Helical : Annual Report & Accounts 2023

Highlights

Highlights 2023

Operational highlights

Disposals of £233m (our share £213m) achieved at 3.7% above book value

Strategic Report

Financial highlights

9.4p

EPRA earnings per share¹

2022: 5.2p

11.75p+5.4%

Earnings and Dividends

• IFRS loss of £64.5m (2022: profit of £88.9m).
• IFRS basic loss per share of 52.6p (2022: earnings of 72.8p).
• Final dividend proposed of 8.70p per share (2022: 8.25p), an increase of 5.5%.

• See-throughTotal Property Return1 of -£51.4m (2022: £89.5m):
• • Group's share1 of net rental income increased 7.2% to £33.5m (2022: £31.2m).
  • Net loss on sale and revaluation of investment properties of £88.1m (2022: gain of £51.7m).
  • Development profits
    of £3.2m (2022: £6.6m).

Continued lettings momentum delivering £5.4m (our share £3.4m) of contracted rent at a 6.9% premium

• In the year, we completed nine new lettings totalling 65,550 sq ft, delivering contracted rent of £5.4m (our share £3.4m) at a 6.9% premium to 31 March 2022 ERVs.

Chief Executive's statement

Well positioned with 790,000 sq ft development pipeline

Overview

The central London office market has suffered a fall in capital values over the last year and Helical has not been immune to these market movements, with our portfolio experiencing a valuation decline of 10.1% (on a like-for-like basis).

While previous valuation falls have been caused by recessions following periods of economic exuberance leading to an oversupply of new office space, the current decline in values reflects a number of differing cyclical and structural factors.

The economy has been affected by multiple geopolitical and economic events which have generated high levels of inflation and a steep rise in interest rates. We have had ultra-low interest rates since 2009 and with the base rate rising from 0.10% in December 2021 to the current 4.50%, the financing of real estate has become significantly more expensive. The rise in interest rates has also led to a repricing of government bonds across the market. Consequently, valuation yields have risen.

In addition, structural changes are impacting the office market, with the latest sustainability criteria challenging the suitability of older office buildings.

Tenant demand for the best, newly developed or refurbished buildings at the forefront of sustainability with top quality amenities is strong, and seeing rising rental values."

Strategic Report

Our pipeline

The Group seeks to grow the business by realising surpluses from its recently developed investment assets, and reinvesting that recycled equity into new opportunities.

In the year to 31 March 2023, the judicious sales of Kaleidoscope, EC1 and Trinity, Manchester realised revaluation surpluses of over £53m and reduced our gearing level from an LTV at 31 March 2022 of 35.0% to 27.5% at 31 March 2023.

Being selected by Transport for London ("TfL") as their joint venture partner for the Platinum Portfolio was a significant milestone, boosting our development pipeline by almost 600,000 sq ft, with the potential for additional schemes to be added to the joint venture in the future. This collaboration with TfL, one of London's largest landowners, is an endorsement of the Helical brand and recognises our track record of producing high quality, successful developments across central London over many years.

With 100 New Bridge Street, EC4, our 192,000 sq ft office scheme, due to start later this year and the three TfL schemes anticipated to start over the period from 2024 to 2026, this pipeline, our most significant for a number of years, is scheduled to deliver best-in-class office space to an undersupplied market from 2025 to 2029.

Results for the year

The loss for the year to 31 March 2023 was £64.5m (2022: profit of £88.9m) with a see-through Total Property Return of -£51.4m (2022: +£89.5m). See-through net rental income increased by 7.2% to £33.5m (2022: £31.2m) while developments generated see-through profits of £3.2m (2022: £6.6m). The see-through net loss on sale and revaluation of the investment portfolio was £88.1m (2022: net gain of £51.7m).

Total see-through net finance costs reduced to £12.0m (2022: £19.7m), reflecting a lower level of debt and much lower debt cancellation costs of £0.1m (2022: £5.9m). An increase in expected future interest rates led to a £12.8m credit (2022: £18.0m) from the valuation of the Group's derivative financial instruments. Recurring see-through administration costs were 4.2% higher at £10.3m (2022: £9.9m), with performance related awards, reflecting the results for the year, reduced to £2.7m (2022: gain of £6.0m) and National Insurance on these awards of £0.3m (2022: £1.2m).

The election to become a REIT from 1 April 2022 has resulted in a £nil (2022: credit of £16.0m) tax charge for the year.

The IFRS basic loss per share was 52.6p (2022: earnings of 72.8p)

and EPRA earnings per share were 9.4p (2022: 5.2p).

On a like-for-like basis, the investment portfolio fell in value by 10.1% (7.7% including purchases and gains on sales). The see-through total portfolio value reduced to £839.5m (31 March 2022: £1,097.3m), reflecting the revaluation loss and the sales of Kaleidoscope, EC1, 55 Bartholomew, EC1 and Trinity, Manchester in the year.

