1st Quarter Results
Workspace Group PLC
20 August 2007
WORKSPACE - RENTAL GROWTH DRIVES VALUATION
Workspace Group PLC ('Workspace') today announces its results for the three
months to 30 June 2007. Workspace provides 4.9 million sq. ft of flexible
business accommodation to over 3,700 small and medium size enterprises ('SMEs')
in London.
Highlights:
• Net Asset Value (NAV) per share at £3.54
- up 4.1% in the quarter and 38.3% on 30 June 2006
• Total rent roll as at 30 June 2007 up 2.3% on 31 March 2007
- up 18.0% on 30 June 2006
• Average occupancy at June 2007 improved to 85.8% (March 2007: 84.8%)
• Net rental income of £11.8m, up 7.3% on the quarter to June 2006
• Trading profit for the quarter is £3.0m (2006: £2.7m)
• Portfolio valuation increased by 2.6% for the quarter to £1,028m
• Valuation surplus for the quarter £21.0m (2006: £34.7m)
• Gearing reduced to 63% (2006: 77%)
• Tax charge nil (2006: 12.8m) following the conversion to REIT status on 1
January 2007
Commenting on the results, Harry Platt, Chief Executive, said,
' The London SME market is vibrant which is resulting in a high level of demand
for our workspace. This demand plays to the fundamentals of our business with
rents growing strongly.
' The future for the Group is promising and the sentiment of our customers in
their businesses is positive.
' With a strong demand for space, growing rental values and good progress on
our improvement and regeneration plans, we are confident that we can continue to
deliver attractive capital and income growth returns for our shareholders.'
-ends-
Date: DRAFT
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
Chief Executive's Statement
The London SME market is vibrant which is resulting in a high level of demand
for our workspace. This demand plays to the fundamentals of our business with
rents growing strongly.
Regeneration activities have progressed well with two major refurbishments
completed in the quarter, one planning consent granted on appeal and two
planning applications submitted for sites in our Workspace Glebe joint venture.
We continue to monitor acquisition opportunities across London and will buy
where we see value although no properties were purchased during the first
quarter.
Rents
Rent roll as at 30 June 2007 is £48.2m, up 2.3% on 31 March 2007 and up 18.0% or
£7.3m on 30 June 2006. £2.7m of this annual increase relates to completed
refurbishment properties and £2.1m to acquisitions net of disposals.
The like for like annual rental increase at existing properties was 6.1%
improving from growth of 4.2% at March 2007. We are seeing market rents rising
across London although the rate of increase varies across the portfolio by
estate type and location.
Customer Activity
We continue to see strong levels of enquiries and lettings with improved
occupancy levels reflecting the strong demand from SME customers in London for
the product we can provide.
We target 90% occupancy at sites not subject to refurbishment or regeneration
and the number of properties running at this level increased by 9 in the
quarter. Of our more recently refurbished properties, Clerkenwell Workshops and
Enterprise House which were completed in June 2006 now have occupancy levels of
95% and 91% respectively.
+--------------------+------------+------------+-----------+
|Occupancy Level | June 2006| March 2007| June 2007|
+--------------------+------------+------------+-----------+
|Sites greater than | 46| 49| 58|
|90% | | | |
+--------------------+------------+------------+-----------+
|Sites 80%-90% | 27| 28| 19|
+--------------------+------------+------------+-----------+
|Sites less than 80% | 23| 24| 24|
+--------------------+------------+------------+-----------+
|Average Occupancy | 81.8%| 84.8%| 85.8%|
+--------------------+------------+------------+-----------+
Properties with lower occupancy primarily represent recent acquisitions, where
our intensive management and property improvement programmes are underway, or
properties where occupancy has been deliberately managed to lower levels to
progress refurbishment or added value programmes.
Valuation
The surplus for the quarter was £21.0m, equivalent to 12.1p per share. Our
directly owned portfolio was valued at £1,028m as at 30 June 2007. The largest
valuation increases in the first quarter have been at The Leathermarket £2.5m,
Clerkenwell £2.1m and Barley Mow £1.6m.
