Helical
Annual Report 2016

Plain-text annual report

6 1 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 & ACCOUNTS 2016 HELICAL BAR PLC REPORT & ACCOUNTS 2016 STRATEGIC REPORT What we do Financial highlights Helical’s portfolio Operational highlights Chief Executive’s statement Our strategy Performance Helical’s property portfolio Asset management Financial review Principal risks review Corporate responsibility GOVERNANCE Chairman’s review Governance structure Board of Directors Governance review Nominations committee report Audit committee report Directors’ remuneration report Report of the directors Statement of directors’ responsibilities Independent Auditor’s report FINANCIAL STATEMENTS Consolidated income statement Consolidated statement of comprehensive income Consolidated and company balance sheets Consolidated and company cash flow statements Consolidated and company statements of changes in equity Notes to the financial statements ADDITIONAL INFORMATION Appendix 1 – See-through analysis Appendix 2 – See-through analysis ratios Appendix 3 – Five year review Appendix 4 – Property portfolio Shareholder information Glossary of terms Financial calendar Advisors 3 4 7 8 14 18 20 22 47 50 58 63 71 72 74 76 79 81 83 103 105 106 112 112 113 114 115 116 147 149 150 151 154 155 156 156 FINANCIAL CALENDAR Year ended 31 March 2016 Annual General Meeting to be held on 25 July 2016 Final ordinary dividend payable 29 July 2016 Half year ending 30 September 2016 Results and interim ordinary dividend announced November 2016 Year ending 31 March 2017 Results and final dividend announced May 2017 Final ordinary dividend payable July 2017 Interim ordinary dividend payable December 2016 HELICAL BAR PLC REPORT & ACCOUNTS 2016 HELICAL BAR PLC REPORT & ACCOUNTS 2016 1 STRATEGIC REPORT WHAT WE DO FINANCIAL HIGHLIGHTS HELICAL’S PORTFOLIO OPERATIONAL HIGHLIGHTS CHIEF EXECUTIVE’S STATEMENT OUR STRATEGY PERFORMANCE 3 4 7 8 14 18 20 HELICAL’S PROPERTY PORTFOLIO 22 ASSET MANAGEMENT FINANCIAL REVIEW PRINCIPAL RISKS REVIEW CORPORATE RESPONSIBILITY 47 50 58 63 2 WHAT WE DO 3 Helical Bar plc is a UK focused property investment and development company. We aim to deliver market-leading returns by acquiring high-yielding investment properties, applying a rigorous approach to asset management and deploying limited equity into development situations which have the potential to be highly profitable. Our portfolio is primarily targeted towards London for capital growth and development profits and the regions for high yielding investment assets. THE BOWER, OLD STREET, LONDON EC1 HELICAL BAR PLC REPORT & ACCOUNTS 2016 STRATEGIC REPORT4 FINANCIAL HIGHLIGHTS TOTAL PROPERTY RETURN PROFIT BEFORE TAX EPRA EARNINGS PER SHARE +10% £170.6m £155.3m £140.1m £35.9m £27.5m 2016 2015 2014 2013 2012 +37% +613% 2016 2015 2014 2013 2012 £120.1m £87.4m £101.7m £5.0m £7.4m 2016 2015 2014 2013 2012 17.1p 2.4p 33.3p 2.4p 3.4p SEE-THROUGH PORTFOLIO VALUE NET ASSETS EPRA NET ASSET VALUE PER SHARE +21% £1,240.0m £1,021.4m £801.7m £626.4m £572.7m 2016 2015 2014 2013 2012 +20% +20% 2016 2015 2014 2013 2012 £486.2m £404.4m £340.5m £253.8m £253.7m 2016 2015 2014 2013 2012 461p 385p 313p 264p 250p HELICAL BAR PLC REPORT & ACCOUNTS 2016 FINANCIAL HIGHLIGHTS 5 PORTFOLIO RETURN – IPD TOTAL SHAREHOLDER RETURN TOTAL DIVIDEND DECLARED PER SHARE 2016 2015 2014 2013 2012 21.7% 20.4% 23.8% 8.6% 5.6% 2016 2015 2014 2013 2012 1.0% 7.6% 61.1% 28.4% (-28.4%) 2016 2015 2014 2013 2012 +13% 8.17p 7.25p 6.75p 5.55p 5.15p SEE-THROUGH LOAN TO VALUE SEE-THROUGH NET ASSET VALUE GEARING INTEREST COVER RATIO 2016 2015 2014 2013 2012 55% 52% 46% 45% 49% 2016 2015 2014 2013 2012 125% 113% 99% 90% 95% 2016 2015 2014 2013 2012 5.4x 2.5x 8.3x 2.7x 2.8x HELICAL BAR PLC REPORT & ACCOUNTS 2016 STRATEGIC REPORT 6 HELICAL’S PORTFOLIO 7 DEVELOPMENT STOCK 15.1% £187.3m LONDON OFFICES 1.5% £18.0m LONDON RESIDENTIAL £60.0m 4.8% REGIONAL OFFICES 0.1% £1.0m REGIONAL RETAIL 0.7% £8.1m RETIREMENT VILLAGES £91.6m 7.3% LAND 0.7% £8.6m INVESTMENT PROPERTIES 84.9% £1,052.7m LONDON OFFICES 47.8% £593.2m RETIREMENT VILLAGES £11.9m 1.0% REGIONAL RETAIL 10.8% £134.5m REGIONAL INDUSTRIAL/LOGISTICS £210.5m 17.0% REGIONAL OFFICES 8.3% £102.5m LAND 0.0% £0.1m TOTAL PORTFOLIO BY FAIR VALUE £1,240.0m C SPACE, LONDON EC1 HELICAL BAR PLC REPORT & ACCOUNTS 2016 STRATEGIC REPORT8 OPERATIONAL HIGHLIGHTS LONDON PORTFOLIO The London portfolio represents 54% of the total property portfolio and is well positioned to provide future valuation surpluses whilst being highly reversionary. 54% BELOW SHEPHERDS BUILDING, SHEPHERDS BUSH W14 TOP THE BOWER, OLD STREET EC1 MIDDLE ONE KING STREET, HAMMERSMITH W6 BOTTOM BARTS SQUARE, EC1 HELICAL BAR PLC REPORT & ACCOUNTS 2016 OPERATIONAL HIGHLIGHTS LONDON PORTFOLIO 9 18.8% VALUATION INCREASE OF LONDON INVESTMENT PORTFOLIO (2015: 9.2%), now valued at £593m (56% of total investment portfolio). Lettings at The Bower EC1, Shepherds Building W14, C-Space EC1 and One King Street W6 INCREASED CONTRACTED GROSS RENTS ON LONDON PORTFOLIO TO £23.6M (2015: £8.7m) compared to an ERV of £45.4m (2015: £28.1m). AT ONE BARTHOLOMEW CLOSE EC1, THE SITE WAS SOLD FOR £102.4M and the 213,000 sq ft office development forward funded, releasing £34m cash to Helical. OFFICES AT THE BOWER EC1 ACQUIRED FOR £248M (with Helical reinvesting its existing one third ownership). Joint venture partner Crosstree acquired the retail parade for £23m and Empire House sold for £20.65m in November 2015, a 38% premium to 31 March 2015 book value. - First phase 100% let - Second phase under construction MAJOR REFURBISHMENT COMMENCED AT CHARTERHOUSE SQUARE EC1 increasing the office space to 38,500 sq ft with 5,100 sq ft of retail, with delivery in early 2017. AT DRURY LANE & DRYDEN STREET WC2 A RESOLUTION TO GRANT PLANNING WAS ISSUED for a residential led scheme of 68 apartments. AT BARTS SQUARE EC1, 102 RESIDENTIAL UNITS EXCHANGED AT 23 MAY 2016 (31 March 2015: 56 units) and two reserved on phase 1 of 144 units. POWER ROAD STUDIOS W4, ACQUIRED FOR £34M. BELOW C-SPACE, 37-45 CITY ROAD EC1 TOP 23-28 CHARTERHOUSE SQUARE, SMITHFIELD EC1 BOTTOM THE LOOM, WHITECHAPEL, E1 HELICAL BAR PLC REPORT & ACCOUNTS 2016 STRATEGIC REPORT10 HELICAL BAR PLC REPORT & ACCOUNTS 2016 11 OPERATIONAL HIGHLIGHTS REGIONAL PORTFOLIO The Regional portfolio represents 46% of the total property portfolio and provided 71% of the net rental income for the year. 46% CONTRACTED GROSS RENTS ON REGIONAL INVESTMENT PORTFOLIO OF £32.4M. REGIONAL INVESTMENT PORTFOLIO INCREASED WITH THE PURCHASE OF £89M OF HIGH YIELDING INDUSTRIAL/LOGISTICS WAREHOUSES. 3.0% VALUATION INCREASE ON REGIONAL OFFICES. REGIONAL INVESTMENT PORTFOLIO NOW COMPRISES 22% OFFICES, 13% IN TOWN RETAIL, 17% RETAIL PARKS, 46% INDUSTRIAL/LOGISTICS AND 2% OTHER. SALE OF 16 REGIONAL ASSETS COMPRISING EIGHT INDUSTRIAL UNITS, THREE REGIONAL OFFICES AND FIVE RETAIL ASSETS FOR £67M IN TOTAL. TOP CHURCHGATE & LEE HOUSE, MANCHESTER LEFT CROW LANE, NORTHAMPTON RIGHT VIKING INDUSTRIAL ESTATE, JARROW STRATEGIC REPORT12 OPERATIONAL HIGHLIGHTS FINANCING SEE-THROUGH LOAN TO VALUE OF 40% (2015: 34%) ON A SECURED BASIS AND 55% OVERALL (2015: 52%). AVERAGE MATURITY OF THE GROUP’S SHARE OF DEBT OF 4.5 YEARS (2015: 4.3 years) AT AN AVERAGE COST OF 4.2% (2015: 4.1%). GROUP’S SHARE OF CASH AND UNDRAWN BANK FACILITIES OF £193M (2015: £229m). AGREED A NEW £200M BANK FACILITY TO FUND THE PURCHASE AND DEVELOPMENT OF THE BOWER, LONDON EC1. THE BOWER, OLD STREET, LONDON EC1 HELICAL BAR PLC REPORT & ACCOUNTS 2016 13 14 EPRA NAV INCREASE 19.7% EPRA EPS 17.1p GROWTH IN CONTRACTED RENTAL INCOME £12.7m INCREASE IN TOTAL DIVIDEND 12.7% TOTAL PROPERTY RETURN £170.6m IPD PROPERTY RETURN 21.7% CHIEF EXECUTIVE’S STATEMENT I am extremely proud to announce today’s record results which show rental levels, investment gains, pre-tax profits, shareholders’ funds and EPRA net asset value per share all at the highest level in Helical’s 32 year history as a real estate company. These results clearly demonstrate that our strategy of targeting London for capital growth and development profits and the regions for higher yielding investment assets provides the most appropriate allocation of resources to enable us to meet our long term objectives. The greatest proportion of our performance this year has come from London where we have increased our portfolio weighting, primarily with the purchase of The Bower EC1. We also increased our weighting in industrial assets whilst reducing our exposure to retail. We sold our Polish assets and continue to deliver on our retirement village programme. Within the investment portfolio we have a strong and diverse tenant profile. We have increased contracted rents by £12.7m (29% increase) from new lettings and by capturing some of the reversionary potential of the portfolio and expect this growth to continue. Our London investment portfolio remains highly reversionary and its inherent value will be unlocked through the completion of our redevelopment and refurbishment programme and the letting of the vacant and remaining reversionary space. London continues to outperform the rest of the UK and our strategy is to increase our London holdings. We now have an investment portfolio poised for future earnings growth which, if supported by a benign economic background, should lead to substantial capital appreciation. PERFORMANCE We measure our performance at both portfolio and Company level, seeking to outperform in the medium and long term relevant sector indices and our peer group. EPRA earnings per share increased from 2.4p to 17.1p, reflecting growing net rental income and increased development profits. On a like-for-like basis, the investment portfolio increased by 14.9% (11.1% including sales and purchases) contributing to an overall growth in the portfolio to £1,240m (2015: £1,021m). The unleveraged return of our property portfolio, as measured by IPD, was 21.7% (2015: 20.4%), compared to 11.4% (2015: 17.5%) for the benchmark index. These investment gains contributed to an increase in EPRA net asset value per share, up 19.7% to 461p (2015: 385p). Since the start of 2016, the listed real estate sector has been affected by concerns over global economic issues and the forthcoming referendum on our membership of the European Union. Despite this, we achieved a positive Total Shareholder Return for the year to 31 March 2016 of 1.0% (2015: 7.6%), compared to the sector index which fell by 6.4% (2015: increase of 22.8%). HELICAL BAR PLC REPORT & ACCOUNTS 2016 CHIEF EXECUTIVE’S STATEMENT 15 RESULTS FOR THE YEAR The profit before tax for the year to 31 March 2016 was £120.1m (2015: £87.4m), the highest in the Group’s history. Total Property Return increased by 10% to £170.6m (2015: £155.3m) and included growing net rents of £43.4m, an increase of 12% on 2015 (£38.6m), and development profits of £27.5m (2015: £17.6m). The gain on sale and revaluation of the investment portfolio contributed £99.7m (2015: £96.6m) and there were no trading profits (2015: £2.5m). Net finance costs of £22.6m were lower than in 2015 (£24.8m), however the income statement was adversely affected by falls in expected future interest rates which led to a £6.9m (2015: £8.4m) charge arising from the valuation of the Group’s derivative financial instruments. The valuation of the Group’s Convertible Bond provided a credit of £0.5m (2015: charge of £3.3m). Recurring administration costs were marginally higher at £10.7m (2015: £10.2m). Performance related awards, reflecting the success of the Group’s activities in the year were £13.3m (2015: £13.4m). National Insurance costs on remuneration, including performance related awards, were £2.1m (2015: £3.0m). These results allow the Board to continue its progressive dividend policy and to recommend to shareholders a final dividend of 0.72p which, together with the two interim dividends paid to date of 7.45p takes the total dividend for the year to 8.17p (2015: 7.25p), an overall increase of 12.7%. THE LONDON PORTFOLIO The London investment and development portfolio continues to contribute the greater proportion of capital growth and development profits. In the year to 31 March 2016, London provided c. 80% of the total property return of £170.6m (2015: £155.3m). Since 2010 we have steadily acquired property in two “clusters”; the Tech Belt districts of Farringdon, Shoreditch, Aldgate and through to Whitechapel and the West London districts of Hammersmith, Shepherds Bush and Chiswick. The East At The Bower EC1, we have acquired the outstanding 2/3rd interest from our joint venture partner Crosstree Real Estate Partners LLP (“Crosstree”), of the buildings known as The Warehouse (122,858 sq ft of offices, 5,404 sq ft of restaurant use) and The Studio (18,283 sq ft of offices, 4,894 sq ft of restaurant use). Construction work on these two buildings was completed in November 2015 and both are fully let at average office rents of £55.00 psf and £43.85 psf respectively. In addition, we have acquired The Tower at 207 Old Street, a 179,000 sq ft refurbishment and extension of the existing building on which work has commenced and is due for completion Q1 2018. At £248m, this purchase is our largest ever acquisition and strongly reaffirms our belief in the London office market. The remaining buildings at The Bower, being Empire House and the retail parade, were sold by the joint venture to Standard Life and Crosstree respectively. At Barts Square EC1, our scheme in joint venture with The Baupost Group LLC, we have now exchanged contracts for sale at an average of £1,580 psf on 102 of the 144 residential units with a further two units reserved in phase 1 of the development which is due for completion in summer 2017. The office development of 212,858 sq ft at One Bartholomew Close EC1 has been forward funded with clients of Ashby Capital, is currently under construction and is due for completion in July 2018. Our 272,426 sq ft office development at One Creechurch Place EC3, equity funded with our joint venture partner HOOPP (Healthcare of Ontario Pension Plan) is expected to complete in September 2016. C-Space EC1 completed its refurbishment in October 2015 and is 75% let at an average rent of £56 psf. At 23-28 Charterhouse Square EC1 we have commenced construction works, due to complete in Q1 2017 on a refurbishment which will comprise 38,500 sq ft of offices and 5,100 sq ft of retail/restaurant use. Our 112,000 sq ft listed building at The Loom, Whitechapel E1 is now undergoing a comprehensive refurbishment and is due for completion in September 2016. The West There has been substantial growth in rents at our West London properties. At Shepherd’s Building W14 we have completed the lease renewal and increased the space let to our largest tenant Endemol, increasing the rent by £1.25m pa, with average rents for the building now £45.75 psf. At One King Street W6 following the completion of the refurbishment works, we have achieved a benchmark rent for the area of £55.00 psf. We have added to our portfolio with the acquisition of Power Road Studios W4, 62,000 sq ft of offices over five buildings acquired for £34m. THE REGIONAL PORTFOLIO The regional investment and development portfolio provides a growing stream of net rents from a high yielding investment portfolio while contributing development profits from our retirement village and retail development programmes. The regional investment portfolio increased to £460m at 31 March 2016 (2015: £420m) with the addition of 13 distribution warehouses and a regional office for an aggregate £94m, offset by the sale of eight distribution warehouses, five retail assets and three regional offices for £67m. Regional assets contributed £31.0m of net rental income during the year (2015: £30.7m) which is expected to continue to grow with contracted rents on the portfolio of £32m and an ERV of £36m. Net gains on the sale and revaluation of the regional portfolio contributed £6.7m (2015: £18.8m). Our regional development exposure is limited to our retirement village and out-of-town retail development programmes and our Scottish Power project in Glasgow, where balance sheet risk is limited. At our retirement village development programme we continued the construction of units at Durrants Village Horsham, Millbrook Village Exeter and Maudslay Park Great Alne, near Stratford-upon-Avon. During the year we completed the clubhouse at Durrants Village and sold 33 residential units at the three schemes (2015: 25 units). In our retail development programme, we have completed our scheme at Shirley, West Midlands and continue to make progress on our scheme at Truro. Subsequent to the year end we forward funded a 79,750 sq ft out-of-town retail development at Cortonwood with a client of Aberdeen Asset Management. The Scottish Power project is pre-let and pre-sold and due for completion in September 2016. As part of the overall deal Helical takes on three existing Scottish Power sites which are surplus to requirements. One has been sold and good progress is being made on the business plans for the other two. HELICAL BAR PLC REPORT & ACCOUNTS 2016 STRATEGIC REPORT16 CHIEF EXECUTIVE’S STATEMENT FINANCE The Group has expanded its activities significantly in the last three years, seeking to increase shareholder funds through the generation and retention of increased net rental streams, development profits and valuation surpluses. This growth has been financed through an increase in secured debt borrowed primarily from UK high street banks and, since 2013, through the use of unsecured debt in the form of a retail bond and a convertible bond. In assessing the needs of the business the Company is conscious that it needs to manage any risks inherent in this leveraged approach to growing the business. It seeks to do this through the use of unsecured debt (23% of total debt), by increasing the maturity of its debt profile and by hedging its interest rate exposure. In addition, the Group’s debt profile includes borrowings in respect of residential and retirement village developments which are expected to be repaid as sales complete. In pursuing this strategy, the Group has increased the average debt maturity to 4.5 years (2015: 4.3 years), with no secured loan repayable before November 2019, whilst marginally increasing the average cost of debt at 4.2% (2015: 4.1%). The Group continues to retain a significant level of liquidity with cash and unutilised bank facilities of £193m (2015: £229m) to fund capital works on its portfolio. BOARD CHANGES As previously announced with our half year results, I will be handing over the reins of the Company to Gerald Kaye, our senior development director for the last 22 years, and I will stand to be elected as Non-Executive Chairman, at the 2016 Annual General Meeting. At that AGM, Nigel McNair Scott, our current Chairman, former Finance Director and my close friend and confidant, will retire after 30 years on the Board. Nigel has proved to be a constant source of advice, support and wisdom during his time at Helical and I wish him a long and happy retirement. The AGM will also see the retirement of Andrew Gulliford, a Non-Executive director for the last ten years. Andrew has also proved to be a tremendous support to the Board and his contribution is greatly appreciated. With these two planned departures we have sought to strengthen the Board with the addition of two new independent Non-Executive Directors and were delighted to be able to announce the appointments of Susan Clayton and Richard Cotton earlier this year. OUTLOOK Since 2012, we have targeted an income producing investment portfolio representing at least 75% of our total property assets and a development programme of the remaining 25% which is capable of producing exceptional profits. We have now exceeded our original targets and, as we complete the current development programme over the next three years, our objectives are clear. We seek to: • Complete and let our London office schemes at The Bower, One Creechurch Place, One Bartholomew Close and 23-28 Charterhouse Square; • Complete the residential scheme at Barts Square and sell the remaining units; • Take forward our London schemes in Hammersmith and Drury Lane and at the appropriate time restock the London development pipeline to enable us to continue to create capital growth and development profits; • Capture the reversion in our investment portfolio; and, • Maintain and grow a sustainable investment income surplus. We aim to do this against a background of increasing uncertainty, exacerbated by the imminent possibility of the UK voting to leave the European Union. However, with substantially increased contracted rents on our portfolio and having de-risked our two largest London office developments at One Creechurch Place EC3 and One Bartholomew Close EC1, Helical is well placed to deal with any headwinds that may come its way. Finally, this will be my last Chief Executive’s Statement after nearly 32 years with the Company. I joined the Board on the 21 August 1984 when the equivalent share price was around one pence per share giving a market capitalisation of circa £800,000 and with Helical Bar plc a steel company making reinforcement bars for the construction industry. I joined the Company to change things. A quick sale of the steel business followed by over 30 years as an entrepreneurial property company, Helical has grown to have a current market capitalisation of over £460m having distributed £276m to shareholders during that period. I now look forward to becoming Chairman and leave the Company in the excellent hands of my successor, Gerald Kaye, and the wider executive team who have an average tenure with the Company of a mere 19 years! I look forward to continuing both on the Board and as the Company’s largest shareholder and am confident that Helical’s outperformance will continue. Michael Slade Chief Executive 16 June 2016 HELICAL BAR PLC REPORT & ACCOUNTS 2016 CHIEF EXECUTIVE’S STATEMENT 17 LEFT ONE CREECHURCH PLACE, LONDON EC1 TOP AND BOTTOM THE BOWER, OLD STREET, LONDON EC1 HELICAL BAR PLC REPORT & ACCOUNTS 2016 STRATEGIC REPORT 18 OUR STRATEGY Helical is a UK focused property company investing in London for capital growth and development profits and the regions for income. LOCATE ASSETS STRUCTURE AND FUNDING LOCATE ASSETS WITH SIGNIFICANT DEVELOPMENT OR ASSET MANAGEMENT POTENTIAL within select locations or asset classes. USE OUR OWN CAPITAL COMBINED WITH EXTERNAL DEBT where we see value in holding the asset for long term income and capital growth. IDENTIFY A JOINT VENTURE PARTNER, limiting our capital commitment and risk exposure, whilst linking our return to performance. MANAGE THE PROJECT on behalf of a partner, sharing in the profit on the successful sale or letting, with minimal equity invested. We use our knowledge of the market and our extensive network of contacts to seek out assets where we see the potential to add significant value. Our development schemes are focused on delivering innovative and modern space, whilst retaining local character. We target areas where we anticipate strong growth. Our asset management opportunities focus on maximising income through attracting and maintaining a balanced and diverse portfolio of tenants and driving increases in the rental value through refurbishment programmes that make intelligent use of space and deliver high yielding assets. When the Group identifies assets that it intends to develop or asset manage and hold for the longer term, it uses its own capital combined with appropriate external debt. Where we see significant potential to create profit in the short to medium term and are keen to limit our equity commitment and risk exposure, we look to bring in a partner. Our approach to working with our partners includes: • Co-investing alongside a larger partner where we have a minority equity stake, whilst receiving a “waterfall” payment whereby we obtain a greater profit share than the percentage of our investment, depending upon the profitability of the project. This strategy is used for the developments at Barts Square, London EC1 and One Creechurch Place, London EC3. • Managing the development process from site acquisition, through construction to letting or sale. In these structures we do not own the asset, committing no or minimum equity. Our return is linked to the profitability of the development, allowing us to potentially benefit from a significant profit that reflects our contribution to the project’s success. We are using this strategy in the development of the office at One Bartholomew Close, London EC1. HELICAL BAR PLC REPORT & ACCOUNTS 2016 OUR STRATEGY 19 DEVELOP, LET & ASSET MANAGE EXIT We actively MANAGE OUR ASSETS THROUGHOUT THEIR DEVELOPMENT, working with trusted contractors and focusing on quality, efficiency and safety. We look to LET OUR PROPERTIES to diverse tenants who are financially robust. Through clever ASSET MANAGEMENT we drive the rental value forward while maximising occupancy. EXIT through sale at the right point in the market or upon completion of projects, recycling capital into new opportunities or repayment of finance. We actively manage our assets from inception to completion. Our close involvement allows us to continue to develop and improve the design whilst being able to rapidly respond to challenges as they arise. Key to this is working closely with trusted contractors who share our values and are focused on quality, health and safety, sustainability and consideration for the local community. Building strong relationships with our tenants and having a good understanding of their business, combined with a detailed knowledge of the market, is fundamental to our approach to maximising rental value and maintaining a high level of occupancy. We actively look to redevelop space where we can see the opportunity to better meet market demands, allowing us to drive rental value and help secure the future of the asset. Determining the most appropriate time to sell an asset is critical in crystallising value. We look to dispose of a property when we believe future market growth is limited, where we have limited opportunity to add further value or when we see greater value elsewhere. Our view of the market and the availability of other opportunities determines whether we reinvest the equity into new properties, repay debt or return capital to shareholders. HELICAL BAR PLC REPORT & ACCOUNTS 2016 STRATEGIC REPORT20 PERFORMANCE We measure our performance using a number of financial and non-financial key performance indicators (“KPIs”). We incentivise management to outperform the Group’s competitors by setting appropriate 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. EPRA NAV 461p EPRA NAV CAGR (3 YEARS) 20.4% IPD UNLEVERAGED RETURN 21.7% TOTAL SHAREHOLDER RETURN (3 YEARS) 20.5% AVERAGE EMPLOYEE SERVICE 7.6years EPRA NET ASSET VALUE PER SHARE (PENCE) 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. 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 calculations provide a guide to performance, the property industry prefers to use an EPRA adjusted net asset per share to represent the fair value of net assets on an ongoing long term basis. The adjustments necessary to arrive at this figure are shown in note 34 of the financial statements. Management is incentivised to exceed 15% pa growth in net asset value per share. 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. IPD has compared the ungeared performance of Helical’s total property portfolio against that of portfolios within IPD for the last 20 years. The Group’s annual performance target is to exceed the top quartile of the IPD database, which it has consistently achieved. Helical’s ungeared performance for the year to 31 March 2016 was 21.7% (2015: 20.4%) compared to the IPD median benchmark of 11.4% (2015: 17.5%) and upper quartile benchmark of 13.0% (2015: 19.6%). Helical’s portfolio unleveraged returns to 31 March 2016 as shown opposite: HELICAL IPD Source: Investment Property Databank. TOTAL SHAREHOLDER RETURN Total Shareholder Return is a measure of the return on investment for shareholders. The table demonstrates this return compared to various indices. Over one, three, ten, fifteen, twenty and twenty five years Helical’s Total Shareholder Return exceeded that of the Listed Retail Estate Sector Index. HELICAL BAR PLC Growth over all periods to 31/03/16 UK EQUITY MARKET Growth in FTSE All-Share Return Index over all periods to 31/03/16 LISTED REAL ESTATE SECTOR INDEX Growth in FTSE 350 Real Estate Super Sector Return Index over all periods to 31/03/16. For data prior to 30 September 1999 FTSE All Share Real Estate Sector Index has been used DIRECT PROPERTY - MONTHLY DATA Growth in Total Return of IPD UK Monthly Index (All Property) over all periods to 31/03/16 Source: Thomson Reuters Datastream. AVERAGE LENGTH OF EMPLOYEE SERVICE (YEARS) High levels of staff retention remain a key feature of Helical’s business. The Group retains a highly skilled and experienced team. Opposite is the average length of service of the Group’s head office employees. The principal driver for the fall in average length of employee service is the increased employee numbers due to the growth of the business. HELICAL BAR PLC REPORT & ACCOUNTS 2016 PERFORMANCE 21 EPRA NET ASSET VALUE PER SHARE (p) EPRA NET ASSET VALUE COMPOUND ANNUAL GROWTH RATE (3 YEARS) 461 385 313 250 264 7.4% -1.0% -4.4% 20.4% 15.5% 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 1 YEAR % pa 3 YEARS % pa 5 YEARS % pa 10 YEARS % pa 20 YEARS % pa 21.7 22.0 14.1 15.8 11.4 10.4 10.0 5.5 15.0 9.2 Helical’s Percentile Rank: 4 Helical’s Percentile Rank: 4 Helical’s Percentile Rank: 5 Helical’s Percentile Rank: 4 Helical’s Percentile Rank: 1 1 YEAR % pa 3 YEARS % pa 5 YEARS % pa 10 YEARS % pa 15 YEARS % pa 20 YEARS % pa 25 YEARS % pa 20.5 14.6 13.6 11.7 1.0 -3.9 -6.4 3.7 10.0 11.5 10.5 5.7 4.7 5.0 1.7 -0.1 13.2 14.2 9.4 7.9 5.0 5.8 9.0 6.5 7.3 8.6 8.0 6.6 AVERAGE LENGTH OF EMPLOYEE SERVICE (YEARS) AVERAGE EMPLOYEE NUMBERS 2016 2015 2014 2013 2012 7.6 7.6 8.7 10.2 9.9 2016 2015 2014 2013 2012 35 32 34 29 27 0 2 4 6 8 10 12 0 5 10 15 20 25 30 35 HELICAL BAR PLC REPORT & ACCOUNTS 2016 STRATEGIC REPORT22 HELICAL’S PROPERTY PORTFOLIO TOTAL PROPERTY PORTFOLIO £1,240m TOTAL PROPERTY RETURN £170.6m 85% HELD AS INVESTMENT PROPERTIES INVESTMENT PORTFOLIO BY ASSET STATUS REGIONAL OFFICES LONDON OFFICES RETIREMENT VILLAGES LONDON OFFICES REGIONAL RETAIL REGIONAL INDUSTRIAL/ LOGISTICS REGIONAL OFFICES INCOME PRODUCING MAJOR PROJECTS HELICAL BAR PLC REPORT & ACCOUNTS 2016 HELICAL’S PROPERTY PORTFOLIO 23 TOTAL PORTFOLIO BY FAIR VALUE Investment £m Development £m %  London offices London residential Total London Regional offices Regional industrial/logistics Regional retail Retirement villages Land Total Regional TOTAL 593.2 - 593.2 102.5 210.5 134.5 11.9 0.1 459.5 1,052.7 INVESTMENT PORTFOLIO BY ASSET STATUS London offices London residential Total London Regional offices Regional industrial/logistics Regional retail Retirement villages Land Total Regional TOTAL Income producing £m 414.6 - 414.6 97.8 210.5 134.5 11.9 - 454.7 869.3 47.8 - 47.8 8.3 17.0 10.8 1.0 - 37.1 84.9 %  39.4 - 39.4 9.3 20.0 12.8 1.1 - 43.2 82.6 18.0 60.0 78.0 1.0 - 8.1 91.6 8.6 109.3 187.3 Major projects £m 178.6 - 178.6 4.7 - - - 0.1 4.8 183.4 %  1.5 4.8 6.3 0.1 - 0.7 7.3 0.7 8.8 Total £m 611.2 60.0 671.2 103.5 210.5 142.6 103.5 8.7 568.8 15.1 1,240.0 %  17.0 - 17.0 0.4 - - - - Total £m 593.2 - 593.2 102.5 210.5 134.5 11.9 0.1 0.4 17.4 459.5 1,052.7 % 49.3 4.8 54.1 8.4 17.0 11.5 8.3 0.7 45.9 100.0 %  56.4 - 56.4 9.7 20.0 12.8 1.1 - 43.6 100.0 Income producing assets are those assets where the majority of the space is let. Major projects are those assets that are being developed or substantially refurbished. TRADING AND DEVELOPMENT PORTFOLIO London offices London residential Total London Regional offices Regional retail Retirement villages Land Total Regional TOTAL Book value £m Fair value £m Surplus £m Fair value % 14.0 56.0 70.0 0.2 8.1 83.6 5.9 97.8 167.8 18.0 60.0 78.0 1.0 8.1 91.6 8.6 109.3 187.3 4.0 4.0 8.0 0.8 - 8.0 2.7 11.5 19.5 9.6 32.0 41.6 0.5 4.3 48.9 4.7 58.4 100.0 HELICAL BAR PLC REPORT & ACCOUNTS 2016 STRATEGIC REPORT       24 PROPERTY PORTFOLIO HELICAL’S PROPERTY PORTFOLIO THE LONDON PORTFOLIO 25 54% OF TOTAL PORTFOLIO 18.8% VALUATION INCREASE IN INVESTMENT ASSETS 80% OF TOTAL PROPERTY RETURN OFFICES AT THE BOWER ACQUIRED FOR £248m London’s economy continues to outperform the rest of the UK and the proportion of our assets located in the Capital now represents 56% of our investment portfolio. London’s population is expected to grow by one million in the next ten years and 175,000 new office jobs are expected to be created by 2020. London is a leading technology centre and there is a “war for talent” which is driving demand for high quality office space. London continues to attract overseas capital as it has a liquid and transparent property market with a long established rule of law. Our strategy is to increase our London holdings, focusing on select areas where we see strong tenant demand and growth potential, such as the “Tech Belt” that runs from Kings Cross through Old Street and Shoreditch to Whitechapel and in West London, in particular Hammersmith, Shepherds Bush and Chiswick. Our London portfolio comprises income producing multi-let offices, office refurbishments and developments and residential development schemes. ONE CREECHURCH PLACE, CITY OF LONDON EC3 HELICAL BAR PLC REPORT & ACCOUNTS 2016 STRATEGIC REPORT26 HELICAL’S PROPERTY PORTFOLIO THE LONDON PORTFOLIO THE WEST HELICAL BAR PLC REPORT & ACCOUNTS 2016 HELICAL’S PROPERTY PORTFOLIO THE LONDON PORTFOLIO 27 THE EAST HELICAL BAR PLC REPORT & ACCOUNTS 2016 STRATEGIC REPORT28 29 HELICAL’S PROPERTY PORTFOLIO THE LONDON PORTFOLIO THE EAST THE BOWER OLD STREET EC1 This 3.12 acre asset was acquired in November 2012 for £60.8m in joint venture with Crosstree Real Estate Partners LLP. The site is in the heart of an area which has become a “creative halo”, a district of London which is a hub for technology, media and telecommunications companies and which is benefitting from substantial investment in infrastructure. A planning consent has been implemented to increase the floor space on the site by 116,000 sq ft, to refurbish existing areas and significantly upgrade the public realm with the creation of a new pedestrian street. On 20 January 2016, Helical acquired The Warehouse and The Studio (211 Old Street) and The Tower (207 Old Street) from the joint venture for £248m. 211 Old Street EC1 Building work started on phase 1 in January 2014 comprising The Warehouse, 128,262 sq ft, and The Studio, 23,177 sq ft, and was completed in November 2015. Phase 1 is fully let: The Warehouse Offices Restaurants The Studio Offices Restaurants Total sq ft Rent £psf 122,858 50.25-67.50 (55.00 average) 5,404 128,262 18,283 4,894 23,177 40.00-45.00 (43.85 average) 207 Old Street EC1 Comprising The Tower, phase 2 of the redevelopment of The Bower commenced in January 2016 and will deliver 171,000 sq ft of office space and 7,500 sq ft of retail/restaurant. It is due for completion in Q1 2018. 183-213 Old Street EC1 This retail parade comprises 55,724 sq ft fully let to tenants including Gymbox, Co-op Food Store, Argos, Peacock and the Post Office generating c. £915,000 rents. The parade was acquired from the joint venture by Crosstree for £23m in January 2016. Empire House, City Road EC1 Empire House, fully let to Z Hotels and restaurant Ceviche, was sold during the year to Standard Life Investments for £20.65m, a premium of 38% to the 31 March 2015 value. STRATEGIC REPORT30 HELICAL BAR PLC REPORT & ACCOUNTS 2016 STRATEGIC REPORT 31 BARTS SQUARE CITY OF LONDON EC1 In joint venture with The Baupost Group LLC we own the freehold interest in land and buildings at Bartholomew Close, Little Britain and Montague Street, a 3.2 acre site adjacent to the new Barts Hospital and just south of Smithfi eld Market. Existing buildings are let to the NHS on a number of short term leases that expire in 2016. Planning consent has been implemented for a comprehensive redevelopment of 19 buildings to provide a total of 236 residential apartments, three offi ce buildings of 213,000 sq ft, 23,000 sq ft and 10,200 sq ft, 20,600 sq ft of retail/A3 at ground fl oor as well as major public realm improvements, which will be incorporated into the wider Smithfi eld Area Strategy being worked up by the City of London. PHASE 1 – Residential/offi ces/retail Phase 1 of the redevelopment of Barts Square comprises 144 residential units, 8,800 sq ft of retail space, 23,000 sq ft of new offi ces behind retained facades and public realm improvements. The demolition of buildings in Bartholomew Close and Little Britain commenced in January 2015, with the retention of various facades behind which the buildings are being demolished. Completion of phase 1 is expected in summer 2017. Contracts have been exchanged for the sale of 102 residential units for a total value of c. £132m at an average £1,580 psf, with a further two units under off er. PHASE 2 One Bartholomew Close – Offi ces One Bartholomew Close was sold to clients of Ashby Capital LLP (“Ashby”) for £102.4m in August 2015, releasing £34m of cash to Helical. The demolition of the existing building and the construction of a new 12 storey offi ce block of 212,858 sq ft, commenced in January 2016. The building is due to be completed in July 2018. Ashby’s clients fi nance the development costs and when the building is completed and successfully let the joint venture will be entitled to receive a profi t share payment. Helical Bar is the development manager for delivery of the project. PHASE 3 – Residential/retail Phase 3 of the redevelopment of the site, involving the demolition of Queen Elizabeth II Building, 62 Bartholomew Close, 42-44 Little Britain and 45-47 Little Britain, is expected to commence after vacant possession of these buildings is obtained in November 2016. In their place, 92 residential units and 11,800 sq ft of retail space will be constructed, with completion due in early 2019. 32 HELICAL BAR PLC REPORT & ACCOUNTS 2016 HELICAL’S PROPERTY PORTFOLIO THE LONDON PORTFOLIO THE EAST 23-28 CHARTERHOUSE SQUARE SMITHFIELD EC1 In January 2016, Helical was granted a new 155 year leasehold interest in 23-28 Charterhouse Square, London EC1 by the Governors of Sutton’s Hospital in Charterhouse for £16m. Helical has received planning for and commenced a major refurbishment of the existing building, which will increase the current 34,000 sq ft to 38,500 sq ft of offi ces, with the addition of a new sixth fl oor, and add 5,100 sq ft of retail/restaurant. The completed building is expected to be delivered in early 2017. C-SPACE 37-45 CITY ROAD EC1 Helical acquired C-Space in June 2013. Planning consent was obtained for a complete refurbishment of the building which increased the previous existing 50,000 sq ft offi ce building to 62,000 sq ft. The works, which were completed in October 2015, involved an additional fl oor and extensions to the third fl oor, a landscaped courtyard and entrance “pavilion” to the rear and full height glazing to the raised ground fl oor. 75% of the space was pre-let to MullenLowe (formerly DLKW Lowe) the creative agency, and only the top fl oor and half of the third fl oor remain available. ONE CREECHURCH PLACE CITY OF LONDON EC3 One Creechurch Place, London EC3, is a landmark City offi ce scheme in the heart of the insurance sector in London. In May 2014, Helical signed a joint venture agreement with HOOPP (Healthcare of Ontario Pension Plan) to redevelop the site. Under the terms of the joint venture, HOOPP and Helical will jointly fund the project on a 90:10 split, with Helical acting as development manager for which it will receive a promote payment depending on the successful outcome of the scheme. It is anticipated the completed development will have a capital value of c. £250m. The new building, comprising 272,000 sq ft NIA of offi ces and 2,227 sq ft of retail, is expected to be completed in September 2016. HELICAL BAR PLC REPORT & ACCOUNTS 2016 STRATEGIC REPORT 33 HELICAL’S PROPERTY PORTFOLIO THE LONDON PORTFOLIO THE EAST CHART HOUSE ISLINGTON N1 Chart House is a 10,500 sq ft offi ce building in Islington. There is currently planning consent for an additional fl oor of residential on top of the building. This building is 100% let. THE LOOM WHITECHAPEL E1 This 112,000 sq ft listed building was acquired in 2013 and Helical has secured planning consent for a comprehensive refurbishment/reconfi guration of the common parts to include a new entrance/reception, showers, bike store, refurbishment of c. 25,000 sq ft of offi ces, including the creation of a single 11,000 sq ft unit and 4,000 sq ft of café and restaurants. The works are underway and are due for completion in July 2016. In addition to our holdings in East London we have a scheme in Covent Garden WC2. DRURY LANE & DRYDEN STREET LONDON WC2 The existing buildings, which are in offi ce and retail use, sit on an island site of approximately 0.5 acres. Approximately half of the site, adjacent to Dryden Street, sits within the Covent Garden Conservation Area. In July 2015, contracts were exchanged with Diageo Pension Fund (a fund managed by Savills Investment Management) for the conditional acquisition of the Drury Lane site. The contract is conditional on Helical securing planning consent. A planning application for the residential led scheme of 68 apartments was submitted in August 2015 and resolution to grant consent was issued at a planning committee in April 2016. 34 HELICAL BAR PLC REPORT & ACCOUNTS 2016 HELICAL’S PROPERTY PORTFOLIO THE LONDON PORTFOLIO THE WEST SHEPHERDS BUILDING SHEPHERDS BUSH W14 This 151,000 sq ft multi-let offi ce building close to the Westfi eld London shopping centre maintains an occupancy approaching 100%, as it has for eight consecutive years. We have completed a renewal of existing leases to Endemol, who have also taken additional space and are the largest tenant in the building, increasing the total contracted rent roll by £1.27m and securing their occupation of the building until December 2026, with a tenant break option in 2021. The average contracted rent for the building is now £45.75 psf with total contracted net rent of £6.68m compared to a passing net rent of £4.38m. ONE KING STREET HAMMERSMITH W6 One King Street, Hammersmith W6, is a 39,000 sq ft building acquired in 2012 comprising 26,000 sq ft of offi ces and 13,000 sq ft of retail. Refurbishment of the fourth fl oor and the addition of a fi fth fl oor of offi ces on top of the building has completed, providing 3,500 sq ft of additional space. The fourth and fi fth fl oors have been let to Orion Healthcare at a headline rent of £52.50 psf and £55.00 psf and the building is now fully let with total contracted rent of £1.8m. POWER ROAD STUDIOS CHISWICK W4 Helical acquired this asset in December 2015 for £34.2m at a NIY of 4.4%. The site comprises 62,000 sq ft of offi ces across fi ve buildings and is multi let to a wide range of predominantly media tenants. Recent lettings have been concluded at a rent of £38 psf compared to an average rental of £24 psf at acquisition. Studies are currently underway to determine how best to add further offi ce space to the site which at two acres has substantial potential. HELICAL BAR PLC REPORT & ACCOUNTS 2016 STRATEGIC REPORT 35 HELICAL’S PROPERTY PORTFOLIO THE LONDON PORTFOLIO THE WEST KING STREET HAMMERSMITH W6 King Street, Hammersmith W6, is a Council led regeneration project which is being carried out in a 50/50 joint venture with Grainger plc. Planning permission for the scheme has been granted for 196 apartments, a three-screen cinema, new retail and restaurant space and replacement offi ces for the Council. A minor amendment to the existing planning approval has been submitted and work is expected to commence in 2017. THE POWERHOUSE CHISWICK W4 Helical acquired this 43,325 sq ft offi ce and recording studios by way of sale and leaseback. The Powerhouse is a listed building on Chiswick High Road and is fully let on a long lease to Metropolis Music Group. SALES ENTERPRISE HOUSE PADDINGTON W2 Enterprise House, Paddington W2, is a freehold building adjacent to Paddington Station in London comprising 45,000 sq ft of offi ces. The building was acquired in 2013 on a sale and lease-back agreement from Network Rail, which holds a 20 year lease without breaks, for c. £31m representing a 5.7% yield generating annual rental income of £1.8m. In October 2015, the asset was sold to a private overseas buyer for £43m, a premium of 10% to the 31 March 2015 valuation, crystallising an IRR in excess of 100%. ARTILLERY LANE BISHOPSGATE E1 Artillery Lane, Bishopsgate, E1, is an offi ce building in the City of London. Acquired for £6.8m in 2013 the property was sold to Standard Life in October 2015 for £15.1m following the completion of works which provided 17,000 sq ft of newly refurbished offi ces. 36 HELICAL’S PROPERTY PORTFOLIO THE REGIONAL PORTFOLIO 37 46% OF TOTAL PORTFOLIO 71% OF NET RENTAL INCOME 95% LET Our regional portfolio contributed 71% of our net rental income from tenants in diverse sectors and geographical locations. The £568.8m regional portfolio comprises £210.5m of industrial/logistics (37% of the portfolio), £103.5m of offices (18%), £142.6m of retail comprising £76.9m of retail warehousing and £65.7m of in-town retail, mainly the Morgan Quarter, Cardiff (in aggregate 25%), £103.5m in our retirement village development programme (18%) and £8.7m of land (2%). Our approach to regional investment is to acquire assets where occupational demand is robust throughout the property cycle and the barriers to new supply are high. Successfully picking the sectors and assets with these attributes will ensure strong cash flows and rental growth. In general, yields for regional assets are higher than those in London and these assets are acquired to provide significant cash flow for the Group. We anticipate that income will become an increasingly important part of total returns as yield compression slows and, as such, we focus our attention on areas where we believe the occupational market remains robust. CHURCHGATE AND LEE HOUSE, MANCHESTER HELICAL BAR PLC REPORT & ACCOUNTS 2016 STRATEGIC REPORT38 HELICAL’S PROPERTY PORTFOLIO THE REGIONAL PORTFOLIO 1 2 3 ST VINCENT STREET, GLASGOW Office development PORTBURY, BRISTOL Industrial/logistics CHURCHGATE & LEE HOUSE, MANCHESTER Offices 4 5 6 THE GLASHAUS, COBHAM Offices WIENERBERGER HOUSE, CHEADLE Offices DALE HOUSE, MANCHESTER Offices 7 8 9 JACKNELL ROAD, HINCKLEY Industrial/logistics CROW LANE, NORTHAMPTON Industrial/logistics COTES WAY, ALFRETON Industrial/logistics 10 OPAL WAY, STONE Industrial/logistics HELICAL BAR PLC REPORT & ACCOUNTS 2016 39 1 INDUSTRIAL AND LOGISTICS LOCATIONS OFFICES RETAIL LOCATIONS 6 3 5 10 9 7 8 2 4 HELICAL BAR PLC REPORT & ACCOUNTS 2016 STRATEGIC REPORT40 HELICAL BAR PLC REPORT & ACCOUNTS 2016 HELICAL’S PROPERTY PORTFOLIO THE REGIONAL PORTFOLIO REGIONAL OFFICES Our regional offi ce investment portfolio comprises nine assets valued at £102.5m, with over 60% of value in Manchester. Other assets are located in Crawley, Glasgow, Reading, Cobham, Castle Donington and Cheadle. During the year we sold three assets for £11.2m, a 16% premium to book value. We now have three offi ces in Manchester having acquired Fountain Court, 31 Booth Street earlier this year. Manchester is a city with a diverse, thriving and growing economy and is widely regarded as England’s second city and the centre of the “Northern Powerhouse”. CHURCHGATE & LEE HOUSE, MANCHESTER Helical acquired Churchgate and Lee House, two interlinked offi ce buildings comprising 248,000 sq ft of offi ces, in March 2014. We have refurbished the reception, café and a number of offi ce fl oors and continue to reposition the asset as fl oors become vacant. We have concluded 14,000 sq ft of new lettings in the year, including letting a refurbished second fl oor Churchgate suite at £16.50 psf, with a further 19,300 sq ft since year end. The building is now 92% occupied. ST VINCENT STREET, GLASGOW In partnership with local development partner, Dawn Developments Ltd, Helical is the development manager for the construction of the new headquarters building for Scottish Power at St Vincent Street, Glasgow. The completed building will comprise c. 220,000 sq ft of prime offi ce space in the heart of the City’s commercial district. Funded by M&G Investments, the scheme is under construction and all works, including Scottish Power’s fi t out, are due to be completed by Autumn 2016. As part of the overall deal, Helical took on three existing Scottish Power sites which were surplus to requirements. We have received planning permission for a change of use of the grounds of Cathcart House to 158 residential units and are in discussions with a number of parties in relation to a sale. At Yoker, we have exchanged contracts, subject to planning, with a supermarket operator to sell the site, and we sold the site at Falkirk during the year. HELICAL BAR PLC REPORT & ACCOUNTS 2016 STRATEGIC REPORT 41 HELICAL’S PROPERTY PORTFOLIO THE REGIONAL PORTFOLIO REGIONAL OFFICES AND INDUSTRIAL/LOGISTICS DALE HOUSE MANCHESTER Dale House is a 42,000 sq ft offi ce building situated in the Northern Quarter of Manchester. It is 85% let to a number of tenants with an average rent of £12.00 psf and was acquired in March 2015 for £7.4m. The property is a long term hold with plans to refurbish the building over time and move rents upwards as the location improves. FOUNTAIN COURT 31 BOOTH STREET, MANCHESTER This vacant offi ce located in the prime city core was acquired in January 2016 for £4.7m. Refurbishment of this 25,349 sq ft building is underway and we anticipate having it available to let before the end of 2016. REGIONAL INDUSTRIAL/ LOGISTICS Helical has 36 distribution and light industrial units located around major UK transport networks, a net increase of fi ve units with 13 acquisitions (£89m) being off set by sales of eight units with (£28m) at a small premium to book value. These units generally have few bespoke features making them straightforward to re-let if vacancies occur with minimal capital expenditure required. The majority of the assets are single let. Signifi cant assets within the portfolio include a 256,000 sq ft distribution warehouse let to Sainsbury’s in Yate, Bristol, a 203,000 sq ft facility in Leighton Buzzard, Bedfordshire, a 210,000 sq ft distribution warehouse in Northampton and a 183,000 sq ft distribution warehouse let to the Royal Mail in Chester. 