (the “IPD Capital Growth Benchmark”). The Committee will recommend the size of the bonus payable by reference to the same sliding scale based on the amount by which the increase in net asset value per share exceeds the increase in the Upper Quartile of the IPD Capital Growth Benchmark subject to a cap. Calculation of amounts payable The total amount of the bonuses payable in any one year shall be determined by: – calculating the difference between the percentage increase in net asset value per share for the Performance Period and the percentage increase in the Upper Quartile of the IPD Capital Growth Benchmark over the same period (the “Difference”); and, – calculating the sum of the amounts payable in relation to each 1% of the Difference on the following basis: Amount of Difference Less than 1% 1% to less than 2% % of base net asset value payable 0.01 0.02 And thereafter for every additional 1% An increment of 0.01 For example: From 4% to less than 5% 0.05 If the net asset value at the end of a financial year is less than the net asset value at the beginning of that year, the bonus payable for any subsequent year will be calculated by reference to the highest net asset value in the preceding year. Financial accounts The audited financial accounts which record the financial performance on which the Plan operates will be those accounts prepared in accordance with International Financial Reporting Standards. 2006 Plan and individual limits The total amount payable under the 2006 Plan in any one year is limited to £2m (2007: £4m). An individual employee’s participation in the 2006 Plan is limited so that the bonus which may be paid to him under the 2006 Plan will not exceed £1.5m per annum. There is a further limit that payments under the 2006 Plan in any year may not exceed 20% of the Group’s pre-tax profits and payments under the 2006 Plan. Among other constraints the Committee could restrict the bonuses if payment would affect the financial or trading position of the Company. No Executive Bonus Plan bonuses have been paid in respect of the year to 31 March 2008 (2007: £3,061,000). Timing of bonuses Bonuses will ordinarily be paid, subject to the performance conditions being satisfied, and provided that the participant remains a director or employee of the Group at the time of payment, on a specified bonus date, which will fall within four months of the end of the relevant Performance Period. Bonuses are not transferable, nor will benefits obtained under the 2006 Plan be pensionable. Termination of employment If a participant dies, the bonus that would have been paid for the relevant financial year may, at the discretion of the Committee, be paid to the participant’s personal representatives, but will be scaled down pro rata to reflect the period elapsed since the start of the Performance Period. If a participant’s employment ends in any other circumstances prior to the payment of the bonus, no entitlement will arise. Change of control In the event of a change in control of the Group, bonuses in respect of the financial year in which the change of control falls may be paid to the extent that the relevant performance target(s) have been satisfied over an adjusted Performance Period. Termination of the 2006 Plan The Committee will not recommend the making of bonuses under the 2006 Plan in connection with a financial year later than the year ended 31 March 2011 without further shareholder authority. Service contracts The service contracts of Michael Slade, Nigel McNair Scott, Gerald Kaye and Michael Brown operate from 1 April 2007, and of Matthew Bonning-Snook and Jack Pitman from 1 August 2007. Each service contract provides for a one year notice period. On termination of employment each director is entitled to a payment in lieu of notice of basic salary and other contractual entitlements i.e. provision of car and health insurance. Non-executive directors Non-executive directors are appointed by a Letter of Appointment and are subject to re-appointment by shareholders at the Company’s AGM at least every three years. The remuneration of the non-executive directors is determined by the Board and was last increased in April 2007. The appointment of non-executive directors is terminable on three months notice. Non-executive directors do not participate in any of the Company’s bonus or share option schemes. Total shareholder return The performance criteria of the Company’s 1999 share option schemes, referred to on pages 39 to 40 below, require the Company to exceed certain targets of total shareholder return. The total shareholder return for a holding in the Company’s shares in the five years to 31 March 2008 is shown in the graph below. This graph looks at the value, by 31 March 2008, of £100 invested in Helical Bar on 31 March 2003 compared with the value of £100 invested in the FTSE All-Share Real Estate Index. The other points plotted are the values at intervening financial year-ends. Dividends received are re-invested in shares. Total shareholder return Source: Thomson Financial ) £ ( e u a v l 450 400 350 300 250 200 150 100 50 • • • • • • • • • •• 31 Mar 03 31 Mar 04 31 Mar 05 31 Mar 06 31 Mar 07 31 Mar 08 • Helical Bar • FTSE All-Share Real Estate Index 37 Helical Bar plc report & accounts 2008 Directors’ remuneration report Information subject to audit: Remuneration of directors Remuneration in respect of the directors was as follows: Year ended 31 March 2008 Salary/fees £000 Benefits- in-kind £000 Sector bonuses £000 Executive bonus plan £000 Gain on vesting of PSP awards £000 Gain on exercise of share options £000 Total (including gains) £000 Total £000 Pensions £000 Chairman Giles Weaver Non-executive directors Antony Beevor Wilf Weeks Andrew Gulliford Executive directors Michael Slade Nigel McNair Scott Gerald Kaye Michael Brown Matthew Bonning-Snook Jack Pitman 75 42 35 35 458 300 271 308 157 157 – – – – 35 28 31 30 11 12 1,838 147 – – – – – – – – – – – – – – – – – – – – – – 75 42 35 35 493 328 302 338 168 169 – – – – 2,767 1,384 1,384 1,384 681 649 – – – – – – 2,079 1,735 – – 75 42 35 35 3,260 1,712 3,765 3,457 849 818 1,985 8,249 3,814 14,048 – – – – – – – – – – – Gerald Kaye was the highest paid director during the year with a total remuneration of £3,765,000 (including gain on share awards) (2007: Michael Slade £9,681,000). Year ended 31 March 2007 Chairman Giles Weaver Non-executive directors Antony Beevor Wilf Weeks Andrew Gulliford John Southwell (retired 20/07/06) Executive directors Michael Slade Nigel McNair Scott Gerald Kaye Michael Brown Salary/fees £000 Benefits- in-kind £000 Sector bonuses £000 Executive bonus plan £000 Gain on vesting of PSP awards £000 Gain on exercise of share options £000 Total (including gains) £000 Total £000 Pensions £000 55 35 30 30 10 480 300 258 258 – – – – 8 35 23 31 30 1,456 127 – – – – – – – 142 775 917 – – – – – 55 35 30 30 18 1,531 2,046 510 510 510 3,061 833 941 1,573 5,561 – – – – – – – – – – – – – – – 55 35 30 30 18 7,635 4,104 764 1,425 9,681 4,937 1,705 2,998 13,928 19,489 – – – – – – – – 225 225 In order to compensate option holders for the payment of the special dividend in April 2002, the Company pays a cash bonus of 20p per share on the date option holders exercise their options, as noted on page 40. The gain on exercise of share options of the directors includes cash bonuses of £233,000 arising out of the exercise of options during the year. The cost of these cash bonuses is included in administrative expenses. 38 Helical Bar plc report & accounts 2008 Directors’ remuneration report Directors’ fees Fees receivable by Nigel McNair Scott in his capacity as Chairman of Avocet Mining Plc are shown in the financial statements of that Company. Share options The Company operated two share option schemes during the year. The Helical Bar 1999 Share Option Scheme operates in respect of the grant of share options which exceed the Inland Revenue limit of £30,000. 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. Remaining share options granted in respect of this scheme are included in note 29. The Helical Bar 1999 Approved Share Option Scheme is an Inland Revenue approved scheme. Under the terms of this scheme options up to a maximum value of £30,000 per individual may be granted. Remaining share options granted in respect of this scheme are included in note 29. The performance criteria of the two schemes require total shareholder return over a set period to exceed a certain percentile of the aggregate performance of companies in the Real Estate 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. These share option schemes have been replaced by the Performance Share Plan, details of which are included on pages 41 and 42, and future share option grants will only be made in exceptional circumstances and only following consultation with principal shareholders on the key terms of those options. The directors’ interests in the share option schemes during the year were as follows: Type At start of year Options exercised in year At end of year Exercise price Date from which granted exercisable Date Profit if options exercised at 31 March 2008 Expiry date Michael Slade Helical Bar 1999 Share Option Scheme Helical Bar 1999 Share Option Scheme Helical Bar Approved 1999 Share Option Scheme Nigel McNair Scott Helical Bar 1999 Share Option Scheme Helical Bar 1999 Share Option Scheme Helical Bar Approved 1999 Share Option Scheme Gerald Kaye Helical Bar 1999 Share Option Scheme Helical Bar 1999 Share Option Scheme Helical Bar Approved 1999 Share Option Scheme Subscription 966,105 Purchase 740,000 Subscription 33,895 – – – 966,105 88.5p 08.03.99 08.03.04 07.03.09 2,777,552 740,000 150.0p 18.12.00 18.12.05 17.12.10 1,672,400 33,895 88.5p 08.03.99 08.03.02 07.03.09 97,448 1,740,000 – 1,740,000 4,547,400 Subscription 367,770 Purchase 360,000 Subscription 33,895 761,665 – – – – 367,770 88.5p 08.03.99 08.03.04 07.03.09 1,057,339 360,000 150.0p 18.12.00 18.12.05 17.12.10 813,600 33,895 761,665 88.5p 08.03.99 08.03.02 07.03.09 97,448 1,968,387 Purchase 635,000 (635,000) – – – – – – Purchase 647,095 Subscription 33,895 – – 647,095 153.3p 15.11.01 15.11.06 14.11.11 1,441,081 33,895 88.5p 08.03.99 08.03.02 07.03.09 97,448 1,315,990 (635,000) 680,990 1,538,529 39 Helical Bar plc report & accounts 2008 Directors’ remuneration report Michael Brown Helical Bar 1999 Share Option Scheme Helical Bar 1999 Share Option Scheme Type At start of year Options exercised in year At end of year Exercise price Date from which granted exercisable Date Profit if options exercised at 31 March 2008 Expiry date Purchase 530,000 (530,000) – – – – – – Helical Bar Approved 1999 Share Option Scheme Subscription 33,895 Purchase 502,090 – – 502,090 153.3p 15.11.01 15.11.06 14.11.11 1,118,154 33,895 88.5p 08.03.99 08.03.02 07.03.09 97,448 Matthew Bonning-Snook Helical Bar 1999 Share Option Scheme Jack Pitman Helical Bar 1999 Share Option Scheme Helical Bar 1999 Share Option Scheme Helical Bar 1999 Share Option Scheme Helical Bar Approved 1999 Share Option Scheme 1,065,985 (530,000) 535,985 1,215,602 Purchase 210,000 210,000 Purchase 170,510 Subscription 150,000 Subscription 299,310 Subscription 21,200 641,020 – – – – – – – 210,000 150.0p 18.12.00 18.12.05 17.12.10 474,600 210,000 474,600 170,510 156.0p 08.01.01 08.01.06 07.01.11 375,122 150,000 156.0p 08.01.01 08.01.06 07.01.11 330,000 299,310 141.5p 21.11.02 21.11.07 20.11.12 * 21,200 141.5p 21.11.02 21.11.05 20.11.12 49,714 641,020 754,836 * Performance conditions not satisfied as at 31 March 2008. Exercise of share options In order that the dilutive effect of issuing new shares be reduced, and to reduce the number of shares required by the ESOP to satisfy share awards, the Company agreed with employees that the number of shares required on the exercise of options be reduced. To ensure that employees were not disadvantaged by this reduction, the exercise prices applied on the exercise of the options were correspondingly reduced. In accordance with this agreement, the options exercised during the year by the directors, were as follows: Director Gerald Kaye Michael Brown Date of exercise 28.09.07 28.09.07 Type of option Original number of shares Reduced number of shares Purchase 635,000 427,850 Purchase 530,000 357,100 Original exercise price 150.0p 150.0p Reduced exercise price 1.0p 1.0p Sale price 458.5p 458.5p Gain £000’s 2,079 1,735 The market price of the ordinary shares at 31 March 2008 was 376p (2007: 429p). This market price varied between 289p and 507p during the year. The gain on exercise of share options includes a cash bonus of 20p per 1p share in accordance with the matter referred to under special dividend below. 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 Share 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 in sufficient quantity to satisfy the requirement to compensate option holders for the special dividend of 100p paid in April 2002. An adjustment to the exercise price of the existing options 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 will compensate holders of options at the time the special dividend was declared, on the dates they exercise their options by 20p per 1p share (previously 100p per 5p share), equivalent to the special dividend. In the year under review compensation of £270,221 was paid following the exercise of options over 1,351,105 1p shares. 