Valuation surplus per quarter (£m)
+--------------+--------------+--------------+--------------+--------------+
|June 06 |Sept 06 |Dec 06 |Mar 07 |Jun 07 |
+--------------+--------------+--------------+--------------+--------------+
|£35m |£25m |£12m |£23m |£21m |
+--------------+--------------+--------------+--------------+--------------+
We have highlighted previously that we expected valuation growth to increasingly
come from higher rental values. In 2006/7 we saw 70% of our valuation growth
come from rent increases and 30% from yield shift. This quarter's valuation has
seen reversionary yields remain stable at 6.5% with the overall valuation
increase in line with the higher rental values being achieved.
We believe the combination of our capital value per square foot of £210 and
average rental income of £11.47 for a portfolio of 4.9 million square feet, 98%
of which is within the boundary of London's M25 motorway, provides a substantial
opportunity for us to add value going forward.
Property Acquisitions and Disposals
During the first quarter there were no completed acquisitions or disposals.
Following the quarter end, we have purchased Ewer Street, SE1 a vacant office
site for £4.7m.
We continue to seek properties that offer the opportunity of delivering superior
rental growth through application of Workspace's operational capabilities, are
in improving areas or where intensification of use opportunities exist. Our REIT
status will provide us with additional opportunities for investment.
Regeneration Update
Refurbishment at both Greville Street and Lombard House was completed on time in
June 2007 and both properties are starting to let. Planning consent was granted
on appeal in May at Aberdeen Centre (Highbury) for a mixed use commercial and
residential scheme of 133,000 sq.ft. In the Workspace Glebe joint venture
planning applications have now been submitted for mixed-use commercial and
residential schemes at both Grand Union Centre and Wandsworth Business Village.
Management
Graham Clemett, Finance Director and Angus Boag, Development Director, have
recently joined the Workspace Executive Team. Chris Pieroni will be joining in
October as Operations Director. This gives us the capability for the next stage
of growth of the Group.
Financial Review
The first quarter has seen good income growth with net rental income of £11.8m
up 7.3% on the quarter to June 2006 (up 8.8% on a like for like basis).
Trading profit for the quarter is £3.0m (2006: £2.7m) with the growth in rental
income reduced by higher finance costs reflecting the impact of the increases in
base rate on our floating rate borrowings.
Profit before tax of £24.9m includes the revaluation gain of £21.0m which
compares to a revaluation gain of £34.7m in the quarter to June 2006 and £95.3m
in the full year 2006/7.
The tax charge for the quarter is nil (2006: £12.8m) following the conversion to
a REIT on 1 January 2007.
£19.5m of debenture stock (with an average interest cost of 11.3% pa) was repaid
in June 2007. A new revolving facility of £75m has been secured to ensure we
have sufficient funds for ongoing investment. At the end of June the Group had
available borrowing facilities of £118.1m with gearing of 63% (2006: 77%).
Net asset value per share at £3.54 is up 4.1% in the quarter and 38.3% on 30
June 2006. The significant increase over the last year reflects both the
increase in the portfolio valuation and the release of deferred tax provisions
following conversion to a REIT.
Prospects
The future for the Group is promising. Our core market in London is vibrant and
the sentiment of our customers in their businesses is positive.
With a strong demand for space, growing rental values and good progress on our
improvement and regeneration plans, we are confident that we can continue to
deliver attractive capital and income growth returns for our shareholders.
Whilst yields in the property market as a whole may be under pressure, we
consider the low capital value per square foot of our portfolio and
concentration in London are robust characteristics. Further, our decision to
significantly reduce gearing in the last year has given us greater flexibility
to exploit acquisition opportunities within this environment.
