Interim Results
Workspace Group PLC
19 November 2007
WORKSPACE DELIVERS RENTAL GROWTH
AS STRONG DEMAND DRIVES OCCUPANCY
Workspace Group PLC ('Workspace') today announces its interim results for the
six months ended 30 September 2007. Workspace provides 6.2 million sq. ft of
flexible business accommodation to over 4,500 small and medium size enterprises
('SMEs') in London.
• Diluted Adjusted Net Asset Value per share at 30 September 2007 of £3.43,
up 2.1% in the six months
• Rent roll £49.5m up 4.9% in the six months with excellent progress at the
refurbishments completed at Clerkenwell, The Lightbox and Greville Street
• Portfolio valued at £1.035bn with valuation surplus for the half year
at £12.2m (2006: £59.7m).
• Net Rental Income £23.2m up 10.0% on 2006 with improved overall occupancy
of 86.4% up from 84.8% at March.
• Good progress on redevelopment schemes with notable success at Wandsworth
• Pre-tax profits on trading operations £7.0m (2006: £5.1m)
• Basic earnings per share 11.5p (2006: 29.4p)
• Interim dividend 1.52 pence up 10.1% on 2006
Commenting on the results, Harry Platt, Chief Executive, said,
' Demand for space in London remains strong, driven by the economic
fundamentals of London as a major global city. London's population and its
small businesses are predicted to grow dramatically, increasing demand for our
Workspace product and increasing pressure on intensification of space throughout
the capital.
' We are well placed to benefit from this long-term trend despite pressures
on yields. Over 50% of our unique £1 billion portfolio will be subject to mixed
use intensification over the next ten years. This will release significant
value for our shareholders.
' Looking ahead we are confident that we have the right team, the right
strategy and an excellent property portfolio with the potential to outperform
over the medium-term. The demands for space in London for housing, business,
leisure and services make our land bank an attractive springboard for mixed use
regeneration. Your Board remains positive on the future prospects for the
Group.'
-ends-
There is a presentation to investment analysts at 9.30am on Monday 19 November
2007. The address for the presentation venue is cityPROFILE, 7 Copthall Avenue,
London, EC2R 7NJ.
This presentation will also have a conference call facility for investors to
listen to.
The details are:
Participant joining details
Meeting title: Workspace Group - Interim Results 2007
Meeting date/start time: Monday November 19 2007, 9:20am GMT
Direct dial-in number: +44(0)1296 317600
Passcode: 504 479#
There will be a playback facility which will be available for up to 36 hours
after the call finishes:
Available from: Monday November 19 2007, 17.00pm GMT
Available for: 1 day
Freefone dial-in number: 0800 032 9687
Direct dial-in number: +44(0)207 136 9233
Passcode: 53698062
Date: 19 November 2007
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
Chairman's Statement
These are a good set of results achieved in more challenging markets. We have a
robust business model and clear strategy which we are confident will continue to
deliver superior asset and dividend returns to our shareholders. We are focused
on:
• driving rental growth and occupancy through our operational and
marketing skills;
• enhancing value through intensification and higher added value use; and
• selectively acquiring space in London with potential to drive rental
income and reposition through investment or change of use longer term.
We have strengthened further the senior management team with the appointment of
Chris Pieroni as Operations Director. This, together with the appointments of
Graham Clemett as Finance Director and Angus Boag as Development Director
earlier this year, puts the Group in an excellent position to deliver the next
stage of its growth.
We are advancing the regeneration plans for a number of schemes across the
portfolio. We work closely with local councils to ensure a strong alignment
between our mixed use plans, which provide local space for small and medium
sized enterprises (SMEs) across London, and the Mayor's overall regeneration
plan for London. We are already seeing the benefits of these strengthening
relationships. Our skills in managing multi-tenanted sites addressing the SME
market make us a natural partner for many of these plans.
The Glebe joint venture announced last year was designed to accelerate the
regeneration initiatives at a number of our estates. This is progressing and we
are delighted that a major planning consent for a mixed use scheme at Wandsworth
has been achieved.
It is now just over ten months since we converted to a Real Estate Investment
Trust (REIT). As a REIT we plan to deliver a progressive dividend policy for our
shareholders underpinned by our focus on growing our rental income. An interim
dividend of 1.52p per share (an increase of 10.1% on 2006) has been declared in
respect of the six months ended 30 September 2007 and will be paid on 4 February
2008 to shareholders on the register on 4 January 2008. The full amount of this
dividend will be in the form of a Property Income Distribution (PID) which will
be subject to a 22% withholding tax unless tax exemptions apply.
