3rd Quarter Results

Workspace Group PLC 24 February 2003 WORKSPACE DELIVERS ROBUST PERFORMANCE AS SME SECTOR DEMONSTRATES RESILIENCE Workspace Group PLC ('Workspace'), the leading provider of flexible business accommodation to small and medium sized enterprises ('SMEs') in London and the South East today announces its financial results for the third quarter and nine months ended 31 December 2002. â€¢ Pre-tax trading profits for the quarter up 7.1% to Â£3.18 million (2001: Â£2.93 million) (Nine month period up 5.5 % to Â£9.0 million (2001: Â£7.48 million)) â€¢ Trading earnings per share at 39.6p for the nine month period up 2.3% before property sales (31 December 2001: 38.7p). â€¢ Turnover Â£11.35 million for the quarter, up by 19.3% and for the nine-month period up by 13.1% to Â£32.72 million. â€¢ Annual rent roll up Â£0.49 million to Â£33.92 million over the quarter (and Â£4.36 million (14.8%) over nine months). â€¢ Average like-for-like rent up 7.1% in three-quarter period to Â£7.88 per sq. ft. â€¢ Net Asset Value per share at 31 December 2002 Â£14.31, up 11.7% over twelve months (31 December 2001: Â£12.81). â€¢ Gearing 94% Commenting, Chief Executive Harry Platt said: ' These results demonstrate the continued resilience and the consistent growth of our SME market. Enquiries continue to be at good levels and occupancy remains stable at high levels. Workspace is on target to meet expectations for the year. ' The Group has a number of acquisitions under negotiation as we pursue our long-term strategy of being the dominant provider of space for small businesses in London and the South East.' -ends- Date: 24 February 2003 For further information: 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 & Financial Review Trading Review The pattern of progress established in the first half has continued during the third quarter. The like-for-like rent roll has improved again by Â£0.49m during the quarter whilst occupancy levels have remained high at 87%. Average rents on a like-for-like basis have now increased by 7.1% in the three-quarter period to Â£7.88 per sq. ft. The rent roll, including acquisitions, now stands at Â£33.92 million compared with Â£29.56 million at 1 April 2002. Pre-tax profits in the third quarter were Â£3.18 million, up 7.1% on the same period last year. For the nine-month period trading pre-tax profits were Â£9.00 million up 5.5% on the same period last year. London and the South East remains the foremost region of the UK for small and medium sized enterprises (SMEs), supporting the decision last year by the Company to refocus its activities into this region by disposing of its Midlands portfolio. Our property stock, being flexible, affordable and located in areas where SMEs are most active continues to appeal to them. At the headline level, profits before tax of Â£7.48 million include an exceptional Â£1.86 million charge arising from the refinancing of the Group's securitised facility by a new loan with Bradford & Bingley, offering greater funding flexibility. Whilst no acquisitions were completed in the quarter itself, one was contracted and completed after the quarter end. Others are under active negotiation. By the year end, the Group also hopes to report further progress on its programme to add value to certain properties through extension and change in use. Portfolio During the nine months the annual rent roll of occupied units increased by Â£4.36 million or 14.8% to Â£33.92 million. Like-for-like rentals grew by 1.68% over the quarter and 7.1% over the year to date to Â£7.88 per sq. ft average. High occupancy levels at 87.00% were maintained throughout the quarter and are continuing. No acquisitions or disposals were made in the quarter. However, contracts were exchanged for the acquisition of Canalot Studios (completed on 13 January 2003). This 55,600 square feet business centre with 100 lettable units is located in Ladbroke Grove close to 5 other centres owned by the Group. It will complement, both in terms of unit size and accommodation type, these other properties. Negotiations on three other purchases are currently underway, with one or more due to be completed before the year end. All are small unit industrial estates in London servicing their local markets and with scope for improvement under our management. The portfolio statistics and progress through the year to date, may be summarised as follows: - 31 30 30 31 December September June March 2002 2002 2002 2002 Number of estates 90 90 88 87 Total floorspace at end of period (sq. ft.) 5,062,256 5,011,204 4,870,735 4,849,758 of which: Like for like portfolio (sq. ft) 4,433,209 4,431,036 4,428,604 4,427,872 Net