42 HELICAL’S PROPERTY PORTFOLIO THE REGIONAL PORTFOLIO RETAIL During the year, five retail properties were sold for a total of £27.0m. At the year end the portfolio consisted of assets in Cardiff, Ellesmere Port, Great Yarmouth, Harrogate, Huddersfield, Leicester, Scarborough, Sevenoaks, Southend and Stockport. Harrogate has been sold since the year end at its book value. Our retail assets total £142.6m, 11.5% of our portfolio (31 March 2015: £171.7m). This part of the portfolio includes a prime retail asset in Cardiff, eight retail parks (one of which has been sold since the year end), one retail unit and a number of pre let and/or prefunded retail developments. The retail market is undergoing major structural changes with high profile companies going into administration. There is a continued migration of customers and retailers to prime centres where the leisure offer and quality of environment are a big driver of footfall which is benefitting our most substantial retail holding in Cardiff. THE MORGAN QUARTER AND ROYAL ARCADES, CARDIFF Tenant demand for the property is strong and rents are steadily increasing. The creative quarter office refurbishment is now largely complete generating £116,000 of rent from previously unusable space, with a further c. £80,000 of rent to follow as the remainder of the new space is let. The Morgan Quarter was originally purchased in 2005 and comprised the David Morgan Department Store and two Victorian Arcades. The main ground floor retail units fronting The Hayes, a prime fashion pitch in Cardiff, have been completely reconfigured and they are now let to tenants such as White Stuff, Urban Outfitters, Molton Brown, Jack Wills and Fred Perry. HELICAL BAR PLC REPORT & ACCOUNTS 2016 HELICAL’S PROPERTY PORTFOLIO THE REGIONAL PORTFOLIO RETAIL 43 PARKGATE SHIRLEY, WEST MIDLANDS The shopping centre at Parkgate, Shirley, where Helical has a 50% interest, was completed in 2014 and the 80,000 sq ft Asda, which had been pre-sold to the food-store, together with a number of other retailers have all opened successfully for trade. The space beyond the food-store is let to occupiers such as B&M, Peacocks, Poundland, Pizza Express, JD Wetherspoon, Prezzo, Shoe Zone and Shirley Library. A second phase of high density residential is being progressed on a 10 acre site opposite the Parkgate scheme. Terms have been agreed with a care home provider, a residential developer and a supermarket operator for a petrol filling station. Planning consent has been achieved subject to a S106 Agreement. TRURO Helical has entered into a Conditional Purchase Agreement on the six acre Truro City Football Club site which has planning consent, subject to a S106 Agreement, for a 78,000 sq ft non-food retail park. The scheme proposals provide for the relocation of the football club and we anticipate starting on site in summer 2017. CORTONWOOD This 79,750 sq ft retail park has been 95% pre-let to tenants including Outfit, H&M, New Look, River Island and Marks and Spencer. The scheme has been forward funded with clients of Aberdeen Asset Management and construction on site has started with completion due in June 2017. POLAND During the year, we completed the sale of our 50% share in the 720,000 sq ft retail development at Europa Centralna, Gliwice, Poland, to our joint venture partners, clients of Standard Life, in accordance with a pre-arranged contractual exit two years post completion of the scheme. The sale, at book value, reduced gross property assets by £41m and reduced net debt by £26m. In July 2015, we also completed the sale of our 103,000 sq ft retail development at Wroclaw, Poland at €17m, a small premium to book value. The sale of these two assets completed the exit of our joint venture in Poland. HELICAL BAR PLC REPORT & ACCOUNTS 2016 STRATEGIC REPORT 44 HELICAL’S PROPERTY PORTFOLIO THE REGIONAL PORTFOLIO RETIREMENT VILLAGES 4 2 1 3 Our retirement village portfolio consists of four villages. We design each of the villages with an active, independent retirement in mind and the communities that we create are the ideal place to live a social and varied lifestyle. Each private, age-exclusive retirement community is centred around a residents’ clubhouse, and feature many amenities including an indoor pool and gym, landscaped gardens, bar, restaurant and library. With an increasing UK population over 65 years old, and a severe under supply in retirement housing, this sector creates significant opportunities for investors and developers. This year has seen us bring the management of this portfolio entirely in house which has led to an increase in sales rates. 1 BRAMSHOTT PLACE LIPHOOK, HAMPSHIRE This village is situated amongst natural parkland near the village of Liphook on the border of Hampshire, West Sussex and Surrey. The village features a selection of two and three bedroom cottages and one, two and three bedroom apartments arranged around a residents’ clubhouse. All 151 units in Phase 1-3 have been completed and sold. Phase 4 will commence in 2016 with the construction of 40 additional cottages. Enabling works have commenced on site with completion due in June 2018. HELICAL BAR PLC REPORT & ACCOUNTS 2016 HELICAL’S PROPERTY PORTFOLIO THE REGIONAL PORTFOLIO RETIREMENT VILLAGES 45 2 DURRANTS VILLAGE FAYGATE, WEST SUSSEX Durrants Village is set within 30 acres of private parkland in the hamlet of Faygate, near Horsham in West Sussex. The village features a selection of cottages and apartments. Phase 2 of the construction completed in January 2016 with 105 units located around the residents’ clubhouse. Phase 3 consists of an additional 50 units towards the front of the site and construction is due to commence in late 2016 with completion in early 2019. Sales are progressing at a good rate with 51 units sold and an additional 24 reserved. 3 MILLBROOK VILLAGE EXETER, DEVON Millbrook Village is nestled close to the river in the heart of the historic cathedral city of Exeter. The village features a selection of two and three bedroom cottages and one, two and three bedroom apartments. The site will comprise 164 units once completed. The clubhouse will include a restaurant and bar, games room, gym, cinema and a swimming pool. The build programme is well advanced with 43 units currently completed with more units becoming available for sale at regular three month intervals. We anticipate that the village will be fully constructed by early 2018. Contracts have been exchanged on 14 units with an additional 13 units reserved. 4 MAUDSLAY PARK GREAT ALNE, WARWICKSHIRE Maudslay Park is set in 90-acres of parkland in the Warwickshire village of Great Alne, near Stratford-upon-Avon. The village will comprise 150 units with a mixture of cottages and apartments built around the central clubhouse facility. Following the administration of our main contractor, progress was delayed last year. We have now appointed a new main contractor and we anticipate the first units will be available for sale at the start of 2017. HELICAL BAR PLC REPORT & ACCOUNTS 2016 STRATEGIC REPORT46 ASSET MANAGEMENT 47 £12.7m INCREASE IN CONTRACTED RENTAL INCOME ERV £81.0m WEIGHTED AVERAGE UNEXPLAINED LEASE TERM 6.3years Asset management is a critical component in driving Helical’s performance. Through having intelligent business plans and by maximising the combined skills of our management team, we are able to create value in our assets without relying on market movements. During the year contracted income increased by £12.7m as a result of new lettings and rent reviews, net of any losses from breaks and lease expiries (2015: £1.1m). With notable contributions from some regional assets, in particular Churchgate and Lee House in Manchester, the majority of these rental increases come from our London assets. The completion and letting of phase 1 at The Bower EC1 and C-Space EC1 contributed £10.5m of new lettings, while the renewal of the Endemol lease in the Shepherds Building W14 added a further £1.3m to the rent roll. The London portfolio remains highly reversionary and this value will continue to be unlocked through refurbishment and leasing activities. There was significant activity within the investment portfolio with 165 lease events. Contracted rent (£) 13.3m 2.0m 0.1m (2.5m) (0.2m) 12.7m NEW LETTINGS UPLIFT AT LEASE RENEWALS RENT REVIEWS RENT LOST AT BREAK/ EXPIRY RENT LOST TO ADMINIS- TRATIONS TOTAL INCREASE Fair value weighting % Passing rent £m London offices London residential Total London Regional offices Regional industrial/logistics Regional retail Retirement villages Land Total Regional TOTAL 49.3 4.8 54.1 8.4 17.0 11.5 8.3 0.7 45.9 100.0 11.2 n/a 11.2 6.5 15.0 9.2 n/a n/a 30.7 41.9 Contracted rent £m 23.6 n/a 23.6 7.0 15.9 9.5 n/a n/a 32.4 56.0  % 26.7 n/a 26.7 15.6 35.7 22.0 n/a n/a 73.3 100.0  % 42.1 n/a 42.1 12.6 28.3 17.0 n/a n/a 57.9 100.0 ERV change since March 2015 % %  56.0 n/a 56.0 10.9 20.6 12.5 n/a n/a 44.0 100.0 7.6 n/a 7.6 2.8 1.1 3.5 n/a n/a 2.2 4.4 ERV £m 45.4 n/a 45.4 8.8 16.7 10.1 n/a n/a 35.6 81.0 THE MORGAN ARCADE, CARDIFF HELICAL BAR PLC REPORT & ACCOUNTS 2016 STRATEGIC REPORT    48 ASSET MANAGEMENT CAPITAL EXPENDITURE We have a planned development and refurbishment programme to drive the rental value and secure the future of our assets. Capex Budget (Helical Share) £m Remaining spend (Helical share) £m 91.0 88.7 9.7 55.0 15.0 75.0 10.0 2.3 85.0 76.8 2.6 55.0 13.0 74.0 2.0 2.0 Current total space sq ft Refurbished space sq ft 114,000 114,000 - - - - - - 34,000 34,000 - 112,000 25,500 - 37,500 25,500 New space sq ft 65,000 236,000 273,000 300,000 9,600 80,000 - - Completion date Mar 2018 Mar 2019 Sept 2016 Dec 2021 Mar 2017 Jun 2019 July 2016 Dec 2016 Capex Budget £m Remaining spend £m Total number of units Completed units Under construction Completion date 40.1 41.0 57.5 15.9 154.5 19.2 12.4 49.9 15.6 97.1 164 156 150 40 510 29 105 5 0 139 Mar 2018 Feb 2019 Dec 2020 Jun 2018 88 0 0 0 88 Property 207 Old Street, London EC1 Barts Square, London EC1 One Creechurch Place, London EC1 King Street, London W6 Charterhouse Square, London EC1 Drury Lane, London WC2 The Loom, London EC1 Booth St, Manchester Retirement Villages Property Millbrook Village, Exeter Durrants Village, Faygate Maudslay Park, Great Alne Bramshott Place, Liphook TOTAL PORTFOLIO YIELDS London offices Regional offices Regional industrial/logistics Regional retail TOTAL CAPITAL VALUES, VACANCY RATES AND UNEXPIRED LEASE TERMS London offices London residential Total London Regional offices Regional industrial/logistics Regional retail Total Regional TOTAL EPRA topped up NIY % Reversionary % 2.50 5.92 6.42 6.12 3.97 6.14 7.48 7.20 6.50 6.60 Capital value psf £ Vacancy rate % WAULT Years 656 n/a 656 197 56 183 93 180 19.3 n/a 19.3 6.5 5.9 0.2 5.0 7.1 7.1  n/a 7.1 5.6 5.3 6.1 5.6 6.3 HELICAL BAR PLC REPORT & ACCOUNTS 2016     ASSET MANAGEMENT 49 VALUATION MOVEMENTS London offices Total London Regional offices Regional industrial/logistics Regional retail Retirement villages Total Regional TOTAL Val change inc capex, sales & purchases % Val change inc capex, excl sales & purchases % Investment portfolio weighting 2016 % Investment portfolio weighting 2015 % 18.8 18.8 3.0 1.1 (0.3) 4.9 1.1 11.1 30.8 30.8 2.0 2.8 0.0 4.9 1.2 56.4 56.4 9.7 20.0 12.8 1.1 43.6 46.9 46.9 13.1 18.5 20.1 1.4 53.1 14.9 100.0 100.0 LEASE EXPIRIES OR TENANT BREAK OPTIONS % of rent roll Number of leases Year to 2017 5.4 88 Year to 2018 11.1 95 Year to 2019 11.3 79 Year to 2020 9.3 32 Year to 2021 3.9 22 Average rent per lease (£) 31,652 59,707 73,463 149,346 90,768 We have a strong rental income stream and a diverse tenant base, with the largest tenant in the portfolio accounting for only 7.1% of the rent roll. The top 10 tenants account for 30.4% of the total rent roll and the tenants come from a variety of industries. Rank Tenant Endemol UK Ltd MullenLowe Ltd Gopivotal (UK) Limited Farfetch UK Ltd DSG Retail Limited Tenant Industry Media Marketing Communications Technology Online Retail Retail Sainsbury’s Supermarkets Ltd Food retail CBS Interactive Limited B&M Retail Limited Media Retail Allegis Group Limited Recruitment Economic Solutions Ltd Employment and Skills Training 1 2 3 4 5 6 7 8 9 10 TOTAL Rent £m Rent Roll % 4.0 2.6 2.0 1.9 1.3 1.2 1.0 1.0 1.0 1.0 7.1 4.6 3.6 3.4 2.3 2.2 1.9 1.8 1.8 1.7 17.0 30.4 HELICAL BAR PLC REPORT & ACCOUNTS 2016 STRATEGIC REPORT    50 PROFIT BEFORE TAX £120m EPRA EPS 17.1p EPRA NAV 461p CASH AND UNDRAWN BANK FACILITIES £193m AVERAGE DEBT MATURITY 4.5years AVERAGE COST OF DEBT 4.2% FINANCIAL REVIEW Helical aims to deliver market leading returns by committing to projects with the potential for substantial capital growth and by deploying limited equity into development situations which have the potential to be highly profitable. Risks associated with our development programme are mitigated through limited equity exposure, options, forward funding, conditional contracts and joint ventures with major UK and global institutions. We have an active asset management programme for the investment portfolio with a clear strategy of increasing net operating income. Our aim is to have a stable platform with all recurring operational and finance costs and dividends fully covered by revenue streams from our investment portfolio. Gearing is used on a tactical basis throughout the property cycle, being raised to accentuate property performance when property returns are judged to materially outperform the cost of debt and lowered when seeking to reduce exposure to the property cycle. SEE-THROUGH ANALYSIS Since 2010 Helical has held a significant proportion of its property assets in joint ventures with partners that provide the majority of the equity required to purchase the assets, whilst relying on the Group to provide asset management or development expertise. Accounting convention requires Helical to account under IFRS for our share of the net results and net assets of joint ventures in limited detail in the income statement and balance sheet. Net asset value per share, a key performance measure used in the real estate industry, as reported in the financial statements under IFRS, does not provide stakeholders with the most relevant information on the fair value of assets and liabilities within an ongoing real estate company with a long term investment strategy. In this review and elsewhere in this statement, we have incorporated the separate components into a more detailed “see-through” analysis of our property portfolio and debt profile and the associated income streams and financing costs to assist in providing a more comprehensive overview of the Group’s activities. This see-through analysis can be found in Appendix 1. RESULTS FOR THE YEAR For the third year running we are delighted to be able to report on excellent results with record pre-tax profits of £120m in the year to 31 March 2016 (2015: £87m). Continued rental growth, good development profits and strong valuation surpluses arose from of the implementation of our London development and asset management strategies. The Group’s real estate portfolio, including its share of assets held in joint venture, increased to £1,240m (2015: £1,021m) largely the result of acquiring the remaining 2/3rd share of The Bower, London EC1, plus substantial gains on sales and revaluation of the investment portfolio. The continued expansion of the Group’s activities has resulted in an increase in its loan to value to 55% (2015: 52%) and an increase in see-through net gearing to 140% (2015: 132%). The Group lengthened its borrowings profile, repaying short term facilities and extending existing secured loans. These actions enabled the Group to extend its overall debt maturity profile to 4.5 years (2015: 4.3 years) with a weighted average cost of debt marginally increasing to 4.2% (2015: 4.1%). HELICAL BAR PLC REPORT & ACCOUNTS 2016 FINANCIAL REVIEW 40 30 20 £m 10 50 0 40 £m 50 FINANCIAL REVIEW 23 24 30 43 39 3 51 50 40 30 20 10 50 0 40 30 3 INCOME STATEMENT 20 0 10 4 RENTAL INCOME AND PROPERTY OVERHEADS Gross rental income receivable by the Group in respect of wholly owned properties increased by 19% to £45.5m (2015: £38.3m) reflecting the growth in the investment portfolio and the partial capture of its reversionary potential. In the joint ventures, gross rents fell from £6.1m to £1.8m reflecting the sale of Clyde Shopping Centre in March 2015. Property overheads in respect of wholly owned assets and in respect of those assets in joint ventures fell significantly from £5.4m to £3.4m reflecting the rotation out of management intensive secondary shopping centres to high yielding distribution warehouses, regional offices and out-of-town retail parks. After taking account of net rents payable to our profit share partners of £0.5m (2015: £0.3m), see-through net rents increased by 12.4% to £43.4m (2015: £38.6m). 4 35 30 Net rental income £m 50 1 40 30 20 10 1 0 25 20 15 10 23 5 35 0 30 25 20 15 2012 10 500 43 39 30 24 2013 2014 2015 2016 80 200 97 100 0 300 2 400 DEVELOPMENT PROFITS 5 £m Developments profits increased by 56% from £17.6m to £27.5m on a see-through basis. The main contributor was in respect of the development management fees of £23.2m crystallised by the acquisition of The Bower, London EC1. We also received development management fees of £3.7m in respect of the development at the Scottish Power headquarters in Glasgow and at One Creechurch Place, London EC3. Our retirement village programme contributed £0.4m of profits. In our joint ventures we recognised £3.2m of development profit on our schemes at Leisure Plaza and Shirley. Set against these profits was a write-down of £0.9m against a site in Telford and £1.8m against our retail development programme. 100 45 400 500 40 60 300 20 100 0 4 4 0 8 6 30 35 100 200 2012 2015 2013 2016 2014 10 33.3 5 SHARE OF RESULTS OF JOINT VENTURES The results of the joint ventures include our share of The Bower, £m London EC1 until it was acquired and fully consolidated in January 2016; our development schemes at Barts Square, London EC1; One Creechurch Place, London EC3; Shirley Town Centre, West Midlands; Leisure Plaza and C.4.1, both Milton Keynes; and King Street, London W6. Detailed analysis of our share of these joint ventures is provided in note 19 to this report and in the see-through analysis in Appendix 1. In the year under review, net rents of £1.3m (2015: £4.4m) were received, offset by net finance costs of £3.7m (2015: £3.6m). Gains on the sale or revaluation of the investment assets of £43.9m (2015: £27.2m) arose primarily in respect of The Bower, London EC1 and Barts Square, London EC1. Net of taxes, our joint ventures contributed £50.5m (2015: £27.5m). 2 10 0 8 17.1 3.4 10 15 20 25 4 5 2.4 2.4 6 2 0 2012 2013 2014 2015 39 43 2016 0 60 30 23 24 20 100 30 £m At 31 March 2016, the Group had unutilised bank facilities of £106m and £87m of cash. These facilities are primarily available to fund phase 2 of the Group’s redevelopment of The Bower, London EC1, its retirement village development programme and the phase 1 construction works at Barts Square, London EC1. 100 10 80 97 40 2012 2015 2013 2014 EPRA EARNINGS PER SHARE 45 EPRA earnings per share were 17.1p (2015: 2.4p), reflecting the Group’s share of net rental income of £43.4m (2015: £38.6m) and £m 20 development profits of £27.5m (2015: £17.6m) but excluding gains 100 97 on sale and revaluation of investment properties of £99.7m (2015: £96.6m) and trading profits of £nil (2015: £2.5m). 2015 100 2014 2016 2016 4 4 0 80 2013 EPRA earnings per share 2012 £m 60 35 40 30 20 25 20 0 15 10 £m 5 35 0 30 25 45 33.3 4 4 2012 2013 2014 2015 3.4 2012 2.4 2013 33.3 2014 2.4 2015 17.1 2016 2016 15 500 20 £m EPRA NET ASSET VALUE EPRA net asset value per share increased by 19.7% to 461p per 461 share (2015: 385p). This increase arose principally from a total comprehensive income (retained profits) of £110.3m (2015: £74.9m) less dividends paid of £14.4m (2015: £7.9m) and reflecting a reduction in the surplus on valuation of the trading and development stock to £19.4m (2015: £36.2m). 10 400 5 385 2.4 17.1 313 3.4 2.4 300 0 264 2013 250 2012 2014 2016 2015 200 EPRA NAV per share £m 100 500 2012 2013 250 264 2012 5.15 5.55 2013 2014 313 6.75 2014 461 2016 2015 385 8.17 7.25 2015 2016 0 400 300 £m 200 10 100 8 0 6 4 £m 2 10 0 8 2012 Increase 5.1% 5.15 6 £m 4 £400.0 2 £300.0 0 2014 21.6% 6.75 2015 7.25 7.4% 8.17 2016 12.7% 2013 7.8% 5.55 £371.3m 0 5 £200.0 Increase 2012 5.1% 2013 7.8% 2014 £219.5m 21.6% 2015 7.4% 2013 2014 2015 2016 461 385 313 4 2 0 2012 400 350 300 250 200 150 50 400 0 350 300 250 150 100 50 0 2016 12.7% £71.1m £71.1m £219.5m £80.0m 4-5 years £80.0m 4-5 years £m 500 400 6 300 200 100 £m 10 8 6 4 2 0 £96.0m £m £400.0 £96.0m £300.0 £200.0 5-6 years £m £400.0 £300.0 £200.0 £100.0 £0.0 £m £100.0 £400.0 £0.0 £300.0 £200.0 £100.0 £m £0.0 £400.0 £300.0 £200.0 £m £100.0 £400.0 £0.0 £300.0 £200.0 £100.0 £0.0 £34.2m £96.0m £102.7m £371.3m £80.0m £0.9m £3.6m 3.6m £1.1m £1.1m £1.1m <1 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 9-10 year years years years years years years years years years ■ Secured ■ In Joint Venture (non recourse) ■ Unsecured £219.5m £34.2m £96.0m £102.7m £80.0m £0.9m £3.6m 3.6m £1.1m £1.1m £1.1m <1 1-2 2-3 3-4 4-5 5-6 6-7 £371.3m 7-8 8-9 9-10 year years years years years years years years years years ■ Secured ■ In Joint Venture (non recourse) ■ Unsecured 250 100 264 0 6 2012 200 2013 2014 2015 2016 6.75 7.25 8.17 5.15 5.55 £34.2m £102.7m £371.3m 3-4 years £34.2m £102.7m 3-4 years £0.9m <1 year £3.6m 1-2 years 3.6m 2-3 years Increase 5-6 years 2012 5.1% 2013 7.8% £1.1m 6-7 years 2014 21.6% £1.1m 7-8 years 2015 7.4% £1.1m 8-9 years ■ Secured ■ In Joint Venture (non recourse) ■ Unsecured £219.5m £371.3m £0.9m <1 year £3.6m 1-2 years 3.6m 2-3 years ■ Secured ■ In Joint Venture (non recourse) ■ Unsecured £100.0 £1.1m 6-7 years £1.1m £219.5m 7-8 years £1.1m 8-9 years £34.2m £96.0m £102.7m £80.0m £0.0 £0.9m £3.6m 3.6m £1.1m £1.1m £1.1m <1 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 9-10 year years years years years years years years years years ■ Secured ■ In Joint Venture (non recourse) ■ Unsecured £71.1m 2016 12.7% 9-10 years £71.1m 9-10 years £71.1m £371.3m £34.2m £102.7m 3-4 years £219.5m £80.0m 4-5 years £96.0m 5-6 years £0.9m <1 year £3.6m 1-2 years 3.6m 2-3 years ■ Secured ■ In Joint Venture (non recourse) ■ Unsecured £1.1m 6-7 years £1.1m 7-8 years £1.1m 8-9 years £71.1m 9-10 years 3 4 1 2 5 6 50 40 30 20 10 0 35 30 25 20 15 10 5 0 500 400 300 200 100 0 10 8 6 4 2 0 400 350 300 250 200 150 100 50 0 HELICAL BAR PLC REPORT & ACCOUNTS 2016 STRATEGIC REPORT 52 FINANCIAL REVIEW £m 50 40 30 20 10 0 £m 100 80 60 43 39 23 24 30 2012 2013 2014 2015 2016 97 100 GAIN ON SALE AND REVALUATION OF INVESTMENT PROPERTIES During the year we sold two London assets, Enterprise House W2, a 45,000 sq ft office building let to Network Rail for 20 years and £m Artillery Lane E1, a 17,000 sq ft refurbished office building, for total gross proceeds of £57m, a small premium to book value. In the regions we sold eight industrial units, three offices and five retail assets, a total of 16 regional assets, for £67m at a small net premium to book value. 43 39 40 50 30 The valuation of our investment portfolio reflected our increased exposure to London offices where we generated an increase of 18.8% overall and 30.8% on a like-for-like basis. The regions contributed 1.1% overall and 1.2% on a like-for-like basis. In total, the investment portfolio showed a valuation increase of 11.1%, or 14.9% on a like-for-like basis. 30 24 23 20 10 0 The total impact on our financial statements of the gain on sale and revaluation of our investment portfolio was a net gain of 2016 2012 £99.7m (2015: £96.6m). 2014 2013 2015 Net gain on sale and revaluation of investment properties £m 100 80 60 40 20 0 97 100 45 4 4 2012 2013 2014 2015 2016 35 £m ADMINISTRATION COSTS Administration costs, before performance related awards, increased by 5% from £10.2m to £10.7m. This increase arose from employing a greater number of asset managers, development executives and in the finance team as the portfolio increased and we move through the delivery phase of the development programme. 33.3 25 30 20 17.1 15 5 10 3.4 Performance related share awards and bonus payments, before National Insurance costs, were £13.3m (2015: £13.4m). Of this amount, the £6.7m (2015: £6.4m) charge for share awards under the Performance Share Plans is expensed through the Income Statement but added back to Shareholders’ Funds through the Statement of Changes in Equity. The £6.6m (2015: £6.9m) charge for bonus 2016 payments comprises £5.5m (2015: £5.8m) which will be paid in June 2016 and £1.1m (2015: £1.1.m) which will be paid in deferred shares to be held for a minimum of three years. In addition, National £m Insurance of £2.1m (2015: £3.0m) has been accrued in the year. 2014 2013 2015 2012 2.4 2.4 0 500 400 2016 £000 385 461 2015 £000 313 10,717 10,156 Administration Costs 300 250 264 Share awards 200 Directors and senior executives’ bonuses NIC on share awards and bonuses 100 Total 6,666 6,633 2,087 6,432 6,920 3,022 26,103 26,530 45 0 4 4 20 40 2012 FINANCE COSTS, FINANCE INCOME AND DERIVATIVE FINANCIAL INSTRUMENTS Interest payable on secured bank loans including our share of loans on assets held in joint ventures, but before capitalised interest, increased to £20.2m (2015: £16.7m). Interest payable in respect of the unsecured Retail and Convertible Bonds was £8.8m (2015: £8.0m). The continued fall in medium and long term interest rate projections at 31 March 2016 contributed to a charge of £6.9m (2015: £8.4m) £m on the derivative financial instruments which have been valued on a mark to market basis. Capitalised interest increased from £3.6m to £4.9m as development schemes progressed. Other interest payable reduced to £3.7m from £6.3m (which includes £2.8m of costs incurred in issuing the Convertible Bond). Total finance costs increased from £27.3m to £27.8m. Finance income earned was £5.1m (2015: £2.5m). 3 33.3 20 30 40 50 2014 2016 2013 2015 25 35 30 20 15 10 17.1 10 TAXATION Helical pays corporation tax on its net rental income, trading and development profits and realised chargeable gains, after offset of administration and finance costs. 3.4 2.4 2.4 0 5 0 2012 The deferred tax charge for the year is principally derived from 2016 the revaluation surpluses recognised in the year offset by the recognition of tax losses which the Group believes will be utilised against profits in the foreseeable future. £m 2014 2013 2015 500 400 300 313 461 385 250 4 DIVIDENDS Helical follows a progressive dividend policy increasing its dividends in line with its results, whilst retaining the majority of funds generated for investment in growing the business. The interim dividend paid on 30 December 2015 of 2.30p was an increase of 9.5% on the previous interim dividend of 2.10p. On 4 April 2016, the Company paid a second interim of 5.15p and together with the final dividend of 0.72p payable on 29 July 2016, this is an increase of 14.0% on the previous year (2015: 5.15p). In total, the dividend paid or payable in respect of the results for the year to 31 March 2016 is 8.17p (2015: 7.25p), an increase of 12.7%. Since 2013 the compound annual growth rate of the Company’s dividends has been 13.8%. 264 2014 2016 2013 2015 100 200 0 Pence per share 2012 35 30 25 20 15 10 5.15 5 0 6.75 7.25 8.17 5.55 £m 10 1 8 6 4 2 0 2012 Increase 5.1% £m £400.0 2 £300.0 £200.0 £100.0 500 400 300 200 100 0 2013 7.8% 2014 21.6% 2015 7.4% 2016 12.7% £371.3m £219.5m £34.2m £96.0m £102.7m £80.0m £71.1m £0.0 £0.9m £3.6m 3.6m £1.1m £1.1m £1.1m <1 10 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 9-10 year years years years years years years years years years ■ Secured ■ In Joint Venture (non recourse) ■ Unsecured 3 4 1 2 5 6 50 40 30 20 10 0 35 30 25 20 15 10 5 0 500 400 300 200 100 0 10 8 6 4 2 0 400 350 300 250 200 150 100 50 0 2012 2013 2014 2015 2016 6.75 7.25 8.17 5.15 5.55 0 £m 10 8 6 4 2 0 £m £400.0 £300.0 £200.0 £100.0 £m £400.0 £300.0 £200.0 £100.0 £0.0 8 6 4 2 0 5 £m £400.0 £300.0 £200.0 £100.0 £0.0 6 400 350 £0.9m 300 <1 250 year 200 150 100 50 0 2012 Increase 5.1% 2013 7.8% 2014 21.6% 2015 7.4% 2016 12.7% £371.3m £219.5m £34.2m £96.0m £102.7m £80.0m £71.1m £0.0 £0.9m £3.6m 3.6m £1.1m £1.1m £1.1m <1 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 9-10 year years years years years years years years years years ■ Secured ■ In Joint Venture (non recourse) ■ Unsecured £371.3m £34.2m £102.7m 3-4 years £219.5m £80.0m 4-5 years £96.0m 5-6 years £3.6m 1-2 years 3.6m 2-3 years ■ Secured ■ In Joint Venture (non recourse) ■ Unsecured £1.1m 6-7 years £1.1m 7-8 years £1.1m 8-9 years £71.1m 9-10 years £371.3m £34.2m £102.7m 3-4 years £219.5m £80.0m 4-5 years £96.0m 5-6 years £0.9m <1 year £3.6m 1-2 years 3.6m 2-3 years ■ Secured ■ In Joint Venture (non recourse) ■ Unsecured £1.1m 6-7 years £1.1m 7-8 years £1.1m 8-9 years £71.1m 9-10 years HELICAL BAR PLC REPORT & ACCOUNTS 2016 FINANCIAL REVIEW 53 BALANCE SHEET INVESTMENT PORTFOLIO Sales of £55m of London assets and £64m of regional assets provided funds, net of loan repayments, for £377m of acquisitions. Included in these acquisitions was the purchase of The Bower EC1, from the joint venture with Crosstree, where the existing cash equity and share of profits to date remained invested in the scheme. The acquisition was funded through new bank finance of £200m, of which £149.5m was drawn down to complete the purchase with the remaining facility available to fund the redevelopment of The Tower at 207 Old Street EC1. Revaluation surpluses of £53.5m (£0.3m attributable to our profit share partners) and £2.3m in our joint ventures contributed to an increase in the overall size of the investment portfolio on a see-through basis to £1,053m (2015: £790m). Valuation at 31 March 2015 Acquisitions Capital Expenditure Disposals Transfer from stock Revaluation Surplus - Helical - Profit Share Partners Valuation at 31 March 2016 Wholly owned £000 In joint venture £000 See-through £000 701,521 376,899 28,234 88,305 - 16,260 789,826 376,899 44,494 (119,385) (96,687) (216,072) - 53,508 323 1,358 2,316 - 1,358 55,824 323 1,041,100 11,552 1,052,652 DEBT AND FINANCIAL RISK In seeking to finance Helical’s recent expansion, the Group has used a combination of new secured facilities, whose purpose and terms reflect the nature of the assets charged to the lenders, and unsecured bonds which have provided the firepower to acquire many of the assets which have contributed to the recent growth in shareholders’ funds. The composition of the Group’s debt structure has significantly changed since 31 March 2014 with unsecured debt now representing 23% of debt drawn at 31 March 2016. In total, Helical’s outstanding debt at 31 March 2016 of £778m (2015: £675m) had an average maturity of 4.5 years (2015: 4.3 years) and a weighted interest cost of 4.2% (2015: 4.1%). Debt profile at 31 March 2016 – excluding the effect of arrangement fees Investment facilities Development facilities Total wholly owned In joint ventures Total secured debt Retail Bond Convertible Bond Working capital Fair Value of Convertible Bond Total unsecured debt Total debt Total facility £000’s 568,635 65,000 633,635 58,035 691,670 80,000 100,000 10,000 2,747 192,747 884,417 Total utilised £000’s 509,331 50,501 559,832 35,302 595,134 80,000 100,000 - 2,747 182,747 777,881 Available facility £000’s Net LTV % Weighted average interest rate % Average maturity Years 59,304 14,499 73,803 22,733 96,536 - - 10,000 - 10,000 106,536 - - - - 40.2 - - - - - 55.0 3.8 5.5 4.0 3.4 3.9 6.0 4.0 - - 4.9 4.2 5.0 4.0 4.8 3.7 4.7 4.2 3.2 - 3.7 4.5 HELICAL BAR PLC REPORT & ACCOUNTS 2016 STRATEGIC REPORT 54 FINANCIAL REVIEW SECURED DEBT The Group arranges its secured investment and development facilities to suit its business needs as follows: UNSECURED DEBT The Group’s unsecured debt, including the Convertible Bond at its mark to market valuation, is £182.7m (2015: £183.9m) as follows: • Investment facilities • Retail Bond In June 2013, the Group raised £80m from the issue of an unsecured Retail Bond with a 6.00% coupon. This bond is repayable in June 2020. • Convertible Bond In June 2014, the Group raised £100m from the issue of a listed unsecured Convertible Bond with a 4.0% coupon, repayable in June 2019, or, subject to certain conditions, convertible at the option of the bond holders into ordinary shares, unless a cash settlement option is exercised by the Company. The initial conversion price has been set at £4.9694 per share, representing a 35% premium above the price on the day of the issue and a premium of 59% above the Company’s EPRA net asset value per share at 31 March 2014. The value of the Bond at 31 March 2016, as determined by the listed market price, was £102.7m (2015: £103.3m). • Short term working capital facilities These facilities provide access to additional working capital for the Group. We have £190m of revolving credit facilities which enable the group to acquire, refurbish, reposition and hold significant parts of our investment portfolio. We have used these facilities to finance our regional portfolio. Our London investment assets are primarily held in £380m of term loan secured facilities which, where appropriate, allow us to finance refurbishment projects. The value of the Group’s properties secured in these facilities at 31 March 2016 was £945m (2015: £639m) with a corresponding loan to value of 54% (2015: 58%). The average maturity of the Group’s investment facilities at 31 March 2016 was 5.0 years (2015: 4.6 years) with a weighted average interest rate of 3.8% (2015: 3.7%). • Development facilities These facilities finance the redevelopment of The Tower at The Bower, Old Street, London EC1 and the construction of the retirement villages at Durrants Village, Horsham; Maudslay Park, Great Alne; and Milbrook Village, Exeter. The average maturity of the Group’s development facilities at 31 March 2016 was 4.0 years (2015: 2.0 years) with a weighted average interest rate of 5. 5% (2015: 3.7%). • Joint venture facilities We hold a number of investment and development properties in joint venture with third parties and include in our reported figures our share, in proportion to our economic interest, of the debt associated with each asset. The average maturity of the Group‘s share of bank facilities in joint ventures at 31 March 2016 was 3.7 years (2015: 3.0 years) with a weighted average interest rate of 3.4% (2015: 4.5%). £m 400 300 200 100 0 £371.3m £219.5m £0.9m £3.6m £3.6m £102.7m £80.0m £1.1m £1.1m £1.1m £34.2m £96.0m £71.1m <1 YEAR 1-2 YEARS 2-3 YEARS 3-4 YEARS 4-5 YEARS 5-6 YEARS 6-7 YEARS 7-8 YEARS 8-9 YEARS 9-10 YEARS SECURED IN JOINT VENTURE (NON RECOURSE) UNSECURED HELICAL BAR PLC REPORT & ACCOUNTS 2016 FINANCIAL REVIEW 55 HEDGING At 31 March 2016, the Group had £635.5m (2015: £500.2m) of fixed rate debt with an average effective interest rate of 4.2% (2015: 4.4%) and £107.1m (2015: £103.4m) of floating rate debt with an average effective interest rate of 3.9% (2015: 2.8%). In addition, the Group has £157m of interest rate caps at an average of 4.0% (2015: £143.2m at 4.0%), all of which expire within 12 months. In our joint ventures, the Group’s share of fixed rate debt was £nil (2015: £23.3m) with an effective rate of nil% (2015: 6.8%) and £35.3m (2015: £47.9m) of floating rate debt with an effective rate of 3.4% (2015: 3.3%). CASH AND CASH FLOW At 31 March 2016, the Group had £193m (2015: £229m) of cash and agreed, undrawn, committed bank facilities including its share in joint ventures as well as £153m (2015: £131m) of uncharged property on which it could borrow funds. NET BORROWINGS AND GEARING Total gross borrowings of the Group, including in joint ventures, have increased from £674.6m to £777.9m during the year to 31 March 2016. After deducting cash balances of £86.8m (2015: £136.3m) and unamortised refinancing costs of £9.3m (2015: £6.4m), net borrowings increased from £531.9m to £681.8m. The gearing of the Group, including in joint ventures, increased from 132% to 140%. Including EPRA adjustments to IFRS shareholders’ funds, the see-through net asset value gearing increases from 113% to 125%. This gearing measure, the ratio of see-through net borrowings to EPRA net asset value, represents a longer term view of gearing than the standard measure. Fixed rate debt - Secured borrowings - Retail Bond - Convertible Bond 2016 2015 - Fair value of Convertible Bond See-through gross borrowings See-through cash balances Unamortised refinancing costs See-through net borrowings Shareholders’ funds EPRA shareholders’ funds See-through gearing - IFRS See-through gearing - EPRA £777.9m £86.8m £9.3m £681.8m £486.2m £546.8m 140% 125% £674.6m £136.3m Total Floating rate debt £6.4m - Secured £531.9m £404.3m £469.1m 132% 113% Total In joint ventures - Fixed rate - Floating rate Total borrowings 2016 £m 2015 £m % 452.8 80.0 100.0 2.7 3.9 316.9 6.0 80.0 4.0 100.0 - 3.3 635.5 4.2 500.2 107.1 742.6 3.9 103.4 4.2 603.6 - 35.3 777.9 - 3.4 23.3 47.9 4.2 674.8 % 4.1 6.0 4.0 - 4.4 2.8 4.1 6.8 3.3 4.2 INTEREST COVER In assessing the results of the Group for each financial year, Helical considers its interest cover as a measure of its performance and its ability to finance its annual interest payments from its net operating income, before revaluation gains or losses on the investment portfolio and net realisable provisions on the trading and development stock. In the year to 31 March 2016, this interest cover was 5.4 times (2015: 2.5 times). 2016 2015 See-through net operating income £121.3m See-through net finance costs Interest cover £22.6m 5.4x £62.7m £24.8m 2.5x Tim Murphy Finance Director 15 June 2016 HELICAL BAR PLC REPORT & ACCOUNTS 2016 STRATEGIC REPORT 56 VIEW LOOKING SOUTH FROM ONE CREECHURCH PLACE, LONDON EC3 57 58 PRINCIPAL RISKS REVIEW Risk is an integral part of any group’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. As well as seeing changes in our internal and external environment as potential risks, we also see them as being opportunities which can drive performance. Risk management starts at Board level where the Directors set the overall risk appetite of the Group and the risk management strategies. Helical’s management runs the business within these guidelines and part of its role is to act within these strategies and to report to the Board on how they are being operated. The Group’s risk appetite and risk management strategies are continually assessed by the Board to ensure that they are appropriate and consistent with the Group’s overall strategy and with external market conditions. The effectiveness of the Group’s risk management strategy is reviewed every six months by the Audit Committee and by the full Board. The Board has ultimate responsibility for risk within the business. However, the small size of our team and our flat management structure allows the Executive Directors to have close contact with all aspects of the business and allows us to ensure that the identification and management of risks and opportunities is part of the mindset of all decision makers at Helical. The principal risks faced by the Group, and the steps taken by the Group to mitigate these risks, are as follows: HELICAL BAR PLC REPORT & ACCOUNTS 2016 HELICAL BAR PLC REPORT & ACCOUNTS 2016 STRATEGIC REPORT 59 PRINCIPAL RISKS REVIEW STRATEGIC RISKS STRATEGIC RISKS Strategic risks are external risks that could prevent the Group delivering its strategy. These risks principally impact our decision Strategic risks are external risks that could prevent the Group delivering its strategy. These risks principally impact our decision to purchase or exit from a property asset. to purchase or exit from a property asset. RiskRisk Risk description Risk description Mitigation/action Mitigation/action The Group’s The Group’s strategy is strategy is inconsistent inconsistent with the market. with the market. Changing market conditions could hinder the Group’s Changing market conditions could hinder the Group’s ability to buy and sell properties envisioned in its strategy. ability to buy and sell properties envisioned in its strategy. The location, size and mix of properties in the Helical The location, size and mix of properties in the Helical portfolio determine the impact of the risk. If the Group’s portfolio determine the impact of the risk. If the Group’s chosen markets underperform, the impact on the chosen markets underperform, the impact on the Group’s liquidity, investment property revaluations and Group’s liquidity, investment property revaluations and rental income is greater. rental income is greater. The Group carries out signifi cant development projects The Group carries out signifi cant development projects over several years and is therefore exposed to over several years and is therefore exposed to fl uctuations in the market over time. fl uctuations in the market over time. Property values Property values decline/reduced decline/reduced tenant demand tenant demand for space. for space. The property portfolio is at risk of revaluation falls The property portfolio is at risk of revaluation falls through changes in market conditions, including through changes in market conditions, including under-performing sectors or locations and lack of under-performing sectors or locations and lack of tenant demand. tenant demand. Management constantly monitors the market and Management constantly monitors the market and makes changes to the Group’s strategy in light of makes changes to the Group’s strategy in light of market shifts. market shifts. The Group’s management is highly experienced and has a The Group’s management is highly experienced and has a good track record of calling the property market. good track record of calling the property market. Due to the Group’s small management team, changes in Due to the Group’s small management team, changes in strategy can be implemented quickly. strategy can be implemented quickly. Management carefully reviews the risk profi le of Management carefully reviews the risk profi le of individual developments and builds properties in several individual developments and builds properties in several phases to minimise the exposure to reduced demand for phases to minimise the exposure to reduced demand for particular asset classes or geographical locations over particular asset classes or geographical locations over time. The Group limits the number of speculative time. The Group limits the number of speculative developments it does on its own balance sheet. developments it does on its own balance sheet. The Group’s property portfolio is diverse in asset type, The Group’s property portfolio is diverse in asset type, location and tenant industries, reducing over-exposure location and tenant industries, reducing over-exposure to one sector. Management reviews external data, seeks to one sector. Management reviews external data, seeks the advice of industry experts and monitors the the advice of industry experts and monitors the performance of individual assets and sectors in order to performance of individual assets and sectors in order to dispose of non-performing assets and rebalance the dispose of non-performing assets and rebalance the portfolio for the changing market. portfolio for the changing market. Political risk Political risk There is a risk that regulatory and tax changes could There is a risk that regulatory and tax changes could adversely aff ect the market in which the Group adversely aff ect the market in which the Group operates and changes in legislation could lead to delays operates and changes in legislation could lead to delays in receiving planning permission. in receiving planning permission. Management seeks advice from experts to ensure Management seeks advice from experts to ensure continued monitoring of upcoming regulatory and tax continued monitoring of upcoming regulatory and tax changes and to understand the potential impact on the changes and to understand the potential impact on the Group. It maintains good relationships with planning Group. It maintains good relationships with planning consultants and local authorities. consultants and local authorities. FINANCIAL RISKS FINANCIAL RISKS Financial risks are those that could prevent the Group from funding its chosen strategy, both in the long and short term. Financial risks are those that could prevent the Group from funding its chosen strategy, both in the long and short term. RiskRisk Risk description Risk description Mitigation/action Mitigation/action Availability of Availability of bank borrowing bank borrowing and cash and cash resources resources The inability to roll over existing facilities or take out The inability to roll over existing facilities or take out new borrowing would impact on the Group’s ability to new borrowing would impact on the Group’s ability to maintain its current portfolio and purchase new properties. maintain its current portfolio and purchase new properties. The Group may forego opportunities if it does not The Group may forego opportunities if it does not maintain suffi cient cash to take advantage of maintain suffi cient cash to take advantage of opportunities as they arise. opportunities as they arise. The Group maintains a good relationship with many The Group maintains a good relationship with many established lending institutions and borrowings are established lending institutions and borrowings are spread across a number of these. spread across a number of these. Funding requirements are regularly reviewed by Funding requirements are regularly reviewed by management, who ensure that the maturity dates of management, who ensure that the maturity dates of borrowings are spread over several years. borrowings are spread over several years. Management monitors the cash levels of the Group on a Management monitors the cash levels of the Group on a daily basis and maintains suffi cient levels of cash daily basis and maintains suffi cient levels of cash resources and undrawn committed bank facilities to resources and undrawn committed bank facilities to fund opportunities as they arise. fund opportunities as they arise. Breach of loan Breach of loan and bond and bond covenants covenants If the Group breaches debt covenants, lending If the Group breaches debt covenants, lending institutions may require the early repayment of institutions may require the early repayment of borrowings. borrowings. Covenants are closely monitored throughout the year. Covenants are closely monitored throughout the year. Management carries out sensitivity analysis to assess Management carries out sensitivity analysis to assess the likelihood of future breaches based on signifi cant the likelihood of future breaches based on signifi cant changes in property values or rental income. changes in property values or rental income. Increase in cost Increase in cost of borrowing of borrowing The Group is at risk of increased interest rates on The Group is at risk of increased interest rates on unhedged borrowings. unhedged borrowings. The Group hedges the interest rates on the majority of The Group hedges the interest rates on the majority of its borrowings, eff ectively fi xing the rates over several its borrowings, eff ectively fi xing the rates over several years. years. 