In summary, the Group is well placed to drive forward the next phase of its
growth.
Chief Executive's Statement
Summary
Our key performance indicators are continuing to show positive trends and our
refurbished properties have achieved encouraging levels of occupancy. Trading
performance was strong with headline net rental income up 10.0% on last year.
This reflects good progress on growing the rent roll, up 15.1% year on year, and
the continued focus on improving overall occupancy which has now reached 86.4%
up from 84.8% in March.
There is a strong demand across London for our offer of flexible space at
affordable rents. The average rent per square foot has increased to £11.54 and
for a typical unit of 1,000 square feet this still only represents a rent of
some £220 per week.
The growth in NAV in the first six months has been modest, with diluted adjusted
NAV increasing by 2.1% to £3.43. The good increases in rents have been tempered
by a softening in reversionary yields of 18 bps. This has resulted in a £9m
reduction in our valuation in the second quarter compared to growth of £21m in
the first quarter.
The majority of our estates are valued on a current use basis at an average
capital value of £207 per square foot and a reversionary yield of 6.7%. We
believe our portfolio valuation is robust and continues to provide significant
opportunity for income and capital growth.
Within our core business, we are progressing with a number of intensification
and mixed-use schemes. 18 estates have been identified where we would expect to
make significant progress or complete improvement projects over the next five
years.
The recent planning permission received for a mixed use development at
Wandsworth Business Village in the Glebe Joint Venture will enable us to
increase the floor space by some 2.5 times the existing space. We are very
pleased with the progress that this joint venture is making and we have more
projects in the pipeline that are moving forward for planning approval over the
next year.
We remain alert to potential acquisitions of property. We track some £8.5bn of
property across London and have made a small number of acquisitions in the year
to date totalling £22.1m. We believe we are well placed to take advantage as
yields soften and pricing becomes more realistic, to make acquisitions that meet
our return requirements.
Valuation
Set out below are details of the estimated rental value (ERV) and valuation of
the Group's directly owned property portfolio which is undertaken independently
by our valuers CB Richard Ellis.
September 2007 March 2007
Total ERV (£m) 69.3 65.3
Valuation (£m) 1,035 1,002
Reversionary Yield* 6.70% 6.52%
* Based on Total ERV divided by Valuation
We highlighted in our first quarter results that valuation growth came from
growth in rental values, with reversionary yields stable. We are now seeing some
softening in reversionary yields across the portfolio offset by the excellent
progress we are making in growing rents. Underlying ERV growth excluding
acquisitions was 3.1% in the second quarter and 4.9% in the first six months.
A summary of the movements in the portfolio valuation may be analysed as
follows:
£m
Valuation at 31 March 2007 1,002
Acquisitions (including costs) 10
Other expenditure on properties 11
Valuation surplus - quarter to 30 June 2007 21
- quarter to 30 September 2007 (9)
-------
Valuation at 30 September 2007 1,035
-------
The movements in valuation by estate over the last six months is summarised
below:
Valuation Percentage of Estates
Up more than 5% 20%
Up less than 5% 27%
Down less than 5% 32%
Down more than 5% 21%
Rents
Rent roll as at 30 September 2007 is £49.5m, up 4.9% in the last six months and
up 15.1% on a year ago. On a like-for-like basis the rent roll growth over the
last year is 7.9% improving from year on year growth of 4.4% at March 2007.
Occupancy
Occupancy levels have improved in the first half by 1.6% to 86.4%. The headline
occupancy and a like-for-like comparison (which excludes acquisitions and
estates subject to refurbishment and regeneration) may be analysed as follows:
September 2007 March 2007
Sites with greater than 90% occupancy 62 49
Sites with 80% - 90% occupancy 17 28
Sites with less than 80% occupancy 25 24
-------------------------------------------------------------------------
Headline average occupancy 86.4% 84.8%
-------------------------------------------------------------------------
Like-for-like estates 90 90
-------------------------------------------------------------------------
Like-for-like occupancy 89.2% 87.6%
-------------------------------------------------------------------------
We have made significant progress at sites where we have completed the
refurbishment and repositioning of properties but which are not yet included in
our like-for-like statistics. Details are set out below:
September 2007 March 2007
Completion Date Occupancy Occupancy
Enterprise House May 2006 98% 89%
Clerkenwell June 2006 95% 89%
The Light Box November 2006 85% 81%
Greville Street June 2007 42% Nil
Lombard House June 2007 33% 23%
Acquisitions and Disposals
We continue to monitor our database of properties across London for potential
acquisitions but there has only been limited stock available that meets our
investment criteria. Three small acquisitions were made in the first six months
totalling £9.3m with a further £12.8m of purchases in October. Whilst these
acquisitions will be initially earnings dilutive we are confident that they will
deliver significant value in the medium term.
