3rd Quarter Results

Workspace Group PLC 18 February 2002 WORKSPACE REPORTS EXCELLENT TRADING AND ACQUISITIONS PROGRESS Workspace Group PLC ('Workspace'), today announces its results for the nine months ended 31 December 2001. Workspace is the leading provider of flexible business accommodation to small and medium size enterprises ('SMEs') in London and the South East. • Pre-tax trading profits for 9 months up 24% to £8.53 million (31 December 2000: £6.88 million*) (*excluding exceptional profit on disposal of investment property) • Trading earnings per share up 29% to 38.7p (31 December 2000: 30.0p) • Annual rent roll during quarter up to £28.0 million (30 September 2001: £26.6 million) • Average rent of core portfolio improved to £7.20 psf (30 September 2001: £7.03 psf) • Occupancy of core portfolio 89.1% (30 September 2001: 89.9 %) • £43 million of acquisitions completed (in the three quarter period) • Gearing 75% • Net asset value per share up to £13.02 (30 September 2001: £12.90) Commenting on the results, Harry Platt, Chief Executive, said, ' The demand from SME's for business space in London and the South East remains buoyant. Current trading continues to be strong and the prospects for the business are good. ' I am delighted that despite the uncertainties following September 11 rentals have continued to grow and occupancy levels have remained stable. Both our recent acquisitions and initiatives that we have underway at other sites will contribute to continued rental growth. ' During the quarter we have been very active on the acquisition front, investing over £27 million in London property. This brings the level of acquisitions over the nine-month period to £43 million with a further £12m secured since the quarter end. Further acquisitions are under negotiation. ' Our programme of added value initiatives is gathering pace. Outline planning consent has been granted for a residential development on land at our Three Mills site in East London. During the quarter we have submitted planning applications for an extension to the Barley Mow Workspace in Chiswick and we are awaiting the outcome of two other planning applications.' -ends- Date: 18 February 2002 For further information please contact: Workspace Group PLC City Profile Group Harry Platt, Chief Executive Simon Courtenay Mark Taylor, Finance Director Ed Senior 020 7247 7614 020 7448 3244 e-mail: info@workspacegroup.co.uk e-mail: simon.courtenay@city-profile.com Web: www.workspacegroup.co.uk Operating and Financial Review Review of Activities The pattern of good progress extended through the third quarter. High levels of occupancy have been maintained together with continuing improvements in rental income. This has lead to trading profits for the quarter of £2.95 million, up 9.8% on the same period last year - with trading earnings per share for the nine month period of 38.7 pence per share, up 29%. Meanwhile, there has been considerable acquisition activity totalling some £27.5 million in the quarter making £43.25 million for the three quarter period. Since the quarter end a further £12.5 million acquisitions have been made. Planning consent for a residential development at 3 Mills was secured during the quarter and a number of other applications made. In time these will add significant value to the related properties. Occupancy of the core portfolio of estates (those not in development and held throughout the year) was 89% at 31 December 2001. Including acquisitions during the year, overall occupancy of the Group's portfolio was 84.5% reflecting the voids inherited at the time of acquisition. The rent roll has increased during the quarter by £1.4 million or 5.3% from £26.6 million to £28.0 million. Of this increase £1.0 million reflects the net effect of acquisitions whilst £0.4 million reflects underlying rental growth. Core average rents are now £7.20 per sq. ft, having increased by 2.4% in the quarter, and over 7.8% over the nine month period. Acquisitions and Disposals During the quarter the Group acquired 5 properties for £27.48 million. The table below shows the main details of acquisitions in this period, including acquisitions since 31 December 2001 on 2 properties of some £12.5 million. Further acquisitions are under negotiation. Name of Property Description Acquisition/ Initial Annual Sale Price Income In the third Acquisitions Quarter Windmill Place, Hanwell, 25,800 business centre; with £3.35m £305,000 Middlesex 63 units Surrey House 16,695 sq. ft over 5 floors £5.0m £335,000 (currently single let) Lavington Street, SE1 