60 HELICAL BAR PLC REPORT & ACCOUNTS 2016 PRINCIPAL RISKS REVIEW OPERATIONAL RISKS OPERATIONAL RISKS Operational risks are internal risks that could prevent the Group from delivering its strategy. Operational risks are internal risks that could prevent the Group from delivering its strategy. RiskRisk Risk description Risk description Mitigation/action Mitigation/action Employment Employment and retention and retention of key of key personnel personnel The Group’s continued success is reliant on its The Group’s continued success is reliant on its management and staff and successful relationships management and staff and successful relationships with its joint venture partners. with its joint venture partners. The senior management team is very experienced and The senior management team is very experienced and the average length of service is high. The Nominations the average length of service is high. The Nominations Committee and Board regularly review succession Committee and Board regularly review succession planning issues and remuneration is set to attract and planning issues and remuneration is set to attract and retain high calibre staff . retain high calibre staff . The Group has well established relationships with joint The Group has well established relationships with joint venture partners. venture partners. Inability to Inability to asset manage, asset manage, develop and develop and let property let property assets assets The Group relies on external parties when asset The Group relies on external parties when asset managing, developing and letting its properties, managing, developing and letting its properties, including planning consultants, contractors, architects, including planning consultants, contractors, architects, project managers, marketing agencies, lawyers and project managers, marketing agencies, lawyers and managing agents. managing agents. The Group has a highly experienced team managing its The Group has a highly experienced team managing its properties. It seeks to maintain excellent relationships with its properties. It seeks to maintain excellent relationships with its specialist professional advisors. Management actively specialist professional advisors. Management actively monitors these parties to ensure they are delivering the monitors these parties to ensure they are delivering the required quality on time. required quality on time. Health and Health and safety / safety / Bribery and Bribery and corruption risk corruption risk The nature of the Group’s operations and markets The nature of the Group’s operations and markets expose it to potential health and safety and bribery expose it to potential health and safety and bribery and corruption risks. and corruption risks. The Group updates its Health and Safety policy The Group updates its Health and Safety policy annually, which is approved by the Board. The Group annually, which is approved by the Board. The Group engages an external health and safety consultant to engages an external health and safety consultant to review contractor contracts prior to appointment to review contractor contracts prior to appointment to ensure they have appropriate policies and procedures in ensure they have appropriate policies and procedures in place, then monitors the adherence to policies place, then monitors the adherence to policies throughout the project. throughout the project. The Executive Committee reviews the report by the The Executive Committee reviews the report by the external consultant every month and the Board reviews external consultant every month and the Board reviews them at every meeting. The internal asset managers them at every meeting. The internal asset managers carry out regular site visits. carry out regular site visits. The Group’s Anti-bribery policy is updated annually and The Group’s Anti-bribery policy is updated annually and projects with greater exposure to bribery and projects with greater exposure to bribery and corruption are monitored closely. The Group avoids corruption are monitored closely. The Group avoids doing business in high risk territories. doing business in high risk territories. REPUTATIONAL RISKS REPUTATIONAL RISKS Reputational risks are those that could aff ect the Group in all aspects of its strategy. Reputational risks are those that could aff ect the Group in all aspects of its strategy. RiskRisk Risk description Risk description Mitigation/action Mitigation/action Poor Poor management of management of stakeholder stakeholder relations relations The Group risks suff ering from reputational damage The Group risks suff ering from reputational damage resulting in a loss of credibility with key stakeholders resulting in a loss of credibility with key stakeholders including shareholders, analysts, banking institutions, including shareholders, analysts, banking institutions, contractors, managing agents, tenants, property contractors, managing agents, tenants, property purchasers/sellers and employees. purchasers/sellers and employees. The Group believes that by successfully delivering its The Group believes that by successfully delivering its strategy and mitigating its strategic, fi nancial and strategy and mitigating its strategic, fi nancial and operational risks its strong reputation will be protected. operational risks its strong reputation will be protected. The Group regularly reviews its strategy and risks to The Group regularly reviews its strategy and risks to ensure it is acting in the interests of its stakeholders. ensure it is acting in the interests of its stakeholders. The Group maintains a strong relationship with The Group maintains a strong relationship with investors and analysts through regular meetings. investors and analysts through regular meetings. PRINCIPAL RISKS REVIEW STRATEGIC REPORT 61 VIABILITY STATEMENT The Directors have assessed the viability of the Group for a period of five years to March 2021, being the period for which the Board regularly reviews forecasts and which encompasses the lifetime of the Group’s major development projects. The Board does consider the future performance of the Group beyond the five years but a longer timeframe involves less certainty over the forecasting assumptions. The viability of the Group is reviewed throughout the year and through multiple channels, detailed below: • The strategic direction of the Group is established by the Board once a year and is captured in the Business Plan which forms the basis of the detailed budgets and actions for the year; • The Board reviews the principal risks of the Group twice a year, reassessing the severity of each risk and determining the Group’s proposed response; • The five year forecasts for the Group are updated and reviewed by the Board on a quarterly basis; and • Management reviews the short term (three-four months) cash requirements of the Group on a weekly basis and cash balances and movements are monitored daily. In making their assessment, the Board considers the principle risks and then assesses the potential impacts in severe, but plausible, downside scenarios together with the likely effectiveness of mitigating actions that the Group would have at its disposal. The most relevant risks and the potential impact of them on the viability of the Group are considered to be: • A significant reduction in the fair value of the Group’s property portfolio, which could result in the Group breaching loan covenants and being required to repay a proportion of borrowings; • A lack of demand from tenants as the Group’s development properties near practical completion, which could reduce the Group’s levels of rental income and profitability; and • An inability to maintain sufficient levels of rental income, which could present a short term liquidity risk for the Group. The Group subjected the five year cashflow forecasts to sensitivity analysis in which it assessed the impact of significant reductions to the property portfolio fair value and associated rental income on the Group’s loan covenants. Management also modelled the rental income profile of the Group, taking into account expected changes to leases and contracted rents, comparing expected income over a five year period with the loan covenant requirements in order to determine points of potential pressure. Based on the outcomes of the procedures outlined above and other matters considered by the Board, it has a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the five year period of their assessment. TOP CREATIVE QUARTER, CARDIFF MIDDLE THE BOWER, OLD STREET, LONDON EC1 BOTTOM ONE BARTHOLOMEW CLOSE, LONDON EC1 HELICAL BAR PLC REPORT & ACCOUNTS 2016 62 HELICAL BAR PLC REPORT & ACCOUNTS 2016 STRATEGIC REPORT 63 CORPORATE RESPONSIBILITY Helical implements responsible environmental and social practices across its direct business, via partners, contractors and suppliers and through its joint venture activities. An endorsement of Helical’s commitment to managing environmental and social impacts is its continued listing in the FTSE4Good Index. The FTSE4Good Index measures the performance of companies that meet globally recognised corporate responsibility standards and facilitates investment in those companies. Maintaining listed status on this Index remains a key priority for Helical, and informs the evolving approach to Corporate Responsibility and sustainability. MANAGING CORPORATE RESPONSIBILITY Each year Helical reviews and updates its environmental management system, which has been in place since 2003. The environmental management system, which is available on the Company website, is embedded within the operations of Helical. Key elements of the system include: • ‘Environment’ and ‘Corporate Responsibility’ policies which set out the Group’s high-level commitment across a number of impact areas. These are reviewed annually at Board level and are implemented by the senior management team; • Annual (and ongoing) performance targets to enable Helical to focus its efforts throughout the year on measurable, yet achievable, performance goals. This year Helical has continued to report on energy and water consumption at the larger managed multi-let assets, and measured performance against quantitative targets set in 2015. In addition, the proportion of waste recycled has been measured at managed assets and Group owned developments projects; • Key Performance Indicators (KPIs) to help Helical monitor progress towards these targets and to ensure they are able to report in line with investor disclosure requirements, notably FTSE4Good. It should be acknowledged that the particular business model of the buying and selling of assets means that absolute performance measures can be difficult to compare year on year, hence this year the reporting against selected intensity (resource consumption) and like for like KPIs is being used; • Checklists to assist in applying minimum sustainability requirements across its development activities. Helical has developed a sustainability project management checklist to ensure that sustainability issues are incorporated into all decisions throughout the development lifecycle. In addition, an Environmental Impact Checklist is issued to individual contractors in order to address corporate goals at the construction stage; and • Effective use of internal audit and review through quarterly meetings of key Helical personnel, external corporate responsibility advisors and principal managing agents to ensure effective delivery of the objectives and targets. The management system has been designed specifically to reflect the flexibility of Helical’s business model. It also reflects the key role that Helical’s partners play in delivering enhanced sustainability outcomes in all its business ventures, be they developments/refurbishments or in the management of individual multi-let assets. REVIEW OF PROGRESS IN THE YEAR TO 31 MARCH 2016 The benefits of managing environmental and social impacts include increased ability to secure planning consent, improved marketability of assets to prospective tenants, reduced operating costs of assets, mitigating the risk of future legislation and regulation, and enhanced corporate reputation. We outline below the progress in relation to each of Helical’s Corporate Responsibility impact areas. ENVIRONMENT The Group’s corporate commitments to environmental issues are outlined in the Group’s Environmental Policy which can be found on the Company website. The policy details Helical’s commitments across a range of impact areas and its development and property management activities. The Group set itself a number of targets to guide its Corporate Responsibility. These targets address a range of impacts arising from development and property management activities, including resource use and waste production, pollution, biodiversity, timber sourcing, tenant engagement, flood risk and sustainable design and construction. A full list of these targets can be found on the Group website. The performance against the key targets is summarised below: • Previously, year on year improvement targets have been reported for the Head Office. Following the relocation of the Head Office to 5 Hanover Square in August 2014, year on year data has been collated for energy. However, as the office is a serviced let property, waste and water consumption data are not available going forward; • The Group’s managed multi-let offices continue to improve energy and water efficiency through the implementation of low and no cost measures. The specific target for 2016 was to achieve a 2% improvement against the 2015 baseline. For this year, only those properties that can be compared on a like – for- like have been included: The Hub, Glasgow, Shepherds Building, London W14 and Churchgate and Lee House, Manchester. The Loom, London E1 and The Morgan Quarter, Cardiff, data cannot be compared year on year due to partial refurbishment taking place during 2015; • Of those that can be compared, Shepherds Building, London W14 has shown a drop in energy consumption of 18%, although this can be partially attributed to the closure of the café for part of the year. Water consumption increased by 6% with the addition of new showers in the common parts. The Hub, Glasgow has shown a small decrease in electricity consumption and a 5% decrease in water consumption but a 22% increase in gas consumption attributable to boiler down time in the prior year. Churchgate and Lee House, Manchester is difficult to assess in terms of year on year performance as there have been a number of issues with metering resulting in a large increase in electricity consumption. Gas consumption, however, has shown a 17% reduction; • The Group’s retail portfolio has been reduced over the year with only The Morgan Quarter, Cardiff and Parkgate, Shirley retained to enable year on year comparison. Of these, The Morgan Quarter, Cardiff has shown a 13% decrease in electricity consumption through implementing a successful awareness raising programme for staff regarding the role they can play in reducing costs and lessening environmental impact. Parkgate, Shirley has shown a 59% increase which is attributed to increased occupancy and a malfunctioning meter. With respect to water consumption year on year comparison is not possible at The Morgan Quarter, Cardiff due to the impact of the ongoing refurbishment work and at Parkgate, Shirley water consumption is not monitored; THE BOWER, OLD STREET, LONDON EC1 64 CORPORATE RESPONSIBILITY • The Group continues to offer recycling facilities at the larger of its managed assets. Where data is available Helical comfortably exceeded its ongoing target of a recycling rate of at least 35% at the majority of properties and achieved 80% at the Hub, Glasgow. The exceptions were Parkgate, Shirley and Churchgate and Lee House, Manchester which will be reviewed in the forthcoming year; • One of Helical’s ongoing targets is to proactively engage with tenants to encourage improvements in the efficient use of the buildings. Individual property managers have engaged with tenants to try to see if there are ways in which efficiency initiatives can be introduced and, particularly, to encourage increased recycling within the portfolio; • In compliance with legal requirements, the Group undertook an audit of its operations in accord with Energy Savings Opportunity Scheme (ESOS) and is currently implementing the key findings where potential payback savings have been identified. Given the nature of the portfolio, the focus of improvements is in the core managed multi-let buildings which have the largest energy consumption. Examples of the initiatives that are being pursued include a rolling programme of upgrading to LED lighting in The Hub, Glasgow and Shepherds Building, London W14 and a £75,000 capital spend on a new boiler system at The Hub, Glasgow; and HEAD OFFICE AND MULTI-LET OFFICES • An ongoing objective is to improve the effectiveness of building management systems (BMS) and the use of smart meters. Of the larger multi-let buildings all have an operating BMS with the exception of The Loom, London E1. Helical has maintained its registration with the Carbon Reduction Commitment Energy Efficiency Scheme (CRC). The confirmed purchased allowance for year to 31 March 2015 was 9,447 tonnes. The projected allowance for the year to 31 March 2016 is in the order of 7,974 tonnes based on the current reported emissions for the portfolio as a whole. The Group has again reported to the Carbon Disclosure Project in the year and achieved an improvement in its disclosure, scoring 86%, above the index average of 84%. In line with the mandatory requirement for reporting its greenhouse gas emissions, Helical has provided a separate disclosure in this report. Helical presents its utility consumption performance for multi-let buildings under management as well as the Head Office (where data availability permits) below. As previously, the data provision focuses on energy consumption that is the responsibility of the landlord within common parts, vacant space and during refurbishment. Buildings that have been sold during the reporting year are not reported. 5 Hanover Square, London W1S 1 11-15 Farm St (until August 2014) Shepherds Building, London W14 The Hub, Glasgow Churchgate & Lee House, Manchester The Loom, London E1 Creative Quarter, Cardiff Notes: N/A refers to data not available or not applicable ‘No gas’ refers to assets where gas is not used on site 1 refers to part year occupancy due to office move 2 restated figure for 2014-15 RETAIL Parkgate, Shirley Morgan Quarter, Cardiff Notes: Electricity 2014-15 kWh 51,3971 44,820 559,366 171,868 445,7132 266,449 46,223 Electricity 2015-16 kWh 100,142 N/A 458,228 170,840 706,951 167,362 64,697 Gas 2014-15 kWh N/A 10,182 No gas 659,465 32,6222 No gas No gas Gas 2015-16 kWh N/A N/A No gas 805,203 27,225 No gas No gas Water 2014-15 m3 N/A 190 6,387 5,569 12,9942 5,137 143 Water 2015-16 m3 N/A N/A 6,773 5,283 11,556 5,162 202 Electricity 2014-15 kWh 38,616 335,978 Electricity 2015-16 kWh 61,365 293,181 Gas 2014-15 kWh No gas1 No gas Gas 2015-16 kWh No gas1 No gas Water 2014-15 m3 N/A 374 Water 2015-16 m3 N/A 116 ‘No gas’ refers to assets where gas is not used on site within landlord control N/A refers to data not available at time of reporting e.g. inaccessible water meters or property not in Helical’s ownership for full year HELICAL BAR PLC REPORT & ACCOUNTS 2016 CORPORATE RESPONSIBILITY 65 WASTE Multi-let offices Shepherds Building, London W14 The Hub, Glasgow Churchgate & Lee House, Manchester The Loom, London E1 Creative Quarter, Cardiff1 1 restated figure for 2014-15 N/A refers to data not available or not applicable Retail Parkgate Shirley Morgan Quarter, Cardiff N/A refers to data not available or not applicable The suitability of the targets will be reviewed against the performance for the reporting year and revised accordingly to ensure that they remain challenging yet achievable. The specific target set by Helical is to reduce energy consumption by 2% per annum in the principal managed assets. As discussed earlier in this section of the report, year on year performance is variable across the portfolio and complicated by the changing nature of the portfolio through acquisition and divestment, increasing occupancy and ongoing refurbishment of the component assets. CONSTRUCTION SITE PERFORMANCE As part of the ongoing refurbishment and development programme, a number of key performance indicators are also measured and recorded for the Group’s schemes above a £500,000 project value threshold. During the reporting year, this encompassed eighteen commercial and residential schemes and the performance is summarised below. BREEAM / Considerate Constructors Scheme (CCS) In accordance with Helical’s corporate objectives, five out of the eligible six commercial developments are registered under the BREEAM scheme to meet a minimum of BREEAM Very Good. The Bower, Old Street London EC1, One Creechurch Place, London EC3, St Vincent Street, Glasgow and 23-28 Charterhouse Square, London EC1 have indicated that they are expecting to achieve an ‘Excellent’ rating. Of the twelve developments registered with CCS, all are above the minimum requirement for compliance and the majority are above the current industry average of 35.4/50 (for the year to March 2016), with four schemes scoring in excess of 40. Waste segregated on site 2014-15 % Waste segregated on site 2015-16 % Weight of waste diverted from landfill 2014-15 tonnes Weight of waste diverted from landfill 2015-16 tonnes 60 61 121 50 60 80 12 53 N/A N/A 126 N/A 129 N/A N/A 133 35 115 88 N/A Waste segregated on site 2014-15 % Waste segregated on site 2015-16 % Waste diverted from landfill 2014 - 15 tonnes Waste diverted from landfill 2015-16 tonnes N/A 33.25 23 50 N/A 30 24 23 Energy and water consumption Eleven of the sites monitor purchased water and energy consumption and have set themselves reduction targets over the course of the project. The remaining seven developments report purchased water and energy use through the managed buildings data set. Electricity 2015-16 kWh 1,244,736 Gas 2015-16 kWh 37 Water 2015-16 m3 13,300 Total Resource use A strong performance is shown by all sites that reported against the key performance indicator for sourcing sustainable timber. All sites which used timber sourced 100% from certified sustainable sources. HELICAL BAR PLC REPORT & ACCOUNTS 2016 STRATEGIC REPORT66 CORPORATE RESPONSIBILITY Waste Eleven out of eighteen developments have implemented a Site Waste Management Plan and the majority of these divert more than 85% of waste disposal from landfill, well in excess of the corporate target of 50% diversion from landfill. Biodiversity Biodiversity improvement is included within Helical’s schemes where feasible and during the reporting period this applied to nine of the eighteen schemes. To encourage biodiversity in urban areas, features such as green and brown roofs, bat boxes and bird boxes are included at C-Space, London EC1, The Bower Old Street, London EC1, One King Street, London W6, One Creechurch Place, London EC3 and St Vincent Street, Glasgow. Biodiversity improvement at the Durrants Retirement Village includes enhancing the wildlife area closest to the Mill Race, the provision of a bat house and the installation of additional bat boxes on retained trees. At Millbrook Retirement Village biodiversity enhancement includes the provision of a new otter holt and associated habitat, in addition to preserving the existing otter holt. Sustainable travel The majority of the Group’s developments are within 650m of a bus service and/or within 1000m of a rail station and for the reporting year eleven developments include cycle provisions on site to maximise sustainable travel options. Climate change and flood risk It is a Group objective to ensure that Sustainable Drainage Systems (SuDS) are included into the design to mitigate against flooding. Half of the developments assessed have incorporated SuDS where appropriate. Site management There have been no prosecutions or fines for environmental pollution incidents reported on the operational sites during the reporting period. Certified Environmental Management Systems (EMS) are implemented where appropriate to the size and capital value of the developments. This applied to two thirds of the projects during the reporting period. GREENHOUSE GAS (GHG) EMISSIONS REPORTING For the reporting year to 31 March 2016 the 2014 UK Government’s Conversion Factors for Company Reporting has been followed. Greenhouse gas emissions are reported using the following parameters to determine what is included within the reporting boundaries. • Scope 1 – direct emissions includes any gas data for landlord controlled parts and fuel use for Group owned vehicles. Fugitive emissions from air conditioning are included where it is Helical’s responsibility within the managed portfolio, providing the data is available. • Scope 2 – indirect energy emissions includes purchased electricity throughout the Group operations within landlord controlled parts. Electricity used in refurbishment projects has been recorded separately where appropriate. In the majority of cases the electricity consumed is recorded for the individual properties as part of the data collection for the management of common parts, and contractors have been required to collect project specific data. The table below highlights that overall GHG emissions have decreased by 33% year on year. The reason for this is primarily due to selling a number of larger multi-let properties during the reporting period and the diversity of the portfolio. Data for last year has been restated due to metering and billing issues at a number of properties. For Scope 1 this represents a reduction of 120 tonnes and for Scope 2 a reduction of 138 tonnes. Due to the changing portfolio, only three multi-let office buildings and one shopping centre can report on carbon intensity. At Churchgate and Lee House, Manchester, The Hub, Glasgow and Shepherds Building, London W14 the average carbon intensity equates to 0.09 tCO2e/m2, whilst The Morgan Quarter, Cardiff has a carbon intensity of 0.02 tCO2e/m2. These levels are consistent with last year’s performance. Greenhouse gas emissions (tonnes CO2e) are set out below for the year: Year ended 31 March 2015 tonnes Year ended 31 March 2016 tonnes Scope 1: Direct emissions Scope 2: Indirect emissions Total All Scopes 727 3,741 4,468 570 2,408 2,978 The specific target set by Helical is to reduce energy consumption by 2% per annum in the principal managed assets. As discussed earlier in this section of the report, year on year performance is variable across the portfolio and complicated by the changing nature of the portfolio through acquisition and divestment, increasing occupancy and ongoing refurbishment of the component assets. HELICAL BAR PLC REPORT & ACCOUNTS 2016 CORPORATE RESPONSIBILITY 67 Wales developing a sales strategy, sourcing products and designing their retail space. On the third day, with support and guidance from academics and industry experts, the students launched a pop up shop in The Morgan Quarter, Cardiff putting all of their knowledge and skills into practice; and • The Morgan Quarter, Cardiff also ran ‘Morgan Quarter Memories’ - a community-based project capturing the reminiscences of people who had been involved with the centre over the years to show what effect the scheme has had on people’s lives. Interviews with five people with particularly captivating stories were filmed by Liana Stewart, a Cardiff born and raised local film producer with strong local community links and her own special memories of the Morgan Arcades. The project attracted a wide ranging media response, including being featured on the local TV station Made in Cardiff. The success of the project was recognised by the winning of a Purple Apple Award. At the 2016 Cardiff Life Awards (the city’s most prestigious, high profile and sought after business awards), The Morgan Quarter, Cardiff was awarded a Special Recognition Award for its contribution to supporting independent business in Cardiff. Other community and social activities during the year included: • Helical’s continued membership of The Aldgate Partnership (TAP”), formed in 2014 to help drive a powerful agenda for change. Membership of the group currently includes landowners, commercial occupiers, and developers. TAP works in partnership with its members to develop Aldgate as ‘One Location’, delivering a range of interventions to support community development and develop a premier business hub with high quality public realm and environment that produces a safe, convenient and inspiring destination for all employees, residents and visitors. CHARITABLE ACTIVITIES During the year to 31 March 2016 Helical donated £36,300 to charities including LandAid, The Lord Mayor’s Appeal, Muscular Dystrophy UK and Great Ormond Street Hospital. The Group’s principal charitable activity is to raise money for LandAid (the official charity of the property industry) and a total of £11,420 was donated to LandAid during the year. In addition to this, £10,376 was raised during the annual LandAid day on 15 October, when a number of Helical Directors and staff, dressed as popular science fiction characters, toured the streets of Mayfair by pedibus and collected donations from fellow members of the property industry. Alongside the Group’s formal charitable activities, Helical employees fundraise for charities on a personal basis and, where appropriate, the Group will make donations to help the staff reach their fundraising goals. EMPLOYEES As at 31 March 2016, Helical had 32 permanent and 3 temporary employees (8.5% of the staff), based at the Group’s head office in London. In addition, there were 5 employees in the Polish subsidiary and 48 full and part-time employees of the retirement village companies acquired in December 2015. The information set out below is in respect of the head office only. Gender diversity of the Board and the Company as at 31 March 2016 is set out below: Board (including Non-Executive Directors) Executives All employees Male Female 92% 56% 47% 8% 44% 53% Helical continues to enforce its equal opportunities, harassment and sexual discrimination policies. We also continue to monitor compliance with its anti-bribery and whistle blowing policies. There have been no incidents to report against these policies to date. A high level of staff retention remains a key feature of the business. Helical has retained a highly skilled and experienced team and the table below shows a breakdown of staff by length of service: Executive directors Executives All employees Total number of staff as at 31 March 2016 Average length of service (years) 5 16 32 21.1 4.9 7.6 Helical’s staff retention levels not only reflect competitive remuneration and benefits packages but also its commitment to enhancing the professional and personal skills of its team by supporting employee training and development, by means of training courses, seminars and mentoring where appropriate. As in previous years, Helical continues to evaluate training needs in line with business objectives. There are no human rights issues of which the Board are aware that are considered relevant to the Group. COMMUNITY AND SOCIAL INITIATIVES Helical takes a strong interest in community issues. Community engagement is an on-going concern throughout the development process, from planning until development completion and operation. The following examples from The Morgan Quarter, Cardiff demonstrate how community engagement has benefited the communities that we work with over the past year: • During November and December 2015, The Morgan Quarter, Cardiff ran Trading Places - a collaborative project between the Further Education Enterprise Hub and First Campus in partnership with The Morgan Quarter Cardiff, NatWest, EE and the Higher Education Enterprise Hub, which aims to develop entrepreneurial skills and attitudes through practical experiences among college students in South East Wales. The “Apprentice”-style challenge aimed to give students some real life enterprise and industry experience and offer an insight into the world of retail including exposure to essential business skills such as communication, negotiation and decision making. It culminated in a three day final with the winning applicants from each of the six participating colleges spending the first two days at the University of South HELICAL BAR PLC REPORT & ACCOUNTS 2016 STRATEGIC REPORT68 CORPORATE RESPONSIBILITY HEALTH & SAFETY Helical has a corporate culture that is committed to the prevention of injuries and ill health to its employees or others that may be affected by its activities and the Group’s Health & Safety policy reflects this commitment. The Board of Directors and senior staff are responsible for implementing this policy and they look to ensure that health and safety considerations are always given priority in planning and in day-to-day activities. The Group’s Health & Safety Policy was last reviewed and updated in February 2016 to reflect the latest legislative and regulatory developments. Training of Helical staff in the updated Health and Safety Policy and supporting CDM requirements has been undertaken during the reporting year. The Group’s Health & Safety policy can be found on the Company website and a summary of performance for the eighteen active sites is below. Helical has delivered over two million man hours of construction during the year (an increase of 115% over the previous year) with no fatalities or major accidents and only 13 RIDDOR reportable incidents. Overall Health and Safety performance using Lost Time Accident Frequency Rate is a 29% improvement over last year. The majority of Helical projects are managed by principal contractors holding OHSAS 18001 certification and that maintain 100% Construction Skills Certification Scheme (CSCS) accreditation for all full time and subcontracted staff. Only one RIDDOR incident occurred in the year across the managed portfolio. No of RIDDOR Reportable No of Lost Time accidents No of Fatalities No of hours worked Accident Frequency Rate for Lost Time Accidents [LTAFR] RIDDOR Incident Frequency Rate [RIFR] 2014 - 2015 2015 - 2016 7 13 15 23 0 0 1,186,224 2,557,524 1.26 0.90 0.59 0.51 SUPPLIERS Fair treatment of suppliers remains a key priority for Helical and the Group’s policy is to settle all agreed liabilities within the terms established with suppliers. As required under the Modern Slavery Act, Helical will publish a statement later this year describing the steps taken during the year to prevent slavery and human trafficking within the Group’s supply chains and business. There will be a link to the statement on the homepage of the Company website. The Strategic Report contained on pages 1-68, was approved by the Board on 15 June 2016. On behalf of the Board Michael Slade Chief Executive HELICAL BAR PLC REPORT & ACCOUNTS 2016 HELICAL BAR PLC REPORT & ACCOUNTS 2016 69 GOVERNANCE CHAIRMAN’S REVIEW GOVERNANCE STRUCTURE BOARD OF DIRECTORS GOVERNANCE REVIEW NOMINATIONS COMMITTEE REPORT AUDIT COMMITTEE REPORT DIRECTORS’ REMUNERATION REPORT REPORT OF THE DIRECTORS STATEMENT OF DIRECTORS’ RESPONSIBILITIES INDEPENDENT AUDITOR’S REPORT 71 72 74 76 79 81 83 103 105 106 70 HELICAL BAR PLC REPORT & ACCOUNTS 2016 HELICAL BAR PLC REPORT & ACCOUNTS 2016 GOVERNANCE 71 CHAIRMAN’S REVIEW Dear Shareholder, This Annual Report reflects on a record year for Helical with pre-tax profits, shareholders’ funds and our total property portfolio at their highest level in the Company’s history as a real estate company. The greatest proportion of this performance has come from our London portfolio, which now constitutes over 54% of our total portfolio. These results reflect a balance between a high yielding regional investment portfolio and a London investment and development programme providing both capital and rental growth. COMPOSITION OF THE BOARD As Chairman of the Nominations Committee, I have reported in detail on page 79 of this Annual Report regarding the present and proposed future constitution of your Board of Directors. Having been on the Board of Helical for over 30 years, the last four as Chairman, I intend to retire from the Board and will not be seeking re-election at this year’s Annual General Meeting (“AGM”). My fellow Non-Executive Director, Andy Gulliford, who has served on the Board for over 10 years will also retire from the Board at the same time. I would very much like to thank him for his expert advice and support to the Board over the years. Chief Executive Officer (“CEO”), Mike Slade, joined the Board of Helical Bar plc in 1984, and has turned this previously small engineering company into a highly successful real estate company. He has led the Company for nearly 32 years and is the Company’s largest shareholder but has indicated that he wishes to step down as Chief Executive. I am, however, pleased that Mike has accepted the request of the Nominations Committee to continue his close involvement with the Group and to stand for election at the 2016 AGM as Non-Executive Chairman following my retirement. On behalf of the Board I would like to thank Mike for his outstanding contribution to the business during his long tenure as Chief Executive and am delighted that he will continue to be part of Helical’s future as Non-Executive Chairman. Gerald Kaye, Development Director of the Company since 1994, will stand for election as Chief Executive of the Company at the AGM. Gerald has delivered many highly profitable schemes during his career with Helical which have played an integral part in delivering strong returns for the Company’s shareholders over the last 22 years. Gerald is highly respected within the property industry and I am confident he will lead this Company with distinction. I share the Board’s view that the appointments of Gerald and Mike to their new roles are in the best interests of the Company and its shareholders. Following the changes announced in November and as Mike Slade will not be regarded as an independent Chairman, the Nominations Committee engaged a firm of external consultants to carry out an extensive search for two new independent Non- Executive Directors. The Committee wanted to appoint candidates with expertise in the property or financial sectors, who could challenge the Board effectively and who would complement the remaining independent Non-Executive Board members. I am extremely pleased that two exceptional candidates, Susan Clayton and Richard Cotton, were identified and subsequently appointed and I am confident that they will be valuable additions to the Board. Immediately following the AGM, the Board will consist of a Chairman, four Executive Directors and five independent Non-Executive Directors. MAJOR DECISIONS The Board meeting agendas during the year contained many issues including: • Consideration and approval of significant property acquisitions and disposals, most notably the acquisition of Crosstree’s 66.7 per cent interest in The Bower, Old Street, London EC1; • A review of the Group’s corporate, property and financial strategy; and • Changes to the composition of the Board as outlined above. ANNUAL STRATEGY REVIEW In April 2016, the Board considered the Executive Directors Annual Strategy Review of the business examining the economic, geopolitical, societal and environmental risks affecting the business. This review reaffirmed the Company’s principal objective of combining investment and development activity to ensure maximum shareholder returns whilst managing risks appropriately. BOARD EVALUATION In order that we may implement our strategy successfully, the Board annually evaluates its own performance and that of its committees and Directors. This evaluation concluded that the Board and its committees continue to operate effectively. As Helical is currently not in the FTSE 350 the Code does not require the Company to undertake the Board evaluation process externally. However, for the year to 31 March 2017 the Board has committed to appoint an external consultant to conduct its Board evaluation process. INVESTOR RELATIONS We have an extensive programme of meetings and presentations with shareholders throughout the year with the majority of these taking place in the periods following our annual and half year results. Either the Chief Executive, Michael Slade or the CEO Designate, Gerald Kaye, and the Finance Director, Tim Murphy, attend the majority of meetings with the remaining Executive Directors, Duncan Walker and Matthew Bonning-Snook, also attending as appropriate. The Senior Independent Director, Richard Gillingwater, and I are available to meet shareholders if they wish to discuss any matters with us. It has been a privilege to serve on this exceptional Company’s Board for 30 years and to be Chairman for 4 years. I shall be sad to relinquish my association with such a dynamic and successful team of people after so long. However, I believe that the Company, the executives and the portfolio of developments and investment properties are poised for a successful future. This success should be further enhanced by a new Chairman, new Chief Executive and a refreshed Board. The following pages describe in greater detail our governance structure and the work of the Board and its Committees. Nigel McNair Scott Chairman 15 June 2016 ONE BARTHOLOMEW CLOSE, LONDON EC1 72 GOVERNANCE STRUCTURE BOARD OF DIRECTORS EXECUTIVE COMMITTEE1 NOMINATIONS COMMITTEE1 AUDIT COMMITTEE REMUNERATION COMMITTEE VALUATIONS COMMITTEE Gerald Kaye - Chairman Matthew Bonning-Snook Richard Gillingwater - Chairman Tim Murphy Duncan Walker Susan Clayton Richard Cotton Richard Grant Michael O’Donnell Richard Grant - Chairman Susan Clayton Richard Cotton Richard Gillingwater Michael O’Donnell Michael O’Donnell - Chairman Susan Clayton Richard Cotton Richard Gillingwater Richard Grant Susan Clayton - Chairman Gerald Kaye Duncan Walker 1 Proposed membership of committees following the 2016 AGM. The Board of Helical is collectively responsible for providing the leadership of the Company within a framework of controls and reporting structures which assist in pursuing its strategic aims and business objectives. Following the 2016 AGM, it will comprise the Chairman, the Chief Executive, five Non-Executive Directors and three Executive Directors. The Board delegates operational responsibilities to an Executive Committee and governance responsibilities to Nominations, Audit, Remuneration and Valuations Committees whilst retaining overall responsibility for the running of the Company. LEADERSHIP Following the proposed changes to the Board noted above and subject to shareholder support for all of the Directors standing for election or re-election at the 2016 AGM, the Chairman of the Company will be Michael Slade. The Chief Executive will be Gerald Kaye and the three Executive Directors will be Matthew Bonning- Snook, Tim Murphy (Finance Director) and Duncan Walker. The Non-Executive Directors will be Richard Gillingwater (Senior Independent Director), Susan Clayton, Richard Cotton, Richard Grant and Michael O’Donnell. All the current Directors, except for Nigel McNair Scott and Andy Gulliford, who intend to retire from the Board, will offer themselves for election or re-election at the 2016 AGM. Biographies of all Directors and details of their shareholdings in the Company are on pages 74 to 75 and 102 respectively. ROLES OF CHAIRMAN AND CHIEF EXECUTIVE The Chairman and the Chief Executive are responsible for the leadership of the Company. The Chairman’s primary responsibility is to lead the Board and ensure its effectiveness, whilst the Chief Executive is responsible for running the Company’s business. The division of responsibilities is clearly established at Helical, is set out in writing and is approved by the Board. BOARD RESPONSIBILITIES The main purpose of the Board is to create and deliver the long term success of the Group and returns for its shareholders. The Board 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 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 also 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. All Directors take decisions objectively in the interests of the Group. As part of their roles as members of the Board, Non- Executive Directors constructively challenge and help develop proposals on strategy and the risk appetite of the Group. 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 the Executive Directors and have a prime role in appointing and, where necessary, removing Executive Directors. In conjunction with the Nominations Committee, the Board considers succession planning of Board members and senior management. In addition to Boardroom discussions, the Chairman maintains contact with other Non-Executive Directors by telephone and at least annually, will hold meetings with the Non-Executive Directors without the Executive Directors present. Richard Gillingwater (Senior Independent Director) holds meetings of the independent Non-Executive Directors separately from the rest of the Board at least once a year to ensure that any issues may be discussed without the presence of a non-independent Director. 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. An Executive Committee, comprising all the Executive Directors, meets regularly to discuss the development of strategy, to review and implement proposed transactions, to review policies and procedures (including health and safety), to monitor budget and financial performance and to assess risk. The full Board reviews all minutes of proceedings at Executive Committee meetings and receives reports from the Executive Committee Chairman at every Board meeting. HELICAL BAR PLC REPORT & ACCOUNTS 2016 GOvERNANCE STRuCTuRE 73 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 as a whole. A summary of the schedule of matters reserved for the Board is set out below: • Strategy and management - responsibility for the overall management of the Group; approval of the Group’s long-term strategic aims and objectives; approval of annual operating and capital expenditure budgets; oversight of the Group’s operations and review of performance; extension of the Group’s activities into new business areas; approval of major capital projects and projects outside the normal course of business; 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 half yearly report, approval of interim and final results announcements; approval of annual report and accounts, including the directors’ report, 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; approval of material unbudgeted capital or operating expenditures; • Internal controls - ensuring maintenance of a sound system of control and risk management; • Contracts - approval of major capital projects; approval of contracts above limits of authority delegated by the Board; • Communication - approval of resolutions and corresponding documentation to be put to shareholders in general meeting; approval of all circulars and listing particulars; • Board membership and other appointments to senior management - appointment and removal of the Company Secretary; membership of Board committees following recommendations from the Nominations Committee; • Corporate governance matters - including Directors’ performance evaluations and review of the Company’s corporate governance arrangements; • Remuneration - determine the remuneration policy for the Chairman, Executive Directors, Company Secretary and other senior executives following recommendation from the Remuneration Committee; determine the remuneration of the Non-Executive Directors subject to the Articles of Association and shareholder approval as appropriate; and • Approval of policies - including anti-bribery policy; anti-slavery policy; whistleblowing procedures; equal opportunities policy; diversity policy; share dealing code; health and safety policy; environmental and corporate social responsibility policy; charitable donations policy. ONE CREECHURCH PLACE, LONDON EC3 HELICAL BAR PLC REPORT & ACCOUNTS 2016 GOVERNANCE 74 BOARD OF DIRECTORS CHAIRMAN NIGEL MCNAIR SCOTT Nigel McNair Scott, MA FCA FCT, joined the Board as a non-executive director in 1985 and was subsequently appointed Finance Director in 1987. He was appointed Chairman of the Company after the 2012 AGM and chairs the Nominations Comittee. Nigel intends to retire from the Board at the 2016 AGM. He is Chairman of Reaction Engines Limited, a former Chairman of Avocet Mining plc and a former director of Johnson Matthey plc and Govett Strategic Investment Trust. CHIEF EXECUTIVE/CHAIRMAN DESIGNATE MICHAEL SLADE Michael Slade, BSc (Est Man) FRICS FSvA, joined the Board as an executive director in 1984 and was appointed Chief Executive in 1986. Mike will step down as an executive director and stand for election as Non-Executive Chairman at the AGM on 25 July 2016. He is President of Land Aid, the property industry charity, a Fellow of the College of Estate Management, Fellow of Wellington College, a Trustee of Purley Park charity and Sherborne School Foundation and vice Admiral of the Marie Rose Trust. CEO DESIGNATE GERALD KAYE Gerald Kaye, BSc (Est Man) FRICS, was appointed to the Board as an executive director in 1994 and is jointly responsible for the Group’s development activities. Gerald will stand for election as Chief Executive at the AGM on 25 July 2016. He is a past President of the British Council for Offices, a former director of London & Edinburgh Trust Plc and former Chief Executive of SPP. LET. EuROPE Nv. FINANCE DIRECTOR TIM MURPHY Tim Murphy, BA (Hons) FCA, joined the Group in 1994 and became Finance Director of the Company in 2012. Prior to joining Helical, he worked for accountants Grant Thornton and KPMG. He has responsibility for financial strategy and reporting, treasury and taxation. DIRECTOR MATTHEW BONNING-SNOOK 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 was a Development Agent and Consultant at Richard Ellis (now CBRE). He is jointly responsible for the Group’s development activities. DIRECTOR DUNCAN WALKER Duncan Walker, MA (Hons) (Oxon), PG Dip Surveying, joined the Group in 2007 and was appointed to the Board as an executive director in 2011. Prior to joining Helical, Duncan led Edinburgh House Estate’s investment team. He is responsible for the Group’s investment portfolio. HELICAL BAR PLC REPORT & ACCOUNTS 2016 BOARD OF DIRECTORS 75 SENIOR INDEPENDENT DIRECTOR RICHARD GILLINGWATER Richard Gillingwater, CBE, is the non-executive Chairman of Henderson Group plc and of SSE plc. He was, until 2013, Dean of Cass Business School. Prior to this he was Chief Executive and later Chairman of the Shareholder Executive, after a career in investment banking at Kleinwort Benson and then at BZW/Credit Suisse First Boston. He has also been a non-executive director of P&O, Debenhams, Tomkins, Qinetiq Group, Kidde Hiscox and Morrisons. Richard is the Senior Independent Director of Helical and is a member of the Nominations, Audit and Remuneration Committees. CHAIRMAN OF THE AUDIT COMMITTEE RICHARD GRANT Richard Grant, BA (Oxon), ACA is the Finance Director at Cadogan Estates Limited and former corporate finance partner at PricewaterhouseCoopers, whom he joined in 1975. Richard chairs the Audit Committee and is a member of the Nominations and Remuneration Committees. CHAIRMAN OF THE REMUNERATION COMMITTEE MICHAEL O’DONNELL Michael O’Donnell was appointed to the Board in June 2011. He is a former Managing Director of LGv Capital, a private equity firm. Through his company, Ebbtide Partners, he acts as a consultant to, and investor in, private companies. Michael chairs the Remuneration Committee and is a member of the Nominations and Audit Committees. CHAIRMAN OF THE VALUATIONS COMMITTEE SUSAN CLAYTON Susan Clayton, FRICS, was appointed to the Board in February 2016. Susan is an Executive Director at CBRE and former Managing Director of CBRE’s Capital Markets Team. She has sat on the CBRE uK Management and Executive Boards and on the CBRE Group Inc. Board as Employee Director. Susan currently chairs CBRE uK’s Women’s Network. In addition to her roles at CBRE, Susan is a Board member of the Committee of Management of Hermes Property unit Trust, and a Trustee and Chair of the Development Committee of Reading Real Estate Foundation. Susan chairs Helical’s valuations Committee and is a member of the Nominations, Audit and Remuneration Committees. NON-EXECUTIVE DIRECTOR RICHARD COTTON Richard Cotton was appointed to the Board as a non-executive director in March 2016. Richard was formally head of uK Real Estate at J.P. Morgan Cazenove which he left in 2009 and spent the subsequent 5 years at Forum Partners. Richard is a non-executive director of Big Yellow Group plc, Chairman of Centurion Properties and a member of the Commercial Development Advisory Group of Transport for London. He was previously a non-executive director of Hansteen Holdings plc and a member of the Advisory Board of the Corporate Real Estate Business Support unit at Lloyds Banking Group. Richard is a member of the Nominations, Audit and Remuneration Committees. NON-EXECUTIVE DIRECTOR ANDREW GULLIFORD Andrew Gulliford, BSc (Est.Man), FRICS, was appointed to the Board as a non-executive director in 2006. A former Deputy Senior Partner of Cushman & Wakefield Healey & Baker (now Cushman & Wakefield LLP), he is a non-executive director of F&C uK Real Estate Investments Limited and various other companies. Andrew is to retire from the Board at the 2016 AGM. HELICAL BAR PLC REPORT & ACCOUNTS 2016 GOVERNANCE 76 GOVERNANCE REVIEW At Helical we believe that robust corporate governance is of fundamental importance in delivering for shareholders the long-term success of the Company through the effective, entrepreneurial and prudent management of the Company. The Board of Helical is collectively responsible for providing the leadership of the Company within a framework of controls and reporting structures which assist in pursuing its strategic aims and business objectives. THE UK CORPORATE GOVERNANCE CODE 2014 (THE “CODE”) The Board is accountable to the Group’s shareholders for good corporate governance and we believe in applying the highest principles of corporate governance. We have complied throughout the year with the principles as set out in the section of the Code headed “The Main Principles of the Code”. The Group also takes into account the corporate governance guidelines of institutional shareholders and their representative bodies. INDUCTION OF NEW DIRECTORS Following their appointments, Susan Clayton and Richard Cotton received a comprehensive induction, which included visits to properties and meetings with the Company’s senior managers. COMPOSITION OF THE BOARD The Code requires a Board and its committees to have an appropriate balance of skills, experience, independence and knowledge of the Company to enable them to discharge their duties and responsibilities effectively. Helical operates with a strong management team of senior decision makers backed up by a finance team and other support staff. The Group is keen to promote exceptional talent to Board level at the earliest opportunity to expose such individuals to the broader issues facing the business, encourage their long term commitment to the Group and to provide for future succession. Provision B.1.2 of the Code notes that companies such as Helical, which are below the FTSE350, are required to have at least two independent Non-Executive Directors. Following the proposed change to the Board at the 2016 AGM, the Board will comprise the Chairman, four Executive Directors and five independent Non-Executive Directors. The independent Non-Executive Directors will be Susan Clayton, Richard Cotton. Richard Gillingwater, Richard Grant and Michael O’Donnell, In the Board’s view, the composition of the Board has an appropriate balance of skills, experience, independence and knowledge of the Company as required by the Code. ANNUAL EVALUATION OF THE BOARD AND ITS COMMITTEES During the year the Board undertook a formal evaluation process, led by the Senior Independent Director, which involved each director submitting an appraisal in respect of the performance of the main Board, its committees and Directors, including the Chairman. The Senior Independent Director reported the results of that evaluation process to the Board. The process reviewed criteria including real estate matters, Board composition and Board and Committee processes. There were no significant areas of concern raised by the Directors and any points raised have been dealt with appropriately. Since the Company is not in the FTSE350 and as permitted by the Code, it does not currently use external consultants to undertake its evaluation process. However, following the changes to the Board, it is proposed that the 2017 Board Evaluation will be carried out externally. 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. The Directors have access to the services of a Company Secretary who is responsible for advising the Board on all governance matters and ensuring compliance with Board procedures and applicable laws and regulations. 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 of new Directors and assisting with professional development as required. The Board ensures that 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 all directors as necessary. NOMINATIONS COMMITTEE The report of the Nominations Committee, which describes the work of the Committee, is on pages 79 and 80. HELICAL BAR PLC REPORT & ACCOUNTS 2016 GOvERNANCE REvIEW 77 deterioration of property valuations. In addition, the forecasts have been subject to sensitivity analysis in which the impact of significant reductions to the property portfolio fair value and associated rental income on the Group’s loan covenants was assessed. From their review, the Directors believe that the Group has adequate resources to continue to be operational as a going concern for the foreseeable future. ATTENDANCE AT BOARD AND COMMITTEE MEETINGS DURING THE YEAR Six scheduled meetings of the Board were held during the year ended 31 March 2016. In addition, several unscheduled meetings were arranged to discuss particular transactions and events. On occasions, Directors who are not members of the Committees attend at the invitation of the Committee Chairman. The attendance record of the Directors at the scheduled meetings and at meetings of the Board’s committees is shown in the table below: Full Board Audit Committee Remuneration Committee Nominations Committee Chairman Nigel McNair Scott 6/6 Executive directors Michael Slade 5/61 Tim Murphy Gerald Kaye Matthew Bonning - Snook 6/6 6/6 6/6 Duncan Walker 5/61 Non-executive directors Richard Gillingwater 5/61 Andrew Gulliford 6/6 Michael O’Donnell 6/6 Richard Grant Susan Clayton2 Richard Cotton2 6/6 1/1 - - - - - - - 5/5 - 5/5 5/5 1/1 - - - - - - - 3/3 - 3/3 3/3 1/1 - 2/2 - - - - - 2/2 - 2/2 2/2 1/1 - 1 Michael Slade was absent from the July meeting due to an operation which had to be performed at short notice. Richard Gillingwater was absent from the November meeting and Duncan Walker from the July meeting due to unavoidable diary commitments. 