3rd Quarter Results
Workspace Group PLC
11 February 2008
Workspace Group PLC
11 February 2008
WORKSPACE DRIVES RENTAL GROWTH
AS LONDON SME MARKET REMAINS RESILIENT
Workspace Group PLC ('Workspace') today announces its results for the nine
months to 31 December 2007. Workspace provides 6.2 million sq. ft of flexible
business accommodation to small and medium size enterprises ('SMEs') across
London.
•Total rent roll up 3.3% in the quarter and 8.4% in first nine months
•Overall occupancy maintained at 86%
•Portfolio valuation down 4.8% to £1,002m in the quarter
•Reversionary yield out 50 bps to 7.2%
•Diluted net asset value per share down 8.7% to 313p in the quarter
•Major refurbishment scheme at Canterbury Court, Kennington Park, SW9
completed on schedule
•Planning consents received at Thurston Road, Parmiter Industrial Estate,
Linton House and Grand Union
•Net cash from operations up 21% to £31.4m
•Trading profits up 42% to £9.1m
•Pre-tax loss of £33.0m after valuation reductions
Commenting on the results, Harry Platt, Chief Executive, said,
' The Group's trading performance demonstrates that the London SME market
remains resilient. Our key performance indicators of rent roll and occupancy are
showing progress, reflecting the demand for space from SMEs across the Capital.
Enquiry levels remain robust and are continuing to convert into lettings.
' The strengths of the Workspace business model are showing through. The trading
and valuation performance over the last nine months highlight the quality of our
business model, significantly out-performing the sector as a whole. The strong
operating cashflows generated by the business and a sound capital base provide a
platform for both investment and dividend growth'.
' Looking forward, we remain confident that the long-term outlook for Workspace
is good. We are delivering rental growth and our portfolio offers many
opportunities to add further value. We have every reason to expect our track
record of out-performance through economic cycles to continue.'
-ends-
Date: 11 February 2008
For further information:
Workspace Group PLC cityPROFILE
Harry Platt, Chief Executive Simon Courtenay
Graham Clemett, Finance Director William Attwell
020-7247-7614 020-7448-3244
e-mail: info@workspacegroup.co.uk
web: www.workspacegroup.co.uk
WORKSPACE GROUP PLC
Quarterly Report
Chairman's Statement
--------------------
This is a good trading performance despite the uncertainties in the financial
markets. As the leading supplier of space to small and medium sized enterprises
(SMEs) across London, we are successfully growing rents, maintaining high
occupancy levels and capturing redevelopment potential. These are the
fundamentals that create long-term value.
This quarter has seen a significant softening in yields across the property
sector. While we are not immune to this, the strong growth in rents and rental
values achieved has reduced the impact with a net reduction of 4.8% in our
overall property valuation in the quarter and a 1.5% reduction over the last
year. This compares favourably with the reductions reported by IPD (Investment
Property Databank) for the UK property sector as a whole of 8.7% in the last 3
months and a reduction of 8.6% over the last year, highlighting the resilience
of our customer base and the diversity of our property portfolio across London.
Strong operating cashflow, sound financing and a position as a trusted partner
in mixed use development leave us well placed to take advantage of the
opportunities that we expect to arise over the coming year.
Chief Executive's Statement
---------------------------
Trading Performance
-------------------
Our key performance indicators of rent roll and occupancy are both positive
reflecting strong demand for space from SME customers across London.
Rent roll has grown consistently quarter by quarter over the last year reaching
£51.1m at December with average rent per square foot increasing by 2.3% in the
quarter to £11.80.
3 months 9 months 12 months
--------------------------------------------------------------------------------
Rent Roll - total +3.3% +8.4% +17.0%
- like-for-like +1.2% +5.5% +7.6%
Occupancy levels have been broadly maintained over the quarter with our
like-for-like occupancy level at 88.8%. At these levels we see the best overall
rental growth, capturing rental increases from customer churn whilst still
retaining a strong underlying rental income base. An analysis of trends in
occupancy is set out below:
December 2007 September 2007 March 2007
--------------------------------------------------------------------------------
Sites with greater than 90%
occupancy 64 62 49
Sites with 80% - 90% occupancy 19 17 28
Sites with less than 80%
occupancy 23 25 24
----------------------- ---------- ----------- --------
Headline average occupancy 86.2% 86.4% 84.8%
----------------------- ---------- ----------- --------
Like-for-like estates 91 91 91
----------------------- ---------- ----------- --------
Like-for-like occupancy 88.8% 89.2% 87.6%
----------------------- ---------- ----------- --------
The good progress we are making at sites recently refurbished, not yet included
in our like-for-like statistics, is set out below:
Completion Date December 2007 September 2007 March 2007
Occupancy Occupancy Occupancy
--------------------------------------------------------------------------------
Enterprise House May 2006 97% 98% 89%
Clerkenwell June 2006 94% 95% 89%
The Light Box November 2006 84% 85% 81%
Greville Street June 2007 66% 42% Nil
Lombard House June 2007 41% 33% 23%
The first phase of the redevelopment of Kennington Park, which was purchased for
£56m in 2005, has now been completed. Canterbury Court, the largest building at
the complex, has been repositioned as a business centre with the works completed
on schedule at a cost of £12m. The refurbished element comprises 102,000 sq.ft.
of lettable space (75 business and studio units) with a new open plan atrium
incorporating reception and cafe areas. It is now available to let and we have
already agreed lettings for 30% of the available space.
