1st Quarter Results

Workspace Group PLC 12 August 2002 WORKSPACE POISED FOR FURTHER GROWTH AS DEMAND FROM SME SECTOR REMAINS STRONG Workspace Group PLC ('Workspace'), today announces its results for the three months ended 30 June 2002. Workspace is the leading provider of flexible business accommodation to small and medium size enterprises ('SMEs') in London and the South East. • Pre-tax profits £2.9 million ( 30 June 2001: £2.9 million) + • Annual rent roll up £0.86 million to £30.42 million (31 March 2002: £29.56 million) • Average 'like-for-like' rent up 2% in quarter to £7.51 psf (31 March 2002: £7.36 psf) • Like-for-like occupancy stable at over 89% • Facilities in place to fund over £130 million of acquisitions • Net asset value per share up to £13.58 (31 March 2002: £13.53) (+ The first quarter of 2001/02 included a contribution from the Midlands portfolio which was disposed of on 15 June 2001. The funds realised from this disposal were reinvested in properties showing a lower initial yield in London and the South East which has had the effect of slowing immediate growth whilst benefiting prospects going forward.) Commenting, Harry Platt, Chief Executive, said, ' The portfolio has performed extremely well. I am delighted that the excellent growth from our London and South East properties has covered the effect of the disposal of the Midlands portfolio last year. This, coupled with the extra potential from recent acquisitions, will underpin growth going forward. ' Looking to the future, Workspace's prospects remain very bright. Despite the turmoil in the financial markets, the SME sector in London and the South East remains buoyant with a good level of enquiries. ' Now, midway through the second quarter, Workspace's like-for-like rent roll continues to grow and we are currently on target to meet our expectations for the year. Meanwhile, we have the funds in place to expand our business and have a number of potential acquisitions either in legal hands or under negotiation.' -ends- Date: 12 August 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 This has been another quarter of excellent progress, especially given the substantial shift in the spread of the portfolio since the comparable period last year. Throughout the quarter like for like occupancy has remained stable at above 89% whilst good progress has been made in lettings and renewals, driving the rent roll forward. Average rents of the London and South East portfolio have increased by 2.0% in the quarter (from £7.36 to £7.51 per sq. ft). The rent roll has increased by £0.86 million or 2.9% to £30.42 million (from £29.56 million). Of this change £0.26 million reflects the net effect of acquisitions whilst £0.60 million reflects underlying rental growth. Profits in the first quarter this year at £2.9m are equivalent to those in the same period last year. This performance has been achieved despite the dilutive effect of the sale of the Group's Midlands portfolio at the end of the first quarter last year. Future years will benefit from the reinvestment of the proceeds in London and South East properties with greater growth potential. Following the quarter end, the Group completed the reorganisation of its borrowing facilities and now has capacity for further substantial acquisitions in London and the South East. One new property acquisition was contracted during the period, whilst others are in legal hands. Further progress was also made on the Group's sites earmarked for disposal for residential development at 3 Mills (Bridport Site) and Hooley Lane, Redhill. Acquisitions and Disposals One acquisition was made in the quarter, in Milton Keynes. Details are given below. Name of Property Description Acquisition/Sale Annual Income Price Acquisitions: Darin Court, Milton Keynes 29,400 sq. ft business £3,000,000 £255,300 centre with 27 units Other acquisitions are in legal hands, or under negotiation. Cash Flow and Financing There was a net cash inflow of £0.20 million (2001: £0.98 million) during the period. Net cash flow from operating activities was an inflow of £5.6 million for the quarter (2001: £5.1 million). Capital expenditure in the quarter was £5.7 million. At the quarter end gearing stood at 79.9% (2001: 60.5%). Following the renewal of its facility with the Royal Bank of Scotland (RBS) in March 2002 (which increased the loan by £67m to £100m over a five year term), the Group refinanced its facility with WestLB shortly after the quarter end. This was a £122m commercial paper facility on which £114m was drawn. The Group was obliged to refinance this facility and, having considered the range of opportunities available including bond issuance, concluded that the senior debt market offered the best option to it. A new £200m facility was negotiated with Bradford & Bingley Plc. This new arrangement, linked to that secured with RBS will provide the financial platform for the Group's future growth. In simple terms, the Group has over £130 million unutilised facilities of which £85m is immediately available for drawdown for investment. Investment of this £85m will provide the capacity to draw on the balance of the facilities. Occupancy and Trading Statistics The Group's key statistics relating to its trading operations are given in the table below. 