Helical
Annual Report 2009

Plain-text annual report

9 0 0 2 s t n u o c c a & t r o p e R l c p r a B l a c i l e H 8 W S n o d n o L i , s o d u t S a e s r e t t a B : e g a m i r e v o c t n o r F e s n e p x e d n a e m o c n i i d e s n g o c e r f o s t n e m e t a t s y n a p m o c d n a p u o r G 9 4 s t n e m e t a t s w o l f h s a c y n a p m o c d n a p u o r G s t n e m e t a t s l i a c n a n i f e h t o t s e t o N n o i t a m r o f n i w e i v e r r a e y n e T r o t s e v n I s m r e t f o y r a s s o G l Change of use Mixed use development Office refurbishment r a d n e a c l l i a c n a n F i s r o s i v d A 0 5 1 5 7 7 8 7 9 7 0 8 0 8 Residential development Property investment Industrial development l s t e e h s e c n a a b y n a p m o c d n a p u o r G t n e m e t a t s e m o c n i d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f e h t o t x e d n I t r o p e r n o i t a r e n u m e r r o t i d u a t n e d n e p e d n i ’ s r o t c e r i D f o t r o p e R t r o p e r e c n a n r e v o g e t a r o p r o C t n e m e g a n a m i r o n e s t r o p e r ’ s r o t c e r i D 1 3 3 3 6 3 3 4 5 4 6 4 7 4 d n a s r o t c e r i d f o d r a o b e h T 0 3 t n e m e t a t s s ’ e v i t u c e x E f e h C i t n e m e t a t s s ’ n a m r i a h C k s i r d n a e c n a m r o f r e P s c i t s i t a t s o i l o f t r o P o i l o f t r o p y t r e p o r P w e i v e r s s e n s u B i h c a o r p p a r u O w e i v e r l i a c n a n F i Asset management Retirement villages Overseas development y t i l i i b s n o p s e r e t a r o p r o C 4 0 6 0 9 0 0 1 2 1 5 1 8 1 3 2 8 2 s t n e t n o C Outsourcing Office development Retail development Helical Bar is a property development and investment group. We create shareholder value through a wide variety of high margin activities with property investment at our core. Whilst a profit centre in its own right, property investment provides a stable income stream to cover all our overheads and interest costs. 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. 01 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H d R esid evelo p e ntial e nt m Office refurbishment R d e e t v a e i l l o p m e n t nt strial e m p elo v e d u d In Property Property investment investment Mixed use develop ment O v e r s e a s d e v e l o p m e n t e O ffic e v e l o d m p n t e Retirement villages f o e g n a h C e s u Asset Management O u t s o u r c i n g Financial highlights Profit before tax, property write-downs and investments gains Diluted EPRA earnings per share Final dividend per share Diluted EPRA net asset value per share £16.2m1 12.8p 2.75p 286p 1 Pre-tax loss as adjusted for property write-downs and investment gains (see Results for the year section of the Financial Review on page 23). 02 Performance indicators Total shareholder return Total Returns Helical Bar plc UK Equity Market Listed Real Estate Sector Index Direct Property – monthly data 1 year %pa (22.3) (29.3) (62.2) (25.5) Performance measured over 3 years %pa 5 years %pa 10 years %pa 15 years %pa 20 years %pa (9.0) (10.2) (32.4) (8.4) 12.2 1.4 (10.4) 1.9 14.6 14.9 13.1 (0.7) (0.8) 6.3 5.0 2.0 7.5 6.9 1.4 6.9 25 years* %pa 28.6 8.0 4.3 7.5 Source: Hewitt New Bridge Street/Thomson Financial *Growth in UK Equity Markets, Listed Real Estate Sector Index and Direct Property since inception (1 January 1986, 1 January 1986 and December 1986 respectively). 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 (6.3) (25.8) 1 3 years %pa Annualised over 5 years %pa 10 years %pa 19 years %pa 5.5 (7.8) 1 13.6 15.0 16.1 2.1 2 6.2 1 6.4 0 “0”= top ranked fund Note: excludes the surplus but includes writedowns 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. 03 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H s r o t a c i d n i e c n a m r o f r e P 8 0 0 2 d e c n e m m o c n o i t c u r t s n o C k o o h p L i , l e c a P t t o h s m a r B e g a l l i v t n e m e r i t e R 04 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H Chairman’s statement The year to 31 March 2009 has been one of the most tumultuous periods in the last century with the global banking crisis and wider economic woes creating unprecedented problems for the property sector. Falling capital values, falling rental values and severe constraints on borrowing have been the backdrop against which companies in the property sector have operated. Helical has weathered this storm well, having degeared in previous years and retained only those assets where there was potential to add value. Whilst this potential has been adversely affected in the short term and values have fallen, the Group has performed well compared to its peers and retained the support of investors, as shown by the successful placing of 9.7m shares in January 2009 at 285p per share, raising £26.4m net of costs to invest in the market. Results The profit before tax, property write-downs and investment gains increased to £16.2m (2008: £8.9m). Development profits, before stock write downs, increased to £15.6m (2008: £6.5m). There was a trading loss of £0.5m (2008: nil) and an increased contribution from the Group’s share in the results of joint ventures of £1.8m (2008: loss £0.1m). However, write-downs of trading and development stock of £23.3m are set against these profits. Net rental income rose to £17.7m (2008: £16.4m). Administration costs reduced from £13.7m to £8.1m with the costs of share awards and performance related bonuses substantially lower at £0.7m (2008: £6.8m). Net finance costs before capitalised interest increased from £9.7m to £14.5m due to a higher average level of borrowings during the year. Capitalised interest reduced to £6.9m from £9.3m. The loss on mark to market valuation of the Group’s financial instruments was £13.4m (2008: £1.3m). The Group benefitted from currency movements with a foreign exchange gain of £4.0m (2008: £1.9m) on its Polish operations. Valuation yields on our investment portfolio rose by 180 (2008: 90) basis points, which was in line with the market and this caused a fall in values of 25.7% (2008: 11.3%) reflected as a loss on revaluation of £68.0m (2008: £32.6m). A gain on sale of investment properties of £1.3m compares with a loss of £0.2m in the previous year. Diluted loss per share was 56.6p (2008: 13.5p) and diluted EPRA earnings per share were 12.8p (2008: 11.6p). The Group’s diluted EPRA net asset value per share fell by 19% to 286p (2008: 352p). The directors’ valuation of trading and development stock showed a surplus of £45m (2008: £43m) and excluding this surplus the adjusted diluted net asset value per share fell by 21% to 242p (2008: 306p). In view of the continuing uncertain economic outlook the Board is recommending to shareholders that the final dividend is maintained at the same level as the last two years 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 2008 of 1.75p (2008: 1.75p) it represents an unchanged total dividend of 4.50p (2008: 4.50p). 05 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H t n e m e t a t s s ’ n a m r i a h C Financing A primary task of your directors during the year has been to put financing in place to ensure the business is well positioned to continue its activities and to enable the Group to take advantage of opportunities that become available as a result of the economic turmoil. In the year to 31 March 2009 Helical has drawn down £81.5m of new secured bank loans and £11.7m under existing bank facilities, extending £27.6m and repaying £8.7m of loans due to expire during the year. At 31 March 2009 the Group had net borrowings of £224.7m (2008: £205.5m) and gross property values of £497.2m (2008: £532.3m). The ratio of net borrowings to the value of the property portfolio (including directors’ valuation of stock) was 45.2% (2008: 38.6%). Net debt to equity gearing at 31 March 2009 was 95% (2008: 76%). At 31 March 2009, the Group had £147.9m (2008: £87.7m) of fixed rate borrowings with an average effective interest rate of 6.31% (2008: 6.33%) and an average length of 3.2 years (2008: 3.4 years) and £110m of interest rate caps at an average of 6.73% (2008: 7%). In addition the Group had a £30m floor at 4.50% until 2013. Banking covenants Each bank loan is secured on individual properties in separate companies, although in almost every case the parent company, Helical Bar plc, is a guarantor of the loans. Loan to value covenants range from 60% to 85% and income covenants from 1.00 to 1.40 of rent as a proportion of interest. At 31 March 2009 there were no breaches of these covenants. The Directors regularly stress test the portfolio with scenario planning to ensure that the Group can stay within its banking covenants allowing for recent and future potential falls in value. Covenants are monitored continuously and where potential breaches are anticipated, the Group has recourse to cure rights to avert such breaches by the placing of deposits with lenders or partial loan repayment. Since 31 March 2009 the Group has renegotiated the terms of £134m of secured loans repaying £28m and removing loan to value covenants for between two and three years. The Group will continue to monitor the loan to value covenants on the remaining secured loans, together with all income covenants. The Group’s significant cash balances put it in a position to remedy any potential breach for the foreseeable future. Placing In January 2009, Helical issued 9,735,100 ordinary 1p shares at 285p per share, raising £26.4m net of costs. The Group was delighted that over 40 institutional investors participated in this Placing, including many new shareholders. The Placing was also supported by the Group’s management with each director and senior employee participating with a total management investment of over £1m. The Board Further to the announcement on 1 May 2009, Mike Brown formally stepped down from the Board on 4 June 2009 to pursue other interests and will leave the Group at the end of June 2009. In Michael Slade we have an outstanding Chief Executive who remains committed to running the Group for many years to come. Helical has a highly experienced senior management team, comprising long-serving executives Nigel McNair Scott, Gerald Kaye, Matthew Bonning-Snook and Jack Pitman who, alongside Michael Slade, have collectively worked at the Group for 86 years, an average of over 17 years each. Outlook It is to be hoped that the next twelve months mark the bottom of the economic recession but any recovery will take time and there will be casualties along the way. Helical will concentrate on making progress with its diverse range of investment properties, planning and development projects. With a strong balance sheet, well-established partnerships and the broad expertise and skills of our management team, we are extremely well positioned to take advantage of opportunities in the market to create future shareholder value when the market stabilises. Giles Weaver Chairman 19 June 2009 06 Chief Executive’s statement In the year to 31 March 2009 commercial property values across all sectors fell by over 30%, whether measured by the Investment Property Databank (“IPD”) or CBRE Indices. From their peak in June 2007 capital values have fallen by over 40% on both indices. I am particularly pleased to note that our ungeared total return over the financial year was -6.3% compared to the IPD Benchmark of -25.8% placing us in the first percentile of performance over 1, 3, 10 and indeed the 19 years we have measured ourselves against the Benchmark. There is now mounting evidence that the pace of decline is slowing. Monthly falls of 6% in the IPD index in November and December slowed to 3% in each of January, February and March and 2% in April. The IPD equivalent yield of 9.3% in April is now well above long term trends and was only materially higher in 1990 – 1993 when interest rates were in double figures. The investment market for well let properties has improved markedly in recent weeks, but some secondary properties are likely to continue to decline in tandem with the fall in rental values. It is worth remembering that the recovery from the last major property downturn took place in 1993 at a time when rents were still declining. As the recent stock market bounce demonstrates, capital markets move in anticipation of events and, even though rents will continue to fall, we expect the property market to find a floor and start to recover within the next twelve months. At a time of such economic uncertainty it is always easy to see the downside risks but lose sight of the opportunities provided when assets are priced at cyclical lows. All the ingredients are coming into place for sustained recovery, similar to that which followed the difficulties of the 1970s and early 1990s, and we have positioned our business to benefit from this. Well let properties may be the most defensive but there is more upside on risk assets and this is where Helical is now concentrating its efforts. Looking forward, Helical is confident that we will see great value emerge. We have the firepower from the recent Placing, the backing of our US partner and others and internally generated resources to take full advantage of the opportunities. The market’s focus is either on corporate survival, on the one hand, or buying opportunities on the other. With no material legacy issues and our track record, we are able to concentrate on high quality and very profitable business. Helical has significant upside in the existing portfolio of projects, particularly from our trading and development activities, which it should be noted have been aggressively written down this year. We are particularly enthusiastic about our out-of-town retail schemes in Poland, food store developments, retirement village projects, student accommodation developments and our Government office campus schemes. Management team I would like to thank Mike Brown for his contribution to Helical’s success over the last 12 years and wish him well in the future. I do not see any need to replace Mike as the existing property team of Gerald Kaye, Matthew Bonning-Snook, Jack Pitman and I, ably supported below Board level by John Inwood and Duncan Walker, have the breadth of experience and skills to continue the success of the last 25 years whilst I have been at the helm of this Group. Michael Slade Chief Executive Our portfolio - how we commit our capital London offices % Provincial offices % In town Out of town retail % retail % Industrial % Change Retirement villages % of use % Investment Trading and development Total 26.4 0.2 26.6 2.6 4.2 6.8 11.0 2.3 13.3 3.4 12.6 16.0 5.9 11.0 16.9 – 15.1 15.1 0.3 5.0 5.3 Note: excludes the surplus arising from the directors’ valuation of trading and development stock. Total % 49.6 50.4 100.0 07 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H t n e m e t a t s s ’ e v i t u c e x E f e i h C s e c i f f o d n a l i a t e r . t f . q s 0 0 0 5 3 , , s t i n u l i a i t n e d s e r 0 4 4 , y r u b s n a S i . t f . q s 0 0 0 0 1 1 , 9 0 0 2 y r a u r b e F d e t e p m o C l s e n y e K n o t l i M , . 1 4 C 08 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H l i a t e r d n a b u c t h g n l i , t n a r u a t s e r . t f . , q s 0 0 0 3 2 s u p s e c i f f o l . t f . , q s 0 0 0 5 3 f o t n e m h s b r u f e R i 1 W S n o d n o L , e s u o H e l l i v e r a C l 9 0 0 2 y r a u r b e F d e t e p m o C l Business review Our goals Our overriding long term strategy is to make excellent returns for our shareholders 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 a 17% stake in the Group 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. Planning We are specialists in unlocking value by obtaining planning consents for more valuable uses. The table below shows some of the changes of use we have achieved over the last few years. 09 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H w e i v e r s s e n i s u B Change of use trade counter industrial leisure residential hotel car showroom retail warehouse student accommodation retirement accommodation offices retail 10 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H w e i v e r s s e n i s u B 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 Mixed use development In Wolverhampton we have converted a disused railway station into a casino and sold a site for student housing having previously disposed of land parcels for residential, hotel, car showroom and a public house. We have a development agreement with the London Borough of Hammersmith & Fulham in partnership with residential specialist Grainger plc to provide a scheme of 120,000 sq.ft. new civic offices, a food store, restaurants and 300 flats. At Parkgate, Shirley we are finalising land assembly for an 80,000 sq.ft. Asda supermarket with 70,000 sq.ft. of retail and 100 residential units. At Amen Corner, Bracknell, we are making good progress in planning terms on the site’s allocation for residential use but a deterioration in market conditions has resulted in site assembly issues which we continue to address. Change of use We continue to work with the London Borough of Hammersmith and Fulham and the GLA in the production of an Opportunity Area Planning Framework for White City which will set out a blueprint for the area’s potential. The aspiration for us and our landowning consortium (Aviva, M&S, BBC and Land Securities) is a major mixed use scheme east of Wood Lane, London W12 incorporating some 4.5m sq.ft. of residential and commercial floorspace with a creative industries bias. The ownership interests of our consortium lie immediately opposite BBC Television Centre and just north of Westfield’s new shopping centre. Helical entered into a joint venture with National Grid UK Pension Scheme where we sought to pursue a change of use, in planning terms, of an existing industrial estate, at Vauxhall, London SW8, to a Thameside residential led scheme. Good progress was made and the site sold in June 2008 for £80m. The final stage payment is due at the end of June 2009. Retail development We are currently focusing on our retail developments in Poland where we have circa 100,000 sq.m (1.1m sq.ft.). of development planned in three projects. We have completed our first scheme in Wroclaw of 9,600 sq.m.(103,000 sq.ft.) which is fully let. In Opole, site enabling works have commenced on our 38,000 sq.m. (409,000 sq.ft.) scheme anchored by Carrefour and Praktiker with funding from Standard Life. Our largest scheme at Gliwice is 50,000 sq.m. (538,000 sq.ft.) and 40% is currently preleased with commitments from Carrefour, Castorama, Media Expert and site preparation is well under way. In total we have let 55,550 sq.m. (598,000 sq.ft.) with 18,250 sq.m. (196,000 sq.ft.) in lawyers hands and 9,500 sq.m. (102,000 sq.ft.) in negotiation. Office development We are acting as development managers for the new 320,000 sq.ft. Man Group HQ at Riverbank House in the City for City of London and Pace Investments. In the West End we have completed the refurbishment of Clareville House, SW1 which comprises 35,000 sq.ft. of offices and 23,000 sq.ft. of leisure and restaurant space for National Grid UK Pension Scheme. At Mitre Square, EC3 we are preparing a revised planning application for a smaller scheme of circa 275,000 sq.ft. of offices. Office refurbishment In Battersea we have just completed a new 50,000 sq.ft. phase 2. This follows the conversion of an empty TV studio into offices with a communal bar and meeting space which is now fully let to over 20 different businesses. Three of our investment properties, Rex House, SW1, Shepherds Building, W12 and 61 Southwark Street, SE1 represent over £90m of buildings that we have refurbished in the past and retained for their growth potential. Our total London holdings comprise circa 440,000 sq.ft. of offices let to 72 tenants generating a rent roll of £10.5 million, an average of just £27 per sq.ft. and an ERV of £12.4m, £28 per sq.ft. Governetz Our Helical Governetz joint venture is proving most exciting with potential demand for space of several million sq.ft. spread between our three schemes at Waverley, Keele and Newport. A number of further campuses are in negotiation with an aim to provide in excess of 4m sq.ft. of supply over a period of time. The Government should be a major driver of occupier demand during these difficult times and, equally importantly, one of the few covenants readily fundable with our institutional partners. Whilst these initiatives will take time to come to fruition they will be a major plank of our future business. 