Valuation
----------
The property portfolio valuation undertaken independently by our valuers CB
Richard Ellis reduced overall by £33m in the quarter with acquisitions and
capital expenditure of £18m offset by a revaluation reduction of £51m. This
comprised growth of 4.0% in estimated rental value (ERV) offset by a 50 bps
softening in reversionary yields.
December 2007 September 2007 March 2007
-------------------------------------------------------------------------------
Valuation (£m) 1,002 1,035 1,001
ERV (£m) 72.1 69.3 65.3
Reversionary Yield 7.20% 6.70% 6.52%
Our continued success in growing rents from new lettings is reflected in
reported ERVs which have grown consistently on both a total and like-for-like
basis over the last year.
3 Months 9 Months 12 Months
-------------------------------------------------------------------------------
ERV - total +4.0% +10.3% +19.6%
- like-for-like +2.6% +7.5% +8.5%
A summary of the movements in the portfolio valuation over the nine months may
be analysed as follows:
£m
Valuation at 31 March 2007 1,001
Acquisitions (including costs) 23
Other expenditure on properties 17
Valuation surplus - quarter to 30 June 2007 21
- quarter to 30 September 2007 (9)
- quarter to 31 December 2007 (51)
-------
Valuation at 31 December 2007 1,002
------
The majority of our properties are valued on a current use basis. Only a small
number have either planning approval or future development potential for change
of use reflected in their current valuations, as detailed below:
December 2007 September 2007
------------------------------------------------------------------------------
Current use valuation
-----------------------
- Number of properties 97 96
- Valuation £876m £927m
- Capital Value £200/sq.ft. £207/sq.ft.
- Reversionary Yield 7.5% 6.9%
With planning/redevelopment value
-----------------------------------
- Number of properties 9 8
- Valuation £126m £108m
- Capital Value £196/sq.ft. £217/sq.ft.
- Reversionary Yield 4.7% 4.3%
We see significant potential for intensification and change of use at more than
half of our properties over the next 10 years. However, our valuation only
reflects this potential at 9 sites where development plans are well advanced or
planning consent obtained.
For the properties valued on a current use basis, the equivalent yield at our
targeted 90% occupancy level is now 6.75%. The current yield on these properties
is 5.0%, providing £16m of reversionary income that we would target to capture
over the next four years, underpinning our income growth.
The current use valuation can also be analysed between:
* Business centres providing office space for small businesses, with
some 70% (by value) located in our Southbank, West London and Clerkenwell
property clusters.
* Industrial centres supporting a broad range of light industrial
customers in locations across London.
Business Centres Industrial
---------------------------------------------------------------------------
Number of properties 61 36
Valuation £671m £205m
Capital Value £260/sq.ft. £113/sq.ft.
Average rent £14.52/sq.ft. £7.23/sq.ft.
Reversionary Yield 7.6% 7.5%
This portfolio of business and industrial centres with low capital cost and
rental per sq.ft. represents a continuing strength for the Group. On a number of
these sites we also have plans for intensification or change of use. The phasing
of our redevelopment plans for these properties are as follows:
Number Current
Valuation
-----------------------------------------------------------------------------
Planning expected to be achieved in next 18 months 10 £108m
Redevelopment completed in next 5 years 15 £163m
Redevelopment Update
--------------------
We are making good progress on planning and received a revised planning consent
in November at Thurston Road, Lewisham for 406 residential units (up from 270
initially) and 40,000 sq.ft. of ground floor retail space and 4,000 sq.ft. of
live-work accommodation. This scheme replaces 46,000 sq.ft. of existing
industrial space.
In January we received planning consent at our Parmiter estate, Bethnal Green
for 106 apartments, 54 student studios and 27,000 sq.ft. of commercial space
replacing 35,000 sq.ft. of existing industrial space. Contracts have been
exchanged to sell this site in February for its book value of £11m.
At Linton House, Southwark we have received planning consent for a two floor
extension providing an additional 17,000 sq.ft. of office space.
Good progress has continued in our Glebe joint venture in line with the original
business plan. In addition to the planning consent we received at Wandsworth
Business Village last quarter, we obtained outline planning consent in December
at Grand Union, North Kensington for 110,000 sq.ft. of new office space, 11,000
sq.ft. of retail space and 145 residential units replacing the existing 51,000
sq.ft. of commercial space.
Acquisitions and Disposals
--------------------------
In the current market there is limited stock available that meets our investment
criteria. Only two acquisitions were made in the quarter and no disposals.