Acquisitions/(Disposals) (sq. ft) 222,639 170,693 29,364 - Three Mills and development (sq. ft) 406,408 409,475 412,767 421,886 Lettable units (number) 4,002 3,943 3,707 3,726 Annual rent roll of occupied units (Â£) 33,924,953 33,439,357 30,419,208 29,560,157 Average rent (Â£/sq. ft) 8.24 8.03 7.39 7.20 Average rent of like-for-like portfolio (Â£/sq. ft) 7.88 7.75 7.44 7.36 Occupancy overall 83.33% 83.15% 84.52% 84.67% Occupancy of like-for-like portfolio 87.00% 87.15% 89.30% 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. Financial Review With turnover up 19.3%, pre-tax trading profits up 7.1%, and net asset value per share up 11.7% over the comparable period quarter last year the Group has continued the progress made over the first half of the year. As referred to in the Trading Review, a Â£1.86m write-off was charged to the P&L account in the first half as a result of the refinancing of the Group's principal debt facility. This was not a cash breakage cost but arose as a result of writing off previously capitalised expenditure incurred on raising the original facility with WestLB. The new loan offers greater availability of finance in terms of the total facility. At the same time the funds immediately drawable, based on the security provided, increased also. Both this and the NatWest facility secured earlier in 2002 are priced at a margin slightly below 1% over LIBOR, reflecting the progress that the Group has made over recent periods in pushing down borrowing costs. At the period end gearing stood at 94%, with trading interest cover of 1.95. Following the refinancing referred to above the Group had at 31 December over Â£45 million of facilities available for immediate drawdown, together with a further Â£40m of currently uncharged investment property available to secure further borrowings. Current Trading Enquiries continue to be at good levels despite the current uncertainties in the wider economic environment. Occupancy remains stable at high levels and we are on target to meet our expectations for the year. Meanwhile, the Group has a number of acquisitions under negotiation as we pursue our consistent long-term strategy of being the dominant provider of space for small businesses in London and the South East. Unaudited Consolidated Profit and Loss Account for the 9 months ended 31 December 2002 Audited Unaudited Unaudited year ended 3 months ended 9 months ended 31 March 31 December 31 December Trading Other Total Operations Items 2002 2002 2001 2002 2001 (restated) Â£000 Â£000 (restated) Â£000 Â£000 Â£000 Â£000 Â£000 ________ ________ ________ ________ ________ ________ ________ 39,083 Turnover - continuing operations 11,354 9,518 32,721 - 32,721 28,926 (11,172) Rent payable and direct costs (3,243) (2,870) (9,457) - (9,457) (8,367) ________ ________ ________ ________ ________ ________ ________ 27,911 Gross profit 8,111 6,648 23,264 - 23,264 20,559 (5,964) Administrative expenses (1,482) (1,373) (4,746) - (4,746) (4,215) ________ ________ ________ ________ ________ ________ ________ 21,947 Operating profit - continuing 6,629 5,275 18,518 - 18,518 16,344 operations 567 Surplus on disposal of investment 25 (16) - 338 338 361 property 333 Interest receivable 10 53 104 - 104 282 (10,819) Interest payable and similar charges (3,483) (2,380) (9,622) (1,861) (11,483) (8,094) ________ ________ ________ ________ ________ ________ ________ 12,028 Profit on ordinary activities before 3,181 2,932 9,000 (1,523) 7,477 8,893 taxation (3,068) Taxation on profit on ordinary (934) (863) (2,700) 484 (2,216) (2,526) activities ________ ________ ________ ________ ________ ________ ________ 8,960 Profit on ordinary activities after 2,247 2,069 6,300 (1,039) 5,261 6,367 taxation - Equity minority interests - - - - - - ________ ________ ________ ________ ________ ________ ________ 8,960 Profit attributable to shareholders 2,247 2,069 6,300 (1,039) 5,261 6,367 (4,192) Dividends - - (1,179) - (1,179) (1,143) ________ ________ ________ ________ ________ ________ ________ 4,768 Retained for the period 2,247 2,069 5,121 (1,039) 4,082 5,224 ________ ________ ________ ________ ________ ________ ________ 55.4p Basic earnings per share 14.1p 12.8p 39.6p (6.5)p 33.1p 39.5p 54.2p Diluted earnings per share 13.8p 12.5p 32.6p 38.7p ________ ________ ________ ________ ________ ________ ________ Statement of Total Recognised Gains and Losses Audited Unaudited year ended 9 months ended 31 March 31 December 2002 2002 2001 (restated) Â£000 Â£000 Â£000 ________ ________ ________ 8,960 Profit for the financial period 5,261 6,367 26,863 Unrealised surplus on revaluation of investment properties 8,091 14,389 (150) Taxation on