Name of Property Description Acquisition Price Income Market Rent
Date £m £000 £000
Ewer St, London 14,000 sq. ft 23 July 4.7 Nil 217
SE1 vacant office
building
Littleton House, 43,000 sq. ft 21 August 3.8 273 382
Ashford, mixed office and
Middlesex industrial
Mallard Place, 9,000 sq. ft 23 August 0.8 43 46
London N22 single industrial
unit
Neil House, 45,000 sq. ft 16 October 10.8 415 879
London E1 retail and
offices
Quicksilver 28,000 sq. ft 29 October 2.0 102 136
Place, London N22 single industrial
unit
------------------------------------------------------------------------------------
Total 22.1 833 1,660
------------------------------------------------------------------------------------
Yield 3.8% 7.5%
There have been no disposals during the six months.
Financial Review
A summary of the financial performance in the six months compared to 2006 is set
out below:
Six months ended 30 September
£m 2007 2006
Trading Operations
-Operating profit 20.7 16.4
-Profit before tax 7.0 5.1
-Basic earnings per share 4.0p 2.2p
Total Profit Before Tax 19.9 69.4
The first half has seen good growth in net rental income up 10.0% on September
2006. The 2006 comparative period includes £1.3m of income from properties that
were transferred in June 2006 to the Glebe JV. Excluding this income year on
year rental growth is 17.2%.
Other income represents a £2m non-refundable option fee for the potential
disposal of a property at a £2m premium to its September valuation. This option
is exercisable at any time up to September 2009.
Trading profit before tax for the first half is £7.0m (2006: £5.1m) with the
growth in operating profit discussed above reduced by higher finance costs
reflecting the impact of the increases in base rate on our floating rate
borrowings. The average cost of borrowing in the first half of 2007 was 7.0%
compared to 6.0% in the first half of last year.
Total profit before tax of £19.9m includes the revaluation gain of £12.2m. This
compares to a revaluation gain of £59.7m in the first half of 2006.
The tax charge for the half year is £0.3m (2006: £20.6m) with the majority of
trading income now exempt from tax following the conversion to a REIT on 1
January 2007.
£19.5m of debenture stock was repaid in June 2007 with a new revolving facility
of £75m obtained in July. £150m of our existing debt falling due in July 2009
was extended out in November to November 2012 on existing terms. At the end of
September the Group had available borrowing facilities of £79.0m with gearing of
71% (2006: 80%).
Prospects
We will not be immune from further yield shift but we would expect to offset
this by our continuing focus on growing rental income which should deliver
attractive and competitive asset and dividend growth for shareholders.
Operational performance is strong with high levels of occupancy and demand,
which gives us a good opportunity to grow rents. Our knowledge of the London
property market and track record of delivering value from acquisitions leaves us
well placed to buy further estates as pricing levels become more attractive.
The ever increasing demands on finite space in London for housing, business,
leisure and services makes our land bank a very attractive springboard for mixed
use regeneration, creating further value for shareholders over time.
Your Board remains positive on the prospects for the Group.