40 Helical Bar plc report & accounts 2008 Directors’ remuneration report Performance Share Plan At the 2004 Annual General Meeting the Company received approval for the adoption of a Performance Share Plan (“PSP”). General The operation of the PSP is supervised by the Remuneration Committee (the “Committee”). The PSP is capable of delivering shares to an executive after a period of not less than three years, other than in exceptional circumstances and with the approval of the Committee, subject to meeting pre-specified performance targets. Eligibility All employees of the Company and its subsidiaries (including directors who are required to devote substantially the whole of their working time to the business of the Group) who are not under notice nor within six months of any contractual retirement ages will be eligible to receive invitations to participate in the PSP at the discretion of the Remuneration Committee. Grant of awards Awards may be made within the six weeks following approval at a general meeting, the announcement by the Company of its results for any period, or the removal of any statutory or regulatory restriction which had previously prevented an award being granted or any other times considered by the Remuneration Committee to be exceptional. No awards may be made more than ten years after the adoption of the PSP by the Company. The Remuneration Committee will formally review the operation of the PSP after no more than five years. An award consists of the right to acquire shares in the Company for either no payment or payment of a nominal sum. Awards are neither transferable nor pensionable. Limit on individual participation No awards may be granted over shares in any financial year whose value is greater than three times an employee’s annual rate of salary. Exercise of awards Other than in exceptional circumstances, an award will vest no earlier than the third anniversary of its grant to the extent that the applicable performance conditions (see below) have been satisfied and the participant is still employed by the Group. Once exercisable, awards will then remain capable of exercise for a period of normally no more than six months. The Remuneration Committee has set demanding performance conditions for the vesting of shares. There are two performance conditions, one based on absolute growth in the Company’s net asset value per share and the other based on the gross total property return per share relative to other property funds as determined by IPD but excluding those funds worth less than £50m at the start of the three year period. Performance will be measured over the three years following grant. Participants will not normally be permitted to sell shares received through the PSP, other than to meet taxation (and national insurance contributions) liabilities, until they own shares to the value of 2 x salary for directors and 1 x salary for other executives. For the growth in net asset value, the “fully diluted triple net” net asset value as at the start of the financial year in which a grant takes place will be compared to the value three years later (having added back dividends). Vesting of Awards During the year the performance conditions relating to the first award, granted on 18 August 2004, were considered. The three year performance period to 31 March 2007 showed that the net asset value per share, calculated in accordance with the terms of the PSP, had increased by 23.1% p.a. During this three year period the total return of Helical’s property portfolio, as determined by the IPD, had increased by 25.9% p.a. Accordingly, the performance criteria applicable to this award were met and the shares vested in full and 1,504,358 shares, after deduction of shares sold to pay income tax, were transferred to award holders on 4 December 2007. The value of the shares on that date which were attributable to the directors is included in the table of the Remuneration of Directors on page 38. The share of the increase in the value of the Company that accrued to all executives through the Company’s long and short-term incentive and bonus plans over the three year performance period to 31 March 2007 was under 20%. Applicable conditions (a) Absolute net asset value per share (having added back dividends) condition Annual compound increase after three years 15% p.a. or more Between 7.5% p.a. and 15% p.a. 7.5% p.a. Below 7.5% p.a. % of award vesting 66.7 Pro rata between 6.7 and 66.7 6.7 Zero If UK inflation (RPI) is higher than 3% per annum over the three year period then the required compound increases will be raised by the excess over the 3% per annum average. 41 Helical Bar plc report & accounts 2008 Directors’ remuneration report (b) Total property return v IPD property funds condition Ranking after three years Upper quartile or above Between median and upper quartile Median Less than median % of award vesting 33.3 Pro rata between 3.3 and 33.3 3.3 Zero Provided the net asset value per share (having added back dividends) increases over the three year period. Share awards will be cancelled where the gross return falls below the IPD median and where the growth in triple net asset value is below 7.5% per annum over the three year period. Alignment with shareholders’ interests The Remuneration Committee has analysed the potential gains that may be made by executives (directors and those below Board level) through the PSP and other incentive arrangements currently in place. It has concluded that the share of the increase in the value of the Company (measured as the increase in the net asset value plus cash returned as dividends to shareholders) that could accrue to all executives through the Company’s long and short-term incentive and bonus plans (excluding gains on share options granted before December 2002) at the point at which the maximum awards vest might be of the order of 20%. At this point, in absolute terms, the Company will have increased its triple net asset value by at least 15% per annum with the Company’s relative performance placing it in the top quartile of IPD, over the three year period. Relationship to the Company’s share option schemes The PSP has replaced future share option grants which will only be made in exceptional circumstances and only following consultation with principal shareholders on the key terms of those options. Awards made to directors under the terms of the PSP which have not yet vested are as follows: Director Michael Slade Nigel McNair Scott Gerald Kaye Michael Brown Matthew Bonning-Snook Jack Pitman Shares awarded 06.07.05 at 277p 519,855 324,910 279,420 279,420 135,380 129,965 Shares awarded 04.07.06 at 368p 391,304 244,565 210,326 210,326 105,978 101,902 Shares awarded 06.07.07 at 481p 187,110 124,740 171,518 202,703 146,570 146,570 Total 1,098,269 694,215 661,264 692,449 387,928 378,437 Helical Bar 2002 Approved Share Incentive Plan On 24 July 2002 the shareholders approved the Helical Bar 2002 Approved Share Incentive Plan (the “Plan”). Under the terms of this Plan employees of the Company are given up to £3,000 of free shares in any tax year. Participants in the Plan may purchase additional shares up to a value of £1,500 which is matched in a ratio of 2:1 by the Company. Provided participants remain employed by the Company for a minimum of three years they will retain the free and matching shares. Shares allocated to, or purchased on behalf of, the directors under the rules of the Plan were as follows: 6 July 2007 at 481.0p 2007 at 432.75p 12 June 28 September 2007 at 450.0p 9 January 2008 at 320.0p Michael Slade Nigel McNair Scott Gerald Kaye Michael Brown Matthew Bonning-Snook Jack Pitman 693 693 693 693 693 693 240 240 240 240 240 240 338 338 338 338 249 338 438 438 438 438 438 438 Shares held by the Trustees of the Plan at 31 March 2008 were 233,460 (2007: 205,660). Giles Weaver Chairman 17 June 2008 42 Helical Bar plc report & accounts 2008 Independent auditors report To the Members of Helical Bar plc We have audited the Group and parent company financial statements (the “financial statements”) of Helical Bar plc for the year ended 31 March 2008 which comprise the principal accounting policies, the Consolidated income statement, the Group and parent balance sheets, the Group and parent cash flow statements, the Group and parent company statements of recognised income and expense and notes 1 to 35. These financial statements have been prepared under the accounting policies set out therein. We have also audited the information in the Directors’ Remuneration Report that is described as having been audited. This report is made solely to the Company’s members, as a body, in accordance with Section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors The directors’ responsibilities for preparing the Annual Report, the Directors’ Remuneration Report and the financial statements in accordance with applicable law and International Financial Reporting Standards (IFRSs) as adopted for use in the European Union are set out in the statement of directors’ responsibilities. Our responsibility is to audit the financial statements and the part of the Directors’ Remuneration Report to be audited in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the part of the Directors’ Remuneration Report to be audited have been properly prepared in accordance with the Companies Act 1985 and, as regards the Group financial statements, Article 4 of the IAS Regulation. We also report to you whether in our opinion the information given in the Directors’ Report is consistent with the financial statements. The information given in the Directors’ Report includes that specific information presented in the Business Review and Financial Review that is cross-referred from the trading results section of the Directors’ Report. In addition we report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors’ remuneration and other transactions is not disclosed. We review whether the corporate governance statement reflects the Company’s compliance with the nine provisions of the 2006 Combined Code specified for our review by the Listing Rules of the Financial Services Authority, and we report if it does not. We are not required to consider whether the Board’s statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the Group’s corporate governance procedures or its risk and control procedures. We read other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. The other information comprises only the Directors’ Report, the unaudited part of the Directors’ Remuneration Report, the Chairman’s statement, operating and financial review, the corporate governance statement and corporate social responsibility report and financial highlights. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information. Basis of opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements and the part of the Directors’ Remuneration Report to be audited. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Group’s and Company’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements and the part of the Directors’ Remuneration Report to be audited are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements and the part of the Directors’ Remuneration Report to be audited. 