2 Susan Clayton and Richard Cotton were appointed to the Board on 1 February 2016 and 1 March 2016 respectively. Their attendance relates to the period from the dates of their appointment to 31 March 2016. AUDIT COMMITTEE The Audit Committee Chairman is Richard Grant, the Finance Director of Cadogan Estates Limited and a former partner of PWC. As a result, the Board considers that he has recent and relevant financial experience as required by the Code. The report of the Chairman of the Audit Committee describing the issues considered by the Committee in the year under review is on pages 81 and 82. RISK MANAGEMENT AND INTERNAL CONTROLS 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 matters. In the year under review the Audit Committee met with the auditors on two occasions; and • The Board is responsible for the management of the Group’s risk profile which is reviewed by the Audit Committee during the year. An analysis of the Group’s principal risks can be found on pages 58 to 61. INTERNAL AUDIT The Board reviewed its position for the year to 31 March 2016 and reaffirmed its stance that in view of the relatively small size of the Group it does not consider an internal audit function would provide any significant additional assistance in maintaining a system of internal controls. 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 valuations and their impact on covenants and potential loan repayments; • Committed future expenditure; • Future rental income; and • Receipt, amount and timings of development profits. The forecast cash flows have been sensitised to reflect those cash inflows which are less certain and to take account of a potential HELICAL BAR PLC REPORT & ACCOUNTS 2016 GOVERNANCE 78 GOvERNANCE REvIEW The directors receive regular reports from sector analysts and investor relations advisors on how the Group is viewed by its shareholders. The Group communicates with all shareholders through the issue of regular press releases and through its website at www.helical.co.uk. Principal Investor Relation Activities May 2015 June 2015 July 2015 Annual results announcement and presentation for 2014/15 Investor Roadshow presentation London, Edinburgh and Netherlands Q1 Interim Management Statement Annual General Meeting September 2015 London portfolio property tour November 2015 Half year results announcement and presentation December 2015 Investor roadshow presentation, London, Edinburgh and Netherlands January 2016 JPMC Investor Conference February 2016 Q3 Interim Management Statement By order of the Board James Moss ACA Company Secretary 15 June 2016 REMUNERATION This information is contained in the Directors’ Remuneration Report on pages 83 to 102. NOTICE OF ANNUAL GENERAL MEETING The Code recommends that the Notice of AGM and related papers be sent to shareholders at least 20 working days before the meeting. For the 2015 AGM the Notice and related papers were sent out 22 working days before the AGM. ENGAGEMENT WITH SHAREHOLDERS The Directors value the views of the Company’s shareholders and recognise their interest in the Group’s strategy and performance, Board membership and quality of management. They hold regular meetings with, and give presentations to, the Company’s institutional shareholders to discuss the Group’s results and objectives. The directors regularly meet, with the help of the Company’s brokers, institutions that do not currently hold shares in the Group to inform them of the Company’s objectives. Michael Slade, as Chief Executive or Gerald Kaye as CEO Designate have attended most of the meetings during the year and they are usually accompanied by at least one of the other executive directors. During the year under review Nigel McNair Scott, Chairman, and Richard Gillingwater, Senior independent Director, engaged with principal investors (holding more than 3% of the Company’s shares) and shareholder representative bodies to discuss the proposed Board changes intended to take effect at the 2016 AGM. Michael O’Donnell, Chairman of the Remuneration Committee, also engaged with Helical’s principal shareholders and shareholder representative bodies to discuss the conclusions of a review of the Company’s Remuneration Policy. The Senior Independent Director, Richard Gillingwater, was available to meet with shareholders throughout the year under review and will hold meetings with shareholders whenever requested in order to ensure sufficient understanding of any issues and concerns they may have. The AGM is used to communicate with investors and they are encouraged to participate. The Chairman, Senior Independent Director and members of the Audit, Remuneration and Nominations Committees will attend the AGM and will be available to answer questions. Separate resolutions are proposed on each issue in order that they can be given proper consideration and there is a separate resolution to consider the annual report and accounts. All proxy votes are counted and the level of proxies lodged on each resolution will be indicated after it has been dealt with by a show of hands. HELICAL BAR PLC REPORT & ACCOUNTS 2016 NOMINATIONS COMMITTEE REPORT 79 Whilst considering the Non-Executive Chairman appointment, the Board was fully mindful of the uK Corporate Governance Code’s recommendation for a new Chairman to be independent upon appointment. In light of this the Committee conducted an extensive consultation exercise with the Company’s largest investors and representative bodies, to explain the reasons for the changes. The Committee is confident that Mike Slade is the most appropriate candidate for this role. In discharging the role of Non-Executive Chairman, he will be assisted by five independent Non-Executive directors, from whom the next Chairman of the Company is expected to be identified. Andy Gulliford, who has been a Non-Executive Director of the Company since 2006, has informed the Committee that he will not be offering himself for re-appointment at the 2016 AGM. On behalf of the Board, I congratulate Mike for his outstanding contribution to the business during his long tenure, and at the same time thank Andy for his expert advice and support over the years. The appointments of Susan Clayton and Richard Cotton as additional Non-Executive Directors on 1 February and 1 March 2016 respectively met our aim of bringing further independence and balance to the Board. Executive Search Consultants, Norman Broadbent were appointed to advise on the search for two new independent Non-Executive Directors. Their brief was to identify potential candidates with a background in the real estate sector or the financial sector. Having met with a number of strong candidates, the Committee was pleased to appoint Susan Clayton on 1 February 2016 and Richard Cotton on 1 March 2016. Both Susan and Richard were appointed as members of the Nominations, Audit and Remuneration Committees. In addition, Susan was appointed Chairman of the valuation Committee. Susan has an impressive track record in the real estate sector and Richard has a strong corporate finance and real estate background. The Board looks forward to benefitting from their considerable experience and fresh perspectives in the years to come. Appointments to the Board and its Committees are made against objective criteria. Care is taken to ensure that appointees have enough time available to devote to the job. The Committee controls the process for Board appointments and makes recommendations to the Board. The Board is mindful of the Group’s diversity policy and the Committee gives full consideration to diversity, including gender diversity, when recommending to the Board any future Board appointments. All Board appointments are be based on experience and will be made on merit. Dear Shareholder, In accordance with the UK Corporate Governance Code, the role of the Nominations Committee, and my primary responsibility as its Chairman, is to ensure that the Company is headed by an effective Board which is collectively responsible for the long-term success of the Company. This is best achieved through the provision of entrepreneurial leadership and a talented executive team, supported by committees with an appropriate balance of skills, experience, independence and knowledge of the Company to be able to constructively challenge and assist the executive team in achieving its objectives. Alongside me, the Committee comprises Susan Clayton, Richard Cotton Richard Gillingwater, Richard Grant and Michael O’Donnell. The terms of reference of the Nominations Committee, which were reviewed during the year, are available on request and are included on the Group’s website at www.helical.co.uk. CHANGES TO THE BOARD Our principal area of focus during the year was succession planning for the Board. On 26 November 2015 the Company announced the Board changes planned, subject to shareholder approval, to take effect at the 2016 Annual General Meeting (“AGM”). Gerald Kaye, Development Director and a member of the Board since 1994, is standing for election as Chief Executive. I intend to stand down from the Board at the 2016 AGM and Mike Slade, current Chief Executive is standing for election as my successor as Non-Executive Chairman. These decisions were taken after careful consideration by the Committee and with independent external professional advice regarding what is in the best long term interests of the Company and its shareholders. We retained Sam Allen Associates, who have done extensive work in the FTSE 250 conducting both Executive and Non-Executive searches, and advising on CEO and Chair succession. With the assistance of Sam Allen Associates, and having considered the options of both external and internal candidates for the position of Chief Executive, it became clear that Helical’s senior management team offered the strongest possible candidates. After a thorough process, the Committee proposed Gerald Kaye as the new Chief Executive. Gerald’s 22 year career with Helical has seen him deliver substantial realised profits for shareholders, often with little or no equity contribution from the Company. He has all the skills needed to head the Company in the next phase of its growth. Most recently he has been responsible for the developments at Barts Square EC1 and The Bower EC1, two major mixed use London schemes. With regard to my replacement as Non-Executive Chairman, we again used Sam Allen Associates who carried out another benchmarking exercise, against a full job specification and list of required attributes. The Committee assessed both internal and external candidates for the Non-Executive Chairman role, considering individuals across the property industry and from a wider financial and uK industry background. ultimately, we believed that Mike Slade would offer the Company the best possible level of experience, access to important relationships and knowledge of property markets and understanding of the culture of Helical Bar, as well as a degree of continuity which is important during a time of change. HELICAL BAR PLC REPORT & ACCOUNTS 2016 GOVERNANCE80 NOMINATIONS COMMITTEE REPORT ANNUAL GENERAL MEETING The Board believes that the requirements of Code Provision B.7.1 of the uK Corporate Governance Code should be fulfilled. This provision requires all directors of FTSE350 companies to be subject to annual re-election by shareholders. Whilst the Company is not in the FTSE350, the Board has chosen to comply with this provision as it accepts that shareholders should annually have the right to vote on each Director’s election or re-election to the Board. The Nominations Committee confirms to shareholders that, following the annual formal performance evaluation and taking into account their qualifications and experience, these directors continue to be effective and demonstrate commitment to their roles. Biographical details of the directors are given on pages 74 and 75. I trust that shareholders will support the Committee and vote in favour of these resolutions. At the Annual General Meeting to be held on 25 July 2016, the following resolutions relating to the appointment of Directors are being proposed: • The election of Mike Slade as Non-Executive Chairman; Nigel McNair Scott Chairman of the Nominations Committee • The election of Gerald Kaye as Chief Executive Officer; 15 June 2016 • The re-election, as Executive Directors, of Tim Murphy, Matthew Bonning-Snook and Duncan Walker; • The election of Susan Clayton, who was appointed by the Board as a Non-Executive Director on 1 February 2016; • The election of Richard Cotton, who was appointed by the Board as a Non-Executive Director on 1 March 2016; and • The re-election, as Non-Executive Directors, of Richard Gillingwater, Richard Grant and Michael O’Donnell. HELICAL BAR PLC REPORT & ACCOUNTS 2016 AUDIT COMMITTEE REPORT 81 Dear Shareholder, • Internal controls I chair the Audit Committee and the other members are Susan Clayton, Richard Cotton, Richard Gillingwater and Michael O’Donnell. Further details of these Directors may be found on pages 74 and 75. None of the Committee members have any personal or financial interests in the matters to be decided (other than as shareholders), potential conflicts of interest arising from cross-directorships, or any day-to-day involvement in running the business. The Committee endorses the principles set out in the FRC Guidance on Audit Committees. The Board has formal and transparent arrangements for considering how it applies the Group’s financial reporting and internal control principles and for maintaining an appropriate relationship with its auditors. Whilst all directors have a duty to act in the interests of the Group, this Committee has a particular role, acting independently from the Executive Directors, to ensure that the interests of shareholders are properly protected in relation to financial reporting and internal control. Appointments to the Committee are made by the Board on the recommendation of the Nominations Committee in consultation with the Audit Committee Chairman. The terms of reference of the Audit Committee, which were reviewed during the year, are available on request and are included on the Company’s website at www.helical.co.uk. THE WORK OF THE AUDIT COMMITTEE IN THE YEAR The Committee met five times during the year and a record of attendance at these meetings is shown on page 77. It is common practice at Helical for Audit Committee meetings to be attended by all Board members who are available, whether or not they are members of the Committee, so that their contribution to the matters discussed may be obtained. In conjunction with the Board, the Audit Committee reviewed the following matters during the year: • Review of risk and internal controls; • The financial statements of the Group and the announcement of the annual results to 31 March 2015 and the interim statement on the half year results to 30 September 2015; • The re-appointment of the Group’s external auditor; and • The external auditors’ independence and the provision of non-audit services by the external auditor. The Audit Committee met the external auditor on two occasions to discuss matters arising from the annual and interim audits. Other matters formally reviewed and discussed by the Committee during the year included: • Review of various company policies including those relating to anti-bribery, share dealing and whistleblowing; and • Review of the Group’s need for an internal audit function and issues related to IT risk and business continuity planning. In discharging its responsibilities in connection with the preparation of the financial statements for the year to 31 March 2016, the Committee is responsible for reviewing the appropriateness of the Group’s accounting policies, assumptions, judgements and estimates as applied by the executive management to the financial statements. During this review the following significant issues were considered: The Committee annually reviews the need for an internal audit function and recently reaffirmed its stance that, in view of the close involvement of the Executive Directors in the running of the Group and the scale and complexity of the business, it does not consider that an internal audit function is required. However, periodically, the Committee asks the Group’s auditors to review its internal controls and their most recent report was presented to the Committee in April 2015. Grant Thornton’s ‘Report on the Design and Operating Effectiveness of Internal Controls of Helical Bar plc’ provided a review of the Group’s control environment and internal controls. This report did not highlight any material weaknesses in the design and effectiveness of the Group’s systems and controls. Its key recommendations, where appropriate, have been introduced during the year; • Valuation The valuation of the Group’s investment and trading and development portfolio is a key area of judgement in preparing the annual and half yearly financial statements and reports. For this reason the fair value of the Group’s investment portfolio is determined by independent third party experts who are familiar with the markets in which the Group operates and have suitable professional qualifications. The Group’s trading and development stock is accounted for in the financial statements at the lower of cost and net realisable value. Accordingly, the Committee reviews the assumptions made in considering whether an asset should be written down to its net realisable value, if lower than cost. In addition, the Committee reviews those instances where stock is considered to have a fair value above its current book value. The surplus of fair value above book value is not included in the Group’s Balance Sheets, nor is any movement reflected in the Income Statement. However, in accordance with the best practice recommendations of the European Public Real Estate Association, the surplus is included in the calculation of the EPRA Net Asset value per share at each reporting date. The fair value calculation of the trading and development stock is reviewed by a suitably qualified independent third party valuer. In addition, the fair values of the investment, trading and development property portfolios are reviewed and approved by the valuations Committee which is chaired by Susan Clayton, FRICS, an independent Non-Executive Director. • Revenue Recognition Revenue recognition is a presumed significant risk under International Standard on Auditing (uK and Ireland) and where the Group enters into complex transactions, judgment must be applied in determining when, and to what extent, revenue should be recognised. For material transactions technical papers are presented to the Committee by Management and the Committee also requests that the Group’s external auditors review and report on these judgments. The Committee assesses the appropriateness of the proposed revenue recognition for each transaction and these are discussed between the external auditor and Richard Grant, ACA and independent Non-Executive Chairman of the Audit Committee. In addition to the significant issues discussed above, the Committee also considered the Group’s ability to continue as a going concern and the estimates and judgements discussed in note 38 to these accounts. HELICAL BAR PLC REPORT & ACCOUNTS 2016 GOVERNANCE 82 AuDIT COMMITTEE REPORT EFFECTIVENESS OF THE EXTERNAL AUDITOR During the year, the Audit Committee reviewed Grant Thornton uK LLP’s fees, effectiveness and whether the agreed audit plan had been fulfilled and the reasons for any variation from the plan. The Audit Committee also considered their robustness and the degree to which they were able to assess key accounting and audit judgements and the content of their reports. This was performed through reviewing their reports and meeting with them to discuss their audit approach and findings. The Audit Committee concluded that both the audit and the audit process were effective. ANNUAL GENERAL MEETING At the Annual General Meeting to be held on 25 July 2016 the following resolutions relating to the auditor are being proposed: • The re-appointment of Grant Thornton uK LLP as Independent Auditor; and • To authorise the Directors to set the remuneration of the Independent Auditor. I hope that shareholders will support the Committee and vote in favour of these resolutions. Richard Grant Chairman of the Audit Committee 15 June 2016 AUDIT INDEPENDENCE The Audit Committee considers the external auditor to be independent. The Audit Committee has noted the rules on mandatory audit firm rotation contained in the Eu Audit Regulation and the requirements under the uK Corporate Governance Code. Mandatory auditor rotation is not required until after the reporting year ended 31 March 2020. Grant Thornton uK LLP has been the auditor of the Group for longer than ten years and there has been no audit tender during this time. However, the Committee will continue to monitor the effectiveness of the external auditor and will act in accordance with the Eu regulations and the Code as appropriate. The Group’s policy on awarding non-audit work to its auditor is designed to ensure that the Group receives the most appropriate advice without compromising the independence of the auditor. A policy of reviewing audit independence has been adopted whereby non-audit services undertaken by the auditor are approved prior to work being carried out. Fees for non-audit work cannot exceed £20,000 without the appointment being approved by the Audit Committee. During the year, non-audit fees of £39,000 were paid to Grant Thornton uK LLP for advisory services in relation to the Group’s Polish operations. This work was carried out by a team separate to the audit team and the work was not relied on by the audit team in reaching their opinion. HELICAL BAR PLC REPORT & ACCOUNTS 2016 3 year 3 year Total shareholder return Source: Datastream (Thomson Reuters) Total shareholder return Source: Datastream (Thomson Reuters) Helical FTSE 350 Supersector Real Estate Index Helical FTSE 350 Supersector Real Estate Index Mar-14 Mar-15 Mar-16 Mar-13 60 40 l 7 year a 20 Total shareholder return 0 Source: Datastream (Thomson Reuters) Mar-14 Mar-13 7 year 350 Total shareholder return Source: Datastream (Thomson Reuters) Helical FTSE 350 Supersector Real Estate Index Mar-15 Mar-16 Helical FTSE 350 Supersector Real Estate Index Mar 09 100 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 Mar 16 Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 Mar 16 Helical FTSE 350 Supersector Real Estate Index Total shareholder return Source: Datastream (Thomson Reuters) Helical FTSE 350 Supersector Real Estate Index Mar 06 Mar 07 Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 Mar 16 of £100 invested in the FTSE 350 Supersector Real Estate Index. Mar 06 Mar 07 Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 Mar 16 of £100 invested in the FTSE 350 Supersector Real Estate Index. ) d e s a b e R ( n r u ) t d e e R s r a e b d e l o R ( h e n r r a u h t e S R l a r t e o d T l o h e r a h S t o T ) d e s a b e R ( n r u ) t d e e R s r a e b d e l R o ( h e n r r a u h t e S R l a r t e o d T l o h e r a h S l T ) d e s a b e R ( n r u ) t d e e R s r a e b d e l o R ( h e n r r a u h t e S R l a r t e o d T l o h e r a h S l a t o T 200 180 160 140 200 120 180 100 160 80 140 60 120 40 100 20 80 0 300 250 350 200 300 150 250 100 200 50 150 0 50 0 140 120 100 140 80 120 60 100 40 80 20 60 0 40 20 0 This graph shows the value, by 31 March 2016, of £100 invested in Helical Bar on 31 March 2013, compared with the value o a t Total shareholder return This graph shows the value, by 31 March 2016, of £100 invested in Helical Bar on 31 March 2013, compared with the value Source: Datastream (Thomson Reuters) This graph shows the value, by 31 March 2016, of £100 invested in Helical Bar on 31 March 2009, compared with the value This graph shows the value, by 31 March 2016, of £100 invested in Helical Bar on 31 March 2009, compared with the value This graph shows the value, by 31 March 2016, of £100 invested in Helical Bar on 31 March 2006, compared with the value This graph shows the value, by 31 March 2016, of £100 invested in Helical Bar on 31 March 2006, compared with the value HELICAL BAR PLC REPORT & ACCOUNTS 2016 GOVERNANCE 83 DIRECTORS’ REMUNERATION REPORT ANNUAL STATEMENT Dear Shareholder EPRA net assets per share I am pleased to present the Remuneration Committee’s Report on directors’ remuneration for the year to 31 March 2016. This report has been approved by the Board of Helical Bar plc. COMMITTEE MEMBERS Michael O’Donnell (Chairman) Susan Clayton Richard Cotton Richard Gillingwater Richard Grant The main duty of the Remuneration Committee (“Committee”) is to determine and agree with the Board, the framework or broad policy for the remuneration of the Chairman and the Executive Directors and, subject to proposals being submitted by the Chief Executive, recommend and monitor the level and structure of remuneration for such other members of the executive management that report directly to the Chief Executive. The remuneration of Non-Executive Directors is a matter for the Chairman and the executive members of the Board. This Directors’ Remuneration Report has been divided into the following three sections: • This Annual Statement; • Remuneration Policy Report, which sets out the Group’s policy on the remuneration of Executive and Non-Executive Directors; and, • Annual Report on Remuneration, which discloses how the remuneration policy was implemented in the year ended 31 March 2016 and how the policy will be operated in the year ending 31 March 2017. As discussed in the Chairmans Review on page 71, there are changes to the Board to be implemented at the Company’s AGM on 25 July 2016 when the current Chief Executive, Michael Slade, is to step down from the role and off er himself for election as Non-Executive Chairman of the Company. Gerald Kaye, currently an Executive Director responsible for the Group’s major development projects, will stand for election as Chief Executive of the Company. The current Chairman, Nigel McNair Scott, and Non-Executive Director, Andy Gulliford, are to retire at the AGM. In addition to these Board changes, the Executive Bonus Plan 2011 reached the end of its shareholder approved life on 31 March 2016. As a consequence, the Committee resolved to review and simplify its remuneration policy and has consulted major shareholders and representative bodies. Following the completion of the consultation process and noting the constructive and pragmatic responses of investors consulted, the Company will be seeking shareholder approval at the 2016 AGM for a new Remuneration Policy which will include an amended Annual Bonus Scheme 2012 (to be renamed Annual Bonus Scheme 2016) for all Executive Directors. The proposed changes to the Annual Bonus Scheme 2012 include signifi cant concessions from its Executive Director participants. PERFORMANCE AND REWARD IN THE YEAR TO 31 MARCH 2016 As noted in the Strategic Report on pages 1 to 68, the Group has delivered an increase in EPRA net assets per share of 19.7% (2015: 23.0%) in the year under review with a CAGR over the three years to 31 March 2016 of 20.4% (2015: 15.5%). The Group’s total portfolio return, as reported by IPD was 21.7% (2015: 20.4%). Pre-tax profi ts of the Group, before performance related awards, were £135m (2015: £104m). Pence per share 500 450 400 Pence per share 350 500 300 450 250 400 200 350 150 300 100 250 50 200 0 150 100 50 0 461 461 385 385 313 313 250 264 250 264 2012 2013 2014 2015 2016 2013 2014 2015 2016 2012 Annual increase % Three year CAGR 23.8 25 2013 Helical Portfolio return 20 15.6 2014 5.6% 18.6% IPD Upper Quantile 2015 23.0% 7.4% 15.5% (1.0%) 2016 19.7% IPD Median 20.4% 20.4 19.7 17.5 21.7 Helical 13.4 IPD Upper Quantile 23.8 15.6 13.4 20.4 19.7 17.5 21.7 2014 2015 IPD Median 13.0 11.4 13.0 2016 11.4 % 15 25 10 20 5 15 0 10 5 0 2014 2015 2016 Subsequent to the year end, and in accordance with the rules of the Executive Bonus Plan 2011 and the Helical Bar Annual Bonus Scheme 2012, cash and deferred shares have been approved for inclusion in the fi nancial statements for the year to 31 March 2016. Details of these annual bonus awards are disclosed in the Annual Report on Remuneration. Awards made in 2013 under the terms of the 2004 Performance Share Plan (“PSP”) were subject to two performance conditions over the three years to 31 March 2016. Two thirds of the awards were based on absolute net asset value performance. The remaining third of the awards were based on a comparison of the Group’s portfolio return to the IPD Total Return index. The performance criteria were measured at the end of the three year period and 100% of the awards are expected to vest. 3,750 3,500 The Committee believes that the provision for annual cash and deferred share bonuses and the expected vesting of the 2013 PSP award in respect of the three-year performance period ended 31 March 2016 accurately and fairly represents the reward determined by the Group’s remuneration schemes based on the performance of the Group over the respective performance periods. 3,000 3,250 3,750 2,750 42% Basic salary & benefits Bonus PSP Basic salary & benefits Bonus PSP 42% 42% 42% 16% 42% 37% 37% 37% 26% 42% 42% 42% 16% 42% 37% 37% 26% 37% 37% 42% 42% 16% 42% 37% 37% 37% 26% 37% 49% 33% 49% 18% 33% 18% 42% 28% 30% 42% 28% 30% Minimum Target Maximum Minimum Target Maximum Minimum Target Maximum 37% Minimum Target Maximum GERALD KAYE 26% 16% TIM MURPHY MATTHEW BONNING-SNOOK DUNCAN WALKER 26% 16% 26% 16% Minimum Target Maximum Minimum Target Maximum Minimum Target Maximum Minimum Target Maximum GERALD KAYE TIM MURPHY MATTHEW BONNING-SNOOK DUNCAN WALKER 3,500 2,500 3,250 0 2,250 0 0 £ 3,000 2,000 2,750 1,750 2,500 1,500 0 2,250 1,250 0 0 £ 2,000 1,000 1,750 750 1,500 500 1,250 250 1,000 0 750 500 250 0 84 DIRECTORS’ REMuNERATION REPORT ANNuAL STATEMENT SUMMARY OF THE PROPOSED CHANGES In light of the reshaping of the Board and the Executive Bonus Plan 2011 reaching the end of its shareholder approved life, the Committee undertook to review the Company’s remuneration policy to reflect these changes. In conducting its review, the Committee restated its overall policy with regard to Executive Directors’ remuneration as follows: • Maintaining fixed remuneration packages below the median level of its peers; and • Aligning variable incentive based bonus and share schemes with the long term success of the Company and the interests of its shareholders. Recognising the reduction in the number of Executive Directors and the current sensitivities surrounding executive pay quantum and transparency in the external environment, the Committee has sought to reduce the total quantum of variable pay, introduce additional, and strengthen existing, shareholder protections and simplify the bonus scheme calculations whilst continuing to operate bonus arrangements which incentivise the Executive Directors. The main changes to the remuneration policy are as follows: • On becoming Chairman, Mike Slade will receive an annual fee of £155,000, plus an additional benefit in kind of £20,000 for use of secretarial support for non-business use, to reflect his Non-Executive Director role. He ceased accruing bonus from 1 April 2016 and is no longer entitled to receive PSP awards. Outstanding PSP awards will continue to vest on the normal vesting dates subject to continued service and performance targets in line with the PSP rules approved by shareholders; • Gerald Kaye’s annual salary will increase from £413,900 to £515,000. This is £20,800 lower than Michael Slade’s current annual salary and, reflecting best practice in respect of an internal promotion, will be phased over a two year period, with the second increase subject to the Committee being satisfied in respect of his individual performance. It is envisaged that Gerald Kaye’s salary will increase in line with RPI annually thereafter; • Duncan Walker’s annual salary will increase from £324,600 to be the same as that of Matthew Bonning-Snook (currently £382,500) to reflect his additional responsibilities within the new Board structure. Again, reflecting best practice, this increase will be phased over a two year period with the second increase subject to the Committee being satisfied in respect of his individual performance; • The salary review date will be changed from 1 July to 1 April to align it to the financial year and the rest of the workforce although bonus calculations and new share awards will continue to be calculated with reference to salaries at 31 March; • The Executive Bonus Plan 2011, which was designed to reward the Chief Executive and Finance Director, will not be renewed so that in future only one Executive Director bonus arrangement will be operated. The terms of the proposed Annual Bonus Plan 2016 will be amended to permit the Chief Executive and Finance Director to participate; • The potential additional awards of up to 300% of salary in year five (2017) and year ten (2022) of the Annual Bonus Scheme 2012 will be removed; • The calculation of the bonus under the proposed Annual Bonus Scheme 2016 will be simplified by operating one profit pool, (previously based on two pools) comprising all annual net rents, profits/losses on the sale and revaluation of assets, loan finance and administration costs and the costs of equity (to be fixed at 7% pa but subject to regular review). In addition, as a further amendment, distributions will continue to be restricted to a maximum of 300% of salary but with the previous additional restriction of bonuses being no more than 70% of the balance of the bonus pool being removed. In considering shareholder protections: • The maximum potential annual bonus will be set at 200% of salary for the Finance Director and will remain at 300% for all other participants; • Rather than an unlimited carry forward in respect of the bonus pool, as currently operated, a maximum of 6.5 times the aggregate Executive Director salary pool may be carried forward; • Rather than a carry forward of the bonus pool of up to five years, the carry forward of any bonus pool not utilised in the year it is generated will be reduced to two years, with any remaining pool foregone. Reflecting this reduction in the carry forward, the minimum period during which losses can be carried forward will be reduced from three to two years; • Good Leavers will receive allocations and deferred share awards for up to two years (previously three years); and • A cap will be introduced on amounts payable upon a change of control (currently, amounts are uncapped). Further details of the proposed new Annual Bonus Scheme 2016 are shown on page 98 below and are set out in the 2016 Notice of Annual General Meeting (“AGM”). In addition to these changes to remuneration, and reflecting consensus from a number of shareholders regarding the length of Executive Director notice periods, the Committee has agreed with all Executive Directors that their notice periods will be reduced from twelve months to six months without compensation. The Company policy of not providing pension provision will continue and no changes are being proposed in respect of the operation of the PSP. REMUNERATION POLICY FOR THE YEAR TO 31 MARCH 2017 The Committee is committed to ensuring that its remuneration policy remains aligned to the interests of shareholders – incentivising management to increase total returns and growing net asset value per share – whilst ensuring that an appropriate balance is maintained between the targets set for management and the risk profile of the Group. The Committee believes it has struck the right balance between fixed annual remuneration and an incentive structure with challenging targets which seek to reward outperformance with a mixture of cash-based bonus payments and longer term share awards set for management and the risk profile of the Group. In addition to the changes made to the salaries of Gerald Kaye and Duncan Walker, referred to above, the Committee determined that the basic salaries of the remaining executive directors should be increased from 1 April 2016 by 1.6% (2015: 2.0%), which is below the average 7% (2015: 8%) awarded to all other employees of the Group. Further details of the implementation of the proposed remuneration policy for the year to 31 March 2017 can be found on pages 97 to 99. ANNUAL GENERAL MEETING At the AGM to be held on 25 July 2016, the following resolutions relating to remuneration are being proposed: • The approval of the Remuneration Policy Report; • The approval of the Annual Statement and Annual Report on Remuneration for the year to 31 March 2016; and, • The approval of the Annual Bonus Scheme 2016. I trust that shareholders will support the Committee and vote in favour of these resolutions. Michael O’Donnell Chairman of the Remuneration Committee 15 June 2016 HELICAL BAR PLC REPORT & ACCOUNTS 2016 DIRECTORS’ REMuNERATION REPORT REMUNERATION POLICY REPORT 85 The Report of the Remuneration Committee has been prepared in accordance with the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 (the “Regulations”). The Company’s remuneration policy follows the principles and guidelines of the Listing Rules and the UK Corporate Governance Code 2012 as they relate to directors’ remuneration. The Company’s Remuneration Policy Report was previously approved by shareholders at the Annual General Meeting held on 25 July 2014 for a maximum period of three years. However, in view of changes to the remuneration of the Executive Directors, the expiry of the Executive Bonus Plan 2011 and proposed replacement of the Annual Bonus Scheme 2012 with the Annual Bonus Scheme 2016, the Committee is seeking the approval of shareholders for an amended Remuneration Policy Report. REMUNERATION POLICY REPORT This section of the Remuneration Report sets out the remuneration policy of the Group. Changes to this policy since its 2014 approval are outlined in the report but the Committee believes that the policy continues to support the Group’s strategy and is aligned with shareholders’ interests. REMUNERATION POLICY Helical’s approach to the remuneration of its Executive Directors is to provide a basic remuneration package below the median level of its peers within the listed real estate sector (the FTSE 350 Super Sector Real Estate Index, excluding storage companies and agencies) combined with an incentive based bonus and share scheme structure aligned with the interests of its shareholders. Remuneration within the real estate sector is monitored and reviewed regularly to ensure that the Group’s positioning of its remuneration remains in line with these objectives. In addition to this external view, the Committee also monitors the remuneration levels of senior management below Board level and the remuneration of other employees to ensure that these are taken into account in determining the remuneration of Executive Directors and considers environmental, social, governance and risk issues. In determining such policy, the Committee shall take into account all factors which it deems necessary. The objective of the remuneration policy shall be to ensure that Executive Directors and senior management are provided with appropriate incentives to encourage enhanced performance and are, in a fair and responsible manner, rewarded for their individual contributions to the success of the Group. Within the terms of the agreed policy the Committee shall determine, for the Executive Directors: • The total individual remuneration packages of each executive director including, where appropriate, basic salaries, bonuses, share awards, and other benefits; • Targets for any performance related remuneration schemes; and, • Service agreements incorporating termination payments and compensation commitments. THE BOWER OLD STREET, LONDON EC1 HELICAL BAR PLC REPORT & ACCOUNTS 2016 GOVERNANCE86 DIRECTORS’ REMuNERATION REPORT REMuNERATION POLICY REPORT DIRECTORS’ REMUNERATION POLICY TABLE The table below summarises the directors’ remuneration policy which will be put to shareholders for approval at the 2016 AGM. The proposed policy differs from that approved by shareholders at the 2014 AGM as follows: • The salary review date will be changed from 1 July to 1 April to align it to the financial year and the rest of the workforce; • The Executive Bonus Plan 2011, which was designed to reward the Chief Executive and Finance Director, will not be renewed so that in future only one Executive Director bonus arrangement will be operated. The terms of the proposed Annual Bonus Plan 2016 will allow all Executive Directors, including the Chief Executive and Finance Director, to participate; and, • The proposed Annual Bonus Plan 2016 simplifies the bonus calculation and introduces a number of additional shareholder protections. Element Salary Purpose and link to strategy Operation - Reflects the value of the individual and their role and responsibilities - Reflects delivery against key personal objectives and development - Provides an appropriate level of basic fixed income avoiding excessive risk arising from over reliance on variable income Annual bonus - Provides focus on delivering returns from the Long term incentive awards Group’s property portfolio - Aligned with shareholders through a profit sharing model, with appropriate hurdles and shareholder protections - Rewards and helps retain key executives and is aligned to the Group’s risk profile - Maximum bonus only payable for achieving demanding targets - Aligned to main strategic objective of delivering long-term value creation - Aligns Executive Directors’ interests with those of shareholders - Rewards and helps retain key Executives and is aligned to the Group’s risk profile - Normally reviewed annually, effective 1 April - Paid in cash on a monthly basis; not pensionable - Takes periodic account against companies with similar characteristics and sector comparators - Targeted below median level of its peers - Reviewed in context of the salary increases across the Group - Payable in cash and deferred shares - Non-pensionable - Discretionary annual grant of conditional share awards under the 2014 PSP - 300% of salary p.a. for all Executive Directors - Performance normally measured over three years - Dividend equivalent payments (in cash or in shares) may be - 10% of an award vests at threshold performance Maximum Performance targets - No maximum or maximum salary increase is operated - N/A - Salary increases will be linked to RPI and will not normally exceed the average increase awarded to other employees - Increases may be above this level if there is an increase in the scale, scope or responsibility of the role or to allow the basic salary of newly appointed Executives to move towards market norms as their experience and contribution increases - 300% of salary p.a. (200% for Finance Director) - Performance normally measured over one year - Dividend equivalent payments (in cash or in shares) may be Targets based on: payable on deferred shares - Profits/losses of the business plus growth in values of the investment, trading and development portfolio after charging for the Group’s finance, administration costs and the use of the Group’s equity - Clawback provisions apply - Details of profit sharing arrangements are set out on page 98 - Performance targets linked to net asset value per share, total property return and total shareholder return - Details of actual targets for the awards to be granted in 2016 are set out on page 99 - Clawback provisions apply - N/A - Aim to hold a shareholding to equal or exceed 200% of basic salary (increasing to 300% on the first vesting of awards granted under the 2014 PSP) payable - N/A - No maximum or maximum fee increase is operated - N/A - Fee increases may be guided by the average increase awarded to Executive Directors and other employees and/or general movements in the market - Increases may be above this level if there is an increase in the scale, scope or responsibility of the role Other benefits - There is no Group pension scheme for Directors and no contributions are payable to Directors’ own pension schemes - Provide insured benefits to support the individual and their family during periods of ill health, accidents or death - Cars or car allowances and fuel allowances to facilitate effective travel - Benefits provided through third party providers - Insured benefits include: private medical cover, life assurance and permanent health insurance - Other benefits may be provided where appropriate Share ownership guidelines - To provide alignment of interests between - Executive Directors are required to build and - N/A Executive Directors and shareholders Non-Executive Director fees - Reflects time commitments and responsibilities of each role and fees paid by similarly sized companies - The remuneration of the Non-Executive Directors is determined by the Executive Board maintain a specified shareholding through the retention of the post-tax shares received on the vesting of awards - PSP participants are required to retain shares acquired for at least two years after vesting - Cash fee paid monthly - Fees are reviewed on a regular basis - Benefits may be provided where appropriate - Fixed three year contracts with three month notice periods In addition to the above, Executive Directors may also participate in any all-employee share arrangement operated by the Company, up to prevailing HMRC limits. However, employees including Directors who participate in the Group’s long term incentive awards are excluded from the Helical Bar 2010 Approved Share Option Scheme. The Executive Bonus Plan 2011 was discontinued on 31 March 2016 at the end of its shareholder approved life. The 2004 PSP expired in 2014 and was replaced by the 2014 PSP. Awards made under the terms of the 2004 PSP which remain outstanding and subject to performance criteria are noted on page 94. HELICAL BAR PLC REPORT & ACCOUNTS 2016 DIRECTORS’ REMuNERATION REPORT REMuNERATION POLICY REPORT 87 Element Salary - Reflects the value of the individual and their - Normally reviewed annually, effective 1 April role and responsibilities - Reflects delivery against key personal objectives and development - Provides an appropriate level of basic fixed income avoiding excessive risk arising from over reliance on variable income - Paid in cash on a monthly basis; not pensionable - Takes periodic account against companies with similar characteristics and sector comparators - Targeted below median level of its peers - Reviewed in context of the salary increases Annual bonus - Provides focus on delivering returns from the - Payable in cash and deferred shares across the Group - Non-pensionable Group’s property portfolio - Aligned with shareholders through a profit sharing model, with appropriate hurdles and shareholder protections - Rewards and helps retain key executives and is aligned to the Group’s risk profile - Maximum bonus only payable for achieving demanding targets - Aligns Executive Directors’ interests with those of shareholders - Rewards and helps retain key Executives and is aligned to the Group’s risk profile Directors and no contributions are payable to Directors’ own pension schemes - Provide insured benefits to support the individual and their family during periods of ill health, accidents or death - Cars or car allowances and fuel allowances to facilitate effective travel Executive Directors and shareholders - Insured benefits include: private medical cover, life assurance and permanent health insurance - Other benefits may be provided where appropriate maintain a specified shareholding through the retention of the post-tax shares received on the vesting of awards - PSP participants are required to retain shares acquired for at least two years after vesting Purpose and link to strategy Operation Maximum - No maximum or maximum salary increase is operated - Salary increases will be linked to RPI and will not normally exceed the average increase awarded to other employees - Increases may be above this level if there is an increase in the scale, scope or responsibility of the role or to allow the basic salary of newly appointed Executives to move towards market norms as their experience and contribution increases - 300% of salary p.a. (200% for Finance Director) - Dividend equivalent payments (in cash or in shares) may be payable on deferred shares Long term incentive awards - Aligned to main strategic objective of - Discretionary annual grant of conditional share delivering long-term value creation awards under the 2014 PSP - 300% of salary p.a. for all Executive Directors - Dividend equivalent payments (in cash or in shares) may be payable Other benefits - There is no Group pension scheme for - Benefits provided through third party providers - N/A Performance targets - N/A - Performance normally measured over one year Targets based on: - Profits/losses of the business plus growth in values of the investment, trading and development portfolio after charging for the Group’s finance, administration costs and the use of the Group’s equity - Clawback provisions apply - Details of profit sharing arrangements are set out on page 98 - Performance normally measured over three years - 10% of an award vests at threshold performance - Performance targets linked to net asset value per share, total property return and total shareholder return - Details of actual targets for the awards to be granted in 2016 are set out on page 99 - Clawback provisions apply - N/A Share ownership guidelines - To provide alignment of interests between - Executive Directors are required to build and - N/A - Aim to hold a shareholding to equal or exceed 200% of basic salary (increasing to 300% on the first vesting of awards granted under the 2014 PSP) Non-Executive Director fees - Reflects time commitments and - Cash fee paid monthly responsibilities of each role and fees paid by similarly sized companies - The remuneration of the Non-Executive Directors is determined by the Executive Board - Fees are reviewed on a regular basis - Benefits may be provided where appropriate - Fixed three year contracts with three month notice periods - No maximum or maximum fee increase is operated - Fee increases may be guided by the average increase awarded to Executive Directors and other employees and/or general movements in the market - Increases may be above this level if there is an increase in the scale, scope or responsibility of the role - N/A HELICAL BAR PLC REPORT & ACCOUNTS 2016 GOVERNANCE 88 DIRECTORS’ REMuNERATION REPORT REMuNERATION POLICY REPORT RECRUITMENT POLICY In considering the structure of the Board, the balance between Executive Directors and independent Non-Executive Directors and the skills, knowledge and experience required to ensure the Board functions in accordance with the Group’s objectives, the Committee will seek to apply the following principles in relation to the remuneration of new directors, whether by internal promotion or external appointment: Element Salary Benefits Pension Annual bonus Long term incentives Share Incentive Plan Buy-out awards Policy The salary of newly appointed Executive Directors would reflect the individual’s experience and skills, and be targeted below the median of appropriate sector comparables, taking into account internal comparisons. On initial appointment, salaries would generally be set at a level lower than benchmarked for that role to allow for pay increases to market levels subject to satisfactory progress and contribution. Benefits would be as are currently provided and periodically reviewed, being car or car allowance, car fuel allowance, private medical cover, permanent health insurance and life assurance. There is no Group pension scheme for Directors and no contributions are payable to Directors’ own pension schemes. Annual bonus arrangements would be set in line with arrangements as approved by shareholders, with the Committee retaining the right to pro-rata any bonus payable in respect of the year of appointment. Annual awards under the terms of the 2014 PSP will be made in accordance with the terms of that Plan. In line with that of existing Executive Directors. Should it be deemed necessary to compensate a new director for loss of bonus or incentives from a previous employer, the Committee may structure the remuneration of such director to buy-out any such bonus or incentives on a like-for-like basis in respect of currency (i.e. cash versus shares), timing and performance targets. Where possible such buy-out will be structured within the Company’s existing incentive arrangements but the Committee has the discretion to implement the exemption under rule 9.4.2 of the Listing Rules. Non-Executive Directors Newly appointed Non-Executive