Key Statistics
+-------------------------------------+---------+---------+---------+---------+---------+
| | Quarter| Quarter| Quarter| Quarter| Quarter|
| | ending| ending| ending| ending| ending|
| | 30/09/| 30/06/| 31/03/| 31/12/| 30/09/|
| | 2007| 2007| 2007| 2006| 2006|
+-------------------------------------+---------+---------+---------+---------+---------+
|Workspace Group directly owned | | | | | |
|portfolio | | | | | |
+-------------------------------------+---------+---------+---------+---------+---------+
|Number of estates | 104| 101| 101| 99| 99|
+-------------------------------------+---------+---------+---------+---------+---------+
|Lettable floorspace (million sq ft) *| 5.0| 4.9| 4.9| 4.8| 5.0|
+-------------------------------------+---------+---------+---------+---------+---------+
|Number of lettable units | 4,441| 4,394| 4,304| 4,233| 4,215|
+-------------------------------------+---------+---------+---------+---------+---------+
|ERV | £69.3m| £66.5m| £65.3m| £60.3m| £60.5m|
+-------------------------------------+---------+---------+---------+---------+---------+
|Net annual rent roll of occupied | £49.5m| £48.2m| £47.2m| £43.7m| £43.0m|
|units | | | | | |
+-------------------------------------+---------+---------+---------+---------+---------+
|Average rent per sq ft | £11.54| £11.47| £11.34| £10.85| £10.56|
+-------------------------------------+---------+---------+---------+---------+---------+
|Overall occupancy | 86.4%| 85.8%| 84.8%| 83.9%| 81.7%|
+-------------------------------------+---------+---------+---------+---------+---------+
|Like-for-like lettable floor space | 4.1| 4.1| 4.1| 4.1| 4.1|
|(million sq ft) | | | | | |
+-------------------------------------+---------+---------+---------+---------+---------+
|Like-for-like net annual rent roll | £39.6m| £38.9m| £38.1m| £37.6m| £36.7m|
+-------------------------------------+---------+---------+---------+---------+---------+
|Like-for-like average rent (£ per sq | £10.85| £10.74| £10.61| £10.38| £10.40|
|ft) | | | | | |
+-------------------------------------+---------+---------+---------+---------+---------+
|Like-for-like occupancy | 89.2%| 88.5%| 87.6%| 87.8%| 85.9%|
+-------------------------------------+---------+---------+---------+---------+---------+
|Workspace Glebe joint venture | | | | | |
|portfolio | | | | | |
+-------------------------------------+---------+---------+---------+---------+---------+
|Number of estates | 16| 15| 15| 14| 14|
+-------------------------------------+---------+---------+---------+---------+---------+
|Lettable floorspace (million sq ft) *| 1.2| 1.2| 1.2| 1.2| 1.2|
+-------------------------------------+---------+---------+---------+---------+---------+
|Number of lettable units | 823| 813| 813| 811| 810|
+-------------------------------------+---------+---------+---------+---------+---------+
|ERV | £10.4m| £10.3m| £10.3m| £10.2m| £10.0m|
+-------------------------------------+---------+---------+---------+---------+---------+
|Net annual rent roll of occupied | £7.5m| £7.9m| £8.1m| £8.1m| £7.8m|
|units | | | | | |
+-------------------------------------+---------+---------+---------+---------+---------+
|Average rent per sq ft | £6.46| £7.77| £7.81| £7.84| £7.39|
+-------------------------------------+---------+---------+---------+---------+---------+
|Overall occupancy | 85.3%| 87.7%| 89.7%| 89.9%| 91.6%|
+-------------------------------------+---------+---------+---------+---------+---------+
|Financial Performance (£m) | | | | | |
+-------------------------------------+---------+---------+---------+---------+---------+
|Net rental income | 11.4| 11.8| 10.9| 9.6| 10.1|
+-------------------------------------+---------+---------+---------+---------+---------+
|Trading profit before taxation | 4.0| 3.0| 3.8| 1.3| 2.4|
+-------------------------------------+---------+---------+---------+---------+---------+
|Revaluation surplus | (8.8)| 21.0| 23.0| 12.6| 25.0|
+-------------------------------------+---------+---------+---------+---------+---------+
|Profit before taxation | (5.0)| 24.9| 27.3| 15.8| 26.3|
+-------------------------------------+---------+---------+---------+---------+---------+
|Investment portfolio valuation | 1,035| 1,028| 1,002| 940| 930|
+-------------------------------------+---------+---------+---------+---------+---------+
|Net assets | 597| 608| 583| 550| 437|
+-------------------------------------+---------+---------+---------+---------+---------+
|Net asset value per share (£) | £3.48| £3.54| £3.40| £3.23| £2.58|
+-------------------------------------+---------+---------+---------+---------+---------+
|Diluted adjusted net asset value per | £3.43| £3.49| £3.36| £3.32| £3.34|
|share (£) | | | | | |
+-------------------------------------+---------+---------+---------+---------+---------+
|Trading interest cover | 1.52x| 1.45x| 1.44x| 1.39x| 1.46x|
+-------------------------------------+---------+---------+---------+---------+---------+
|Gearing (%) | 71%| 63%| 65%| 62%| 80%|
+-------------------------------------+---------+---------+---------+---------+---------+