Key Statistics
+--------------------------------+---------+---------+-----------+-----------+---------+
| | Quarter| Quarter| Quarter| Quarter| Quarter|
| | ending| ending| ending| ending| ending|
| | | | | | |
| | 30 June| 31 March|31 December| 30| 30 June|
| | | | | September| |
| | 2007| 2007| 2006 | 2006| 2006|
+--------------------------------+---------+---------+-----------+-----------+---------+
|Workspace Group portfolio: | | | | | |
+--------------------------------+---------+---------+-----------+-----------+---------+
|Number of estates | 101| 101| 99| 99| 96|
+--------------------------------+---------+---------+-----------+-----------+---------+
|Lettable floorspace (million | 4.9| 4.9| 4.8| 5.0| 4.9|
|sq.ft)** | | | | | |
+--------------------------------+---------+---------+-----------+-----------+---------+
|Number of lettable units | 4,394| 4,304| 4,233| 4,215| 4,286|
+--------------------------------+---------+---------+-----------+-----------+---------+
|Net annual rent roll of occupied| £48.22m| £47.15m| £43.69m| £43.01m| £40.88m|
|units | | | | | |
+--------------------------------+---------+---------+-----------+-----------+---------+
|Average rent per sq ft | £11.47| £11.34| £10.85| £10.56| £10.22|
+--------------------------------+---------+---------+-----------+-----------+---------+
|Overall occupancy | 85.8%| 84.8%| 83.9%| 81.7%| 81.8%|
| | | | | | |
| | | | | | |
+--------------------------------+---------+---------+-----------+-----------+---------+
|Workspace Glebe joint venture | | | | | |
|portfolio: | | | | | |
+--------------------------------+---------+---------+-----------+-----------+---------+
|Number of estates | 15| 15| 14| 14| 14|
+--------------------------------+---------+---------+-----------+-----------+---------+
|Lettable floorspace (million | 1.2| 1.2| 1.2| 1.2| 1.1|
|sq.ft)** | | | | | |
+--------------------------------+---------+---------+-----------+-----------+---------+
|Number of lettable units | 813| 813| 811| 810| 806|
+--------------------------------+---------+---------+-----------+-----------+---------+
|Net annual rent roll of occupied| £7.90m| £8.12m| £8.08m| £7.76m| £7.50m|
|units | | | | | |
+--------------------------------+---------+---------+-----------+-----------+---------+
|Average rent per sq ft | £7.77| £7.81| £7.84| £7.39| £7.13|
+--------------------------------+---------+---------+-----------+-----------+---------+
|Overall occupancy | 87.7%| 89.7%| 89.9%| 91.6%| 92.5%|
| | | | | | |
| | | | | | |
+--------------------------------+---------+---------+-----------+-----------+---------+
|Financial Performance (£m): | | | | | |
+--------------------------------+---------+---------+-----------+-----------+---------+
|Revenue | 16.1| 16.8*| 14.6| 14.4| 15.2|
+--------------------------------+---------+---------+-----------+-----------+---------+
|Net rental income | 11.8| 12.0| 9.6| 10.1| 11.0|
+--------------------------------+---------+---------+-----------+-----------+---------+
|Trading profit before taxation | 3.0| 3.8| 1.3| 2.4| 2.7|
+--------------------------------+---------+---------+-----------+-----------+---------+
|Profit before taxation | 24.9| 27.3| 15.8| 26.3| 43.1|
+--------------------------------+---------+---------+-----------+-----------+---------+
|Investment portfolio valuation | 1,028.1| 1,001.6| 940.1| 930.4| 881.0|
+--------------------------------+---------+---------+-----------+-----------+---------+
|Net assets | 607.8| 582.6| 550.1| 437.4| 420.9|
+--------------------------------+---------+---------+-----------+-----------+---------+
|Net asset value per share (£) | £3.54| £3.40| £3.23| £2.58| £2.56|
+--------------------------------+---------+---------+-----------+-----------+---------+
|Diluted adjusted net assets per | £3.49| £3.36| £3.32| £3.34| £3.21|
|share (£) | | | | | |
+--------------------------------+---------+---------+-----------+-----------+---------+
|Trading interest cover | 1.45x| 1.44x| 1.39x| 1.46x| 1.45x|
+--------------------------------+---------+---------+-----------+-----------+---------+
|Gearing (%) | 63%| 65%| 62%| 80%| 77%|
+--------------------------------+---------+---------+-----------+-----------+---------+
|Available borrowing facilities | 118.1| 65.4| 99.2| 93.9| 145.7|
+--------------------------------+---------+---------+-----------+-----------+---------+
*Includes £1.1m option fees received for the potential sale of Thurston Road.