Name of Property Description Acquisition Price Income Market Rent
Date £m £000 £000
Neil House, 45,000 sq. ft
London E1 retail and
offices 16 October 10.8 415 879
Quicksilver Place, 28,000 sq. ft
London N22 single 29 October 2.0 102 136
industrial unit
Total 12.8 517 1,015
Yield 4.0% 7.9%
• Neil House, on the edge of Brick Lane, is a site near to our existing
Whitechapel Technology Centre. We have been monitoring this property for
many years. Local demand offers good opportunity for upgrading and
repositioning as a business centre to significantly improve both occupancy
and rents.
• The acquisition of Quicksilver Place in Wood Green complements our
existing cluster of properties in this regeneration area adjacent to The
Chocolate Factory.
We expect to see more property become available on financially attractive terms
for the Group, sourcing many of these directly from our extensive property
database.
Financial Review
A summary of performance in the nine months is set out below:
Nine months ended 31 December
-------------------------------
£m 2007 2006
-----------------------------------------------------------------------------
Trading - net rental income 35.0 30.7
Trading - operating profit 30.4 23.3
Interest costs (21.1) (16.8)
Trading - profit 9.1 6.4
Revaluation (loss)/gain (38.6) 72.3
Joint venture (loss)/profit (3.1) 0.2
Other (loss)/profits (0.4) 6.3
Total (loss)/profit before tax (33.0) 85.2
Cash generated from operations 31.4 25.9
The first nine months has seen a strong growth in net rental income up 14.0% on
last year. This increase combined with the £2m non-refundable option fee
received in September and flat administrative costs has resulted in an increase
of 30.5% in trading operating profits.
Operating profit has translated into strong growth for operating cashflow which
is up 21.2% year on year. There has been no discernible deterioration in the
credit quality of our customer base and bad debts continue to run at less than
0.5% of rental income, in line with the long term trend.
Interest costs have risen year on year with debt at December £93m higher than in
2006 and interest rates averaging 6.9% in the current year compared to 6.1% last
year. The interest rate cost moderated somewhat in the third quarter at 6.8%
compared to 7.0% in the first half reflecting a reduction in libor rates and the
£150m fixed rate hedge taken out in November at an all-in cost of 6.4%.
The joint venture loss includes a revaluation reduction of £4.3m in the last
quarter (£3.4m reduction in the year to date), with ERV growth of 2.9% offset by
a softening in reversionary yield of 40 bps from 6.2% to 6.6%.
Trading profits have grown strongly to £9.1m, up £2.7m (42%) on last year. At a
total PBT level, the revaluation reduction on both the Workspace and Joint
Venture portfolios results in a net loss in the nine months of £33.0m.
Net assets at £542m are down £55m in the quarter and £9m on last year as a
result of the revaluation reductions seen in the last quarter. On a diluted net
asset value per share basis this equates to 313p at December compared to 343p in
September, a reduction of 8.7%.
Total bank debt at December is £437m. This is supported by banking facilities of
£499m, £270m falling due in August 2010, £150m due in November 2012 with the
remaining £79m of facilities rolling on a yearly basis. Interest cover based on
trading profits in the nine months is 1.44 and loan to value is 44%. As at
December the Group had £62m of available facilities together with £133m of
uncharged assets.
Prospects
The fundamental dynamics of London as a global city underpin our business model,
comprising:
• an increasing population which is younger, more diverse and more
entrepreneurial;
* a concentration of successful and fast growing businesses growing in
number;
* an ever increasing demand on finite land in London; and
* continuing rejuvenation and regeneration.
The trading performance and valuation highlight the resilience of this model.
Strong operating cashflows generated by the business and a sound capital base
provide a platform for both investment and dividend growth.
We and our customers cannot be immune to the effects of the current
uncertainties in the financial markets. However, we have every reason to expect
our track record of out-performance through economic cycles to continue. Our
knowledge of the London property market, the location of our properties, our
skills in managing our portfolio and our position as a trusted partner for
mixed-use developments, make us well placed to exploit acquisition and
redevelopment opportunities that will arise over the coming years.
Your Board remains positive on the prospects for the Group.
