3rd Quarter & 9 Mths Results

Workspace Group PLC 19 February 2001 WORKSPACE ACQUISITIONS ROLL ON AS SME SECTOR GROWS Workspace Group PLC ('Workspace') the leading provider of flexible accommodation to small and medium sized enterprises (SME's) in London and the South East, today announces its third quarter results for the nine months ended 31 December 2000. Financial Highlights * Headline pre-tax profits for the three quarter period up 193% to £16.6 million * Trading pre-tax profit for period up 10.0% to £6.88 million * Annual Rent Roll for the three quarter period increased by £1.66m to £ 27.52 million (up 6.4% since 31 March 2000) * Sale of 1-10 Union Street and Phoenix Business centre for a total of £ 29.25 million producing £9.72 million profit. * Basic EPS 30.0p (up 4.5%) for the three quarter period (excluding exceptional items and property sales). * NAV per share at 31 December 2000 at £10.94 up 42.4% year on year (31 March 2000: £9.04, 31 December 1999: £7.68). Commenting on the results, Harry Platt, Chief Executive said, ' This has been an excellent quarter for Workspace. The disposal of the Sainsbury's building at Union Street has released significant resources, which we are re-investing into properties with good potential. During the quarter we have agreed five acquisitions totalling over £20m. ' Our strategy remains focused on enhancing the rental streams at all our properties. We are also striving to provide our customers with the services that growing businesses need, at cost-effective levels. For the future, we are planning to roll out telecommunications and digital communications services that will sit alongside our existing energy and insurance services. ' Demand for our type of flexible business space is excellent. We are confident that we will continue to drive the rent roll forward. We are keen to continue our expansion and to develop further our dominant position as the leading SME accommodation provider in the South East.' - ends - Date: 19 February 2001 For further information contact: Harry Platt, Chief Executive Workspace Group PLC 020-7247-7614 e-mail: info@workspacegroup.co.uk web: www.workspacegroup.co.uk Simon Courtenay Ed Senior City Profile 020-7726-8588 e-mail: sc@profilecomms.co.uk Operating and Financial Review Review of Activities Trading activity continues to be strong, with occupancy stable and rents in London rising by some 10.3% per annum. As a result of this, excluding profits arising on the sale of properties and exceptional costs, basic pre-tax profits for the three quarter period were £6.88 million, up 10.0% on the same period for 1999. The rent roll now totals £27.52 million, up 6.4% since 31 March 2000. Of this increase rents on the core like for like portfolio grew by £1.54 million or 6.1%. Net asset value per share is now £10.94 up 42.4% on a year ago. The slight fall of 10.0p since the half year is because of the tax charge (some £3.28 million) on the sale of 1-10 Union Street. As is customary there has been no further property revaluation at the quarter end (the last being at 30 September 2000; and the next being with the full year's accounts at 31 March 2001). Profits from the sale of 1-10 Union Street and the Phoenix Business Centre dominate the headline profit figures for the quarter. Union Street was acquired in 1998 as a vacant building for refurbishment as a business centre. In September 1999 J Sainsbury agreed to take the whole property on a 15 year lease at a rental of £2 million per annum, commencing in March 2001, subject to the completion of certain refurbishment works (costing some £11 million). Works were completed in September 2000, Sainsbury took up occupation, and the building was sold in December 2000 for £27.75 million generating a profit of £ 9.16 million. The Group has retained three parcels of land adjacent to the site for development. Phoenix Business Centre, which was acquired as part of the Tonex portfolio and valued at £0.9 million at 31 March 2000 was sold for £ 1.5 million. Acquisitions and Disposals The Group has focused increasingly on expanding its portfolio in London and the South East and as a result is currently looking at the alternatives for its Midland portfolio. With recent disposals and the