**Excludes storage space.
Acquisitions and disposals - 1 April 2007 to date
+---------------------+----------------------+-----------+----------+--------+----------+
|Name of Property |Description |Acquisition| | | Market |
| | | Date | | | rent at |
| | | | Price | Income | purchase |
| | | | | | |
| | | | £m | £000 | £000 |
+---------------------+----------------------+-----------+----------+--------+----------+
|Acquisitions | | | | | |
+---------------------+----------------------+-----------+----------+--------+----------+
|Ewer St, London, SE1 |14,000 sq. ft vacant | 23 July | 4.70m | Nil | 217 |
| |office building | | | | |
| | | | | | |
+---------------------+----------------------+-----------+----------+--------+----------+
| | | | | | |
+---------------------+----------------------+-----------+----------+--------+----------+
Consolidated Income Statement
Audited Unaudited Unaudited
Year ended 3 months ended 3 months ended
31 March 2007 30 June 2007 30 June 2006
(restated**)
Trading Other Total
operations items*
£m Notes £m £m £m £m
61.0 Revenue 1 16.1 - 16.1 15.2
(18.3) Direct costs 1 (4.3) - (4.3) (4.2)
------------------------------------------------------------------------------------------
42.7 Net rental income 1 11.8 - 11.8 11.0
(10.0) Administrative expenses (2.1) (0.3) (2.4) (2.4)
95.3 Gain from change in fair - 21.0 21.0 34.7
value of investment property
0.7 Other income 2a - - - 0.9
4.4 Profit on disposal of 2b - - - 4.5
investment properties
------------------------------------------------------------------------------------------
133.1 Operating profit 9.7 20.7 30.4 48.7
0.1 Finance income - interest - - - -
receivable
(23.3) Finance costs - interest 3 (6.7) - (6.7) (6.0)
payable
------------------------------------------------------------------------------------------
109.9 3.0 20.7 23.7 42.7
0.9 Change in fair value of - 0.2 0.2 0.4
derivative financial
instruments
1.7 Share of joint venture post 12 - 1.0 1.0 -
tax profit
------------------------------------------------------------------------------------------
112.5 Profit before tax 3.0 21.9 24.9 43.1
80.9 Taxation - - - (12.8)
------------------------------------------------------------------------------------------
193.4 Profit for the period after 3.0 21.9 24.9 30.3
tax and attributable to
equity shareholders
------------------------------------------------------------------------------------------
115.1p Basic earnings per share 4 1.7p 12.8p 14.5p 18.4p
112.5p Diluted earnings per share 4 1.7p 12.6p 14.3p 17.6p
* Other items - the definition of other items is consistent with that noted in
previous quarters.
** Refer to note 6
Consolidated Statement of Recognised Income and Expense (SORIE)
Audited Unaudited Unaudited
Year ended 3 months ended 3 months ended
31 March 2007 30 June 2007 30 June 2006
£m £m £m
193.4 Profit for the financial period 24.9 30.3
------------------------------------------------------------------------------------------
193.4 Total recognised income and expense 24.9 30.3
for the period
There is no difference between the profit for the financial period and the total
recognised income and expense for the period.