Key Statistics
Quarter Quarter Quarter Quarter Quarter
ending ending ending ending ending
31/12/2007 30/09/2007 30/06/2007 31/03/2007 31/12/2006
Workspace Group
directly owned portfolio
Number of estates 106 104 101 101 99
Lettable floorspace
(million sq ft)+ 5.0 5.0 4.9 4.9 4.8
Number of lettable units 4,522 4,441 4,394 4,304 4,233
ERV £72.1m £69.3m £66.5m £65.3m £60.3m
Reversionary Yield* 7.2% 6.7% 6.5% 6.5% 6.4%
Net annual rent roll of
occupied units £51.1m £49.5m £48.2m £47.2m £43.7m
Average rent
per sq ft £11.80 £11.54 £11.47 £11.34 £10.85
Overall occupancy 86.2% 86.4% 85.8% 84.8% 83.9%
Like-for-like lettable
floor space (million sq ft) 4.1 4.1 4.1 4.1 4.1
Like-for-like net annual
rent roll £40.4m £39.9m £39.1m £38.2m £37.5m
Like-for-like average
rent (£ per sq ft) £11.05 £10.85 £10.74 £10.61 £10.37
Like-for-like occupancy 88.8% 89.2% 88.5% 87.6% 87.7%
Workspace Glebe joint
venture portfolio
Number of estates 17 16 15 15 14
Lettable floorspace
(million sq ft)+ 1.2 1.2 1.2 1.2 1.2
Number of lettable units 866 823 813 813 811
ERV £10.7m £10.4m £10.3m £10.3m £10.2m
Reversionary Yield* 6.6% 6.2% 6.3% 6.3% 6.5%
Net annual rent roll of
occupied units £7.2m £7.8m £7.9m £8.1m £8.1m
Average rent per sq ft £7.64 £7.87 £7.77 £7.81 £7.84
Overall occupancy 81.7% 85.3% 87.7% 89.7% 89.9%
Financial Performance (£m)
Net rental income 11.8 11.4 11.8 10.9 9.6
Trading profit before interest 9.7 11.0 9.7 10.2 6.9
Revaluation (reduction)/
surplus (50.8) (8.8) 21.0 23.0 12.6
(Loss)/profit before taxation (52.9) (5.0) 24.9 27.3 15.8
Investment property valuation 1,003 1,035 1,028 1,002 940
Net assets 542 597 608 583 550
Net asset value per share (£) £3.16 £3.48 £3.54 £3.40 £3.23
Diluted adjusted net asset
value per share (£) £3.13 £3.43 £3.49 £3.36 £3.32
Trading interest cover 1.44x 1.52x 1.45x 1.44x 1.39x
(cumulative)
Gearing (%) 81% 71% 63% 65% 62%
Loan to value (%) 44% 41% 39% 38% 37%
Available borrowing facilities
(£m) 62 79 118 65 99
+Excludes storage space
* Based on ERV divided by valuation
The like-for-like portfolio is defined as properties that have been held
throughout a 12 month period and have not been subject to a refurbishment
programme in the last 24 months.
Consolidated Income Statement
Audited Unaudited Unaudited
Year ended 9 months ended 9 months ended
31 March 2007 31 December 2007 31 December 2006
(restated+) (restated+)
£m Notes Trading Other Total £m
operations items*
£m £m £m
59.9 Revenue 1 49.4 - 49.4 44.2
(18.3) Direct costs 1 (14.4) - (14.4) (13.5)
------------------------------------------------------------------------------
41.6 Net rental income 1 35.0 - 35.0 30.7
(10.0) Administrative expenses (6.8) (0.1) (6.9) (7.2)
95.3 Change in fair value - (38.6) (38.6) 72.3
of investment property
1.8 Other income 2a 2.2 - 2.2 0.9
Profit on disposal
4.4 of investment properties 2b - - - 4.5
------------------------------------------------------------------------------
133.1 Operating profit 30.4 (38.7) (8.3) 101.2
Finance income - interet
0.1 receivable 0.1 - 0.1 0.1
Finance costs - interest 3
(23.3) payable (21.2) - (21.2) (16.9)
------------------------------------------------------------------------------
109.9 9.3 (38.7) (29.4) 84.4
Change in fair value of
0.9 derivative financial instruments - (0.3) (0.3) 0.6
Share of joint venture post-tax
1.7 (loss)/profit 12 (0.2) (3.1) (3.3) 0.2
------------------------------------------------------------------------------
112.5 (Loss)/profit before tax 9.1 (42.1) (33.0) 85.2
80.9 Taxation (0.2) (0.1) (0.3) 75.0
------------------------------------------------------------------------------
193.4 (Loss)/profit for the period 8.9 (42.2) (33.3) 160.2
after tax and attributable to
equity shareholders
------------------------------------------------------------------------------
115.1p Basic earnings per share 4 5.2p (24.6)p (19.4)p 95.8p
112.5p Diluted earnings per share 4 5.1p (24.3)p (19.2)p 93.0p
* Other items - the definition of other items is consistent with that noted in
the Annual Report and Accounts 2007 and in previous quarters.