30 June 31 March 2002 2002 Number of estates 88 87 Total floorspace at end of period (sq. ft.) 4,870,735 4,849,758 of which: London and South East (sq. ft.) 4,457,968 Three Mills and developments (sq. ft.) 412,767 Lettable floorspace of like for like portfolio (sq. ft.) 4,428,604 4,427,872 Lettable units (number) 3,705 3,726 Annual rent roll of occupied units (£) 30,419,208 29,560,157 Average rent (£/sq. ft) 7.39 7.20 Average rent of like-for-like portfolio (£/sq. ft) 7.51 7.36 Occupancy overall 84.52% 84.67% Occupancy of like-for-like portfolio 89.21% 89.15% Comparisons of overall occupancy and rent roll are distorted by acquisitions, disposals and transfers. The 'like-for-like portfolio' is defined as those properties, excluding Three Mills (which due to the short term nature of lettings of studio space has a volatile occupancy rate which can obscure overall patterns), that have been held throughout the year to date and which are not subject to refurbishment/redevelopment programmes. Current Trading Despite the turmoil in the financial markets, confidence in the SME sector in London and the South East remains buoyant with a good level of enquiries. Now, midway through the second quarter, Workspace's like-for-like rent roll continues to grow and we are currently on target to meet our expectations for the year. Meanwhile, we have the funds in place to expand our business and we have a number of potential acquisitions either in legal hands or under negotiation Unaudited Consolidated Profit and Loss Account for the 3 months ended 30 June 2002 3 months ended 30 June 2002 2001 £000 (restated) £000 ___________________________________________________________________________________ Turnover - continuing operations 10,331 10,013 Rent payable and direct costs (2,948) (2,705) ___________________________________________________________________________________ Gross profit 7,383 7,308 Administrative expenses (1,626) (1,401) ___________________________________________________________________________________ Operating profit - continuing operations 5,757 5,907 Profit on Disposal of investment property 2 3 Interest receivable 34 85 Interest payable and similar charges (2,911) (3,131) ___________________________________________________________________________________ Profit on ordinary activities before taxation 2,882 2,864 Taxation on profit on ordinary activities (865) (859) ___________________________________________________________________________________ Profit attributable to shareholders 2,017 2,005 Dividends (23) - ___________________________________________________________________________________ Retained for the period 1,994 2,005 ___________________________________________________________________________________ Earnings per shares (basic) 12.3p 12.6p Diluted earnings per share 12.1p 12.2p Other than the profit for the period there were no other recognised gains or losses during the period (2001: Nil) 2001 comparatives have been restated due to the application of FRS 19 (Deferred Tax). See Note 4. Consolidated Balance Sheet Unaudited Audited 30 June 2002 31 March 2002 £000 £000 ___________________________________________________________________________________ Fixed assets Tangible assets Investment properties 419,544 414,707 Other fixed assets 3,723 3,540 Investment in own shares 977 1,015 ___________________________________________________________________________________ 424,244 419,262 ___________________________________________________________________________________ Current Assets Stock: properties for sale 150 150 Debtors 6,600 6,189 Investments 5,304 5,443 Cash at bank and in hand 290 340 ___________________________________________________________________________________ 12,344 12,122 Creditors: amounts falling due within one year Loans and overdrafts (5,832) (6,120) Others (24,982) (24,844) ___________________________________________________________________________________ Net current liabilities (18,470) (18,842) ___________________________________________________________________________________ Total assets less current liabilities 405,774 400,420 Creditors: amounts falling due after more than one year (loans including Convertible Loan Stock) (178,441) (175,730) Provision for liabilities and charges (3,601) (3,365) ___________________________________________________________________________________ 223,732 221,325 ___________________________________________________________________________________ Capital and reserves Called up share capital 1,659 1,648 Share premium account 42,432 42,030 Revaluation reserve 144,588 144,588 Profit and loss account 35,053 33,059 ___________________________________________________________________________________ Shareholders' funds - equity interests 223,732 221,325 Minority Interests - - ___________________________________________________________________________________ Capital Employed 223,732 221,325 ___________________________________________________________________________________ Net asset value per share £13.58 £13.53 ___________________________________________________________________________________ Movement in shareholders' funds ___________________________________________________________________________________ Profit for the financial period 2,017 8,960 Dividends (23) (4,192) ___________________________________________________________________________________ 1,994 4,768 Issue of Shares 11 30 Share premium account 402 1,364 Revaluation reserve - increase - 26,863 Taxation on valuation surpluses realised on sale of properties - (150) ___________________________________________________________________________________ Net movement in shareholders' funds for the financial period 2,407 32,875 