43 Helical Bar plc report & accounts 2008 Independent auditors report Opinion In our opinion: – the financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the Group’s affairs as at 31 March 2008 and of its result for the year then ended; – the parent company financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union as applied in accordance with the provisions of the Companies Act 1985, of the state of the parent company’s affairs as at 31 March 2008; – the financial statements and the part of the Directors’ Remuneration Report to be audited have been properly prepared in accordance with the Companies Act 1985 and, as regards the Group financial statements, Article 4 of the IAS Regulation; and, – the information given in the Directors’ Report is consistent with the financial statements for the year ended 31 March 2008. Separate opinion in relation to IFRSs As explained in the notes to the Group financial statements, the Group in addition to complying with its legal obligation to comply with IFRSs as adopted by the European Union, has also complied with the IFRSs as issued by the International Accounting Standards Board. In our opinion the Group financial statements give a true and fair view, in accordance with IFRSs, of the state of the Group’s affairs as at 31 March 2008 and of its result for the year then ended. Grant Thornton UK LLP Registered Auditors Chartered Accountants London 17 June 2008 44 Helical Bar plc report & accounts 2008 Index to the financial statements 46 Consolidated income statement 47 Group and company balance sheets 49 Group and company statements of recognised income and expense 50 Group and company cash flow statements 51 Notes to the financial statements 77 Ten year review 78 Glossary of terms 79 Financial calendar 79 Advisors 45 Helical Bar plc report & accounts 2008 Consolidated income statement Helical Bar plc and subsidiary undertakings for the year ended 31 March 2008 Revenue Net rental income Development profits Trading (losses)/profits Share of results of joint ventures Other operating (expense)/income Gross profit before (loss)/gain on sale and revaluation of investment properties (Loss)/gain on sale and revaluation of investment properties Gross (loss)/profit Administrative expenses Operating (loss)/profit Finance costs Finance income Change in fair value of derivative financial instruments Foreign exchange gains (Loss)/profit before tax Taxation on (loss)/profit on ordinary activities (Loss)/profit after tax – attributable to minority interests – attributable to equity shareholders (Loss)/profit for the year Basic (loss)/earnings per share Diluted (loss)/earnings per share Year ended 31.3.08 £000 Year ended 31.3.07 £000 Note 2 3 4 5 18 6 7 8 8 21 9 13 13 65,623 16,400 6,068 (29) (98) (315) 22,026 (32,790) (10,764) (13,659) (24,423) (3,033) 2,579 (1,270) 1,862 (24,285) 11,971 (12,314) (7) (12,307) (12,314) (13.5p) (13.5p) 123,176 14,771 13,587 2,094 6,196 766 37,414 40,637 78,051 (17,544) 60,507 (2,710) 1,335 956 – 60,088 (8,000) 52,088 300 51,788 52,088 58.0p 53.7p 46 Helical Bar plc report & accounts 2008 Group and company balance sheets Helical Bar plc and subsidiary undertakings for the year ended 31 March 2008 Non-current assets Investment properties Owner occupied property, plant and equipment Available-for-sale investments Investment in subsidiaries Investment in joint ventures Goodwill Current assets Land, developments and trading properties Available-for-sale investments Derivative financial instruments Trade receivables and other receivables Cash and cash equivalents Total assets Current liabilities Trade payables and other payables Current tax liabilities Borrowings Non-current liabilities Borrowings Derivative financial instruments Deferred tax provision Obligations under finance leases Total liabilities Net assets Group 31.3.08 £000 Group 31.3.07 £000 Company 31.3.08 £000 Company 31.3.07 £000 Note 14 15 16 17 18 19 20 16 22 23 24 25 25 10 27 306,778 316,025 2,007 12,000 – 6,078 30 351 _ _ 6,188 30 326,893 322,594 182,508 110,815 12 – 44,083 17,090 243,693 570,586 (66,374) – (50,238) (116,612) 912 345 70,526 3,389 185,987 508,581 (64,203) (3,909) (31,560) (99,672) (172,362) (105,847) (925) (11,851) (177) (185,315) (301,927) – (20,697) (179) (126,723) (226,395) – 2,007 12,000 37,771 7,065 – 58,843 546 – – – 351 – 15,300 6,679 – 22,330 1,166 900 – 352,585 360,964 11 353,142 411,985 11 363,041 385,371 (197,963) (164,726) – (2,508) (2,785) (10,250) (200,471) (177,761) – – (2,824) – (2,824) – – (172) – (172) (203,295) (177,933) 268,659 282,186 208,690 207,438 47 Helical Bar plc report & accounts 2008 Group and company balance sheets Helical Bar plc and subsidiary undertakings for the year ended 31 March 2008 Equity Called-up share capital Share premium account Revaluation reserve Capital redemption reserve Other reserves Retained earnings Own shares held Equity attributable to equity holders of the parent Minority interests Total equity Note 31 31 31 31 31 31 31 Group 31.3.08 £000 1,222 42,520 57,072 7,478 291 163,911 (3,992) 268,502 157 Group 31.3.07 £000 Company 31.3.08 £000 Company 31.3.07 £000 1,222 42,520 79,664 7,478 291 157,006 (5,995) 282,186 – 1,222 42,520 – 7,478 1,987 159,475 (3,992) 208,690 – 1,222 42,520 – 7,478 1,987 160,226 (5,995) 207,438 – 268,659 282,186 208,690 207,438 The financial statements were approved by the Board of Directors on 17 June 2008. M.E. Slade Director N.G. McNair Scott Director 48 Helical Bar plc report & accounts 2008 Group and company statements of recognised income and expense Helical Bar plc and subsidiary undertakings for the year ended 31 March 2008 (Loss)/profit for the year Fair value movements on available-for-sale investments Associated deferred tax on fair value movements Total recognised income and expense for the year – attributable to equity shareholders – attributable to minority interest Group Year ended 31.3.08 £000 Group Year ended 31.3.07 £000 (12,314) 52,088 9,974 (2,793) (5,133) (5,126) (7) (5,133) (24) – 52,064 51,764 300 52,064 Company Year ended 31.3.08 £000 7,284 9,974 (2,793) 14,465 14,465 – 14,465 Company Year ended 31.3.07 £000 71,751 – – 71,751 71,751 – 71,751 49 Helical Bar plc report & accounts 2008 Group and company cash flow statements Cash flows from operating activities (Loss)/profit before tax Depreciation Loss/(gain) on investment properties Other non-cash items Cash flows from operations before changes in working capital Change in trade and other receivables Change in land, developments and trading properties Change in trade and other payables Cash (outflow)/inflow generated from operations Finance costs Finance income Minority interest dividends paid Dividends from joint ventures Dividends from subsidiaries Tax paid Cash flows from operating activities Cash flows from investing activities Purchase of investment property Sale of investment property Purchase of investments Sale of investments Purchase of shares by ESOP Sale of plant and equipment Purchase of leasehold improvements, plant and equipment Cash flows from financing activities Issue of shares Borrowings drawn down Borrowings repaid Equity dividends paid Refinancing costs Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at 1 April Cash and cash equivalents at 31 March 50 Group Year to 31.3.08 £000 (24,285) 270 32,554 3,441 11,980 26,051 (65,031) 2,563 (24,437) (12,987) 2,579 – 98 – (3,100) (13,410) (37,847) (26,760) 6,014 (8,080) 6,508 (5,273) – (1,973) (29,564) – 96,837 (11,644) (4,081) – 81,112 13,701 3,389 17,090 Group Year to 31.3.07 £000 60,088 180 (40,637) (6,294) 13,337 (36,317) (19,705) 14,828 (27,857) (8,035) 574 (300) 303 – (2,602) (10,060) (37,917) (27,772) 53,446 (4,164) 3,909 (5,084) 7 (48) 20,294 43 46,206 (31,616) (3,615) (141) 10,877 (6,746) 10,135 3,389 Company Year to 31.3.08 £000 Company Year to 31.3.07 £000 12,272 84,472 270 – (31,873) (19,331) 8,379 620 33,237 22,905 (514) 628 – 98 – (2,922) (2,710) 20,195 – – (1,126) – (5,273) – (1,973) (8,372) – – (7,742) (4,081) – (11,823) – 11 11 180 – (81,790) 2,862 (57,048) (645) (21,742) (76,573) (223) 9,925 – – 65,558 (2,359) 72,901 (3,672) – – – – (5,984) 7 (48) (6,025) 43 10,250 – (3,615) – 6,678 (3,019) 3,030 11 Helical Bar plc report & accounts 2008 Notes to the financial statements 1. Principal accounting policies – Group and Company Basis of preparation The consolidated financial statements have been prepared in accordance with applicable International Financial Reporting Standards (“IFRS”), as adopted by the European Union and IFRS as issued by the International Accounting Standards Board. The parent company’s financial statements have also been prepared in accordance with IFRS, as adopted by the European Union. The directors have taken advantage of the exemption offered by S.230 of the Companies Act not to present a separate income statement for the parent company. The financial statements have been prepared under the historical cost convention as modified by the revaluation of investment properties, available-for-sale investments and derivative financial instruments. The measurement bases and principal accounting policies of the Group are set out below. Basis of consolidation The Group financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to 31 March 2008. Subsidiary undertakings are those entities over which the Group has the ability to govern the financial and operating policies through the exercise of voting rights. Subsidiaries are accounted for under the purchase method. Unrealised gains on transactions between the Company and its subsidiaries and between subsidiaries are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Revenue recognition Revenue consists of gross rental income, sales of trading and development properties, profits accrued on developments, sales of current asset investments and investment income. Rental income receivable is recognised on the accruals basis in the period from lease commencement to expiry and is spread evenly over that period. Any incentive for lessees to enter into a lease agreement and any costs associated with entering into the lease are spread over the same period. Trading properties and development sites are regarded as sold when significant risks and rewards of ownership have been transferred to the buyer. For unconditional contracts, sales are recognised on exchange. For conditional contracts, sales are recognised as the conditions are satisfied. Development profits on pre-sold developments are recognised in accordance with the following milestones: - on sale of land - on sale of completed development - on letting of developed building to tenants - over the course of the construction in accordance with an agreed contract Revenue in respect of investment and other income represents investment income, fees and commissions earned on an accruals basis and profits or losses recognised on investments held for the short-term. Dividends are recognised when the shareholders’ right to receive payment has been established. Interest income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate. Share-based payments The Group provides share-based payments in the form of share options, performance share plan awards and a share incentive plan. These payments are discussed in greater detail in the Directors’ Remuneration Report on pages 36 to 42. The fair value of share-based payments related to employees’ service are determined indirectly by reference to the fair value of the related instrument at the grant date. All share-based payment arrangements granted after 7 November 2002 that had not vested prior to 1 January 2005 are recognised in the financial statements. The Group uses the stochastic valuation model and the resulting value is amortised through the Consolidated Income Statement (“Income Statement”) over the vesting period of the share-based payments. For the performance share plan and share incentive plan awards, where non-market conditions apply, the expense is allocated, over the vesting period, to the Income Statement based on the best available estimate of the number of awards that are expected to vest. Estimates are subsequently revised if there is any indication that the number of awards expected to vest differs from previous estimates. Depreciation In accordance with IAS 40 Investment Property, depreciation is not provided for on freehold investment properties or on leasehold investment properties. The Group does not own the freehold land and buildings which it occupies. Costs incurred in respect of leasehold improvements to the Group’s head office at 11-15 Farm Street, London W1J 5RS are capitalised and held as short leasehold improvements. Leasehold improvements, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Residual values are reassessed annually. 51 Helical Bar plc report & accounts 2008 Notes to the financial statements Depreciation is charged so as to write off the cost of assets less residual value, over their estimated useful lives, using the straight line method, on the following basis: Short leasehold improvements – 10% or length of lease, if shorter Plant and equipment – 25% Taxation The taxation charge represents the sum of tax currently payable and deferred tax. The charge for current taxation is based on the results for the year as adjusted for items which are non-assessable or disallowed. It is calculated using rates that have been enacted or substantively enacted by the balance sheet date. Tax payable upon realisation of revaluation gains recognised in prior periods is recorded as a current tax charge with a release of the associated deferred taxation. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. The measurement of deferred tax assets and liabilities reflects the tax consequences of the manner in which Helical expects, at the balance sheet date, to recover or settle the carrying amount of those assets and liabilities. Such assets and liabilities are not recognised if the temporary differences arise from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the assets to be recovered. The deferred tax asset relating to share based payment awards reflects the estimated value of tax relief available on the vesting of the awards at the balance sheet date. Deferred tax is determined using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. It is recognised in the Income Statement except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. The Group recognises a deferred tax liability for all taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, except to the extent that both of the following conditions are satisfied: a) the Group is able to control the timing of the reversal of the temporary difference; and, b) it is probable that the temporary difference will not reverse in the foreseeable future. Dividends Dividend distributions to the Company’s shareholders are recognised as a liability in the financial statements in the period in which dividends are approved. Investment properties Investment properties are properties owned or leased by the Group which are held for long-term rental income and for capital appreciation. Investment properties are initially recognised at cost and revalued at the balance sheet date to fair value as determined by professionally qualified external valuers. In accordance with IAS 40, investment properties held under leases are stated gross of the recognised finance lease liability. An investment property is regarded as sold when the significant risks and rewards of ownership have been transferred to the buyer. For unconditional contracts, sales are recognised on exchange. For conditional contracts, sales are recognised as the conditions are satisfied. Gains or losses arising from changes in the fair value of investment properties are included in other operating income in the Income Statement of the period in which they arise. In accordance with IAS 40, as the Group uses the fair value model, no depreciation is provided in respect of investment properties including integral plant. When the Group redevelops an existing investment property for continued future use as investment property, the property remains an investment property measured at fair value and is not reclassified. Interest is capitalised before tax relief until the date of practical completion. Details of the valuation of investment properties can be found in note 14. Investment in joint ventures Entities whose economic activities are controlled jointly by the Group and by other ventures independent of the Group are accounted for using the equity method of accounting. Under IFRS the Group’s share of the results and of the net assets of the joint ventures are shown in the Income Statement and Consolidated Balance Sheet (“Balance Sheet”) respectively. Under IFRS the Company’s cost of investment in joint ventures is shown in the Company Balance Sheet. Investments in subsidiaries Investments in subsidiaries are held in the Company balance sheet at cost and reviewed annually for impairment. 52 Helical Bar plc report & accounts 2008 Notes to the financial statements Goodwill Goodwill, representing the excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired, is capitalised and reviewed annually for impairment. Goodwill is carried at cost less accumulated impairment losses. Negative goodwill is recognised immediately after acquisition in the Income Statement. Land, developments and trading properties Land, developments and trading properties held for sale are inventory and are included in the Balance Sheet at the lower of cost and net realisable value. Investments Investments are classified as available-for-sale investments or trading investments dependent on the purpose for which they were acquired. Available-for-sale investments are revalued to fair value at the balance sheet date. Gains or losses arising from changes in fair value are recognised directly in equity except to the extent that losses are attributable to impairment, in which case they are recognised in the Income Statement. Upon disposal, accumulated fair value adjustments are included in the Income Statement. Trade receivables Trade receivables do not carry any interest and are stated initially at fair value and subsequently at amortised cost as reduced by appropriate allowances for estimated irrecoverable amounts. Cash and cash equivalents Cash and cash equivalents are carried in the Balance Sheet at cost. For the purposes of the cash flow statement, cash and cash equivalents comprise cash in hand, deposits with banks, other short-term, highly liquid investments with original maturities of three months or less. Trade and other payables Trade and other payables are not interest bearing and are initially recognised at fair value and subsequently at amortised cost. Borrowing and borrowing costs Interest bearing bank loans and overdrafts are initially recorded at fair value, net of finance and other costs yet to be amortised. Borrowing costs directly attributable to the acquisition and construction of new development and investment properties are added to the costs of such properties until the date of completion of the development or investment. Derivative financial instruments Derivative financial assets and financial liabilities are recognised on the Balance Sheet when the Group becomes a party to the contractual provisions of the instrument. The Group enters into derivative transactions such as interest rate caps and floors in order to manage the risks arising from its activities. Derivatives are initially recorded at fair value and are subsequently remeasured to fair value based on market prices, estimated future cash flows and forward rates as appropriate. Any change in the fair value of such derivatives is recognised immediately in the Income Statement as a finance cost or income. Further information on the categorisation of financial instruments can be found in note 21. Leases Leases are classified according to the substance of the transaction. A lease that transfers substantially all the risks and rewards of ownership to the lessee is classified as a finance lease. All other leases are classified as operating leases. In accordance with IAS 40, finance leases of investment property are accounted for as finance leases and recognised as an asset and an obligation to pay future minimum lease payments. The investment property asset is included in the balance sheet at fair value, gross of the recognised finance lease liability. Lease payments are allocated between the liability and finance charges so as to achieve a constant financing rate. Net asset values per share Net asset values per share have been calculated in accordance with the best practice recommendations of the European Public Real Estate Association (“EPRA”). (Loss)/earnings per share (Loss)/earnings per share have been calculated in accordance with IAS 33 and the best practice recommendations of EPRA. Employee Share Ownership Plan Trust Shares held in the Helical Bar Employee Share Ownership Plan Trust (“ESOP”) are shown as a deduction in arriving at equity funds. Assets, liabilities and reserves of the ESOP are included in the statutory headings to which they relate. Use of estimates and judgements To be able to prepare accounts according to generally accepted accounting principles, management must make estimates and assumptions that affect the asset and liability items and revenue and expense amounts recorded in the financial accounts. These estimates are based on historical experience and various other assumptions that management and the Board of Directors believe are reasonable under the circumstances. The results of these considerations form the basis for making judgements about the carrying value of assets and liabilities that are not readily available from other sources. 53 Helical Bar plc report & accounts 2008 Notes to the financial statements Areas requiring the use of estimates and critical judgement that may significantly impact on the Group’s earnings and financial position are: - revenue and cost recognition on developments where profits, recognised only when developments are sold and let, are spread over the construction period using estimates of the final outcome; - valuation of investment properties, where external valuers are used to provide third party valuations; - valuation of recently acquired investment properties, where a directors’ valuation is used based on the terms of the acquisition; - calculation of deferred tax liabilities, where indexation is used to reduce the provision for deferred tax on revaluation surpluses; - recognition of share-based payments which is dependent upon the estimated number of performance share plan awards that will vest at the end of the performance periods; - calculation and assessment of recoverability of deferred tax assets, where it has been assumed that the performance share plan awards will be tax deductible on the vesting of the share awards; and, - valuation of the investment in Quotient Bioscience Limited, which is based on recent share transactions, as discounted to a current fair value (note 16). Status of Adoption of Significant New or Amended IFRS Standards or Interpretations The Group has adopted IFRS 7 “Financial Instruments: Disclosures” in the year. There has been no change in the Income Statement and Balance Sheet as a result of adopting this standard but it has resulted in additional disclosure. The following standards, interpretations and amendments have been issued but are not yet effective. They will be adopted at the point they are effective: IAS 1 “Presentation of financial statements” (revised 2007) – effective 1 January 2009 IAS 23 “Borrowing costs” (revised 2007) – effective 1 January 2009 IAS 27 “Consolidated and separate financial statements” (revised 2008) – effective 1 July 2009 Amendment to IFRS 2 “Share-based Payment” – vesting conditions and cancellations – effective 1 January 2009 IFRS 3 “Business combinations” (revised 2008) – effective 1 January 2009 IFRS 8 “Operating segments” – effective 1 January 2009 Helical does not anticipate any material impact on adopting the above. 2. Segmental information Revenue Rental income Trading property sales Developments Other Revenue Investment and trading Year ended 31.3.08 £000 18,284 115 – 18,399 – 18,399 Developments Year ended 31.3.08 £000 Total Year ended 31.3.08 £000 – – 40,585 40,585 – 40,585 18,284 115 40,585 58,984 6,639 65,623 Investment and trading Year ended 31.3.07 £000 18,044 12,355 – 30,399 – 30,399 Developments Year ended 31.3.07 £000 Total Year ended 31.3.07 £000 – – 88,685 88,685 – 88,685 18,044 12,355 88,685 119,084 4,092 123,176 All sales were within the UK. All revenue is attributable to continuing operations. 54 Helical Bar plc report & accounts 2008 Notes to the financial statements Profit before tax Net rental income Development profits Trading (losses)/profits Share of results of joint venture (Loss)/gain on sale and revaluation of investment properties Other operating (expense)/income Gross (loss)/profit Unallocated administrative expenses Unallocated net finance income/(costs) (Loss)/profit before tax Investment and trading Year ended 31.3.08 £000 16,400 – (29) (98) (32,790) (16,517) Balance sheet Investment properties Land, development and trading properties Borrowings Unallocated assets Unallocated liabilities Net assets 31.3.08 £000 306,778 1,390 308,168 (141,247) 166,291 31.3.08 £000 – 181,118 181,118 (81,353) 100,395 Developments Year ended 31.3.08 £000 Total Year ended 31.3.08 £000 – 6,068 – – – 6,068 Investment and trading Year ended 31.3.07 £000 14,771 – 2,094 6,196 40,637 63,698 Developments Year ended 31.3.07 £000 – 13,587 – – – 13,587 31.3.07 £000 316,025 1,650 317,675 (96,602) 221,073 31.3.07 £000 – 109,165 109,165 (40,805) 68,360 Total Year ended 31.3.07 £000 14,771 13,587 2,094 6,196 40,637 77,285 766 78,051 (17,544) (419) 60,088 31.3.07 £000 316,025 110,815 426,840 (137,407) 289,433 81,741 (88,988) 282,186 16,400 6,068 (29) (98) (32,790) (10,449) (315) (10,764) (13,659) 138 (24,285) 31.3.08 £000 306,778 182,508 489,286 (222,600) 266,686 81,300 (79,327) 268,659 The segmental information has been provided in respect of the two main divisions of the Group, the investment and trading department and the development department. Details of capital expenditure and depreciation are included in notes 14 and 15. 3. Net rental income Gross rental income Rents payable Other property outgoings Net rental income 4. Development profits Development revenue Cost of sales Sales expenses Development profit Year ended 31.3.08 £000 Year ended 31.3.07 £000 18,284 (42) (1,842) 16,400 18,044 (137) (3,136) 14,771 Year ended 31.3.08 £000 Year ended 31.3.07 £000 40,585 (33,640) (877) 6,068 88,685 (70,052) (5,046) 13,587 55 Helical Bar plc report & accounts 2008 Notes to the financial statements 5. Trading (losses)/profits Trading property sales Cost of sales Sales expenses Trading (losses)/profits 6. (Loss)/gain on sale and revaluation of investment properties Net proceeds from the sale of investment properties Book value (note 14) Lease incentive and letting costs adjustment (Loss)/gain on sale of investment properties Revaluation (losses)/gains on investment properties (Loss)/gain on sale and revaluation of investment properties 7. Administrative expenses Administrative expenses Operating (loss)/profit is stated after: Staff costs during the year: – salaries and other remuneration – social security costs – other pension costs Depreciation: – owner occupied property, plant and equipment Share-based payments charge Auditors’ remuneration: – audit of parent company and consolidated financial statements – audit of company’s subsidiaries – interim audit of consolidated financial statements – financial assistance – PSP review Year ended 31.3.08 £000 Year ended 31.3.07 £000 115 (143) (1) (29) 12,355 (9,251) (1,010) 2,094 Year ended 31.3.08 £000 Year ended 31.3.07 £000 6,014 (6,250) – (236) (32,554) (32,790) 53,446 (45,638) (351) 7,457 33,180 40,637 Year ended 31.3.08 £000 Year ended 31.3.07 £000 13,659 17,544 3,765 1,033 238 5,036 270 4,208 135 70 38 7 3 8,511 1,318 302 10,131 180 4,578 127 70 25 – 3 Details of the remuneration of Directors amounting to £14,048,000 (2007: £19,714,000) are included in the Directors’ Remuneration Report on pages 36 to 42. The amount of the share-based payments charge incurred in relation to share awards made to Directors is £3,660,000 (2007: £3,342,000). Other pension costs relate to payments to individual pension plans. The average number of employees (management and administration) of the Group during the year was 24 (2007: 22). 