+ Refer to note 2(a)
Consolidated Statement of Recognised Income and Expense (SORIE)
Audited Unaudited Unaudited
Year ended 9 months ended 9 months ended
31 March 2007 31 December 31 December
2007 2006
£m £m £m
193.4 (Loss)/profit for the financial (33.3) 160.2
period
- Fair value movement on (1.9) -
derivatives
-------------------------------------------------------------------------------
193.4 Total recognised income and (35.2) 160.2
expense for the period
-------------------------------------------------------------------------------
Consolidated Balance Sheet
Audited Unaudited Unaudited
31 March 2007 31 December 31 December
2007 2006
£m Notes £m £m
Non-current assets
1,001.6 Investment properties 6 1,003.2 940.1
0.3 Intangible assets 0.4 0.2
3.3 Property, plant and equipment 3.1 3.4
18.5 Investment in joint venture 12 15.1 17.8
------------------------------------------------------------------------------
1,023.7 1,021.8 961.5
------------------------------------------------------------------------------
Current assets
8.8 Trade and other receivables 10.9 9.6
0.1 Financial assets - derivative - 0.1
financial instruments
2.4 Cash and cash equivalents 2.7 2.1
------------------------------------------------------------------------------
11.3 13.6 11.8
------------------------------------------------------------------------------
Current liabilities
(20.4) Financial liabilities - 8 (62.0) (21.2)
borrowings
(0.3) Financial liabilities - (2.4) (0.6)
derivative financial instruments
(32.3) Trade and other payables (30.5) (30.9)
(17.6) Current tax liabilities 7 - (21.8)
------------------- -----------------------------------------------------------
(70.6) (94.9) (74.5)
-------------------------------------------------------------------------------
(59.3) Net current liabilities (81.3) (62.7)
Non-current liabilities
(360.7) Financial liabilities - 8 (377.9) (323.2)
borrowings
(0.2) Deferred tax liabilities (0.2) (25.5)
(20.9) Provisions 10 (20.9) -
-------------------------------------------------------------------------------
(381.8) (399.0) (348.7)
-------------------------------------------------------------------------------
582.6 Net assets 541.5 550.1
-------------------------------------------------------------------------------
Shareholders' equity
17.4 Ordinary shares 11 17.4 17.4
30.7 Share premium 11 30.8 30.6
(2.8) Investment in own shares 11 (4.5) (3.8)
1.3 Other reserves 11 (0.2) 0.8
536.0 Retained earnings 11 498.0 505.1
-------------------------------------------------------------------------------
582.6 Total shareholders' equity 11 541.5 550.1
-------------------------------------------------------------------------------
£3.40 Net asset value per share 5 £3.16 £3.23
(basic)
£3.36 Diluted adjusted net asset 5 £3.13 £3.32
value per share
Consolidated Cash Flow Statement
Audited Unaudited Unaudited
Year ended 9 months ended 9 months ended
31 March 2007 31 December 2007 31 December 2006
£m Notes £m £m
Cash flows from operating
activities
37.1 Cash generated from 9a 31.4 25.9
operations
0.1 Interest received 0.1 0.1
(23.0) Interest paid (25.6) (16.7)
0.1 Tax (paid)/refunded (18.9) -
-----------------------------------------------------------------------------
14.3 Net cash from operating activities (13.0) 9.3
Cash flows from investing activities
(74.6) Purchase of investment properties (23.8) (44.9)
(20.3) Capital expenditure on (15.3) (14.8)
investment properties
160.3 Net proceeds from disposal - 159.9
of investment properties
(4.8) Tax paid on disposal of (0.4) (2.7)
investment properties
(0.2) Purchase of intangible assets (0.2) (0.1)
(0.3) Purchase of property, (0.4) (0.3)
plant and equipment
(19.5) Investment and loan to joint venture - (19.5)
------------------------------------------------------------------------------
40.6 Net cash from investing activities (40.1) 77.6
Cash flows from financing activities
0.3 Net proceeds from issue of 0.1 0.2
ordinary share capital
- Net proceeds from issue of 57.6 -
bank borrowings
(47.0) Net repayment of bank borrowings - (81.6)
1.7 ESOT shares net (purchase)/release (0.8) 0.9
(0.1) Finance lease principal payments (0.1) -
(6.4) Dividends paid to shareholders (4.7) (4.1)
------------------------------------------------------------------------------
(51.5) Net cash from financing activities 52.1 (84.6)
------------------------------------------------------------------------------
3.4 Net (decrease)/increase in (1.0) 2.3
cash and cash equivalents
------------------------------------------------------------------------------
(1.9) Cash and cash equivalents 9b 1.5 (1.9)
at start of period
1.5 Cash and cash equivalents 9b 0.5 0.4
at end of period
-----------------------------------------------------------------------------
Notes to the Quarterly Report
For the 9 months ended 31 December 2007
1. Analysis of net rental income
Year ended 9 months ended 9 months ended
31 March 2007 31 December 2007 31 December 2006
(restated+)
Revenue Direct Net Revenue Direct Net Revenue Direct Net
costs rental cots rental costs rental
income income income
£m £m £m £m £m £m £m £m £m
45.6 (0.2) 45.4 Rental 37.9 (0.3) 37.6 33.6 (0.2) 33.4
income
12.3 (17.1) (4.8) Service 10.1 (13.3) (3.2) 9.2 (12.5) (3.3)
charges and
other
recoveries
2.0 (1.0) 1.0 Services, 1.4 (0.8) 0.6 1.4 (0.8) 0.6
fees,
commissions
and
sundry
income
-------------------------------------------------------------------------------
59.9 (18.3) 41.6 49.4 (14.4) 35.0 44.2 (13.5) 30.7
-------------------------------------------------------------------------------
+ Refer to note 2(a)
The Group operates a single business segment, providing business accommodation
for rent in London, which is continuing.