Directors will be paid fees at a level consistent with existing Non- Executive Directors. Fees would be paid pro-rata in the year of appointment. HOW EMPLOYEE PAY IS TAKEN INTO ACCOUNT AND HOW IT COMPARES TO THE REMUNERATION POLICY OF EXECUTIVE DIRECTORS All permanent employees of the Group, including Executive Directors, receive a basic remuneration package including base salary, private medical cover, permanent health insurance, life assurance and membership of the Share Incentive Plan. In addition, Directors and senior management are entitled to the use of company cars or the payment of a car allowance and a car fuel allowance. Whilst employees below Board level are not entitled to participate in the Annual Bonus Scheme, discretionary bonuses are paid to employees on an individual basis depending on their performance and contribution. The Performance Share Plan is available to all employees but is primarily utilised to incentivise Executive Directors and senior management. An Inland Revenue approved Share Option Scheme is available for the Committee to grant options to those who do not receive awards under the Performance Share Plan. Consequently, Directors are not granted awards under this scheme. In determining executive remuneration, the Committee considers the overall remuneration of all the Group’s employees and, other than in exceptional circumstances, seeks to award increases in salaries at levels below those made to other staff and within its own guidelines. The remaining remuneration is weighted towards performance related awards. The Committee does not consult with its employees when drawing up the Group’s remuneration policy. PERFORMANCE METRICS The performance metrics used in the annual bonus scheme and the long term incentive plan are aligned with the Group’s Key Performance Indicators, discussed on pages 20 to 21. The proposed Annual Bonus Scheme 2016 (and previously the Annual Bonus Scheme 2012), if approved at the 2016 AGM, is a profit sharing model which takes the results of the Company, including valuation movements on its property portfolio, and, after charging all finance costs, non-performance related administration costs and a charge for the use of the Group’s equity (initially set at 7% but subject to regular review), allocates the net results into a profit pool for payment to participants with maximum limits, deferral, clawback and other shareholder protections. The scheme will be open to all Executive Directors. Long term incentives, awarded in accordance with the rules of the 2014 PSP are subject to an absolute net asset value growth test, a relative performance metric based on the performance of the Group’s property portfolio compared to an IPD index and a relative performance metric based on Total Shareholder Return. HELICAL BAR PLC REPORT & ACCOUNTS 2016 DIRECTORS’ REMuNERATION REPORT REMuNERATION POLICY REPORT 89 EXECUTIVE DIRECTORS’ DATES OF APPOINTMENT AND SERVICE CONTRACTS All service contracts are available for inspection at the registered offices of the Company. Original dates of appointment to the Board, are as follows: Executive Director Michael Slade Gerald Kaye Tim Murphy Matthew Bonning- Snook Duncan Walker Notice Period Date of Employment Board Appointment Date of current contract 12m1 21 August 1984 21 August 1984 6m 6m 6m 6m 6 March 1994 28 September 1994 1 March 1994 24 July 2012 13 March 1995 1 August 2007 28 August 2007 24 June 2011 1 August 2007 1 March 2010 24 July 2012 1 March 2010 24 June 2011 1 The notice period for Michael Slade will reduce to three months subject to his election as Chairman at the 2016 AGM. LEAVER POLICY On termination of employment each Director may be entitled to a payment in lieu of notice of basic salary and other contractual entitlements i.e. provision of a car, health and life insurance etc. The Group may make payments in lieu of notice as one lump sum or in instalments, at its own discretion. If the Group chooses to pay in instalments the Director is obliged to seek alternative income over the relevant period and to disclose the amount to the Group. Instalment payments will be reduced by any alternative income. under the Annual Bonus Scheme 2016, participants shall not normally be entitled to receive any distribution under the scheme following cessation and shall immediately cease to have any interests, benefits, rights and/or entitlements under the scheme howsoever arising on the date of such cessation except where good leaver status applies (i.e. death; injury, disability; redundancy; retirement; sale or transfer of employing company or business outside of the Group or any other reason permitted by the Committee). For good leavers, individuals would cease to accrue future amounts into Bonus Award Pool although would continue to receive deferred share awards and any remaining amounts held in the Bonus Award Pool for a period of two years after cessation. Any share-based entitlements granted to an Executive Director under the Group’s share plans will be determined based on the relevant plan rules. For awards granted under the 2014 PSP, awards held by good leavers will vest on the normal vesting date subject to performance conditions and time pro-rating, unless the Committee determines that awards should vest at cessation and/or time pro-rating should not apply. NON-EXECUTIVE DIRECTORS Non-Executive Directors are appointed by a Letter of Appointment and their remuneration is determined by the Board. Current Letters of Appointment, setting out the terms of appointment, operate from 1 April 2015 or, if later, the date of appointment. The appointment of Non-Executive Directors is terminable on three months’ notice. Non-Executive Directors are not eligible to participate in any new share awards made under the terms of the Group’s bonus or share award schemes. In exceptional circumstances, where an Executive Director becomes a Non-Executive Director e.g. Michael Slade becoming Chairman in 2016 (subject to his re-election at the 2016 AGM), ongoing participation in awards previously made in bonus and share schemes will be subject to the rules of those schemes and will be subject to the discretion of the Committee. NON-EXECUTIVE DIRECTOR’S LETTERS OF APPOINTMENT Non-executive director Nigel McNair Scott1 – Chairman Andy Gulliford1 – Property Advisor to the Board Richard Gillingwater – Senior Independent Director Michael O’Donnell – Chairman of the Remuneration Committee Richard Grant – Chairman of the Audit Committee Susan Clayton – Chairman of the valuation Committee Richard Cotton Board appointment 17 December 1985 1 March 2006 24 July 2012 24 June 2011 24 July 2012 1 February 2016 1 March 2016 1 Nigel McNair Scott and Andy Gulliford are to retire from the Board at the AGM on 25 July 2016. Commencement date of current term 1 April 2015 1 April 2015 1 April 2015 1 April 2015 1 April 2015 1 February 2016 1 March 2016 HELICAL BAR PLC REPORT & ACCOUNTS 2016 GOVERNANCE3 year Total shareholder return Source: Datastream (Thomson Reuters) Helical FTSE 350 Supersector Real Estate Index ) d e s a b e R ( n r u t e R r e d l o h e r a h S l a t o T 200 180 160 140 120 100 80 60 40 20 0 7 year ) d e s a b e R ( n r u t e R r e d l o h e r a h S l a t o T 350 300 250 200 150 100 50 0 ) d e s a b e R ( n r u t e R r e d l o h e r a h S l a t o T 140 120 100 80 60 40 20 0 Mar-13 Mar-14 Mar-15 Mar-16 Total shareholder return Source: Datastream (Thomson Reuters) Helical FTSE 350 Supersector Real Estate Index Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 Mar 16 Total shareholder return Source: Datastream (Thomson Reuters) Helical FTSE 350 Supersector Real Estate Index Mar 06 Mar 07 Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 Mar 16 of £100 invested in the FTSE 350 Supersector Real Estate Index. This graph shows the value, by 31 March 2016, of £100 invested in Helical Bar on 31 March 2013, compared with the value This graph shows the value, by 31 March 2016, of £100 invested in Helical Bar on 31 March 2009, compared with the value This graph shows the value, by 31 March 2016, of £100 invested in Helical Bar on 31 March 2006, compared with the value 461 385 313 250 264 Pence per share 500 450 400 350 300 250 200 150 100 50 90 HELICAL BAR PLC REPORT & ACCOUNTS 2016 0 2012 2013 2014 2015 2016 DIRECTORS’ REMuNERATION REPORT REMuNERATION POLICY REPORT Helical IPD Upper Quantile IPD Median 23.8 15.6 13.4 20.4 19.7 17.5 21.7 13.0 11.4 % 25 20 15 10 5 0 2014 2015 2016 SHARE OWNERSHIP GUIDELINES Senior Executives will not normally be permitted to sell shares received through the 2004 PSP/2014 PSP, other than to meet taxation (and national insurance contributions) liabilities, for at least two years and until they own shares to the value of 200% of basic salary for Executive Directors and 100% of salary for other Executives. The 200% of salary guideline for Executive Directors will increase to 300% on the fi rst vesting of share awards granted under the 2014 PSP. increase in the net asset value, before incentives, 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 at the point at which the maximum awards vest over the term of the plans 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 and Total Shareholder Return, over each three year period. ALIGNMENT WITH SHAREHOLDER INTERESTS The Remuneration Committee has analysed the potential gains that may be made by Executives (Directors and those below Board level) through the 2004 PSP/2014 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 REWARD SCENARIOS The charts below show how the composition of the Executive Directors’ remuneration packages varies at three performance levels, namely, at minimum (i.e. fi xed pay), target (assumed to be 50% of the maximum incentive levels) and maximum levels, under the policy set out in the table overleaf. VALUE OF REMUNERATION PACKAGES AT DIFFERENT LEVELS OF PERFORMANCE Basic salary & benefits Bonus PSP 3,750 3,500 3,250 3,000 2,750 2,500 0 2,250 0 0 £ 2,000 1,750 1,500 1,250 1,000 750 500 250 0 42% 42% 37% 37% 26% 16% 49% 33% 18% 42% 28% 30% 42% 42% 37% 37% 42% 42% 37% 37% 26% 16% 26% 16% Minimum Target Maximum Minimum Target Maximum Minimum Target Maximum Minimum Target Maximum GERALD KAYE TIM MURPHY MATTHEW BONNING-SNOOK DUNCAN WALKER The chart is based on: • salary levels eff ective 1 April 2016. • an approximated annual value of benefi ts (no pension is provided). • a 300% of salary maximum annual bonus for the CEO and other directors and 200% for the Finance Director (with target assumed to be 50% of the maximum). • a 300% of salary award under the 2014 PSP in line with the normal maximum award (with target assumed to be 50% of the maximum). • No share price appreciation in respect of deferred bonus and PSP awards has been assumed. REMUNERATION COMMITTEE The Committee comprises Michael O’Donnell, as Chairman, and Richard Gillingwater and Richard Grant, all of whom have served throughout the year, Susan Clayton and Richard Cotton, both of whom have served on the Committee since their appointment to the Board. Each member of the Committee is an independent Non- Executive Director. The Company Secretary acts as Secretary to the Committee. The terms of reference of the Committee are available on request and are included on the Group’s website at www.helical.co.uk. ADVISORS TO THE COMMITTEE The Committee consults the Chief Executive and Finance Director about its proposals and has access to professional advice from independent remuneration consultants, New Bridge Street, to help it determine appropriate remuneration arrangements. Terms of reference for New Bridge Street, which provided no other services to the Company, are available from the Company Secretary on request. Their fees for the year to 31 March 2016 amounted to £20,384 (2015: £42,710). DIRECTORS’ REMuNERATION REPORT ANNUAL REPORT ON REMUNERATION 91 APPLICATION OF THE REMUNERATION POLICY IN THE YEAR TO 31 MARCH 2016 BALANCE OF FIXED VERSUS VARIABLE PAY In line with its policy, the Committee seeks to ensure that the balance of remuneration provides a basic salary below the median, and performance related bonuses and share awards that reward absolute performance and outperformance relative to the Group’s peer group. In the year to 31 March 2016, the balance of fixed versus variable pay on an actual basis for the Executive Directors in office during the year compared to the maximum payable was as follows: Basic salaries and benefits-in-kind Annual Bonus Scheme 2012 Executive Bonus Plan 2011 Performance Share Plan shares vested Actual £ 2,537,000 3,364,000 2,000,000 8,320,000 Share of total % 16 21 12 51 Maximum £ 2,537,000 3,364,000 2,000,000 8,320,000 16,221,000 100 16,221,000 Share of total % 16 21 12 51 100 Note: Performance Share Plan shares vested reflect the market value of shares that are expected to vest (actual) or could vest (maximum) in respect of the three year performance period to 31 March 2016 in accordance with the terms of the Group’s Performance Share Plan. DIRECTORS’ REMUNERATION Remuneration in respect of the directors was as follows: Fixed Variable Year to 31 March 2016 EXECUTIVE DIRECTORS Michael Slade Tim Murphy Gerald Kaye Matthew Bonning-Snook Duncan Walker NON-EXECUTIVE DIRECTORS Nigel McNair Scott Andrew Gulliford Richard Gillingwater Richard Grant Michael O’Donnell Susan Clayton1 Richard Cotton2 Basic salary/ fees £000 Benefits £000 Sub-total £000 Annual cash bonus £000 Deferred bonus shares £000 533 285 412 381 323 155 52 52 52 52 9 4 42 30 49 54 29 23 - - - - - - 575 315 461 435 352 178 52 52 52 52 9 4 1,500 500 828 765 649 - - - - - - - - - 414 383 325 - - - - - - - Share awards £000 2,454 1,227 1,896 1,516 1,227 - - - - - - - Sub-total £000 Total £000 3,954 1,727 3,138 2,664 2,201 - - - - - - - 4,529 2,042 3,599 3,099 2,553 178 52 52 52 52 9 4 Total 2,310 227 2,537 4,242 1,122 8,320 13,684 16,221 1 Susan Clayton joined the Board on 1 February 2016. 2 Richard Cotton joined the Board on 1 March 2016. HELICAL BAR PLC REPORT & ACCOUNTS 2016 GOVERNANCE92 DIRECTORS’ REMuNERATION REPORT ANNuAL REPORT ON REMuNERATION Fixed Variable Year to 31 March 2015 EXECUTIVE DIRECTORS Michael Slade Tim Murphy Gerald Kaye Matthew Bonning-Snook Duncan Walker NON-EXECUTIVE DIRECTORS Nigel McNair Scott Andrew Gulliford Richard Gillingwater Richard Grant Michael O’Donnell FORMER DIRECTOR Jack Pitman1 Total Basic salary/fees £000 Benefits2 £000 Sub-total £000 Annual cash bonus £000 Deferred bonus shares £000 523 279 404 375 307 152 51 51 51 42 43 31 49 54 29 26 - - - - 566 310 453 429 336 178 51 51 51 42 1,500 500 811 750 637 - - - - - 323 2,558 25 257 348 2,815 974 5,172 - - 406 375 318 - - - - - - 1,099 Share awards £000 3,468 1,456 2,601 2,081 1,734 Sub-total £000 Total £000 4,968 1,956 3,818 3,206 2,689 5,534 2,266 4,271 3,635 3,025 1,630 1,630 1,808 - - - - - - - - 51 51 51 42 2,081 15,051 3,055 21,322 3,403 24,137 1 Jack Pitman stepped down from the Board on 13 February 2015 and left the Company on 31 March 2015. 2 The benefits in the year to 31 March 2015 have been adjusted to include Share Incentive Plan Shares and life assurance costs. The information in this section has been audited. EXECUTIVE BONUS PLAN 2011 In 2011, shareholders approved the renewal of the Executive Bonus Plan (the “2011 Plan”) for a further five years. Michael Slade and Tim Murphy were eligible for 2011 Plan bonuses during the year. Total 2011 Plan bonuses for the year to 31 March 2016 of £2,000,000 (2015: £2,000,000) have been accrued in the financial statements for the year to 31 March 2016 and are payable in June 2016. The performance conditions which applied for the year ended 31 March 2016 were as follows: • 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; • absolute performance of the portfolio – un-geared 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, • 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 total amount of bonus payable in the year to 31 March 2016 was 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. Applying this methodology to the results for the year to 31 March 2016, the bonus for the year was calculated as follows: 1. Increase in net asset value per share, pre dividends and performance related awards Net asset value per share at 1 April 2015 Net asset value per share at 31 March 2016* Increase in net asset value per share 385p 475p 23.6% *Adjusted for dividends and performance related awards paid or accrued during the year. HELICAL BAR PLC REPORT & ACCOUNTS 2016 DIRECTORS’ REMuNERATION REPORT ANNuAL REPORT ON REMuNERATION 93 2. Absolute performance of the portfolio Performance of portfolio as measured by IPD upper quartile of IPD Total Return Benchmark 3. Performance of net asset value per share Increase in net asset value per share upper quartile of IPD Capital Growth Benchmark 21.7% 13.0% 23.6% 8.0% Applying these percentages to the net asset value base, the percentage increase in the actual net asset value above that was derived by applying the upper quantile of the IPD Capital Growth Benchmark is 14.43%. Applying this outperformance to the base net asset value results in a potential payment of £4,606,000 (2015: £4,612,000). This was reduced to the maximum amount payable of £2,000,000 (2015: £2,000,000). Bonuses paid under the terms of this 2011 Plan in the last seven years are as follows: Year 2016 2015 2014 2013 2012 2011 2010 Amount Paid £ 2,000,000 2,000,000 2,000,000 1,297,000 nil nil nil The Executive Bonus Plan 2011 reached the end of its shareholder approved life at 31 March 2016 and no further payments will be made in respect of this scheme for subsequent periods. HELICAL BAR ANNUAL BONUS SCHEME 2012 The Helical Bar Annual Bonus Scheme 2012 was approved by shareholders at the 2012 AGM. This scheme provides annual cash bonuses based on the performance of the Group’s property portfolio and is aligned with shareholders through a profit sharing model, with appropriate hurdles and shareholder protections (including deferral and clawback). Total 2012 Bonus Scheme Bonuses have been accrued in the financial statements for the year to 31 March 2016 and the cash element will be payable in June 2016. The main features of the 2012 Bonus Scheme as applied to the year to 31 March 2016 were as follows: • the scheme participants were Gerald Kaye, Matthew Bonning- Snook and Duncan Walker. Former director, Jack Pitman, remained eligible for a bonus in respect of the bonus pool carried forward from 31 March 2015. Neither the Chief Executive nor the Finance Director participated in the Scheme given their participation in the 2011 Plan; • all property assets held during the year were allocated to one of two pools namely the “Investment Pool” or the “Development Pool” (“Profit Pools”); • investment assets were included at valuation as at 31 March 2015 with subsequent valuation movements increasing or decreasing the size of the relevant Profit Pool. Development assets were also included at valuation as at 31 March 2015 with subsequent valuation movements increasing or decreasing the size of the Profit Pool. Any opening surpluses or deficits in the value of the trading and development assets as at the introduction of the scheme on 1 April 2012 were only included in the Profit Pools if they were realised; • development profits, development management fees, net rents, other income and profits/losses on the sale of property assets were allocated to the relevant Profit Pools; and, • profits in the two Profit Pools were eligible for the award of bonuses once they were sufficient to exceed the recovery of all related finance costs, a charge for the use of the Company’s equity at a rate equivalent to the Company’s weighted average cost of debt plus a margin (reviewed regularly to reflect any changes in the cost of debt and the risk profile of the Company’s activities), the Group’s total administrative costs (excluding performance related remuneration) and any unallocated losses from the previous three financial years. Shareholder Protections • no more than 10% of profits were available to participants for distribution (“Bonus Award Pool”) at the end of the relevant financial year. Pool allocations between participants were based on a set formula agreed at the start of the financial year; • the distribution of the Bonus Award Pools to participants were restricted in any financial year to the lower of 70% of the balance of the Bonus Award Pool and 300% of salary. Any excess is deferred and carried forward to the subsequent year to form part of the Bonus Award Pool for the subsequent year(s); • two thirds of any payment is made in cash after the relevant financial year end and one third is deferred for three years into Helical Bar plc shares; and, • other shareholder protections as noted on page 98 in respect of the Annual Bonus Scheme 2016. Bonus Scheme Pool – Year to 31 March 2016 The amount transferred to the Bonus Pool based on the results of the Group for the year to 31 March 2016 and its allocation to cash and deferred share awards is as follows: Bonus Pool brought forward Amount transferred to Bonus Pool based on the results for the year Bonus Pool available for distribution Amount paid as cash bonuses Amount paid as deferred shares Bonus Pool carried forward 2016 £ 15,812,000 12,533,000 28,345,000 2015 £ 7,295,000 12,788,000 20,083,000 (3,216,000) (3,172,000) (1,122,000) (1,099,000) 24,007,000 15,812,000 The proposed changes to this bonus scheme, to be reflected in the Annual Bonus Scheme 2016, are expected to reduce the Bonus Pool carried forward at 31 March 2016 to c. £10,400,000. HELICAL BAR PLC REPORT & ACCOUNTS 2016 GOVERNANCE 94 DIRECTORS’ REMuNERATION REPORT ANNuAL REPORT ON REMuNERATION Other matters • whilst shareholder approval for the Plan was obtained for ten years from 1 April 2012, the Remuneration Committee has reviewed the operation of the Plan early in light of the various Board changes, the expiry of the Executive Bonus Plan 2011 and general sensitivities surrounding executive pay and, subject to shareholder approval, intends replacing the Plan with the Helical Annual Bonus Plan 2016 with additional shareholder protections. Further details of this new plan are noted on page 98 and are set out in the 2016 Notice of AGM; • awards may be satisfied through shares purchased in the market or by new issue or treasury shares. Where new issue or treasury shares are used, the ABI’s 5% in ten year dilution limit will apply; and, • on a change of control of the Company, any amounts accrued over the financial year up to the relevant date, and any amounts held within the Bonus Award Pools will be paid out, subject to a cap on those awards of 600% of base salary, Any deferred shares would vest immediately. PSP AWARDS VESTING IN 2016 The PSP award (granted under the 2004 PSP), granted on 24 June 2013, will vest after 25 June 2016. The expected vesting percentage is as follows: Metric NAv Performance Condition Net asset value growth (fully diluted triple net) 10% of this part of an award vests for compound NAv growth of 7.5% p.a. increasing pro-rata to 100% of this part of an award vesting for compound NAv growth of 15% p.a. TPR Total property return v IPD property 10% of this part of an award vests for median ranking increasing pro-rata to 100% of this part of an award vesting for upper quartile or above performance Total Threshold Target 7.5% Stretch Target 15.0% Actual 22.2% % Vesting 66.67% Median 13.8% upper quartile 15.7% 22.0% 33.33% 100.00% Based on the above and given that net value per share (having added back dividends) increased over the three year performance period, details of the shares under award and the expected value at vesting is as follows: Executive directors Michael Slade Tim Murphy Gerald Kaye Matthew Bonning-Snook Duncan Walker Number of shares at grant Number of shares expected to lapse Number of shares expected to vest Estimated value at vesting1 £’000 615,384 307,692 475,384 380,307 307,692 - - - - - 615,384 307,692 475,384 380,307 307,692 2,454 1,227 1,896 1,516 1,227 Jack Pitman – former director 380,307 126,769 253,538 1,011 1The share price used to calculate the expected value at vesting was 398.75p, based on the average share price over the three months to 31 March 2016. The 2004 PSP numbers presented for the comparatives in the remuneration table above are based on the 2004 PSP awards granted on 31 May 2012. The three year performance period to 31 March 2015 showed that the net asset value per share, calculated in accordance with the terms of the 2004 PSP, had increased by 18.1% p.a. During this three year period the total return of Helical’s property portfolio, as determined by IPD, was 17.4% compared to the upper quantile of the IPD Benchmark which showed a return of 12.3%. Therefore, 100% of the shares vested. The share price used to calculate the expected value at vesting for the 2012 PSP awards was 387.24p (based on the average share price over the three months to 31 March 2015). The actual share price at vesting on 15 September 2015 was 421.00p. The information in this section has been audited. HELICAL BAR PLC REPORT & ACCOUNTS 2016 DIRECTORS’ REMuNERATION REPORT ANNuAL REPORT ON REMuNERATION 95 PSP AWARDS GRANTED IN THE YEAR The following conditional awards were granted on 8 June 2015 under the 2014 PSP in the year: Individual Michael Slade Tim Murphy Gerald Kaye Matthew Bonning-Snook Duncan Walker Basis of Award (as a % of salary) Face Value £000 Vesting at threshold Vesting at Maximum Performance Period 300% 300% 300% 300% 300% 1,576 842 1,217 1,125 955 10% 10% 10% 10% 10% 100% 3 years to 31 March 2018 100% 3 years to 31 March 2018 100% 3 years to 31 March 2018 100% 3 years to 31 March 2018 100% 3 years to 31 March 2018 The total number of awards made to directors under the terms of the 2004 PSP and 2014 PSP which have not yet vested are as follows: Director Michael Slade Tim Murphy Gerald Kaye Matthew Bonning-Snook Duncan Walker Jack Pitman – former director Shares awarded 24.06.13 at 243.75p Shares awarded 25.07.14 at 358.00p Shares awarded 08.06.15 at 420.00p 615,384 307,692 475,384 380,307 307,692 380,307 440,195 235,055 340,055 314,245 266,706 272,053 375,214 200,357 289,857 267,857 227,335 - Total shares awarded 1,430,793 743,104 1,105,296 962,409 801,733 652,360 It is currently expected that 100% of the shares awarded on 24 June 2013, 83% of the shares awarded on 25 July 2014 and 72% of the shares awarded on 8 June 2015 will vest. As detailed below, Jack Pitman, a former director, has been treated as a good leaver under the 2004 PSP and 2014 PSP. Awards will vest under terms of the relevant plans, subject to performance and time pro-rating. The information in this section has been audited. VESTING OF PSP AWARDS Awards to Executive Directors, in office during each year and excluding leavers, which have vested or are expected to vest in accordance with the terms of the 2004 PSP in the last seven years are as follows: Year 2016 – value based on average share price over three months to 31 March 2016 of 389.75p Value £ 8,320,000 2015 – value based on average share price over three months to 31 March 2015 of 387.24p. Actual vesting share price was 421.00p. 15,051,000 2014 – value based on average share price over three months to 31 March 2016 of 359.60p. Actual vesting share price was 351.00p. 5,623,000 2013 2012 2011 2010 nil nil nil nil HELICAL BAR PLC REPORT & ACCOUNTS 2016 GOVERNANCE96 DIRECTORS’ REMuNERATION REPORT ANNuAL REPORT ON REMuNERATION HELICAL BAR 2002 APPROVED SHARE INCENTIVE PLAN under the terms of this Plan employees of the Group are given annual awards of free shares with a value of £3,600 and participants are allowed to purchase additional shares up to a value of £1,800, to be matched in a ratio of 2:1 by the Company. 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 Tim Murphy Gerald Kaye Matthew Bonning-Snook Duncan Walker 9 March 2016 at 379.00p 8 January 2016 at 462.25p 2 December 2015 at 451.00p 15 September 2015 at 421.00p 18 August 2015 at 441.75p 9 June 2015 at 413.5p - 354 354 354 354 210 109 210 208 122 297 297 297 297 297 318 318 318 318 318 479 244 479 473 276 1,197 1,197 1,197 1,197 1,197 Shares held by the Trustees of the Plan at 31 March 2016 were 437,597 (2015: 438,898). The information in this section has been audited. PAYMENTS TO FORMER DIRECTORS – DEPARTURE OF JACK PITMAN As disclosed last year, Jack Pitman stepped down from the Board on 13 February 2015 and ceased employment on 31 March 2015. No payments in respect of salary and car allowance were made after 31 March 2015 although in line with his termination arrangements, Jack Pitman’s Group health insurance continued until the end of the policy in October 2015. In respect of his incentives, it was determined by the Remuneration Committee that Jack Pitman should be treated as a Good Leaver for the purposes of the Annual Bonus Scheme 2012 and his outstanding PSP awards. He will receive cash bonuses in respect of the Annual Bonus Scheme 2012 in respect of the balance remaining in that scheme at 31 March 2015 for a further three years in line with the plan rules, subject to offset of future losses and clawback. A payment of £973,950 will be made in June 2016 at the normal payment date. The 2013 PSP (granted under the 2004 PSP) is expected to vest in full, subject to time pro-rating. The estimated value, based on the average share price over the three months to 31 March 2016 of 398.75p is £1,010,983. The 2014 PSP award (granted under the 2014 PSP) is expected to vest in June 2017, again subject to performance and time pro-rating and full details will be disclosed in next year’s Annual Report on Remuneration. HELICAL BAR PLC REPORT & ACCOUNTS 2016 DIRECTORS’ REMuNERATION REPORT ANNuAL REPORT ON REMuNERATION 97 IMPLEMENTATION OF THE REMUNERATION POLICY FOR THE YEAR TO 31 MARCH 2017 EXECUTIVE DIRECTORS’ BASIC ANNUAL SALARY AND BENEFITS-IN-KIND The basic package of salary and benefits is designed to match the experience and responsibilities of each director and is reviewed annually to ensure that it is consistent with and appropriate to their responsibilities and expectations. The Group does not provide any separate pension provision for Executive Directors and expects individuals to provide for their retirement through their basic salaries and incentive payments. Executive Directors’ basic annual salaries at 31 March 2016 and increases from 1 April 2016 are as follows: At 31 March 2016 £ 535,800 286,100 413,900 Michael Slade Tim Murphy Gerald Kaye Matthew Bonning-Snook 382,500 Duncan Walker 324,600 Increases wef 1 April 2016 £ At 1 April 2016 £ - 4,600 61,100 6,100 32,400 535,800 290,700 475,000 388,600 357,000 The Committee’s policy in respect of basic salaries is that they should be reviewed annually and increased to reflect an appropriate level of inflation (being linked to the Retail Prices Index) or greater to reflect increases in the scale, scope or responsibility of their roles or to allow recently appointed Executives to move to market norms as their experience and contributions increase. At the 2016 AGM to be held on 25 July 2016, Michael Slade is to step down as Chief Executive. His salary will remain at its current level of £535,800 until the AGM, from which date he will be remunerated (subject to his re-election) as Non-Executive Chairman. Gerald Kaye, subject to his re-election, will become the Chief Executive from 25 July 2016. In recognition of his increased responsibilities, his basic salary is to increase to £515,000 pa, £20,800 below that of the current Chief Executive salary, in two stages. This basic salary increased to £475,000 pa on 1 April 2016 and will be increased to £515,000 pa on 1 April 2017 subject to the Committee being satisfied in respect of his individual performance. Thereafter, he is expected to receive inflationary increases each year. Duncan Walker has taken on increased responsibilities over the last twelve months and in recognition of this it is intended that his basic salary will increase to that of Matthew Bonning-Snook over the course of two salary reviews. He received an increase to £357,000 pa on 1 April 2016 and is expected to receive a further increase to c. £391,350 pa, subject to RPI, on 1 April 2017, and subject to the Committee being satisfied in respect of his individual performance. Thereafter, he is expected to receive inflationary increases each year. In addition to these two changes, the Committee has determined that the remaining two Executive Directors will receive increases of 1.6%, being the increase in RPI to 31 March 2016, from 1 April 2016, compared to an average 6.8% awarded to other employees. BENEFITS-IN-KIND Benefits-in-kind provided to Executive Directors comprise the provision of a company car or car allowance, car fuel, private medical cover, permanent health insurance, life insurance and participation in the Company’s Share Incentive Plan. There is no Group pension scheme for Directors and no contributions will be paid by the Group to the Directors’ own pension schemes. NON-EXECUTIVE DIRECTORS’ FEES Michael Slade, subject to his re-election at the 2016 AGM, will become Non-Executive Chairman on 25 July 2016, replacing Nigel McNair Scott who is retiring. Fees payable to him for the role will be £155,000 pa plus an additional benefit-in-kind of £20,000 for use of secretarial support for non-business use. The fees payable to the remaining independent Non-Executive Directors have been reviewed and an increase of £3,000 pa has been awarded with effect from 1 April 2016. This increase takes the base fee to £45,000 pa with an additional £10,000 pa payable to the Senior Independent Director and the Chair of each Committee. Non-Executive Directors’ annual fees at 31 March 2016 and changes at 1 April 2016 and 25 July 2016, are as follows: Michael Slade – Chairman Elect Nigel McNair Scott – Chairman Richard Gillingwater – Senior Independent Director Richard Grant – Chairman of the Audit Committee Andy Gulliford – Property Advisor to the Board Michael O’Donnell – Chairman of the Remuneration Committee Susan Clayton – Chairman of the valuation Committee Richard Cotton 31 March 2016 £ 1 April 2016 £ 25 July 2016 £ - - 155,000 156,000 156,000 52,000 52,000 52,000 52,000 52,000 42,000 55,000 55,000 55,000 55,000 55,000 45,000 - 55,000 55,000 - 55,000 55,000 45,000 HELICAL BAR PLC REPORT & ACCOUNTS 2016 GOVERNANCE98 DIRECTORS’ REMuNERATION REPORT ANNuAL REPORT ON REMuNERATION ANNUAL BONUSES EXECUTIVE BONUS PLAN 2011 The Executive Bonus Plan 2011 reached the end of its shareholder approved life at 31 March 2016 and ceased operation at this date. Of the two participants in the Plan in the year to 31 March 2016, Michael Slade is stepping down as Chief Executive and will no longer be eligible for annual bonuses and Tim Murphy, subject to shareholder approval, will be eligible to participate in the Annual Bonus Scheme 2016. The main features of the 2011 Plan, and details of how it operated for the year ended 31 March 2016, are set out on pages 92 to 93. ANNUAL BONUS SCHEME 2012 This scheme has been reviewed by the Committee and, following consultation with major shareholders, will be replaced by the Helical Annual Bonus Scheme 2016, subject to shareholder approval at the 2016 AGM. The main features of the 2012 Bonus Scheme and how it operated for the year ended 31 March 2016 are set out on pages 93 to 94. As disclosed last year, Jack Pitman, a former director, will continue to receive annual bonuses out of the Bonus Award Pool accrued up to 31 March 2015, in accordance with the “Good Leaver” provisions of the scheme. ANNUAL BONUS SCHEME 2016 Gerald Kaye, Tim Murphy, Matthew Bonning-Snook and Duncan Walker will, subject to shareholder approval, participate in the Annual Bonus Scheme 2016 which is to be considered by Shareholders at the 2016 AGM. This scheme provides annual bonuses based on the performance of the Group’s property portfolio and is aligned with shareholders’ interests through a profit sharing model, with appropriate hurdles and shareholder protections (including deferral and clawback). The main features of the Annual Bonus Scheme 2016, as applied to the year to 31 March 2017, are as follows: • all property assets held at 1 April 2016 or acquired during the year will be allocated to a Profit Pool; • investment assets will be included at valuation as at 31 March 2016 with subsequent valuation movements increasing or decreasing the size of the Profit Pool. Development assets will also be included at valuation as at 31 March 2016 with subsequent valuation movements increasing or decreasing the size of the Profit Pool; • development profits, development management fees, net rents, other income and profits/losses on the sale of property assets will be allocated to the Profit Pools; and, • profits in the Profit Pool will be eligible for the award of bonuses once they are sufficient to exceed the recovery of all related finance costs, a charge for the use of the Company’s equity at a rate of 7% (reviewed regularly to reflect any changes in the risk profile of the Company’s activities), and the Group’s total administrative costs (excluding performance related remuneration). Shareholder Protections • no more than 10% of profits will be available to participants for distribution (“Bonus Award Pool”) at the end of the relevant financial year; • the distribution of the Bonus Award Pool to participants will be restricted in any financial year to 300% of salary (200% for Tim Murphy). Any excess is deferred and carried forward to the subsequent year to form part of the Bonus Award Pool for the subsequent two year(s); • a maximum of 6.5 times the aggregate Executive Director salary pool may be carried forward to form part of the Bonus Award Pool for the subsequent year; • two thirds of any payment is made in cash after the relevant financial year end and one third is deferred for three years into Helical Bar plc shares; • no payments will be made where the Company has not generated a profit (amounts will be deferred until a profit is generated). In addition, the Remuneration Committee will retain discretion to increase the deferred share amount (up to 100% of the payment) or not to make a payment at all (with any amounts reverting back to the Company rather than remaining in the Bonus Award Pool) where it is considered appropriate to do so; • net losses will be carried forward for offset against future net profits. Carry forward of losses will be for a minimum of two years, subject to extension at the request of the Remuneration Committee; • the scheme will operate a clawback provision whereby amounts deferred, amounts held in Bonus Award Pools or the net of tax amounts paid may be recovered in the event of a misstatement of results, an error being made in assessing the calculation of Bonus Award Pools or in the event of gross misconduct; and, • the share of any increase in value of the Company (measured as the increase in net asset value plus cash returned as dividends) that could accrue to all Executives through the Group’s long and short-term incentive and bonus plans at maximum vesting/payouts during the lifetime of the plans will continue to be no more than 20%. HELICAL BAR PLC REPORT & ACCOUNTS 2016 HELICAL BAR PLC REPORT & ACCOUNTS 2016 GOVERNANCE 99 DIRECTORS’ REMuNERATION REPORT ANNuAL REPORT ON REMuNERATION LONG-TERM INCENTIVES PERFORMANCE SHARE PLAN It is anticipated that long-term incentives will be granted to all Executive Directors and senior management in the form of shares awarded under the terms of the 2014 PSP Scheme. For Executive Directors the awards will be granted at 300% of base salary. The main features of the 2014 PSP are as follows: Relative TSR Ranking after three years % of award vesting upper quartile or above Between median and upper quartile Pro rata between 3.3 and 33.3 33.3 • awards will normally vest no earlier than the third anniversary of Median Less than median 3.3 Zero their grant to the extent that the applicable performance conditions (see below) have been satisfi ed and the participant is still employed by the Group. Once exercisable, awards will remain capable of exercise for a period of normally no more than six months; • no award may be granted to an individual in any fi nancial year over shares worth more than three times salary; • there are three performance conditions, one based on absolute growth in the Group’s net asset value per share, one based on the gross (ungeared) total property return per share relative to other property funds as determined by IPD and one based on relative total shareholder return; and, • performance conditions for the awards to be granted in 2016 will, subject to shareholder approval, be measured over the three years following grant as follows. Growth in net asset value The “fully diluted triple net” net asset value as at the start of the fi nancial year in which a grant takes place will be compared to the value three years later (having added back dividends and changes in issued share capital): Annual compound increase after three years 15% p.a. or more 3 year % of award vesting 33.3 Between 7.5% p.a. and 15% p.a. Pro rata between 3.3 and 33.3 7.5% p.a. Below 7.5% p.a. 3.3 Zero If uK infl ation (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. Total property return versus IPD property funds Ranking after three years % of award vesting upper quartile or above Between median and upper quartile Median Less than median Pro rata between 3.3 and 33.3 33.3 3.3 Zero The comparator group for the awards to be granted in 2016 will be the companies included in the FTSE 350 Super Sector Real Estate Index, excluding storage companies and agencies. Share awards will lapse in full where: • net asset value per share (having added back dividends) does not increase over the three year performance period; or • the gross return falls below the IPD median, the growth in triple net asset value is below 7.5% per annum and relative TSR is below median over the three year period. TOTAL SHAREHOLDER RETURN AND CHIEF EXECUTIVE’S REMUNERATION The total shareholder returns for a holding in the Group’s shares in the three, seven and ten years to 31 March 2016 compared to a holding in the FTSE 350 Super-sector Real Estate Index are shown in the graphs below. This index has been chosen because it includes the majority of listed real estate companies. Three years to 31 March 2016 The graph showing the relative performance of Helical during the three years to 31 March 2016 matches the performance period for the 2004 PSP Award granted on 24 June 2013 and which will vest after 25 June 2016. The graph shows that Helical outperformed the benchmark index during this period. Total shareholder return Source: Datastream (Thomson Reuters) Helical FTSE 350 Supersector Real Estate Index ) d e s a b e R ( n r u t e R r e d o h e r a h S l l a t o T 200 180 160 140 120 100 80 60 40 20 0 Mar-13 Mar-14 Mar-15 Mar-16 This graph shows the value, by 31 March 2016, of £100 invested in 7 year Helical Bar on 31 March 2013, compared with the value of £100 invested in the FTSE 350 Super-sector Real Estate Index. Total shareholder return Source: Datastream (Thomson Reuters) Helical FTSE 350 Supersector Real Estate Index ) d e s a b e R ( n r u t e R r e d o h e r l a h S l a t o T 350 300 250 200 150 100 50 0 ) d e s a b e R ( n r u t e R r e d l o h e r a h S l a t o T 140 120 100 80 60 40 20 0 Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 Mar 16 Total shareholder return Source: Datastream (Thomson Reuters) Helical FTSE 350 Supersector Real Estate Index Mar 06 Mar 07 Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 Mar 16 of £100 invested in the FTSE 350 Supersector Real Estate Index. This graph shows the value, by 31 March 2016, of £100 invested in Helical Bar on 31 March 2013, compared with the value This graph shows the value, by 31 March 2016, of £100 invested in Helical Bar on 31 March 2009, compared with the value This graph shows the value, by 31 March 2016, of £100 invested in Helical Bar on 31 March 2006, compared with the value 461 385 313 250 264 2012 2013 2014 2015 2016 Helical IPD Upper Quantile IPD Median 23.8 15.6 13.4 20.4 19.7 17.5 21.7 13.0 11.4 2014 2015 2016 Pence per share 500 450 400 350 300 250 200 150 100 50 0 % 25 20 15 10 5 0 0 2,250 0 0 £ 3,750 3,500 3,250 3,000 2,750 2,500 2,000 1,750 1,500 1,250 1,000 750 500 250 0 Basic salary & benefits Bonus PSP 42% 42% 37% 37% 26% 16% 49% 33% 18% 42% 28% 30% 42% 42% 37% 37% 42% 42% 37% 37% 26% 16% 26% 16% Minimum Target Maximum Minimum Target Maximum Minimum Target Maximum Minimum Target Maximum GERALD KAYE TIM MURPHY MATTHEW BONNING-SNOOK DUNCAN WALKER 3 year ) d e s a b e R ( n r u t e R r e l d o h e r a h S l a t o T 200 180 160 140 120 100 80 60 40 20 0 Mar-13 100 HELICAL BAR PLC REPORT & ACCOUNTS 2016 Mar-14 Mar-15 Mar-16 Total shareholder return Source: Datastream (Thomson Reuters) Helical FTSE 350 Supersector Real Estate Index 3 year DIRECTORS’ REMuNERATION REPORT ANNuAL REPORT ON REMuNERATION 7 year Total shareholder return Source: Datastream (Thomson Reuters) Helical FTSE 350 Supersector Real Estate Index This graph shows the value, by 31 March 2016, of £100 invested in Helical Bar on 31 March 2013, compared with the value 350 300 250 200 150 100 50 ) d e s a b e R ( n r u t e R r e d o h e r a h S l l a t o T Total shareholder return Source: Datastream (Thomson Reuters) Helical FTSE 350 Supersector Real Estate Index 200 l 80 120 180 160 140 100 ) d e s a b e R Seven years to 31 March 2016 ( n r u The base position at 31 March 2009, from which subsequent t e R performance is measured as required by the Regulations, is the r e d nearest accounting period end to the bottom of the property o h cycle. Helical’s share price at that date was 287.50 per share, a e r a small premium to the EPRA net asset value per share of 286.00 h S pence per share. The Company’s share price, at that stage, had a t o not fallen as much as the average of the FTSE 350 Super-Sector T Real Estate Index and remained at a premium until 2012. The subsequent performance of the Company’s TSR refl ects the relatively higher base position of Helical’s share price. 7 year 0 Mar-13 Mar-14 Mar-15 40 60 20 l Total shareholder return Source: Datastream (Thomson Reuters) Helical FTSE 350 Supersector Real Estate Index Mar-16 ) d e s a b e R ( n r u t e R r e d o h e r a h S l l a t o T 350 300 250 200 150 100 50 0 Mar 09 Mar 11 0 Mar 09 Ten years to 31 March 2016 Mar 10 The ten years to 31 March 2016 covers the end of the previous property cycle, the impact of the Financial Crisis of 2008 and the subsequent economic recovery. The graph below shows that Helical’s share price remained at a premium until 2012, following which it fell to a low of 164p before recovering. Mar 14 Mar 13 Mar 15 Mar 12 Mar 16 Total shareholder return Source: Datastream (Thomson Reuters) Helical FTSE 350 Supersector Real Estate Index ) d e s a b e R ( n r u t e R r e d o h e r a h S l l a t o T 140 120 100 80 60 40 20 0 Mar 06 Mar 07 Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 Mar 16 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 Mar 16 of £100 invested in the FTSE 350 Supersector Real Estate Index. This graph shows the value, by 31 March 2016, of £100 invested in Helical Bar on 31 March 2006, compared with the value of £100 invested in the FTSE 350 Super-Sector Real Estate Index. This graph shows the value, by 31 March 2016, of £100 invested in Helical Bar on 31 March 2013, compared with the value This graph shows the value, by 31 March 2016, of £100 invested in Helical Bar on 31 March 2009, compared with the value of £100 invested in the FTSE 350 Super-Sector Real Estate Index. REMUNERATION OF THE CHIEF EXECUTIVE Total shareholder return Source: Datastream (Thomson Reuters) 120 140 100 Helical FTSE 350 Supersector Real Estate Index Comparing the seven year TSR of the Company, as noted above, to the remuneration of the Chief Executive, the table below presents single fi gure remuneration for the Chief Executive over the period, since 31 March 2009, together with past annual bonus payouts and the vesting of long term incentive share awards. There is a clear alignment between the TSR performance of the Company and the levels ) d e of total remuneration paid to the Chief Executive. s a b e R ( n r u t 80 e R Year ended r e 60 d 31 March 2016 o h e r 31 March 2015 a h S 31 March 2014 a t o T 31 March 2013 Annual Bonus (% of max payout) Total Remuneration £000 LTIP (% of max vesting) Michael Slade Michael Slade Michael Slade Michael Slade 5,534 3,343 4,529 1,523 Name 100 100 100 100 100 65 62 40 20 - l l 0 Mar 06 Mar 07 Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14 Mar 15 Mar 16 31 March 2012 of £100 invested in the FTSE 350 Supersector Real Estate Index. 31 March 2011 31 March 2010 Michael Slade Michael Slade Michael Slade 541 538 1,500* - - - - - - *The total remuneration in the year to 31 March 2010 includes £973,000 in respect of share options granted in 2000 and eligible to vest between 2005 and 2010. This graph shows the value, by 31 March 2016, of £100 invested in Helical Bar on 31 March 2009, compared with the value This graph shows the value, by 31 March 2016, of £100 invested in Helical Bar on 31 March 2009, compared with the value This graph shows the value, by 31 March 2016, of £100 invested in Helical Bar on 31 March 2006, compared with the value This graph shows the value, by 31 March 2016, of £100 invested in Helical Bar on 31 March 2006, compared with the value 461 385 313 250 264 2012 2013 2014 2015 2016 Helical IPD Upper Quantile IPD Median 23.8 15.6 13.4 20.4 19.7 17.5 21.7 13.0 11.4 2014 2015 2016 Pence per share 500 450 400 350 300 250 200 150 100 50 0 % 25 20 15 10 5 0 0 2,250 0 0 £ 3,750 3,500 3,250 3,000 2,750 2,500 2,000 1,750 1,500 1,250 1,000 750 500 250 0 Basic salary & benefits Bonus PSP 42% 42% 37% 37% 26% 16% 49% 33% 18% 42% 28% 30% 42% 42% 37% 37% 42% 42% 37% 37% 26% 16% 26% 16% Minimum Target Maximum Minimum Target Maximum Minimum Target Maximum Minimum Target Maximum GERALD KAYE TIM MURPHY MATTHEW BONNING-SNOOK DUNCAN WALKER Basic salary & benefits Bonus PSP 461 385 313 250 264 2012 2013 2014 2015 2016 Helical IPD Upper Quantile IPD Median 23.8 15.6 13.4 20.4 19.7 17.5 21.7 13.0 11.4 2014 2015 2016 Pence per share 500 450 400 350 300 250 200 150 100 50 0 % 25 20 15 10 5 0 0 2,250 0 0 £ 3,750 3,500 3,250 3,000 2,750 2,500 2,000 1,750 1,500 1,250 1,000 750 500 250 0 42% 42% 37% 37% 26% 16% 49% 33% 18% 42% 28% 30% 42% 42% 37% 37% 42% 42% 37% 37% 26% 16% 26% 16% Minimum Target Maximum Minimum Target Maximum Minimum Target Maximum Minimum Target Maximum GERALD KAYE TIM MURPHY MATTHEW BONNING-SNOOK DUNCAN WALKER HELICAL BAR PLC REPORT & ACCOUNTS 2016 GOVERNANCE 101 DIRECTORS’ REMuNERATION REPORT ANNuAL REPORT ON REMuNERATION CHIEF EXECUTIVE’S REMUNERATION COMPARED TO REMUNERATION OF HELICAL EMPLOYEES PERCENTAGE INCREASES IN CHIEF EXECUTIVE REMUNERATION Chief Executive Salary Benefi ts Annual bonus Relative importance of the spend on pay Staff costs Distributions to shareholders1 Net asset value of the Group 1 In respect of the fi nancial year to which they relate. 