56 Helical Bar plc report & accounts 2008 Notes to the financial statements 8. Finance costs and finance income Interest payable on bank loans and overdrafts Other interest payable and similar charges Finance arrangement costs Interest capitalised Finance costs Interest receivable and similar income Finance income Year ended 31.3.08 £000 Year ended 31.3.07 £000 (11,901) (265) (163) 9,296 (3,033) 2,579 2,579 (8,437) (228) (114) 6,069 (2,710) 1,335 1,335 All interest payable relates to interest on borrowings and all interest receivable relates to interest on cash and cash equivalents. 9. Taxation on (loss)/profit on ordinary activities The tax credit/(charge) is based on the (loss)/profit for the year and represents: United Kingdom corporation tax at 30% (2007: 30%) – Group corporation tax – adjustment in respect of prior periods Current tax credit/(charge) Deferred tax at 28% (2007: 30%) – capital allowances – other temporary differences – revaluation surpluses Deferred tax Tax on (loss)/profit on ordinary activities Year ended 31.3.08 £000 Year ended 31.3.07 £000 (1,160) 1,492 332 (560) 1,209 10,990 11,639 11,971 (6,449) 141 (6,308) 7 929 (2,628) (1,692) (8,000) Factors affecting tax credit/(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: (Loss)/profit on ordinary activities before tax (Loss)/profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 30% (2007: 30%) Effect of: – payments for use of tax losses – expenses not deductible for tax purposes – capital allowances not reflected through deferred tax – tax relief on share awards – tax losses utilised – operating losses/(profit) of joint ventures – prior year adjustment – other temporary differences Total tax credit/(charge) for period The current tax charge has been calculated at a rate of 30%, applicable to periods up to 31 March 2008. From 1 April 2008 the corporation tax rate is 28% and the deferred tax balances at 31 March 2008 have been calculated using that rate. The effect of the reduction in the rate applicable to deferred tax balances is to reduce the deferred tax provision at 31 March 2008 and, hence, increase the deferred tax credit for the year to 31 March 2008, by £647,000. Factors that may affect future tax charges The tax charge is expected to be less than the full rate in future years, primarily due to the Group continuing to claim capital allowances in respect of eligible expenditure on investment properties. 31.3.08 £000 (24,285) 31.3.07 £000 60,088 7,285 (18,027) (905) (958) 907 2,963 795 (29) 1,492 421 11,971 (3,191) (375) 727 3,851 9,538 (107) 142 (558) (8,000) 57 Helical Bar plc report & accounts 2008 Notes to the financial statements 10. Deferred tax Deferred taxation provided for in the financial statements is set out below: Capital gains Capital allowances Other temporary differences Deferred tax provision Group 31.3.08 £000 12,566 2,728 (3,443) 11,851 Group 31.3.07 £000 23,555 2,168 (5,026) 20,697 Company 31.3.08 £000 Company 31.3.07 £000 – 31 2,793 2,824 – 172 – 172 Under IAS 12, deferred tax provisions are made for the tax that would potentially be payable on the realisation of investment properties and other assets at book value. Other temporary differences represent deferred tax assets arising from future tax relief available to the Group from capital allowances and when Performance Share Plan awards vest. If upon sale of the investment properties the Group retained all the capital allowances, the deferred tax provision in respect of capital allowances of £2.7m would be released and further capital allowances of £9.2m would be available to reduce future tax liabilities. The provision in respect of capital gains tax has been reduced by indexation. 11. Dividends paid Attributable to equity share capital Ordinary – interim paid of 1.75p (2007: 1.60p) per share – prior period final paid of 2.75p (2007: 2.45p) per share Total dividends paid in year – 4.50p (2007: 4.05p) per share Year ended 31.3.08 £000 Year ended 31.3.07 £000 1,613 2,468 4,081 1,441 2,174 3,615 The interim dividend of 1.75p was paid on 21 December 2007 to shareholders on the register on 7 December 2007. The final dividend, if approved at the AGM on 23 July 2008, will be paid on 25 July 2008 to shareholders on the register on 27 June 2008. This final dividend, amounting to £2,490,444, representing 2.75p per share, has not been included as a liability at 31 March 2008. 12. Parent company The Company has taken advantage of Section 230 of the Companies Act 1985 and has not included its own income statement in the financial statements. The profit for the year of the Company was £7,284,000 (2007: £71,751,000). 58 Helical Bar plc report & accounts 2008 Notes to the financial statements 13. (Loss)/earnings per share The calculation of the basic (loss)/earnings per share is based on the (loss)/earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year. This is a different basis to the net asset per share calculations which are based on the number of shares at the year end. 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 (loss)/earnings per share is based on the basic (loss)/earnings per share, adjusted to allow for the issue of shares on the assumed exercise of all dilutive options. The (loss)/earnings per share are calculated in accordance with IAS 33 and the best practice recommendations of the European Public Real Estate Association (“EPRA”). Reconciliations of the (loss)/earnings and weighted average number of shares used in the calculations are set out below. Ordinary shares in issue Weighting adjustment Weighted average ordinary shares in issue for calculation of basic earnings per share Weighted average ordinary shares issued on exercise of share options Weighted average ordinary shares to be issued on exercise of share options Weighted average ordinary shares to be issued under performance share plan Weighted average ordinary shares in issue for calculation of diluted earnings per share Weighted average ordinary shares issued on exercise of share options Weighted average ordinary shares to be issued on exercise of share options Weighted average ordinary shares to be issued under performance share plan Weighted average ordinary shares in issue for calculation of diluted EPRA earnings per share Year ended 31.3.08 000s Year ended 31.3.07 000s 95,732 (4,289) 91,443 – – – 91,443 461 2,919 2,929 97,752 94,372 (5,028) 89,344 1,847 2,972 2,303 96,466 – – – 96,466 (Loss)/earnings used for calculation of basic and diluted earnings per share (12,307) 51,788 Basic (loss)/earnings per share Diluted (loss)/earnings per share (Loss)/earnings used for calculation of basic and diluted earnings per share (Loss)/gain on sale and revaluation of investment properties Fair value movement on derivative financial instruments Deferred tax in respect of investment properties Tax on profit on disposal of investment properties Earnings used for calculation of adjusted earnings per share Diluted EPRA earnings per share (13.5p) 58.0p (13.5p) 53.7p (12,307) 32,790 1,270 (10,430) – 11,323 51,788 (40,637) (955) 2,621 3,191 16,008 11.6p 16.6p In accordance with IAS 33 on Earnings per share, no weighting adjustments have been made for share awards in existence during the year to 31 March 2008 as a loss was made during that year making the adjustments anti-dilutive. Accordingly, the basic and diluted loss per share for the year are the same. Diluted EPRA earnings per share excludes from earnings the IFRS effects of including the loss on sale and revaluation of investment properties (net of tax) and fair value movement on derivative financial statements. 59 Helical Bar plc report & accounts 2008 Notes to the financial statements 14. Investment properties Group Fair value at 1 April Additions at cost Disposals Revaluation (deficit)/surplus Amortisation of finance lease Fair value at 31 March Freehold 31.3.08 £000 253,696 29,066 (6,250) (30,211) – 246,301 Leasehold 31.3.08 £000 62,329 493 – (2,343) (2) 60,477 Total 31.3.08 £000 316,025 29,559 (6,250) (32,554) (2) Freehold 31.3.07 £000 211,451 32,445 (15,174) 24,974 – Leasehold 31.3.07 £000 83,132 1,458 (30,464) 8,206 (3) Total 31.3.07 £000 294,583 33,903 (45,638) 33,180 (3) 306,778 253,696 62,329 316,025 A disposal of the investment property portfolio at its stated fair value would crystallise a payment due to the Group’s joint venture partners in respect of their share of the revaluation surplus of £6.0m (2007: £9.4m). This amount is included in accruals (note 24). Interest capitalised during the year in respect of the refurbishment of investment properties amounted to £2,634,000 (2007: £1,192,000). Interest capitalised in respect of the refurbishment of investment properties is included in investment properties to the extent of £5,140,000 (2007: £2,505,000). The investment properties have been valued on an open market basis at 31 March 2008 as follows: Cushman & Wakefield LLP Jones Lang LaSalle Drivers Jonas LLP Directors’ valuation The net deficit arising of £32,554,000 (2007: surplus of £33,180,000) has been transferred to the revaluation reserve. The historical cost of investment property is £237,838,000 (2007: £213,501,000). 15. Owner occupied property, plant and equipment – Group and Company Cost at 1 April Additions at cost Disposals Cost at 31 March Depreciation at 1 April Provision for the year Eliminated on disposals Depreciation at 31 March Net book amount at 31 March Short leasehold improvements 31.3.08 £000 Plant and equipment 31.3.08 £000 646 1,734 (347) 2,033 552 123 (347) 328 1,705 778 239 (430) 587 521 147 (383) 285 302 Short leasehold improvements 31.3.07 £000 Plant and equipment 31.3.07 £000 646 – – 646 505 47 – 552 94 866 49 (137) 778 518 133 (130) 521 257 Total 31.3.08 £000 1,424 1,973 (777) 2,620 1,073 270 (730) 613 2,007 Plant and equipment include vehicles, fixtures and fittings and other office equipment. £000 229,075 59,700 6,500 11,503 306,778 Total 31.3.07 £000 1,512 49 (137) 1,424 1,023 180 (130) 1,073 351 60 Helical Bar plc report & accounts 2008 Notes to the financial statements 16. Available-for-sale investments Non-current investments Investment in Quotient Bioscience Ltd Current investments Investment in Quotient Bioscience Ltd UK listed investments at fair value Group 31.3.08 £000 12,000 – 12 12 Group 31.3.07 £000 – 900 12 912 Company 31.3.08 £000 12,000 – – – Company 31.3.07 £000 – 900 – 900 Helical owns 29% of the share capital of Quotient Bioscience Limited (QBL), a private bioscience company. The investment has been valued at £12,000,000 by the directors at 31 March 2008 based on recent share transactions and after discounting the value to reflect Helical’s minority interest, certain restrictions in the shareholders agreement and other risk factors inherent in the valuation of a shareholding in a private company. If the directors’ valuation was increased by 10% the equity of the Group would increase by £864,000 and the value of the investment increased by £1,200,000. If the directors’ valuation was reduced by 10% the equity of the Group would decrease by £864,000 and the value of the investment decrease by £1,200,000. 