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 minority stake in Quotient, a fast growing biosciences company. During the year we sold a tenth of our shareholding and recovered the cost of our initial stake, leaving us with a 22% holding in the Company. Student accommodation Completion of the sale of our site at Fieldgate Street, London, E1, which has planning consent for 340 student rooms, is due in August 2009. At 200 Great Dover Street, London, SE1, currently an investment property, let to Conoco Phillips until June 2011, we are at detailed planning negotiation stage for a new development of 35,000 sq.ft. of offices and 290 student rooms. Other schemes are under consideration. lndustrial development In partnership with Chancerygate and Quadrant we have built 120 units totalling over 570,000 sq.ft. for onward sale to owner occupiers at two sites in Oxford as well as at Southampton, Southall (West London) and Hailsham. We have let or sold 46 of these units (300,000 sq.ft.), realising £35m. These schemes include sales of parcels of land for car showrooms, builders merchants and self-storage uses and the development of trade counter schemes. Retirement villages We continue to be a major supplier of retirement village schemes. Our successful scheme at Cawston, Rugby is now in its final stages and we retain a further 40 acres for future development. At Bramshott Place, Liphook we have built a 51 unit first phase and have sold eight units with reservations on 18, leaving 25 available. Schemes at Horsham (156 units) and Cambridge (101 units) have now received planning consent and we look to commence development next year. Further projects in Exeter and Great Alne, Warwickshire are the subject of recent planning applications. Despite the slowdown in the new build housing market, we are very pleased with the reception the villages receive in the market. Outsourcing The market positioning of The Asset Factor in property services outsourcing is an attractive one as an increasing number of organisations look to save cost and meet increasingly demanding compliance issues as the economic downturn continues. The principal Asset Factor venture, NB Entrust (a joint venture with NB Real Estate), two years after our major repositioning exercise, is now trading profitably and growing strongly and should be a major winner from this market trend. Similarly the commercialisation business, Asset Space, is well placed to grow as an incremental cash generating service for property owners. A new joint venture with Integral in the facilities management sector (Mobius Support Services) and the existing managed help desk service (Asset OnCall) should also benefit from the market’s focus on costs. Our service project in Reading has faced pressure on market rates but has now achieved sustainable occupancy albeit at a lower rate than originally budgeted. 8 W S n o d n o L , l l a h x u a V t a e s u f o e g n a h C m o t t o b o t p o t m o r F i 8 W S n o d n o L , s o d u t S a e s r e t t a B t a t n e m h s b r u f e r e c i f f i O d n a o P l , l w a c o r W n i t n e m p o e v e d l l i a t e R 4 C E n o d n o L , e s u o H k n a b r e v i R t a t n e m p o e v e d e c i f f l O 11 k o o h p L , i l e c a P t t o h s m a r B t a e g a l l i v t n e m e r i t e R 12 Portfolio statistics Investment portfolio Valuation movements Sector Offices Retail Industrial All Valuation yields Sector Offices Retail Industrial All Valuation Decrease 20.9% 32.3% 29.7% 25.7% On letting voids 9.4% 7.9% 10.3% 9.1% Initial 8.2% 7.1% 6.5% 7.7% Rise in equivalent yield over Weighting 60% 28% 12% On rack rental value 9.7% 8.3% 10.5% 9.4% 1 year +150bp +240bp +180bp +180bp Equivalent 8.7% 8.2% 9.6% 8.6% 2 years +270bp +320bp +220bp +270bp True equivalent 9.1% 8.6% 10.1% 9.0% Average unexpired lease term 5.2 8.2 5.2 6.0 2012 17.4% 37 Capital values, vacancy rates and lease terms Sector Offices Retail Industrial All Lease expiries and tenant break options in: Percentage of rent roll Number of leases Average rent per lease Capital value psf Vacancy rate £267 £229 £36 £148 2010 4.7% 29 12% 5% 27% 12% 2011 22.9% 53 2009 4.8% 22 £37,600 £28,800 £76,300 £82,900 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 use development Total Contributions from joint venture partners to writedowns Total writedown Book cost £m 72 56 22 21 54 15 240 Write down £m 11 11 – 3 – 5 30 (7) 23 Valuation changes Written down book cost £m Directors’ valuation £m Surplus over book cost £m 61 45 22 18 54 10 82 46 29 18 70 10 210 255 21 1 7 – 16 – 45 -15% -20% – -14% – -33% -12% -10% Basis of valuation – the Directors’ valuation of the properties is based on current site values. s e n y e K n o t l i M , . 1 4 C 13 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H s c i t s i t a t s o i l o f t r o P 9 0 0 2 y r a u r b e F d e t e p m o C l s e c i f f o d n a l i a t e r . t f . q s 0 0 0 5 3 , , s t i n u l i a i t n e d s e r 0 4 4 , y r u b s n a S i . t f . q s 0 0 0 0 1 1 , 14 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H s t i n u t n e d u t s 0 0 7 , l i a t e r . t f . q s 0 0 0 0 8 1 , 8 0 0 2 r e b m e t p e S d e t e p m o C l m a h g n i t t o N , e r a u q S y t i n i r T Property portfolio Ongoing projects Mixed use developments C4.1, Milton Keynes Description 110,000 sq.ft. Sainsbury’s completed and sold. 440 residential units (forward sold). 35,000 sq.ft. of retail and offices Trinity Square, Nottingham 180,000 sq.ft. retail – tenants include Borders, TK Maxx, Dixons, Waitrose. 700 student units. Forward funded and sold to Morley for over £100m. Completed King Street, Hammersmith Selected as Development Partner to Hammersmith & Fulham Borough Council. Joint venture with Grainger plc. Scheme comprises new civic offices (120,000 sq.ft.), food store, restaurants/retail, and 300 flats with a bridge linking to the River Thames. Application to be submitted May 2010 Amen Corner, Bracknell Land and options held for a gateway residential led/mixed use development off the 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 completed of listed building for casino use. 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 Parkgate, Shirley, Birmingham 70,000 sq.ft. retail plus Asda (80,000 sq.ft. supermarket). 100 residential units. Site assembly underway Hagley Road West, Quinton, Birmingham 16,000 sq.ft. retail plus 15 residential units Helical share 50%/D 65%/D 50%/D 100%/D 75%/D 50%/D 50%/D 75%/D 15 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H o i l o f t r o p y t r e p o r P Projects with change of use potential White City, London W12 Description Opportunity Area Planning Framework being progressed for 4.5 million sq.ft. of commercial and residential on 33 acres Vauxhall, London SW8 Site sold and profit share in our joint venture with National Grid UK Pension Scheme partly paid with final payment due June 2009 Fieldgate Street, London E1 Planning consent obtained for 14,000 sq.ft. of retail and 340 student residential units and 9 residential flats St Loye’s College, Exeter 18 acre site currently used as a college. Potential for retirement village use, planning application to be submitted for 240 units Ely Road, Milton, Cambridge 32,000 sq.ft. of industrial on 20 acres. Planning consent granted during year for 101 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 Helical share Consortium landowner & development manager/D Profit Share/D 67%/D 90%/D 90%/D 90%/D Cherry Tree Yard, Faygate, Horsham Former saw mill on 15 acres. Planning consent granted for 156 retirement home units 90%/D Thanet Way, Whitstable 80,000 sq.ft. of industrial on 6 acres with potential for 236 residential units Arleston, Telford 19 acre green field site with residential potential Winterhill, Milton Keynes 28,000 sq.ft. of warehouses and offices with trade counter consent and retail warehouse potential Cawston, Rugby 32 acre green field site with residential potential 90%/D 90%/D 50%/I 30%/D I – Investment D – Development T – Trading 16 Office developments Riverbank House, London EC4 Description 320,000 sq.ft. pre-let to Man Group. Under construction Clareville House, London SW1 Refurbishment of 35,000 sq.ft. offices plus 23,000 sq.ft. of restaurant, nightclub and retail. Completed February 2009 Battersea Studios, London SW8 (Phase 2) 50,000 sq.ft. new office development. Completed December 2008 The Hub at Pacific Quay, Glasgow 60,000 sq.ft. new office development. 40% pre-let to Glasgow School of Art and other media tenants. Completed early 2009 Mitre Square, London EC3 275,000 sq.ft. Planning application to be made Forestgate, Crawley Refurbishment of 24,000 sq.ft. completed. Scheme for two new buildings of 21,000 sq.ft. and 18,000 sq.ft. Helical share Development management role/D Development management role/D 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H o i l o f t r o p y t r e p o r P Industrial developments Description Scotts Road, Southall, West London Ropemaker Park, Hailsham Millbrook Trading Estate, Southampton 167,000 sq.ft. of industrial units for freehold sales. 61,000 sq.ft. sold during the year 70,000 sq.ft. light industrial, 12,000 sq.ft. supermarket, 12,000 sq.ft. industrial and 1,500 sq.ft. restaurant all let/sold. 30,000 sq.ft. industrial remaining Construction of industrial units (66,000 sq.ft.), trade counters (64,000 sq.ft) completed December 2008, 15,000 sq.ft. let or sold during year. 1 acre sold for self-storage. Phase 2 comprises 4 acres of industrial land Watlington Road, Cowley, Oxford 71,000 sq.ft. of industrials and offices of which 68,000 sq.ft. sold Langford Lane, Kidlington Phase 1 of 72,000 sq.ft. industrial units completed, 11,000 sq.ft let or sold during year. Phase 2, 15,000 sq.ft. completed and sold. 1 acre site for further sales Tiviot Way, Stockport Planning application submitted 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. 1 acre sold during year for self storage Retail developments Description Opole, Poland 38,000 sq.m. out of town retail. Part pre-let to Carrefour and Praktiker. Forward funded with Standard Life. Construction commenced Wroclaw, Poland 9,600 sq.m. out of town retail. Fully pre-let. Construction completed December 2008 Europa Centralna (Gliwice), Poland 50,000 sq.m. out of town retail. 40% preleased to Carrefour and Castorama, Media Expert and others. Construction to commence in the second half of 2009 Retirement village developments Lime Tree Village, Rugby Description 154 bungalows, cottages and apartments being constructed in phases. 141 sold to date Bramshott Place, Liphook Construction commenced in 2008 of 51 unit Phase 1 of 147 unit scheme. 8 sold with reservations on a further 18 units I – Investment D – Development T – Trading 75%/I 70%/D 100%/D 75%/D Helical share 100%/D 50%/D 100%/D 100%/D 100%/D 100%/D Helical share 50%/D 50%/D 50%/D Helical share 33%/D 90%/D 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 circa 40 tenants. Acquired vacant in 2000 61 Southwark Street, London SE1 200 Great Dover Street, London SE1 Battersea Studios, London SW8 Quotient HQ, Fordham, Newmarket 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 55,000 sq.ft. of media style offices refurbished in 2006. Acquired vacant in 2005 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 Department Store, Cardiff Description 160,000 sq.ft. retail – Borders, White Stuff, Molton Brown, Shoon. 56 flats, 45 of which were sold in the year. Completed 2008 Morgan & Royal Arcades, Cardiff 56 units opposite new St Davids 2 Shopping Centre. Acquired 2005 1-5 Queens Walk, East Grinstead 37,000 sq.ft. of retail opposite a proposed new retail scheme. Acquired 2005 Glasgow Portfolio Two unit shop investments and part of a multi-let office block, all in Glasgow City Centre. Acquired 2005 90%/I 100%/I 100%/I 75%/I 53%/I 95%/I Helical share 100%/I 100%/I 87%/I 100%/I/T 17 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H o i l o f t r o p y t r e p o r P 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 Helical share 75%/I 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 75%/I 67%/I Industrial Waterside, Fleet Description 54,000 sq.ft. of industrial property with redevelopment potential. Acquired 2000 Helical share 100%/I Westgate, Aldridge 208,000 sq.ft.. Let to Greenstar Environmental Ltd. Acquired 2006 Dales Manor, Sawston, Cambridge Standard Industrial Estate, North Woolwich 70,000 sq.ft. of industrial property. Acquired 2003 50,000 sq.ft. estate, 95% let. Acquired 2002 Hawtin Park, Blackwood 249,000 sq.ft. estate, 78% let. Acquired 2003 Golden Cross, Hailsham 102,000 sq.ft. unit recently vacated. Acquired 2001 Bushey Mill Lane, Watford 24,000 sq.ft. fully let with development potential. Acquired 2006 80%/I 67%/I 60%/I 100%/I 100%/I 80%/D I – Investment D – Development T – Trading 18 Performance & risk A property company’s share price should reflect growth in net assets per share. Our Group’s main objective is to maximise growth in assets from increases in investment portfolio values and from retained earnings from other property related activities. 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 Group’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 19 years. The Group’s annual performance target is to exceed the top quartile of the IPD database. Helical’s ungeared performance for the year to 31 March 2009 was -6.3% (2008: -1.6%) compared to the IPD median benchmark of -24.2% (2008: -8.5%) and upper quartile benchmark of -21.9% (2008: -6.3%). IPD (all monthly and quarterly valued funds) Ungeared returns Total Returns Helical 31.3.09 31.3.08 31.3.07 % 24.1 % (1.6) % (6.3) IPD upper quartile (21.9) (6.3) 17.2 Percentile rank 1 8 5 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 £45m (2008: £43m) surplus of trading and development stock above book value arising from the directors’ valuation. 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 2009 was -22.3% (2008: -11.4%) compared to the median of the listed real estate sector of -62.2% (2008: -33.3%). 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 35 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 2009 was 242p (2008: 306p). Including the surplus on valuation of trading and development stock, the diluted EPRA net asset value per share at 31 March 2009 was 286p (2008: 352p). Diluted EPRA triple net asset value per share was 269p (2008: 335p). 19 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H k s i r & e c n a m r o f r e P w o g s a G l , y a u Q c i f i c a P t a b u H e h T l t n e m p o e v e d e c i f f o . t f . q s 0 0 0 0 6 , 9 0 0 2 y r a u r b e F d e t e p m o C l Operational risks Operational risk is the risk that the Group 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 Group’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 Group has not suffered any material losses arising from exposure to operational risks in the year under review. 20 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H k s i r & e c n a m r o f r e P Risk management Risk governance The responsibility for the governance of the Group’s risk profile lies with the Board of Directors of Helical. The Board is responsible for setting the Group’s risk strategy by assessing risks, determining its willingness to accept those risks and ensuring that the risks are monitored and that the Group is aware of and, if appropriate, reacts to, changes in those risks. The Board is also responsible for allocating responsibility for risk within the Group’s management structure. Strategic risks Strategic risks are those risks that may adversely affect the Group’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 Group operates and the environment assumed on the establishment of that strategy. The Group’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 Group 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 group; – 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 Group’s Finance Director to the full Board each year. In addition the Group 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 Group, should only be decided by the Board of Directors as a whole. The Board monitors the financial performance of the Group at regular 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 Group’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 Group’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 Group indicate that the business of Helical is appropriate to the business environment in which it competes. Market conditions in the period under review continued the deterioration seen in the year to 31 March 2008 with capital values at 31 March 2009 having fallen 41.4% from their peak in June 2007 and rents declining 4.9% from their peak in April 2008, as reported by the Investment Property Database (“IPD”) Monthly Index. The Group’s decision to reduce its investment portfolio in 2005 – 2007, in anticipation of these falls in values, reduced the impact of these valuation falls. Consequently, the Group’s property portfolio outperformed benchmark returns, as measured by IPD, by 20% and the 22.3% fall in Total Shareholder Return for the Group in the year to 31 March 2009 compares to a fall of 62.2% for the Listed Real Estate Sector Index. Market risks Market risks arise from the possibility that the Group 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 Group’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 Group’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 Group. Measuring that success is undertaken by comparing the Group’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 Group’s performance compares favourably with the rest of the sector as reported by IPD on pages 2 and 18. Liquidity risks Liquidity risks arise from having insufficient financial resources to enable the Group to meet its obligations as they fall due, or can only secure them at an excessive cost. Liquidity risks also arise where the Group has insufficient resources to enable investment decisions, arising from its assessment of market risks, to be executed. The Group 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 Group’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 Group’s cash resources, bank borrowings, interest rate protection and gearing are noted on pages 64 to 70. 21 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H k s i r & e c n a m r o f r e P Credit risks Credit risk is the possibility that the Group may suffer a loss from the failure of its tenants, borrowers, suppliers or other counterparties to meet their financial obligations to the Group, including their failure to meet them in a timely manner. It includes the risks that the Group 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 Group’s business activities, rather it is a consequence of those activities. The Group 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 Group to credit risk. Guarantees to third parties, such as banks, where the Group is in joint venture with partners expose the Group 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 Group. 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 1.50% of gross rental income and no other third parties resulted in a loss arising in the Group from their financial position. 