|Available borrowing facilities | 79| 118| 65| 99| 94|
+-------------------------------------+---------+---------+---------+---------+---------+
* Excludes storage space
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
Year ended Unaudited 6 months ended
31 March 6 months ended 30 September 30 September
2007 2007 2006
(restated#) Trading Other (restated+)
Operations items*
£m Notes £m £m £m £m
----------------------------------------------------------------------------------------------
59.9 Revenue 2 32.4 - 32.4 29.6
(18.3) Direct costs 2 (9.2) - (9.2) (8.5)
----------------------------------------------------------------------------------------------
41.6 Net rental income 2 23.2 - 23.2 21.1
(10.0) Administrative expenses (4.5) - (4.5) (4.5)
Gain from change in fair
95.3 value of investment property - 12.2 12.2 59.7
1.8 Other income 3a 2.0 - 2.0 0.9
4.4 Profit on disposal of 3b - - - 4.4
investment properties
----------------------------------------------------------------------------------------------
133.1 Operating profit 20.7 12.2 32.9 81.6
0.1 Finance income - interest 0.1 - 0.1 0.1
receivable
(23.3) Finance costs - interest 4 (13.7) - (13.7) (11.3)
payable
----------------------------------------------------------------------------------------------
109.9 7.1 12.2 19.3 70.4
0.9 Change in fair value of - - - 0.4
derivative financial
instruments
1.7 Share of joint venture post 15 (0.1) 0.7 0.6 (1.4)
tax (loss)/profit
----------------------------------------------------------------------------------------------
112.5 Profit before tax 7.0 12.9 19.9 69.4
80.9 Taxation 5 (0.2) (0.1) (0.3) (20.6)
----------------------------------------------------------------------------------------------
193.4 Profit for the period after 6.8 12.8 19.6 48.8
tax and attributable to
equity shareholders
----------------------------------------------------------------------------------------------
115.1p Basic earnings per share 7 4.0p 7.5p 11.5p 29.4p
112.5p Diluted earnings per share 7 3.9p 7.4p 11.3p 28.3p
* 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 9(a)
# Refer to note 2 and 3(a)
Consolidated Statement of Recognised Income and Expense (SORIE)
Unaudited Unaudited
Audited 6 months 6 months
Year ended ended ended
31 March 30 September 30 September
2007 2007 2006
£m £m £m
-----------------------------------------------------------------------------------------
193.4 Profit for the financial period 19.6 48.8
-----------------------------------------------------------------------------------------
193.4 Total recognised income and expense for the period 19.6 48.8
-----------------------------------------------------------------------------------------
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 30 September 30 September
2007 2007 2006
£m Notes £m £m
-----------------------------------------------------------------------------------------
Non-current assets
1,001.6 Investment properties 9 1,035.1 930.4
0.3 Intangible assets 0.3 0.2
3.3 Property, plant and equipment 3.3 3.5
18.5 Investment in joint venture 15 19.1 16.2
-----------------------------------------------------------------------------------------
1,023.7 1,057.8 950.3
-----------------------------------------------------------------------------------------
Current assets
8.8 Trade and other receivables 13.6 10.0
0.1 Financial assets - derivative 0.2 0.1
financial instruments
2.4 Cash and cash equivalents 3.6 1.8
-----------------------------------------------------------------------------------------
11.3 17.4 11.9
-----------------------------------------------------------------------------------------
Current liabilities
(20.4) Financial liabilities - 11 - (22.3)
borrowings
(0.3) Financial liabilities - (0.4) (0.8)
derivative financial instruments
(32.3) Trade and other payables (33.9) (30.5)
(17.6) Current tax liabilities 10 - (2.7)
-----------------------------------------------------------------------------------------
(70.6) (34.3) (56.3)
-----------------------------------------------------------------------------------------
(59.3) Net current liabilities (16.9) (44.4)
Non-current liabilities
(360.7) Financial liabilities - 11 (423.2) (327.2)
borrowings
(0.2) Deferred tax liabilities (0.3) (141.3)
(20.9) Provisions 13 (20.9) -
-----------------------------------------------------------------------------------------
(381.8) (444.4) (468.5)
-----------------------------------------------------------------------------------------
582.6 Net assets 596.5 437.4
-----------------------------------------------------------------------------------------
Shareholders' equity
17.4 Ordinary shares 14 17.4 17.4
30.7 Share premium 14 30.8 30.5
(2.8) Investment in own shares 14 (4.3) (4.9)
1.3 Other reserves 14 1.7 0.7
536.0 Retained earnings 14 550.9 393.7
-----------------------------------------------------------------------------------------
582.6 Total shareholders' equity 14 596.5 437.4
-----------------------------------------------------------------------------------------
£3.40 Net asset value per share (basic) 8 £3.48 £2.58