17. Investment in subsidiaries At 1 April Acquired during year Impairment in the carrying value of investments At 31 March Group 31.3.08 £000 Group 31.3.07 £000 – – – – – – – – Company 31.3.08 £000 15,300 30,246 (7,775) 37,771 Company 31.3.07 £000 15,300 – – 15,300 Additions by the Company arise from a restructuring of the group during the year to 31 March 2008. The Company’s principal subsidiary undertakings, all of which have been consolidated, are: Name of undertaking Albion Land (Bushey Mill) Ltd Aycliffe and Peterlee Development Company Ltd Baylight Developments Ltd* Chancerygate (Cowley) Ltd Chancerygate (Kidlington) Ltd Chancerygate (Southampton) Ltd Chancerygate (Stockport) Ltd Cranmer Investments (Whitstable) Ltd Dencora (Docklands) Ltd Dencora (Fordham) Ltd Harbour Developments (Bracknell) Ltd HB Cambs No. 3 Ltd HB Dales Manor No. 3 Ltd HB Sawston No. 3 Ltd Helical (Aldridge) Ltd Helical (Ashford) Ltd Nature of business Development Development and trading Investment Development Development Development Development Development Investment Investment Development Investment Investment Investment Investment Investment Percentage of ordinary share capital held 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 61 Helical Bar plc report & accounts 2008 Notes to the financial statements Name of undertaking Helical Bar Developments (South East) Ltd Helical Bar (East Grinstead) Ltd Helical Bar (Epsom) Ltd Helical Bar (Hawtin Park No. 3) Ltd Helical Bar (Rex House) Ltd Helical Bar Services Ltd Helical Bar (Wales) Ltd* Helical Bar (White City) Ltd Helical (Battersea) Ltd Helical (Cardiff) Ltd Helical (Crawley) Ltd Helical (Faygate) Ltd Helical (Fleet) No. 2 Ltd* Helical (Glasgow) Ltd Helical (Hailsham) Ltd Helical (Liphook) Ltd Helical (Milton) Ltd Helical (Paignton) Ltd Helical Properties Investment Ltd Helical Properties Ltd Helical Retail Ltd Helical Retail (RBS) Ltd* Helical (Sevenoaks) Ltd Helical (Winterhill) Ltd Prescot Street Investments Ltd 61 Southwark Street Ltd* Nature of business Development Investment Development Investment Investment Management Services Investment Development Investment Investment Investment Development Investment Investment Development Development (Jersey) Development Investment Investment Investment and trading Development Development Investment Investment Investment Investment 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% All principal subsidiary undertakings operate in the United Kingdom and, unless otherwise indicated, are incorporated and registered in England and Wales. A full list of all subsidiaries is lodged with the Annual Return at Companies House. *Ordinary capital is held by a subsidiary undertaking. 18. Investment in joint ventures Summarised income statements Revenue Operating profit Net finance costs (Loss)/profit before tax Tax (Loss)/profit after tax Summarised balance sheets Non-current assets Current assets Current liabilities Non-current liabilities Net assets The cost of the Company’s investment in joint ventures was £150,000 (2007: £150,000). 62 Group 31.3.08 £000 16,450 233 (331) (98) – (98) 81 30,919 (7,432) (17,490) 6,078 Group 31.3.07 £000 16,233 6,480 (284) 6,196 – 6,196 10 25,168 (6,415) (12,575) 6,188 Helical Bar plc report & accounts 2008 Notes to the financial statements At 31 March 2008 the Group and the Company had interests in the following joint venture companies: Country of incorporation Class of share capital held Proportion held Group Proportion held Company Nature of business Abbeygate Helical (Leisure Plaza) Ltd Abbeygate Helical (Winterhill) Ltd Abbeygate Helical (C4.1) LLP The Asset Factor Ltd Shirley Advance LLP King Street Developments (Hammersmith) Ltd United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom United Kingdom Ordinary Ordinary n/a Ordinary n/a Ordinary 50% 50% 50% 50% 50% 50% 19. Goodwill Cost at 1 April Additions Cost at 31 March Impairment at 1 April Impairment for the year Impairment at 31 March Fair value at 31 March Property development Property development Property development – – – 50% Outsourcing Property development Property development – – Group 31.3.08 £000 1,515 – 1,515 1,485 – 1,485 30 Group 31.3.07 £000 1,515 – 1,515 1,447 38 1,485 30 The carrying values of the Group’s goodwill is reassessed at least annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If analysis indicates that the carrying value is too high, then this is reduced to its recoverable amount which is the higher of fair value and its value in use. 20. Land, developments and trading properties Development sites Properties held as trading stock Group 31.3.08 £000 181,118 1,390 182,508 Group 31.3.07 £000 109,165 1,650 110,815 Company 31.3.08 £000 546 – 546 Company 31.3.07 £000 1,166 – 1,166 The directors’ valuation of trading and development stock shows a surplus of £43m above book value (2007: surplus £36m). Interest capitalised in respect of the development of sites is included in stock to the extent of £11,636,000 (2007: £4,523,000). Interest capitalised during the year in respect of development sites amounted to £6,661,000 (2007: £4,877,000). Capitalised interest previously provided for but reinstated during the year amounted to £452,000 (2007: nil). Development sites and properties held as trading stock were impaired during the year by £743,891 and £150,094 respectively. The fair value of the impaired development sites and properties held as trading stock at 31 March 2008 was £10,154,232 and £1,362,000 respectively. 63 Helical Bar plc report & accounts 2008 Notes to the financial statements 21. Financial instruments Financial assets and liabilities by category The financial instruments of the Group as classified in the financial statements as at 31 March can be analysed under the following IAS 39 categories: Financial assets Loans and receivables Available for sale financial assets At fair value through income statement Total financial assets These financial assets are included in the balance sheet within the following headings: Available-for-sale investments Derivative financial instruments Trade receivables and other receivables Cash and cash equivalents Total financial assets Group 31.3.08 £000 59,689 12,012 – 71,701 Group 31.3.08 £000 12,012 – 42,599 17,090 71,701 Group 31.3.07 £000 73,621 912 345 Company 31.3.08 £000 352,228 12,000 – Company 31.3.07 £000 360,800 900 – 74,878 364,228 361,700 Group 31.3.07 £000 912 345 70,232 3,389 74,878 Company 31.3.08 £000 12,000 – Company 31.3.07 £000 900 – 352,217 360,789 11 11 364,228 361,700 For fair value of available-for-sale investments see note 16. Derivative financial instruments are shown at fair value. The carrying value of the trade receivables and other receivables and cash and cash equivalents is deemed to be the fair value. Financial receivables At fair value through income statement Other financial liabilities Total financial liabilities Group 31.3.08 £000 (925) (279,889) (280,814) These financial liabilities are included in the balance sheet within the following headings: Trade payables and other payables Borrowings - current Borrowings - non current Derivative financial instruments Total financial liabilities Group 31.3.08 £000 (57,289) (50,238) (172,362) (925) (280,814) Group 31.3.07 £000 – (196,761) (196,761) Group 31.3.07 £000 (59,354) (31,560) (105,847) (196,761) (196,761) Company 31.3.08 £000 – (199,551) (199,551) Company 31.3.08 £000 (197,043) (2,508) – – Company 31.3.07 £000 – (174,976) (174,976) Company 31.3.07 £000 (164,726) (10,250) – – (199,551) (174,976) The carrying value of trade payables and other payables and borrowings is deemed to be the fair value. Derivative financial instruments are shown at their fair value. 64 Helical Bar plc report & accounts 2008 Notes to the financial statements Change in fair value of derivative financial instruments Change in fair value of: Interest rate swaps Interest rate caps Other Group Year ended 31.3.08 £000 Group Year ended 31.3.07 £000 Company Year ended 31.3.08 £000 Company Year ended 31.3.07 £000 (1,297) (20) 47 (1,270) 673 (7) 290 956 – – – – – – – – Credit Risk Credit risks arise from the possibility that customers may not be able to settle their obligations as agreed. To manage this risk the Group periodically assesses the financial reliability of customers, taking into account the financial position, past experience and other factors. Of the trade receivables held at 31 March 2008 £2,650,000 related to the sales of part of the development site at Bluebrick in Wolverhampton which was sold at 31 March 2008 and the monies received on 22 April 2008. A further £1,446,574 related to monies due on the development at Trinity Square, Nottingham which was received on 7 April 2008 and a further £3,297,426 related to rent due from tenants all of which was deemed receivable. All other debtors are deemed to be recoverable. For further information on trade and other receivables, see note 22. Liquidity Risk Liquidity risk is defined as the risk that the Group would not be able to settle or meet its obligations on time or at a reasonable price. Liquidity and funding risks, related processes and policies are overseen by management. Helical manages its liquidity risk on a consolidated basis based on business needs, tax, capital or regulatory considerations, if applicable, through numerous sources of finance in order to maintain flexibility. Management monitors the Group’s net liquidity position through rolling forecasts on the basis of expected cash flows. The Group’s cash and cash equivalents are held with major regulated financial institutions. For further information on borrowing facilities, see notes 25 and 26. The Group had the following contracted liabilities as at 31 March 2008. Payable within 1 year Payable between 1 and 3 years Payable after 3 years Total contracted liabilities Group 31.3.08 £000 153,700 58,900 132,400 345,000 Group 31.3.07 £000 104,700 68,700 63,500 236,900 Company 31.3.08 £000 199,700 – – Company 31.3.07 £000 171,900 – – 199,700 171,900 At 31 March 2008 Helical had £76m of undrawn loan facilities, £179m of uncharged assets and cash balances of £17m. The above contracted liabilities assume that no loans are extended beyond their current facility expiry date. The management believe that these facilities together with anticipated sales and the renewal of some of these loan facilities means that Helical can meet its contracted liabilities as they fall due. Market Risk Helical is exposed to market risk, primarily related to interest rates, foreign currency exchange movements, the market value of the investments and accrued development profits. The Group actively monitors these exposures. 65 Helical Bar plc report & accounts 2008 Notes to the financial statements Interest rate risk It is the Group’s policy and practice to minimise interest rate cash flow exposures on long-term financing. Helical does this by using a number of derivative financial instruments including interest rate swaps and interest rate caps. The purpose of these derivatives is to manage the interest rate risks arising from the Group’s sources of finance. The Group does not use financial instruments for speculative purposes. Details of financing and financial instruments can be found in note 26. In the year to 31 March 2008, if interest rates had moved by 1%, this would have resulted in the following movement to pre-tax (losses)/profits and equity due to movements in interest charges and mark-to-market valuations of derivatives. 1% increase – increase in net results and equity 1% decrease – decrease in net results and equity 31 March 2008 Impact on results £000 2,135 (2,483) Equity impact £000 2,065 (2,413) There would have been no significant impact on the results or on the equity of the Company if interest rates had increased or decreased. Foreign currency exchange risk Helical has reviewed its foreign currency exchange risk and deems there to be an insignificant risk associated with exchange movements on foreign currencies. Accrued development profits Helical has a standard policy for recognising development profits. Development profits are recognised on a scheme by scheme basis taking into account: the funding arrangements of the scheme, the level of completion of the scheme and whether there are any pre-lets with the scheme. At the end of each accounting period, all accrued development profit is reviewed for possible impairment. 22. Trade receivables and other receivables Trade receivables Amounts owed by joint venture undertakings Amounts owed by subsidiary undertakings Other receivables Prepayments and accrued income Receivables Fully performing Past due < 3 months Past due > 3 months Total receivables being financial assets Total receivables being non-financial assets Total receivables Group 31.3.08 £000 11,626 10,529 – 3,602 18,326 44,083 Group 31.3.08 £000 40,380 2,068 151 42,599 1,484 44,083 Group 31.3.07 £000 50,850 5,185 Company 31.3.08 £000 110 8,423 – 335,585 5,922 2,545 Company 31.3.07 £000 389 15,074 345,293 33 175 1,390 13,101 70,526 Group 31.3.07 £000 67,230 1,936 1,066 70,232 294 70,526 352,585 360,964 Company 31.3.08 £000 352,217 – – 352,217 368 352,585 Company 31.3.07 £000 360,789 – – 360,789 175 360,964 Past due but not impaired relate to a number of independent customers for whom there is no recent history of default. Against trade receivables, Helical held £1.1m of rental deposits at 31 March 2008. Movements in the provision for impairment of trade receivables are as follows: Gross receivables being financial assets Provisions for receivables impairment Net receivables being financial assets Receivables written off during the year as uncollectable 66 Group 31.3.08 £000 42,776 (177) 42,599 343 Group 31.3.07 £000 70,524 (292) 70,232 32 Company 31.3.08 £000 352,217 – 352,217 Company 31.3.07 £000 360,789 – 360,789 – – Helical Bar plc report & accounts 2008 Notes to the financial statements 23. Cash and cash equivalents Rent deposits and cash held at managing agents Cash secured against debt and cash held at solicitors Cash deposits 24. Trade payables and other payables Trade payables Social security costs and other taxation Amounts owed to joint venture undertakings Amounts owed to subsidiary undertakings Other payables Accruals and deferred income 25. Borrowings Current borrowings Bank loans repayable within: – one to two years – two to three years – three to four years – four to five years – after five years Deferred arrangement costs Non-current borrowings Group 31.3.08 £000 3,105 – 13,985 17,090 Group 31.3.08 £000 13,035 136 8,512 – 225 44,466 66,374 Group 31.3.08 £000 50,238 34,984 16,037 48,280 64,314 9,142 Group 31.3.07 £000 1,852 1,045 492 3,389 Group 31.3.07 £000 9,841 304 7,733 – 515 45,810 64,203 Group 31.3.07 £000 31,560 39,981 2,600 9,400 48,336 5,800 172,757 106,117 (395) (270) 172,362 105,847 Company 31.3.08 £000 Company 31.3.07 £000 – – 11 11 Company 31.3.08 £000 306 – 825 186,875 1,121 8,836 – – 11 11 Company 31.3.07 £000 123 – 1,554 159,003 462 3,584 197,963 164,726 Company 31.3.08 £000 2,508 Company 31.3.07 £000 10,250 – – – – – – – – – – – – – – – – 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 £331,657,000 (2007: £222,109,000). These will be repayable when the underlying properties are sold. Bank overdrafts and term loans exclude the Group’s share of borrowings in joint venture companies of £19,990,000 (2007: £12,583,000). 