Consolidated Balance Sheet
Audited Unaudited Unaudited
31 March 2007 30 June 2007 30 June 2006
£m Notes £m £m
Non-current assets
1,001.6 Investment properties 6 1,028.1 881.0
0.3 Intangible assets 0.3 0.2
3.3 Property, plant and equipment 3.3 3.5
18.5 Investment in joint venture 12 19.5 17.7
------------------------------------------------------------------------------------------
1,023.7 1,051.2 902.4
Current assets
8.8 Trade and other receivables 11.0 8.2
0.1 Financial assets - derivative 0.4 0.1
financial instruments
2.4 Cash and cash equivalents 2.5 1.8
------------------------------------------------------------------------------------------
11.3 13.9 10.1
Current liabilities
(20.4) Financial liabilities - 8 (5.9) (3.3)
borrowings
(0.3) Financial liabilities - (0.4) (0.8)
derivative financial instruments
(32.3) Trade and other payables (34.8) (29.4)
(17.6) Current tax liabilities 7 (17.1) (3.2)
------------------------------------------------------------------------------------------
(70.6) (58.2) (36.7)
------------------------------------------------------------------------------------------
(59.3) Net current liabilities (44.3) (26.6)
------------------------------------------------------------------------------------------
Non-current liabilities
(360.7) Financial liabilities - 8 (378.0) (321.5)
borrowings
(0.2) Deferred tax liabilities (0.2) (133.4)
(20.9) Provisions 10 (20.9) -
------------------------------------------------------------------------------------------
(381.8) (399.1) (454.9)
------------------------------------------------------------------------------------------
582.6 Net assets 607.8 420.9
------------------------------------------------------------------------------------------
Shareholders' equity
17.4 Ordinary shares 11 17.4 16.9
30.7 Share premium 11 30.7 28.7
(2.8) Investment in own shares 11 (2.7) (5.1)
1.3 Other reserves 1.5 1.1
536.0 Retained earnings 11 560.9 379.3
------------------------------------------------------------------------------------------
582.6 Total shareholders' equity 11 607.8 420.9
------------------------------------------------------------------------------------------
£3.40 Net asset value per share (basic) 5 £3.54 £2.56
£3.36 Diluted adjusted net asset value 5 £3.49 £3.21
per share
Consolidated Cash Flow Statement
Audited Unaudited Unaudited
Year ended 3 months ended 3 months ended
30 June 2006 30 June 2007 31 March 2007
£m Notes £m £m
Cash flows from operating activities:
37.1 Cash generated from operations 9a 9.8 11.2
0.1 Interest received - -
(23.0) Interest paid (6.8) (7.3)
0.1 Tax (paid)/refunded (0.2) (0.2)
------------------------------------------------------------------------------------------
14.3 Net cash from operating activities 2.8 3.7
Cash flows from investing activities:
(74.6) Purchase of investment properties - (21.6)
(20.3) Capital expenditure on investment (5.7) (4.7)
properties
160.3 Net proceeds from disposal of - 148.4
investment properties
(4.8) Tax paid on disposal of investment (0.4) (1.1)
properties
(0.2) Purchase of intangible assets - -
(0.3) Purchase of property, plant and (0.2) (0.1)
equipment
(19.5) Investment and loan to joint venture - (19.5)
------------------------------------------------------------------------------------------
40.6 Net cash from investing activities (6.3) 101.4
Cash flows from financing activities:
0.3 Net proceeds from issue of ordinary - -
share capital
(47.0) Net repayment of bank borrowings (0.9) (104.7)
1.7 ESOT shares released 0.8 -
(0.1) Finance lease principal payments - -
(6.4) Dividends paid to shareholders - -
------------------------------------------------------------------------------------------
(51.5) Net cash from financing activities (0.1) (104.7)
------------------------------------------------------------------------------------------
3.4 Net (decrease)/increase in cash and (3.6) 0.4
cash equivalents
------------------------------------------------------------------------------------------
(1.9) Cash and cash equivalents at start of 9b 1.5 (1.9)
period
1.5 Cash and cash equivalents at end of 9b (2.1) (1.5)
period
Notes to the Quarterly Report
For the 3 months ended 30 June 2007
1. Analysis of net rental income
Year ended 3 months ended 3 months ended
31 March 2007 30 June 2007 30 June 2006
Revenue Direct Net Revenue Direct Net Revenue Direct Net
costs rental costs rental costs rental
income income income
£m £m £m £m £m £m £m £m £m
45.6 (0.2) 45.4 Rental income* 12.5 (0.1) 12.4 11.7 (0.1) 11.6
12.3 (17.1) (4.8) Service charges 3.2 (4.0) (0.8) 3.1 (4.0) (0.9)
and other
recoveries
3.1 (1.0) 2.1 Services, fees, 0.4 (0.2) 0.2 0.4 (0.1) 0.3
commissions and
sundry income**
---------------------------------------------------------------------------------------------