22 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H d n a o P l , w a l c o r W l i a t e r n w o t - f o - t u o ) . t f . q s 0 0 0 3 0 1 ( , . m . q s 0 0 6 9 , 8 0 0 2 r e b m e c e D d e t e p m o C l 23 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H w e i v e r l a i c n a n F i Financial review Consolidated income statement Results for the year The Group made profits of £16.2m (2008: £8.9m) before write-downs of its investment and trading and development properties, its gain on sale of investment properties and gain on sale of investments. However, a revaluation deficit of £68.0m (2008: £32.6m), and a £29.9m (2008: £0.4m) write-down of development and trading stock, partially offset by contributions from joint venture partners and tenants against the write-down of development stock of £6.6m (2008: £nil) and by gains on sales of investments of £1.9m (2008: £nil) and investments properties of £1.3m (2008: loss of £0.2m) turned this profit into a pre-tax loss of £71.9m (2008: £24.3m). Loss after tax was £53.5m (2008: £12.3m). Net rental income Net rental income rose by 8% to £17.7m (2008: £16.4m) reflecting full year rents at 200 Great Dover Street and the first rents at our retail development at Wroclaw, Poland. Rental costs increased to £3.1m (2008: £1.9m) as irrecoverable service charges on vacant units increased. Tenant bad debts remain low at less than 1.5% of gross rental income. Trading loss There was a trading loss of £0.5m (2008: £nil) in the year. Development loss The development programme generated substantial profits from its schemes at Tideway, Vauxhall London SW8, Trinity Square Nottingham and Scotts Road Southall and from C4.1 Milton Keynes, shown in these accounts as a share of the operating profit in joint ventures. However, by 31 March 2009 values had fallen considerably and stock write-downs of £23.3m offset these profits. Share of results of joint ventures During the year profits recognised on the mixed use scheme at C4.1 Milton Keynes were partially offset by our share of the costs of operating The Asset Factor resulting in a net profit of £1.8m (2008: loss £0.1m). Loss on sale and revaluation of investment properties During the year to 31 March 2009 the Group sold investment properties with book values of £9.0m (2008: £6.3m) on which it made a £1.3m profit (2008: £0.2m loss). The properties sold included a freehold interest at Cardiff Royal Infirmary and 45 residential apartments at the Morgan Department Store, Cardiff. The revaluation deficit for the year was £68.0m (2008: £32.6m). Administrative expenses Administrative expenses decreased to £8.1m (2008: £13.7m) with the costs of share awards and performance related bonuses substantially lower at £0.7m (2008: £6.8m). Administrative expenses, before share based payments charge and executive bonuses, increased to £7.4m (2008: £6.9m). Finance costs, finance income and derivative financial instruments Interest payable on bank loans, before capitalised interest, increased from £11.9m to £15.9m on a greater level of borrowing. Capitalised interest reduced to £6.9m from £9.3m as interest rates fell and development expenditure on investment properties was lower. Finance income earned on cash deposits decreased to £2.1m (2008:£2.6m). Net finance costs Interest payable on bank loans Other interest payable Finance arrangement costs Interest capitalised Net finance costs Interest receivable 2009 £000 15,890 362 321 (6,855) 9,718 (2,082) 2008 £000 11,901 265 163 (9,296) 3,033 2007 £000 8,437 228 114 (6,069) 2,710 (2,579) (1,335) Derivative financial instruments have been valued on a mark to market basis and a deficit of £13.4m (2008: £1.3m) recognised in the Income Statement due to an adverse movement in interest rates in the year. Foreign exchange gains A foreign exchange gain of £4.0m (2008: £1.9m) has been recognised in respect of transactions in connection with, and consolidation of, the Group’s retail developments in Poland. 24 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H w e i v e r l a i c n a n F i Taxation The Group corporation tax charge for the year is less than the standard rate of 28% 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 22 July 2009 a final dividend of 2.75p per share (2008: 2.75p) to be paid on 24 July 2009 to shareholders on the register on 3 July 2009. This final dividend, amounting to £2.9m (2008: £2.4m) has not been included as a liability at 31 March 2009, in accordance with IFRS. Dividends Interim Prior period final Total 2009 pence 1.75 2.75 4.50 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 2009 was 56.6p (2008: 13.5p) per share and on a diluted basis was 56.6p (2008: 13.5p) per share. Diluted EPRA earnings per share increased to 12.8p (2008: 11.6p) per share. (Loss)/earnings per share (Loss)/earnings per share Diluted (loss)/earnings per share Diluted EPRA earnings per share 2009 pence (56.6) (56.6) 12.8 2008 pence (13.5) (13.5) 11.6 2007 pence 58.0 53.7 16.6 (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 2009. 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 2009 as a loss was made during that year. 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 net loss on sale and revaluation of investment properties (net of tax) and fair value movement of derivative financial instruments. Consolidated balance sheet Investment portfolio During the year investment properties with a book value of £9.0m were sold. No new properties were acquired. In addition, around £17.6m of capital expenditure was spent on refurbishing various office, industrial and retail buildings. At 31 March 2009 there was a revaluation deficit of £68.0m (2008: £32.6m) on the investment portfolio. Investment portfolio Fair value at 1 April Property acquisitions Properties transferred from land, trading and development properties Disposals Revaluation (deficit)/surplus Fair value at 31 March 2009 £000 2008 £000 2007 £000 306,778 316,025 294,583 16,011 1,514 (9,005) (74,011) 241,287 31,601 28,962 – – (6,250) (45,638) (34,598) 38,118 306,778 316,025 The revaluation deficit of £74,011,000 (2008: £34,598,000) comprises the Groups share of £68,005,000 (2008: £32,554,000) and the share attributable to profit share partners of £6,006,000 (2008: £2,044,000). 25 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H w e i v e r l a i c n a n F i Net asset values The performance of the Group in the year to 31 March 2009 has decreased equity shareholders funds, on which the net asset value per share is calculated, by £31.6m. This has led to a 22% decrease in diluted net assets per share to 226p (2008: 289p). Taking into account the surplus on the directors’ valuation of trading and development stock of £45m (2008: £43m), the diluted EPRA net assets per share decreased by 19% to 286p (2008: 352p). Net asset values per ordinary share Diluted Adjusted diluted Diluted EPRA Diluted EPRA triple net asset value 2009 pence 226 242 286 269 2008 pence 289 306 352 335 2007 pence 307 334 374 346 The net asset value per share calculations are included in Note 35 of these financial statements. Borrowings and financial risk The Group’s expenditure on development sites has increased debt and, at 31 March 2009, net debt had increased from £205.5m to £224.7m. Taken with a decrease in net assets of £31.6m, the increase in net debt combined to increase the Group’s net gearing from 76% to 95%. The fair value of the Group’s investment, trading and development portfolio at 31 March 2009 was £497.2m (2008: £532.3m). With net borrowings of £224.7m (2008: £205.5m) the ratio of net borrowings to the value of the property portfolio was 45.2% (2008: 38.6%). At 31 March 2009 the Group had £147.9m (2008: £87.7m) of fixed rate borrowings with an average effective interest rate of 6.31% (2008: 6.33%) and an average length of 3.2 years (2008: 3.4 years), and £110m of interest rate caps at an average of 6.73% (2008: £80m at 7%). In addition the Group had a £30m floor at 4.50% until 2013. Net debt and gearing Net debt Gearing £m % 2009 224.7m 95 2008 205.5 76 2007 134.0 47 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 £39m of undrawn bank facilities and cash of £72.8m (2008: £17.1m). In addition it had £64m (2008: £179m) of uncharged property on which the Group could borrow funds. As at 19 June 2009, Helical’s average interest rate was 4.82%. Going Concern The directors have reviewed the current and projected financial position of the Group making reasonable assumptions about future trading performance. The key areas of sensitivity are: • timing and value of property sales • availability of loan finance and related cash flows • future property valuation and its impact on covenants and potential loan repayments • committed future expenditure • future rental income and potential bad debts • repayment timing and value of trade receivables The forecast cashflows have been sensitised to eliminate those cash inflows which are less certain and to take account of a further deterioration of property valuations. From their review the directors believe that the Group have adequate resources to continue to be operational as a going concern for the foreseeable future. Placing On 28 January 2009 the Group placed 9,735,100 ordinary 1p shares (the “Placing Shares”) at a price of 285 pence per share, raising net proceeds of £26.4m. These Placing Shares represented 9.99% of the Group’s issued ordinary share capital prior to the Placing and were admitted to trading on 2 February 2009. The shares rank pari passu with existing ordinary shares. Nigel McNair Scott Finance Director 19 June 2009 26 27 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H w e i v e r l a i c n a n F i e m e h c s d e l l i a i t n e d s e r e d s e m a h T i l r o f d o s e t i S 8 W S n o d n o L , l l a h x u a V 28 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H Corporate responsibility At Helical we recognise that our business activities impact on the environment and the wider communities in which we operate. Over the past year we have been analysing the way that our business manages environmental and social issues. This has led us to the conclusion that we must focus on developing a robust and strategic approach to embed environmental and social considerations into our business operations. Our priority as we move forward is to ensure that Helical is positioned to minimise the business risks of any adverse environmental and social impacts from our investment, development and asset management activities as well as maximise the benefits that a strategic approach to corporate responsibility can bring to the business. Our approach To date, we have largely focused on environmental impacts, and the setting of annual targets to monitor and report on progress. After our last assessment of progress in the year to 31 March 2008, we took the decision to review our overall approach to ensure that we are delivering maximum impact through our work in this area. Helical commissioned Jones Lang LaSalle to assist with this process, with two key objectives: As a result of the review, our key activities over the next year will focus on: • The introduction of aspirational strategic targets as well as minimum standards across environmental and social impacts that address our most significant business risks. • Improved measuring and monitoring of environmental and social performance. • Improved public disclosure through the Annual Report and on the Group website. • Delivery against our strategic targets. Review of progress in the year to 31 March 2009 We continue to manage our environmental and social impacts in the belief that doing so can help us secure planning consent, improve asset marketability, reduce the operating costs of our managed assets and also mitigate the risk of future legislation and regulation. A selection of last year’s highlights are described below. • To ensure that our stakeholders’ priorities (particularly investors 1 Employees Helical Bar is committed to treating our employees equally and fairly. As at 31 March 2009, we employed 24 people including executive Directors. 38% of our staff are women. During the year to 31 March 2009 we carried out reviews to a number of our key employee policies to ensure legislative compliance, notably our equal opportunities, whistle blowing and harassment and sexual discrimination policies. We also implemented revised maternity and anti-bribery policies. There are no incidents to report against these policies to date. We continue to maintain high levels of staff retention, and consequently retain a highly skilled and experienced team. This also reflects our ability to continue to offer a competitive remuneration and benefits package. The table below shows a breakdown of the average length of service. Directors & management Finance Administration Total number of people Average length of service (years) 9 7 8 14 7 5 and joint venture partners) are echoed in our approach to managing corporate responsibility. • To continue listing in the FTSE4Good UK Benchmark Index (which we have been part of since 2001), using current and future inclusion criteria as a basis to inform practical action. The review concluded that: • The targets in the year to 31 March 2008 were focused on individual assets which enabled us to drive operational improvements. Going forward, there is a need to bring these commitments together as portfolio-wide aims to ensure consistency and to gain strategic value from our efforts. In addition, we identified the need to broaden the scope of our strategy to include socio-economic issues. • There are a number of immediate and medium-term priorities that we need to address in order to meet and exceed shareholder expectations and drive true value from our activities in this area. These include improved reporting on environmental performance and employee management, and a clear policy commitment on climate change. • Stakeholders felt that the flexibility of Helical’s approach and business model was one of its core strengths and a key factor in its success to date; this should continue to be one of the key principles of our corporate responsibility strategy. • Stakeholders felt that there were a number of areas where we could make improvements in order to ensure greater consistency in responding to environmental and social challenges. For example, establishing a set of minimum environmental standards for our development and refurbishment projects. 29 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H 2 Health and safety Helical’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. The Board of Directors and senior staff are responsible for implementing this policy and ensure that health and safety considerations are always given priority in planning and in day-to-day activities. 3 Community investment Helical takes a strong interest in community issues. Community engagement is an on-going concern throughout the development process, from planning until development completion. At our Bramshott Place development in Liphook, for example, we have signed up to the Considerate Constructors Scheme which follows a strict code of practice in relation to construction impacts such as noise, vehicle movements and community liaison. The following examples also demonstrate how community engagement has benefited the communities that we work within: • We recently completed a wide ranging consultation for our proposed development at 200 Great Dover Street involving the local community which resulted in reducing the height of the proposed building, making alterations to the facade design to integrate it better into its surroundings and altering ground floor uses from retail to flexible mixed-use space. • In Exeter, as part of our planning application for the St Loye’s College scheme, we have been working closely with a local leisure and football club, located within one of the most deprived residential wards in England. As part of our s106 contribution we are discussing a package of benefits that will enable the club to invest in the future of its junior football teams through improved pitch and changing facilities. At a corporate level we continue to support charitable causes. Over the past year we have donated £14,400 to charity including UNICEF and Land Aid. Helical Bar continues its involvement with Land Aid and our Chief Executive Michael Slade is a trustee of the charity. 4 Environment Policy and objectives We recognise our responsibility to reduce any adverse environmental impacts arising from our business activities. The Group’s full environmental policy can be found on the website. The following environmental objectives ensure that we address our key environmental impacts throughout the property process: • In acquiring new properties, we will investigate pollution and other environmental risks as part of our due diligence procedures. • We will limit our consumption of natural resources, including energy and water in an attempt to maximise efficiency and minimise waste. • 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. • We will integrate environmental considerations into the design of new and refurbished buildings, seeking wherever possible to achieve good practice standards. • 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. • 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. • We will seek to reduce the adverse environmental impacts associated with our own office management practices and procurement policies. • 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. • 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. Practical action Our approach to environmental management is pragmatic, practical and tailored according to individual assets or projects. We continue to comply with environmental legislation as a minimum and go beyond where it is practicable to do so. The following examples provide an overview of some of our environmental initiatives in the year to 31 March 2009: Bramshott Place, Liphook: In partnership with Urban Renaissance Villages we recently received planning consent to develop 147 retirement homes to the Eco-Homes (2006) ‘Excellent’ Standard. The units will produce between 10 and 12% of their own energy sources from solar heating. Furthermore, water harvesting systems have been sensitively incorporated into the scheme to support landscaping. To reduce car dependency, we will be introducing a village bus to transport residents to and from the local shopping area. Shepherds Building and 61 Southwark Street, London: Following an energy audit at Southwark Street which highlighted recommendations for energy savings, low cost energy efficiency measures such as lighting sensors have been fitted at both buildings in common areas. Larger capital investments have also been made to replace old plant and machinery including boilers, water pumps and pressure vessels which has resulted in improved energy efficiency. 5 Suppliers Fair treatment of suppliers remains a key priority for Helical, particularly in challenging market conditions. The Group’s policy is to settle all agreed liabilities within the terms established with suppliers. During the year to 31 March 2009, the average payment period to suppliers was 29 days. • We will take care to protect landscape and biodiversity and try to Board responsibility improve the quality of these wherever practical. • 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. Board level responsibility for employment, health and safety, community and environmental issues lie with the Group’s Chief Executive, Michael Slade. For further information on our approach to corporate responsibility, please visit our website www.helical.co.uk. 30 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H The Board of Directors and senior management The Board of Helical Bar plc is collectively responsible for providing the entrepreneurial leadership of the Group within a framework of controls and reporting structures which assist the Group in pursuing its strategic aims and business objectives. The Board of Helical Bar plc comprises five 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 62. 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 63. Director Gerald Kaye, BSc (Est Man) FRICS, was appointed to the Board as an executive director in 1994 and is responsible for the Group’s development activities. He is a former director of London & Edinburgh Trust Plc. Aged 51. Director Matthew Bonning-Snook, BSc (Urb Est Surveying) MRICS, was appointed to the Board as an executive director in 2007. Prior to joining Helical in 1995 he worked for Richard Ellis (now CB Richard Ellis), and oversees many of Helical’s office and mixed use developments. Aged 41. Director Jack Pitman, MA (Cantab) MRICS, was appointed to the Board as an executive director in 2007. Before joining the Group in 2001 he was a director of Chester Properties Ltd. He is responsible for overseeing a number of joint venture projects, an investment portfolio and industrial development and retirement village projects. Aged 40. Former Director Michael Brown resigned from the Board on 4 June 2009. 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 past 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 IRP Property Investments Limited as well as being Chairman or a director of a number of investment companies. Aged 63. 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. Aged 69. 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 61. 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, IRP Property Investments Limited and various other companies. Aged 62. Company Secretary Tim Murphy, ACA, was appointed Company Secretary in 1994. Aged 49. Senior management John Inwood joined the Group as a management executive in 1995. Aged 43. Duncan Walker joined the Group as a development executive in 2007. Aged 30. Directors’ report The directors’ present their report and financial statements for the year ended 31 March 2009. Principal activities The principal activity of the Group 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 9 to 25. Trading results The results for the year are set out on page 46. The loss after tax amounts to £53,496,000 (2008 £12,314,000). Share capital The detailed movements in share capital are set out in note 29 to these financial statements. At 31 March 2009 and 19 June 2009 there were 107,087,012 ordinary 1p shares in issue. Dividends A final dividend of 2.75p (2008: 2.75p) per share is recommended for approval at the Annual General Meeting on 22 July 2009. The total ordinary dividend paid in the year of 4.50p (2008: 4.50p) per share amounts to £4,130,000 (2008: £4,081,000). Charitable donations Donations to charities amounted to £14,400 (2008: £28,050). Creditor payment policy The Group’s policy is to settle all agreed liabilities within the terms established with suppliers. At 31 March 2009 there were 29 days’ (2008: 75 days’) purchases outstanding in respect of the Group’s creditors. Auditors Grant Thornton UK LLP have expressed their willingness to continue in office. In accordance with section 489(4) of the Companies Act 2006 a resolution to reappoint Grant Thornton UK LLP will be proposed at the Annual General Meeting on 22 July 2009. Substantial shareholdings At 8 June 2009 the shareholders listed in Table A on page 32 had notified the Group of a disclosable interest of 3% or more in the nominal value of the ordinary share capital of the Group. 