Clerkenwell Workshops 69,583 sq. ft, subject to head lease expiry in 2003 and EC1 150 individual business £9.1m £109,000 sub-tenants Union Court 67,500 sq. ft ; 13 units £6.5m £301,000 business centre Clapham, SW4 Alpine Way, Beckton, E6 1.75 acre site for £3.53m £350,000 development of 35,000 sq. ft new build warehouse (£1.2m land purchase) when complete Post December Westbourne Studios 63,963 sq. ft, 95 units £12.25m £807,000 2001 business centre Ladbroke Grove London, W10 School Road, Acton, London, 2,895 sq. ft, 1 unit, £0.245m £24,000 NW10 adjacent to Europa Building Added Value Initiatives Outline planning consent (subject to a Section 106 Agreement) has been granted for a residential development at Three Mills. This scheme is in joint venture with Copthorn Homes. During the quarter a planning application has been submitted for a 65,000 sq. ft extension to Barley Mow Workspace in Chiswick. This scheme will be undertaken in partnership with the London Borough of Hounslow. The Group awaits the outcome of its planning applications for a retail warehouse scheme at Thurston Road Industrial Estate, Lewisham and for a residential development at Hooley Lane, Redhill. It is anticipated that further planning applications on other estates will be made over the next few months. Cash Flow and Financing There was a net cash outflow of £0.85 million during the quarter (2000: inflow of £0.84 million). For the year to date there was an inflow of £0.82 million (2000: £2.86 million inflow). Capital expenditure for the year to date, net of disposal proceeds was an outflow of £4.05 million (2000: inflow of £16.22 million). At the quarter end gearing stood at 74.5% (2000: 73.6%) and interest cover for the year to date was 2.14 times (2000: 2.94 times). A new £100 million loan facility has been negotiated with the Group's bankers NatWest. This will provide capacity for the acquisition programme for the immediate future. Occupancy and Trading Statistics The Group's key statistics relating to its trading operations are given in the table below. 31 December 30 September 30 June 31 March 2001 2001 2001 2001 Number of estates 83 80 79 78 Total floorspace at end of period 4,702,550 4,520,707 4,513,937 4,525,030 of which: London and South East (sq. ft) 4,315,664 4,134,148 4,127,378 Three Mills and developments (sq. ft). 386,886 386,559 386,559 Lettable floorspace of core portfolio 4,003,557 3,996,025 4,001,944 3,988,450 Lettable units (number) 3,587 3,489 3,521 3,507 Annual rent roll of occupied units £28,003,732 £26,573,800 £25,570,817 £24,941,423 Average rent (£/sq ft) £7.05 £6.91 £6.71 £6.39 Average rent of core portfolio (£/sq ft) £7.20 £7.03 £6.90 £6.68 Occupancy overall 84.5% 85.1% 84.2% 86.2% Occupancy of core portfolio 89.1% 89.9% 89.4% 90.6% All figures exclude the Midlands portfolio, which was sold on 15 June 2001. Comparisons of overall occupancy and rent roll are distorted by acquisitions, disposals and transfers. The 'core portfolio' is defined as those properties, excluding Three Mills (which due to the short term nature of the lettings of studio space has a volatile occupancy rate which in turn can obscure overall patterns), that have been held throughout the year to date and which are not subject to refurbishment/development programmes. Current Trading At mid February trading remains strong with good enquiries and continuing rental uplift - albeit at lower rates of increase than were experienced a year or so ago. Prospects are therefore good. Negotiations continue on a number of potential acquisitions which will bring additional long term value to shareholders. Unaudited Consolidated Profit and Loss Account for the three and nine months ended 31 December 2001 3 months ended 31 December 9 months ended 31 December Trading Other Total Operations Items 2001 2000 £000 £000 2001 2000 £000 £000 £000 £000 _______________________________________________________________________________ Turnover - continuing operations 9,518 9,365 28,926 - 28,926 26,298 Rent payable and direct costs (2,870) (2,611) (8,367) - (8,367) (7,240) _______________________________________________________________________________ Gross profit 6,648 6,754 20,559 - 20,559 19,058 Administrative expenses (1,373) (1,161) (4,215) - (4,215) (3,586) _______________________________________________________________________________ Operating profit - continuing 5,275 5,593 16,344 - 16,344 15,472 operations Profit on Disposal of investment (16) 9,700 - 361 361 9,762 property Interest receivable 53 76 282 - 282 333 Interest payable and similar