61.0 (18.3) 42.7 16.1 (4.3) 11.8 15.2 (4.2) 11.0
* Rental income includes lease surrender premia of £0.2m (31 March 2007: £0.3m,
30 June 2006: £0.1m).
**Sundry income includes £nil (31 March 2007: £1.1m; 30 June 2006 £nil) option
fees received from the potential sale of Thurston Road.
The Group operates a single business segment, providing business accommodation
for rent in London, which is continuing.
2(a). Other income
Amounts last year represent insurance proceeds received net of diminution in
value at Westwood Business Centre. Following a fire that destroyed part of the
property, it was decided that the damaged part would not be replaced.
2(b). Profit on disposal of investment properties
Year ended 3 months ended 3 months ended
31 March 2007 30 June 2007 30 June 2006
£m £m £m
168.3 Gross proceeds from sale of investment - 156.2
properties
(161.2) Book value at time of sale plus sale costs - (149.1)
-----------------------------------------------------------------------------------------
7.1 - 7.1
(2.7) Unrealised profits on sale of properties to - (2.6)
joint venture
-----------------------------------------------------------------------------------------
4.4 Pre tax profit on sale - 4.5
3. Finance costs
Year ended 3 months ended 3 months ended
31 March 2007 30 June 2007 30 June 2006
£m £m £m
20.9 Interest payable on bank loans and 6.1 5.4
overdrafts
0.5 Amortisation of issue costs of bank loans 0.1 0.1
0.1 Interest payable on finance leases 0.1 -
1.4 Interest payable on 11.125% First Mortgage 0.4 0.4
Debenture Stock 2007
0.8 Interest payable on 11.625% First Mortgage 0.2 0.2
Debenture Stock 2007
0.1 Interest payable on 11% Convertible Loan - 0.1
Stock 2011
(0.5) Interest capitalised on property (0.2) (0.2)
refurbishments
------------------------------------------------------------------------------------------
23.3 6.7 6.0
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 ended Year ended Earnings used for 3 months 3 months 3 months 3 months
31 March 31 March calculation of earnings ended ended ended ended
2007 2007 per share 30 June 2007 30 June 2006 30 June 2007 30 June 2006
£m pence £m £m pence pence
Earnings used for basic
193.4 115.1 earnings per share 24.9 30.3 14.5 18.4
Interest saving net of
taxation on 11%
Convertible Loan Stock
0.1 (1.1) dilution - 0.1 - (0.4)
- (1.5) Share option scheme - - (0.2) (0.4)
dilution
------------------------------------------------------------------------------------------------------------
193.5 112.5 Total diluted earnings 24.9 30.4 14.3 17.6
(182.7) (106.2) Less non trading items (21.9) (28.4) (12.6) (16.5)
------------------------------------------------------------------------------------------------------------
10.8 6.3 Trading diluted 3.0 2.0 1.7 1.1
earnings
Year ended Weighted average number of shares used for 3 months ended 3 months ended
31 March 2007 calculating earnings per share 30 June 2007 30 June 2006
Number Number Number
Weighted average number of shares (excluding
168,083,460 shares held in the ESOT) 171,548,826 164,573,545
2,179,100 Dilution due to Share Option Schemes 2,567,960 3,566,635
1,651,507 Dilution due to Convertible Loan Stock - 4,400,000
-----------------------------------------------------------------------------------------