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 Group are listed in Table B on page 32. On 4 June 2009 Michael Brown resigned from the Board. 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. Other than in respect of shares held by Michael Brown there have been no changes in the directors’ interests in the period from 31 March 2009 to 19 June 2009. 31 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H Corporate governance The Group’s application of the principles of corporate governance is noted in the Corporate Governance Report on pages 33 to 35. 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 page 34. 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. Takeovers Directive Where not provided elsewhere in this Directors’ report, the following provides the additional information required for shareholders as a result of the implementation of the Takeovers Directive into English law. The Group’s share capital consists of both ordinary shares and deferred shares. Each class of shares rank pari passu between themselves. Details of the Group’s share capital can be found in note 29 to the financial statements. There are no restrictions on transfer of the ordinary shares in the Group other than: certain restrictions which may from time to time be imposed by laws and regulations (for example: insider trading laws); and pursuant to the Listing Rules of the Financial Services Authority whereby certain employees of the Group require the approval of the Group to deal in the ordinary shares. On a show of hands at a general meeting of the Group, every holder of ordinary shares present in person and entitled to vote shall have one vote and on a poll every member present in person or by proxy and entitled to vote shall have one vote for every ordinary share held. The Notice of the Annual General Meeting specifies deadlines for exercising voting rights and appointing a proxy or proxies to vote in relation to resolutions to be passed at the meeting. The rules governing the appointment and replacement of Directors and changes to the articles of association accord with usual English company law provisions. Subject to the Group’s memorandum of association, the articles of association, any statute or subordinate legislation for the time being in force concerning companies and affecting the company, and directions given by special resolution, the business of the Group shall be managed by the Directors, who may exercise all the powers of the Group. Annual general meeting The Annual General Meeting of the Group will be held on 22 July 2009 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. Financial risk Financial risk policies and objectives are discussed in the Performance and Risk report on pages 18 to 21. Statement of directors’ responsibilities The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. 32 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H Company law requires the directors to prepare financial statements for each financial year. Under that law the directors are required to prepare financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs). 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 IFRSs 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 Group and enable them to ensure that the financial statements comply with the Companies Acts 1985. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. In so far as the directors are aware: – there is no relevant audit information of which the Group’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. We, the directors listed below, confirm that to the best of our knowledge: – the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit and loss of the group and the undertakings included in the consolidation taken as a whole; and, – the management report includes a fair review of the development and performance of the business and the position of the group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. On behalf of the Board Table A – Substantial shareholdings Michael Slade – Chief Executive Aberdeen Asset Management Threadneedle Legal & General F&C Asset Management Dimensional Fund Advisors Table B – Directors’ interests Giles Weaver – Chairman Michael Slade – Chief Executive 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 Former director Michael Brown Michael Slade Chief Executive Nigel McNair Scott Finance Director 19 June 2009 Number of ordinary shares at 8 June 2009 13,615,240 5,424,270 4,839,872 4,631,722 4,607,640 4,169,193 Ordinary 1p shares 31 March 2009 113,794 13,615,240 2,467,956 1,406,048 231,786 265,831 14,013 3,509 8,772 % 12.7 5.1 4.5 4.3 4.3 3.9 Ordinary 1p shares 1 April 2008 96,250 13,130,209 2,238,370 1,203,232 124,214 150,919 8,750 – – 18,126,949 16,951,944 107,087,012 95,732,457 16.9% 17.7% n/a 1,132,437 33 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H Corporate governance report The Group is committed to applying the highest principles of corporate governance. and critical function of the Board in a small, people-orientated business such as Helical. The Board is accountable to the Group’s shareholders for good corporate governance. This report and the Directors’ Remuneration Report describe how the Group 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 (excluding the Chairman) to be comprised of independent non-executive directors, the Group has complied throughout the year with the Code provisions set out in Section 1 of the Combined Code (2006). Helical employed 24 people (including 6 executive directors) during the year to 31 March 2009 and in considering Code provision A.3.2 it was not considered appropriate to the needs of the business to appoint a further three non-executive directors (which would have taken the total to thirteen directors) merely to meet Corporate Governance guidelines. The Group considered that the non-executive directors were able to discharge their duties without additional support, but will keep this under review in future periods. Application of the principles The Board currently consists of five executive directors who hold the key operational positions in the Group and four non-executive directors, who bring a breadth of experience and knowledge to their roles. Michael Brown resigned from the Board on 4 June 2009 to pursue other interests. In view of the breadth of experience and skills of the remaining executive team the Board does not intend replacing him in the forseeable future. Chairman and Chief Executive The Chairman of the Board is Giles Weaver. The Group’s business is run by Michael Slade, the Chief Executive. Board balance and independence The Chairman, Giles Weaver, has been a non-executive director of Helical since 1993. In the Group’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 Group requires. These skills together with his detachment from day-to-day issues within the Group, 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 Group, Giles Weaver, is also Chairman of the Remuneration Committee because the Group regards the setting of remuneration policy to be an integral Recognising that the independence of non-executive directors is an issue for some shareholders, Giles Weaver offers himself for re-election at each Annual General Meeting. He has received an overwhelming majority in favour of re-election at all Annual General Meetings since his appointment as Chairman of 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 Group enable the non-executive Board members to assess and advise the full Board on the major risks faced by the Group. 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 Group supports the concept of an effective Board leading and controlling the Group. 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 Group’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 Group. 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 2008 AGM, the full Board met on eight occasions during the year under review. The attendance record of the directors is shown in the table below. Meetings Full Board Audit Committee Remuneration Committee Nominations and Appointments Committee Giles Weaver Michael Slade Nigel McNair Scott Gerald Kaye Matthew Bonning- Snook Jack Pitman Antony Beevor Wilf Weeks Andrew Gulliford 8 n/a 5 1 7 n/a n/a n/a 8 n/a n/a n/a 7 n/a n/a n/a 8 n/a n/a n/a 8 n/a n/a n/a 8 5 5 1 5 3 2 0 7 5 5 1 Michael Brown resigned from the Board on 4 June 2009. Wilf Weeks was absent from a number of meetings due to ill health. Former Director Michael Brown 8 n/a n/a n/a 34 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H t r o p e r e c n a n r e v o g e t a r o p r o C 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 Group, 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: • 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. • 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 Group’s listing or plc status. • 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. • Internal controls – ensuring maintenance of a sound system of internal control and risk management. • Communication – approval of resolutions and documentation to be put to shareholders in general meeting; approval of press releases concerning matters decided by the Board. • Board membership and other appointments to senior management. • Both the appointment and removal of the Company Secretary. • Corporate governance matters including directors’ performance evaluations. • 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 Group’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. All the members of the Committee are independent non-executive Directors. The work of the Nominations and Appointments Committee in the year The Committee met once during the period. A record of attendance at this meeting is shown on page 33. During this meeting the Committee resolved that Giles Weaver, Wilf Weeks, Matthew Bonning-Snook and Jack Pitman be recommended to shareholders for re-appointment as directors at the 2008 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 Group’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 Group 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, of each member of the 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. The evaluation process identified a concern regarding the balance between the time spent considering the business and time spent on governance issues. The Board concluded that Board meeting timetables should be reviewed to ensure that an appropriate amount of time is devoted to each area. Otherwise, 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 2009 AGM: – Giles Weaver has served more than nine years on the Board and in accordance with the Code offers himself for re-election; – Antony Beevor is due to retire by rotation and offers himself for re-election; – Andrew Gulliford is due to retire by rotation and offers himself for re-election; – Michael Slade is due to retire by rotation and offers himself for re-election; and, – Nigel McNair Scott is due to retire by rotation and offers himself for re-election. Biographical details of the directors are given on page 30. Relations with shareholders The Group values the views of its shareholders and recognises their interest in the Group’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 Group also regularly meets, with the help of its brokers, institutions that do not currently hold shares in the Group 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 Group. There were no meetings during the year between shareholders and non-executive directors. 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 Group 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 Group communicates with all shareholders through the issue of regular press releases and through its website at www.helical.co.uk. The Group 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 Group’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 The directors have reviewed the current and projected financial position of the Group making reasonable assumptions about future trading performance. The key areas of sensitivity are: • timing and value of property sales • availability of loan finance and related cash flows • future property valuation and its impact on covenants and potential loan repayments • committed future expenditure • future rental income and potential bad debts • repayment timing and value of trade receivables The forecast cashflows have been sensitised to eliminate those cash inflows which are less certain and to take account of a further deterioration of property valuations. From their review the directors believe that the Group have adequate resources to continue to be operational as a going concern for the foreseeable future. Audit Committee and auditors The terms of reference of the Audit Committee are available by request and are included on the Group’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. 35 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H t r o p e r e c n a n r e v o g e t a r o p r o C 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 Group’s auditors. Whilst all directors have a duty to act in the interests of the Group, 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 five 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 met with the auditors once to discuss the Group’s system of internal control following receipt of the auditors review of the design effectiveness of internal controls in February 2009. The key findings and recommendations of this report, which cover governance, operational controls and financial reporting were considered and are being implemented. Internal control The Board is responsible for maintaining a sound system of internal control to safeguard shareholders’ investment and the Group’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 Group’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 four occasions. Internal audit The Board reviewed its position during the year to 31 March 2009 and reaffirmed its stance that in view of the relatively small size of the Group 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 a review of the financial accounts and a review of internal controls. The audit committee considers the external auditors to be independent and has satisfied itself of the effectiveness of the external auditors, making use of information available from the Audit Inspection Unit of the Financing Reporting Council. The Group’s policy on awarding non-audit work to its auditors is designed to ensure that the Group receives the most appropriate advice without compromising the independence of the auditors. Whilst no fee caps or limits have been set by the Committee, the level of fees would be a factor in considering whether the auditors independence could be affected by the award of non-audit work. 36 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H 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. 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 Group. No director has a service contract of more than one year. Information not subject to audit Remuneration Committee The terms of reference of the Remuneration Committee are available on request and are included on the Group’s website at www.helical.co.uk. The Remuneration Committee (“Committee”) has responsibility for making recommendations to the Board to determine the Group’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 Group. During the year under review the Committee were advised by Hewitt New Bridge Street in relation to the performance criteria of the Group’s share option schemes and Performance Share Plan. Policy on executive directors’ remuneration The Group 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 Group’s position as a market leader and to reward them for enhancing shareholder value and returns. The performance measurement of the executive directors and the determination of their annual remuneration package is undertaken by the Committee. In determining remuneration packages the Committee considers the views of its remuneration consultants and remuneration at comparable companies within the property sector. It also takes into account the remuneration structure below Board level. There are four main elements to the executive directors’ remuneration packages: i basic annual salary and benefits-in-kind; ii annual cash bonus payments; iii Executive Bonus Plan; and, iv share incentives. The Group makes no pension contributions in respect of the executive directors. 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 cash 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 were eligible for sector bonuses in the period under review. The maximum amount payable in each year is a total of £5m. Payment of annual sector bonuses is at the discretion of the Committee. Sector bonuses paid in the year to 31 March 2009 totalled £735,000 (2008: £nil). In addition, a discretionary cash bonus of £300,000 was paid to Nigel McNair Scott in recognition of his contribution to the successful introduction of a number of fiscal initiatives. Executive Bonus Plan The Group 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 Group’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; 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, 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 are 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 (2008: £2m). 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 plus any 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 Group. No Executive Bonus Plan bonuses have been paid in respect of the year to 31 March 2009 (2008: nil). 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 37 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H t r o p e r n o i t a r e n u m e r ’ s r o t c e r i D 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 and Gerald Kaye operate from 1 April 2007, and of Matthew Bonning-Snook and Jack Pitman from 1 August 2007. No service contract provides for more than 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 Group’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 Group’s bonus or share option schemes. Total shareholder return The performance criteria of the Group’s 1999 share option schemes, referred to on pages 38 to 40 below, require the Group to exceed certain targets of total shareholder return. The total shareholder return for a holding in the Group’s shares in the five years to 31 March 2009 is shown in the graph below. This graph looks at the value, by 31 March 2009, of £100 invested in Helical Bar on 31 March 2004 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 Reuters 300 250 200 150 100 • 50 31 Mar 04 • • • • • • • • 31 Mar 05 31 Mar 06 31 Mar 07 31 Mar 08 • Helical Bar • FTSE All-Share Real Estate Index • • 31 Mar 09 38 Information subject to audit: Remuneration of directors Remuneration in respect of the directors was as follows: 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H t r o p e r n o i t a r e n u m e r ’ s r o t c e r i D Salaries and bonuses 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 fees £000 75 42 35 35 450 300 275 325 235 235 2,007 Salary/ Benefits- Cash in-kind bonuses £000 £000 2009 Executive bonus plan Pensions £000 £000 Total £000 2008 Salary/ Benefits- in-kind £000 fees £000 Cash bonuses £000 Executive bonus plan Pensions £000 £000 Total £000 – – – – – – – – 40 30 34 31 19 20 – 300 – – 735 – 174 1,035 – – – – – – – – – – – – – – – – – – – – – – 75 42 35 35 75 42 35 35 490 630 309 356 989 255 458 300 271 308 157 157 3,216 1,838 – – – – 35 28 31 30 11 12 147 – – – – – – – – – – – – – – – – – – – – – – – – – – 75 42 35 35 493 – 328 – 302 – 338 – 168 – – 169 – 1,985 Salaries and benefits-in-kind in respect of Matthew Bonning-Snook and Jack Pitman, as disclosed for 2008, are with effect from the date of their appointment as directors on 1 August 2007. Michael Brown resigned from the Board on 4 June 2009. Michael Slade was the highest paid director during the year with a total remuneration of £4,962,000 (including gains on share awards) (2008: Gerald Kaye £3,765,000). Share awards 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 Vesting of PSP awards £000 2009 Gain on exercise of share options £000 Total gains £000 Vesting of PSP awards £000 2008 Gain on exercise of share options £000 - - - - 1,576 985 847 847 410 394 5,059 - - - - 2,896 1,675 706 1,124 - 656 7,057 - - - - 4,472 2,660 1,553 1,971 410 1,050 12,116 - - - - 2,767 1,384 1,384 1,384 681 649 8,249 - - - - - - 2,079 1,735 - - 3,814 Total gains £000 - - - - 2,767 1,384 3,463 3,119 681 649 12,063 In order to compensate option holders for the payment of the special dividend in April 2002, the Group 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 £638,000 arising out of the exercise of options during the year. The cost of these cash bonuses is included in administrative expenses. 