2016 £000 533 42 1,500 2015 £000 523 43 1,500 2016 £000 Average change for Helical employee % 7 1 110 Change % 2 (2) - 2015 £000 Changes % 15,622 9,361 16,101 8,305 486,189 404,363 (3) 13 20 DIRECTORS’ SHARE INTERESTS AND SHAREHOLDING GUIDELINES Michael Slade Gerald Kaye Tim Murphy Matthew Bonning-Snook Duncan Walker 1 Salaries as at 31 March 2016. Shareholding Requirement £ Value of Benefi cially Held Shares2 £ Ratio of Shares Held to Requirement % 1,071,600 50,547,000 4,717 827,800 572,200 765,000 649,200 4,283,000 1,425,000 1,712,000 1,257,000 517 249 224 194 Salary1 £ 535,800 413,900 286,100 382,500 324,600 2 value as per the weighted average share price for the three months to 31 March 2016 of 398.75p. 102 DIRECTORS’ REMuNERATION REPORT ANNuAL REPORT ON REMuNERATION DIRECTORS’ SHAREHOLDINGS Legally owned 31.3.15 Legally owned 31.3.16 Deferred shares All-employee restricted All-employee unrestricted Total 31.3.16 PSP awards unvested Executive Directors Michael Slade 12,648,820 12,649,357 Tim Murphy Gerald Kaye 152,257 351,600 1,046,753 1,047,722 Matthew Bonning - Snook 118,034 Duncan Walker 67,145 402,809 304,458 Non-Executive Directors Nigel McNair Scott 2,620,941 2,777,433 Andrew Gulliford Richard Gillingwater Richard Grant Michael O’Donnell Susan Clayton Richard Cotton 14,328 11,500 15,000 62,000 - - 14,328 11,500 15,000 62,000 - - The information in this table has been audited. - 6,731 305,658 291,507 187,605 15,449 16,606 16,268 15,728 14,268 26,943 12,691,749 1,430,793 5,690 26,436 26,553 10,740 373,896 743,104 1,090,426 1,105,296 445,090 329,466 962,409 801,733 - - - - - - - - - - - - - - - - - - - - - 2,777,433 14,328 11,500 15,000 62,000 - - - - - - - - - SHAREHOLDER VOTING AT THE LAST AGM At the 2015 AGM the Annual Statement and Annual Report on Remuneration received the following votes from shareholders: For Against Total votes cast (for and against) votes withheld Total votes cast (including withheld votes) Report Total Number of Votes % of Votes Cast 89,087,021 7,333,603 96,420,624 5,543,231 101,963,855 92% 8% 100% - - The Committee was pleased to note the level of shareholder support for the 2015 Annual Statement and Annual Report on Remuneration. SHARE PRICE The market price of the ordinary shares at 31 March 2016 was 386.00p (2015: 394.25p). This market price varied between 365.00p and 474.75p during the year. Approved by the Board on 15 June 2016 and signed on its behalf. Michael O’Donnell Chairman of the Remuneration Committee HELICAL BAR PLC REPORT & ACCOUNTS 2016 REPORT OF THE DIRECTORS 103 STRATEGIC REPORT A review of the Company’s business during the year, the principal risks and uncertainties facing the Group and future prospects and developments are included in the Chairman’s Review on page 71, the Chief Executive’s statement on pages 14 to 17, the Strategic Report on pages 1 to 68 and the Principal Risks report on pages 58 to 61, which should be read in conjunction with this report. RESULTS AND DIVIDENDS The results for the year are set out in the Consolidated Income Statement on page 112 and Consolidated Statement of Comprehensive Income on page 112. An interim dividend of 2.30p (2015: 2.10p) was paid on 30 December 2015 to shareholders on the shareholder register on 4 December 2015. A second interim dividend of 5.15p was paid on 4 April 2016 to shareholders on the shareholder register on 11 March 2016. A final dividend of 0.72p (2015: 5.15p) per share is recommended for approval at the Annual General Meeting (“AGM”) to be held on 25 July 2016 and, if approved, will be paid on the 29 July 2016 to shareholders on the register on 1 July 2016. The total ordinary dividend paid or declared in the year of 12.60p (2015: 6.85p) per share, including the second interim dividend paid on 4 April 2016, amounts to £14,437,000 (2014: £7,944,000). DIRECTORS The Directors who held office during the year and up to the date of this report are listed below: Age Date of appointment Title Chairman Nigel McNair Scott Executive Directors Michael Slade Gerald Kaye Tim Murphy Matthew Bonning-Snook Duncan Walker Non-Executive Directors Susan Clayton Richard Cotton Richard Gillingwater Richard Grant Andrew Gulliford Michael O’Donnell 70 69 58 56 48 37 58 60 59 62 69 49 December 1985 Chairman August 1984 Chief Executive/Chairman Designate September 1994 Chief Executive Designate July 2012 Finance Director August 2007 Executive Director June 2011 Executive Director February 2016 Non-Executive Director, Chairman valuations Committee March 2016 Non-Executive Director July 2012 July 2012 Non-Executive Director, Senior Independent Director Non-Executive Director, Chairman Audit Committee March 2006 Non-Executive Director June 2011 Non-Executive Director, Chairman Remuneration Committee Details of the Directors’ interests in the ordinary shares of the Company are shown on page 102. Biographical details of all Directors are shown on pages 74 and 75. With the exception of Nigel McNair Scott and Andrew Gulliford, who retire at the AGM, all the Directors will offer themselves for election or re-election at the AGM to be held on 25 July 2016. Details of Directors’ remuneration and their interests in share awards are set out in the Directors’ Remuneration Report on pages 83 to 102. CORPORATE GOVERNANCE The Group’s corporate governance policies, compliance with the uK Corporate Governance Code and Going Concern statement are set out on pages 76 to 78. DIRECTORS’ CONFLICT OF INTEREST under the Companies Act 2006 (the “Act”), Directors are subject to a statutory duty to avoid a situation where they have, or can have, a direct or indirect interest that conflicts, or may possibly conflict, with the interests of the Company. As is permissible under the Act, the Company’s Articles of Association allow the Board to consider, and if it sees fit, to authorise situations where a Director has an interest that conflicts, or may possibly conflict, with the interests of the Company. Directors are required to notify the Company of any conflict or potential conflict of interest under an established procedure and any conflicts or potential conflicts are noted at each Board meeting. DIRECTORS’ LIABILITY INSURANCE AND INDEMNITY The Company maintains Directors and Officers Liability Insurance. To the extent permitted by uK Law, the Company also indemnifies the Directors against claims made against them as a consequence of the execution of their duties as directors of the Company. POLITICAL DONATIONS The Company’s policy with regard to political donations is to ensure that shareholder approval is sought before making any such payments. No shareholder approval has been sought and, accordingly, the Company made no political donations in the year to 31 March 2016. FINANCIAL INSTRUMENTS, CAPITALISED INTEREST AND LONG TERM INCENTIVE SCHEMES The information required in respect of financial instruments, as required by Schedule 7 of the Large and Medium Sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 is shown in note 36. Interest capitalised on the Group property portfolio is shown in notes 15 and 20. Long term incentive schemes are explained in the Directors’ Remuneration Report on pages 83 to 102. HELICAL BAR PLC REPORT & ACCOUNTS 2016 GOVERNANCE104 REPORT OF THE DIRECTORS CHANGE OF CONTROL Certain agreements between the Company or its subsidiaries and entities including lending banks, joint venture partners and development partners contain termination rights to take effect in the event of a change of control of the Group. Given the commercial sensitivity of these agreements, the Directors do not intend to disclose specific details. The Company’s Employee Share Incentive Plan, Annual Bonus Scheme and Performance Share Plan contain provisions relating to the vesting and exercise of options or share awards in the event of a change of control of the Company. Further to the issue on 24 June 2013 of £80 million 6.00% bonds due in 2020 (the “Bonds”), upon a change of control event as defined by the terms and conditions of the Bonds, the bondholders will have the option to require the Company to redeem or, at the Company’s option, purchase the Bonds at their nominal amount together with accrued interest. Similarly, if a change of control event occurs, the holders of the Convertible Bonds of £100m, issued on 17 June 2014 at 4.00% and due for redemption in June 2019, have the right to require the issuer to redeem the Convertible Bonds at their principal amount and accrued interest. EMPLOYMENT AND ENVIRONMENTAL MATTERS Information in respect of the Group’s employment and environmental matters and greenhouse gas reporting is contained in the Corporate Responsibility Report on pages 63 to 68. POST BALANCE SHEET EVENTS There were no material post balance sheet events. GROUP STRUCTURE Details of the Group’s subsidiary undertakings are disclosed in note 39 to the Financial Statements. SHARE CAPITAL Details of the Company’s issued share capital are shown in note 28 to the Financial Statements. The Company’s share capital consists of both ordinary shares and deferred shares. Each class of shares rank pari passu between themselves. There are no restrictions on the transfer of shares in the Company other than those specified by law or regulation (for example: insider trading laws) and pursuant to the Listing Rules of the Financial Conduct Authority whereby certain employees of the Group require the approval of the Company to deal in the ordinary shares. On a show of hands at a general meeting of the Company, 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 2016 Annual General Meeting (AGM) specifies deadlines for exercising voting rights and appointing a proxy or proxies to vote in relation to resolutions to be passed at the meeting. There are no restrictions on voting rights other than as specified by the Company’s Articles of Association. PURCHASE OF OWN SHARES The Company was granted authority at the 2015 Annual General Meeting to make market purchases of its own ordinary shares. No ordinary shares were purchased under this authority during the year and up to the date of this report. The authority will expire at the conclusion of the 2016 AGM, at which a resolution will be proposed to renew this authority. SUBSTANTIAL SHAREHOLDINGS As at 1 June 2016, the shareholders listed below had notified the Company of a disclosable interest of 3% or more in the nominal value of the ordinary share capital of the Group: Michael E Slade Aberdeen Group Old Mutual Baillie Gifford & Co Blackrock Inc. Investec Group Aviva plc Dimensional Fund Advisors Number of ordinary shares at 31 May 2016 % 12,649,357 10.7% 10,496,503 7,345,029 7,342,611 6,460,753 5,332,915 5,453,294 4,719,268 8.8% 7.1% 6.0% 5.3% 4.7% 4.6% 3.8% 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. ANNUAL GENERAL MEETING The Annual General Meeting of the Company will be held on 25 July 2016 at 11.30 a.m. at The Connaught, Carlos Place, Mayfair, London W1K 2AL. The special business at the 2016 AGM will include resolutions dealing with the authority to issue shares, the disapplication of pre-emption rights, the authority for the Company to purchase its own shares, the authority to call general meetings on not less than 14 clear days’ notice and the approval of the Annual Bonus Scheme 2016. The notice of meeting, containing explanations of all the resolutions to be proposed at that meeting, is enclosed with this Annual Report and can be found on the Group’s website at www.helical.co.uk. AUDITORS The Group’s auditors, Grant Thornton uK LLP, have expressed their willingness to continue in office and resolutions to reappoint them and to authorise the Directors to determine their remuneration will be proposed at the AGM. DISCLOSURE OF INFORMATION TO AUDITORS The Directors who held office at the date of approval of this Directors’ report confirm that, so far as they are aware, there is no relevant audit information of which the Company’s auditors are unaware, and each Director has taken all the steps that he ought to have taken as a Director to make himself aware of any relevant information and to establish that the Company’s auditors are aware of that information. By order of the Board James Moss ACA Company Secretary 15 June 2016 HELICAL BAR PLC REPORT & ACCOUNTS 2016 STATEMENT OF DIRECTORS’ RESPONSIBILITIES 105 The Directors are responsible for preparing the Strategic Report, Annual Report, the Remuneration Report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the directors have to prepare the financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the Company and 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 accounting 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; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements and the Remuneration Report comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors confirm that: • so far as each Director is aware, there is no relevant audit information of which the company’s auditor is unaware; and • the Directors have taken all the steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information. The Directors consider the Annual Report and the financial statements, taken as a whole, provides the information necessary to assess the Company’s performance, business model and strategy and is fair, balanced and understandable. 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. We confirm to the best of our knowledge: • the Group financial statements, prepared in accordance with IFRSs as adopted by the European union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and • the Annual Report including the Strategic Report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. Michael Slade Chief Executive Tim Murphy Finance Director 15 June 2016 HELICAL BAR PLC REPORT & ACCOUNTS 2016 GOVERNANCE106 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF HELICAL BAR PLC OUR OPINION ON THE FINANCIAL STATEMENTS IS UNMODIFIED In our opinion: • the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 March 2016 and of the Group’s profit for the year then ended; • the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union; • the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. WHO WE ARE REPORTING TO This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. 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 auditor’s 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. WHAT WE HAVE AUDITED Helical Bar plc’s financial statements comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated and Company Balance Sheets, the Consolidated and Company Cash Flow Statements, the Consolidated and Company Statements of Changes in Equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by the European union and, as regards the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006. OVERVIEW OF OUR AUDIT APPROACH • Overall group materiality: £4.858 million which represents approximately 1% of the Group’s net assets; • We performed full scope audit procedures at all material locations; and • Key audit risks were identified as revenue recognition; investment property valuation; carrying value of land, development and trading properties and the disclosures made in respect of unrecognised development surpluses; and employee remuneration, including charges in respect of the Performance Share Plan and Bonuses. OUR ASSESSMENT OF RISK In arriving at our opinions set out in this report, we highlight the following risks that, in our judgement, had the greatest effect on our audit. Audit risk How we responded to the risk REVENUE RECOGNITION The risk: The revenue cycle includes fraudulent transactions. under International Standards on Auditing (uK and Ireland) 240 there is a presumed risk that revenue may be misstated owing to the improper recognition of revenue. The Group has complex contracts for which the timing and quantum of revenue recognition require the exercise of management judgement. Dependent upon the nature of the contract, this risk applies to development property profit, share of results of joint ventures and net gain on sale and revaluation of investment properties. We therefore identified revenue recognition as a risk requiring special audit consideration. Our work included, but was not limited to: • evaluating the Group’s revenue recognition policies to confirm that they comply with International Financial Reporting Standards and have been applied consistently; • testing property sales, and on a sample basis residential units in retirement villages, to contracts, completion statements and proceeds received; • agreeing, on a sample basis, net rental income to managing agents’ reports and the underlying lease agreements; • testing development profits to the underlying contracts having regard to the stage of completion - this included challenging development profits where the project appraisals had changed from previous years and obtaining explanations and supporting third-party evidence where practicable; • assessing the challenges made by the valuations Committee where changes in development project appraisals occurred; and • in respect of the development contract that involved the exercise of the greatest degree of management judgement, challenging the judgements made and undertaking sensitivity analysis to evaluate the level of precision of the development profit recognised; the Senior Statutory Auditor made a physical inspection of this site and made enquiries of on-site personnel to confirm that the accounting judgements in respect of the stage of completion aligned with the physical status of the development. The Group’s accounting policy on revenue recognition is shown in note 38. The components of revenue and profits are included in notes 3 to 6 and 19. The Audit Committee also identified revenue recognition as a key area of judgement on page 81, where the Committee describes how it addressed the issue. We were satisfied that: • based on our audit work the judgements made, and assumptions used, by management in determining the revenue recognised, were balanced and supported by the evidence obtained from our testing. HELICAL BAR PLC REPORT & ACCOUNTS 2016 INDEPENDENT AuDITOR’S REPORT 107 Audit risk How we responded to the risk INVESTMENT PROPERTY VALUATION Our work included, but was not limited to: The risk: Investment properties are not valued appropriately. valuers and whether the basis of their valuations was consistent with the RICS “red book” as required by International Accounting Standard 40; • examining the qualifications and experience of the Group’s independent external Investment property is held at fair value under International Accounting Standard 40. The fair value of all of the Group’s investment properties is determined based on level 3 fair value inputs as defined by International Financial Reporting Standard 13 which means that the inputs used in valuing investment properties are unobservable and are therefore subject to estimation. We therefore identified investment property valuation as a risk requiring special audit consideration. Investment properties are valued at £1,041 million. • discussions with the independent valuers and challenging the estimates, assumptions and valuation methodology used; • obtaining the information provided by management to the independent valuers to confirm it was consistent with information obtained during our audit; • evaluating evidence of the reliability of valuation estimations by comparing the historical trend of investment property sales with the related carrying values; • evaluating the challenge to valuations made by the valuations Committee; and • comparing, on a sample basis, valuation yields used in preparing valuations with yields for comparable properties published in the CBRE Monthly Index. The Group’s accounting policy on investment properties is shown in note 38. Disclosures on investment properties are set out in note 15. Disclosures in respect of investment properties held by joint ventures are set out in note 19. The Audit Committee also identified the valuation of the Group’s investment property as a key area of judgement on page 81, where the Committee describes how it addressed the issue. We were satisfied that: • investment property valuations were made by suitably qualified and experienced independent valuations experts and subject to challenge by the valuations Committee; • the judgements made, and assumptions used, in determining the investment property valuations were balanced and supported by the evidence obtained from our testing; and • for the sample of properties selected, yields used by management and the independent valuers were consistent with or more prudent than those published in the CBRE Monthly Index, but not to a significant extent. Our work included, but was not limited to: • assessing the qualifications and experience of the Group’s internal and external, independent valuers and whether the basis of their valuations was consistent with the Group’s accounting policy as required by International Accounting Standard 2; • challenging the estimates, assumptions and valuation methodology used by management; this included challenging development profits where project appraisals had changed from previous years and obtaining explanations and supporting third-party evidence where practicable; • discussing with the independent valuers the basis of management’s valuations of all properties in excess of £2m; and • evaluating the challenge to valuation made by the valuations Committee. The Group’s accounting policy on land, development and trading properties is shown in note 38. Disclosures on investment properties are set out in note 20. Disclosures in respect of land, trading and development properties held by joint ventures are set out in note 19. The Audit Committee also identified the valuation of the land, development and trading properties as a key area of judgement on page 81, where the Committee describes how it addressed the issue. We were satisfied that: • land, development and trading property valuations, and disclosures in respect of unrecognised surpluses, were made by suitably qualified and experienced management personnel and subject to challenge by the valuations Committee and by suitably qualified and experienced independent valuations experts; and • the judgements made, and assumptions used, by management in determining the land and development and trading property valuations were balanced and supported by the evidence obtained from our testing. CARRYING VALUE OF LAND, DEVELOPMENT AND TRADING PROPERTIES AND THE DISCLOSURES MADE IN RESPECT OF UNRECOGNISED DEVELOPMENT SURPLUSES The risk: Land, developments and trading properties are inventory and are included in the Balance Sheet at the lower of cost and net realisable value in accordance with International Accounting Standard 2. The notes include disclosures about Directors’ valuations of unrecognised surpluses in these properties and those valuations impact certain non-statutory key performance indicators disclosed by the Group (eg “EPRA” net asset values). These unrecognised surpluses (and net realisable value assessments) are based upon estimation methodologies used by management. We therefore identified the carrying value of land, development and trading properties and the disclosures made in respect of unrecognised property development surpluses as a risk requiring special audit consideration. Land, development and trading properties are carried in the balance sheet at £92 million. HELICAL BAR PLC REPORT & ACCOUNTS 2016 GOVERNANCE 108 INDEPENDENT AuDITOR’S REPORT Audit risk How we responded to the risk EMPLOYEE REMUNERATION, INCLUDING CHARGES IN RESPECT OF THE PERFORMANCE SHARE PLAN AND BONUSES The risk: The Group operates three Directors’ bonus and share plans, being the Executive Bonus Plan 2011, the Helical Bar Annual Bonus Scheme 2012 and the Performance Share Plan (“PSP”). Determining the charge in respect of the PSP in accordance with International Financial Reporting Standard 2 involves complex calculations and elements of management judgement. The key inputs to the bonus calculations are the results of the Group and the performance of the property portfolio, the latter of which is considered to be an area of significant management judgement and estimation. We therefore identified employee remuneration, including charges in respect of the Performance Share Plan and Bonuses as a risk requiring special audit consideration. Our work included, but was not limited to: • confirming that calculation methodologies adopted are in accordance with the Schemes’ rules; • challenging the fair value assumptions in respect of options at the grant date by reference to independent valuations commissioned by management and an independent assessment by our own share valuation experts; • challenging management judgements over key inputs into the bonus calculations and PSP charge, including assumptions with regard to future vesting; • meeting with the Chairman of the Remuneration Committee to evaluate areas of management judgement; and • confirming that Directors salaries, as set out in the Directors’ Remuneration Report, have been approved. The Group’s accounting policy in respect of share based payments is shown in note 38. Disclosures in respect of Employee and Directors’ Remuneration are set out in note 8 and the Directors’ Remuneration Report on pages 83 to 102. We were satisfied that: • Directors’ salaries were approved; • bonus calculations were made in accordance with the Schemes’ rules; and • the judgement made by management in respect of the Helical Bar Annual Bonus Scheme 2012 accrual included in the income statement and balance sheet was calculated around the mid-point of likely outcomes. This judgement did not affect the Directors’ emoluments set out in the Directors’ Remuneration Report. HELICAL BAR PLC REPORT & ACCOUNTS 2016 INDEPENDENT AuDITOR’S REPORT 109 OUR APPLICATION OF MATERIALITY AND AN OVERVIEW OF THE SCOPE OF OUR AUDIT MATERIALITY We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality in determining the nature, timing and extent of our audit work and in evaluating the results of that work. We determined materiality for the audit of the Group financial statements as a whole to be £4.858 million, which is approximately 1% of net assets. In determining this level of materiality we had regard to the Group’s status as a listed entity. This benchmark is considered the most appropriate because this is a key performance measure used by the Board of Directors to report to shareholders on the financial position of the Group, as well as being generally regarded by investors in the property sector as a key performance indicator. Materiality for the current year is at the same percentage of net assets as we determined for the year ended 31 March 2015 as we had not identified any reason for users of the accounts to change their view of the appropriate level of materiality. We use a different level of materiality, performance materiality, to drive the extent of our testing and this was set at 75% of financial statement materiality for the audit of the Group financial statements. We also determine a lower level of specific materiality for certain areas such as Directors’ remuneration and related party transactions. We determined the threshold at which we will communicate misstatements to the Audit Committee to be £242,000. In addition we communicate misstatements below that threshold that, in our view, warrant reporting on qualitative grounds. OVERVIEW OF THE SCOPE OF OUR AUDIT A description of the generic scope of an audit of financial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeprivate. We conducted our audit in accordance with International Standards on Auditing (uK and Ireland). Our responsibilities under those standards are further described in the ‘Responsibilities for the financial statements and the audit’ section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. We are independent of the Group in accordance with the Auditing Practices Board’s Ethical Standards for Auditors, and we have fulfilled our other ethical responsibilities in accordance with those Ethical Standards. Our audit approach was based on a thorough understanding of the Group’s business and is risk-based. The Group’s properties are spread across 134 wholly owned statutory entities and the Group’s 21 joint ventures. The components of the Group were evaluated by the group audit team based on a measure of materiality, considering each as a percentage of total Group assets, revenues and profit before tax, to assess the significance of each component and to determine the planned audit response. For those components that were deemed significant either a full scope or targeted audit approach was determined based on their relative materiality to the Group and our assessment of audit risk. For significant components requiring a full scope approach we evaluated controls over the financial reporting systems identified as part of our risk assessment, reviewed the accounts production process and addressed critical accounting matters. In order to address the audit risks described above, as identified during our planning procedures, we performed a full scope audit of the consolidated financial statements of the Parent Company, Helical Bar plc, and of the financial information of the Group’s operations throughout the united Kingdom. Statutory audits of subsidiaries are performed to lower materiality where applicable. The components that were subject to full scope audit procedures make up 94% of the Group’s net assets at the balance sheet date, 100% of the Group’s revenue for the year and 58% of the Group’s profit before tax for the year. In total our full scope and targeted procedures covered 100% of the Group’s net assets at the balance sheet date, 100% of the Group’s revenue for the year and 100% of the Group’s profit before tax for the year. HELICAL BAR PLC REPORT & ACCOUNTS 2016 GOVERNANCE110 INDEPENDENT AuDITOR’S REPORT OTHER REPORTING REQUIRED BY REGULATIONS OUR OPINION ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006 IS UNMODIFIED In our opinion: • the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and • the information given in the Strategic Report and Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements. MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION Under the Companies Act 2006 we are required to report to you if, in our opinion: • adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or • the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or • certain disclosures of Directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Under the Listing Rules, we are required to review: • the Directors’ statements in relation to going concern and longer-term viability set out on pages 61 and 77; and • the part of the Corporate Governance Statement relating to the company’s compliance with the provisions of the uK Corporate Governance Code specified for our review. Under the International Standards on Auditing (UK and Ireland) we are required to report to you if, in our opinion, information in the annual report is: • materially inconsistent with the information in the audited financial statements; or • apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Group acquired in the course of performing our audit; or • otherwise misleading. We also confirm that we do not have anything material to add or to draw attention to in relation to: • the Directors’ confirmation in the annual report that they have carried out a robust assessment of the principal risks facing the Group including those that would threaten its business model, future performance, solvency or liquidity; • the disclosures in the annual report that describe those risks and explain how they are being managed or mitigated; • the Directors’ statement in the financial statements about whether they have considered it appropriate to adopt the going concern basis of accounting in preparing them, and their identification of any material uncertainties to the Group’s ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements; and • the Directors’ explanation in the annual report as to how they have assessed the prospects of the Group, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions. RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND THE AUDIT What the Directors are responsible for: As explained more fully in the Statement of Directors’ Responsibilities set out on page 105, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. What we are responsible for: Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (uK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Stephen Maslin Senior Statutory Auditor for and on behalf of Grant Thornton uK LLP Statutory Auditor, Chartered Accountants London In particular, we are required to report to you if: 15 June 2016 • we have identified any inconsistencies between our knowledge acquired during the audit and the Directors’ statement that they consider the annual report is fair, balanced and understandable; or • the annual report does not appropriately disclose those matters that were communicated to the Audit Committee which we consider should have been disclosed. We have nothing to report in respect of any of the above matters. HELICAL BAR PLC REPORT & ACCOUNTS 2016 HELICAL BAR PLC REPORT & ACCOUNTS 2016 111 FINANCIAL STATEMENTS CONSOLIDATED INCOME STATEMENT CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME CONSOLIDATED AND COMPANY BALANCE SHEETS CONSOLIDATED AND COMPANY CASH FLOW STATEMENTS CONSOLIDATED AND COMPANY STATEMENTS OF CHANGES IN EQUITY NOTES TO THE FINANCIAL STATEMENTS 112 112 113 114 115 116 FINANCIAL STATEMENTS112 CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH 2016 Revenue Net rental income Development property profit Trading property gain Share of results of joint ventures Other operating income Gross profit before net gain on sale and revaluation of investment properties Net gain on sale and revaluation of investment properties Impairment of available for sale assets Gross profit Administrative expenses Operating profit Finance costs Finance income Change in fair value of derivative financial instruments Change in fair value of convertible bond Foreign exchange gains/(losses) Profit before tax Taxation on profit on ordinary activities Profit after tax - attributable to equity shareholders - attributable to non-controlling interests Profit for the year Basic earnings per share Diluted earnings per share Year ended 31.3.16 £000 Note 2 3 4 5 19 6 22 7 9 9 36 26 10 14 14 116,500 42,164 24,252 - 50,469 20 116,905 55,893 (1,370) 171,428 (26,103) 145,325 (24,113) 5,128 (6,860) 516 100 120,096 (9,745) 110,351 110,411 (60) 110,351 96.1p 92.6p Year ended 31.3.15 £000 106,341 34,233 15,674 2,503 27,497 368 80,275 69,384 (773) 148,886 (26,530) 122,356 (23,678) 2,480 (8,389) (3,263) (2,061) 87,445 (12,669) 74,776 74,489 287 74,776 64.6p 60.8p CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2016 Profit for the year Exchange difference on retranslation of net investments in foreign operations Total comprehensive income for the year - attributable to equity shareholders - attributable to non-controlling interests Total comprehensive income for the year Year ended 31.3.16 £000 Year ended 31.3.15 £000 110,351 (16) 110,335 110,395 (60) 110,335 74,776 149 74,925 74,638 287 74,925 The exchange differences on retranslation of net investments in foreign operations will be reclassified to the Income Statement in the future. HELICAL BAR PLC REPORT & ACCOUNTS 2016 CONSOLIDATED AND COMPANY BALANCE SHEETS AS AT 31 MARCH 2016 113 Note Group 31.3.16 £000 Group 31.3.15 £000 Company 31.3.16 £000 Company 31.3.15 £000 Non-current assets Investment properties Owner occupied property, plant and equipment Investment in subsidiaries Investment in joint ventures Derivative financial instruments Trade and other receivables Deferred tax asset Current assets Land, developments and trading properties Property derivative financial asset Available-for-sale investments Corporate tax receivable Trade and other receivables Cash and cash equivalents Total assets Current liabilities Trade and other payables Corporate tax payable Borrowings Non-current liabilities Borrowings Derivative financial instruments Deferred tax liability Total liabilities Net assets Equity Called-up share capital Share premium account Revaluation reserve Capital redemption reserve Other reserves Retained earnings Equity attributable to equity holders of the parent company Non-controlling interests Total equity - 2,166 68,212 15 - - 1,334 71,727 - - - - 815,721 36,225 851,946 923,673 - 2,292 36,585 15 - - 1,233 40,125 - - - 1,418 777,728 13,942 793,088 833,213 1,041,100 2,200 - 27,990 - - - 701,521 2,361 - 71,585 1 1,555 - 1,071,290 777,023 92,578 16,388 4,342 1,418 65,216 120,993 300,935 1,077,958 92,035 - 3,114 - 73,057 74,670 242,876 1,314,166 (71,000) (1,592) (885) (73,477) 15 17 18 19 36 23 11 20 21 22 23 24 25 26 26 36 11 (65,802) (516,557) (416,696) - (1,554) (45,428) (111,230) - (518,111) - (6,120) (422,816) (169,109) (11,080) - (180,189) (603,005) (733,178) (552,813) (171,313) (14,955) (6,367) (754,500) (827,977) (8,096) (1,456) (562,365) (673,595) (7,134) - (178,447) (696,558) 2 486,189 404,363 227,115 230,208 28 1,447 98,798 149,766 7,478 291 228,409 486,189 - 1,447 98,798 108,060 7,478 291 188,229 404,303 60 1,447 98,798 - 7,478 1,987 117,405 227,115 - 1,447 98,798 - 7,478 1,987 120,498 230,208 - 486,189 404,363 227,115 230,208 The financial statements were approved by the Board of Directors on 15 June 2016. Michael Slade Director Tim Murphy Director HELICAL BAR PLC REPORT & ACCOUNTS 2016 FINANCIAL STATEMENTS 114 CONSOLIDATED AND COMPANY CASH FLOW STATEMENTS FOR THE YEAR TO 31 MARCH 2016 Cash flows from operating activities Profit/(loss) before tax Depreciation Revaluation gain on investment properties Gain on sales of investment properties Profit on sale of plant and equipment Net financing costs Change in value of derivative financial instruments Profit on forward property contract Change in fair value of Convertible Bond Share based payment charge Share of results of joint ventures Impairment of available for sale assets Foreign exchange movement Other non-cash items Cash inflow from operations before changes in working capital Change in trade and other receivables Change in forward property contract Change in land, developments and trading properties Change in trade and other payables Cash inflow/(outflow) generated from operations Finance costs Finance income Tax paid Cash flows from operating activities Cash flows from investing activities Purchase of investment property Sale of investment property Investment in subsidiaries Investment in joint ventures Return of investment in joint ventures Dividends from joint ventures Available-for-sale asset additions Sale of plant and equipment Purchase of leasehold improvements, plant and equipment Net cash used in investing activities Cash flows from financing activities Borrowings drawn down Shares issued Borrowings repaid Purchase of own shares Equity dividends paid Net cash generated from financing activities Net (decrease) /increase in cash and cash equivalents Exchange losses on cash and cash equivalents Cash and cash equivalents at 1 April Cash and cash equivalents at 31 March Group 31.3.15 £000 Company 31.3.16 £000 Company 31.3.15 £000 Group 31.3.16 £000 120,096 338 (53,508) (2,385) - 18,985 6,860 - (516) 6,666 87,445 544 (66,904) (2,480) (23) 20,806 8,389 (16,388) 3,263 6,432 (50,469) (27,497) 1,370 250 - 47,687 (5,074) 16,388 306 5,314 64,621 (25,312) 3,915 (4,712) (26,109) 38,512 773 2,213 - 16,573 (25,975) - 4,125 13,162 7,885 (22,277) 2,480 (7,064) (26,861) (18,976) 11,286 318 - - - 5,639 (1,898) - (2,049) - - - - - 13,296 (30,992) - - 99,929 82,233 (9,388) 5,815 (4,000) (7,573) 74,660 (405,133) 121,770 (271,093) 133,209 - - - - 11,495 82,569 (142) 70 (263) - (31,627) (10,141) 11,778 17,013 (144) 23 (1,859) - - - - 70 (263) (189,634) (121,214) (31,820) 299,754 - 375,503 120 - - (161,648) (156,381) (6,120) (18,857) (14,437) 104,812 (46,310) (13) 120,993 74,670 (13,349) (7,944) 197,949 57,759 (3) 63,237 120,993 - (14,437) (20,557) 22,283 - 13,942 36,225 (1,780) 517 - - - 6,260 3,014 - - - - - - (23) 7,988 (286,291) - - 182,976 (95,327) (12,216) 5,157 (6,841) (13,900) (109,227) - - (1) - - - - 23 (1,859) (1,837) 104,200 120 (1,746) - (7,944) 94,630 (16,434) - 30,376 13,942 HELICAL BAR PLC REPORT & ACCOUNTS 2016 CONSOLIDATED AND COMPANY STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR TO 31 MARCH 2016 115 Group Share capital £000 Share premium £000 Revaluation reserve £000 Capital redemption reserve £000 Other reserves £000 Retained earnings £000 Own shares held £000 Non- controlling interests £000 Total £000 At 31 March 2014 1,447 98,678 33,106 Total comprehensive income Revaluation surplus Realised on disposals Payment to minority interest Performance share plan Performance share plan deferred tax Share settled bonus New share capital issued Dividends paid Purchase of own shares Own shares held reserve transfer At 31 March 2015 Total comprehensive income Revaluation surplus Realised on disposals Performance share plan Performance share plan deferred tax Share settled bonus Dividends paid Movement on foreign exchange reserve Purchase of own shares Own shares held reserve transfer At 31 March 2016 - - - - - - - - - - - 1,447 - - - - - - - - - - 1,447 - - - - - - - 120 - - - 98,798 - - - - - - - - - - 98,798 - 66,904 8,050 - - - - - - - - 108,060 - 53,508 (11,802) - - - - - - - 149,766 7,478 - - - - - - - - - - - 7,478 - - - - - - - - - - 7,478 291 200,455 (950) 22 340,527 - - - - - - - - - - - 74,638 (66,904) (8,050) - 6,432 2,477 1,424 - (7,944) - - - - - - - - - - (13,349) (14,299) 14,299 - 291 188,229 - 110,411 (53,508) - 11,802 - 6,666 - (3,002) - - 1,121 (14,437) - (16) - - - - - - - - - - - - (18,857) (18,857) 18,857 - 291 228,409 74,925 287 - - - - (249) (249) 6,432 - 2,477 - 1,424 - 120 - - (7,944) - (13,349) - - 60 404,363 (60) 110,351 - - - - 6,666 - (3,002) - 1,121 - (14,437) - (16) - (18,857) - - - - 486,189 For a breakdown of Total Comprehensive Income, see the Consolidated Statement of Comprehensive Income. Included within changes in equity are net transactions with owners of £28,509,000 (2015: £10,840,000) made up of: the performance share plan charge of £6,666,000 (2015: £6,432,000) and related deferred tax of charge of £3,002,000 (2015: credit of £2,477,000), dividends paid of £14,437,000 (2015: £7,944,000), the purchase of own shares of £18,857,000 (2015: £13,349,000), new share capital issued of £nil (2015: £120,000) and the share settled bonuses of £1,121,000 (2015: £1,424,000). The adjustment to retained earnings of £6,666,000 adds back the performance share plan charge (2015: £6,432,000), in accordance with IFRS 2 Share-Based Payments. Company At 31 March 2014 Total comprehensive expense Dividends paid New share capital issued At 31 March 2015 Total comprehensive income Dividends paid At 31 March 2016 Share capital £000 Share premium £000 Revaluation reserve £000 Capital redemption reserve £000 Other reserves £000 Retained earnings £000 Total £000 1,447 - - - 1,447 - - 1,447 98,678 - - 120 98,798 - - 98,798 - - - - - - - - 7,478 - - - 7,478 - - 7,478 1,987 129,758 239,348 (1,316) (1,316) (7,944) (7,944) 120 - 1,987 120,498 230,208 - - - - - 11,344 11,344 (14,437) (14,437) 1,987 117,405 227,115 Total Comprehensive Income is made up of the profit after tax of £11,344,000 (2015: loss of £1,316,000). Included within changes in equity are net transactions with owners of £14,437,000 (2015: £7,824,000) made up of dividends paid of £14,437,000 (2015: £7,944,000) and new share capital issued of £nil (2015: £120,000). 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/deficit 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. HELICAL BAR PLC REPORT & ACCOUNTS 2016 FINANCIAL STATEMENTS116 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. The directors have taken advantage of the exemption offered by Section 408 of the Companies Act 2006 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, convertible bonds and derivative financial instruments. The measurement bases and principal accounting policies of the Group are set out in note 38. These accounting policies are consistent with those applied in the year to 31 March 2015, as amended to reflect any new Standards. Amendments to Standards and interpretations which are mandatory for the year ended 31 March 2016 are detailed below: Annual improvements to IFRSs 2011-2013 cycle (effective period commencing after 1 July 2014); There has been no material impact as a result of adopting the above other than additional disclosure on the fair value measurement of Investment Properties. The following standards, interpretations and amendments have been issued but are not yet effective and will be adopted at the point they are effective: Amendments to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations (effective for periods beginning on or after 1 January 2016); Amendments to IFRS 7 Financial Instruments: Disclosures (effective for periods beginning on or after 1 January 2016); IFRS 9: Financial instruments (effective for periods beginning on or after 1 January 2018); Amendments to IFRS 10 Consolidated Financial Statements regarding the application of the consolidation exception (effective for periods beginning on or after 1 January 2016); Amendments to IFRS 11 Joint Arrangements Accounting for acquisitions of interests in joint operations (effective for periods beginning on or after 1 January 2016); Amendments to IFRS 12 Disclosure of Interest in Other Entities regarding the application of the consolidation exception (effective for periods beginning on or after 1 January 2016); IFRS 14 Regulatory Deferral Accounts (effective for periods beginning on or after 1 January 2016); IFRS 15 Revenue from Contracts with Customers (effective for periods beginning on or after 1 January 2018); IFRS 16 Leases (effective for periods beginning on or after 1 January 2019); Amendments to IAS 1 Presentation of Financial Statements (effective for periods beginning on or after 1 January 2016); Amendments to IAS 7 Statement of Cash Flows (effective for periods beginning on or after 1 January 2017); Amendments to IAS 12 Income Taxes (effective for periods beginning on or after 1 January 2017); Amendments to IAS 16 Property, Plant and Equipment (effective for periods beginning on or after 1 January 2016); Amendments to IAS 19 Employee Benefits (effective for periods beginning on or after 1 January 2016); Amendments to IAS 27: Separate Financial Statements (effective for periods beginning on or after 1 January 2016); Amendments to IAS 28: Investments in Associates and Joint Ventures (effective for periods beginning on or after 1 January 2016); and Amendments to IAS 34: Interim Financial Reporting (effective for periods beginning on or after 1 January 2016). The Directors do not expect that the adoption of these Standards and Interpretations in future periods will have a material impact on the financial statements of the Group. 2. SEGMENTAL INFORMATION IFRS 8 requires the identification of the Group’s operating segments, which are defined as being discrete components of the Group’s operations whose results are regularly reviewed by the Chief Operating Decision Maker (being the Chief Executive) to allocate resources to those segments and to assess their performance. The Group divides its business into the following segments: • Investment properties, which are owned or leased by the Group for long-term income and for capital appreciation, and Trading properties which are owned or leased with the intention to sell; and, • Developments, which include sites, developments in the course of construction, completed developments available for sale, pre-sold developments and interests in third party developments. Revenue Rental income Development property income Trading property sales Other revenue Total revenue Investment and trading Year ended 31.3.16 £000 45,158 - - 119 45,277 Developments Year ended 31.3.16 £000 Total Year ended 31.3.16 £000 347 70,876 - - 45,505 70,876 - 119 71,223 116,500 Investment and trading Year ended 31.3.15 £000 37,246 - 37,394 199 74,839 Developments Year ended 31.3.15 £000 Total Year ended 31.3.15 £000 1,086 30,416 - - 38,332 30,416 37,394 199 31,502 106,341 All revenue is from external sales and is attributable to continuing operations. There were no inter-segmental sales. HELICAL BAR PLC REPORT & ACCOUNTS 2016 NOTES TO THE FINANCIAL STATEMENTS 117 2. SEGMENTAL INFORMATION CONTINUED Revenue for the year comprises revenue from construction contracts of £nil (2015: £nil), revenue from the sale of goods of £42,910,000 (2015: £63,953,000), revenue from services of £28,085,000 (2015: £4,056,000), and rental income of £45,505,000 (2015: £38,332,000). All revenues are within the UK other than proceeds from the sale of a development property in Poland of £12,351,000 (2015: £nil), rental income from development properties in Poland of £347,000 (2015: £1,086,000) and £225,000 (2015: £630,000) of development income derived from the Group’s operations in Poland. Profit before tax Net rental income Development property profit Trading property profit Share of results of joint ventures Gain on sale and revaluation of investment properties Impairment of available for sale assets Other operating income Gross profit Administrative expenses Finance costs Finance income Change in fair value of derivative financial instruments Change in fair value of convertible bond Foreign exchange gains/(losses) Profit before tax Net assets Investment properties Land, developments and trading properties Investment in joint ventures Property derivative financial asset Owner occupied property, plant and equipment Derivative financial instruments Available-for-sale investments Trade and other receivables Corporation tax receivable Cash and cash equivalents Total assets Liabilities Net assets Investment and trading Year ended 31.3.16 £000 42,010 - - 47,592 55,893 145,495 Developments Year ended 31.3.16 £000 Total Year ended 31.3.16 £000 154 24,252 - 2,877 - 42,164 24,252 - 50,469 55,893 Investment and trading Year ended 31.3.15 £000 33,270 - 2,503 27,398 69,384 Developments Year ended 31.3.15 £000 Total Year ended 31.3.15 £000 963 15,674 - 99 - 34,233 15,674 2,503 27,497 69,384 27,283 172,778 132,555 16,736 149,291 (1,370) 20 171,428 (26,103) (24,113) 5,128 (6,860) 516 100 120,096 (773) 368 148,886 (26,530) (23,678) 2,480 (8,389) (3,263) (2,061) 87,445 Investment and trading At 31.3.16 £000 1,041,100 28 14,162 - Developments At 31.3.16 £000 Total At 31.3.16 £000 Investment and trading At 31.3.15 £000 Developments At 31.3.15 £000 Total At 31.3.15 £000 - 1,041,100 701,521 - 701,521 92,007 13,828 - 92,035 27,990 - 28 57,209 - 92,550 14,376 16,388 92,578 71,585 16,388 1,055,290 105,835 1,161,125 758,758 123,314 882,072 2,200 - 3,114 73,057 - 74,670 1,314,166 (827,977) 486,189 2,361 1 4,342 66,771 1,418 120,993 1,077,958 (673,595) 404,363 All non-current assets are derived from the Group’s UK operations except for owner occupied property, plant and equipment with a net book value of £31,600 (2015: £69,000). HELICAL BAR PLC REPORT & ACCOUNTS 2016 FINANCIAL STATEMENTS 118 NOTES TO THE FINANCIAL STATEMENTS 3. NET RENTAL INCOME Gross rental income Rents payable Property overheads Net rental income Net rental income attributable to profit share partner Group share of net rental income Year ended 31.3.16 £000 Year ended 31.3.15 £000 45,505 (80) (2,728) 42,697 (533) 42,164 38,332 (269) (3,489) 34,574 (341) 34,233 Property overheads include lettings costs, vacancy costs and bad debt provisions. The amounts above include gross rental income from investment properties of £45,158,000 (2015: £37,246,000) and net rental income from investment properties of £42,010,000 (2015: £33,270,000). No contingent rental income was received in the year (2015: £nil). 4. DEVELOPMENT PROPERTY PROFIT Development property income Profit on forward property contract Cost of sales Sales expenses Provision against book values Development property profit 5. TRADING PROPERTY GAIN Trading property sales Cost of sales Sales expenses Trading property gain 6. NET GAIN ON SALE AND REVALUATION OF INVESTMENT PROPERTIES Net proceeds from the sale of investment properties Book value (note 15) Tenants incentives on sold investment properties Gain on sale of investment properties Revaluation surplus on investment properties Gain on sale and revaluation of investment properties Year ended 31.3.16 £000 Year ended 31.3.15 £000 70,876 14 (29,519) (10,671) (6,448) 24,252 30,416 16,388 (30,136) (542) (452) 15,674 Year ended 31.3.16 £000 Year ended 31.3.15 £000 - - - - 37,394 (33,512) (1,379) 2,503 Year ended 31.3.16 £000 Year ended 31.3.15 £000 122,201 (119,385) (431) 2,385 53,508 55,893 133,782 (130,729) (573) 2,480 66,904 69,384 HELICAL BAR PLC REPORT & ACCOUNTS 2016 NOTES TO THE FINANCIAL STATEMENTS 7. ADMINISTRATIVE EXPENSES Administrative expenses Operating profit is stated after the following items that are contained within administrative expenses: Depreciation - owner occupied property, plant and equipment Share-based payments charge Auditors’ remuneration: Audit fees - audit of parent company and consolidated financial statements - audit of company’s subsidiaries - audit of interim consolidated financial statements - audit of Company’s subsidiaries by affiliate of Group Auditor Non-Audit fees Operating lease costs 8. STAFF COSTS Staff costs during the year: - wages and salaries - social security costs - other pension costs 119 Year ended 31.3.16 £000 Year ended 31.3.15 £000 26,103 26,530 338 6,666 159 90 65 3 39 1,118 544 6,432 154 62 68 3 - 730 Year ended 31.3.16 £000 Year ended 31.3.15 £000 12,536 2,896 190 15,622 12,406 3,524 171 16,101 Details of the remuneration of Directors amounting to £16,221,000 (2015: £24,137,000) are included in the Directors’ Remuneration Report on pages 83 to 102. The amount of the share-based payments charge relating to share awards made to Directors is £4,426,000 (2015: £5,815,000). Included within wages and salaries are directors’ bonuses of £5,364,000 (2015: £6,271,000) as discussed in the Directors’ Remuneration Report on pages 83 to 102. 