£3.36 Diluted adjusted net asset value 8 £3.43 £3.34
per share
Consolidated Cash Flow Statement
Audited Unaudited Unaudited
Year 6 months ended 6 months ended
ended 30 September 30 September
31 March 2007 2007 2006
£m Notes £m £m
------------------------------------------------------------------------------------------
Cash flows from operating activities
37.1 Cash generated from operations 12a 21.6 17.8
0.1 Interest received 0.1 0.1
(23.0) Interest paid (13.8) (12.0)
0.1 Tax (paid)/refunded (18.7) 0.6
------------------------------------------------------------------------------------------
14.3 Net cash from operating activities (10.8) 6.5
Cash flows from investing activities
(74.6) Purchase of investment properties (12.3) (41.0)
(20.3) Capital expenditure on investment (10.8) (9.2)
properties
160.3 Net proceeds from disposal of - 148.0
investment properties
(4.8) Tax paid on disposal of investment (0.4) (2.3)
properties
(0.2) Purchase of intangible assets (0.1) (0.1)
(0.3) Purchase of property, plant and (0.4) (0.3)
equipment
(19.5) Investment and loan to joint venture - (19.5)
------------------------------------------------------------------------------------------
40.6 Net cash from investing activities (24.0) 75.6
Cash flows from financing activities
0.3 Net proceeds from issue of ordinary 0.1 0.1
share capital
- Net proceeds from issue of bank 42.8 -
borrowings
(47.0) Net repayment of bank borrowings - (77.4)
1.7 ESOT shares net (purchase)/release (1.2) 0.2
(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 36.9 (81.2)
------------------------------------------------------------------------------------------
3.4 Net increase in cash and cash 2.1 0.9
equivalents
------------------------------------------------------------------------------------------
(1.9) Cash and cash equivalents at start of 12b 1.5 (1.9)
period
1.5 Cash and cash equivalents at end of 12b 3.6 (1.0)
period
------------------------------------------------------------------------------------------
Notes to the Half Year Report
For the 6 months ended 30 September 2007
1. Basis of preparation and accounting policies
The half year report has been prepared in accordance with the Disclosure and
Transparency Rules of the Financial Services Authority and with IAS34 'Interim
Financial Reporting' as adopted by the European Union. The half year report
should be read in conjunction with the annual financial statements for the year
ended 31 March 2007, which have been prepared in accordance with IFRSs as
adopted by the European Union.
The accounting policies adopted are consistent with those of the annual
financial statements for the year ended 31 March 2007, as described in those
annual financial statements.
In addition the following new standards have been adopted by the Group for the
financial year ending 31 March 2008.
• IFRS 7 'Financial instruments: Disclosures', effective for annual
periods beginning on or after 1 January 2007.
• IAS 34 'Interim Financial Reporting' effective for accounting periods
beginning on or after 20 January 2007.
The following new standards, amendments to standards or interpretations have
been considered by the Group and are either not relevant or have no significant
impact on the Group.
• IAS 1 'Amendments to capital disclosures', IFRS 4 'Insurance contracts',
IFRIC 7 'Applying the restatement approach under IAS 29', IFRIC 8 'Scope of
IFRS 2', IFRIC 9 'Reassessment of embedded derivatives', IFRIC 10 'Interims
and impairment', IFRIC 11 'IFRS 2 - Group and treasury share transactions'.
This half year report is unaudited and does not constitute statutory accounts
within the meaning of Section 240 of the Companies Act 1985. The statutory
accounts 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 accounts
was unqualified and did not contain a statement made under Section 237(2) or
Section 237(3) of the Companies Act 1985.
The Group's financial performance does not suffer materially from seasonal
fluctuations. There have been no changes in estimates of amounts reported in
prior periods which have a material impact on the current half year period.
This report was approved by the Board on 16 November 2007.
2. Analysis of net rental income
Year ended 6 months ended 6 months ended
31 March 2007 30 September 2007 30 September 2006
(restated•)
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* 25.0 (0.1) 24.9 22.5 (0.1) 22.4
12.3 (17.1) (4.8) Service charges 6.6 (8.6) (2.0) 6.3 (8.0) (1.7)
and other
recoveries
2.0 (1.0) 1.0 Services, fees, 0.8 (0.5) 0.3 0.8 (0.4) 0.4
commissions and
sundry income+
---------------------------------------------------------------------------------------------
59.9 (18.3) 41.6 32.4 (9.2) 23.2 29.6 (8.5) 21.1
---------------------------------------------------------------------------------------------
* Rental income includes lease surrender premia of £0.2m (31 March 2007: £0.3m,
30 September 2006: £0.2m).
+ Services, fees, commissions and sundry income as published last year included
non-refundable option fees received for the potential sale of property. This has
been restated as other income (see note 3(a)).