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 Group 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 over 1,356,405 shares are included in note 30. These options have satisfied their performance criteria and may be exercised before their expiry dates. 39 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H t r o p e r n o i t a r e n u m e r ’ s r o t c e r i D 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 over 21,200 shares are included in note 30. These options have satisfied their performance criteria and may be exercised before their expiry dates. 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 granted Date from which exercisable Expected values if options exercised at 31 March 2009 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 Approved 1999 Share Option Scheme Michael Brown Helical Bar 1999 Share Option Scheme Helical Bar Approved 1999 Share Option Scheme Subscription 966,105 (966,105) - - - - - - Purchase 740,000 (240,000) 500,000 150.0p 18.12.00 18.12.05 17.12.10 687,500 Subscription 33,895 (33,895) 1,740,000 (1,240,000) - 500,000 Subscription 367,770 (367,770) Purchase 360,000 (360,000) Subscription 33,895 761,665 (33,895) (761,665) - - - - - - - - - - - - - - - - - 687,500 - - - - Purchase 647,095 (300,000) 347,095 153.3p 15.11.01 15.11.06 14.11.11 465,801 Subscription 33,895 680,990 (33,895) (333,895) - 347,095 Purchase 502,090 (502,090) Subscription 33,895 535,985 (33,895) (535,985) - - - - - - - - - - - - - 465,801 - - - - - - - - - - Matthew Bonning-Snook Helical Bar 1999 Share Option Scheme Purchase 210,000 210,000 – – 210,000 210,000 150.0p 18.12.00 18.12.05 17.12.10 288,750 288,750 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 Purchase 170,510 (170,510) Subscription 150,000 (150,000) - - - - - - - - - - - - Subscription 299,310 – 299,310 141.5p 21.11.02 21.11.07 20.11.12 436,993 Subscription 21,200 641,020 – (320,510) 21,200 320,510 141.5p 21.11.02 21.11.05 20.11.12 30,952 467,945 40 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H t r o p e r n o i t a r e n u m e r ’ s r o t c e r i D Exercise of share options In the period under review options over 1,619,455 new subscription shares and 1,572,600 shares held by the Group’s ESOP were exercised. In order that the number of shares required by the ESOP to satisfy share awards be reduced, the Group agreed with employees that the number of shares acquired on the exercise of those options be reduced. To ensure that employees were not disadvantaged by the reduction, the exercise prices applied on the exercise of the options were correspondingly reduced. The options exercised during the year by the directors, in accordance with their agreement and on the original basis, were as follows: Director Michael Slade Date of exercise Type of option Original number of shares Reduced number of shares Original exercise price Reduced exercise price Sale price Gain £000’s 23.07.08 Subscription 700,000 n/a 88.50p n/a 300.4p 1,618 19.08.08 Subscription 88,701 n/a 88.50p n/a 335.4p 29.08.08 Subscription 177,404 n/a 88.50p n/a 324.4p 05.09.08 Subscription 33,895 n/a 88.50p n/a 318.8p 19.09.08 24.09.08 Purchase 170,000 96,880 150.00p 1p 348.6p Purchase 70,000 37,556 150.00p 1p 323.5p 1,240,000 Nigel McNair Scott 23.07.08 Subscription 300,000 n/a 88.50p n/a 300.4p 19.08.08 Subscription 29.08.08 Subscription 22,590 45,180 05.09.08 Subscription 33,895 n/a n/a n/a 88.50p 88.50p 88.50p n/a 335.4p n/a 324.4p n/a 318.8p 19.09.08 24.09.08 Purchase 142,000 80,664 150.00p 1p 348.6p Purchase 218,000 118,329 150.00p 1p 321.0p 761,665 Michael Brown 05.09.08 Subscription 33,895 n/a 88.50p n/a 318.8p 19.09.08 24.09.08 Purchase 355,000 198,950 153.30p 1p 348.6p Purchase 147,090 77,396 153.30p 1p 323.5p 535,985 Gerald Kaye 05.09.08 Subscription 33,895 n/a 88.50p n/a 318.8p 19.09.08 24.09.08 Purchase 212,000 118,800 153.30p 1p 348.6p Purchase 88,000 46,305 153.30p 1p 323.5p 333,895 Jack Pitman 19.09.08 Subscription 108,406 n/a 156.00p n/a 348.6p 19.09.08 Purchase 120,000 66,300 156.00p 1p 348.6p 24.09.08 Subscription 41,594 n/a 156.00p 24.09.08 Purchase 50,510 26,164 156.00p n/a 1p 323.5p 323.5p 320,510 236 453 84 370 135 2,896 693 60 115 84 309 414 1,675 84 761 279 1,124 84 455 167 706 230 254 78 94 656 The market price of the ordinary shares at 31 March 2009 was 287.5p (2008: 376p). This market price varied between 233p and 398p 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 Helical Bar 1999 Share Option Scheme (“the Scheme”), the authority to adjust the number of shares subject to option or the exercise price of those options. The Group 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 Group. Accordingly, the Board has considered alternative ways of compensating option holders and, as a result, the Group 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 £638,411 was paid following the exercise of options over 3,192,055 1p shares. Performance Share Plan At the 2004 Annual General Meeting the Group 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 Group 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 Group 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 Group. 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 Group 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 Group’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). 41 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H t r o p e r n o i t a r e n u m e r ’ s r o t c e r i D Applicable conditions (a) Absolute net asset value per share (having added back dividends) condition Annual compound increase after three years % of award vesting 15% p.a. or more 66.7 Between 7.5% p.a. and 15% p.a. Pro rata between 6.7 and 66.7 7.5% p.a. Below 7.5% p.a. 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. (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. 42 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H t r o p e r n o i t a r e n u m e r ’ s r o t c e r i D 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 Group (measured as the increase in the net asset value plus cash returned as dividends to shareholders) that could accrue to all executives through the Group’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 Group will have increased its triple net asset value by at least 15% per annum with the Group’s relative performance placing it in the top quartile of IPD, over the three year period. Relationship to the Group’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. Vesting of Awards During the year the performance conditions relating to the second award, granted on 6 July 2005, were considered. The three year performance period to 31 March 2008 showed that the net asset value per share, calculated in accordance with the terms of the PSP, had increased by 18.4% p.a. During this three year period the total return of Helical’s property portfolio, as determined by IPD, had increased by 16.4% p.a. compared to the upper quantile of the IPD Benchmark of 9.9%. Accordingly, the performance criteria applicable to this award were met and the shares vested in full and 1,159,125 shares, after deduction of shares sold to pay income tax, were transferred to award holders on 19 September 2008. 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 Group that accrued to all executives through the Group’s long and short-term incentive and bonus plans over the three year performance period to 31 March 2008 was under 20%. 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 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 n/a 146,570 146,570 Shares awarded 14.07.08 at 276.25p Total 325,792 904,206 217,195 586,500 298,643 n/a 680,487 210,326 255,204 507,752 255,204 503,676 Michael Brown resigned from the Board on 4 June 2009 and, as a consequence, the awards made on 6 July 2007 and 14 July 2008 will not vest. It is expected that one third of the shares awarded on 4 July 2006 will vest at the end of the performance period on 4 July 2009. It is currently expected that no shares will vest in respect of the share awards made on 6 July 2007 and 14 July 2008. 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 Group 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 Group. Provided participants remain employed by the Group 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: Michael Slade Nigel McNair Scott Gerald Kaye Michael Brown Matthew Bonning-Snook Jack Pitman Shares held by the Trustees of the Plan at 31 March 2009 were 250,000 (2008: 233,460). Giles Weaver Chairman 19 June 2009 2 July 2008 at 281.25p 30 September 2008 at 299.0p 6 January 2009 at 296.75p 1,867 1,867 1,867 1,867 1,867 1,867 520 520 520 520 516 520 486 486 485 486 482 486 43 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H Report of independent auditor To the Members of Helical Bar plc We have audited the Group and Company financial statements (the “financial statements”) of Helical Bar plc for the year ended 31 March 2009 which comprise the principal accounting policies, the Consolidated Income Statement, the Group and Company balance sheets, the Group and Company cash flow statements, the Group and Company statements of recognised income and expense and notes 1 to 36. 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 that is cross-referred to in the principle activities 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 Chairman’s statement, the Chief Executive’s statement, the business review, the Group’s approach statement, the portfolio statistics, the property portfolio, the performance and risk statement, the financial review, the corporate responsibility statement, the details of the board and senior management, the directors’ report, the corporate governance report and the un-audited part of the directors’ remuneration report. 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. 44 Opinion In our opinion: 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H t r o p e r s r o t i d u a t n e d n e p e d n I – 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 2009 and of its loss for the year then ended; – the 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 Company’s affairs as at 31 March 2009; – 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 2009. 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 2009 and of its loss for the year then ended. Grant Thornton UK LLP Registered Auditors Chartered Accountants London 19 June 2009 45 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H s r o s i v d A n o i t a m r o f n i r o t s e v n I s m r e t f o y r a s s o G l w e i v e r r a e y n e T r a d n e a c l l i a c n a n F i 7 7 8 7 9 7 0 8 0 8 e s n e p x e d n a e m o c n i i d e s n g o c e r f o s t n e m e t a t s y n a p m o c d n a p u o r G s t n e m e t a t s w o l f h s a c y n a p m o c d n a p u o r G s t n e m e t a t s l i a c n a n i f e h t o t s e t o N l s t e e h s e c n a a b y n a p m o c d n a p u o r G t n e m e t a t s e m o c n i d e t a d i l o s n o C 6 4 7 4 9 4 0 5 1 5 s t n e m e t a t s l a i c n a n i f e h t o t x e d n I 46 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H Consolidated income statement Helical Bar plc and subsidiary undertakings for the year ended 31 March 2009 Revenue Net rental income Development (losses)/profits Trading losses Share of results of joint ventures Other operating income/(expense) Gross profit before net loss on sale and revaluation of investment properties Net loss on sale and revaluation of investment properties Gain on sale of investments Gross loss Administrative expenses Operating loss Finance costs Finance income Change in fair value of derivative financial instruments Foreign exchange gains Loss before tax Taxation on loss on ordinary activities Loss after tax – attributable to minority interests – attributable to equity shareholders Loss for the year Basic loss per share Diluted loss per share Year ended 31.3.09 £000 Year ended 31.3.08 £000 Note 3 4 5 6 20 5 7 18 8 9 9 23 81,770 17,682 (7,704) (514) 1,846 6,752 65,623 16,400 6,068 (29) (98) (315) 18,062 22,026 (66,670) (32,790) 1,892 (46,716) (8,090) (54,806) (9,718) 2,082 (13,412) 3,999 - (10,764) (13,659) (24,423) (3,033) 2,579 (1,270) 1,862 (71,855) (24,285) 10 18,359 11,971 (53,496) (12,314) 143 (53,639) (53,496) (56.6p) (56.6p) (7) (12,307) (12,314) (13.5p) (13.5p) 14 14 47 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H Group and company balance sheets Helical Bar plc and subsidiary undertakings at 31 March 2009 Note Group 31.3.09 £000 Group 31.3.08 £000 Company 31.3.09 £000 Company 31.3.08 £000 Non-current assets Investment properties Owner occupied property, plant and equipment Available-for-sale investments Investment in subsidiaries Investment in joint ventures Goodwill Deferred tax asset Current assets Land, developments and trading properties Available-for-sale investments Trade receivables and other receivables Corporation tax receivable Cash and cash equivalents Total assets Current liabilities Trade payables and other payables Borrowings Non-current liabilities Borrowings Derivative financial instruments Deferred tax provision Total liabilities Net assets 15 17 18 19 20 21 11 22 18 24 25 26 27 27 23 11 241,287 306,778 1,745 13,310 – 7,924 30 3,440 2,007 12,000 – 6,078 30 – – 1,721 13,310 32,896 9,308 – – – 2,007 12,000 37,771 7,065 – – 267,736 326,893 57,235 58,843 210,415 182,508 7,684 40,591 868 72,776 332,334 600,070 12 43,871 212 17,090 243,693 570,586 853 – 546 – 348,948 352,373 862 55,793 406,456 463,691 212 11 353,142 411,985 (51,215) (48,155) (99,370) (66,551) (50,238) (193,015) (197,963) – (2,508) (116,789) (193,015) (200,471) (249,297) (172,362) (27,007) (14,337) – (263,634) (363,004) (925) (11,851) (185,138) (301,927) (2,776) (3,218) (33,001) – – (2,824) (2,824) (226,016) (203,295) 237,066 268,659 237,675 208,690 48 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H Group and company balance sheets Helical Bar plc and subsidiary undertakings at 31 March 2009 Equity Called-up share capital Share premium account Revaluation reserve Capital redemption reserve Other reserves Retained earnings Own shares held Group 31.3.09 £000 1,336 70,378 529 7,478 291 Group 31.3.08 £000 1,222 42,520 57,072 7,478 291 Company 31.3.09 £000 Company 31.3.08 £000 1,336 70,378 – 7,478 1,987 1,222 42,520 – 7,478 1,987 158,494 163,911 158,093 159,475 (1,597) (3,992) (1,597) (3,992) Note 32 32 32 32 32 32 32 Equity attributable to equity holders of the parent 236,909 268,502 237,675 208,690 Minority interests Total equity 157 157 – – 237,066 268,659 237,675 208,690 The financial statements were approved by the Board of Directors on 19 June 2009. Michael Slade Director Nigel McNair Scott Director Group and company statements of recognised income and expense Helical Bar plc and subsidiary undertakings for the year ended 31 March 2009 (Loss)/profit for the year Reclassification of prior year fair value adjustment realised in the year on disposal of available-for-sale investments Fair value movements on available-for-sale investments Associated deferred tax on fair value movements Exchange difference on retranslation of net investments in foreign operations Total recognised income and expense for the year – attributable to equity shareholders – attributable to minority interest Group Year ended 31.3.09 £000 (53,496) Group Year ended 31.3.08 £000 (12,314) Company Year ended 31.3.09 £000 Company Year ended 31.3.08 £000 7,157 7,284 (1,028) 5,170 (1,159) (309) (50,822) (50,965) 143 (50,822) – 9,974 (2,793) – (5,133) (5,126) (7) (5,133) (1,028) 2,546 (425) – 8,250 8,250 – – 9,974 (2,793) – 14,465 14,465 – 8,250 14,465 49 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H 50 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H Group and company cash flow statements Helical Bar plc and subsidiary undertakings for the year to 31 March 2009 Cash flows from operating activities (Loss)/profit before tax Depreciation Revaluation loss on investment properties Net interest payable (Gain)/loss on sale of investments (Gain)/loss on sales of investment properties Loss on valuation of derivative financial instruments Share based payment (credit)/charge Non-cash share acquisition by ESOP Share of results of joint ventures Investment written off in the year 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 Dividends from joint ventures Tax received 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 Net increase in cash and cash equivalents Cash and cash equivalents at 1 April Cash and cash equivalents at 31 March Group Year to 31.3.09 £000 (71,855) 321 68,005 6,999 (1,892) (1,335) 13,412 (1,363) – (1,846) – (448) 9,998 3,503 (23,632) (8,688) (18,819) (16,992) 2,497 – 1,439 (331) (13,387) (32,206) (15,024) 10,340 (5,048) 2,100 (3,107) 14 (77) (10,802) 27,972 93,250 (18,398) (4,130) 98,694 55,686 17,090 72,776 Group Year to 31.3.08 £000 (24,285) 270 32,554 1,112 – 236 1,270 4,655 (3,859) 98 – (71) 11,980 26,051 (65,031) 2,563 (24,437) (12,987) 2,579 98 98 (3,198) (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 Company Year to 31.3.09 £000 Company Year to 31.3.08 £000 5,916 321 – (5,665) (1,892) – 2,776 – – (2,243) 5,675 (796) 4,092 3,404 (307) (4,851) 2,338 (1,597) 6,396 – 1,439 (89) 6,149 8,487 – – – 2,100 (3,107) 14 (53) (1,046) 27,972 32,608 (8,109) (4,130) 48,341 55,782 11 55,793 12,272 270 – (114) – – – – (3,859) (484) 7,775 46 15,906 3,769 211 3,285 23,171 (514) 628 98 10 (3,198) (2,976) 20,195 – – (1,126) – (5,273) – (1,973) (8,372) – – (7,742) (4,081) (11,823) – 11 11 51 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H Notes to the financial statements 1. Basis of preparation These financial statements have been prepared in accordance with applicable International Financial Reporting Standards (“IFRS”), including International Financial Reporting Interpretations Committee (“IFRIC”) interpretations as adopted by the European Union and as issued by the International Accounting Standards Board (“IASB”). The directors have taken advantage of the exemption offered by S.230 of the Companies Act 1985 not to present a separate income statement for the parent company. The financial statements have been prepared in Sterling (rounded to the nearest thousand) under the historical cost convention as modified by the revaluation of investment properties, available-for-sale investments and derivative financial instruments. The measurement bases and principal accounting policies of the Group are set out below. These accounting policies are consistent with those applied in the year to 31 March 2008, as amended to reflect any new Standards, Amendments to Standards and interpretations which are mandatory for the year ended 31 March 2009. Status of Adoption of Significant New or Amended IFRS Standards or Interpretations The Group has not adopted any new or amended IFRS standards or interpretations in the year. 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 January 2009) Amendment to IFRS 2 Share-based Payments - Vesting Conditions and Cancellations (effective 1 January 2009) Amendment to IAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged Items (effective 1 July 2009) Amendment to IFRS 7 Financial Instruments: Disclosures - Improving Disclosures About Financial Instruments (effective 1 January 2009) Embedded Derivatives - Amendments to IAS 39 and IFRIC 9 (effective for annual periods ending on or after 30 June 2009) IFRS 3 Business Combinations (revised 2008) (effective 1 July 2009) IFRS 8 Operating Segments (effective 1 January 2009) IFRIC 15 Agreements for the Construction of Real Estate (effective 1 January 2009) IFRIC 16 Hedges of a Net Investment in a Foreign Operation (effective 1 October 2008) Helical does not anticipate any material impact on adopting the above other than in the presentation of accounts under the revised requirements of IAS 1. 