171,914,067 Used for calculating diluted earnings per 174,116,786 172,540,180
share
5. Net assets per share
31 March 2007 Net assets used for calculation of net assets 30 June 2007 30 June 2006
per share
£m £m £m
582.6 Net assets at end of period (basic) 607.8 420.9
- Dilution due to Convertible Loan Stock - 2.2
-------------------------------------------------------------------------------------------
582.6 Diluted net assets 607.8 423.1
0.2 Derivative financial instruments at fair value - 0.7
- Deferred tax on accelerated tax depreciation - 8.6
- Deferred tax on fair value change of investment - 122.9
properties
- Deferred tax on derivative financial - (0.3)
instruments
-------------------------------------------------------------------------------------------
582.8 Diluted adjusted net assets 607.8 555.0
-------------------------------------------------------------------------------------------
582.8 Adjusted net assets (basic) 607.8 552.8
31 March 2007 Number of shares used for calculating net 30 June 2007 30 June 2006
assets per share
Number Number Number
174,221,087 Shares in issue at period end 174,221,087 169,509,640
(2,738,360) Less ESOT shares (2,628,360) (4,823,410)
-------------------------------------------------------------------------------------------
171,482,727 Number of shares for calculating basic net 171,592,727 164,686,230
assets per share
2,179,100 Dilution due to Share Option Schemes 2,567,960 3,566,635
- Dilution due to Convertible Loan Stock - 4,400,000
-------------------------------------------------------------------------------------------
173,661,827 Number of shares for calculating diluted net 174,160,687 172,652,865
assets per share
6. Investment properties
31 March 2007 30 June 2007 30 June 2006
(restated) £m*
£m £m
954.0 Balance at beginning of period 1,001.6 954.0
102.1 Additions during the period 5.3 30.5
0.5 Capitalised interest on refurbishments 0.2 0.2
(149.5) Disposals during the period - (137.7)
(0.8) Diminution in value due to fire loss* - (0.7)
Net gain from fair value adjustments on
95.3 investment property 21.0 34.7
-------------------------------------------------------------------------------------------
1,001.6 Balance at end of period 1,028.1 881.0
*June 2006 comparatives have been restated to be consistent with the 2007 year
end presentation of diminution in value of the Westwood Business Centre.
Valuation
The Group's investment properties were revalued at 30 June 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 2007 30 June 2007 30 June 2006
£m £m £m
1,000.9 Total per CB Richard Ellis valuation report 1,027.6 883.1
(2.5) Owner occupied property (2.7) (2.4)
3.6 Head leases treated as finance leases under IAS 17 3.6 0.7
(0.4) Short leases valued as head leases (0.4) (0.4)
--------------------------------------------------------------------------------------------
1,001.6 Total per balance sheet 1,028.1 881.0
7. Current tax liabilities
31 March 2007 30 June 2007 30 June 2006
£m £m £m
17.6 Current tax liabilities 17.1 3.2
The liability at 30 June 2007 and 31 March 2007 includes the REIT conversion
charge of £18.8m which was paid on 14 July 2007. The balance represents an
overpayment of tax in prior years which is considered recoverable.
