1st Quarter Results

WORKSPACE GROUP PLC 16 August 1999 Workspace Group PLC - Quarterly Report for the three months ended 30 June 1999 WORKSPACE REPORTS CONFIDENT FIRST QUARTER Workspace Group PLC, today announces its results for the three month period to 30th June 1999. The Company provides flexible workspace for small and growing businesses in London, the South East and the Midlands. In July, Workspace acquired an £81 million portfolio of properties in London and the South East. * Acquisition of £81 million Tonex portfolio completed in July. * Rental growth continuing, especially in London. * Core portfolio occupancy increased to 91.1% (89.3%). * Earnings per share at 8.7p for the quarter increased by 20.8% over the corresponding period in 1998. * Net asset value per share at 30 June rose to £6.92 (31 March 1999: £6.83). * Pre tax profits grew by 16% to £1.8 million for the quarter compared with the same period in 1998. Commenting Alan Porter, Chairman, added, 'This has been an important period for Workspace. The Tonex acquisition provides considerable scope for growth. Whilst completing this deal, we maintained our focus on day to day issues such as increasing occupancy and, where possible, moving rent levels ahead. 'Given that we have only controlled the Tonex portfolio for a few days, we are delighted with progress to date. Lettings are moving ahead strongly and I am confident that our purchase will prove very worthwhile. 'We are focused upon regions - London, the South East and the Midlands - where we believe growth will be strong and the market active. Looking to the future, I believe that our growth prospects are excellent.' Date: 16 August 1999 For further information contact: Alan Porter, Chairman, Workspace Group PLC 0171-247-7614 Harry Platt, MD, Workspace Group PLC 0171-247-7614 Jonathan Gillen, City Profile Group 0171-726-8588 Operating and Financial Review Review of Activities The Group had a good first quarter, with consistent demand for space and lower interest charges reflected in pre-tax profits which increased by more than 16% compared with the first quarter in 1998/99. A decrease in the estimated effective rate of Corporation Tax helped increase earnings per share by 20.8%. The rent roll increased during the quarter by 2.4% from £17.36m to £17.78m and occupancy of the core portfolio improved from 89.3% to 91.1%. Overall occupancy including development/refurbishment schemes fell slightly from 87.3% to 86.5%. Following the end of the quarter on 23 July the Group concluded its purchase of a portfolio of 23 estates, primarily in London for £81.2 million (with £6.5 million deferred). This, together with the repayment of £40 million existing debt, was financed through a new £122 million debt facility arranged by WestLB. During the quarter, the Group was pleased to win, at the annual British Insurance Awards, the 'Broker Initiative of the year' award for its specialist tenants' insurance scheme, Workspace Plus. The scheme currently provides insurance cover for over 300 tenants, increasing monthly. Acquisitions and Disposals During the quarter the Group acquired the Sugar House Business Centre in London E15. This property directly adjoins the Group's Three Mills Estate, Stratford, E3 and, with improvements and the introduction of media-based businesses into it, has good growth prospects. The Group sold at book value one smaller property during the quarter, the Westgate Centre, Hackney, E8 where growth prospects were considered to be limited. Name of Property Description Purchase Annual Sale Price Income ______________________________________________________________________________ Acquisition: Sugar House Freehold (20 units; £385,000 £45,112 Business 23,120 sq. ft) Centre, Sugar business centre House Lane, London E15 Disposal: Westgate Leasehold (17 units; £410,000 £57,373 Business 5,510 sq.ft) single Centre storey light London, E8 industrial estate On the night of 18/19 July, the Group's Ferry Lane, Rainham, industrial property was destroyed by fire. The property was fully insured, including two years' loss of rent, and will be re-built to best current standards. New Development In April work commenced on the Group's £1.2 million 20-unit 19,641 sq. ft light industrial development at Wilton Road, Camberley. Completion is expected end-November 1999. Cash Flow and Financing There was a net cash inflow of £0.25 million (1998: £0.72 million) during the period. Net cash flow from operating activities was an inflow of £2.95 million for the quarter (1998: £3.56 million). Capital expenditure in the quarter net of disposal proceeds totalled £5.91 million (1998: £8.31 million). At the quarter end gearing stood at 66%. Occupancy and Trading Statistics The Group's key statistics relating to its trading operations are given in the table below. 30 June 31 March 1999 1999 Number of Estates 73 73 Total Floorspace at beginning of period 3,824,913 Adjustments: acquisitions 23,118 disposals (5,510) developments/adjustments 33,935 Total Floorspace at end of period 3,876,456 3,824,913 of which: Available for letting 3,724,773 Undergoing development/refurbishment 151,683 3,876,454 Lettable Floorspace of core portfolio 2,839,194 2,734,421 Lettable Units (number) 2,717 2,692 Annual Rent Roll of Occupied Units 17,777,821 17,361,828 Average Rent (£/sq ft) 5.34 5.20 Average Rent of Core Portfolio (£/sq ft) 6.19 5.99 Average Rent of Acquisitions (£/sq ft) 2.99 Occupancy overall 86.45% 87.31% Occupancy of Core Portfolio 91.11% 89.31% Occupancy of Acquisitions 95.07% Comparisons of overall occupancy and rent roll are distorted by acquisitions, disposals and transfers. The 'core portfolio' is defined as those properties that have been held throughout the