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 53 (2015: 43) of which 35 are UK head office staff, 9 are other UK staff and 9 are based in Poland. Of the staff costs of £15,622,000 (2015: £16,101,000), £14,810,000 is included within administrative expenses (2015: £15,663,000) and £812,000 is included within development costs (2015: £438,000). Within administrative costs is the share based payment charge for the year of £6,666,000 (2015: £6,432,000) which is not included in the staff costs above. 9. FINANCE COSTS AND FINANCE INCOME Interest payable on bank loans and overdrafts Other interest payable and similar charges Interest capitalised Finance costs Interest receivable and similar income Finance income Year ended 31.3.16 £000 Year ended 31.3.15 £000 (25,353) (3,700) 4,940 (24,113) 5,128 5,128 (21,055) (6,264) 3,641 (23,678) 2,480 2,480 On projects where specific third party loans have been arranged, interest has been capitalised in accordance with IAS 23 – Borrowing Costs, at the rate for the individual loan. The weighted average capitalised interest rate of such loans was 3.50% (2015: 3.68%). 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 4.18% (2015: 4.62%). HELICAL BAR PLC REPORT & ACCOUNTS 2016 FINANCIAL STATEMENTS 120 NOTES TO THE FINANCIAL STATEMENTS 10. TAXATION ON PROFIT ON ORDINARY ACTIVITIES The tax charge is based on the profit for the year and represents: United Kingdom corporation tax at 20% (2015: 21%) - Group corporation tax - adjustment in respect of prior periods - overseas tax Current tax charge Deferred tax at 19% (2015: 20%) - capital allowances - tax losses - unrealised chargeable gains - other temporary differences Deferred tax charge Tax charge on profit on ordinary activities Factors affecting the tax charge for the period The tax assessed for the period is lower than the standard rate of corporation tax in the UK. The differences are explained below: Profit on ordinary activities before tax Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 20% (2015: 21%) Effect of: - expenses not deductible for tax purposes - income not subject to UK corporation tax - adjustment to capital allowances - tax movements on share awards - additional tax losses unavailable - tax losses not previously recognised in deferred tax - operating profit of joint ventures - prior year adjustment - Movement on sale and revaluation not recognised through deferred tax - chargeable gain in excess of profit or loss on investment property - overseas tax - other temporary differences Effect of change of rate of corporation tax Total tax charge for the year Year ended 31.3.16 £000 Year ended 31.3.15 £000 (7,010) (115) (712) (7,837) (385) 500 (8,046) 6,023 (1,908) (9,745) (215) (22) (39) (276) (297) 3,033 (15,096) (33) (12,393) (12,669) Year ended 31.3.16 £000 Year ended 31.3.15 £000 120,096 (24,019) 87,445 (18,363) (534) - 707 2,807 - 1,930 10,094 (115) 1,355 (2,472) (505) 943 64 (1,041) 285 331 609 (143) - 5,774 (22) (1,370) (278) (39) 901 687 (9,745) (12,669) Note: all deferred tax balances have been calculated at an effective rate of corporation tax of 19% which is the average of the substantively enacted future rates for the periods in which the deferred tax is expected to be realised. 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. 11. DEFERRED TAX Deferred tax provided for in the financial statements is set out below: Capital allowances Tax losses Unrealised chargeable gains Other temporary differences Deferred tax (liability)/asset Group 31.3.16 £000 (1,946) 12,521 (24,733) 7,791 (6,367) Group 31.3.15 £000 (1,561) 12,021 (16,687) 4,771 (1,456) Company 31.3.16 £000 Company 31.3.15 £000 6 1,255 73 - 1,334 60 1,173 - - 1,233 HELICAL BAR PLC REPORT & ACCOUNTS 2016 NOTES TO THE FINANCIAL STATEMENTS 121 11. DEFERRED TAX CONTINUED Other temporary differences include 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. A debit of £3,002,000 (2015: credit of £2,477,000) in respect of future tax relief for share awards has been recognised in reserves in accordance with IAS 12. The Group contains entities with tax losses for which no deferred tax asset is recognised. The total unrecognised losses amount to approximately £9,026,000 (2015: £9,036,000). A deferred tax asset has not been recognised because the entities in which the losses have been generated either do not have forecast taxable profits or the losses have restrictions whereby their utilisation is considered to be unlikely. If upon sale of the investment properties the Group retained all the capital allowances, the deferred tax provision in respect of capital allowances of £1,946,000 (2015: £1,561,000) would be released and further capital allowances of £20,340,000 (2015: £18,031,000) would be available to reduce future tax liabilities. 12. DIVIDENDS PAID AND PAYABLE Attributable to equity share capital Ordinary - interim paid of 2.30p (2015: 2.10p) per share - second interim paid of 5.15p (2015: nil) per share - prior period final paid of 5.15p (2015: 4.75p) per share Total dividends paid and payable in year – 12.60p (2015: 6.85p) per share Year ended 31.3.16 £000 Year ended 31.3.15 £000 2,652 5,886 5,899 14,437 2,406 - 5,538 7,944 An interim dividend of 2.30p was paid on 30 December 2015 to shareholders on the register on 4 December 2015 and a second interim dividend of 5.15p was paid on 4 April 2016 to shareholders on the register on 11 March 2016. The final dividend of 0.72p, if approved at the AGM on 25 July 2016, will be paid on 29 July 2016 to shareholders on the register on 1 July 2016. This final dividend, amounting to £823,000, has not been included as a liability as at 31 March 2016, in accordance with IFRS. 13. PARENT COMPANY The Company has taken advantage of Section 408 of the Companies Act 2006 and has not included its own income statement in the financial statements. The profit for the year of the Company was £11,344,000 (2015: loss of £1,316,000). 14. EARNINGS PER SHARE The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year. 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 earnings per share is based on the basic earnings per share, adjusted to allow for the effect of all dilutive options and awards. The earnings per share are calculated in accordance with IAS 33, Earnings per Share and the best practice recommendations of the European Public Real Estate Association (“EPRA”). Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below. Earnings per share Ordinary shares in issue Weighting adjustment Weighted average ordinary shares in issue for calculation of basic and EPRA earnings per share Weighted average ordinary shares to be issued on share settled bonuses Weighted average ordinary shares to be issued under performance share plan Year ended 31.3.16 000 Year ended 31.3.15 000 118,184 (3,296) 114,888 1,197 3,212 118,184 (2,897) 115,287 1,016 6,182 Weighted average ordinary shares in issue for calculation of diluted earnings per share 119,297 122,485 Earnings used for calculation of basic and diluted earnings per share Basic earnings per share Diluted earnings per share £000 110,411 96.1p 92.6p £000 74,489 64.6p 60.8p HELICAL BAR PLC REPORT & ACCOUNTS 2016 FINANCIAL STATEMENTS 122 NOTES TO THE FINANCIAL STATEMENTS 14. EARNINGS PER SHARE CONTINUED Earnings used for calculation of basic and diluted earnings per share Net gain on sale and revaluation of investment properties Share of net gain on sale and revaluation of investment properties in the results of joint ventures Tax on profit on disposal of investment properties Trading property gain Fair value movement on derivative financial instruments Fair value movement on Convertible Bond Share of fair value movements on derivative financial instruments in the results of joint ventures Impairment of available-for-sale investment Deferred tax Earnings used for calculation of EPRA earnings per share Year ended 31.3.16 £000 Year ended 31.3.15 £000 110,411 (55,893) (50,210) 998 - 6,860 (516) (211) 1,370 6,811 19,620 74,489 (69,384) (27,225) - (2,503) 8,389 3,263 578 773 14,425 2,805 EPRA earnings per share 17.1p 2.4p The earnings used for calculation of EPRA earnings per share includes net rental income and development property profits but excludes trading property gains/losses. 15. INVESTMENT PROPERTIES Group Fair value at 1 April Property acquisitions Disposals Revaluation surplus Revaluation surplus attributable to profit share partner Freehold 31.3.16 £000 Leasehold 31.3.16 £000 Total 31.3.16 £000 Freehold 31.3.15 £000 Leasehold 31.3.15 £000 Total 31.3.15 £000 591,870 377,890 109,651 27,243 701,521 405,133 450,276 191,280 42,925 79,813 493,201 271,093 (96,237) (23,148) (119,385) (112,089) (18,640) (130,729) 51,779 323 1,729 - 53,508 323 61,376 1,027 5,528 25 66,904 1,052 Fair value at 31 March 925,625 115,475 1,041,100 591,870 109,651 701,521 Interest capitalised during the year in respect of the refurbishment of investment properties amounted to £1,200,000 (2015: £667,000). Interest capitalised in respect of the refurbishment of investment properties is included in investment properties to the extent of £6,571,000 (2015: £5,449,000). Investment properties with a total fair value of £945,400,000 (2015: £628,621,000) were held as security against borrowings. All of the Group’s properties are level 3, as defined by IFRS 13 Fair Value Measurement, in the fair value hierarchy as at 31 March 2016 and there were no transfers between levels during the year. Level 3 inputs used in valuing the properties, are those which are unobservable, as opposed to level 1 (inputs from quoted prices) and level 2 (observable inputs either directly, i.e. as prices, or indirectly, i.e. derived from prices). Transfers into and transfers out of the fair value hierarchy levels are recognised on the date of the event or change in circumstances that caused the transfer. There were no transfers in or out of Level 3 for investment properties during the year. Valuation methodology The fair value of the Group’s investment property as at 31 March 2016 was determined by independent external valuers at that date, except for investment properties valued by the Directors. The valuations are in accordance with the Royal Institution of Chartered Surveyors (‘RICS’) Valuation – Professional Standards (“The Red Book”) and the International Valuation Standards and were arrived at by reference to market transactions for similar properties. Fair values for investment properties are calculated using the present value income approach. The main assumptions underlying the valuations are in relation to rent profile and yields as discussed below. A key driver of the property valuations is the terms of the leases in place at the valuation date. These determine the cash flow profile of the property for a number of years. The valuation assumes adjustments from these rental values to current market rent at the time of the next rent review (where a typical lease allows only for upward adjustment) and as leases expire and are replaced by new leases. The current market level of rent is assessed based on evidence provided by the most recent relevant leasing transactions and negotiations. The nominal equivalent yield is applied as a discount rate to the rental cash flows which, after taking into account other input assumptions such as vacancies and costs, generates the market value of the property. The equivalent yield applied is assessed by reference to market transactions for similar properties and takes into account, amongst other things, any risks associated with the rent uplift assumptions. HELICAL BAR PLC REPORT & ACCOUNTS 2016 NOTES TO THE FINANCIAL STATEMENTS 123 15. INVESTMENT PROPERTIES CONTINUED The net initial yield is calculated as the current net income over the gross market value of the asset and is used as a sense check and to compare against market transactions for similar properties. The valuation output, along with inputs and assumptions, are reviewed to ensure these are in line with what a market participant would use when pricing each asset. The reversionary yield is the return received from an asset once the estimated rental value has been captured on today’s assessment of market value. There are interrelationships between all the inputs as they are determined by market conditions. The existence of an increase in more than one input would be to magnify the input on the valuation. The impact on the valuation will be mitigated by the interrelationship of two inputs in opposite directions. Details of the investment portfolio yields can be found on page 48 of this report. The graph below illustrates the sensitivity of the value of the investment portfolio to the reversionary yield. Valuation – Reversionary Yield Sensitivity Investment Portfolio Value - Sensitivity to Reversionary Yield £1,300,000,000 £1,250,000,000 £1,200,000,000 £1,150,000,000 £1,100,000,000 £1,050,000,000 £1,000,000,000 £950,000,000 £900,000,000 £850,000,000 £800,000,000 ) £ ( n o i t a u a V o l i l o f t r o P 5.52 5.77 6.02 6.27 6.52 6.77 7.02 7.72 7.52 Reversionary Yield (%) The investment properties have been valued at 31 March 2016 as follows: Cushman & Wakefield LLP Colliers International UK plc Directors’ valuation The historical cost of investment property is £889,493,000 (2015: £590,965,000). 31.3.16 £000 801,800 239,200 100 1,041,100 31.3.15 £000 697,521 - 4,000 701,521 HELICAL BAR PLC REPORT & ACCOUNTS 2016 FINANCIAL STATEMENTS 124 NOTES TO THE FINANCIAL STATEMENTS 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 Group 31.3.16 £000 43,266 157,948 115,382 316,596 Group 31.3.15 £000 39,393 104,268 159,001 302,662 The Company has no operating lease arrangements as lessor. At the balance sheet date, the Group and Company had outstanding commitments for future minimum lease payments under non- cancellable operating leases, which fall due as follows: Group and Company Not later than one year Later than one year but not more than five years More than five years 31.3.16 £000 818 3,273 5,319 9,410 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 improvements 31.3.16 £000 Plant and equipment 31.3.16 £000 2,007 99 - 2,106 111 146 - 257 1,849 1,008 164 (160) 1,012 543 192 (74) 661 351 Short leasehold improvements 31.3.15 £000 Plant and equipment 31.3.15 £000 2,373 1,695 (2,061) 2,007 1,811 361 (2,061) 111 1,896 935 164 (91) 1,008 447 183 (87) 543 465 Total 31.3.16 £000 3,015 263 (160) 3,118 654 338 (74) 918 2,200 31.3.15 £000 281 3,273 7,773 11,327 Total 31.3.15 £000 3,308 1,859 (2,152) 3,015 2,258 544 (2,148) 654 2,361 Plant and equipment include vehicles, fixtures and fittings and other office equipment. All short leasehold improvements and plant and equipment relate to the Company except for plant and equipment with a net book value of £34,000 as at 31 March 2016 (2015: £69,000). 18. INVESTMENT IN SUBSIDIARIES At 1 April Acquired during year At 31 March Group 31.3.16 £000 - - - Group 31.3.15 £000 - - - Company 31.3.16 £000 36,585 31,627 68,212 Company 31.3.15 £000 36,584 1 36,585 A list of all the Company’s subsidiary undertakings, all of which have been consolidated, are shown in Note 39 to the financial statements. HELICAL BAR PLC REPORT & ACCOUNTS 2016 125 Total 31.3.15 £000 6,098 6,098 (809) (877) 4,412 1,902 1,091 26,134 293 (951) NOTES TO THE FINANCIAL STATEMENTS 19. INVESTMENT IN JOINT VENTURES Investment & trading 31.3.16 £000 Development 31.3.16 £000 Total 31.3.16 £000 Investment & trading 31.3.15 £000 Development 31.3.15 £000 Summarised statements of consolidated income Revenue Gross rental income Rents payable Property overheads Net rental income Development profit Profit on sale of property 917 917 - (483) 434 - 41,553 Gain on revaluation of investment properties 995 Other operating income/(expense) Administrative expenses Finance costs Finance income Change in fair value movement of derivative financial instruments Profit before tax Tax Profit after tax Economic interest adjustment* Share of results of joint ventures Summarised balance sheets Non-current assets Investment properties 196 (705) (1,902) 12 211 40,794 458 41,252 6,341 47,593 10,107 Owner occupied property, plant and equipment 50 Deferred tax Current assets 50 10,207 Land, development and trading properties - Trade and other receivables Cash and cash equivalents Current liabilities Trade and other payables Non-current liabilities Trade and other payables Borrowings Derivative financial instruments Deferred Tax Net assets 769 6,433 7,202 (836) (836) - (2,413) - - (2,413) 14,160 911 911 - (75) 836 3,223 - 1,321 22 (435) (1,771) 9 - 3,205 (329) 2,876 - 2,876 1,445 46 362 1,853 75,904 2,728 5,744 84,376 (13,600) (13,600) (26,586) (32,213) - - 1,828 1,828 - (558) 1,270 3,223 41,553 2,316 218 (1,140) (3,673) 21 211 43,999 129 44,128 6,341 50,469 75,904 3,497 12,177 91,578 (14,436) (14,436) (26,586) (34,626) - - 5,523 5,523 (809) (683) 4,031 - 1,087 26,134 (1) (291) 575 575 - (194) 381 1,902 4 - 294 (660) (2,254) (1,390) (3,644) 4 (578) 28,132 (734) 27,398 - 27,398 - 1,468 7,030 8,498 (3,947) (3,947) (5,590) (29,503) (473) (237) (35,803) 57,209 39 - 570 (471) 99 - 99 100 42 278 420 61,782 1,258 6,423 69,463 (20,749) (20,749) (19,842) (14,916) - - (34,758) 14,376 43 (578) 28,702 (1,205) 27,497 - 27,497 88,305 42 534 88,881 61,782 2,726 13,453 77,961 (24,696) (24,696) (25,432) (44,419) (473) (237) (70,561) 71,585 11,552 88,205 96 412 - 256 12,060 88,461 (58,799) 13,830 (61,212) 27,990 * Under the Barts Square joint venture agreement the Group is entitled to varying returns dependent upon the performance of the development. Whilst the Group holds a 33.35% equity share in the Barts Square group, it has accounted for its share at 43.8% to reflect its expected economic interest in the joint venture. This has changed from the 33.35% interest shown at 31 March 2015, and resulted in a gain of £6,341,000 being recognised in the Consolidated Income Statement to reflect the Group’s increased share in the opening net assets of the joint venture. The cost of the Company’s investment in joint ventures was £15,000 (2015: £15,000). The Directors’ valuation of the trading and development stock shows a surplus of £7,000,000 above book value (2015: £11,013,000). HELICAL BAR PLC REPORT & ACCOUNTS 2016 FINANCIAL STATEMENTS 126 NOTES TO THE FINANCIAL STATEMENTS 19. INVESTMENT IN JOINT VENTURES CONTINUED The Group has three material joint ventures. The full results and position of these joint ventures are set out below, of which we have included our share in the previous table. Barts LP Group 31.03.16 £000 Old Street Holdings LP Group 31.03.16 £000 Shirley Advance LLP 31.03.16 £000 Barts LP Group 31.03.15 £000 Old Street Holdings LP Group 31.03.15 £000 Shirley Advance LLP 31.03.15 £000 Summarised statements of consolidated income Revenue Gross rental income Property overheads Net rental income Development profit Profit on sale of property Gain on revaluation of investment properties 1,681 1,681 (104) 1,577 - 20,113 5,287 1,772 1,772 (1,329) 443 - 98,232 - Other operating income/(expense) 50 (34,506) Administrative expenses Finance costs Finance income Change in fair value movement of derivative financial instruments Profit/(loss) before tax Tax Profit/(loss) after tax Summarised balance sheets Non-current assets Investment properties Owner occupied property, plant and equipment Deferred tax Current assets Land, development and trading properties Trade and other receivables Cash and cash equivalents (1,044) (1,134) 33 - 24,882 340 25,222 26,375 106 925 27,406 110,281 4,720 20,125 135,126 (1,839) (4,738) 2 632 58,226 (95) 58,131 - 150 - 150 915 915 (59) 856 3,234 - - - - (3,192) - - 898 - 898 3,532 3,532 (530) 3,002 - - 30,287 (19) (2,324) (1,283) 8 - 29,671 (96) 29,575 2,885 2,885 (804) 2,081 - - 48,105 - (367) (2,533) - (1,733) 45,553 437 45,990 - - - - 91,887 173,000 126 99 - 767 92,112 173,767 179 179 (16) 163 - - - 599 - (912) - - (150) - (150) - - - - - 16,250 2,017 591 1,671 1,554 3,225 78,784 2,419 29,219 18,858 110,422 - 3,593 3,656 7,249 44,911 1,800 967 47,678 Current liabilities Trade and other payables Borrowings Non-current liabilities Trade and other payables Borrowings Derivative financial instruments Deferred Tax Net assets (25,855) (1,124) (2,598) (11,626) (8,419) (31,161) - - - - - - (25,855) (1,124) (2,598) (11,626) (8,419) (31,161) - (79,054) - - (79,054) 57,623 - - - - - (15,373) - - (2) - (64,883) - - (16,767) (68,348) (1,416) - (16,527) - - - (15,375) (64,883) (86,531) (16,527) 2,251 885 126,025 86,066 (10) HELICAL BAR PLC REPORT & ACCOUNTS 2016 NOTES TO THE FINANCIAL STATEMENTS 127 19. INVESTMENT IN JOINT VENTURES CONTINUED At 31 March 2016 the Group and the Company had legal interests in the following joint venture companies: Country of incorporation Class of share capital held Proportion held Group Proportion held Company Nature of business Barts Close Office Ltd Barts Square First Office Ltd Barts Square Active One Ltd Barts Square First Ltd Barts Square Land One Ltd Old Street Holdings LP Jersey Jersey Jersey United Kingdom United Kingdom Jersey Ordinary Ordinary Ordinary Ordinary Ordinary n/a Abbeygate Helical (Leisure Plaza) Ltd United Kingdom Ordinary Abbeygate Helical (Winterhill) Ltd United Kingdom Ordinary Abbeygate Helical (C4.1) LLP Shirley Advance LLP United Kingdom United Kingdom n/a n/a King Street Developments (Hammersmith) Ltd United Kingdom Ordinary Creechurch Place Ltd Jersey Ordinary Significant Judgements and Estimates 33% 33% 33% 33% 33% 33% 50% 50% 50% 50% 50% 10% - - - Investment Investment Investment - Development - Development - Investment 50% Development 50% Development 50% Development - Development - Development - Development There are a number of companies which are accounted for as joint ventures where the Group has an equity interest of less than 50%. This typically occurs where the Group’s joint venture partner is providing a greater share of finance into the Company, with the Group contributing a greater share towards the day to day management of the underlying project. In these cases neither party has control over the entity and therefore it is considered appropriate to account for our interest as a joint venture. Dividends of £82,569,000 were received from joint venture companies during the year (2015: £17,013,000). The joint venture companies are private companies, therefore no quoted market prices are available for their shares. At 31 March 2015, the Group had an investment in Helical Sosnica Sp. Zoo, which had been accounted for as an investment held for sale due to a commitment to sell the Group’s share. At 31 March 2015 Helical Sosnica Sp. zoo held a development property, the fair value of which the Directors believed to be £81,866,000 (of which Helical’s share was £40,933,000) and a bank loan of £51,156,000 (of which Helical’s share was £25,578,000) repayable in September 2017. During the year, the Group sold its investment in Helical Sosnica Sp.Zoo. During the year, Old Street Holdings LP sold its investments in 207 Old Street Unit Trust, 211 Old Street Unit Trust, Old Street Retail Unit Trust and City Road Jersey Limited. The Group purchased the trust capital of 207 Old Street Unit Trust and 211 Old Street Unit Trust from Old Street Holdings LP. During the year, Barts Two Limited sold its investment in Barts Two Investment Property Limited. Under the Barts Square joint venture agreement the Group is entitled to varying returns dependent upon the performance of the development. Whilst the Group holds a 33.35% legal share in the Barts Square group, it has accounted for its share at 43.8% to reflect its expected economic interest in the joint venture. This has changed from the 33.35% interest shown at 31 March 2015, and resulted in a gain of £6,341,000 being recognised in the Consolidated Income Statement to reflect the Group’s increased share in the opening net assets of the joint venture. 20. LAND, DEVELOPMENTS AND TRADING PROPERTIES Group At 1 April Acquisitions and construction costs Interest capitalised Disposals Foreign exchange movements Provision At 31 March Development properties 31.3.16 £000 92,550 31,465 3,740 (29,063) (237) (6,448) 92,007 Trading stock 31.3.16 £000 28 - - - - - 28 Total 31.3.16 £000 92,578 31,465 3,740 (29,063) (237) (6,448) 92,035 Development properties 31.3.15 £000 95,632 21,131 3,381 (25,685) (1,457) (452) 92,550 Trading stock 31.3.15 £000 2,528 31,012 - (33,512) - - 28 Total 31.3.15 £000 98,160 52,143 3,381 (59,197) (1,457) (452) 92,578 The Directors’ valuation of trading and development stock shows a surplus of £12,412,000 above book value (2015: £25,230,000). Interest capitalised in respect of the development of sites is included in stock to the extent of £11,626,000 (2015: £9,788,000). Land, developments and trading properties with carrying values totalling £81,870,000 (2015: £83,948,000) were held as security against borrowings. The Company had no land, developments or trading properties (2015: none). HELICAL BAR PLC REPORT & ACCOUNTS 2016 FINANCIAL STATEMENTS 128 NOTES TO THE FINANCIAL STATEMENTS 21. PROPERTY DERIVATIVE FINANCIAL ASSET Group Property derivative financial asset 31.3.16 £000 - - 31.3.15 £000 16,388 16,388 In the year to 31 March 2015, the Group assigned its forward purchase contract on Clifton Street, London EC2 to a third party. The agreement to assign the forward purchase contract was considered to be a derivative financial instrument. As such, under IAS 39, it was carried at its fair value with gains and losses taken to the Income Statement. Cash of £17.3m was received during the year to 31 March 2016. 22. AVAILABLE-FOR-SALE INVESTMENTS Group At 1 April Additions Disposals Impairment in the year At 31 March 31.3.16 £000 4,342 142 - (1,370) 3,114 31.3.15 £000 4,973 144 (2) (773) 4,342 Included within available-for-sale investments is an amount lent to a company promoting a mainly residential mixed-use development and a holding of 20% of the equity of this company. The loan and the equity are together classed as an available-for-sale investment and held at fair value. It is considered to be Level 3 of the IFRS 13 fair value hierarchy. The Group has determined its fair value by considering both the loan and the equity element separately. The loan element is valued at the fair value of the expected consideration to be received including anticipated future costs of recovering this loan. This amount has been impaired in the year due to a revision in the expected receipt. The value of the available-for-sale investment is 100% sensitive to changes in the expected repayment proceeds. The equity element is given a £nil value with the Group valuing the underlying company on a break up basis at £nil as it is believed that this is the most probable outcome. This £nil valuation is derived because 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. The Group does not consider that it has significant influence over this company despite having 20% of the equity as another party owns a majority shareholding and the Group does not have a representative on the board of the company. The decline in value of £1,370,000 (2015: £773,000) has been recognised in the Income Statement. 23. TRADE AND OTHER RECEIVABLES Due after 1 year Trade receivables Due within 1 year 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 31.3.16 £000 - - Group 31.3.16 £000 20,869 32,099 - 283 19,806 73,057 Group 31.3.16 £000 70,855 1,397 61 72,313 744 73,057 Group 31.3.15 £000 1,555 1,555 Group 31.3.15 £000 12,432 42,220 - 879 9,685 65,216 Group 31.3.15 £000 56,848 1,384 70 58,302 8,469 66,771 Company 31.3.16 £000 Company 31.3.15 £000 - - - - Company 31.3.16 £000 Company 31.3.15 £000 117 40 97 40 814,268 776,550 891 405 853 188 815,721 777,728 Company 31.3.16 £000 Company 31.3.15 £000 815,316 777,540 - - 815,316 405 815,721 - - 777,540 188 777,728 Past due receivables not impaired relate to a number of independent customers for whom there is no recent history of default. Against trade receivables, Helical held £4,562,000 of rental deposits at 31 March 2016 (2015: £1,648,000). HELICAL BAR PLC REPORT & ACCOUNTS 2016 129 NOTES TO THE FINANCIAL STATEMENTS 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 31.3.16 £000 72,385 (72) 72,313 Group 31.3.15 £000 58,390 (88) 58,302 Company 31.3.16 £000 Company 31.3.15 £000 815,721 777,540 - - 815,721 777,540 Receivables written off during the year as uncollectable 2 9 - - 24. CASH AND CASH EQUIVALENTS Rent deposits and cash held at managing agents Restricted cash Cash deposits Group 31.3.16 £000 4,906 17,063 52,701 74,670 Group 31.3.15 £000 3,049 91,955 25,989 120,993 Company 31.3.16 £000 - - 36,225 36,225 Company 31.3.15 £000 3 2 13,937 13,942 Restricted cash is made up of amounts held by solicitors and amounts in blocked accounts. Included in this amount at 31 March 2015 was £70,166,000 held in a blocked account due to a bank refinancing, which was subsequently released during the year. 25. TRADE AND OTHER PAYABLES Trade payables Social security costs and other taxation Amounts owed to subsidiary undertakings Other payables Accruals Deferred income 26. BORROWINGS Current borrowings Borrowings repayable within: - one to two years - two to three years - three to four years - four to five years - five to six years - six to ten years Non-current borrowings Group 31.3.16 £000 14,463 5,774 - 2,444 39,425 8,894 71,000 Group 31.3.16 £000 885 3,617 3,650 337,098 219,523 95,981 73,309 733,178 Group 31.3.15 £000 9,868 5,156 - 3,420 37,834 9,524 65,802 Group 31.3.15 £000 45,428 136,091 3,617 83,608 175,177 80,060 74,260 552,813 Company 31.3.16 £000 421 - Company 31.3.15 £000 440 - 512,090 412,690 - 4,046 - 44 3,522 - 516,557 416,696 Company 31.3.16 £000 - - - 92,088 79,225 - - Company 31.3.15 £000 6,120 - - - 90,067 79,042 - 171,313 169,109 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 book value of £1,027,270,000 (2015: £712,569,000). 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 £34,626,000 (2015: £44,419,000). Convertible Bond On 17 June 2014 the Group issued £100m convertible bonds at par with a 4% coupon rate which are due for settlement on 17 June 2019 (the “Bonds”). The Bonds can be converted from 28 July 2014 up to and including 7 July 2017, if the share price has traded at a level exceeding 130% of the conversion price for a specified period, and from 8 July 2017 to (but excluding) the seventh dealing day before 17 June 2019 at any time. On conversion, the Group can elect to settle the Bonds by any combination of ordinary shares and cash. The Convertible Bond is included at its fair value of £102,747,000 (2015: £103,263,000) in borrowings repayable within three to four years. Retail Bond On 24 June 2013 the Group issued an £80m fixed rate retail bond at 6% per annum and with a maturity date of 24 June 2020. Under certain circumstances, the bonds can be repaid early. The Retail Bond is included at its amortised cost of £79,225,000 (2015: £79,042,000) in borrowings repayable within four to five years. HELICAL BAR PLC REPORT & ACCOUNTS 2016 FINANCIAL STATEMENTS 130 NOTES TO THE FINANCIAL STATEMENTS 27. FINANCING AND DERIVATIVE FINANCIAL INSTRUMENTS The policies for dealing with liquidity and interest rate risk are noted in the Principle Risks Review on pages 58 to 61. Borrowings maturity Due after more than one year Due within one year Group 31.3.16 £000 733,178 885 734,063 Group 31.3.15 £000 552,813 45,428 598,241 The Group has various undrawn committed borrowing facilities. The facilities available at 31 March 2016 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 but not more than three years Expiring in more than three years but not more than four years Expiring in more than four years but not more than five years Expiring in more than five years Interest rates – Group Fixed rate borrowings: - swap rate plus bank margin - swap rate plus bank margin - fixed rate plus margin - fixed rate Retail Bond - swap rate plus bank margin - swap rate plus bank margin - fixed rate Convertible Bond - swap rate plus bank margin - swap rate plus bank margin - swap rate plus bank margin % Expiry 3.650 5.650 3.480 6.000 3.850 4.070 4.000 4.025 3.770 - Nov 2019 Nov 2019 Dec 2024 Jun 2020 Jan 2020 Jul 2019 Jun 2019 Aug 2020 May 2018 - 31.3.16 £000 105,000 44,500 80,005 80,000 75,000 30,000 100,000 74,280 10,800 - - swap rate plus bank margin 4.070 Oct 2017 20,300 - swap rate plus bank margin - swap rate plus bank margin Weighted average Floating rate borrowings Unamortised finance costs Fair value adjustment of Convertible Bond - 3.715 4.226 3.924 - - Aug 2020 Jul 2020 Sep 2018 - - 13,000 632,885 107,109 (8,678) 2,747 % - - 3.480 6.000 4.500 4.070 4.000 4.525 4.020 3.365 4.070 3.510 - 4.366 2.438 - Group 31.3.16 £000 10,000 - - 55,697 14,499 3,445 83,641 Expiry - - Dec 2024 Jun 2020 Jan 2020 Jul 2019 Jun 2019 Feb 2019 May 2018 Jan 2016 Jan 2016 May 2015 - Mar 2019 Nov 2016 - Group 31.3.15 £000 14,147 3,982 - 33,161 2,840 - 54,130 31.3.15 £000 - - 80,862 80,000 75,000 30,000 100,000 75,630 10,800 9,172 11,100 21,375 - 493,939 106,291 (5,252) 3,263 Total borrowings 4.182 Sep 2020 734,063 4.026 Aug 2019 598,241 The year on year changes in fixed borrowing rates are the result of stepped increases/decreases in interest rate swaps rates. Floating rate borrowings bear interest at rates based on LIBOR. At 31 March 2016 the Company had £30,000,000 (2015: £30,000,000) and £20,300,000 (2015: £11,100,000) interest rate swaps, both at 4.070% and expiring in July 2019 and October 2017 respectively. Interest is fixed on the retail bond and convertible bond as shown above, with the remaining borrowings being at floating rates. In addition to the above, the Group has a £50,000,000 interest rate swap at 1.865% starting in January 2020 and expiring in June 2026. HELICAL BAR PLC REPORT & ACCOUNTS 2016 NOTES TO THE FINANCIAL STATEMENTS 27. FINANCING AND DERIVATIVE FINANCIAL INSTRUMENTS CONTINUED In addition to the fixed rates, borrowings are also hedged by the following financial instruments: Instrument Current: - cap - cap - cap - cap - cap Value £000 25,000 25,000 25,000 – 75,000 7,200 25,000 Rate % 4.000 4.000 4.000 4.000 4.000 Where a range in capped values is shown, these reflect stepped increases/decreases over the life of the cap. Gearing Total debt Cash Net debt 131 Start Expiry Apr 2011 Jul 2013 Apr 2015 Jan 2012 Jul 2013 Group 31.3.16 £000 734,063 (74,670) 659,393 Apr 2016 Jul 2016 Jan 2017 Oct 2016 Jul 2016 Group 31.3.15 £000 598,241 (120,993) 477,248 Net debt excludes the Group’s share of debt in joint ventures of £34,626,000 (2015: £44,419,000), and cash of £12,177,000 (2015: £13,453,000). Net assets Gearing 28. SHARE CAPITAL Authorised Group 31.3.16 £000 Group 31.3.15 £000 486,189 404,363 136% 118% 31.3.16 £000 39,577 39,577 31.3.15 £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 - 118,183,806 (2015: 118,183,806) ordinary shares of 1p each - 212,145,300 (2015: 212,145,300) deferred shares of 1 ⁄8p each Ordinary shares At 1 April and 31 March Deferred shares At 1 April and 31 March 31.3.16 £000 1,182 265 1,447 31.3.15 £000 1,182 265 1,447 Shares in issue 31.3.16 Number Share capital 31.3.16 £000 Shares in issue 31.3.15 Number Share capital 31.3.15 £000 118,183,806 1,182 118,183,806 1,182 212,145,300 265 212,145,300 265 HELICAL BAR PLC REPORT & ACCOUNTS 2016 FINANCIAL STATEMENTS 132 NOTES TO THE FINANCIAL STATEMENTS 28. SHARE CAPITAL CONTINUED Capital Management 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, share premium, retained earnings, revaluation reserve and other reserves (2016: £478,711,000; 2015: £396,825,000). The Group continually monitors its gearing level to ensure that it is appropriate. Gearing increased from 118% to 136% in the year as the Group took advantage of favourable debt market conditions. 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. 29. SHARE OPTIONS At 31 March 2016 and 31 March 2015 there were no unexercised options over new ordinary 1p shares in the Company. No options over purchased ordinary 1p shares held by the ESOP had been granted to directors and employees under the Company’s share option schemes (31 March 2015: none). The Company uses a stochastic valuation model to value the share options. Summary of share options At 1 April Options exercised At 31 March The share price at date of exercise was 344.25p. Weighted average exercise Price 31.3.16 - - - Weighted average exercise price 31.3.15 259.25p 259.25p - Number 31.3.15 46,284 (46,284) - Number 31.3.16 - - - 30. SHARE-BASED PAYMENTS The Group provides share-based payments to employees in the form of performance share plan awards and a share incentive plan. 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. Performance share plan awards Outstanding at beginning of year Awards vested during year Awards lapsed during the year Awards made during the year Outstanding at end of year 2016 Weighted average award value 221p 153p 153p 353p 284p Awards 9,721,375 (1,707,216) (1,021,711) 2,134,705 9,127,153 2015 Weighted average award value 215p 246p 246p 295p 221p Awards 9,127,153 (4,212,534) - 1,642,997 6,557,616 The performance share plan awards outstanding at 31 March 2016 had a weighted average remaining contractual life of one year and one month. The fair value of the awards made in the year to 31 March 2016 was £5,802,000 (2015: £6,305,000). The inputs into the stochastic model of valuation of the PSP awards made in the year to 31 March 2016 were as follows: Weighted average share price Weighted average exercise price Expected volatility Expected life Risk free rate Expected dividends 2016 413.5p - 25.7% 3 years 0.79% 0.00% 2015 355.0p - 28.4% 3 years 1.24% 0.00% 2014 303.2p - n/a 3 years n/a 2.20% The Group recognised a charge of £6,666,000 (2015: £6,432,000) during the year in relation to share-based payments. Volatility is measured by calculating the standard deviation of the natural logarithm of share price movements for the period prior to the date of grant which is commensurate with the remaining length of the performance period. At the balance sheet date there were no exercisable awards. HELICAL BAR PLC REPORT & ACCOUNTS 2016 NOTES TO THE FINANCIAL STATEMENTS 133 31. 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. For this purpose, 4,488,000 shares (2015: 3,790,000) in the Company were purchased during the year at a cost of £18,857,000 (2015: £13,349,000). At 31 March 2016, outstanding awards over 6,558,000 (2015: 9,127,000) ordinary 1p shares in Helical Bar plc had been made under the terms of the Performance Share Plan over shares held by the Trust. At 31 March 2016, the Trust held 3,901,000 shares (2015: 3,625,000). 32. CONTINGENT LIABILITIES The Company has entered into cross guarantees in respect of the banking facilities of its subsidiaries. These are not considered to have a material value. There were no other contingent liabilities at 31 March 2016 for the Group or the Company (2015: £nil). 33. CAPITAL COMMITMENTS The Group has a commitment of £34,054,000 (2015: £86,800,000) in relation to construction contracts, which are due to be completed in the period to September 2018. 34. NET ASSETS PER SHARE Net asset value Less: own shares held by ESOP deferred shares Basic net asset value Add: share settled bonuses Add: dilutive effect of the Performance Share Plan Diluted net asset value Adjustment for: 31.3.16 £000 Number of shares 000s 31.3.16 pence per share 31.3.15 £000 Number of shares 000s 31.3.15 pence per share 486,189 118,184 404,363 118,184 (3,901) (3,625) (265) (265) 485,924 114,283 425 404,098 114,559 353 1,197 3,177 1,016 6,256 485,924 118,657 410 404,098 121,831 332 - fair value of financial instruments - fair value movement on Convertible Bond - deferred tax 14,955 2,747 23,759 8,568 3,263 16,956 Adjusted diluted net asset value 527,385 118,657 444 432,885 121,831 355 Adjustment for: - fair value of trading and development properties 19,412 36,243 EPRA net asset value Adjustment for: 546,797 118,657 461 469,128 121,831 385 - fair value of financial instruments - deferred tax (14,955) (23,759) (8,568) (16,956) EPRA triple net asset value 508,083 118,657 428 443,604 121,831 364 The net asset values per share have been calculated in accordance with the best practice recommendations of the European Public Real Estate Association (“EPRA”). The adjustments to the net asset value comprise the amounts relating to the Group and its share in Joint Ventures. HELICAL BAR PLC REPORT & ACCOUNTS 2016 FINANCIAL STATEMENTS 134 NOTES TO THE FINANCIAL STATEMENTS 35. RELATED PARTY TRANSACTIONS At 31 March 2016 and 31 March 2015 the following amounts were due from the Group’s joint ventures: King Street Developments (Hammersmith) Ltd Shirley Advance LLP Barts Square First Ltd Helical Sosnica Sp. Zoo 207 Old Street Unit Trust 211 Old Street Unit Trust Old St Retail Unit Trust City Road (Jersey) Ltd Old Street Holdings LP Ltd Creechurch Place Ltd 31.3.16 £000 6,231 11,347 77 1,099 - - - - - 13,345 31.3.15 £000 5,280 12,501 42 6,000 2,325 1,801 725 738 100 12,132 All movements in joint venture balances related to loans repaid and loans advanced. At 31 March 2016, there was £nil due to the Group (2015: £347,000) by a company under common control. At 31 March 2016 and 31 March 2015 there were the following balances between the Company and its subsidiaries. Amounts due from subsidiaries Amounts due to subsidiaries 31.3.16 £000 807,268 512,090 31.3.15 £000 776,550 412,690 During the years to 31 March 2016 and 31 March 2015 there were the following transactions between the Company and its subsidiaries: Management charges receivable Interest receivable Interest payable Year ended 31.3.16 £000 Year ended 31.3.15 £000 9,734 2,205 3,881 10,795 2,294 3,125 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 23. Amounts owed to subsidiaries by the Company are identified in note 25. The Group considers that key management personnel are the directors. The compensation paid or payable to key management is: Salaries and other short term employee benefits Other long-term benefits Share based payments Year ended 31.3.16 £000 Year ended 31.3.15 £000 7,715 - 6,314 14,029 8,656 - 8,238 16,894 The total dividends paid to directors of the Group in the year were £1,260,000 (2015: £1,181,000). On 4 April 2016, a further payment was made of £907,000 (2015: £nil) in respect of the second interim dividend (note 12). During the year purchases of £60,000 (2015: £50,000) were made from a partnership in which Michael Slade, a director of the company, and his wife are partners. All transactions were carried out on an arm’s length basis. HELICAL BAR PLC REPORT & ACCOUNTS 2016 NOTES TO THE FINANCIAL STATEMENTS 135 36. FINANCIAL INSTRUMENTS Categories of financial instruments Financial assets in the Group include derivative financial assets which are designated as ‘Fair value through the Profit or Loss’. Financial assets also include trade and other receivables and cash and cash equivalents all of which are included within loans and receivables as well as available-for-sale investments. Financial liabilities classed as ‘Fair value through the Profit or Loss’ include derivatives and those liabilities designated as such. Financial liabilities also include secured bank loans and overdrafts, trade and other payables and provisions, all of which are classified as financial liabilities at amortised cost. Financial assets and liabilities by category The financial instruments of the Group as classified in the financial statements can be analysed under the following IAS 39 Financial Instruments: Recognition and Measurement, categories: Financial assets Loans and receivables Fair value through the Profit or Loss Available-for-sale financial investments Total financial assets Group 31.3.16 £000 146,983 - 3,114 150,097 These financial assets are included in the balance sheet within the following headings: Available-for-sale investments Derivative financial instruments Property derivative financial asset Trade and other receivables Cash and cash equivalents Total financial assets Group 31.3.16 £000 3,114 - - 72,313 74,670 150,097 Group 31.3.15 £000 180,713 16,389 4,342 201,444 Group 31.3.15 £000 4,342 1 16,388 59,720 120,993 201,444 Company 31.3.16 £000 Company 31.3.15 £000 851,541 792,900 - - - - 851,541 792,900 Company 31.3.16 £000 Company 31.3.15 £000 - - - 815,316 36,225 851,541 - - - 778,958 13,942 792,900 Financial assets are stated in accordance with IAS 32 Financial Instruments: Presentation. For the fair value of available-for-sale investments see note 22. The carrying value of the trade and other receivables and cash and cash equivalents is deemed not to be materially different from the fair value. Financial liabilities Fair value through the Profit or Loss Designated at Fair value through Profit or Loss Measured at amortised cost Total financial liabilities Group 31.3.16 £000 (18,562) (102,747) (689,815) (811,124) Group 31.3.15 £000 (12,545) (103,263) (545,523) (661,331) Company 31.3.16 £000 Company 31.3.15 £000 (7,134) (11,080) - (689,424) (696,558) - (591,925) (603,005) The Convertible Bond has been designated at fair value through profit or loss. The change in fair value of the Convertible Bond is wholly attributable to changes in market conditions. If bondholders do not exercise their conversion right, the obligation is settled by a cash payment of £100,000,000. The difference between the carrying amount of £102,747,000 and this settlement amount is an additional liability of £2,747,000. The financial liabilities are included in the balance sheet within the following headings: Trade and other payables Borrowings – current Borrowings – non current Derivative financial instruments Total financial liabilities Group 31.3.16 £000 (62,106) (885) (733,178) (14,955) (811,124) Group 31.3.15 £000 (54,994) (45,428) Company 31.3.16 £000 Company 31.3.15 £000 (516,557) (416,696) - (552,813) (171,313) (8,096) (7,134) (661,331) (695,004) (6,120) (169,109) (11,080) (603,005) HELICAL BAR PLC REPORT & ACCOUNTS 2016 FINANCIAL STATEMENTS 136 NOTES TO THE FINANCIAL STATEMENTS 36. FINANCIAL INSTRUMENTS CONTINUED The carrying value of trade and other payables and borrowings is not deemed to be materially different from the fair value. Financial liabilities are stated in accordance with IAS 32. The Group and Company financial instruments that are measured subsequent to initial recognition at fair value are available-for-sale assets, forward exchange contracts and interest rate swaps, caps and floors, and those designated on initial recognition. Forward foreign exchange contracts are externally measured using quoted forward exchange rates and yield curves derived from quoted interest rates matching maturities of the contracts. Interest rate swaps, caps and floors are measured at the present value of future cash flows estimated and discounted based on the applicable yield curves derived from quoted interest rates. IFRS 13 categorises financial assets and liabilities as being valued in 3 hierarchical levels: - Level 1: values are unadjusted quoted prices in active markets for identical assets or liabilities - Level 2: values are derived from observing market data - Level 3: values cannot be derived from observable market data Assets and liabilities measured at fair value are classified as below: Level 1 Level 2 Level 3 Convertible bond (note 26) Derivative financial instruments (note 27) Property derivative financial asset (note 21) Available-for-sale investment (note 22) Investment property (note 15) There were no transfers between categories in the current or prior year. Derivative financial instruments Derivative financial assets Interest rate caps Interest rate swaps Property derivative financial asset Derivative financial liabilities Interest rate swaps Convertible bond derivative element Group 31.3.16 £000 - - - - Group 31.3.15 £000 1 - 16,388 16,389 (14,955) (8,096) - - (14,955) (8,096) Company 31.3.16 £000 Company 31.3.15 £000 - - - - - (7,134) (7,134) - - - - (1,898) (9,182) (11,080) The Group’s movement in the fair value of the derivative financial instruments in the year was a loss of £6,860,000 (2015: gain of £7,999,000), of which a gain of £nil (2015: £16,388,000) was due to the property derivative financial asset and a loss of £6,860,000 (2015: £8,389,000) was due to interest rate caps and swaps. In accordance with IAS 39, the convertible bond is split into a loan and derivative element in the Company Balance Sheet. On initial recognition the derivative element had a value of £8,190,000. At 31 March 2016, the derivative element had a value of £7,134,000 (2015: £9,182,000) with a corresponding gain of £2,048,000 (2015: loss of £992,000) recognised in the Income Statement. The movement in the Company’s interest rate swaps in the year was a gain of £1,898,000 (2015: loss of £2,021,000). 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 their financial position, past experience and other factors. As at 31 March 2016 the Group had total credit risk exposure excluding cash of £58,004,000 of which £3,114,000 is available-for-sale assets and £54,890,000 is loans and receivables. Available-for-sale assets are analysed in note 22. The cash is held with reputable banking institutions and in client accounts with solicitors and managing agents and therefore credit risk is considered low. All other debtors are deemed to be recoverable. All Company debtors are considered to be fully recoverable. The Group is not reliant on any major customer for its ability to continue as a going concern. For further information on trade and other receivables, see note 23. 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. The Group manages its liquidity risk on a consolidated basis based on business needs, tax, capital or regulatory considerations, if applicable, and 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 debt facilities, see notes 26 and 27. HELICAL BAR PLC REPORT & ACCOUNTS 2016 137 NOTES TO THE FINANCIAL STATEMENTS 36. FINANCIAL INSTRUMENTS CONTINUED The maturity profile of the Group’s contracted financial liabilities is as follows: 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 31.3.16 £000 51,204 34,817 65,602 760,795 912,418 Group 31.3.15 £000 40,696 75,390 182,692 451,877 750,655 Company 31.3.16 £000 6,866 7,220 19,032 178,099 211,217 Company 31.3.15 £000 6,244 13,053 19,237 198,504 237,038 At 31 March 2016 the Group had £83,641,000 (2015: £54,130,000) of undrawn borrowing facilities, £105,865,000 (2015: £81,530,000) of uncharged property assets and cash balances of £74,670,000 (2015 £120,993,000). The above contracted liabilities assume that no loans are extended beyond their current facility expiry date. Management believe that these facilities, together with anticipated sales and the renewal of some of these loan facilities, mean that the Group can meet its contracted liabilities as they fall due. Market risk The Group 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. The Group 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 27. In the year to 31 March 2016, if interest rates had moved by 0.5%, this would have resulted in the following movement to net profits and equity due to movements in interest charges and mark-to-market valuations of derivatives. 0.5% increase – increase in net results and equity 0.5% decrease – decrease in net results and equity Foreign currency exchange risk Group Impact on results 31.3.16 £000 7,684 (7,245) Group Equity impact 31.3.16 £000 7,684 (7,245) Company Impact on results 31.3.16 £000 771 (185) Company Equity impact 31.3.16 £000 771 (185) Due to its operations in Poland and its investment in a non-UK based property developer, the Group has exposure to exchange movements on foreign currencies. 