revaluation surpluses realised on sale of properties - (150) ________ ________ ________ 35,673 Total recognised gains relating to the financial period 13,352 20,606 (3,128) Prior year adjustment - (3,128) ________ ________ ________ 32,545 Total gains recognised since last financial statements 13,352 17,478 ________ ________ ________ Note of Historical Cost Profits and Losses Audited Unaudited year ended 9 months ended 31 March 31 December 2002 2002 2001 (restated) Â£000 Â£000 Â£000 ________ ________ ________ 12,028 Reported profits on ordinary activities before taxation 7,477 8,893 5,014 Realisation of property revaluation (losses)/gains of previous years (87) 4,770 (150) Taxation on valuation surpluses realised on sale of properties - (150) ________ ________ ________ 16,892 Historical cost profit on ordinary activities before taxation 7,390 13,513 9,632 Historical cost profit for the period retained after taxation and 3,995 9,844 dividends ________ ________ ________ Unaudited Consolidated Balance Sheet as at 31 December 2002 Audited Unaudited 31 March 31 December 2002 2002 2001 (restated) Â£000 Â£000 Â£000 ________ ________ ________ Fixed Assets Tangible assets 414,707 Investment properties 464,622 382,876 3,540 Other fixed assets 3,913 1,538 1,015 Investment in own shares 6,249 1,015 ________ ________ ________ 419,262 474,784 385,429 ________ ________ ________ Current Assets 150 Stock: properties for sale 150 - 6,189 Debtors 5,617 6,950 5,443 Investments 1,960 6,100 340 Cash at bank and in hand 162 14 ________ ________ ________ 12,122 7,889 13,064 (30,964) Creditors: amounts falling due within one year (22,912) (25,847) ________ ________ ________ (18,842) Net current liabilities (15,023) (12,783) ________ ________ ________ 400,420 Total assets less current liabilities 459,761 372,646 (175,730) Creditors: amounts falling due after more than one year (221,904) (160,148) (including Convertible Loan Stock) (3,365) Provision for liabilities and charges (3,909) (3,315) ________ ________ ________ 221,325 233,948 209,183 ________ ________ ________ Capital and reserves 1,648 Called up share capital 1,661 1,644 42,030 Share premium account 42,467 41,910 144,588 Revaluation reserve 152,766 132,358 33,059 Profit and loss account 37,054 33,271 ________ ________ ________ 221,325 Shareholders' funds - equity interests 233,948 209,183 - Equity minority interests - - ________ ________ ________ 221,325 Capital Employed 233,948 209,183 ________ ________ ________ Â£13.53 Net asset value per share Â£14.31 Â£12.81 ________ ________ ________ Movement in Shareholders' Funds 8,960 Profit for the financial period 5,261 6,367 (4,192) Dividends (1,179) (1,143) ________ ________ ________ 4,768 4,082 5,224 30 Issue of shares 13 26 1,364 Share premium account 437 1,244 26,863 Revaluation reserve - increase 8,091 14,389 (150) Taxation on valuation surpluses realised on sale of - (150) properties ________ ________ ________ 32,875 Net addition to shareholders' funds 12,623 20,733 188,450 Opening shareholders' funds 221,325 188,450 ________ ________ ________ 221,325 Closing shareholders' funds 233,948 209,183 ________ ________ ________ Unaudited Consolidated Cash Flow Statement for the 9 months ended 31 December 2002 Audited year ended Unaudited 9 months ended 31 December 31 March 2002 2002 2001 Â£000 Â£000 Â£000 ________ ________ ________ 23,429 Net cash inflow from operating activities 20,163 16,913 (11,261) Return on investments and servicing of finance (9,584) (7,623) (5,564) Taxation (2,360) (4,780) (23,278) Capital expenditure- net (48,794) (4,052) (3,796) Equity dividends paid (3,035) (2,659) ________ ________ ________ (20,470) Net cash outflow before use of liquid (43,610) (2,201) resources and financing (70) Management of liquid resources 4,358 (727) 19,751 Financing 42,478 3,749 ________ ________ ________ (789) Net cash inflow/(outflow) 3,226 821 ________ ________ ________ Reconciliation of net cash flow to movement in net debt (789) Increase/(decrease) in cash 3,226 821 70 (Decrease)/increase in liquid resources (4,358) 727 (18,201) Outflow from movements in debt financing (42,822) (2,662) ________ ________ ________ (18,920) Changes in net debt resulting from cash flows (43,954) (1,114) ________ ________ ________ (157,147) Net debt at beginning of period (176,067) (157,147) (176,067) Net debt at period end (220,021) (158,261) ________ ________ ________ 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 accounts for the period ended 31 December 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. The full accounts for the year ended 31 March 2002 have been filed with the Registrar of Companies. 