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Helical builds up firepower

Debt levels are down, and there are just two developments to complete
November 21, 2018

London and Manchester-focused office landlord Helical (HLCL) spent the six months to September positioning itself to take advantage of development opportunities as they arise. Asset sales brought in £155m, and after the half-year it also completed the sale of the Shepherds Building for £125.2m.

IC TIP: Hold at 320p

This has allowed it to reduce debt, with the loan to value ratio coming down from 41.4 per cent a year earlier to 29.6 per cent. Inevitably, rental income was lower because of the sales, falling from £18m to £11.7m. However, there is considerable reversionary value within the portfolio, and together with rental income from current developments, contracted uplifts and rent from available unoccupied space, rental income could reach £53.4m.

As well as securing 179,364 square feet (sq ft) of new office lettings in London, Helical has just two development projects to complete, both of which will be finished in the next year.

Strong demand for office space in Manchester continued, with population growth from 2002 to 2015 reaching 149 per cent, the largest increase in any regional city. Helical’s largest asset is the Churchgate and Lee House development, which comprised 243,518 sq ft of multi-let offices. This was 64 per cent let when acquired in 2014, and following refurbishment is now 97 per cent let, with the remaining 3 per cent under refurbishment.

Analysts at Peel Hunt are forecasting adjusted net asset value (NAV) at the March year-end of 505.6p, up from 468.2p a year earlier.

HELICAL (HLCL)   
ORD PRICE:320pMARKET VALUE:£382m
TOUCH:316-320p12-MONTH HIGH:399pLOW: 291p
DIVIDEND YIELD:3.0%TRADING PROP:£125m
DISCOUNT TO NAV:31%   
INVESTMENT PROP:£776m*NET DEBT:67%
Half-year to 30 SepNet asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20174351.20.32.5
201846329.121.82.6
% change+6+2311+7167+4
Ex-div:29 Nov   
Payment:31 Dec   
*Includes joint ventures