2. Principal accounting policies Basis of consolidation The Group financial statements consolidate those of Helical Bar plc (the “Company”) and all of its subsidiary undertakings (together the “Group”) drawn up to 31 March 2009. 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 and are held in the Company balance sheet at cost and reviewed annually for impairment. Joint Ventures are entities whose economic activities are controlled jointly by the Group and by other ventures independent of the Group and 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. Associates are those entities over which the Group has significant influence but which are neither subsidiaries nor joint ventures. Intra-group balances and any 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. Going concern The accounts have been prepared on a going concern basis as explained in the Financial Review on pages 23 to 25. Revenue recognition Rental income - rental income receivable is recognised in the Income Statement on a straight line basis over the lease term. 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. Sale of goods - assets, such as trading properties, development sites and completed developments, are regarded as sold upon the transfer of the significant risks and rewards of ownership to the purchaser, in accordance with IAS 18 Revenue. This occurs on exchange of unconditional contracts for the sale of the site, on satisfaction of any and all conditions on a conditional contract for the sale of the site or on completion of the contract on a conditional sale where those conditions are satisfied at completion. Measurements of revenue arising from the sale of such assets is derived from the fair value of the consideration received in accordance with IAS 18 Revenue. 52 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H s t n e m e t a t s l a i c n a n i f e h t o t s e t o N Construction contracts - where an asset is constructed under a specific contract with a purchaser (a “pre-sold development”) the initial sale of the site to that purchaser is recognised as a sale of goods in accordance with IAS 18 Revenue. The construction element of the contract is treated, for the purposes of revenue recognition, as a construction contract in accordance with IAS 11 Construction Contracts. Revenue is recognised by reference to the stage of completion which is typically determined by reference to project appraisals, normally supported by independent valuation certificates provided by quantity surveyors. The Company’s principal other responsibility on pre-sold developments is the identification of and agreement of terms with potential tenants of the completed building(s). The revenue recognition of this additional component of the funding agreements is considered separately to reflect the substance of the transaction as the rendering of services, in accordance with IAS 18 Revenue. The amount of revenue recognised is determined by reference to the percentage of the building(s) that are let. Investment income - revenue in respect of investment and other income represents investment income, fees and commissions earned on an accruals basis and the fair value of the consideration received/receivable 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-term leasehold improvements. Leasehold improvements, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Residual values are reassessed annually. 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 Plant and equipment – 10% or length of lease, if shorter – 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. 53 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H s t n e m e t a t s l a i c n a n i f e h t o t s e t o N 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, including associated transaction costs, and revalued at the balance sheet date to fair value. These fair values are based on market values 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. Gains or losses arising from changes in the fair value of investment properties are included as gains or losses on revaluation 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. Property that is being constructed or developed for future use as an investment property, but which had not previously been classified as such, is classified as investment property under development within property, plant and equipment. It is recognised initially at cost but is subsequently remeasured to fair value at the balance sheet date. Any gain or loss on remeasurement is taken direct to equity unless any loss in the period exceeds any net cumulative gain previously recognised in equity, in which case, the amount by which the loss in the period exceeds the cumulative gain previously recognised is taken to the Income Statement. On completion, the property is transferred to investment property with final remeasurement accounted for in accordance with this policy. 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. Gross borrowing costs associated with expenditure on properties under development or undergoing major refurbishment are capitalised. The interest capitalised is calculated using the Group’s weighted average cost of borrowings. Interest is capitalised from the date of commencement of the development work until date of practical completion. Details of the valuation of investment properties can be found in note 15. 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 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 amortised cost. For the purposes of the cash flow statement, cash and cash equivalents comprise cash in hand, deposits with banks, and 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 developments and investment properties are added to the costs of such properties until the date of completion of the development or investment. After initial recognition borrowings are carried at amortised cost. 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. Further information on the categorisation of financial instruments can be found in note 23. 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. 54 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H s t n e m e t a t s l a i c n a n i f e h t o t s e t o N 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. Foreign currencies Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the balance sheet date. Non-monetary items that are measured at historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Any exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were initially recorded are recognised in the Income Statement in the period in which they arise. Exchange differences on non-monetary items are recognised in the statement of recognised income and expenses to the extent that they relate to a gain or loss on that non-monetary item which is included in the statement of recognised income and expenses, otherwise such gains and losses are recognised in the income statement. The assets and liabilities in the financial statements of foreign subsidiaries are translated at the rate of exchange ruling at the balance sheet date. Income and expenses are translated at the actual rate. The exchange differences arising from the retranslation of the opening net investment in subsidiaries are taken directly to retained earnings in equity. On disposal of a foreign operation the cumulative translation differences (including, if applicable, gains and losses on related hedges) are transferred to the income statement as part of the gain or loss on disposal. 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. Purchases and sales of own shares increase or decrease the book value of “Own shares held” in the Balance Sheet. At each period end the Group assesses and recognises the fair value of “Own shares held” and accounts for movement between book value and fair value as a reserves transfer. 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. Areas requiring the use of estimates and critical judgement that may significantly impact on the Group’s earnings and financial position are: – revenue on construction contracts where the valuation is spread over the construction period using estimates of the final outcome (note 3); – valuation of investment properties, where external valuers are used to provide third party valuations (note 15); – valuation of recently acquired investment properties, where a directors’ valuation is used based on current market values (note 15); – calculation of deferred tax liabilities, where indexation is used to reduce the provision for deferred tax on revaluation surpluses (note 11); – 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 (note 31); – 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 (note 11); – valuation of the investment in Quotient Bioscience Group Limited, which is based on a valuation method (note 18); – valuation of the investment in a property developer which is based on a valuation method (note 18); – use of the euro as of the functional currency of the operations in Poland; and – directors’ valuation of land, development and trading properties include subjective assumptions including the result of future planning decisions and future sales values and timings (note 22). 3. Segmental information Revenue Rental income Trading property sales Developments Other Revenue Investment and trading Year ended 31.3.09 £000 19,989 – – 19,989 Developments Year ended 31.3.09 £000 792 – 54,097 54,889 Total Year ended 31.3.09 £000 20,781 – 54,097 74,878 6,892 81,770 Investment and trading Year ended 31.3.08 £000 18,284 115 – 18,399 – Developments Year ended 31.3.08 £000 Total Year ended 31.3.08 £000 – – 40,585 40,585 – 18,284 115 40,585 58,984 6,639 65,623 18,399 40,585 All revenue is attributable to continuing operations. Revenue for the year comprises revenue from construction contracts of £16,251,000 (2008: £16,832,000), revenue from the sale of goods of £15,993,000 (2008: £18,882,000) and revenue from services of £28,745,000 (2008: £4,986,000), rental income of £20,781,000 (2008: £18,284,000) and income from the sale of investments of £nil (2008: £6,639,000). 3. Segmental information (continued) Profit before tax Net rental income Development (loss)/profit Trading losses Share of results of joint ventures Loss on sale and revaluation of investment properties Gain on sale of investments Other operating income/(expense) Gross loss Unallocated administrative expenses Unallocated net finance income/(costs) Loss before tax Balance sheet Investment properties Land, development and trading properties Investment and trading Year ended 31.3.09 £000 17,008 – (514) (332) (66,670) (50,508) Developments Year ended 31.3.09 £000 674 (7,704) – 2,178 – (4,852) Total Year ended 31.3.09 £000 17,682 (7,704) (514) 1,846 (66,670) (55,360) 1,892 6,752 (46,716) (8,090) (17,049) (71,855) 31.3.09 £000 241,287 878 242,165 31.3.09 £000 31.3.09 £000 – 241,287 209,537 209,537 210,415 451,702 Borrowings (185,718) (111,734) (297,452) Unallocated assets Unallocated liabilities Net assets 56,447 97,803 154,250 148,368 (65,552) 237,066 55 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H s t n e m e t a t s l a i c n a n i f e h t o t s e t o N Investment and trading Year ended 31.3.08 £000 16,400 – (29) (98) (32,790) (16,517) Developments Year ended 31.3.08 £000 – 6,068 – – – 6,068 Total Year ended 31.3.08 £000 16,400 6,068 (29) (98) (32,790) (10,449) – (315) (10,764) (13,659) 138 (24,285) 31.3.08 £000 306,778 1,390 308,168 (141,247) 166,921 31.3.08 £000 31.3.08 £000 – 306,778 181,118 181,118 182,508 489,286 (81,353) (222,600) 99,765 266,686 81,300 (79,327) 268,659 Investment properties are owned or leased by the Group for long-term income and for capital appreciation, trading properties are owned or leased with the intention to sell and development properties include sites, developments in the course of construction and completed developments available for sale. 4. Net rental income Gross rental income Rents payable Other property outgoings Net rental income 5. Development profits Development revenue Cost of sales Sales expenses Provision against book values Development (losses)/profits Year ended 31.3.09 £000 20,781 (12) (3,087) 17,682 Year ended 31.3.09 £000 54,097 (26,274) (6,141) (29,386) (7,704) Year ended 31.3.08 £000 18,284 (42) (1,842) 16,400 Year ended 31.3.08 £000 40,585 (33,255) (877) (385) 6,068 Within other operating income of £6,752,000 (2008: expense of £315,000) is £6,642,000 relating to contributions from joint venture partners and tenants against the write-down of development stock (2008: £nil). 56 6. Trading losses 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H s t n e m e t a t s l a i c n a n i f e h t o t s e t o N Trading property sales Cost of sales Sales expenses Provision against book values Trading losses 7. Net loss on sale and revaluation of investment properties Net proceeds from the sale of investment properties Book value (note 15) Gain/(loss) on sale of investment properties Revaluation deficit on investment properties Loss on sale and revaluation of investment properties 8. Administrative expenses Administrative expenses Operating loss 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 (credit)/charge Auditors’ remuneration: – audit of parent company and consolidated financial statements – audit of company’s subsidiaries – interim audit of consolidated financial statements – financial assistance – internal controls review – financial accounts review – PSP review Year ended 31.3.09 £000 Year ended 31.3.08 £000 – – – (514) (514) 115 (143) (1) – (29) Year ended 31.3.09 £000 Year ended 31.3.08 £000 10,340 (9,005) 1,335 (68,005) (66,670) 6,014 (6,250) (236) (32,554) (32,790) Year ended 31.3.09 £000 Year ended 31.3.08 £000 (8,090) (13,659) 4,368 506 77 4,951 321 (425) 163 79 30 – 15 18 3 3,765 1,033 238 5,036 270 4,208 135 70 38 7 – – 3 Details of the remuneration of Directors amounting to £15,332,000 (2008: £14,048,000) are included in the Directors’ Remuneration Report on pages 36 to 42. The amount of the share-based payments credit relating to share awards made to Directors is £348,000 (2008: charge £3,660,000). 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 (2008: 24). 9. 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 31.3.09 £000 Year ended 31.3.08 £000 (15,890) (11,901) (362) (321) 6,855 (9,718) 2,082 2,082 (265) (163) 9,296 (3,033) 2,579 2,579 All interest payable relates to interest on borrowings and all interest receivable relates to interest on cash and cash equivalents. On projects where specific third party loans have been arranged, interest has been capitalised at the rate for the individual loan. The weighted average capitalised interest rate of such loans was 6.04% (2008: 6.90%). Where general finance has been used to fund the acquisition and construction of properties the rate used was a weighted average of the financing costs for the applicable borrowings of 6.15% (2008: 8.04%). 10. Taxation on loss on ordinary activities The tax credit is based on the loss for the year and represents: United Kingdom corporation tax at 28% (2008: 30%) – Group corporation tax – adjustment in respect of prior periods Current tax credit Deferred tax at 28% (2008:28%) – capital allowances – revaluation deficits – tax losses – other temporary differences Deferred tax Tax credit on loss on ordinary activities Year ended 31.3.09 £000 Year ended 31.3.08 £000 – 1,915 1,915 (480) 12,566 5,285 (927) 16,444 18,359 (1,160) 1,492 332 (560) 10,990 – 1,209 11,639 11,971 57 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H s t n e m e t a t s l a i c n a n i f e h t o t s e t o N 58 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H s t n e m e t a t s l a i c n a n i f e h t o t s e t o N 10. Taxation on loss on ordinary activities (continued) Factors affecting the tax credit for the period: The tax assessed for the period is lower than the standard rate of corporation tax in the UK (28%). The differences are explained below: Loss on ordinary activities before tax Year ended 31.3.09 £000 Year ended 31.3.08 £000 (71,855) (24,285) Loss on ordinary activities multiplied by standard rate of corporation tax in the UK of 28% (2008: 30%) 20,119 7,285 Effect of: – payment for use of tax losses – expenses not deductible for tax purposes – income not subject to UK corporation tax – capital allowances not reflected through deferred tax – tax relief on share awards – tax losses utilised – operating profit of joint ventures – prior year adjustment – revaluation deficit not recognised through deferred tax – other temporary differences Total tax credit for the period – (390) 2,288 – (1,351) 2,257 – 1,915 (6,475) (4) 18,359 (905) (958) – 907 2,963 795 (29) 1,492 – 421 11,971 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 allowances in respect of eligible expenditure on investment properties and unrealised capital losses at 31 March 2009 of £16.4m. 11. Deferred tax Deferred tax provided for in the financial statements is set out below: Capital gains Capital allowances Available-for-sale assets Tax losses Other temporary differences Group 31.3.09 £000 – 3,205 3,218 (5,579) (4,284) (3,440) Group 31.3.08 £000 12,566 2,728 2,793 – (6,236) 11,851 Company 31.3.09 £000 – 179 3,218 (179) – 3,218 Company 31.3.08 £000 – 31 2,793 – – 2,824 Other temporary differences represent deferred tax assets arising from the recognition of the fair value of derivative financial instruments and future tax relief available to the Group from capital allowances and when share 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 £3.2m (2008: £2.7m) would be released and further capital allowances of £11.8m (2008: £9.2m) would be available to reduce future tax liabilities. 12. Dividends paid Attributable to equity share capital Ordinary – interim paid of 1.75p (2008: 1.75p) per share – prior period final paid of 2.75p (2008: 2.75p) per share Total dividends paid in year – 4.50p (2008: 4.50p) per share Year ended 31.3.09 £000 Year ended 31.3.08 £000 1,640 2,490 4,130 1,613 2,468 4,081 The interim dividend of 1.75p was paid on 23 December 2008 to shareholders on the register on 5 December 2008. The final dividend, if approved at the AGM on 22 July 2009, will be paid on 24 July 2009 to shareholders on the register on 3 July 2009. This final dividend, amounting to £2,881,000, representing 2.75p per share, has not been included as a liability at 31 March 2009. 13. 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 year of the Group was £7,157,000 (2008: £7,284,000). 14. (Loss)/earnings per share The calculation of the basic loss per share is based on the loss 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 per share is based on the basic loss 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 and 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 31.3.09 000s 107,087 (12,242) 94,845 804 703 918 97,270 Year ended 31.3.08 000s 95,732 (4,289) 91,443 461 2,919 2,929 97,752 59 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H s t n e m e t a t s l a i c n a n i f e h t o t s e t o N Loss used for calculation of basic and diluted earnings per share (53,639) (12,307) Basic loss per share Diluted loss per share Loss used for calculation of basic and diluted earnings per share Net loss on sale and revaluation of investment properties Fair value movement on derivative financial instruments Deferred tax in respect of investment properties Deferred tax in respect of capital allowances Gain on disposal of investment Earnings used for calculation of adjusted earnings per share Diluted EPRA earnings per share (56.6p) (13.5p) (56.6p) (13.5p) (53,639) 66,670 13,412 (12,566) 480 (1,892) 12,465 (12,307) 32,790 1,270 (10,990) 560 – 11,323 12.8p 11.6p In accordance with IAS 33 on Earnings per share, no weighting adjustments have been made for share awards in existence during the years to 31 March 2009 and 31 March 2008 as losses were made during those years making the adjustments anti-dilutive. Accordingly, the basic and diluted losses per share for each 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. 60 15. Investment properties 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H s t n e m e t a t s l a i c n a n i f e h t o t s e t o N Group Fair value at 1 April Property acquisitions Properties transferred from land trading and development properties Disposals Revaluation deficit Fair value at 31 March Freehold 31.3.09 £000 Leasehold 31.3.09 £000 Total 31.3.09 £000 Freehold 31.3.08 £000 Leasehold 31.3.08 £000 Total 31.3.08 £000 246,301 15,325 1,514 (9,005) (58,773) 195,362 60,477 686 – – (15,238) 45,925 306,778 16,011 1,514 (9,005) (74,011) 241,287 253,696 30,974 – (6,250) (32,119) 246,301 62,329 316,025 627 31,601 – – (2,479) 60,477 (6,250) (34,598) 306,778 The revaluation deficit of £74,011,000 (2008: £34,598,000) consists of the Group’s share of £68,005,000 (2008: £32,554,000) and the share attributable to profit share partners of £6,006,000 (2008: £2,044,000). 