quarter and which are not subject to refurbishment/redevelopment programmes (the properties subject to such programmes in the quarter were Three Mills, Kingsland Viaduct, 1-10 Union Street and Wilton Road, Camberley). In common with previous reports, values relating to open storage land (Raynes Park and Redhill) have been excluded in calculating areas, occupancy and rental levels. Current Trading Demand for space remains strong, with rents continuing to improve especially in London. Underlying growth prospects for the year ahead are good. The remainder of the year will benefit from the positive impact of the Group's major new portfolio acquisition, completed on 23 July. There will be some exceptional costs to be taken in the first half arising from the re- organisation of the Group's debt. Unaudited Consolidated Profit and Loss Account for the 3 months ended 30 June 1999. 3 months ended 30 June 1999 1998 £000 £000 ______________________________________________________________________________ Turnover - continuing operations 5,601 5,450 Rent payable and direct costs (1,487) (1,336) ______________________________________________________________________________ Gross profit 4,114 4,114 Administrative expenses (925) (857) ______________________________________________________________________________ Operating profit - continuing operations 3,189 3,257 Deficit on Disposal of Investment Property (4) (19) Interest receivable 26 68 Interest payable (1,399) (1,744) ______________________________________________________________________________ Profit on ordinary activities before taxation 1,812 1,562 Taxation on profit on ordinary activities (453) (422) ______________________________________________________________________________ Profit attributable to shareholders 1,359 1,140 Dividends - - ______________________________________________________________________________ Retained for the period 1,359 1,140 ============================================================================== Basic Earnings per share 8.7p 7.2p Diluted Earnings per share 8.7p 7.2p Other than the profit for the period there were no other recognised gains or losses during the period (1998 - nil). Unaudited Cash Flow Statement for the 3 months ended 30 June 1999 3 months ended 30 June 1999 1998 £000 £000 ______________________________________________________________________________ Net cash inflow from operating activities 2,947 3,562 Return on investment and servicing of finance (1,088) (1,367) Taxation (218) (193) Capital expenditure (net) (5,912) (8,310) Equity dividends paid - - ______________________________________________________________________________ Net cash outflow before use of liquid resources and financing (4,271) (6,308) Management of liquid resources 1,569 2,575 Financing 2,949 4,453 ______________________________________________________________________________ Net cash inflow 247 720 ______________________________________________________________________________ Reconciliation of net cash flow to movement in net debt Increase in cash 247 720 Increase/(decrease) in liquid resources (1,569) (2,575) Cash inflow from (increase)/decrease in debt (2,949) (4,453) ______________________________________________________________________________ Changes in debt result from cash flows (4,271) (6,308) ______________________________________________________________________________ Net debt at 1 April (68,457) (70,436) Net debt at 30 June (72,728) (76,744) ============================================================================== Consolidated Balance Sheet Unaudited Audited 30 June 1999 31 March 1999 £000 £000 ______________________________________________________________________________ Fixed assets Tangible assets Investment properties 187,577 185,978 Other fixed assets 1,198 1,179 Investment in own shares 999 1,024 ______________________________________________________________________________ 189,774 188,181 ______________________________________________________________________________ Current assets Debtors 6,491 2,514 Investments 763 2,332 Cash at bank and in hand 3 2 ______________________________________________________________________________ 7,257 4,848 Creditors: amounts falling due within one year loans and overdrafts (480) (4,726) others (13,939) (13,983) ______________________________________________________________________________ Net current liabilities (7,162) (13,861) ______________________________________________________________________________ Total assets less current liabilities 182,612 174,320 Creditors: amounts falling due after more than one year loans (72,799) (65,866) ______________________________________________________________________________ 109,813 108,454 ============================================================================== Capital and reserves Called up share capital 1,588 1,588 Share premium account 39,668 39,668 Revaluation reserve 56,139 56,043 Profit and loss account 12,418 11,155 ______________________________________________________________________________ Shareholders' funds - equity interests 109,813 108,454 ============================================================================== Net asset value per share £6.92 £6.83 ============================================================================== Movement in shareholders' funds Profit for the financial period 1,359 6,536 Dividends - (2,989) ______________________________________________________________________________ 1,359 3,547 Issue of Shares - 2 Share premium account - 17 Revaluation reserve - increase - 21,843 ______________________________________________________________________________ Net movement in shareholders' funds for the financial period 1,359 25,409 