The total return of our property portfolio, as measured by MSCI, was -5.6% (2022: 10.7%), which outperformed the Central London Offices Total Return Index of -8.6%.

The portfolio was 83.9% let at 31 March 2023 and generated contracted rents of £39.0m (2022: £46.4m), equating to an average of £60 psf. This increases to £48.9m on the letting of currently vacant space as we move towards capturing the portfolio ERV of £60.4m (2022: £67.1m). The Group's contracted rent has a Weighted Average Unexpired Lease Term ("WAULT") of 5.0 years.

The Total Accounting Return ("TAR"), being the growth in the IFRS net asset value of the Group, plus dividends paid in the year, was -9.4% (2022: 15.0%). Based on EPRA net tangible assets, the TAR was -12.1% (2022: 10.2%). EPRA net tangible assets per share fell by 13.8% to 493p (31 March 2022: 572p), with EPRA net disposal value per share falling by 11.1% to 490p (31 March 2022: 551p).

6

Balance Sheet strength and liquidity

The Group has a significant level of liquidity with see-through cash and unutilised bank facilities of £244.2m (31 March 2022: £147.0m) to fund capital works on its portfolio and future acquisitions.

At 31 March 2023, the Group had £31.9m of cash deposits available to deploy without restrictions and a further £13.7m of rent in bank accounts available to service payments under loan agreements, cash held at managing agents and cash held in joint ventures. In addition, the Group held rental deposits from tenants of £9.1m. Furthermore, the Group had £189.5m of loan facilities available to draw on.

The see-through loan to value ratio ("LTV") reduced to 27.5% at the Balance Sheet date (31 March 2022: 35.0%) and our see-through net gearing, the ratio of net borrowings to the net asset value of the Group, reduced to 38.0% (31 March 2022: 56.5%) over the same period.

At the year end, the average debt maturity on secured loans, on a see- through basis, was 2.9 years (31 March 2022: 3.0 years). The average cost of debt, on a see-through basis, was 3.4% (31 March 2022: 3.2%).

Dividends

Helical is a capital growth stock, seeking to maximise value by successfully letting comprehensively refurbished and redeveloped property. Once stabilised, these assets are either retained for their long-term income and reversionary potential or sold to recycle equity into new schemes.

This recycling leads to fluctuations in our EPRA earnings per share, as the calculation of these earnings excludes capital profits generated from the sale and revaluation of assets. As such, both EPRA earnings and realised capital profits are considered when determining the payment of dividends.

In the year to 31 March 2023, EPRA earnings per share increased by 80% from 5.2p last year to 9.4p this year. The sales of Kaleidoscope, EC1, 55 Bartholomew, EC1 and Trinity, Manchester, during the year realised capital profits of £53.4m, transferred into distributable retained earnings.

In the light of the increased EPRA earnings and the capital profits realised in the year, the Board will be recommending to Shareholders a final dividend of 8.70p per share, an increase of 5.5% on last year. If approved by Shareholders at the 2023 AGM, the total dividend for the year will be 11.75p, up 5.4% on 2022.

This final dividend, if approved, will be paid out of distributable reserves generated from the Group's activities. Following its conversion to a UK REIT, dividends payable by Helical will comprise

1. Property Income Distribution ("PID") from the operations that fall under the REIT regime, and a dividend from those operations that fall outside the REIT regime. The PID, for the year to 31 March 2023, will be 5.70p, with the balance of the final dividend of 3.00p representing an additional ordinary dividend.

Sustainability

Sustainability remains at the heart of our business, both at a corporate and asset level.

We have made good progress in the year and continue to perform strongly against the targets we have set. Despite increasing occupancy levels, energy intensity across our like-for-like portfolio fell by 8% during the year to an average of 129 kWh/m2, on track for our 2030 net zero carbon target of 90kwh/m2.

The JJ Mack Building, EC1 completed in September 2022, at which point we have accounted for 100% of the associated upfront embodied carbon emissions in our reporting. The building achieved an embodied carbon intensity of 741 kgCO2e/m2, on track for our 2030 net zero carbon target of 600 kgCO2e/m2. This considerable reduction was achieved through a combination of using materials with a high recycled content, adopting modern methods of construction

Helical plc - Annual Report and Accounts 2023

Sustainability and net zero carbon

We continue to make good progress against the targets we set out in our sustainability strategy "Built for the Future" and our aim to become a net zero carbon business by 2030. With the publication of our "Net Zero Carbon Pathway" in May 2022, our progress towards rapidly decreasing our emissions across our development activities and existing portfolio has been recognised by our improved GRESB status.