8. Financial liabilities - borrowings
31 March 2007 30 June 2007 30 June 2006
£m £m £m
20.4 Current liabilities 5.9 3.3
360.7 Non-current liabilities 378.0 321.5
-----------------------------------------------------------------------------------------
381.1 383.9 324.8
Maturity:
31 March 2007 30 June 2007 30 June 2006
£m £m £m
Secured (excluding finance leases)
20.4 Repayable in less than one year 5.9 3.3
- Repayable between one year and two years - 19.5
132.7 Repayable between two years and three years 150.0 -
225.0 Repayable between three years and four years 225.0 100.0
- Repayable between four years and five years - 200.0
-----------------------------------------------------------------------------------------
378.1 380.9 322.8
(0.6) Less cost of raising finance (0.6) (0.9)
-----------------------------------------------------------------------------------------
377.5 380.3 321.9
Unsecured
- Repayable in five years or more - 2.2
Finance leases (part secured)
3.6 Repayable in five years or more 3.6 0.7
-----------------------------------------------------------------------------------------
381.1 383.9 324.8
9. Notes to cash flow statement
a) Reconciliation of profit for the period to cash generated from operations:
Year ended 3 months ended 3 months ended
30 June 2007 30 June 2006
31 March 2007 (restated*)
£m £m £m
193.4 Profit for the period 24.9 30.3
(80.9) Tax - 12.8
0.6 Depreciation 0.2 0.2
0.1 Amortisation of intangibles - -
(4.4) Profit on disposal of investment properties - (4.5)
(95.3) Net gain from fair value adjustments on (21.0) (34.7)
investment property
0.8 Diminution in value due to fire loss - 0.7
(0.9) Fair value gains on financial instruments (0.2) (0.4)
(0.1) Interest income - -
23.3 Interest expense 6.7 6.0
(1.7) Share in joint venture post tax profit (1.0) -
Changes in working capital:
(1.1) Increase in trade and other receivables (2.7) (1.3)
3.3 Increase in trade and other payables 2.9 2.1
--------------------------------------------------------------------------------------------
37.1 Cash generated from operations 9.8 11.2
*Refer to note 6
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 30 June 2007 30 June 2006
£m £m £m
- Cash at bank and in hand - -
2.4 Restricted cash - tenants' deposit deeds 2.5 1.8
(0.9) Bank overdrafts (4.6) (3.3)
-------------------------------------------------------------------------------------------
1.5 (2.1) (1.5)
10. Provisions
31 March 2007 30 June 2007 30 June 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 March Share Share Investment in Other Retained 30 June 30 June
2007 capital premium own shares reserves earnings 2007 2006
Total Total Total
equity equity equity
£m £m £m £m £m £m £m £m
390.3 Balance at start of 17.4 30.7 (2.8) 1.3 536.0 582.6 390.3
period
0.3 Share issues - - - - - - -
2.3 ESOT shares released - - 0.1 - - 0.1 -
(6.4) Dividends paid - - - - - - -
2.0 Loan stock conversion - - - - - - -
0.7 Value of employee - - - 0.2 - 0.2 0.3
services
193.4 Profit for the period - - - - 24.9 24.9 30.3
------------------------------------------------------------------------------------------------------
582.6 Balance at end of 17.4 30.7 (2.7) 1.5 560.9 607.8 420.9
period
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:
Balance Sheet:
31 March 2007 30 June 2007 30 June 2006
£m £m £m
78.8 Investment properties 79.2 76.0
2.2 Current assets 4.3 1.7
------------------------------------------------------------------------------------------
81.0 Total assets 83.5 77.7
------------------------------------------------------------------------------------------
(1.8) Current liabilities (2.2) (1.5)
(60.7) Non-current liabilities (61.8) (58.5)
------------------------------------------------------------------------------------------
(62.5) Total liabilities (64.0) (60.0)
------------------------------------------------------------------------------------------
18.5 Group share of joint venture net assets 19.5 17.7
Income Statement:
Year ended 3 months ended 3 months ended
31 March 2007 30 June 2007 30 June 2006
£m £m £m
4.2 Revenue 1.3 0.3
(1.1) Direct costs (0.3) (0.1)
------------------------------------------------------------------------------------------
3.1 Net rental income 1.0 0.2
(0.1) Administrative expenses - -
1.4 Change in fair value of investment (0.1) -
property
(3.1) Finance costs - interest payable (1.0) (0.2)
1.2 Change in fair value of derivative 1.5 -
financial instruments
------------------------------------------------------------------------------------------
2.5 Profit before tax 1.4 -
(0.8) Taxation (0.4) -
------------------------------------------------------------------------------------------
1.7 Profit after tax 1.0 -
13. Post balance sheet events
On 23 July 2007 the Group acquired St Ives House, Ewer Street, London, SE1, a
14,500 sq.ft. vacant office building for a cash consideration of £4.7m.
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 17 August 2007.
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 20 August 2007
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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