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 £nil (2008: £6.0m). Interest capitalised during the year in respect of the refurbishment of investment properties amounted to £1,065,000 (2008: £2,634,000). Interest capitalised in respect of the refurbishment of investment properties is included in investment properties to the extent of £6,205,000 (2008: £5,140,000). Investment properties with fair value of £233,798,000 were held as security against borrowings. Properties are stated at market value as at 31 March 2009, valued by professionally qualified external valuers except for investment properties valued by the Directors. The valuations have been prepared in accordance with the Valuation Standards (6th edition) published by the Royal Institution of Chartered Surveyors (“the Standards”). In their valuation reports, the valuers have noted, in accordance with Guidance Note 5 of the Standards, that the primary source of evidence for valuations is recent, comparable market transactions on arms length terms. The current economic environment means that there have been fewer transactions and, consequently, there is a greater degree of uncertainty in respect of the figures reported by our valuers. Until the number and consistency of comparable transactions increases, this situation is likely to remain. The Directors have valued £4.7m (2%) of the investment portfolio on the same basis. The investment properties have been valued at 31 March 2009 as follows: Cushman & Wakefield LLP Jones Lang LaSalle Drivers Jonas LLP Directors’ valuation £000 191,650 40,000 4,900 4,737 241,287 The net deficit arising of £68,005,000 (2008: £32,554,000) has been transferred to the revaluation reserve. The historical cost of investment property is £240,583,000 (2008: £237,838,000). 16. Operating lease arrangements The Group earns rental income by leasing its investment properties to tenants under non-cancellable operating leases. At the balance sheet date the Group had contracted with tenants to receive the following future minimum lease payments: Not later than one year Later than one year but not more than five years More than five years The Company has no operating lease arrangements. Group 31.03.09 £000 17,715 49,037 50,367 Group 31.03.08 £000 18,583 58,179 59,022 117,119 135,784 17. Owner occupied property, plant and equipment – Group 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 improvement 31.3.09 £000 Plant and equipment 31.3.09 £000 2,033 38 – 2,071 328 190 – 518 1,553 587 39 (72) 554 285 131 (54) 362 192 Total 31.3.09 £000 2,620 77 (72) 2,625 613 321 (54) 880 1,745 Short leasehold improvement 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 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. All short leasehold improvement, plant and equipment relates to the Company except for plant and equipment with a net book value of £24,000 as at 31 March 2009. 18. Available-for-sale investments At 1 April 2008 Additions Disposals Fair value adjustments At 31 March 2009 Non-Current Group £000 12,000 – (1,236) 2,546 13,310 Company £000 12,000 – (1,236) 2,546 13,310 Group £000 12 5,048 – 2,624 7,684 Current Company £000 – – – – – 61 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H s t n e m e t a t s l a i c n a n i f e h t o t s e t o N Included in non-current available-for-sale investments is a 22% shareholding in Quotient Biosciences Group Limited (“Quotient”), a private bioscience company. Quotient is accounted for as an investment as Helical believes that despite the level of its shareholding it does not have significant influence as it is not represented on the board of Quotient and has no influence over its operational and financial decisions. The valuation of the investment in Quotient was determined using a valuation technique as there is no active market for the shares. The valuation for one part of the business is based on the sales price of a similar business. Due to the movement in market conditions and difference in the technology involved the sales price was discounted by 60%. For the remainder of the business the valuation was derived from the earnings for the year to 31 March 2009 and an earnings multiple for the business based on the sales values of similar businesses within the biosciences sector. The increase in the valuation of the investment in Quotient has been recognised as a movement in reserves and in the statement of recognised income and expense as has the associated movement in deferred tax. During the year the Group sold a tenth of its holding in Quotient for £2,100,000 generating a profit on cost of £1,892,000 and £864,000 on carrying value. It was believed that the correct discount factor should be within the range of 50% to 60%. The discount factor of 60% was deemed to be the most appropriate discount factor. However, had the discount factor been 50% the value of the investment would have been £1,455,000 greater and the shareholder funds would have been increased by £1,048,000. The earnings multiple was calculated from the sales values of other similar businesses. The multiple chosen was in the middle of the range of multiples identified. Had the earnings multiple been at the bottom of the range the value of the investment would have been £958,000 lower and the shareholder funds would have been reduced by £690,000. Had the earnings multiple been at the top of the range the value of the investment would have been £574,000 greater and the shareholder funds would have been increased by £413,000. Included within current available-for-sale investments is an amount lent to a company promoting a mainly residential mixed-use development. On repayment of this loan the Group is entitled to 10% of the equity of the counterparty. In addition, Helical has two options to purchase additional shares for a pre-determined price, which are held at fair value with any movement being recognised in the Income Statement. The loan and the right to the equity have been classed as available-for-sale investments and are held at fair value. The Group has determined its fair value by considering both the loan and the equity element separately. The loan element has been valued at the fair value of the consideration receivable. The equity element has been given a nil value with the Group valuing the underlying company on a break up basis at nil as they believe this is the most probable outcome. The underlying company has been valued at nil as in the event of the break-up of the Company, the Group believe that the value of the property and any other of the Company’s assets, after the repayment of the loan payable to the Group, would be required to repay the outstanding creditors leaving negligible value to the shareholders. For this reason the two options have also been valued at £nil. The movement in the value of the available-for-sale investments and the associated deferred tax movement have been recognised as movements in reserves. 62 19. Investment in subsidiaries 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H s t n e m e t a t s l a i c n a n i f e h t o t s e t o N At 1 April Acquired during year Impairment in the carrying value of investments At 31 March Group 31.3.09 £000 Group 31.3.08 £000 – – – – – – – – Company 31.3.09 £000 37,771 800 (5,675) 32,896 Company 31.3.08 £000 15,300 30,246 (7,775) 37,771 The Company’s principal subsidiary undertakings, all of which have been consolidated, are: Name of undertaking Albion Land (Bushey Mill) Ltd Baylight Developments Ltd* Chancerygate (Cowley) Ltd Chancerygate (Kidlington) Ltd Chancerygate (Southall) Ltd Chancerygate (Southampton) Ltd Chancerygate (Stockport) Ltd Cranmer Investments (Whitstable) Ltd Dencora (Docklands) Ltd Dencora (Fordham) Ltd Downtown Space Properties LLP Harbour Developments (Bracknell) Ltd HB Sawston No. 3 Ltd Helical (Aldridge) Ltd Helical (Ashford) Ltd Helical Bar Developments (South East) Ltd Helical Bar (East Grinstead) Ltd Helical Bar (Great Dover Street) 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 (Bramshott Place) Ltd Helical (Cardiff) Ltd Helical (Crawley) Ltd Helical (Exeter) Ltd Helical (Faygate) Ltd Helical (Fleet) No. 2 Ltd* Helical (Glasgow) Ltd Helical (Hailsham) Ltd Helical (Liphook) Ltd Helical (Milton) Ltd Helical Opole Sp. z.o.o.* Helical (Paignton) Ltd Helical Retail Ltd Helical Retail (RBS) Ltd* Helical (Sevenoaks) Ltd Helical Sosnica Sp. z.o.o.* Helical (Telford) Ltd Helical (Winterhill) Ltd Helical Wroclaw Sp. z.o.o.* Prescot Street Investments Ltd 14 Fieldgate Street Ltd 61 Southwark Street Ltd* Nature of business Development Investment Development Development Development Development Development Development Investment Investment Development Development Investment Investment Investment Development Investment Investment Investment Investment Management Services Investment Development Investment Development Investment Investment Development Development Investment Investment/Trading Development Development (Jersey) Development Development (Poland) Investment Development Development Investment Development (Poland) Development Investment Development (Poland) Investment Development Investment Percentage of ordinary share capital held 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 70% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 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. Investments in subsidiaries have been impaired based on a review of their fair value at the balance sheet date. A review of the fair value of the investments is undertaken periodically. The fair value of the investment in subsidiaries is based on the value of the subsidiaries underlying assets. 63 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H s t n e m e t a t s l a i c n a n i f e h t o t s e t o N 20. Investment in joint ventures Summarised income statements Revenue Operating profit Net finance costs Profit/(loss) before tax Tax Profit/(loss) after tax Summarised balance sheets Non-current assets Current assets Current liabilities Non-current liabilities Net assets Group 31.3.09 £000 2,595 1,862 (16) 1,846 – 1,846 31 22,677 (14,784) – 7,924 Group 31.3.08 £000 16,450 233 (331) (98) – (98) 81 30,919 (7,432) (17,490) 6,078 The cost of the Company’s investment in joint ventures was £150,000 (2008: £150,000). The Group did not have any contingent liabilities relating to its joint ventures (2008: £nil) and the joint venture companies did not have any contingent liabilities (2008: £nil) at the balance sheet date. At 31 March 2009 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% 21. 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 31.3.09 £000 1,515 – 1,515 1,485 – 1,485 30 Group 31.3.08 £000 1,515 – 1,515 1,485 – 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. 64 22. Land, developments and trading properties 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H s t n e m e t a t s l a i c n a n i f e h t o t s e t o N Development sites Properties held as trading stock Group 31.3.09 £000 209,537 878 210,415 Group 31.3.08 £000 181,118 1,390 182,508 Company 31.3.09 £000 Company 31.3.08 £000 853 – 853 546 – 546 The directors’ valuation of trading and development stock shows a surplus of £45m above book value (2008: surplus £43m). Interest capitalised in respect of the development of sites is included in stock to the extent of £8,749,000 (2008: £11,636,0000). Interest capitalised during the year in respect of development sites amounted to £5,790,000 (2008: £6,661,000). Capitalised interest previously provided for but reinstated during the year amounted to £nil (2008: £452,000). Development sites and properties held as trading stock were impaired during the year by £29,386,000 and £514,000 respectively. The fair value of the impaired development sites and properties held as trading stock at 31 March 2009 was £60,172,000 and £850,000 respectively. Land, developments and trading properties with carrying value of £159,602,000 were held as security against borrowings. 23. 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 Total financial assets Group 31.3.09 £000 113,392 20,994 134,386 These financial assets are included in the balance sheet within the following headings: Available-for-sale investments Trade receivables and other receivables Corporation tax receivable Cash and cash equivalents Total financial assets Group 31.3.09 £000 20,994 39,748 868 72,776 134,386 Group 31.3.08 £000 59,689 12,012 71,701 Group 31.3.08 £000 12,012 42,387 212 17,090 71,701 Company 31.3.09 £000 Company 31.3.08 £000 403,507 352,228 13,310 12,000 416,817 364,228 Company 31.3.09 £000 13,310 Company 31.3.08 £000 12,000 346,852 352,005 862 55,793 212 11 416,817 364,228 Financial assets are stated in accordance with IAS32. For fair value of available-for-sale investments see note 18. 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 not to be materially different from the fair value. Financial liabilities At fair value through income statement Other financial liabilities Total financial liabilities Group 31.3.09 £000 (14,337) (337,263) (351,600) Group 31.3.08 £000 (925) (279,889) (280,814) Company 31.3.09 £000 (2,776) Company 31.3.08 £000 – (220,022) (199,551) (222,798) (199,551) 23. Financial instruments (continued) 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 31.3.09 £000 (39,811) (48,155) Group 31.3.08 £000 (57,289) (50,238) Company 31.3.09 £000 Company 31.3.08 £000 (193,015) (197,043) – (2,508) (249,297) (172,362) (14,337) (925) (27,007) (2,776) – – (351,600) (280,814) (222,798) (199,551) The carrying value of trade payables and other payables and borrowings is not deemed to be materially different from the fair value. Derivative financial instruments are shown at their fair value. Financial liabilities are stated in accordance with IAS32. Derivative financial instruments Interest rate swaps Interest rate caps Interest rate floors Other Group Year ended 31.3.09 £000 (11,561) 153 (2,929) – (14,337) Group Year ended 31.3.08 £000 (706) 1 – (220) (925) Company Year ended 31.3.09 £000 Company Year ended 31.3.08 £000 – 153 (2,929) – (2,776) – – – – – 65 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H s t n e m e t a t s l a i c n a n i f e h t o t s e t o N The movement in the fair value of the derivative financial instruments in the year was a loss of £13,412,000 (2008: £1,270,000). 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. As at 31 March 2009 Helical has total credit risk excluding cash of £61.6m of which £21.0m is available-for-sale assets and £40.6m is loans and receivables. Available-for-sale assets are analysed in note 18. Of the trade receivables held at 31 March 2009, £8.9m is due from a business partner which has security on a property which is deemed to be worth more than the debt, £2.3m is due on development sales in Southall for which monies were received on 15 April 2009 and a further £2.7m related to rent due from tenants which is deemed recoverable. All other debtors are deemed to be recoverable. For further information on trade and other receivables, see note 24. 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 and the directors regularly monitor the financial institutions that the group uses to ensure its exposure to liquidity risk is minimised. For further information on borrowing facilities, see notes 27 and 28. The Group had the following contracted liabilities as at 31 March 2009. Payable within 3 months Payable between 3 months and 1 year Payable between 1 and 3 years Payable after 3 years Total contracted liabilities Group 31.3.09 £000 42,400 53,100 147,800 145,900 389,200 Group 31.3.08 £000 60,700 93,000 58,900 132,400 345,000 Company 31.3.09 £000 Company 31.3.08 £000 193,300 197,700 800 28,300 – 2,000 – – 222,400 199,700 At 31 March 2009 Helical had £39m of undrawn loan facilities, £64m of uncharged assets and cash balances of £73m. 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. 66 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H s t n e m e t a t s l a i c n a n i f e h t o t s e t o N 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. 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 28. In the year to 31 March 2009, if interest rates had moved by 1%, this would have resulted in the following movement to pre-tax losses 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 2009 Impact on results £000 5,282 (5,043) Equity impact £000 5,282 (5,043) 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 Due to its operations in Poland and its investment in a non-UK based property developer, Helical has exposure to exchange movements on foreign currencies. Helical’s management monitors its exposure to risks associated with foreign currency exchange risk and reviews any requirements to act to minimise these risks. In the year to 31 March 2009 the Group made foreign exchange gains of £4.0m resulting from foreign exchange movements on the consolidation of the results of its Polish operations. The Group’s Polish operations have zloty denominated receivables, cash and payables. Had the Polish zloty been 10% weaker against the euro at the balance sheet date the loss before tax would have been £393,000 greater and the shareholder funds would have decreased by £437,000. Had the Polish zloty been 10% stronger against the euro at the balance sheet date the loss before tax would have been £481,000 less and shareholder funds would have increased by £534,000. The Group’s Polish operations were partially financed by intra-group loans. Had the Polish zloty been 10% weaker against sterling at the balance sheet date the loss before tax would have increased by £1,314,000. Had the Polish zloty been 10% stronger against sterling at the balance sheet date the loss before tax would have decreased by £1,605,000. Had the euro been 10% weaker against sterling at the balance sheet date the loss before tax would have increased by £920,000. Had the euro been 10% stronger against sterling at the balance sheet date the loss before tax would have decreased by £1,116,000. 24. 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 31.3.09 £000 19,001 11,978 – 4,071 5,541 40,591 Group 31.3.09 £000 38,658 1,061 29 39,748 843 40,591 Group 31.3.08 £000 11,626 10,529 Company 31.3.09 £000 116 7,017 Company 31.3.08 £000 110 8,423 – 333,367 335,585 3,390 18,326 43,871 Group 31.3.08 £000 40,168 2,068 151 42,387 1,484 43,871 4,237 4,211 5,710 2,545 348,948 352,373 Company 31.3.09 £000 Company 31.3.08 £000 346,852 352,005 – – – – 346,852 352,005 2,096 368 348,948 352,373 67 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H s t n e m e t a t s l a i c n a n i f e h t o t s e t o N Past due receivables relate to a number of independent customers for whom there is no recent history of default. Against trade receivables, Helical held £0.7m of rental deposits at 31 March 2009 (2008: £1.1m). 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 Group 31.3.09 £000 39,873 (125) 39,748 Group 31.3.08 £000 42,564 (177) 42,387 Company 31.3.09 £000 Company 31.3.08 £000 346,852 352,005 – – 346,852 352,005 Receivables written off during the year as uncollectable 329 343 – – 25. Cash and cash equivalents Rent deposits and cash held at managing agents Cash secured against debt and cash held at solicitors Cash deposits Group 31.3.09 £000 1,215 15 71,546 72,776 Group 31.3.08 £000 3,105 – 13,985 17,090 Company 31.3.09 £000 Company 31.3.08 £000 – – 55,793 55,793 – – 11 11 68 26. Trade payables and other payables 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H s t n e m e t a t s l a i c n a n i f e h t o t s e t o N 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 27. 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 31.3.09 £000 3,611 332 5,603 – 9,767 31,902 51,215 Group 31.3.09 £000 48,155 69,642 54,150 65,075 61,890 – 250,757 (1,460) 249,297 Group 31.3.08 £000 13,035 136 8,512 – 402 44,466 66,551 Group 31.3.08 £000 50,238 34,984 16,037 48,280 64,314 9,142 172,757 (395) 172,362 Company 31.3.09 £000 Company 31.3.08 £000 68 – 835 306 – 825 183,194 186,875 122 8,796 1,121 8,836 193,015 197,963 Company 31.3.09 £000 – 27,570 – – – – 27,570 (563) 27,007 Company 31.3.08 £000 2,508 – – – – – – – – 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 £393,400,000 (2008: £331,657,000). 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 £5,644,000 (2008: £19,990,000). 