The Group operates a single business segment, providing business accommodation
for rent in London, which is continuing.
3(a). Other income
Year ended 6 months ended 6 months ended
31 March 2007 30 September 30 September
£m 2007 2006
(restated+) £m £m
-----------------------------------------------------------------------------------------
1.1 Non-refundable option fees for potential 2.0 -
sale of property
0.7 Insurance proceeds less diminution in value - 0.9
at Westwood Business Centre
-----------------------------------------------------------------------------------------
1.8 2.0 0.9
-----------------------------------------------------------------------------------------
+March 2007 comparatives have been restated to include £1.1m non-refundable
option fees for potential sale of property that were previously shown as revenue
(see note 2).
3(b). Profit on disposal of investment properties
Year 6 months ended 6 months ended
ended 30 September 30 September
31 March 2007 2007 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 - (2.7)
joint venture
-----------------------------------------------------------------------------------------
4.4 Pre tax profit on sale - 4.4
-----------------------------------------------------------------------------------------
4. Finance costs
Year 6 months ended 6 months ended
ended 30 September 30 September
31 March 2007 2007 2006
£m £m £m
-----------------------------------------------------------------------------------------
20.9 Interest payable on bank loans and 13.2 10.1
overdrafts
0.5 Amortisation of issue costs of bank loans 0.2 0.3
0.1 Interest payable on finance leases 0.1 -
1.4 Interest payable on 11.125% First Mortgage 0.4 0.7
Debenture Stock 2007
0.8 Interest payable on 11.625% First Mortgage 0.2 0.4
Debenture Stock 2007
0.1 Interest payable on 11% Convertible Loan - 0.1
Stock 2011
(0.5) Interest capitalised on property (0.4) (0.3)
refurbishments
-----------------------------------------------------------------------------------------
23.3 13.7 11.3
-----------------------------------------------------------------------------------------
5. Taxation
Year Analysis of charge in period 6 months ended 6 months ended
ended 30 September 30 September
31 March 2007 2007 2006
£m £m £m
--------------------------------------------------------------------------------------------
20.6 Current tax 0.2 2.7
(101.5) Deferred tax 0.1 17.9
--------------------------------------------------------------------------------------------
(80.9) Total taxation 0.3 20.6
--------------------------------------------------------------------------------------------
The majority of the Group's income is now exempt from tax following conversion
to a UK REIT on 1 January 2007. Current tax last year included the REIT
conversion charge of £18.8m. A deferred tax credit of £101.5m arose last year
following the release of provisions no longer required under REIT status.
Deferred tax has been recalculated at a rate of 28% rather than 30%, reflecting
the reduction in the UK corporation tax rate that will apply from 1 April 2008.
6. Dividends paid
Year 6 months ended 6 months ended
ended 30 September 30 September
31 March 2007 2007 2006
£m £m £m
--------------------------------------------------------------------------------------------
- Final dividend 2006/7 - 2.76p per ordinary 4.7 -
share
2.3 Interim dividend 2006/7 - 1.38p per ordinary - -
share
4.1 Final dividend 2005/6 - 2.51p per ordinary - 4.1
share
--------------------------------------------------------------------------------------------
6.4 4.7 4.1
--------------------------------------------------------------------------------------------
In addition the directors have declared an interim dividend in respect of the
financial year ending 31 March 2008 of 1.52p per ordinary share which will
absorb an estimated £2.6m of shareholders' funds. It will be paid on 4 February
2008 to shareholders who are on the register of members on 4 January 2008. The
full amount of this dividend will be in the form of a Property Income
Distribution (PID) which will be subject to a 22% withholding tax unless tax
exemptions apply.