67 Helical Bar plc report & accounts 2008 Notes to the financial statements 26. Financing and financial instruments The policies for dealing with liquidity and interest rate risk are noted in the Financial Review on page 26. Bank overdraft and loans – maturity Due after more than one year Due within one year Group 31.3.08 £000 172,362 50,238 222,600 Group 31.3.07 £000 105,847 31,560 137,407 The Group has various undrawn committed borrowing facilities. The facilities available at 31 March 2008 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 – swap rate plus bank margin – swap rate plus bank margin – swap rate plus bank margin – swap rate plus bank margin – swap rate plus bank margin – swap rate plus bank margin – swap rate plus bank margin – swap rate plus bank margin Weighted average Floating rate borrowings Total borrowings Deferred arrangement costs % Expiry 9.050 5.939 – 5.341 5.661 7.273 6.405 4.990 6.052 6.332 6.724 Feb 2009 Sep 2009 – Jun 2011 Nov 2010 Nov 2009 Oct 2012 Mar 2009 Jan 2011 Aug 2011 Aug 2010 31.3.08 £000 6,188 14,324 – 4,536 5,200 8,000 35,190 10,120 4,200 87,758 135,237 222,995 (395) 222,600 Floating rate borrowings bear interest at rates based on LIBOR. Group 31.3.08 £000 62,427 2,000 11,730 76,157 % Expiry 9.050 5.939 6.231 5.341 5.661 – – – 6.052 6.189 6.326 Feb 2009 Sep 2009 Feb 2008 Jun 2011 Nov 2010 – – – Jan 2011 Nov 2009 Jun 2009 Group 31.3.07 £000 44,200 27,456 2,000 73,656 31.3.07 £000 6,815 14,324 5,800 4,536 5,200 – – – 4,200 40,875 96,802 137,677 (270) 137,407 68 Helical Bar plc report & accounts 2008 Notes to the financial statements Hedging In addition to the fixed rates, borrowings are also hedged by the following financial instruments: Value £000 Rate % Start Expiry 80,000 7.000 Jan 2006 Sep 2009 Instrument Current: – cap Gearing Total borrowings Cash Net borrowings Net borrowings exclude the Group’s share of borrowings in joint ventures of £19,990,000 (2007: £12,583,000). Net assets Gearing 27. Obligations under finance leases Lease payments under finance leases fall due: Not later than one year Later than one year and not later than five years Later than five years Present value of finance lease obligations Group 31.3.08 £000 222,600 (17,090) 205,510 Group 31.3.08 £000 268,659 76% Group 31.3.07 £000 137,407 (3,389) 134,018 Group 31.3.07 £000 282,186 47% Group 31.3.08 £000 Group 31.3.07 £000 14 46 117 177 14 46 119 179 69 Helical Bar plc report & accounts 2008 Notes to the financial statements 28. Share capital Authorised 31.3.08 £000 39,577 39,577 31.3.07 £000 39,577 39,577 The authorised share capital of the Company is £39,576,626.60 divided into ordinary shares of 1p each, 5.25p convertible redeemable preference shares 2012 of 70p each and deferred shares of 1⁄8p each. Allotted, called up and fully paid – 95,732,457 ordinary shares of 1p each (2007: 95,719,432) – 212,145,300 deferred shares of 1⁄8p each 31.3.08 £000 31.3.07 £000 957 265 1,222 957 265 1,222 As at 1 April 2007 the Company had 95,719,432 ordinary 1p shares in issue. On 28 September 2007 options over 13,025 ordinary 1p shares were exercised. At 31 March 2008 there were 95,732,457 ordinary 1p shares in issue. Ordinary shares At 1 April New shares issued At 31 March Deferred shares At 1 April At 31 March Shares in issue 31.3.08 Number Share capital 31.3.08 £000 Shares in issue 31.3.07 Number Share capital 31.3.07 £000 95,719,432 13,025 95,732,457 212,145,300 212,145,300 957 – 957 265 265 94,371,925 1,347,507 95,719,432 212,145,300 212,145,300 944 13 957 265 265 The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure. Capital is defined as being issued ordinary and deferred shares. The deferred shares were issued on 23 December 2004 to those shareholders electing to receive a dividend, rather than a capital repayment or further shares in the Company, as part of the Return of Cash approved by shareholders on 20 December 2004. The deferred shares carry no voting rights and have no right to a dividend or capital payment in the event of a winding up of the Company. The Company’s Articles of Association give the Company irrevocable authority to purchase all or any of the deferred shares for a maximum aggregate total of 1 penny for all deferred shares in issue on the date of such purchase. 70 Helical Bar plc report & accounts 2008 Notes to the financial statements 29. Share options At 31 March 2008 unexercised options over 1,939,965 (2007: 1,956,070 ) new ordinary 1p shares in the Company and 2,629,695 (2007: 3,964,695) purchased ordinary 1p shares held by the ESOP had been granted to directors and employees under the Company’s share option schemes. During the period no new options were granted. Options over 16,105 new ordinary 1p shares and 1,335,000 purchased ordinary 1p shares were exercised. In order that the dilutive effect of issuing new shares be reduced, and to reduce the number of shares required by the ESOP to satisfy share awards, the Company agreed with employees that the number of shares required on the exercise of options be reduced. To ensure that employees were not disadvantaged by this reduction, the exercise prices applied on the exercise of the options were correspondingly reduced. The effect of the reductions to the exercise prices was to reduce the weighted average exercise price from 149p to 1p. These reductions in exercise prices were not applied to options exercised in accordance with the Helical Bar 1999 Approved Share Option Scheme. Share options exercised 28 September 2007 Original subscription options 16,105 16,105 Original purchase options 1,335,000 1,335,000 Original total options 1,351,105 1,351,105 Exercise price per share pence Reduced subscription options 13,025 13,025 Number of shares Reduced purchase options 899,475 899,475 Date from which exercisable Reduced total options 912,500 912,500 Expiry date of options Helical Bar 1999 Share Option Scheme Subscription options Options granted: – 8 March 1999 – 8 January 2001 – 21 November 2002 Purchase options Options granted: – 18 December 2000 – 8 January 2001 – 15 November 2001 Helical Bar 1999 Approved Share Option Scheme Subscription options Options granted: – 8 March 1999 – 21 November 2002 Summary of share options At 1 April Options granted Options exercised Option expired/lapsed At 31 March 88.5 156.0 141.5 150.0 156.0 153.3 1,333,875 8 Mar 2005 7 Mar 2009 150,000 8 Jan 2007 7 Jan 2011 299,310 21 Nov 2007 20 Nov 2012 1,310,000 18 Dec 2006 17 Dec 2010 170,510 8 Jan 2007 7 Jan 2011 1,149,185 15 Nov 2007 14 Nov 2011 88.5 141.5 135,580 8 Mar 2003 7 Mar 2009 21,200 21 Nov 2006 20 Nov 2012 4,569,660 Weighted average exercise price 31.3.08 Number 31.3.07 135p 9,890,205 Weighted average exercise price 31.3.07 121p –– 1p –– – (3,969,440) 3p – Number 31.3.08 5,920,765 – (1,351,105) – 4,569,660 131p 5,920,765 135p 71 Helical Bar plc report & accounts 2008 Notes to the financial statements 30. Share-based payments The Company provides share-based payments to employees in the form of share options, performance share plan awards and a share incentive plan. All share-based payment arrangements granted after 7 November 2002 that had not vested prior to 1 January 2005 are recognised in the financial statements. The Company uses a stochastic valuation model and the resulting value is amortised through the Income Statement over the vesting period of the share-based payments. Share options granted after 7 November 2002 Outstanding at beginning and end of period 2008 Weighted average exercise price 141.50 Options 320,510 320,510 Options 320,510 320,510 The options outstanding at 31 March 2008 had a weighted average remaining contractual life of four years and eight months. The input into the stochastic model of valuation of the options were as follows: Weighted average share price Weighted average exercise price Expected volatility Expected life Risk free rate Expected dividends 2008 146.72 141.50 16% 6 years 4.48% 1.99% 2007 Weighted average exercise price 141.50 2007 146.72 141.50 16% 6 years 4.48% 1.99% Expected volatility was determined by calculating the historical volatility of the Company’s shares over the last six years. The expected life used in the model has been adjusted, based on the Company’s best estimate, for the effects of employee changes (subject to good leaver provisions), exercise restrictions and behavourial considerations. Performance share plan awards Outstanding at beginning of period Awards vested during the period Awards made during the period Outstanding at end of period 2008 Weighted average award value 268p 197p 502p 366p Awards 4,514,380 – 1,446,195 5,960,575 2007 Weighted average award value 229p – 377p 268p Awards 5,960,575 (2,549,760) 1,125,250 4,536,065 The performance share plan awards outstanding at 31 March 2008 had a weighted average remaining contractual life of two years nine months. The inputs into the stochastic model of valuation of the PSP awards were as follows: Weighted average share price Weighted average exercise price Expected volatility Expected life Risk free rate Expected dividends The Company recognised total expenses of £5,340,000 (2007: £4,578,000) in relation to share-based payments. 72 2008 366p – n/a 3 years n/a 1.09% 2007 268p – n/a 3 years n/a 1.41% Helical Bar plc report & accounts 2008 Notes to the financial statements 31. Statement of changes in equity Group At 1 April 2006 Issue of shares Revaluation surplus Realised on disposals Total recognised income Dividends paid Minority interest Purchase of shares Share options exercised Performance share plan Own shares held At 31 March 2007 Revaluation deficit Realised on disposals Total recognised expense Dividends paid Minority interest Purchase of shares Performance share plan Own shares held At 31 March 2008 Share capital £000 Capital Share Revaluation redemption reserve reserve £000 £000 premium £000 Other reserves £000 Retained earnings £000 Own shares held £000 Minority interests Total £000 1,209 42,490 64,820 7,478 291 120,948 (7,139) 13 30 – – – – – – – – – – – – – – – – – – – 30,552 (15,708) – – – – – – – – – – – – – – – – – – – – – – – – – – – – (30,552) 15,708 52,064 (3,615) (300) – – 8,981 – – – – – – (5,155) 71 – (6,228) 6,228 1,222 42,520 79,664 7,478 291 157,006 (5,995) – – – – – – – – – – – – – – – – (21,564) (1,028) – – – – – – – – – – – – – – – – – – – – – – 21,564 1,028 (5,133) (4,081) 7 – – – – – – (9,132) 4,655 – (11,135) 11,135 – – – – – – – – – – – – – – – – 230,097 43 – – 52,064 (3,615) (300) (5,155) 71 8,981 – 282,186 – – (5,133) (4,081) 157 164 – – – (9,132) 4,655 – 1,222 42,520 57,072 7,478 291 163,911 (3,992) 157 268,659 The adjustment to retained earnings of £4,655,000 (2007: £8,981,000) adds back the share-based payments charge, in accordance with IFRS 2 Share-Based Payments. Notes: Share capital – represents the nominal value of issued share capital. Share premium – represents the excess of value of shares issued over their nominal value. Revaluation reserve – represents the surplus of fair value of investment properties over their historic cost. Capital redemption reserve – represents amounts paid to purchase issued shares for cancellation at their nominal value. Retained earnings – represents the accumulated retained earnings of the Group. Own shares held – relates to the shares purchased by the Helical Bar Employees’ Share Ownership Plan Trust. 