69 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H s t n e m e t a t s l a i c n a n i f e h t o t s e t o N 28. Financing and financial instruments The policies for dealing with liquidity and interest rate risk are noted in the Financial Review on pages 23 to 25. Bank overdraft and loans – maturity Due after more than one year Due within one year Group 31.3.09 £000 Group 31.3.08 £000 249,297 172,362 48,155 50,238 297,452 222,600 The Group has various undrawn committed borrowing facilities. The facilities available at 31 March 2009 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 – 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 % – 5.939 5.341 5.661 7.273 6.405 6.260 6.052 5.290 6.565 6.270 6.465 6.313 2.251 Expiry – Sep 2009 Jun 2011 Nov 2010 Nov 2009 Oct 2012 Dec 2013 Jan 2011 Mar 2012 Aug 2013 Oct 2010 Aug 2013 May 2012 Aug 2011 31.3.09 £000 – 14,324 4,536 5,200 8,000 35,190 10,120 4,200 3,570 9,912 15,347 37,500 147,899 151,013 298,912 (1,460) 297,452 Group 31.3.09 £000 35,646 3,000 – 38,646 % Expiry 9.050 5.939 5.341 5.661 7.273 6.405 4.990 6.052 – – – – Feb 2009 Sep 2009 Jun 2011 Nov 2010 Nov 2009 Oct 2012 Mar 2009 Jan 2011 – – – – 6.332 6.724 Aug 2011 Aug 2010 Group 31.3.08 £000 62,427 2,000 11,730 76,157 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. The Company’s borrowings of £27,007,000 are floating rate borrowings. 70 Hedging In addition to the fixed rates, borrowings are also hedged by the following financial instruments: Value £000 80,000 30,000 – 40,950 30,000 Rate % 7.000 6.000 4.500 Start Expiry Jan 2006 Sep 2009 May 2008 May 2013 May 2008 May 2013 Net borrowings exclude the Group’s share of borrowings in joint ventures of £5,644,000 (2008: £19,900,000). Net assets Gearing Group 31.3.09 £000 Group 31.3.08 £000 297,452 222,600 (72,776) (17,090) 224,676 205,510 Group 31.3.09 £000 Group 31.3.08 £000 237,066 268,659 95% 76% Instrument Current: – cap – cap – floor Gearing Total borrowings Cash Net borrowings 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H s t n e m e t a t s l a i c n a n i f e h t o t s e t o N 29. Share capital Authorised 31.3.09 £000 39,577 39,577 31.3.08 £000 39,577 39,577 The authorised share capital of the Company is £39,576,626.60 divided into ordinary shares of 1p each and deferred shares of 1⁄8p each. Allotted, called up and fully paid – 107,087,012 ordinary shares of 1p each (2008: 95,732,457) – 212,145,300 deferred shares of 1⁄8p each 31.3.09 £000 31.3.08 £000 1,071 265 1,336 957 265 1,222 As at 1 April 2008 the Company had 95,732,457 ordinary 1p shares in issue. In the year to 31 March 2009 1,619,455 new ordinary 1p shares were issued as the result of share options being exercised. The dates and number of shares issued are details in note 30. On 2 February 2009 the Company issued 9,735,100 new ordinary 1p shares to shareholders as a part of the Placing referred to in the Financial Review on page 25. At 31 March 2009 there were 107,087,012 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 31.3.09 Number Share capital 31.3.09 £000 Shares in issue 31.3.08 Number Share capital 31.3.08 £000 95,732,457 11,354,555 957 114 95,719,432 13,025 107,087,012 1,071 95,732,457 212,145,300 212,145,300 265 265 212,145,300 212,145,300 957 – 957 265 265 71 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H s t n e m e t a t s l a i c n a n i f e h t o t s e t o N The Group’s capital management objectives are: – to ensure the Group’s ability to continue as a going concern; and, – to provide an adequate return to shareholders. The Group sets the amount of capital in proportion to its overall financing structure. It manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt. Capital is defined as being issued share capital, retained earnings and other reserves. 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. 72 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H s t n e m e t a t s l a i c n a n i f e h t o t s e t o N 30. Share options At 31 March 2009 unexercised options over 320,510 (2008: 1,939,965) new ordinary 1p shares in the Company and 1,057,095 (2008: 2,629,695) 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 1,619,455 new ordinary 1p shares and 1,572,600 purchased ordinary 1p shares were exercised. In order 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 purchase 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 on all options exercised from 123p to 48p. These reductions in exercise prices were not applied to options exercised over subscription shares. 23 July 2008 19 August 2008 29 August 2008 5 September 2008 19 September 2008 24 September 2008 Original subscription options 1,000,000 111,291 222,584 135,580 108,406 41,594 Original purchase options Original total options Subscription options exercised – – – – 999,000 573,600 1,000,000 1,000,000 111,291 222,584 135,580 1,107,406 615,194 111,291 222,584 135,580 108,406 41,594 Reduced purchase options exercised – – – – 561,594 305,750 Total options exercised 1,000,000 111,291 222,584 135,580 670,000 347,344 1,619,455 1,572,600 3,192,055 1,619,455 867,344 2,486,799 Helical Bar 1999 Share Option Scheme Subscription options Options granted: – 21 November 2002 Purchase options Options granted: – 18 December 2000 – 15 November 2001 Helical Bar 1999 Approved Share Option Scheme Subscription options Options granted: – 21 November 2002 Summary of share options At 1 April Options granted Options exercised Option expired/lapsed At 31 March At the balance sheet date all options were exercisable. Exercise price per share pence Number of shares Date from which exercisable Expiry date of options 141.5 299,310 21 Nov 2007 20 Nov 2012 150.0 153.3 710,000 18 Dec 2006 17 Dec 2010 347,095 15 Nov 2007 14 Nov 2011 141.5 21,200 21 Nov 2006 20 Nov 2012 1,377,605 Weighted average exercise price 31.3.09 Number 31.3.09 Number 31.3.08 4,569,660 131p 5,920,765 – (3,192,055) – – 48p – – (1,351,105) – Weighted average exercise price 31.3.08 135p – 1p – 1,377,605 149p 4,569,660 131p 31. 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 2009 Weighted average exercise price 141.50 Options 320,510 Options 320,510 The options outstanding at 31 March 2009 had a weighted average remaining contractual life of three 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 2009 146.72 141.50 16% 6 years 4.48% 1.99% 2009 Weighted average exercise price 141.50 2008 146.72 141.50 16% 6 years 4.48% 1.99% 73 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H s t n e m e t a t s l a i c n a n i f e h t o t s e t o N 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 2009 Weighted average award value 366p 280p 276p 364p Awards 5,960,575 (2,549,760) 1,125,250 4,536,065 Awards 4,536,065 (1,964,620) 2,167,455 4,738,900 The performance share plan awards outstanding at 31 March 2009 had a weighted average remaining contractual life of one year five months. The inputs into the stochastic model of valuation of the PSP awards made in the year to 31 March 2009 were as follows: Weighted average share price Weighted average exercise price Expected volatility Expected life Risk free rate Expected dividends 2009 276p – n/a 3 years n/a 1.63% 2008 Weighted average award value 268p 197p 502p 366p 2008 502p – n/a 3 years n/a 0.87% The Company recognised a credit of £425,000 (2008: expenses of £4,207,000) in relation to Share based payments. At the balance sheet date there were no exercisable awards. 74 32. Statement of changes in equity 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H s t n e m e t a t s l a i c n a n i f e h t o t s e t o N Group 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 1 April 2008 Revaluation deficit Realised on disposals Total recognised expense Dividends paid Minority interests Purchase of shares Performance share plan Own shares held Issue of shares At 31 March 2009 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 £000 Total £000 1,222 42,520 79,664 7,478 291 157,006 (5,995) – 282,186 – – – – – – – – – – – – – – – – (21,564) (1,028) – – – – – – – – – – – – – – – – – – – – – – 21,564 1,028 (5,133) (4,081) 7 – – – – – – (9,132) 4,655 – (11,135) 11,135 – – – – – – (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 – – – – – – – – – – – – – – – – 114 27,858 (56,360) (183) – – – – – – – – – – – – – – – – – – – – – – – – – 56,360 183 (50,822) (4,130) (143) – – – – – – (3,107) (1,363) (5,502) – – 5,502 – – – – – – (50,822) – – – – – – (4,130) (143) (3,107) (1,363) – 27,972 1,336 70,378 529 7,478 291 158,494 (1,597) 157 237,066 The adjustment to retained earnings of £1,363,000 (2008: £4,655,000) adds back the share-based payments (credit)/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. Company At 31 March 2007 Total recognised income Dividends paid Purchase of shares Own shares held At 1 April 2008 Total recognised expense Dividends paid Purchase of shares Own shares held Issue of shares At 31 March 2009 Share capital £000 1,222 Share premium £000 42,520 – – – – – – – – 1,222 42,520 – – – – – – – – 114 1,336 27,858 70,378 Revaluation reserve £000 Capital redemption reserve £000 Other reserves £000 Retained earnings £000 Own shares held £000 Total £000 – – – – – – – – – – – – 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 – – – – – – – – – – 8,250 (4,130) – – 8,250 (4,130) – (3,107) (3,107) (5,502) 5,502 – – – 27,972 7,478 1,987 158,093 (1,597) 237,675 75 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H s t n e m e t a t s l a i c n a n i f e h t o t s e t o N 33. Own shares held 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 2009 the Trust held 2,338,904 (2008: 4,170,868) ordinary 1p shares in Helical Bar plc. At 31 March 2009 unexercised options over 1,057,095 (2008: 2,629,695) ordinary 1p shares in Helical Bar plc had been granted over shares held by the Trust. At 31 March 2009 outstanding awards over 4,738,900 (2008: 4,536,065) ordinary 1p shares in Helical Bar plc had been made under the terms of the Performance Share Plan over shares held by the Trust. 34. Contingent liabilities The Group has no contingent liabilities. The Company has entered into cross guarantees in respect of the banking facilities of its subsidiaries. The Company has undertaken to provide support for some of its subsidiaries undertakings. However it does not believe that this support will be required in the foreseeable future. Other than these contingent liabilities there were no contingent liabilities at 31 March 2009 (2008: £nil). 35. Net assets per share 31.3.09 £000 Number of shares 000s 31.3.09 pence per share Net asset value 237,066 107,087 Less: own shares held by ESOP deferred shares Basic net asset value – (265) (2,339) 236,801 104,748 Add: unexercised share options 454 321 Diluted net asset value 237,255 105,069 226 226 Adjustment for: – fair value of financial instruments 14,337 – deferred tax on capital allowances 3,205 – deferred tax on capital gains – Adjusted diluted net asset value 254,797 105,069 242 Adjustment for: – fair value of trading properties Diluted EPRA net asset value Adjustment for: 45,455 300,252 – fair value of financial instruments (14,337) – deferred tax on capital allowances (3,205) – deferred tax on capital gains – 105,069 286 Diluted EPRA triple net asset value 282,710 105,069 269 31.3.08 £000 268,502 – (265) 268,237 1,988 270,225 925 2,728 12,566 286,444 42,970 329,414 (925) (2,728) (12,566) 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 The net asset values per share have been calculated in accordance with the best practice recommendations of the European Public Real Estate Association (“EPRA”). 76 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H s t n e m e t a t s l a i c n a n i f e h t o t s e t o N 36. Related party transactions At 31 March 2009 and 31 March 2008 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 King Street Developments (Hammersmith) Ltd Shirley Advance LLP The Asset Factor Ltd At 31.3.09 £000 1,516 (162) (636) 1,109 4,320 4,270 At 31.3.08 £000 1,318 (152) (636) 530 5,352 4,116 All movements in joint venture balances related to loan repaid and loans advanced except for interest receivable from the Asset Factor in the year of £48,000. At 31 March 2009 and 31 March 2008 there were the following balances between the Company and its subsidiaries. Amounts due from subsidiaries Amounts due to subsidiaries At 31.3.09 £000 333,367 183,194 At 31.3.08 £000 335,585 186,875 During the years to 31 March 2009 and 31 March 2008 there were the following transactions between the Company and its subsidiaries: Management charges receivable Management charges payable Interest receivable Interest payable Year ended 31.3.09 £000 Year ended 31.3.08 £000 3,404 530 5,232 – 3,230 3,603 14,789 – 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. Amounts owed by subsidiaries to the company are identified in note 24. Amounts owed to subsidiaries by the company are identified in note 26. The Group consider that the key management personnel are the directors and the detail of their remuneration is disclosed in the directors’ remuneration report on pages 36-42. Share based payments for directors are disclosed in note 8. Key management personnel in the prior year whose remuneration of £68,828 was not included in the directors’ remuneration report were employees who became directors in the prior year. Ten year review IFRS 31.3.09 £000 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 Revenue 81,770 65,623 123,176 119,274 101,469 54,566 135,192 136,632 165,259 149,922 Net rental income 17,682 16,400 14,771 16,524 20,440 22,980 25,619 27,827 25,532 23,652 Development (losses)/profits (7,704) 6,068 13,587 4,594 12,664 38 4,630 17,072 29,507 19,345 77 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H Trading (losses)/profits Share of results of joint ventures Other income (514) 1,846 6,752 (29) (98) 6,196 (315) 766 2,094 13,441 5,771 1,031 349 437 235 2,699 1,636 1,544 235 601 626 154 986 (67) 920 86 342 372 – 113 Gross profit before (loss)/gain on investment properties (Loss)/gain on sale and revaluation of investment properties 18,062 22,026 37,414 35,231 41,809 26,286 32,768 45,972 56,387 43,482 (66,670) (32,790) 40,637 43,551 44,204 2,035 2,126 2,463 709 4,555 Gain on sale of investments 1,892 – – – – – – – – – Administrative expenses (8,090) (13,659) (17,544) (16,582) (15,757) (8,037) (6,391) (10,888) (12,031) (9,669) Loss on sale of subsidiary Negative goodwill Net finance costs – – – – – – – – – – (59) – (195) – 6,362 – – – – – (21,048) (1,724) (419) (5,080) (5,561) (6,572) (9,638) (14,779) (19,241) (16,348) Foreign exchange gains 3,999 1,862 – – – – – – – – (Loss)/profit before tax (71,855) (24,285) 60,088 57,120 64,695 13,653 25,227 22,573 25,824 22,020 Tax 18,359 11,971 (8,000) (9,676) 844 (2,199) (7,660) (5,353) (5,471) (6,032) (Loss)/profit after tax (53,496) (12,314) 52,088 47,444 65,539 11,454 17,567 17,220 20,353 15,988 Investment portfolio Shareholders’ funds 241,287 306,778 316,025 294,583 271,315 334,932 342,484 439,911 453,607 419,570 237,066 268,659 282,186 230,097 186,165 234,917 226,870 227,653 223,606 171,770 Dividend per ordinary share 4.50p 4.50p 4.05p 3.65p 3.32p 3.32p 3.00p 2.75p 2.50p 2.23p Special dividend per ordinary share – – – – – – – 20.0p – – Diluted (loss)/earnings per ordinary share (56.6p) (13.5p) 53.7p 51.8p Diluted EPRA net assets per share 286p 352p 374p 309p 53.7p 238p 7.9p 11.8p 11.8p 13.5p 13.8p 182p 155p 155p 151p 116p 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 years 31 March 2000 to 31 March 2005 have been restated to reflect the impact of the 5 for 1 share issue on 1 September 2005 Dividends Dividends paid on the Company’s Ordinary 1p shares in 2008 were as follows: Dividend Record Date 2007/08 27 June Final 2008 Payment Date 25 July 2008 Amount 2.75p 2008/09 5 Dec 2008 Interim 23 Dec 2008 1.75p Dividends to be paid on the Company’s Ordinary 1p shares in 2009 will be as follows: Dividend Record Date 2008/09 3 July Final 2009 Payment Date 24 July 2009 2009/10 Dec 2009 Interim Dec 2009 Share price information The latest information on the Helical Bar plc share price is available on our website www.helical.co.uk. Registered office 11 – 15 Farm Street, London, W1J 5RS Registered in England and Wales No. 156663. 78 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H Investor information The report and financial statements, share price information, company presentations, the financial calendar, Corporate Governance, contract details and other investor information on the Group are available in the Investor Relations and Company Profile area of our website www.helical.co.uk. Registrar All general enquiries concerning holdings of ordinary shares in Helical Bar plc should be addressed to: Capita Registrars The Registry, 34 Beckenham Road, Beckenham Kent, BR3 4TJ Telephone: 0871 664 0300 Fax: 020 8639 2220 Website: www.capitaregistrars.com Email: ssd@capitaregistrars.com e-communication UK shareholders may chose to be alerted about updates to the Financial Reports, Results, Press Releases and Events Calendar sections of the Group’s website by subscribing to the Alerting Service at www.helical.co.uk. Shareholders may also submit their proxy votes electronically. To register for this service, shareholders should visit the Shareholders area of www.capitaregistrars.com. Payment dividends Shareholders whose dividends are not currently paid to mandated accounts may wish to consider having their dividends paid directly into their bank or building society account. This has a number of advantages, including the crediting of cleared funds into the nominated account on the dividend payment date. If shareholders would like their future dividends to be paid in this way, they should complete a mandate instruction available from the registrars. Under this arrangement tax vouchers are sent to the shareholder’s registered address. Dividends for shareholders resident outside the UK Instead of waiting for a sterling cheque to arrive by mail, you can ask us to send your dividends direct to your bank account. For information contact the Company’s Registrar. Dividend reinvestment plan (DRIP) The Company offers shareholders the option to participate in a DRIP. This enables shareholders to reinvest their cash dividends in Helical Bar plc shares. For further details, contact the Company’s Registrar. For participants in the plan, key dates can be found in the online financial calendar in the ‘Investor relations’ area at www.helical.co.uk. ShareGift Shareholders with a small number of shares, the value of which makes it uneconomic to sell them, may wish to consider donating them to a charity ShareGift, (registered charity 1052686) which specialises in using such holdings for charitable benefit. Further information about ShareGift is available at www.sharegift.org or by writing to: ShareGift, 17 Carlton House Terrace, London, SW1Y 5AH Telephone: 020 7930 3737 79 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H Glossary of terms Average Unexpired Lease Term The average unexpired lease term expressed in years. BREEAM Method. Building Research Establishment’s Environmental Assessment 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 Net assets per share or net asset value (NAV) Net gearing Return on capital employed (ROCE) Reversionary yield Total shareholder return (TSR) True equivalent yield 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. Equity shareholders’ funds divided by the number of ordinary shares at the balance sheet date. Total borrowings less short-term deposits and cash as a percentage of equity shareholders’ funds. 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. 80 9 0 0 2 s t n u o c c a & t r o p e r c l p r a B l a c i l e H Financial calendar Year ended 31 March 2009 Half year ending 30 September 2009 Year ending 31 March 2010 Annual General Meeting to be held 22 July 2009 Final ordinary dividend payable 24 July 2009 Results and interim ordinary dividend announced November 2009 Interim ordinary dividend payable December 2009 Results and final dividend announced June 2010 Final ordinary dividend payable July 2010 Advisors Registrars Bankers Stockbrokers Auditors Merchant bankers Solicitors Capita Registrars The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Aareal Bank AG Allied Irish Bank Bank of Ireland Barclays Bank PLC Eurohypo AG HSBC plc The Royal Bank of Scotland Group plc JP Morgan Cazenove Limited 20 Moorgate London EC2R 6DA Grant Thornton UK LLP Grant Thornton House Melton Street Euston Square London NW1 2EP Lazard Ltd 50 Stratton Street London W1J 8LL Ashurst Clifford Chance Dechert Lawrence Graham Linklaters Lovells Mishcon de Reya Nabarro Norton Rose Wragge & Co 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. design sg design [www.sg-design.co.uk] | print beacon press 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 

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