consequent fall in borrowing, gearing is now 73.6% and the Group has substantial capacity to make acquisitions in its core areas. During and since the quarter end, a number of acquisitions have been completed, or committed. These are listed in the table below. Two of these purchases stem from the Company's co-operation agreement with Greater London Enterprise (Wandsworth Business Village and Villiers Road, Kingston), whilst a further purchase is from Haringey Council (Bounds Green Industrial Estate). The Group continues to target opportunities in London and the South East at good immediate income yields and which have, with its flexible leasing package, strong growth prospects and good reversionary income growth over the next two years. Name of Property Description Acquisition/ Annual Date of Sale Price Income Completion £m £000 Acquisitions: Block F, Tower Industrial Unit of 141,881 6.5 355 10/01/01 Bridge (final part sq. ft (under review) of Tonex purchase) Bounds Green Industrial Estate, 110,703 5.1 449 31/01/01 Industrial Estate, sq. ft on a site of 6.5 acres Haringey, N11 The Ivories, 6/18 Business Centre; 24 units; 4.0 332 09/02/01 Northampton Street, 24,800 sq. ft London N1 Wandsworth Business Centre 88,500 sq. ft 7.34 544 12/02/01 Business Village, (with planning consent for London SW18 9,500 sq. ft additional space) Villiers Road, New Build Business Park; 20 4.2 - Late 2001 Kingston units ; 42,000 sq. ft Disposals: Union Street, SE1 Freehold building let to J Sainsbury for £2m rent per year commencing March 2001 27.75 Nil at 20/12/00 time of sale Phoenix Business Multi-storey industrial 1.5 41.3 22/12/00 Centre, Bow Common Lane, E3 Cash Flow and Financing There was a net cash inflow of 0.84 million during the quarter (1999 inflow of: £0.09 million). For the year to date there was an inflow of £2.86 million (1999: £1.72 million outflow). Capital expenditure for the year to date, net of disposal proceeds, was an inflow of £16.22 million (1999: outflow of £83.30 million). At the quarter end gearing stood at 73.6% (1999: 122%) and interest cover for the year to date was 2.94 times (1999: 2.03 times). Occupancy and Trading Statistics The Group's key statistics relating to its trading operations are given in the table below: - 31 30 30 June 31 March December September 2000 2000 2000 2000 Number of Estates 93 95 93 94 Total Floorspace at end of period 5,620,170 5,723,014 5,649,753 5,677,521 (sq. ft) of which: Available for letting 5,620,170 5,627,733 5,554,472 Undergoing development/refurbishment 0 95,281 95,281 Lettable Floorspace of core portfolio 5,530,891 5,430,115 5,416,723 5,401,601 Lettable Units (number) 3,570 3,568 3,546 3,523 Annual Rent Roll of Occupied Units 27,516,658 27,114,761 26,077,673 25,855,226 Average Rent (£/sq. ft) 5.64 5.42 5.30 5.21 Average Rent of Core Portfolio (£/sq 5.54 5.43 5.30 5.22 .ft) Occupancy Overall 86.82% 87.38% 87.04% 87.35% Occupancy of Core Portfolio 86.60% 88.66% 88.45% 88.68% 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 to date and which are not subject to refurbishment/redevelopment programmes. Average occupancy is reduced by properties in which substantial areas are let on a short term basis (e.g. Three Mills) and those where areas are being held vacant pending redevelopment/improvement (e.g. Kingsland Viaduct and Wharf Road). Excluding these occupancy is 91%. Current Trading The strong performance in previous periods has been maintained. There continues to be good demand for our product at improving rentals. Initiatives are underway at a number of estates which will improve rentals further. These include refurbishment of the common areas of certain estates, increased floor space at others, and over the next two years, the provision of a telecommunications (broadband) and digital services infrastructure over our main London business centres. These improvements will increase the attraction of the Group's properties to our current and future customers. Following the disposals in the latter part of 2000, Workspace is targeting further acquisitions and an added value programme within London and the South East. The Group aims to double the floorspace under ownership and management for its target customers (small and medium sized