Shareholders' funds as at 1 April 1999/1998 108,454 83,045 ______________________________________________________________________________ Shareholders' funds as at 30 June/31 March 1999 109,813 108,454 ============================================================================== Notes to the Quarterly Results 1. Basis of Preparation The unaudited financial information contained in this quarterly report does not comprise statutory accounts within the meaning of Section 240 of the Companies Act 1985. The statutory accounts for the year ended 31 March 1999 included an unqualified report of the auditors. The Group's unaudited quarterly accounts for the period ended 30 June 1999 have been prepared on the basis of the accounting policies set out in the Annual Report and Accounts for the year ended 31 March 1999 3 Months ended 30 June 1999 1998 2. Segmental Analysis £000 £000 ============================================================================== Rental Income 4,464 4,375 Service charge and other recoveries 934 908 Fees, commissions, and sundry income 203 167 ============================================================================== 5,601 5,450 ============================================================================== 3 Months ended 30 June 1999 1998 £000 £000 3. Interest Payable ============================================================================== Convertible loan stock and debenture stock interest 662 662 Mortgage interest 788 1,182 Bank and other interest 97 58 Development interest capitalised (148) (158) ============================================================================== Charged to profit and loss account 1,399 1,744 ============================================================================== 4. Taxation The taxation charge for the three months ended 30 June 1999 is based on the estimated effective tax rate for the year ending 31 March 2000 of 25% (1998 estimated: 27%). The charge has increased from the effective tax rate of 23.8%, excluding property disposals for the year ended 31 March 1999 because the benefits of the recovery of ACT previously written off have come to an end. 5. Earnings Per Share and Net Assets Per Share Earnings per share have been calculated by dividing the profit after tax for each period attributable to shareholders by the weighted average number of ordinary shares in issue during the period. Net assets per share have been calculated by dividing net assets at the end of each period by the number of ordinary shares in issue at that time. 6. Valuation No valuation of investment properties has been carried out at 30 June 1999. The valuation shown in the unaudited accounts is based on the independent valuation at 31 March 1999, plus additions at cost less disposals at book value. 7. Creditors Creditors falling due within one year include tenants' deposits of £1.72 million (31 March 1999: £1.66 million) and deferred rental and service charges of £2.42 million (31 March 1999: £2.34 million). 8. Financial Instruments In accordance with the requirements of FRS 13, an assessment of the fair value of the Group's financial instruments held for financing purposes has been undertaken as at 30 June 1999. The results are summarised as follows: Book Value Fair Value Difference £ Million £ Million £ Million ______________________________________________________________________________ Short term borrowings and current part of long term borrowings (0.7) (0.7) - Long term borrowings (73.2) (84.3) (11.1) Interest rate Swap and Cap 0.4 (0.1) (0.5) ______________________________________________________________________________ (73.5) (85.1) (11.6) ============================================================================== This represents 73.1 pence per issued ordinary share and if applied to net asset value per share at 30 June 1999 would reduce the latter to £6.19. However, the Group has no obligation or present intention to repay its Debenture and Convertible borrowings other than at maturity, when they will be repaid at par. Cash outflows arising from these borrowings will be limited to the future fixed interest payments and redemption at par. These outflows are unaffected by the notional market or fair values referred to above. 9. Copies of this statement will be dispatched to shareholders on 16 August 1999 and will be available from the Group's registered office at Magenta House, 85 Whitechapel Road, London, E1 1DU from 9.00am on that day. Directors, Officers and Advisers The Business Workspace Group is a specialised property investment company devoted to the provision of small unit light industrial, studio and office workspace for rent to new and emerging businesses in Greater London, the Home Counties and the Midlands. Directors Alan R Porter FCA, IPFA (Chairman) Alan H Cherry MBE, FRICS, FSVA, Hon MRTPI (Deputy Chairman)* Harry Platt MA, MRTPI (Managing Director) Madeleine Carragher FRICS, (Operations Director) J Patrick Marples ARICS (Property Director) Phillip B Rhodes FCA* R Mark Taylor BSc, FCA (Finance Director) *Non-executive and members of Remuneration and Audit Committees Secretary R Mark Taylor BSc, FCA Senior Nirmal Chandra Saha MCOM, MBA, FCMA Management (Divisional Director, Finance) Simon Taylor, FRICS (Divisional Director, Midlands) Registered Magenta House Office and 85 Whitechapel Road Headquarters London E1 1DU Tel: 0171 247 7614 Fax: 0171 247 0157 Financial WestLB Panmure Limited Advisors and New Broad Street House Stockbrokers 35 New Broad Street London EC2M 1SQ Tel: 0171 638 4010 Fax: 0171 588 5297 Registrars Computershare Services Plc PO Box 82 Caxton House Redcliffe Way Bristol BS99 7NH Tel: 0117 930 6522 Fax: 0117 930 6534

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