We have been ranked the number one company in the UK Office Listed sector, scoring 88% and receiving a 5 Star GRESB rating in the annual sustainability performance index for our standing investment properties. Alongside this, we have also received a 5 Star GRESB rating for our developments, scoring 94%.

For our sustainability reporting, we achieved a Gold Award for the second consecutive year, for reporting in accordance with EPRA's European Sustainability Best Practice Recommendations ("sBPR"). The EPRA sBPR is intended to raise the standards and consistency of sustainability reporting for listed real estate companies across Europe.

We also improved our CDP score to B, up from C, demonstrating our rigorous approach to assessing climate change risks and opportunities and our transparent disclosures.

Our portfolio is well placed in terms of energy efficiency, with 99% of our assets (by value) already compliant with the proposed legislative requirement that all rented commercial buildings achieve a minimum EPC rating of B by 2030. Market research suggests that only c.25% of commercial assets are currently compliant, with significant capital outlay likely to be required to take non-compliant buildings up to the minimum standard. Likewise, 99% of our assets (by value) hold a BREEAM certification, with 88% being "Outstanding" or "Excellent" (excluding 100 New Bridge Street, EC4 which is to be refurbished).

The JJ Mack Building, EC1 was the UK's first commercial building to be awarded BREEAM "Outstanding" at the design stage under the 2018 regulations. On 30 September 2022, the building achieved practical completion and we anticipate the "Outstanding" rating will be retained at the post construction assessment stage. Through the use of recycled materials, Earth Friendly Concrete and modern methods of construction, we have reduced embodied carbon to 42% below the current "Business as Usual" RIBA target. Operationally, it is estimated that carbon emissions will be c.53% lower than the regulated Targeted Emissions Rate as defined by Part L of the Building Regulations (2013). This reduction is a result of sustainable, intelligent and renewable technologies designed into the building alongside connection to the Citigen District Energy Network. Our embodied carbon from construction is in the process of being offset and, once completed, will provide us with our first net zero carbon building.

Going forward, we will continue to focus on minimising embodied carbon in our new buildings and, where we can, delivering "carbon friendly new build" schemes, such as the planned redevelopment of 100 New Bridge Street, EC4 where we will re-use or recycle large portions of the existing building and look to incorporate the existing structural frame to minimise the carbon impact.

• See page 54

Helical plc - Annual Report and Accounts 2023

With an experienced management team, a substantial development pipeline, no legacy assets and historically low gearing levels, Helical is well positioned to capitalise on the structural trends impacting the office sector."

and embedding circular economy principles into the design and delivery of the project. The building received an EPC A rating and is anticipated to achieve a NABERS 5 Star for the commitment to excellent energy efficiency in operation. Furthermore, the building received BREEAM "Outstanding" at the design stage, which is expected to be retained upon final certification.

We continue to perform well across the industry benchmarks

we participate in. We received a 5 Star GRESB rating for both our standing investments and developments and retained our Green Star status. For our sustainability reporting, we were granted a Gold Award for the second consecutive year, for reporting in accordance with EPRA's European Sustainability Best Practice Recommendations (sBPR). We were also pleased to receive an improved CDP score of B, further demonstrating our commitment to best practice disclosure and enhanced climate change risk assessment.

Our portfolio is market leading in terms of energy efficiency, with

99% of our assets (by value) already compliant with the proposed legislative requirement that all rented commercial buildings achieve a minimum EPC rating of B by 2030.

Looking forward, we plan to define our approach to carbon offsetting and uphold our commitment to deliver all future developments as net zero carbon.

The opportunity

London remains a leading world city and, barring economic or geopolitical catastrophe, there will be ongoing demand for best-in- class office buildings from occupiers who require well located, highly sustainable offices with good amenities, which are essential in attracting and retaining the top talent. There remains a shortage of this best-in- class newly refurbished or redeveloped office space in central London, enabling landlords to command premium rents, a dynamic that is likely to persist for the rest of this decade as the market plays catch up.

With an experienced management team, a substantial development pipeline, no legacy assets and historically low gearing levels, Helical is well positioned to capitalise on the structural trends impacting the office sector.

Finally

It is with great sadness that we record the death on 7 April of Nigel MacNair-Scott. Nigel was Finance Director of Helical Bar plc from 1986 to 2013 after which he became Chairman, retiring in 2016. Nigel was the other half of the duo with Michael Slade who jointly turned Helical from producing steel rebar for the construction industry into

1. highly successful property company. Nigel's financial acumen and general shrewdness, coupled with Mike's property skills, enabled Helical to survive the major downturns of the early 1990s and the Global Financial Crisis in 2008-2009 and prosper in subsequent years, becoming a well-known brand in the property sector.

Gerald Kaye

Chief Executive

23 May 2023

7

Strategic Report