charges (2,380) (2,985) (8,094) - (8,094) (8,922) _______________________________________________________________________________ Profit on ordinary activities before 2,932 12,384 8,532 361 8,893 16,645 taxation Taxation on profit on ordinary (813) (4,454) (2,304) (35) (2,339) (5,605) activities _______________________________________________________________________________ Profit attributable to shareholders 2,119 7,930 6,228 326 6,554 11,040 Dividends - - (1,143) - (1,143) (1,070) _______________________________________________________________________________ Retained for the period 2,119 7,930 5,085 326 5,411 9,970 _______________________________________________________________________________ Earnings per shares (basic) 13.1p 50.0p 38.7p 2.0p 40.7p 69.6p Diluted earnings per share 12.8p 47.3p 39.8p 66.6p Statement of Total Recognised Gains and Losses 9 months ended 31 December 2001 2000 £000 £000 _______________________________________________________________________________ Profit for the financial period 6,554 11,040 Unrealised surplus on revaluation of investment properties 14,389 22,232 Taxation on revaluation surpluses realised on sale of properties (150) (510) _______________________________________________________________________________ Total gains relating to the financial period 20,793 32,762 Consolidated Balance Sheet Unaudited Audited 31 December 2001 31 March 2001 £000 £000 _______________________________________________________________________________ Fixed assets Tangible assets Investment properties 382,876 366,525 Other fixed assets 1,538 999 Investment in own shares 1,015 1,015 _______________________________________________________________________________ 385,429 368,539 _______________________________________________________________________________ Current Assets Debtors 6,950 5,844 Investments 6,100 5,373 Cash at bank and in hand 14 206 _______________________________________________________________________________ 13,064 11,423 Creditors: amounts falling due within one year loans and overdrafts (4,227) (4,355) Others (21,620) (25,658) _______________________________________________________________________________ Net current liabilities (12,783) (18,590) _______________________________________________________________________________ Total assets less current liabilities 372,646 349,949 Creditors: amounts falling due after more than one year loans (including Convertible Loan Stock) (160,148) (158,371) _______________________________________________________________________________ 212,498 191,578 _______________________________________________________________________________ Capital and reserves Called up share capital 1,644 1,618 Share premium account 41,910 40,666 Revaluation reserve 132,358 122,739 Profit and loss account 36,586 26,555 _______________________________________________________________________________ Shareholders' funds - equity interests 212,498 191,578 _______________________________________________________________________________ Net asset value per share £13.02 £11.93 _______________________________________________________________________________ Movement in shareholders' funds Profit for the financial period 6,554 13,222 Dividends (1,143) (3,723) _______________________________________________________________________________ 5,411 9,499 Issue of Shares 26 27 Share premium account 1,244 871 Revaluation reserve - increase 14,389 38,673 Taxation on valuation surpluses realised on sale of properties (150) (510) _______________________________________________________________________________ Net movement in shareholders' fund for the financial period 20,920 48,560 Shareholders' funds as at 1 April 2001/2000 191,578 143,018 _______________________________________________________________________________ Shareholders' fund as at 31 December 2001/31 March 2001 212,498 191,578 _______________________________________________________________________________ Unaudited Consolidated Cash Flow Statement for the nine months ended 31 December 2001 9 months ended 31 December 2001 2000 £000 £000 _______________________________________________________________________________ Net cash inflow from operating activities 16,913 15,168 Return on investment and servicing of finance (7,623) (8,953) Taxation (4,780) (1,185) Capital (expenditure)/proceeds - net (4,052) 16,224 Equity dividends paid (2,659) (2,391) _______________________________________________________________________________ Net cash (outflow)/inflow before use of liquid resources and (2,201) 18,863 financing (Outflow)/inflow from management of liquid resources (727) 358 Inflow/(outflow) from financing 3,749 (16,357) _______________________________________________________________________________ Net cash inflow 821 2,864 _______________________________________________________________________________ Reconciliation of net cash flow to movement in net debt Increase in cash 821 2,864 Increase/(Decrease) in liquid resources 727 (358) (outflow)/inflow from movements in debt financing (2,662) 16,999 _______________________________________________________________________________ Changes in debt resulting from cash flows (1,114) 19,505 _______________________________________________________________________________ Net debt at 1 April (157,147) (148,731) Net debt at 31 December (158,261) (129,226) _______________________________________________________________________________ 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 2001 included an unqualified report of the auditors. The Group's unaudited accounts for the period ended 31 December 2001 have been prepared on the basis of the accounting policies set out in the Annual Report and Accounts for the year ended 31 March 2001. 2. Segmental Analysis 3 months ended 31 December 9 months ended 31 December 2001 2000 2001 2000 £000 £000 £000 £000 _______________________________________________________________________________ Rental Income 7,517 7,461 22,939 20,774 Service charge and other recoveries 1,612 1,513 5,006 4,470 Fees, commissions, and sundry income 389 391 981 1,054 _______________________________________________________________________________ 9,518 9,365 28,926 26,298 _______________________________________________________________________________ 3. Interest Payable 3 months ended 31 December 9 months ended 31 December 2001 2000 2001 2000 £000 £000 £000 £000 _______________________________________________________________________________ Convertible loan stock and debenture stock 631 663 1,935 1,987 interest Mortgage interest 1,801 2,666 6,252 8,006 Bank and other interest 13 22 42 64 Net development interest capitalised (65) (366) (135) (1,135) _______________________________________________________________________________ Charged to profit and loss account 2,380 2,985 8,094 8,922 _______________________________________________________________________________ 4. Taxation The taxation charge, excluding tax on property disposals, for the nine months ended 31 December 2001 is based on the estimated effective tax rate for the year ending 31 March 2002 of 27% (2001 estimated: 27%). Tax on property disposals is only 9.7% due to tax losses made on some properties within the Midlands sale. 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 (16,115,912 shares). Net assets per share have been calculated by dividing net assets at the end of each period by the number of shares in issue at that time less investment in own shares of 200,000 (16,245,105 shares). 6. Valuation The Group's investment properties were valued by Insignia Richard Ellis at 30 September 2001 on an open market existing use basis in accordance with the guidance notes issued by the Royal Institution of Chartered Surveyors. 7. Creditors Creditors falling due within one year include tenants' deposits of £3.94 million (31 March 2001: £3.26 million) and deferred rental and service charges of £4.49 million (31 March 2001: £4.95 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 2001. The results are summarised as follows: Book Value Fair Value Difference £ Million £ Million £ Million _______________________________________________________________________________ Short term borrowings and current part of long term borrowings (4.2) (4.2) - Long term borrowings (160.1) (165.6) (5.5) Financial Assets 6.1 6.1 - Interest rate Cap / Collar 0.3 (2.3) (2.6) _______________________________________________________________________________ (157.9) (166.0) (8.1) _______________________________________________________________________________ This represents 49.9 pence per issued ordinary share and if applied to net asset value per share at 31 December 2001 would reduce the latter to £12.52. On a diluted basis, allowing for conversion of the Group's convertible loan stock, this adjustment reduces to 31.8 pence per share. 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 Monday 18 February 2002 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. This information is provided by RNS The company news service from the London Stock Exchange

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