2(a). Other income
Year ended 9 months ended 9 months ended
31 March 2007 31 December 31 December
2007 2006
(restated+) £m (restated+)
£m £m
1.1 Non-refundable option fees for 2.2 -
potential sale of property
0.7 Insurance proceeds less diminution - 0.9
in value at Westwood Business Centre
----------------------------------------------------------------------------
1.8 2.2 0.9
----------------------------------------------------------------------------
+Prior period comparatives have been restated for the following: i) the March
2007 comparatives have been restated to include £1.1m non refundable option
fees, these fees were formerly disclosed in Revenue - Services, fees,
commissions and sundry income in previous periods. ii) the December 2006
comparatives have been restated with regard to the accounting for the fire at
Westwood Business Centre to be consistent with the presentation in the 2007
Annual Report and Accounts.
2(b). Profit on disposal of investment properties
Year ended 9 months ended 9 months ended
31 March 2007 31 December 31 December
2007 2006
£m £m £m
168.3 Gross proceeds from sale of - 168.3
investment properties
(161.2) Book value at time of sale plus - (161.1)
sale costs
----------------------------------------------------------------------------
7.1 - 7.2
(2.7) Unrealised profits on sale of - (2.7)
properties to joint venture
------------------------------------------------------------------------------
4.4 Pre tax profit on sale - 4.5
------------------------------------------------------------------------------
3. Finance costs
Year ended 9 months ended 9 months ended
31 March 2007 31 December 31 December
2007 2006
£m £m £m
20.9 Interest payable on bank loans 20.8 15.2
and overdrafts
0.5 Amortisation of issue costs of 0.3 0.4
bank loans
0.1 Interest payable on finance 0.1 -
leases
2.2 Interest payable on 11.125% and 0.6 1.6
11.625% Debenture Stock 2007
0.1 Interest payable on 11% - 0.1
Convertible Loan Stock 2011
(0.5) Interest capitalised on property (0.6) (0.4)
refurbishments
-----------------------------------------------------------------------------
23.3 21.2 16.9
-----------------------------------------------------------------------------
4. Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of ordinary shares
outstanding during the period, excluding those held in the employee share
ownership trust (ESOT).
For diluted earnings per share the weighted average number of ordinary shares in
issue is adjusted to assume conversion of all dilutive potential ordinary
shares. Following the conversion of the 11% Convertible Loan Stock in 2006 the
Group has only one class of dilutive potential ordinary shares: those share
options granted to employees.
Reconciliations of the earnings and weighted average number of shares used in
the calculations are set out below:
Profit Earnings Profit Earnings per share
per share
Year Year Earnings used for 9 months 9 months 9 months 9 months
ended ended calculation of earnings ended 31 ended 31 ended 31 ended 31
31 March 31 March per share December December December December
2007 2007 2007 2006 2007 2006
193.4 115.1 Earnings used for (33.3) 160.2 (19.4) 95.8
basic earnings per share
0.1 (1.1) Interest saving - 0.1 - (1.2)
net of taxation on
11% Convertible Loan
Stock dilution
- (1.5) Share option - - 0.2 (1.6)
scheme dilution
-------------------------------------------------------------------------------
193.5 112.5 Total diluted (33.3) 160.3 (19.2) 93.0
earnings
(182.7) (106.2) Less non trading items 42.2 (154.8) 24.3 (89.8)
------------------------------------------------------------------------------
10.8 6.3 Trading diluted earnings 8.9 5.5 5.1 3.2
------------------------------------------------------------------------------
Year ended Weighted average number of shares 9 months ended 9 months ended
31 March used for calculating earnings 31 December 31 December
2007 per share 2007 2006
Number Number Number
168,083,460 Weighted average number of shares 171,406,733 167,203,011
(excluding shares held in the
ESOT)
2,179,100 Dilution due to Share Option 2,469,892 2,947,264
Schemes
1,651,507 Dilution due to Convertible Loan - 2,192,000
Stock
------------------------------------------------------------------------------
171,914,067 Used for calculating diluted 173,876,625 172,342,275
earnings per share
------------------------------------------------------------------------------
5. Net assets per share
31 March 2007 Net assets used for calculation of net 31 December 31 December
assets per share 2007 2006
£m £m £m
582.6 Net assets at end of period (basic) 541.5 550.1
(0.9) Derivative financial instruments at fair value* 2.4 -
- Deferred tax on accelerated tax - 0.2
depreciation
0.4 Deferred tax on fair value change of (0.6) 25.3
investment properties*
0.3 Deferred tax on derivative financial - -
instruments*
------------------------------------------------------------------------------
582.4 Adjusted net assets 543.3 575.6
------------------------------------------------------------------------------
*Including share of joint venture (comparatives have been restated).