enterprises) over the next five years - and to strengthen its dominant position as the leading supplier of space in the Capital for this market. Unaudited Consolidated Profit and Loss Account for the 3 and 9 months ended 31 December 2000 3 months ended 9 months ended 31 December 31 December Trading Other Total Operations Items 2000 1999 £000 £000 2000 1999 £000 £000 £000 £000 ________ ______ _________ ______ ______ ______ Turnover - continuing operations 9,365 8,627 26,298 - 26,298 21,394 Rent payable and direct costs (2,611)(2,263) (7,240) - (7,240)(5,593) ________ ______ _________ ______ ______ ______ Gross profit 6,754 6,364 19,058 - 19,058 15,801 Administrative expenses (1,161)(1,004) (3,586) - (3,586)(3,133) ________ ______ _________ ______ ______ ______ Operating profit - continuing 5,593 5,360 15,472 - 15,472 12,668 operations Profit on Disposal of investment 9,700 356 - 9,762 9,762 351 property Interest receivable 76 62 333 - 333 122 Interest payable and similar (2,985)(2,731) (8,922) - (8,922)(7,470) charges ______ ______ _________ ______ ______ ______ Profit on ordinary activities 12,384 3,047 6,883 9,762 16,645 5,671 before taxation Taxation on profit on ordinary (4,454) (853) (2,128)(3,477)(5,605)(1,588) activities ______ ______ _________ ______ ______ ______ Profit attributable to 7,930 2,194 4,755 6,285 11,040 4,083 shareholders Dividends - - (1,070) - (1,070) (941) ______ ______ _________ ______ ______ ______ Retained for the period 7,930 2,194 3,685 6,285 9,970 3,142 ______ ______ _________ ______ ______ ______ Earnings per shares (basic) 50.0p 14.0p 30.0p 39.6p 69.6p 26.0p Diluted earnings per share 47.3p 13.9p 66.6p 25.8p Statement of Total Recognised Gains and Losses 9 months ended 31 December 2000 1999 £000 £000 ___________ ___________ Profit for the financial period 11,040 4,083 Unrealised surplus on revaluation of investment 22,232 10,371 properties Taxation on revaluation surpluses realised on sale of (510) - properties ___________ ___________ Total gains relating to the financial period 32,762 14,454 Consolidated Balance Sheet Unaudited Audited 31 December 2000 31 March 2000 £000 £000 _______________ ___________ Fixed assets Tangible assets Investment properties 320,130 304,248 Other fixed assets 987 1,117 Investment in own shares 1,015 1,015 _______________ ___________ 322,132 306,380 _______________ ___________ Current Assets Debtors 6,738 5,236 Investments 11,067 11,424 Cash at bank and in hand 101 201 _______________ ___________ 17,906 16,861 Creditors: amounts falling due within one year loans and overdrafts (3,034) (5,511) others (24,158) (19,867) _______________ ___________ Net current liabilities (9,286) (8,517) _______________ ___________ Total assets less current liabilities 312,846 297,863 Creditors: amounts falling due after more than one year loans (including Convertible Loan Stock) (137,359) (154,845) _______________ ___________ 175,487 143,018 _______________ ___________ Capital and reserves Called up share capital 1,614 1,591 Share premium account 40,549 39,795 Revaluation reserve 106,245 86,412 Profit and loss account 27,079 15,220 _______________ ___________ Shareholders' funds - equity interests 175,487 143,018 _______________ ___________ Net asset value per share £10.94 £9.04 _______________ ___________ Movement in shareholders' fund Profit for the financial period 11,040 6,523 Dividends (1,070) (3,298) _______________ ___________ 9,970 3,225 Issue of Shares 23 3 Share premium account 754 127 Revaluation reserve - increase 22,232 31,209 Taxation on valuation surpluses realised on sale (510) - of properties _______________ ___________ Net movement in shareholders' funds for the 32,469 34,564 financial period Shareholders' funds as at 1 April 2000/1999 143,018 108,454 _______________ ___________ Shareholders' funds as at 31 December 2000/31 175,487 143,018 March 2000 _______________ ___________ Unaudited Consolidated Cash Flow Statement for the 9 months ended 31 December 2000 9 months ended 31 December 2000 1999 £000 £000 __________ ___________ Net cash inflow from operating activities 15,168 12,821 Return on investment and servicing of finance (8,953) (6,600) Taxation (1,185) (2,372) Capital expenditure (net receipts/(net expenditure)) 16,224 (83,304) Equity dividends paid (2,391) (2,116) __________ ___________ Net cash inflow/(outflow) before use of liquid resources 18,863 (81,571) and financing Management of liquid resources 358 (4,471) Financing (16,357) 84,323 __________ ___________ Net cash inflow/(outflow) 2,864 (1,719) __________ ___________ Reconciliation of net cash flow to movement in net debt Increase/(Decrease) in cash 2,864 (1,719) (Decrease)/Increase in liquid resources (358) 4,471 Cash outflow/(inflow) from decrease/(increase) in debt 16,999 (84,297) __________ ___________ Changes in debt resulting from cash flows 19,505 (81,545) __________ ___________ Net debt at 1 April (148,731) (68,457) Net debt at 31 December (129,226) (150,002) __________ ___________ 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 2000 included an unqualified report of the auditors. The Group's unaudited quarterly accounts for the period ended 31 December 2000 have been prepared on the basis of the accounting policies set out in the Annual Report and Accounts for the year ended 31 March 2000. 2. Segmental Analysis 3 months ended 31 9 months ended 31 December December 2000 1999 2000 1999 £000 £000 £000 £000 ________ ___________ __________ ________ Rental Income 7,461 6,563 20,774 16,938 Service charge and other recoveries 1,513 1,628 4,470 3,499 Fees, commissions, and sundry 391 436 1,054 957 income ________ ___________ __________ ________ 9,365 8,627 26,298 21,394 ________ ___________ __________ ________ 3. Interest Payable 3 months ended 31 9 months ended 31 December December 2000 1999 2000 1999 £000 £000 £000 £000 ________ ___________ __________ ________ Convertible loan stock and 663 663 1,987 1,987 debenture stock interest Mortgage interest 2,666 2,132 8,006 4,794 Bank and other interest 22 108 64 242 Net development interest (366) (172) (1,135) (490) capitalised Loan breakage costs - - - 937 ________ ___________ __________ ________ Charged to profit and loss account 2,985 2,731 8,922 7,470 ________ ___________ __________ ________ 4. Taxation The taxation charge, excluding tax on property disposals for the nine months ended 31 December 2000 is based on the estimated effective tax rate for the year ending 31 March 2001 of 27% (2000 estimated 28%), which is increased to 30.9% due to a prior year adjustment of £0.3 million. Tax on property disposals of £3.48 million (shown as other items) has been provided for at 35.6% leading to an overall effective rate for the period of 33.7%. 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 less investment in own shares of 200,000 (15,865,134 shares). Net assets per share have been calculated by dividing net assets at the end of each period less investment in own shares by the number of shares in issue at that time less 200,000 (15,942,393 shares). 6. Valuation The valuation of the Group's investment properties is based upon the independent valuation by Insignia Richard Ellis at 30 September 2000 on an open market existing use basis in accordance with the guidance notes issued by the Royal Institute of Chartered Surveyors, net of subsequent acquisitions and disposals. 7. Creditors Creditors falling due within one year include tenants' deposits of £3.03 million (31 March 2000: £2.60 million) and deferred rental and service charges of £4.49 million (31 March 2000: £4.29 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 31 December 2000. The results are summarised as follows: Book Fair Difference Value Value £ £ £ Million Million Million __________ ________ _________ Short term borrowings and current part of long (3.0) (3.0) - term borrowings Long term borrowings (137.4) (143.6) (6.2) Financial Assets 11.2 11.2 - Interest rate Cap / Collar 0.3 0.2 (0.1) __________ ________ _________ (128.9) (135.2) (6.3) __________ ________ _________ This represents 40 pence per issued ordinary share (diluted 20 pence per share) and if applied to net asset value per share at 31 December 2000 would reduce the latter to £10.54 (£10.21 diluted). 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. Quarterly Statement Copies of this statement will be dispatched to shareholders on 19 February 2001 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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