2001 comparatives have been restated due to the application of FRS 19 (deferred tax). 2. Segmental Analysis Audited Unaudited Unaudited Year ended 3 months ended 9 months ended 31 March 31 December 31 December 2002 2002 2001 2002 2001 Â£000 Â£000 Â£000 Â£000 Â£000 ________ ________ _______ _______ ______ 30,864 Rental Income 8,993 7,517 25,962 22,939 6,877 Service charge and other 1,861 1,612 5,445 5,006 recoveries 1,342 Services fees, commissions, 500 389 1,314 981 and sundry income ________ ________ _______ _______ ______ 39,083 11,354 9,518 32,721 28,926 ________ ________ _______ _______ ______ 3. Interest payable and similar charges Audited Unaudited Unaudited Year ended 3 months ended 9 months ended 31 March 31 December 31 December 2002 2002 2001 2002 2001 Â£000 Â£000 Â£000 Â£000 Â£000 ________ ________ _______ _______ _______ 361 11% Convertible Loan Stock 79 79 239 281 2011 1,391 11.125% First Mortgage 348 348 1,043 1,043 Debenture Stock 2007 814 11.625% First Mortgage 204 204 611 611 Debenture Stock 2007 7,486 Mortgage interest on - 1,731 1,884 5,778 securitised loan not wholly repayable within five years 1,007 Bank and other interest on 2,954 83 6,252 516 amounts wholly repayable within five years - Finance costs written off - - 1,861 - ________ ________ _______ _______ _______ 11,059 3,585 2,445 11,890 8,229 (240) Interest capitalised on (102) (65) (407) (135) development properties ________ ________ _______ _______ _______ 10,819 Charged to profit and loss 3,483 2,380 11,483 8,094 account ________ ________ _______ _______ _______ 4. Taxation The taxation charge, excluding tax on property disposals, for the nine months ended 31 December 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 9 months ended 31 December 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 investment in own shares of 699,190 (15,879,438 shares). Net assets per share have been calculated by dividing net assets at the end of each period by the number of shares in issue at that time less investment in own shares of 699,190 (15,906,795 shares). 6. Valuation The Group's investment properties were valued by Insignia Richard Ellis at 30 September 2002 on the basis of open market existing use value and in accordance with the guidance notes issued by the Royal Institution of Chartered Surveyors. The valuation shown in the unaudited accounts is based on the independent valuation at 30 September 2002 plus additions at cost less disposals at book value. 7. Creditors Creditors falling due within one year include tenants' deposits of Â£4.72 million (31 March 2002: Â£4.2 million) and deferred rental and service charges of Â£5.2 million (31 March 2002: Â£5.1 million). 8. Fair Value of Financial Liabilities In accordance with the requirements of FRS 13, an assessment of the fair value of the Group's financial instruments held for financing purposes has been undertaken as at 31 December 2002. The results are summarised as follows: - Audited 31 March Unaudited 31 December 2002 Book value Fair value Book Value Fair value 2002 2002 2001 2001 Â£000 Â£000 Â£000 Â£000 Â£000 ________ ________ ________ ________ ________ ________ Book Value Fair Value Primary financial instruments (6,120) (6,120) Short-term liabilities (238) (238) (4,227) (4,227) (175,730) (181,293) Long-term borrowing (221,904) (227,076) (160,148) (165,648) 5,783 5,783 Financial assets 2,122 2,122 6,114 6,114 Derivative financial instruments 283 (2,298) Interest rate collars 254 (4,638) 293 (2,306) ________ ________ ________ ________ ________ ________ (175,784) (183,928) (219,766) (229,830) (157,968) (166,067) ________ ________ ________ ________ ________ ________ This represents 63.3pence per issued ordinary share and if applied to net asset value per share at 31 December 2002 would reduce the latter to Â£13.68. On a diluted basis, allowing for conversion of the Group's convertible loan stock, this adjustment reduces to 47.0 pence per share. However, the Group has no obligation or present intention to repay its Debenture and Convertible borrowings other than at maturity, when they will be repaid at par. Cash outflows arising from these borrowings will be limited to the future fixed interest payments and redemption at par. These outflows are unaffected by the notional market or fair values referred to above. 9. Quarterly Statement Copies of this statement will be despatched to shareholders on Monday 24 February 2003 and will be available from the Group's registered office at Magenta House, 85 Whitechapel Road, London E1 1DU from 9.00am that day. This information is provided by RNS The company news service from the London Stock Exchange

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