31 March 2007 Number of shares used for 31 December 31 December
Number calculating net assets per share 2007 2006
Number Number
174,221,087 Shares in issue at period end 174,311,997 174,080,087
(2,738,360) Less ESOT shares (2,941,069) (3,718,410)
---------------- --------------------------------------------------------------
171,482,727 Number of shares for calculating 171,370,928 170,361,677
basic net assets per share
2,179,100 Dilution due to Share Option 2,262,545 2,947,264
Schemes
-------------------------------------------------------------------------------
173,661,827 Number of shares for calculating 173,633,473 173,308,941
diluted adjusted net assets per
share
-------------------------------------------------------------------------------
6. Investment properties
31 March 2007 31 December 31 December
2007 2006 (restated+)
£m £m £m
954.0 Balance at beginning of period 1,001.6 954.0
102.1 Additions during the period 39.6 63.6
0.5 Capitalised interest on 0.6 0.4
refurbishments
(149.5) Disposals during the period - (149.5)
(0.8) Diminution in value due to fire loss+ - (0.7)
95.3 Change in fair value of investment (38.6) 72.3
property+
-------------------------------------------------------------------------------
1,001.6 Balance at end of period 1,003.2 940.1
-------------------------------------------------------------------------------
+Refer to note 2(a)
Valuation
The Group's investment properties were revalued at 31 December 2007 by CB
Richard Ellis, Chartered Surveyors, a firm of independent qualified valuers. The
valuations were undertaken in accordance with the Royal Institution of Chartered
Surveyors Appraisal and Valuation Standards on the basis of market value. Market
value is defined as the estimated amount for which a property should exchange on
the date of valuation between a willing buyer and willing seller in an arm's
length transaction.
The reconciliation of the valuation report to the total shown in the
Consolidated Balance Sheet as non-current assets, investment properties, is as
follows:
31 March 31 December 31 December
2007 2007 2006
£m £m £m
1,000.9 Total per CB Richard Ellis valuation report 1,002.2 942.2
(2.5) Owner occupied property (2.8) (2.4)
3.6 Head leases treated as finance leases under 4.1 0.7
IAS 17
(0.4) Short leases valued as head leases (0.3) (0.4)
------------------------------------------------------------------------------
1,001.6 Total per balance sheet 1,003.2 940.1
------------------------------------------------------------------------------
7. Current tax liabilities
31 March 2007 31 December 2007 31 December 2006
£m £m £m
17.6 Current tax liabilities - 21.8
-------------------------------------------------------------------------------
The liability at 31 December 2006 and 31 March 2007 included the REIT conversion
charge of £18.8m which was paid on 14 July 2007. The Group currently has a tax
debtor of £1.4m which represents an overpayment of tax in prior years and which
is considered recoverable. This is included under trade and other receivables on
the balance sheet.
8. Financial liabilities - borrowings
31 March 2007 31 December 2007 31 December 2006
£m £m £m
20.4 Current liabilities 62.0 21.2
360.7 Non-current liabilities 377.9 323.2
---------------- -------------------------------------------------------------
381.1 439.9 344.4
------------------------------------------------------------------------------
Maturity:
31 March 2007 31 December 2007 31 December 2006
£m £m £m
Secured (excluding finance leases)
20.4 Repayable in less than one year 62.0 21.2
- Repayable between one year and two years - -
132.7 Repayable between two years and three years 225.0 123.1
225.0 Repayable between three years and four years - 200.0
- Repayable between four years and five years 150.0 -
years
-------------------------------------------------------------------------------
378.1 437.0 344.3
(0.6) Less cost of raising finance (1.2) (0.6)
-----------------------------------------------------------------------------
377.5 435.8 343.7
Finance leases (part secured)
3.6 Repayable in five years or more 4.1 0.7
------------------------------------------------------------------------------
381.1 439.9 344.4
------------------------------------------------------------------------------
9. Notes to cash flow statement
a) Reconciliation of profit for the period to cash generated from operations:
Year ended 9 months ended 9 months ended
31 March 2007 31 December 31 December
2007 2006
(restated+)
£m £m £m
193.4 (Loss)/profit for the period (33.3) 160.2
(80.9) Tax 0.3 (75.0)
0.6 Depreciation 0.5 0.5
0.1 Amortisation of intangibles 0.1 0.1
(4.4) Profit on disposal of investment - (4.5)
properties
(95.3) Change in fair value of investment 38.6 (72.3)
property
0.8 Diminution in value due to fire - 0.7
loss
(0.9) Fair value changes on financial 0.3 (0.6)
instruments
(0.1) Interest income (0.1) (0.1)
23.3 Interest expense 21.2 16.9
(1.7) Share in joint venture post tax 3.3 (0.2)
loss/(profit)
Changes in working capital:
(1.1) Increase in trade and other (0.8) (2.3)
receivables
3.3 Increase in trade and other 1.3 2.5
payables
-------------------------------------------------------------------------------
37.1 Cash generated from operations 31.4 25.9
------------------------------------------------------------------------------
+Refer to note 2(a)
b) Reconciliation of cash and cash equivalents:
For the purposes of the cash flow statement, the cash and cash equivalents
comprise the following:
31 March 2007 31 December 31 December
2007 2006
£m £m £m
- Cash at bank and in hand - -
2.4 Restricted cash - tenants' deposit deeds 2.7 2.1
(0.9) Bank overdrafts (2.2) (1.7)
-------------- ---------------------------------------------------------------
1.5 0.5 0.4
------------------------------------------------------------------------------
10. Provisions
31 March 2007 31 December 31 December
2007 2006
£m £m £m
- Balance at start of period 20.9 -
20.9 Provision for tax indemnity - -
--------------------- --------------------------------------------------------
20.9 Balance at end of period 20.9 -
------------------------------------------------------------------------------
On the formation of the joint venture with Glebe (which was created by a merger
and so triggered no tax liabilities) the Group gave an indemnity that should a
tax liability arise in the future on the disposal of any of the properties that
have been transferred, then the Group would pay to the joint venture a
proportion of the liability based on the pre-merger gain. An appropriate
provision under current tax law has been made for this liability.