Shareholders' funds as at 1 April 2002/2001 221,325 188,450 ___________________________________________________________________________________ Shareholders' fund as at 30 June 2002/31 March 2002 223,732 221,325 ___________________________________________________________________________________ Unaudited Consolidated Cash Flow Statement for the 3 months ended 30 June 2002 3 months ended 30 June 2002 2001 £000 £000 ___________________________________________________________________________________ Net cash inflow from operating activities 5,553 5,137 Returns on investments and servicing of finance (2,049) (2,674) Taxation (742) (1,200) Net Capital (expenditure)/proceeds (5,709) 38,916 Equity dividends paid - - ___________________________________________________________________________________ Net cash (outflow)/inflow before use of liquid resources and financing (2,947) 40,179 Management of liquid resources 138 (17,009) Financing 3,011 (22,195) ___________________________________________________________________________________ Net cash inflow 202 975 ___________________________________________________________________________________ Reconciliation of net cash flow to movement in net debt Increase in cash 202 975 (Decrease)/Increase in liquid resources (138) 17,009 (Outflow)/inflow from movements in debt financing (2,675) 22,073 ___________________________________________________________________________________ Changes in debt resulting from cash flows (2,611) 40,057 ___________________________________________________________________________________ Net debt at 1 April (176,067) (157,147) Net debt at 30 June (178,678) (117,090) ___________________________________________________________________________________ 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 2002 included an unqualified report of the auditors. The Group's unaudited quarterly accounts for the period ended 30 June 2002 have been prepared on the basis of the accounting policies set out in the Annual Report and Accounts for the year ended 31 March 2002. 2. Segmental Analysis 3 months ended 30 June 2002 2001 £000 £000 ___________________________________________________________________________________ Rental Income 8,189 7,982 Service charges and other recoveries 1,856 1,715 Fees, commissions, and sundry income 286 316 ___________________________________________________________________________________ 10,331 10,013 ___________________________________________________________________________________ 3. Interest Payable 3 months ended 30 June 2002 2001 £000 £000 ___________________________________________________________________________________ Convertible loan stock and debenture stock interest 631 662 Mortgage and bank loan interest 2,394 2,445 Bank and other interest 23 24 Net development interest capitalised (137) - ___________________________________________________________________________________ Charged to profit and loss account 2,911 3,131 ___________________________________________________________________________________ 4. Taxation The taxation charge for the three months ended 30 June 2002 is based on the estimated effective tax rate for the year ending 31 March 2003 of 30% (due provision being made for both current and deferred taxation liabilities). For comparative purposes the taxation charge for the 3 months ended 30 June 2001 has been restated (30%). 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 192,420 (30 June 2001: 200,000) holding in own shares, (16,340,209 shares). Net assets per share have been calculated by dividing net assets at the end of each period, less value of investment in own shares, by the number of shares in issue at that time, less 192,420 (31 March 2002: 200,000) holding in own shares, (16,402,695 shares). 6. Valuation No valuation of investment properties has been carried out at 30 June 2002. The valuation shown in the unaudited accounts is based on the independent valuation at 31 March 2002, plus additions at cost less disposals at book value. 7. Creditors Creditors falling due within one year include tenants' deposits of £4.4 million (31 March 2002: £4.2 million) and deferred rental and service charges of £4.9 million (31 March 2002: £5.1 million). 8. Financial Instruments In accordance with the requirements of FRS 13, an assessment of the fair value of the Group's financial instruments held for financing purposes has been undertaken as at 30 June 2002. The results are summarised as follows: Book Value Fair Value Difference £ Million £ Million £ Million ___________________________________________________________________________________ Short term borrowings and current part of long term (5.8) (5.8) - borrowings Long term borrowings (178.4) (183.8) (5.4) Financial Assets 5.6 5.6 - Interest rate Caps /Collars 0.3 (2.5) (2.8) ___________________________________________________________________________________ (178.3) (186.5) (8.2) ___________________________________________________________________________________ This represents 49.6 pence per issued ordinary share and if applied to net asset value per share at 30 June 2002 would reduce the latter to £13.08. On a diluted basis, allowing for conversion of the Group's convertible loan stock, this adjustment reduces to 31.6 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. Interim Statement Copies of this statement will be dispatched to shareholders on Monday 12 August 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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