3rd Quarter & 9 Months Results

Workspace Group PLC 14 February 2000 WORKSPACE GROUP PLC WORKSPACE REPORTS STRONG DEMAND FOR BUSINESS SPACE AS NEW PORTFOLIO PERFORMS WELL Workspace Group PLC ('Workspace'), today announces its third quarter results for the nine months ended 31 December 1999. Workspace provides 5.7 million sq. ft of flexible accommodation to over 3000 small and medium sized enterprises ('SMEs') in London, the South East and the Midlands. * Pre-tax profits up 40% to £2.7 million for the quarter (1998 Q3: £1.9 million) - up 25% to £6.3 million for the nine month period * * Earnings per share up 24.2% to 28.7p for the nine month period * * Turnover increased 46% to £8.6 million (1998 Q3: £5.9m) * Net Asset Value per share rose to £7.68 (30 September 1999: £7.65) * Rent roll increased by 44% to £25.01million (31 March 1999: £17.4m) * £81m Tonex portfolio acquired in July performing very well * Refinancing and securitisation programme on track * Dr Chris Pieroni appointed as non-executive director * excluding profits arising on sale of properties and exceptional financing costs Harry Platt, Chief Executive of Workspace, commented; ' The 2 million sq. ft property portfolio that we acquired in July is bedding down well. We have integrated the 23 business centres and estates with our existing properties. This creates a strong branded network of Workspace sites throughout London and the South East. The new portfolio is responding ahead of our expectations owing to our hands-on management style. We are achieving some excellent new lettings and we are seeing rental growth. ' Occupancy of our core portfolio remains high at over 90%. Demand for space continues to be good, with an encouraging flow of new enquires. We are confident that the product and services that we offer our customers, provides them with a business environment in which they can flourish. ' Looking to the future, we are strengthening our links with local authorities. We have formed successful joint ventures to create high quality business space for SMEs. We are keen to extend our activities in this area. ' The business is continuing to perform well and we remain cautiously optimistic about our future prospects.' Date: 14th February 2000 For further information contact: Harry Platt, Chief Executive, Workspace Group PLC 0207 247 7614 Mark Taylor, Finance Director, Workspace Group PLC 0207 247 7614 Jonathan Gillen, City Profile Group 0207 726 8588 Simon Courtenay, City Profile Group 0207 726 8588 Operating and Financial Review Review of Activities Good progress continues to be made with pre-tax profits for the quarter increasing by 40% to £2.7 million and earnings per share by 39.4% to 12.4p (excluding profits arising on the sale of properties and exceptional costs). For the three-quarter period similar pre-tax profits grew by 25% to £6.3 million and earnings per share by 24.2% to 28.7p. Published pre-tax profits for the three-quarter period including £0.35 million profits arising on the sale of properties and £0.94 million exceptional financing costs, was £5.7 million. Integration of the Tonex portfolio, comprising 23 estates with over 2 million sq. ft. acquired on 23 July 1999, continued during the quarter and is now complete. A marketing and management programme has been implemented for those properties which are intended to be held long term. A number of lettings have been achieved at rentals in excess of those anticipated at the time of acquisition. Disposal of certain smaller estates, either with limited long term prospects or which have potential for change of use has begun. Two disposals (one of which is referred to below) have already been agreed at values in excess of book value. Good progress continues to be made on the core portfolio. Occupancy has been maintained at over 91% whilst rentals continue to improve. Overall, including new acquisitions and major refurbishment/development schemes, occupancy now stands at 87.62% with a rent roll of £25.01 million, up nearly 1% in the third quarter alone and 44% during the nine month period. Disposals One disposal was concluded in the quarter at a surplus of £120,000 on the March 1999 valuation: - Name of Description Sale Annual Property Price Income ------------------------------------------------------------------------------ Malham Road Single storey £1.1m £106,000 Industrial light industrial Estate, estate: 23 units; London, SE23 21,794 sq. ft In addition Tysoe Studios, London EC1, which was recently acquired as part of the Tonex portfolio, was sold after the quarter end for £1.33 million, an exit yield of 6% and some £480,000 above book value. Heads of Terms have been agreed on a further disposal of a small property acquired as part of the Tonex portfolio. Ferry Lane The Group has previously reported that its property at Ferry Lane, Rainham was destroyed by fire in July 1999. Settlement terms have now been agreed with the insurers. The Group is currently reviewing all options for the future of the site including rebuilding, or outright sale of the land comprising some 1.5 acres. Helix Business Park, Camberley The development of the Group's small unit industrial estate, undertaken jointly with Surrey Heath District Council, was completed in January 2000. This estate provides 20,000 square feet of accommodation in 20 units in a location that has been under provided with starter accommodation. We are looking currently for further opportunities to provide space for Small and Medium sized Enterprises. We are confident that we can strengthen our links with local authorities to help us achieve our aims. Cash Flow and Financing During the quarter the Group secured the transfer of its principal debt facility of £122 million (obtained earlier in the year to finance the acquisition of the Tonex portfolio and refinance certain other debt) into a commercial paper programme administered by WestLB, at an interest rate saving of 0.15% per annum. There was a net cash inflow of £0.09 million during the quarter (1998 outflow of £0.07 million). For the year to date there was an outflow of £1.72 million (1998: £1.79 million inflow). Capital expenditure