11. Statement of changes in shareholders' equity
31 Share Share InvestmentOther Retained 31 31
March capital premium in own reservesearnings Dec Dec
2007 shares 2007 2006
Total Total Total
equity equity equity
£m £m £m £m £m £m £m £m
390.3 Balance at start 17.4 30.7 (2.8) 1.3 536.0 582.6 390.3
of period
0.3 Share issues - 0.1 - - - 0.1 0.2
2.3 ESOT shares net - - (1.7) - - (1.7) 1.3
(purchase)/release
(6.4) Dividends paid - - - - (4.7) (4.7) (4.1)
2.0 Loan stock - - - - - - 2.0
conversion
0.7 Value of - - - 0.4 - 0.4 0.2
employee services
- Fair value - - - (1.9) - (1.9) -
movement on
derivatives
193.4 (Loss)/profit - - - - (33.3) (33.3) 160.2
for the period
-------------------------------------------------------------------------------
582.6 Balance at end 17.4 30.8 (4.5) (0.2) 498.0 541.5 550.1
of period
-------------------------------------------------------------------------------
On 18 July 2007 the Employee Share Ownership Trust (ESOT) purchased 500,000
shares in the Company for a cash consideration of £1.9m.
12. Joint Venture
Workspace Group PLC holds 50% of the ordinary share capital of a joint venture
company, Workspace Glebe Limited. Its interest in this joint venture has been
equity accounted.
The Group's share of amounts of each of current assets, long term assets,
current liabilities and long term liabilities, income and expenses are shown
below:
Assets and liabilities:
31 March 2007 31 December 31 December
2007 2006
£m £m £m
78.8 Investment properties 78.7 76.7
2.2 Current assets 1.6 2.1
------------------------------------------------------------------------------
81.0 Total assets 80.3 78.8
------------------------------------------------------------------------------
(1.8) Current liabilities (2.4) (1.7)
(60.7) Non-current liabilities (62.8) (59.3)
------------------------------------------------------------------------------
(62.5) Total liabilities (65.2) (61.0)
------------------------------------------------------------------------------
18.5 Group share of joint venture net assets 15.1 17.8
-------------------------------------------------------------------------------
Income and expenses:
Year ended 9 months ended 9 months ended
31 March 2007 31 December 31 December
£m 2007 2006
£m £m
4.2 Revenue 3.8 2.9
(1.1) Direct costs (1.0) (0.8)
-----------------------------------------------------------------------------
3.1 Net rental income 2.8 2.1
(0.1) Administrative expenses - -
1.4 Change in fair value of investment (3.4) (0.1)
property
(3.1) Finance costs - interest payable (2.9) (2.2)
1.2 Change in fair value of derivative (1.1) 0.5
financial instruments
-------------------------------------------------------------------------------
2.5 (Loss)/profit before tax (4.6) 0.3
(0.8) Taxation 1.3 (0.1)
------------------------------------------------------------------------------
1.7 (Loss)/profit after tax (3.3) 0.2
------------------------------------------------------------------------------
13. Post balance sheet events
A sales contract was exchanged in March 2007 for the sale of Parmiter
Industrial Estate a 35,000 sq.ft. industrial estate in London, E2 dependent on
planning consent. After the period end planning consent was granted for a mixed
use development and the sale of the asset is now expected to complete in
February 2008.
14. Basis of preparation
The financial information reflects the current versions of the standards of the
International Accounting Standards Board (IASB) and interpretations of the
International Financial Reporting Interpretations Committee (IFRIC) as currently
adopted by the European Union.
The Group's accounting policies are unchanged from those set out in the Annual
Report and Financial Statements for the year ended 31 March 2007 and have been
applied in preparing the financial information contained in this report.
This report was approved by the Board on 8 February 2008.
This report is unaudited and does not constitute statutory accounts within the
meaning of Section 240 of the Companies Act 1985. The financial statements for
the year to 31 March 2007, which were prepared under IFRS have been delivered
to the Registrar of Companies. The auditors' opinion on those financial
statements was unqualified and did not contain a statement made under
Section 237(2) or Section 237(3) of the Companies Act 1985.
15. Quarterly Report
Copies of this statement will be dispatched to shareholders on 11 February 2008
and will be available from the Group's registered office at Magenta House, 85
Whitechapel Road, London, E1 1DU and on the Group's website
www.workspacegroup.co.uk from 9.00am on that day.
16. Glossary of Terms
A full glossary of terms used within this report is included in the Group's
Annual Report and Accounts 2007, available on the Group's website
www.workspacegroup.co.uk .
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