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 2016 the Group made foreign exchange gains of £100,000 (2015: losses of £2,061,000) resulting from movements in foreign exchange rates during the year affecting its assets and liabilities related to its overseas operations. The Group’s balance sheet translation exposure is summarised as follows: Gross currency assets Gross currency liabilities Net exposure Euro 31.3.16 £000 1,447 (66) 1,381 Zloty 31.3.16 £000 538 (788) (250) US dollars 31.3.16 £000 3,103 - 3,103 Euro 31.3.15 £000 16,897 (7,134) 9,763 Zloty 31.3.15 £000 927 (1,139) (212) The Company’s balance sheet translation exposure is almost exclusively due to intra-group loans and is summarised as follows: Gross currency assets Gross currency liabilities Net exposure Euro 31.3.16 £000 1,320 - 1,320 Zloty 31.3.16 £000 1,168 - 1,168 Euro 31.3.15 £000 6,151 - 6,151 US dollars 31.3.15 £000 4,331 - 4,331 Zloty 31.3.15 £000 4,462 - 4,462 The Group’s main currency exposure is to the US Dollar. The sensitivity of the net assets and profit of the Group to a 10% change in the value of the foreign currencies against sterling is Euro: £138,000 (2015: £976,000), Zloty: £25,000 (2015: £21,000), US dollar: £310,000 (2015: £433,000). The sensitivity of the net assets and profit of the Company to a 10% change in the value of the foreign currencies against sterling is Euro: £132,000 (2015: £615,000), Zloty: £117,000 (2015: £446,000). HELICAL BAR PLC REPORT & ACCOUNTS 2016 FINANCIAL STATEMENTS 138 NOTES TO THE FINANCIAL STATEMENTS 37. POST BALANCE SHEET EVENTS There were no material post balance sheet events. 38. 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 2016. Subsidiary undertakings are entities for which the Group is exposed to variable returns and has the ability to control those returns. 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, where both parties are exposed to variable returns but neither has control over those returns. They are accounted for using the equity method of accounting, whereby the Group’s share of profit after tax in the Joint Venture is recognised in the Consolidated Income Statement and the Group’s share of the Joint Venture’s net assets are incorporated in the Consolidated Balance Sheet. The Company’s cost of investment in Joint Ventures less any provision for permanent impairment loss 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 Governance Review on page 77. 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 are derived from the fair value of the consideration received in accordance with IAS 18 Revenue. 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, where the sale of the land is not conditional on the construction of the buildings and is not reversible in the event that the building is not constructed. 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. Property advisory/development management services – where the Group provides these services to the third party property site owner the Group recognises income over the period these services are provided and in accordance with the specific terms of the contract. If the amount and payment of the consideration for these services are contingent upon a future event (such as sale of the property) and if the fair value of the consideration can be reliably estimated, the Group recognises this income as its services are performed, discounting for time and risk if appropriate. 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. Deferred income – money received in advance of the provision of goods or services is held in the balance sheet until the income can be recognised in the Income Statement. Share-based payments The Group provides share-based payments in the form of performance share plan awards and a share incentive plan. These payments are discussed in greater detail in the Directors’ Remuneration Report on pages 83 to 102. 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. 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. The amount charged to the Income Statement is credited to the Retained Earnings reserve. HELICAL BAR PLC REPORT & ACCOUNTS 2016 NOTES TO THE FINANCIAL STATEMENTS 139 38. PRINCIPAL ACCOUNTING POLICIES CONTINUED 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 5 Hanover Square, London W1S 1HQ 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 - 10% or length of lease, if shorter Plant and equipment - 25% Taxation The taxation charge represents the sum of tax currently payable and deferred tax. The charge for current taxation is based on the results for the year as adjusted for items which are non-assessable or disallowed. It is calculated using rates that have been enacted or substantively enacted by the balance sheet date. Tax payable upon realisation of revaluation gains recognised in prior periods is recorded as a current tax charge with a release of the associated deferred taxation. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. The measurement of deferred tax assets and liabilities reflects the tax consequences of the manner in which the Group expects, at the balance sheet date, to recover or settle the carrying amount of those assets and liabilities. Such assets and liabilities are not recognised if the temporary differences arise from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the assets to be recovered. The deferred tax asset relating to share based payment awards reflects the estimated value of tax relief available on the vesting of the awards at the balance sheet date. Deferred tax is determined using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. It is recognised in the Income Statement except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. The Group recognises a deferred tax liability for all taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, except to the extent that both of the following conditions are satisfied: a) the Group is able to control the timing of the reversal of the temporary difference; and, b) it is probable that the temporary difference will not reverse in the foreseeable future. Dividends Dividend distributions to the Company’s shareholders are recognised as a liability in the financial statements in the period in which dividends are approved. Investment properties Investment properties are properties owned or leased by the Group which are held for long-term rental income and for capital appreciation. Investment properties are initially recognised at cost, 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 or are determined by the directors of the Group based on their knowledge of the property. 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 recognised 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 is treated as investment property in accordance with IAS 40. When the Group redevelops an existing investment property for continued future use as investment property, the property remains an investment property measured at fair value and is not reclassified. Interest is capitalised before tax relief until the date of practical completion. Details of the valuation of investment properties can be found in note 15. HELICAL BAR PLC REPORT & ACCOUNTS 2016 FINANCIAL STATEMENTS 140 NOTES TO THE FINANCIAL STATEMENTS 38. PRINCIPAL ACCOUNTING POLICIES CONTINUED 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. Net realisable value is the estimated selling price in the ordinary course of business less estimated costs to completion and estimated costs necessary to make the sale. Gross borrowing costs associated with expenditure on properties under development or undergoing major refurbishment are capitalised. The interest capitalised is either based on the interest paid (where a project has a specific loan) or calculated using the Group’s weighted average cost of borrowings (where there are no specific borrowings for the project). Interest is capitalised from the date of commencement of the development work until date of practical completion. 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 in the Statement of Comprehensive Income except to the extent that losses are attributable to impairment below historic cost, in which case they are recognised in the Income Statement. Upon disposal, accumulated fair value adjustments are included in the Income Statement. Held for sale investments Investments are defined as held for sale when the Group intends to sell the investment and if sale is highly probable. Such held for sale investments are measured at the lower of their carrying amounts immediately prior to their classification as held for sale and their fair value less costs to sell. 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, cash held at solicitors, cash in blocked accounts 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 and the Group’s retail bond are initially recorded at fair value, net of finance and other costs yet to be amortised in accordance with IAS39. Embedded derivatives contained within the borrowing agreements are treated in accordance with IAS39, which includes consideration of whether embedded derivatives require bifurcation. The retail bond and bank loans are held at amortised cost. Convertible bonds are designated as fair value through the profit and loss and so are presented on the Balance Sheet at fair value, with all gains and losses, including the write-off of issuance costs, recognised in the Income Statement. The interest charge in respect of the coupon rate on the bonds has been recognised within Finance Costs on an accruals basis. 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. This treatment has been adopted since transition to IFRS. Gains or losses on extinguishing debt are recognised in the Income Statement in the period in which they occur. 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 swaps, caps and floors, and forward foreign currency contracts 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. A derivative property asset is recognised on the Balance Sheet when the Group has contractually assigned an existing purchase contract. A derivative property asset is initially recorded at its fair value and is remeasured at each reporting period date to its fair value, which is based upon the future contracted cash flow discounted for both time and risk. Any change in fair value is recognised in the Income Statement as a development profit. Further information on the categorisation of financial instruments can be found in note 36. Leases Leases are classified according to the substance of the transaction. A lease that transfers substantially all the risks and rewards of ownership to the lessee is classified as a finance lease. All other leases are classified as operating leases. In accordance with IAS 40, finance leases of investment property are accounted for as finance leases and recognised as an asset and an obligation to pay future minimum lease payments. The investment property asset is included in the Balance Sheet at fair value, gross of the recognised finance lease liability. Lease payments are allocated between the liability and finance charges so as to achieve a constant financing rate. In accordance with IAS17, operating leases receipts and payments are spread on a straight-line basis over the length of the lease. HELICAL BAR PLC REPORT & ACCOUNTS 2016 NOTES TO THE FINANCIAL STATEMENTS 141 38. PRINCIPAL ACCOUNTING POLICIES CONTINUED 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 Comprehensive Income to the extent that they relate to a gain or loss on that non-monetary item which is included in the Statement of Comprehensive Income, 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 average rate. The exchange differences arising from the retranslation of the opening net investment in subsidiaries are recognised in Other Comprehensive Income. 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”). Earnings per share 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 on consolidation. 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 value of “Own shares held” with reference to the expected cash proceeds and accounts for any difference as a reserves transfer. Use of estimates and judgements To be able to prepare accounts according to the accounting principles, management must make estimates and assumptions that affect the asset and liability items and revenue and expense amounts recorded in the financial statements. 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: Estimates - 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 periods based on future forecast performance and employee retention (note 30); - The provision for future bonuses payable under the Annual Bonus scheme (note 8); - Valuation of investment properties, including Directors’ valuations and where external valuers are used to provide third party valuations (note 15); and - Directors’ valuation of land, development and trading properties include subjective assumptions including the results of future planning decisions, future construction costs and future sales values and timings (note 20). Judgements - Calculation and assessment of the recoverability of deferred tax assets, where it has been assumed that sufficient taxable profits will be available in future periods to allow all of the assets to be recovered (note 11); - An assessment of the most suitable accounting treatment for convertible bonds (note 26); - Consideration of the nature of joint arrangements. In the context of IFRS 10, this involves consideration of where the control lies and whether either party has the power to vary its returns from the arrangements. In particular, significant judgement is exercised where the shareholding of the Group is not 50% (note 19); and - Consideration of whether an investment property purchase that has exchanged but not completed should be recognised as investment property under IAS 40. The judgement lies in assessing whether the exchange is unconditional, in which case it is recognised (note 15). - Determination of the most appropriate percentage interest in our Joint Ventures to equity account for, where our economic interest can differ to our ownership interest (see note 19). - Recognition of development management service income, where payment for these services is triggered by a future event (sale or letting of the property) and where estimation is required to determine the stage of completion. HELICAL BAR PLC REPORT & ACCOUNTS 2016 FINANCIAL STATEMENTS 142 NOTES TO THE FINANCIAL STATEMENTS 39. SUBSIDIARY AND RELATED UNDERTAKINGS The Company’s subsidiary and related undertakings are listed below. All undertakings operate in the United Kingdom other than Helical Wroclaw Sp.Z.o.o, EC Property Management Sp.Z.o.o and Helical Asset Management Sp.Z.o.o and, unless otherwise indicated, are incorporated and registered in the United Kingdom. Company Direct/Indirect Country Ultimate %Age Active Subsidiaries 207 Old Street Unit Trust 211 Old Street Unit Trust 61 Southwark Street Limited Aycliffe & Peterlee Development Company Limited Aycliffe & Peterlee Investment Company Limited Baylight Developments Limited Bramshott Place Management Limited CPP Investments Limited Dencora (Docklands) Limited Dencora (Fordham) Limited Downtown Space Properties LLP Durrants Management Limited EC Property Management SP. Z O.O. Embankment Place (LP) Limited G2 Estates Limited Glenlake Limited Harbour Developments (Bracknell) Limited Hb Sawston No 3 Limited Helical (Alfreton) Limited Helical (Artillery) Limited Helical (Ashford) Limited Helical (Basildon Retail) LP Helical (Basildon) B.V. Helical (Battersea) Limited Helical (Beacon Road) Limited Helical (Booth St) Limited Helical (Boss 2) Limited Helical (Boss) Limited Helical (Bramshott Place) Limited Helical (Broadway) Limited Helical (Brownhills) Limited Helical (Cannock) Limited Helical (Cardiff) Limited Helical (Chart) Limited Helical (Chester) Limited Helical (Churchgate) Limited Helical (Cobham) Limited Helical (Corby Investments) Limited Helical (Crownhill) Limited Helical (CS Holdings) Jersey Limited Helical (CS) Jersey Limited Helical (Dale House) Limited Helical (Doxford) Limited Helical (Durrants) Limited Helical (East Kilbride) Limited Helical (Eastcheap) Limited Helical (Ellesmere Port) Limited Helical (Enterprise) Limited Helical (Exeter) Limited Helical (Fordham) Limited Helical (FP) Holdings Limited Helical (FP) Jersey Holdings Limited Helical (Glasgow) Limited Helical (Gracelands) Limited Helical (Great Yarmouth) Limited Helical (Hailsham) Limited Helical (Halesowen) Limited Helical (Harrogate) Limite Helical (Havant) Limited Helical (Hedge End) Limited Helical (Hinckley) Limited Helical (Huddersfield) Limited 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 Indirect Indirect Indirect Direct Indirect Indirect Indirect Indirect Direct Indirect Direct Indirect Indirect Direct Direct Indirect Direct Direct Direct Direct Direct Indirect Indirect Direct Direct Direct Direct Direct Direct Indirect Direct Direct Indirect Direct Direct Direct Direct Direct Indirect Direct Indirect Direct Direct Indirect Direct Indirect Direct Indirect Indirect Direct Indirect Indirect Direct Direct Direct Indirect Direct Direct Direct Direct Direct Direct Jersey Jersey UK UK UK UK UK UK UK UK UK UK Poland UK UK UK UK UK UK UK UK UK Netherlands UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK Jersey Jersey Jersey UK UK UK UK Jersey UK UK UK UK UK Jersey UK UK UK UK UK UK UK UK UK UK 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% 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% HELICAL BAR PLC REPORT & ACCOUNTS 2016 NOTES TO THE FINANCIAL STATEMENTS 143 39. SUBSIDIARY AND RELATED UNDERTAKINGS CONTINUED Company Direct/Indirect Country Ultimate %Age Helical (Jarrow) Limited Helical (LB) Limited Helical (Liphook) Limited Helical (Merlin Park) Limited Helical (Mint) Limited Helical (Newmarket) B.V. Helical (Northampton) Limited Helical (OS Holdco) Jersey Limited Helical (Peterborough) Limited Helical (Porchester) Limited Helical (Portbury) Limited Helical (Power Road) Limited Helical (Quartz) Limited Helical (Salford) Limited Helical (Scarborough) Limited Helical (Sevenoaks) Limited Helical (Shepherds) Limited Helical (Shoreditch) Limited Helical (Six) Limited Helical (Southend) Limited Helical (Stevenage) Limited Helical (Stone) Limited Helical (Sun) Limited Helical (Sutton-In-Ashfield) B.V. Helical (Sutton-In-Ashfield) Holdings B.V. Helical (Telford) Limited Helical (Wellingborough) Limited Helical (Whitechapel) Limited Helical (Winterhill) Ltd Helical (Yate) Limited Helical Asset Management SP. Z O.O. Helical B.V. Helical Bar (Cathcart) Limited Helical Bar (City Investments) Limited Helical Bar (Drury Lane) Limited Helical Bar (Falkirk) Limited Helical Bar (Great Dover Street) Limited 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100 Helical Bar (Jersey) Limited 101 Helical Bar (Maple) Limited 102 Helical Bar (Mitre Square) Developments Limited 103 Helical Bar (St Vincent Street) Limited 104 Helical Bar (Wales) Limited 105 Helical Bar (White City) Limited 106 Helical Bar (Yoker) Limited 107 Helical Bar Developments (South East) Limited 108 Helical Bar Developments Limited 109 Helical Bar Services Limited 110 Helical Finance (AV) Limited 111 Helical Finance (BAR) Limited 112 Helical Finance (RBS) Limited 113 Helical Food Retail Limited 114 Helical Investment Holdings Limited 115 Helical Jersey Holdings Limited 116 Helical Jersey Investment Holdings Limited 117 Helical Old Street Jersey Holdings Limited 118 Helical Old Street Jersey Limited 119 Helical Poland SP. Z O.O. 120 Helical Properties Investment Limited 121 Helical Properties Limited 122 Helical Properties Retail Limited 123 Helical Retail (RBS) Limited 124 Helical Retail Limited 125 Helical Wroclaw SP. Z O.O. 126 Maudslay Park Management Limited 127 Metropolis Property Limited 128 Millbrook Village Management Limited 129 Newmarket LP Direct Direct Indirect Indirect Direct Indirect Direct Indirect Direct Direct Direct Direct Direct Direct Direct Direct Indirect Direct Direct Direct Direct Direct Direct Indirect Indirect Direct Direct Direct Direct Direct Indirect Direct Direct Indirect Direct Direct Indirect Direct Direct Direct Direct Indirect Direct Direct Direct Direct Direct Direct Direct Direct Direct Direct Direct Direct Direct Indirect Indirect Direct Direct Direct Indirect Direct Indirect Indirect Indirect Indirect Indirect UK UK Jersey UK UK Netherlands UK Jersey UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK Netherlands Netherlands UK UK UK UK UK Poland Netherlands UK UK UK UK UK Jersey UK UK UK UK UK UK UK UK UK UK UK UK UK UK Jersey Jersey Jersey Jersey Poland UK UK UK UK UK Poland UK UK UK UK 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% 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% HELICAL BAR PLC REPORT & ACCOUNTS 2016 FINANCIAL STATEMENTS 144 NOTES TO THE FINANCIAL STATEMENTS 39. SUBSIDIARY AND RELATED UNDERTAKINGS CONTINUED Company Direct/Indirect Country Ultimate %Age 130 Old Street Unitholder No 1 Limited 131 Old Street Unitholder No 2 Limited 132 Renaissance Villages Limited 133 Sutton-In-Ashfield LP 134 The Asset Factor Limited 1 2 3 4 5 6 7 8 9 10 11 Joint Ventures And Joint Operations Abbeygate Helical (C4.1) LLP Abbeygate Helical (Leisure Plaza) Limited Barts Close Office Limited Barts One Limited Barts Square Active One Limited Barts Square First Limited Barts Square First Office Limited Barts Square First Residential Limited Barts Square Land One Limited Barts Two Limited Barts, L.P. Acting Through Its General Partner Helical Jersey Investment Holdings Limited Creechurch Place Limited Dencora (Newmarket Road) LLP Haslucks Green Limited Helical Bar (Mitre Square) Limited King Street Developments (Hammersmith) Limited 12 13 14 15 16 17 Obc Development Management Limited 18 Old Street Holdings Gp Limited 19 Old Street Holdings L.P. 20 21 PH Properties Limited Shirley Advance LLP Dormant Subsidiaries And Joint Ventures 14 Fieldgate Street Limited Abbeygate Helical (MK) Limited Abbeygate Helical (Willen) Limited Abbeygate Helical (Winterhill) Limited Albion Land (Bushey Mill) Limited Banagate Limited Basildon General Partner Limited Basildon Nominee Limited Cranmer Investments (Whitstable) Limited Crondall Road Limited Dencora (Harlow) Limited Gresham Street Limited Groovemodel Limited Hallco 850 Limited HB Cambs No 3 Limited HB Dales Manor No 3 Limited HB Group Services Limited HB Sawston No. 1 Limited HB Sawston No. 2 Limited HB Sawston No. 4 Limited Helical (Aldridge) Limited Helical (Angel 1) Limited Helical (Basildon) Limited Helical (Bow) Limited Helical (Cawston) Limited Helical (CG) Limited Helical (CG2) Limited Helical (CMV) Limited Helical (Colchester) Limited Helical (Cowley) Limited Helical (CR) Limited Helical (Crawley Roadway) Limited Helical (Crawley) Limited Helical (East Grinstead) Limited Helical (Fleet) Limited Helical (Fleet) No 1 Limited 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 Indirect Indirect Direct Indirect Direct Direct Direct Indirect Indirect Indirect Indirect Indirect Indirect Indirect Indirect Indirect Indirect Direct Indirect Direct Indirect Indirect Indirect Indirect Indirect Indirect Direct Direct Direct Direct Indirect Indirect Direct Indirect Indirect Direct Indirect Direct Direct Direct Direct Direct Direct Direct Direct Direct Direct Direct Direct Direct Direct Direct Direct Direct Indirect Indirect Indirect Direct Direct Direct Direct Indirect Jersey Jersey UK UK UK UK UK Jersey Jersey Jersey UK Jersey Jersey UK Jersey United States Jersey UK UK UK UK UK Jersey Jersey Virgin Islands, British UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK 100% 100% 100% 100% 100% 50% 50% 33% 33% 33% 33% 33% 33% 33% 33% 33% 10% 53% 50% 10% 50% 33% 33% 33% 60% 50% 100% 50% 50% 50% 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% HELICAL BAR PLC REPORT & ACCOUNTS 2016 NOTES TO THE FINANCIAL STATEMENTS 145 39. SUBSIDIARY AND RELATED UNDERTAKINGS CONTINUED Company Direct/Indirect Country Ultimate %Age Helical (Fleet) No 2 Limited 37 Helical (HRH) Limited 38 Helical (HUB) Limited 39 Helical (Interchange) Limited 40 Helical (Kidlington) Limited 41 Helical (Letchworth) Limited 42 Helical (Mill Street) Limited 43 Helical (Milton) Limited 44 Helical (Motherwell) Limited 45 Helical (Newmarket) Limited 46 Helical (Paignton) Limited 47 Helical (SA) Limited 48 Helical (Sawston) Limited 49 Helical (Southall) Limited 50 Helical (Southampton) Limited 51 Helical (Stockport) Limited 52 Helical (Sutton-In-Ashfield) Limited 53 Helical (West Drayton) Limited 54 Helical (West London) Limited 55 Helical (Westfields) Limited 56 Helical (Witham) Limited 57 Helical (Woking) Limited 58 Helical (Worthing) Limited 59 Helical Bar (Bunhill Row) Limited 60 Helical Bar (City Developments) Limited 61 Helical Bar (CL) Investment Company Limited 62 Helical Bar (Epsom) Limited 63 Helical Bar (Fenchurch Street) Limited 65 Helical Bar (Hawtin Park No.1) Limited 66 Helical Bar (Hawtin Park No.2) Limited 67 Helical Bar (Hawtin Park No.3) Limited 68 Helical Bar (Scotland) Limited 69 Helical Bar Trustees Limited 71 Helical Group Limited 72 Helical Nominees Limited 73 Helical Properties (HSM) Limited 74 Helical Properties (RS) Limited 75 Helical Properties (WSM) Limited 76 Helical Registrars Limited 77 Helical Retirement Homes Limited 78 HGCI (Holdco) Limited 79 HGCI (Transco) Limited 80 HGCI (UK) Limited 81 HGCI Holdings Limited 82 HGCI Intermediate Limited 83 84 HGCI Limited 85 Matchearth Limited 86 Maudslay Park Limited 87 88 89 90 91 92 93 94 95 96 97 98 99 100 Sutton-In-Ashfield General Partner Limited 101 Sutton-In-Ashfield Nominee Limited 102 The Morgan Apartments Management Company Limited Newmarket General Partner Limited Newmarket Nominee Limited Paperbrick Limited Prescot Street Investments Limited Ratelawn Limited Shopfile Limited Spring (EFS) Limited Spring (EM) Limited Spring (Holdings) Limited Spring (ITE) Limited Spring (No.1) Limited Spring (No.2) Limited Spring (No.3) Limited Indirect Direct Direct Direct Indirect Indirect Direct Direct Indirect Direct Direct Direct Indirect Indirect Indirect Indirect Indirect Indirect Direct Direct Indirect Indirect Indirect Direct Indirect Direct Direct Indirect Direct Direct Direct Direct Direct Direct Direct Indirect Direct Indirect Direct Direct Indirect Indirect Indirect Indirect Direct Direct Direct Direct Direct Indirect Direct Direct Indirect Direct Indirect Indirect Indirect Indirect Direct Indirect Indirect Indirect Indirect Indirect UK UK UK UK UK UK UK UK UK UK UK UK Jersey UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK UK 100% 100% 100% 90% 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% 75% 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% HELICAL BAR PLC REPORT & ACCOUNTS 2016 FINANCIAL STATEMENTS 146 HELICAL BAR PLC REPORT & ACCOUNTS 2016 ADDITIONAL INFORMATION APPENDIX 1 – SEE-THROUGH ANALYSIS 147 APPENDIX 2 – SEE-THROUGH ANALYSIS RATIOS 149 APPENDIX 3 – FIVE YEAR REVIEW APPENDIX 4 – PROPERTY PORTFOLIO SHAREHOLDER INFORMATION GLOSSARY OF TERMS FINANCIAL CALENDAR ADVISORS 150 151 154 155 156 156 APPENDIX 1 – SEE-THROUGH ANALYSIS 147 This analysis incorporates the separate components of the results of the consolidated subsidiaries and Helical’s share of its joint ventures results into a ‘See-through’ analysis of our property portfolio, debt profile and the associated income streams and financing costs, to assist in providing a comprehensive overview of the Group’s activities. SEE-THROUGH NET RENTAL INCOME AND PROPERTY OVERHEADS Helical’s share of the gross rental income, head rents payable and property overheads from property assets held in subsidiaries and in joint ventures are shown in the table below. Gross rental income Total gross rental income Rents payable – subsidiaries – joint ventures – subsidiaries – joint ventures 2012 £000 23,058 6,645 29,703 (418) (848) 2013 £000 25,816 6,193 32,009 (342) (802) 2014 £000 29,994 6,601 36,595 (476) (625) 2015 £000 38,332 6,098 44,430 (269) (809) 2016 £000 45,505 1,828 47,333 (80) - Property overheads – subsidiaries (3,938) (5,186) (4,328) (3,489) (2,728) Net rental income attributable to profit share partner Total property costs See-through net rental income – joint ventures (737) (826) (510) (710) (539) (788) (877) (341) (6,767) (7,550) (6,756) (5,785) 22,936 24,459 29,839 38,645 (558) (533) (3,899) 43,434 SEE-THROUGH NET DEVELOPMENT PROFITS Helical’s share of development profits from property assets held in subsidiaries and in joint ventures are shown in the table below. In parent and subsidiaries In joint ventures Total gross development profit Provision against stock See-through development profits 2012 £000 5,166 - 5,166 (4,511) 2013 £000 7,616 - 7,616 (660) 2014 £000 62,273 2,199 64,472 552 2015 £000 16,126 1,902 18,028 (452) 655 6,956 65,024 17,576 SEE-THROUGH NET GAIN ON SALE AND REVALUATION OF INVESTMENT PROPERTIES Revaluation surplus on investment properties – subsidiaries – joint ventures Total revaluation surplus 2012 £000 3,664 581 4,245 2013 £000 3,723 3,109 6,832 Net gain/(loss) on sale of investment properties – subsidiaries (376) (2,388) 2014 £000 20,714 15,710 36,424 8,611 Total net gain/(loss) on sale of investment properties (376) (2,388) See-through net gain on sale and revaluation of investment properties 3,869 4,444 8,580 45,004 – joint ventures - - (31) 2015 £000 66,904 26,134 93,038 2,480 1,091 3,571 96,609 2016 £000 30,700 3,223 33,923 (6,448) 27,475 2016 £000 53,508 2,316 55,824 2,385 41,553 43,938 99,762 HELICAL BAR PLC REPORT & ACCOUNTS 2016 ADDITIONAL INFORMATION148 APPeNdIx 1 – See-THRouGH ANAlySIS SEE-THROUGH NET FINANCE COSTS Helical’s share of the interest payable, finance charges, capitalised interest and interest receivable on bank borrowings and cash deposits in subsidiaries and in joint ventures are shown in the table below. Interest payable on bank loans and overdrafts – subsidiaries Total interest payable on bank loans and overdrafts other interest payable and similar charges Interest capitalised Total finance costs Interest receivable and similar income – joint ventures – subsidiaries – subsidiaries 2012 £000 10,808 2,223 13,031 901 2013 £000 10,445 2,269 12,714 1,658 2014 £000 14,298 3,051 17,349 2,520 2015 £000 21,055 3,644 24,699 6,264 (3,300) (2,526) (2,835) (3,641) 10,632 11,846 17,034 27,322 2016 £000 25,353 3,673 29,026 3,700 (4,940) 27,786 (5,128) (21) – subsidiaries – joint ventures (583) (12) (887) (66) (4,135) (2,480) (539) (43) See-through net finance costs 10,037 10,893 12,360 24,799 22,637 SEE-THROUGH PROPERTY PORTFOLIO Helical’s share of the investment, trading and development property portfolio in subsidiaries and joint ventures are shown in the table below. 2012 £000 2013 £000 2014 £000 2015 £000 2016 £000 Investment property – subsidiaries 326,876 312,026 493,201 701,521 1,041,100 – joint ventures 67,187 94,962 107,504 88,305 11,552 Total investment property 394,063 406,988 600,705 789,826 1,052,652 Trading and development stock – subsidiaries 99,741 92,874 98,160 92,578 – joint ventures *44,324 *76,698 *75,368 *102,715 92,035 75,904 Total trading and development stock Trading and development stock surplus Total trading and development stock surpluses Total trading and development stock See-through property portfolio – subsidiaries – joint ventures 144,065 169,572 173,528 195,293 167,939 33,107 1,435 34,542 48,837 1,028 49,865 25,719 1,760 27,479 25,230 11,013 36,243 12,412 7,000 19,412 178,607 219,437 201,007 231,536 187,351 572,670 626,425 801,712 1,021,362 1,240,003 *Trading and development stock of joint ventures includes the Group’s share of development stock of Helical Sosnica Sp. Zoo (see note 19). SEE-THROUGH NET BORROWINGS Helical’s share of borrowings and cash deposits in parent and subsidiaries and joint ventures are shown in the table below. In parent and subsidiaries – gross borrowings less than one year 59,203 39,295 2012 £000 2013 £000 2014 £000 1,275 2015 £000 45,428 – gross borrowings more than one year 203,992 220,446 374,811 552,813 Total 263,195 259,741 376,086 598,241 In joint ventures – gross borrowings less than one year 1,500 720 12,453 - – gross borrowings more than one year *54,342 *72,509 *60,134 *69,997 Total 55,842 73,229 72,587 69,997 In parent and subsidiaries Cash and cash equivalents (35,411) (36,863) (63,237) (120,993) In joint ventures Cash and cash equivalents *(4,024) *(12,757) *(20,377) *(15,348) See-through net borrowings 279,602 283,350 365,059 531,897 *Gross borrowings in joint ventures include the Group’s share of borrowings of Helical Sosnica Sp. Zoo (see note 19). 2016 £000 885 733,178 734,063 - 34,626 34,626 (74,670) (12,177) 681,842 HELICAL BAR PLC REPORT & ACCOUNTS 2016 APPENDIX 2 – SEE-THROUGH ANALYSIS RATIOS 149 Interest cover Net rental income Trading profits/(losses) development profits (before provisions) Gain/(loss) on sale of investment properties Net operating income Finance costs Interest cover Balance sheet Property portfolio Net borrowings Shareholders’ funds ePRA net asset value loan to value Gearing Gearing based on ePRA net asset value 31.03.12 £000 22,936 – 5,166 (376) 27,726 31.03.13 £000 24,459 (1) 7,616 (2,388) 29,686 31.03.14 £000 29,839 252 64,472 8,580 103,143 31.03.15 £000 38,645 2,503 18,028 3,571 62,747 31.03.16 £000 43,434 - 33,923 43,938 121,295 10,037 10,893 12,360 24,799 22,637 2.8x 2.7x 8.3x 2.5x 5.4x 572,670 279,602 253,730 294,398 49% 110% 95% 626,425 283,350 253,768 313,733 45% 112% 90% 801,712 365,059 340,527 370,062 46% 107% 99% 1,021,362 1,240,003 531,897 404,363 469,128 52% 132% 113% 681,842 486,189 546,797 55% 140% 125% HELICAL BAR PLC REPORT & ACCOUNTS 2016 ADDITIONAL INFORMATION150 APPENDIX 3 – FIVE YEAR REVIEW INCOME STATEMENTS Revenue Net rental income development profit Provisions against stock Trading profit/(loss) Share of results of joint ventures other income/(expense) Gross profit before gain/(loss) on investment properties Gain/(loss) on sale of investment properties Revaluation surplus on investment properties Impairment of available-for-sale investments 31.3.12 £000 52,968 17,876 5,166 (4,511) - 2,472 113 21,116 (376) 3,664 - Administrative expenses excluding performance related awards (7,385) Performance related awards Finance costs Finance income Movement in fair value of derivative financial instruments Convertible Bond adjustment Foreign exchange gains/(losses) Profit before tax Tax Profit after tax BALANCE SHEETS (415) (8,409) 583 (306) - (1,064) 7,408 158 7,566 31.3.13 £000 65,439 19,578 7,616 (660) (1) 3,854 (547) 29,840 (2,388) 3,723 - (8,092) (6,828) (9,577) 887 (2,573) - 17 5,009 815 5,824 31.3.12 £000 31.3.13 £000 326,876 312,026 Investment portfolio land, developments and trading properties Group’s share of investment properties held by joint ventures Group’s share of land, trading and development properties held by joint ventures 99,741 67,187 15,709 Group’s share of land, trading and development stock surpluses 34,542 Group’s share of total properties at fair value Net debt Group’s share of net debt of joint ventures Group’s share of net debt Shareholders’ funds ePRA shareholders’ funds dividend per ordinary share paid/payable dividend per ordinary share declared ePRA earnings per ordinary share ePRA net assets per share 572,670 227,784 36,409 279,602 253,730 294,398 4.90p 5.15p 3.4p 250p 92,874 94,962 23,797 49,685 626,425 222,878 38,521 283,350 253,768 313,733 5.25p 5.55p 2.4p 264p 31.3.14 £000 31.3.15 £000 31.3.16 £000 123,637 106,341 116,500 24,402 62,273 552 252 16,448 230 104,157 8,611 20,714 (88) (8,816) (17,860) (13,983) 4,135 5,312 - (501) 101,681 (14,126) 87,555 31.3.14 £000 493,201 98,160 107,504 27,165 34,233 16,126 (452) 2,503 27,497 368 80,275 2,480 66,904 (773) (10,156) (16,374) (23,678) 2,480 (8,389) (3,263) (2,061) 87,445 (12,669) 74,776 42,164 30,700 (6,448) - 50,469 20 116,905 2,385 53,508 (1,370) (10,716) (15,387) (24,113) 5,128 (6,860) 516 100 120,096 (9,745) 110,351 31.3.15 £000 31.3.16 £000 701,521 1,041,100 92,578 88,305 61,782 92,035 11,552 75,904 27,479 36,243 19,412 801,712 1,021,362 1,240,003 312,849 27,050 365,059 340,527 370,062 5.70p 6.75p 33.3p 313p 477,248 30,966 531,897 404,363 469,128 6.85p 7.25p 2.4p 385p 659,393 22,449 681,842 486,189 546,797 12.6p 8.17p 17.1p 461p HELICAL BAR PLC REPORT & ACCOUNTS 2016 APPENDIX 4 – PROPERTY PORTFOLIO 151 LONDON PORTFOLIO Address Held As Major Projects or Income Producing Description Area sq ft (NIA) Vacancy rate Shepherds Building, london W14 Investment The Bower (Ph 1), london eC1 Investment IP IP The Bower (Ph 2), london eC1 Investment MP Multi let office building. let to media companies office and retail buildings office and retail buildings undergoing refurbishment and extension 150,389 151,439 179,000 The loom, london e1 Investment MP Multi let office building with refurbishment underway 112,229 C-Space, london eC1 Investment one King Street, london W6 Investment The Powerhouse, london W4 Investment Power Road Studios, london W4 Investment Charterhouse Square, london eC1 Investment Chart House, london N1 Investment Barts Square, london eC1 Investment/ development IP IP IP IP MP IP MP office refurbishment scheme completed in october 2015 61,880 Recently refurbished office and retail building adjacent to Hammersmith Broadway Single let recording studios/office building Multi let office building with redevelopment potential 39,222 43,325 61,990 office building with scope for extension and refurbishment 43,600 Single let office building with refurbishment and extension potential 10,505 236,000 sq ft offices, 236 residential apartments and 21,000 sq ft retail/leisure development under construction 459,000 Creechurch Place, london eC3 development New building due for completion September 2016 drury lane, london WC1 development Planning consent for comprehensive refurbishment scheme comprising 68 apartments and retail 273,000 16,000 King Street, london W6 development Planning permission received for residential, office, retail and leisure scheme. due to start on site early 2017 300,000 3% - n/a 25% 25% - - 2% n/a - n/a n/a n/a n/a REGIONAL PORTFOLIO Address Held As Major Projects or Income Producing Description 1,901,579 Area sq ft (NIA) Vacancy rate In Town Retail Cardiff, The Hayes leicester Out-of-town Retail ellesmere Port Great yarmouth Harrogate Huddersfield Scarborough Sevenoaks, Kent Southend on Sea Stockport Investment Investment Investment Investment Investment Investment Investment Investment Investment Investment IP IP IP IP IP IP IP IP IP IP Prime retail parade and listed retail arcades 290,394 6.6% Town centre shop Single let retail park Single let retail park Single let retail park Retail park Retail park Retail park Retail park Single let retail park 6,060 296,454 36,258 38,771 25,290 101,491 28,970 42,490 74,954 31,803 380,027 - - - - - - - - - HELICAL BAR PLC REPORT & ACCOUNTS 2016 ADDITIONAL INFORMATION    152 APPeNdIx 3 – FIve yeAR RevIeW ReGIoNAl PoRTFolIo CoNTINued Address Held As Major Projects or Income Producing Description Industrial/Logistics Alfreton Bedford Bolton Bristol, Portbury Brownhills, Birmingham Burton-on-Trent Cannock Cannock Cardiff, Heol Billingsley Chester daventry doncaster, Aspect Way doncaster, Kirk Sandalls Gloucester Quedgley Halesowen Havant Hinckley Jarrow leighton Buzzard Milton Keynes, Mailcom Northampton Northampton Peterborough Rugby Salford Stevenage Stone, Bibby Stone, opal Way Sunderland, doxford Telford Thetford Warrington, Calver Quay Warrington, Raglan Court Wellingborough Wolverhampton yate Investment Investment Investment Investment Investment Investment Investment Investment Investment Investment Investment Investment Investment Investment Investment Investment Investment Investment Investment Investment Investment Investment Investment Investment Investment Investment Investment Investment Investment Investment Investment Investment Investment Investment Investment Investment IP IP IP IP IP IP IP IP IP IP IP IP IP IP IP IP IP IP IP IP IP IP IP IP IP IP IP IP IP IP IP IP IP IP IP IP Single let distribution centre Single let distribution centre Single let cash and carry Single let industrial centre Single let distribution centre Single let distribution centre Single let distribution centre Single let distribution centre Single let distribution centre Single let distribution centre Single let distribution centre Single let distribution centre Single let distribution centre Multi let industrial estate Single let industrial centre Single let distribution centre Single let distribution centre Single let industrial centre Multi let industrial estate Multi let industrial estate Multi let industrial estate Single let distribution centre Single let industrial centre Single let distribution centre Single let industrial centre Single let distribution centre Single let industrial centre Single let industrial centre Single let industrial centre Single let distribution centre Single let distribution centre Multi let industrial estate Single let distribution centre Single let industrial centre Single let distribution centre Single let distribution centre Area sq ft (NIA) Vacancy rate 167,954 36,023 73,433 64,003 52,368 92,715 153,665 103,050 50,684 183,119 44,658 122,591 153,547 43,239 73,088 38,914 188,242 101,476 202,674 25,282 210,383 45,356 158,000 45,045 52,726 74,373 122,301 130,537 139,130 65,225 127,256 70,594 81,342 67,570 119,600 255,714 3,735,877 - - - - - 100% - - - - - 100% - - - - - - - - - - - - - - - - - - - - - - - HELICAL BAR PLC REPORT & ACCOUNTS 2016   APPeNdIx 3 – FIve yeAR RevIeW 153 ReGIoNAl PoRTFolIo CoNTINued Address Held As Regional Offices Castle donington Cheadle Cobham Crawley Glasgow Manchester, 31 Booth St Manchester, Churchgate & lee House Investment Investment Investment Investment Investment Investment Investment Manchester, dale House Investment Reading Investment Regional Office Development Major Projects or Income Producing Description Area sq ft (NIA) Vacancy rate IP IP IP IP IP MP IP IP IP offices let to National Grid Single let office building Single let office building Single let office building Multi let office building Multi let office building to be refurbished 25,471 16,470 21,837 48,131 57,388 25,349 Multi let city centre office building with refurbishment and asset management potential 248,342 Multi let city centre office building with refurbishment and asset management potential office building let to Thames Water 42,282 35,847 - - - - 2% n/a 15% 8% - Glasgow Land Bracknell Hailsham Telford, dawley Road Crawley, Tilgate Retail Development Cortonwood Retail Park Truro, Football Club Shirley, Birmingham RETIREMENT VILLAGES development Pre-let to Scottish Power plc. Pre-sold to M&G development development development development development development development Residential land Commercial development site Residential land Commercial development site Pre-let retail park Retail park Shopping centre Address Millbrook village, exeter durrants village, Faygate Held As development development Major Projects or Income Producing Description Retirement village development Retirement village development Maudslay Park, Great Alne development Retirement village development Bramshott Place, liphook Penally Farm, liphook development development Bramshott Place Clubhouse Investment durrants village Clubhouse Investment IP IP Retirement village development Retirement village development Clubhouse at retirement village Clubhouse at retirement village 521,117 6.47% 220,000 220,000 n/a n/a n/a n/a 79,750 78,000 195,000 352,750 n/a n/a n/a n/a n/a n/a n/a n/a Units Vacancy rate n/a n/a n/a n/a n/a n/a n/a 164 156 150 151 40 n/a n/a 661 HELICAL BAR PLC REPORT & ACCOUNTS 2016 ADDITIONAL INFORMATION 154 SHAREHOLDER INFORMATION WEBSITE The report and financial statements, a list of properties held by the Group, Company presentations, press releases, the financial calendar and other information on the Group are available on our website 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. REGISTRAR All general enquiries concerning holdings of ordinary shares in Helical Bar plc should be addressed to the Company’s Registrar: Capita Asset Services The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4Tu Telephone: 0871 664 0300* Fax: 020 8639 2220 From outside the uK +44 371 664 0300 Website: www.capitaassetservices.com email: shareholderenquiries@capita.co.uk * Calls cost 12p per minute plus your phone company’s access charge. Calls outside the united Kingdom will be charged at the applicable international rate. We are open between 9.00 a.m. and 5:30 p.m., Monday to Friday excluding public holidays in england and Wales. Further information about ShareGift is available at www.sharegift. org or by writing to: ShareGift, Po Box 72253, london, SW1P 9lQ. email: help@sharegift.org. Telephone: 020 7930 3737. DIVIDENDS dividend’s declared and paid during the year to 31 March 2016 were as follows: Dividend Record date Payment date 2014/15 Final 3 July 2015 31 July 2015 2015/16 Interim 4 december 2015 30 december 2015 Amount 5.15p 2.30p 2015/16 2nd Interim 11 March 2016 4 April 2016 5.15p dividend payment dates in 2016 will be as follows: E-COMMUNICATION Shareholders and all interested parties may choose to be alerted about updates to the Financial Reports, Results, Press Releases and event Calendar sections of the Group’s website by subscribing to the Alert Service in the ‘News’ area of our website. Dividend Record date Payment date 2015/16 Final 1 July 2016 29 July 2016 2016/17 Interim december 2016 december 2016 Amount 0.72p PAYMENT OF 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 dividend confirmation 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 dRIP, key dates of forthcoming dividends can be found in the online financial calendar in the ‘Investors’ area at www.helical.co.uk. SHARE DEALING SERVICE An online and telephone share dealing service is available to our shareholders through Capita deal. For further information on this service or to buy and sell shares online, please visit www.capitadeal. com. For telephone dealing, please call 0371 664 0445. Calls cost 12p per minute plus your phone company’s access charge. Calls outside the united Kingdom will be charged at the applicable international rate. lines are open between 8.00 a.m. - 4.30 p.m. Monday to Friday excluding publics holidays in england and Wales. Unsolicited investment advice – warning to shareholders Many companies have become aware that their shareholders have received unsolicited phone calls or correspondence concerning investment matters. These are typically from overseas-based ‘brokers’ who target uK shareholders offering to sell them what often turn out to be worthless or high risk shares in uS or uK investments. They can be very persistent and extremely persuasive. It is not just the novice investor who has been duped in this way; many of the victims had been successfully investing for several years. Shareholders are advised to be very wary of any unsolicited advice, offers to buy shares at a discount or offers of free reports into the Company. If you receive any unsolicited investment advice: • Make sure you get the correct name of the person and organisation. • Check that they are properly authorised by the FCA (Financial Conduct Authority) before getting involved. you can check at www.fca.org.uk/consumers. • Report the matter to the FCA either by calling 0800 111 6768 or by completing an online form at: www.fca.org.uk/consumers/scams/investment-scams/ share-fraud-and-boiler-room-scams/reporting-form. If you deal with an unauthorised firm, you would not be eligible to receive payment under the Financial Services Compensation Scheme. Also keep in mind that some fraudsters use the name of genuine firms or individuals on the FCA Register to suggest that they are legitimate. However, authorised firms are unlikely to contact you out of the blue offering to buy or sell shares. SHARE PRICE INFORMATION The latest information on the Helical Bar plc share price is available on our website www.helical.co.uk. REGISTERED OFFICE 5 Hanover Square, london, W1S 1HQ Registered in england and Wales No. 156663. HELICAL BAR PLC REPORT & ACCOUNTS 2016 GLOSSARY OF TERMS 155 Average unexpired lease term The average unexpired lease term expressed in years. Capital value (PSF) Company or Helical EPRA earnings per share The open market value of the property divided by the area of the property in square feet. Helical Bar plc. 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, trading property losses/profits, impairment of available-for-sale investments and fair value movements on derivative financial instruments, on an undiluted basis. details of the method of the calculation of the ePRA earnings per share are available from ePRA. EPRA net assets per share 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 and development properties in accordance with the best practice recommendations of ePRA. EPRA triple net asset value per share 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. Diluted figures Reported amounts adjusted to include the effects of potential shares issuable under the employee share option schemes. Earnings per share (EPS) Profit after tax divided by the weighted average number of ordinary shares in issue. EPRA Equivalent yield european Public Real estate Association. 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 in arrears. Estimated rental value (ERV) The market rental value of lettable space as estimated by the Group’s valuers at each balance sheet date. Gearing Group Initial yield IPD Net assets value per share (NAV) Net gearing Passing rent Reversionary yield See-through See-through net asset value gearing Total property return The normal value of Group borrowings expressed as a percentage of net assets Helical Bar plc and its subsidiaries. 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. The annual gross rental income excluding the net effects of straightlining lease incentives. The income/yield from the full estimated rental value of the property on the market value of the property grossed up to include purchaser’s costs, capital expenditure and capitalised revenue expenditure. The net rental income, net finance cost, property portfolio and net borrowings of the Group and the Group’s share in its Joint ventures. The see-through net borrowings expressed as a percentage of ePRA net asset value. The total of net rental income, trading and development profits and net gain on sale and revaluation of investment properties on a See-through basis. Total shareholder return (TSR) 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. True equivalent yield 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. Unleveraged returns Total property gains and losses (both realised and unrealised) plus net rental income expressed as a percentage of the total value of the properties. HELICAL BAR PLC REPORT & ACCOUNTS 2016 ADDITIONAL INFORMATION156 FINANCIAL CALENDAR 2016 30 June 2016 1 July 2016 25 July 2016 29 July 2016 ex-dividend date for final ordinary dividend Record date for final ordinary dividend Annual General Meeting Final ordinary dividend payable 24 November 2016 (provisional)1 Half year Results and interim ordinary dividend announced December 2016 (provisional)2 December 2016 (provisional)2 ex-dividend date for interim ordinary dividend Registration qualifying date for interim ordinary dividend 2017 May 2017 Notes Announcement of Full year Results to 31 March 2017 1 The announcement date of the Half year Results will be confirmed in october 2016 2 dates for the potential interim dividend will be confirmed in the Half year Results Announcement ADVISORS Registrars Bankers Joint stockbrokers Auditors Merchant bankers Corporate solicitors CONTACT DETAILS Helical Bar plc Registered office 5 Hanover Square london W1S 1HQ 020 7629 0113 email: info@helical.co.uk www.helical.co.uk Capita Asset Services Aviva Commercial Finance limited Barclays Bank PlC deutsche Pfandbriefbank AG HSBC Bank PlC The Royal Bank of Scotland PlC Santander uK PlC lloyds Bank PlC J.P. Morgan Cazenove Numis Securities limited Grant Thornton uK llP lazard & Co limited Ashurst llP HELICAL BAR PLC REPORT & ACCOUNTS 2016 Design: SG Design {sg-design.co.uk} Printed by Park Communication on FSC® certified paper. Park is an EMAS certified company and its Environmental Management System is certified to ISO 14001. 100% of the inks used are vegetable oil based, 95% of press chemicals are recycled for further use and, on average 99% of any waste associated with this production will be recycled. This document is printed on Colorplan and Novatech Matt; both papers contain 100% virgin fibre sourced from well-managed, responsible, FSC® certified forests. The pulp is bleached using both elemental chlorine free (ECF) and totally chlorine free (TCF) processes. 6 1 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 HELICAL BAR PLC Registered Office 5 Hanover Square London W1S 1HQ T: 020 7629 0113 F: 020 7408 1666 E: info@helical.co.uk www.helical.co.uk 

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