for the year to date was £83.30 million (1998 £3.16 million). At the quarter end gearing stood at 122% (1998 77.7%) and interest cover for the year to date was 2.03 times (1998 2.2). Occupancy and Trading Statistics The Group's key statistics relating to its trading operations are given in the table below:- 31 30 30 31 December September June March 1999 1999 1999 1999 ------------------------------------------------------------------------------ Number of Estates 95 96 73 73 ------------------------------------------------------------------------------ Total Floorspace at end of period 5,720,600 5,733,122 3,851,622 3,824,913 ------------------------------------------------------------------------------ of which: Available for letting 4,726,204 4,743,613 2,862,312 Undergoing development /refurbishment 994,396 989,512 989,512 ------------------------------------------------------------------------------ Lettable Floorspace of core portfolio (sq ft) 2,819,913 2,817,766 2,817,400 2,818,312 ------------------------------------------------------------------------------ Lettable Units (number) 3,492 3,514 2,717 2,682 ------------------------------------------------------------------------------ Annual Rent Roll of Occupied Units (£) 25,014,216 24,788,742 17,777,821 17,361,828 ------------------------------------------------------------------------------ Average Rent (£/sq. ft) 4.99 4.88 5.34 5.20 ------------------------------------------------------------------------------ Average Rent of Core Portfolio (£/Sq. ft) 6.37 6.24 6.20 6.00 ------------------------------------------------------------------------------ Occupancy: overall 87.62% 88.55% 86.45% 87.31% ------------------------------------------------------------------------------ Occupancy of Core Portfolio 91.15% 91.83% 91.12% 92.33% ------------------------------------------------------------------------------ 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 year and which are not subject to major refurbishment/development programmes (the properties subject to such programmes in the year were Three Mills, Kingsland Viaduct, 1-10 Union Street and Wilton Road Camberley). Contracted future rentals not included in the current annual rent roll include £2 million commencing on 31.3.2001 for 1-10 Union Street. Current Trading There continues to be a good flow of new enquiries for space, and improvements in headline rents. This continues the good underlying progress seen throughout 1999. With its strong London and South East representation and the benefit of income reversions from the Tonex portfolio, the underlying prospects for the Group in the year ahead remain strong. New Non-Executive Director On 17 January 2000, Dr Christopher Pieroni was appointed as a non-executive director of the Company and a member of the Audit, Remuneration and Nominations Committees. Aged 41 he is currently Chief Operating Officer of Colliers, Erdman Lewis, the property surveying firm. Following this appointment the Board considers that the constitution of the Board complies fully with the 'Combined Code' on the Principles of Governance and Code of Best Practice. Unaudited Consolidated Profit and Loss Account for the 3 and 9 months ended 31 December 1999 9 months ended 31 December 3 months ended Trading Other 31 December Operations Items Total 1999 1998 1999 1998 1999 1998 £000 £000 £000 £000 £000 £000 ------------------------------------------------------------------------------ Turnover - continuing operations 8,627 5,897 21,394 - 21,394 16,824 Rent payable and direct costs (2,263) (1,505) (5,593) (5,593) (4,338) ------------------------------------------------------------------------------ Gross profit 6,364 4,392 15,801 15,801 12,486 Administrative expenses (1,004) (873) (3,133) (3,133) (2,488) ------------------------------------------------------------------------------ Operating profit - continuing operations 5,360 3,519 12,668 12,668 9,998 Profit on Disposal of Investment Property 356 919 351 351 1,122 Interest receivable 62 12 122 122 116 Interest payable and similar charges (2,731) (1,606) (6,533) (937)(7,470) (5,090) ------------------------------------------------------------------------------ Profit on ordinary activities before taxation 3,047 2,844 6,257 (586) 5,671 6,146 Taxation on profit on ordinary activities (853) (768) (1,752) 164 (1,588) (1,659) ------------------------------------------------------------------------------ Profit attributable to shareholders 2,194 2,076 4,505 (422) 4,083 4,487 Dividends - - (941) - (941) (873) ------------------------------------------------------------------------------ Retained for the period 2,194 2,076 3,564 (422) 3,142 3,614 ============================================================================== Earnings per share (basic) 14.0p 13.1p 28.7p (2.7)p 26.0p 28.3p Diluted earnings per share 13.9p 13.0p 25.8p 28.2p Statement of Total Recognised Gains and Losses 9 months ended 31 December 1999 1998 £000s £000s ------------------------------------------------------------------------------ Profit for the financial period 4,083 4,487 Unrealised surplus on revaluation of investment properties 10,371 4,365 ============================================================================== Total gains relating to the financial period 14,454 8,852 Consolidated Balance Sheet Unaudited Audited 31 December 1999 31 March 1999 £000 £000 ------------------------------------------------------------------------------ Fixed assets Tangible assets Investment properties 279,889 185,978 Other fixed assets 1,089 1,179 Investment in own shares 999 1,024 ------------------------------------------------------------------------------ 281,977 188,181 ------------------------------------------------------------------------------ Current assets Debtors 7,547 2,514 Investments 6,802 2,332 Cash at bank and in hand 74 2 ------------------------------------------------------------------------------ Creditors: amounts falling due within one year loans and overdrafts (2,517) (4,726) others (20,277) (13,983) ------------------------------------------------------------------------------ Net current liabilities (8,371) (13,861) ------------------------------------------------------------------------------ Total assets less current liabilities 273,606 174,320 Creditors: amounts falling due after more than one year (151,614) (65,866) ------------------------------------------------------------------------------ 121,992 108,454 ============================================================================== Capital and reserves Called up share capital 1,588 1,588 Share premium account 39,693 39,668 Revaluation reserve 66,414 56,043 Profit and loss account 14,297 11,155 ------------------------------------------------------------------------------ Shareholders' funds - equity interests 121,992 108,454 ============================================================================== Net asset value per share £7.68 £6.83 ============================================================================== Movement in shareholders' funds Profit for the financial period 4,083 6,536 Dividends (941) (2,989) ------------------------------------------------------------------------------ 3,142 3,547 Issue of Shares - 2 Share premium account 25 17 Revaluation reserve - increase 10,371 21,843 ------------------------------------------------------------------------------ Net movement in shareholders' funds for the financial period 13,538 25,409 Shareholders' funds as at 1 April 1999/1998 108,454 83,045 ------------------------------------------------------------------------------ Shareholders' funds as at 31 December 1999/31 March 1999 121,992 108,454 ============================================================================== Unaudited Cash Flow Statement for the nine months ended 31 December 1999 9 months ended 31 December 1999 1998 £000 £000 ------------------------------------------------------------------------------ Net cash inflow from operating activities 12,821 11,006 Return on investment and servicing of finance (6,600) (4,986) Taxation (2,372) (1,257) Capital expenditure (net) (83,304) (3,155) Equity dividends paid (2,116) (1,904) ------------------------------------------------------------------------------ Net cash outflow before use of liquid resources and financing (81,571) (296) Management of liquid resources (4,471) 2,640 Financing 84,323 (558) ------------------------------------------------------------------------------ Net cash outflow/inflow (1,719) 1,786 ------------------------------------------------------------------------------ Reconciliation of net cash flow to movement in net debt (Decrease)/Increase in cash (1,719) 1,786 Increase/(decrease) in liquid resources 4,471 (2,640) Cash inflow from (increase)/decrease in debt (84,297) 557 ------------------------------------------------------------------------------ Changes in net debt resulting from cash flows (81,545) (297) ------------------------------------------------------------------------------ Net debt at 1 April (68,457) (70,436) Net debt at 31 December (150,002) (70,733) ============================================================================== 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 accounts for the period to 31 December 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. 2. Segmental Analysis 3 months ended 9 months ended 31 December 31 December 1999 1998 1999 1998 £000s £000s £000s £000s ------------------------------------------------------------------------------ Rental income 6,563 4,790 16,938 13,543 Service charge and other recoveries 1,628 906 3,499 2,729 Fees, commissions, and sundry income 436 201 957 552 ------------------------------------------------------------------------------ 8,627 5,897 21,394 16,824 ============================================================================== 3. Interest Payable 3 months ended 9 months ended 31 December 31 December 1999 1998 1999 1998 £000s £000s £000s £000s ------------------------------------------------------------------------------ Convertible loan stock and debenture stock interest 663 663 1,987 1,987 Mortgage interest 2,132 1,067 4,794 3,432 Bank and other interest 108 25 242 131 Net development interest capitalised (172) (149) (490) (460) Loan Breakage Costs - - 937 - ------------------------------------------------------------------------------ Charged to profit and loss account 2,731 1,606 7,470 5,090 ============================================================================== 4. Taxation The taxation charge for the nine months ended 31 December 1999 is based on the estimated effective tax rate for the year ending 31 March 2000 of 28% (1998:27%). 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 (of 15,679,800 shares on an undiluted basis and 15,808,175 on a diluted basis). Net assets per shares have been calculated by dividing net assets at the end of each period by the number of ordinary shares in issue at that time (of 15,883,815 shares). 6. Valuation The valuation of investment properties at 31 December 1999 is based on the independent valuation by Richard Ellis St Quintin at 30 September 1999 net of subsequent additions and disposals. 7. Creditors Creditors falling due within one year include tenants' deposits of £2.21million (31 March 1999:£1.66 million) and deferred rental and service charges of £4.23 million (31 March 1999: £2.34 million). 8. Financial Instruments Book Value Fair Value Difference £ Million £ Million £ Million ------------------------------------------------------------------------------ Short term borrowings and current part of long term borrowings (2.5) (2.5) - Long term borrowings (151.6) (161.8) (10.2) ------------------------------------------------------------------------------ (154.1) (164.3) (10.2) ============================================================================== This represents 64 pence per issued ordinary share and if applied to net asset value per share at 31 December 1999 would reduce the latter to £7.04. 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. Interim Statement Copies of this statement will be dispatched to shareholders on Monday 14 February 2000 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.

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