73 Helical Bar plc report & accounts 2008 Notes to the financial statements Company At 1 April 2006 Issue of shares Total recognised income Dividends paid Shares purchased Share options exercised Own shares held At 31 March 2007 Total recognised income Dividends paid Shares purchased Own shares held At 31 March 2008 32. Own shares held Share capital £000 Capital Share Revaluation redemption reserve reserve £000 £000 premium £000 Other reserves £000 Retained earnings £000 Own shares held £000 Total £000 1,209 42,490 13 30 – – – – – – – – – – 1,222 42,520 – – – – – – – – 1,222 42,520 – – – – – – – – – – – – – 7,478 1,987 98,318 (7,139) 144,343 – – – – – – – – – – – – – 71,751 (3,615) – – – – – (5,155) 71 (6,228) 6,228 43 71,751 (3,615) (5,155) 71 – 7,478 1,987 160,226 (5,995) 207,438 – – – – – – – – 14,465 (4,081) – – 14,465 (4,081) – (9,132) (9,132) (11,135) 11,135 – 7,478 1,987 159,475 (3,992) 208,690 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. The Trust purchases shares in the Company to satisfy the Company’s obligations under its Share Option Schemes and Performance Share Plan. At 31 March 2008 the Trust held 4,170,868 (2007: 5,174,701) ordinary 1p shares in Helical Bar plc. At 31 March 2008 unexercised options over 2,629,695 (2007: 3,964,695) ordinary 1p shares in Helical Bar plc had been granted over shares held by the Trust. At 31 March 2008 outstanding awards over 4,536,065 (2007: 5,960,675) ordinary 1p shares in Helical Bar plc had been made under the terms of the Performance Share Plan over shares held by the Trust. 33. Contingent liabilities The Company has entered into cross guarantees in respect of the banking facilities of its subsidiaries. Other than these contingent liabilities there were no contingent liabilities at 31 March 2008 (2007: nil). 74 Helical Bar plc report & accounts 2008 Notes to the financial statements 34. Net assets per share Net asset value Less: own shares held by ESOP deferred shares Basic net asset value Add: unexercised share options Diluted net asset value Adjustment for: – fair value of financial instruments – deferred tax on capital allowances – deferred tax on capital gains Adjusted diluted net asset value Adjustment for: – fair value of trading properties Diluted EPRA net asset value Adjustment for: – fair value of financial instruments – deferred tax on capital allowances – deferred tax on capital gains Diluted EPRA triple net asset value 31.3.08 £000 268,502 – (265) 268,237 1,988 270,225 925 2,728 12,565 286,443 42,970 329,413 (925) (2,728) (12,565) 313,195 Number of shares 000s 95,732 (4,170) – 91,562 1,940 93,502 31.3.08 pence per share 293 289 93,502 306 93,502 352 93,502 335 31.3.07 £000 282,186 – (265) 281,921 2,002 283,923 (345) 2,168 23,555 309,301 36,480 345,781 345 (2,168) (23,555) 320,403 Number of shares 000s 95,719 (5,174) – 90,545 1,956 92,501 31.3.07 pence per share 311 307 92,501 334 92,501 374 92,501 346 The net asset values per share have been calculated in accordance with the best practice recommendations of the European Public Real Estate Association (“EPRA”). 75 Helical Bar plc report & accounts 2008 Notes to the financial statements 35. Related party transactions At 31 March 2008 and 31 March 2007 the following amounts were due from the Group’s joint ventures Abbeygate Helical (Leisure Plaza) Ltd Abbeygate Helical (Winterhill) Ltd Abbeygate Helical (C4.1) LLP Grosvenor Hill (Sprucefield) Ltd King Street Developments (Hammersmith) Ltd Shirley Advance LLP The Asset Factor Ltd At 31.3.08 £000 At 31.3.07 £000 1,318 (152) (636) – 530 5,352 4,116 889 (864) (636) (17) – 4,112 551 At 31 March 2008 and 31 March 2007 there were the following balances between the Company and its subsidiaries. Amounts due from subsidiaries Amounts due to subsidiaries At 31.3.08 £000 335,585 186,875 At 31.3.07 £000 346,766 159,003 During the years to 31 March 2008 and 31 March 2007 there were the following transactions between the Company and its subsidiaries: Year ended 31.3.07 £000 3,863 Year ended 31.3.08 £000 3,230 Management charges receivable Management charges payable Interest receivable Interest payable 3,603 14,789 – 620 9,482 – Management charges relate to the performance of management services for the Company or its subsidiaries. Interest receivable relates to interest on loans made by the Company to its subsidiaries. All of these transactions, and the year end balance sheet amounts arising from these transactions were conducted on an arm’s length basis and on normal commercial terms. Key management personnel, who are not included in the directors’ remuneration report on pages 40-46, were paid £68,828 during the year. 76 Helical Bar plc report & accounts 2008 Ten year review IFRS 31.3.08 £000 IFRS 31.3.07 £000 IFRS 31.3.06 £000 IFRS 31.3.05 £000 UK GAAP 31.3.04 £000 UK GAAP 31.3.03 £000 UK GAAP 31.3.02 £000 UK GAAP 31.3.01 £000 UK GAAP 31.3.00 £000 UK GAAP 31.3.99 £000 Revenue 65,623 123,176 119,274 101,469 54,566 135,192 136,632 165,259 149,922 121,244 Net rental income Development profits 16,400 6,068 Trading (losses)/profits 72 14,771 13,587 (29) 16,524 4,594 2,094 20,440 12,664 13,441 22,980 25,619 38 5,771 4,630 1,031 27,827 17,072 349 25,532 29,507 154 23,652 19,345 920 18,475 21,601 372 Share of results of joint ventures Other income Gross profit before gain on investment properties (Loss)/gain on sale and revaluation of investment properties Administrative expenses Loss on sale of subsidiary Negative goodwill (98) (315) 6,196 766 437 235 2,699 235 1,636 601 1,544 626 986 (67) 86 342 – 113 – (1,144) 22,026 37,414 35,231 41,809 26,286 32,768 45,972 56,387 43,482 39,004 (32,790) 40,637 43,551 44,204 2,035 2,126 2,463 709 4,555 415 (13,659) (17,544) (16,582) (15,757) (8,037) (6,391) (10,888) (12,031) (9,669) (6,860) – – – – – – – – (59) – – 6,362 (195) – – – – – – – Net finance income/(costs) 138 (419) (5,080) (5,561) (6,572) (9,638) (14,779) (19,241) (16,348) (12,515) (Loss)/profit before tax (24,285) 60,088 57,120 64,695 13,653 25,227 22,573 25,824 22,020 20,044 Tax 11,971 (8,000) (9,676) 844 (2,199) (7,660) (5,353) (5,471) (6,032) (3,899) (Loss)/profit after tax (12,314) 52,088 47,444 65,539 11,454 17,567 17,220 20,353 15,988 16,145 Investment portfolio 306,778 316,025 294,583 271,315 334,932 342,484 439,911 453,607 419,570 332,457 Shareholders’ funds 268,659 282,186 230,097 186,165 234,917 226,870 227,653 223,606 171,770 132,652 Dividend per ordinary share Special dividend per ordinary share Diluted (loss)/earnings per ordinary share Diluted EPRA net assets per share 4.50p 4.05p 3.65p 3.32p 3.32p 3.00p 2.75p 2.50p 2.23p 2.00p – – – – – – 20.0p – – 20.0p (13.5p) 53.7p 51.8p 53.7p 7.9p 11.8p 11.8p 13.5p 13.8p 10.3p 352p 374p 309p 238p 182p 155p 155p 151p 116p 94p The financial statements for the year to 31 March 2005 have been restated to reflect the adoption of International Financial Reporting Standards. The financial statements for the year to 31 March 1999 and subsequently have been restated to reflect the impact of the 5 for 1 share issue on 1 September 2005. 77 Helical Bar plc report & accounts 2008 Glossary of terms Average Unexpired Lease Term The average unexpired lease term expressed in years. BREEAM Building Research Establishment’s Environmental Assessment Method. Diluted EPRA earnings per share Diluted EPRA net assets per share Diluted EPRA triple net asset value Diluted figures Earnings per share EPRA Estimated rental value (ERV) Initial yield IPD Earnings per share adjusted to exclude losses/gains on sale and revaluation of investment properties and their deferred tax adjustments, the tax on loss/profit on disposal of investment properties and fair value movements on derivative financial instruments, on a diluted basis. Details of the method of the calculation of the diluted EPRA earnings per share is available from EPRA. Diluted net asset value per share adjusted to exclude fair value of financial instruments and deferred tax on capital allowances and on investment properties revaluation, but including the fair value of trading properties in accordance with the best practice recommendations of EPRA. Diluted EPRA net asset value per share adjusted to include fair value of financial instruments and deferred tax on capital allowances and on investment properties revaluation. Reported amounts adjusted to include the effects of potential shares issuable under the employee share option schemes. Profit after tax divided by the weighted average number of ordinary shares in issue. European Public Real Estate Association The market rental value of lettable space as estimated by the Company’s valuers at each balance sheet date. Annualised net rents on investment properties as a percentage of the investment property valuation. The Investment Property Databank Limited (IPD) is a company that produces a number of independent benchmarks of unleveraged commercial property returns. Like-for-like portfolio Properties that have been held for the whole of the period of account. Net assets per share or net asset value (NAV) Equity shareholders’ funds divided by the number of ordinary shares at the balance sheet date. Net gearing REIT Return on capital employed (ROCE) Reversionary yield Total shareholder return (TSR) True equivalent yield Weighted Average Cost of Capital (WACC) Total borrowings less short-term deposits and cash as a percentage of equity shareholders’ funds. Real Estate Investment Trust. Return on capital employed is measured as profit before financing costs plus revaluation surplus on investment property divided by the opening gross capital. The anticipated yield, which the initial yield will rise to once the rent reaches the ERV. The growth in the ordinary share price as quoted on the London Stock Exchange plus dividends per share received for the period expressed as a percentage of the share price at the beginning of the period. The constant capitalisation rate which, if applied to all cash flows from an investment property, including current rent, reversions to current market rent and such items as voids and expenditures, equates to the market value. Assumes rent is received quarterly in advance. The weighted average pre-tax cost of the Group’s debt and the notional cost of the Group’s equity used as a benchmark to assess investment returns. 78 Helical Bar plc report & accounts 2008 Financial calendar Year ended 31 March 2008 Annual General Meeting to be held 23 July 2008 Final ordinary dividend payable 25 July 2008 Half year ending 30 September 2008 Results and interim ordinary dividend announced November 2008 Year ending 31 March 2009 Results and final dividend announced June 2009 Interim ordinary dividend payable December 2008 Final ordinary dividend payable July 2009 Advisors Registrars Bankers Stockbrokers Auditors Merchant bankers Solicitors Capita Registrars The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Aareal Bank AG Bank of Ireland Barclays Bank plc The Royal Bank of Scotland plc Allied Irish Bank JP Morgan Cazenove 20 Moorgate London EC2R 6DA Grant Thornton UK LLP Grant Thornton House Melton Street Euston Square London NW1 2EP Lazard 50 Stratton Street London W1J 8LL Ashurst Clifford Chance Dechert Lawrence Graham Mishcon de Reya Norton Rose Olswang 79 Helical Bar plc report & accounts 2008 80 Contents 4 Chairman’s statement 5 Chief Executive’s statement 7 Business review 10 Our approach 13 Portfolio statistics 16 Property portfolio 20 Performance and risk 24 Financial review 28 Corporate social responsibility 29 Environmental policy and objectives 30 The Board of Directors and senior management 31 Directors’ report 33 Corporate governance report 36 Directors’ remuneration report 43 Independent auditors report 45 Index to the financial statements 46 Consolidated income statement 47 Group and company balance sheets 49 Group and company statements of recognised income and expense 50 Group and company cash flow statements 51 Notes to the financial statements 77 Ten year review 78 Glossary of terms 79 Financial calendar 79 Advisors Contact details Helical Bar plc, 11-15 Farm Street, London, W1J 5RS Tel: 020 7629 0113 Fax: 020 7408 1666 email: info@helical.co.uk Website: www.helical.co.uk Financial highlights Profit before tax, revaluation and loss on sale of investment properties Diluted EPRA earnings per share Final dividend per share Diluted EPRA net asset value per share £8.5m 11.6p 2.75p 352p This Report was printed by Beacon Press using their pureprint® environmental print technology. The printing inks are made using vegetable based oils. The electricity was generated from renewable sources and 90% of the waste associated with this product will be recycled. Beacon Press is registered to environmental management system ISO 14001 and EMAS (Eco Management Audit Scheme). It is printed on paper made from Elemental Chlorine Free (ECF) pulps from well managed forests. The paper mill is registered to environmental management systems ISO 14001 and EMAS. s s e r p n o c a e b t n i r p | i . ] k u o c . n g s e d g s . w w w - [ i n g s e d g s n g i s e d H e l i c a l B a r p l c r e p o r t & a c c o u n t s 2 0 0 8 Helical Bar plc Registered Office 11-15 Farm Street London W1J 5RS Tel: 020 7629 0113 Fax: 020 7408 1666 email: info@helical.co.uk www.helical.co.uk Helical Bar plc Report & accounts 2008