7. 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 6 months 6 months 6 months 6 months
ended ended calculation of earnings ended ended ended ended
31 March 31 March per share 30 September 30 September 30 September 30 September
2007 2007 2007 2006 2007 2006
£m pence £m £m pence pence
----------------------------------------------------------------------------------------------------
Earnings used for basic
193.4 115.1 earnings per share 19.6 48.8 11.5 29.4
Interest saving net of
taxation on 11%
Convertible Loan Stock
0.1 (1.1) dilution - 0.1 - (0.6)
Share option scheme
- (1.5) dilution - - (0.2) (0.5)
----------------------------------------------------------------------------------------------------
193.5 112.5 Total diluted earnings 19.6 48.9 11.3 28.3
(182.7) (106.2) Less non trading items (12.8) (45.2) (7.4) (26.2)
----------------------------------------------------------------------------------------------------
10.8 6.3 Trading diluted earnings 6.8 3.7 3.9 2.1
----------------------------------------------------------------------------------------------------
Year Weighted average number of shares used for 6 months ended 6 months ended
ended calculating earnings per share 30 September 30 September
31 March 2007 2007 2006
Number Number Number
---------------------------------------------------------------------------------------------
Weighted average number of shares (excluding
168,083,460 shares held in the ESOT) 171,394,733 165,761,714
2,179,100 Dilution due to Share Option Schemes 2,667,978 3,330,327
1,651,507 Dilution due to Convertible Loan Stock - 3,845,480
---------------------------------------------------------------------------------------------
171,914,067 Used for calculating diluted earnings per share 174,062,711 172,937,521
---------------------------------------------------------------------------------------------
8. Net assets per share
31 March Net assets used for calculation of net assets 30 September 30 September
2007 per share 2007 2006
£m £m £m
(restated*) (restated*)
---------------------------------------------------------------------------------------------
582.6 Net assets at end of period (basic) 596.5 437.4
(0.9) Derivative financial instruments at fair value* (1.0) 1.0
- Deferred tax on accelerated tax depreciation - 8.8
0.4 Deferred tax on fair value change of investment 0.7 130.0
properties*
0.3 Deferred tax on derivative financial 0.4 (0.3)
instruments*
---------------------------------------------------------------------------------------------
582.4 Adjusted net assets 596.6 576.9
---------------------------------------------------------------------------------------------
* including share of joint venture (comparatives have been restated)
31 March Number of shares used for calculating net 30 September 30 September
2007 assets per share 2007 2006
Number Number Number
---------------------------------------------------------------------------------------------
174,221,087 Shares in issue at period end 174,311,997 174,035,087
(2,738,360) Less ESOT shares (2,867,860) (4,393,410)
---------------------------------------------------------------------------------------------
171,482,727 Number of shares for calculating basic net 171,444,137 169,641,677
assets per share
2,179,100 Dilution due to Share Option Schemes 2,439,898 3,330,327
---------------------------------------------------------------------------------------------
173,661,827 Number of shares for calculating diluted 173,884,035 172,972,004
adjusted net assets per share
---------------------------------------------------------------------------------------------
9(a). Investment properties
30 September
31 March 30 September 2006
2007 2007 (restated•)
£m £m £m
---------------------------------------------------------------------------------------------
954.0 Balance at beginning of period 1,001.6 954.0
102.1 Additions during the period 20.9 54.8
0.5 Capitalised interest on refurbishments 0.4 0.3
(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 12.2 59.7
---------------------------------------------------------------------------------------------
1,001.6 Balance at end of period 1,035.1 930.4
---------------------------------------------------------------------------------------------
*September 2006 comparatives have been restated to be consistent with the 2007
year end presentation of diminution in value of the Westwood Business Centre.
9(b) Valuation
The Group's investment properties were revalued at 30 September 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 30 September 30 September
2007 2007 2006
£m £m £m
--------------------------------------------------------------------------------------------
1,000.9 Total per CB Richard Ellis valuation report 1,034.5 932.5
(2.5) Owner occupied property (2.8) (2.4)
3.6 Head leases treated as finance leases under 3.8 0.7
IAS 17
(0.4) Short leases valued as head leases (0.4) (0.4)
--------------------------------------------------------------------------------------------
1,001.6 Total per balance sheet 1,035.1 930.4
--------------------------------------------------------------------------------------------
10. Current tax liabilities
31 March 30 September 30 September
2007 2007 2006
£m £m £m
--------------------------------------------------------------------------------------------
17.6 Current tax liabilities - 2.7
--------------------------------------------------------------------------------------------
The liability at 31 March 2007 includes the REIT conversion charge of £18.8m
which was paid on 14 July 2007. The Group currently has a tax debtor of £1.3m
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.
11. Financial liabilities - borrowings
a) Balances
31 March 30 September 30 September
2007 2007 2006
£m £m £m
----------------------------------------------------------------------------------------
Current
0.9 Bank overdraft due within one year or on - 2.8
demand (secured)
12.5 11.125% First Mortgage Debenture Stock 2007 - 12.5
(secured)
7.0 11.625% First Mortgage Debenture Stock 2007 - 7.0
(secured)
----------------------------------------------------------------------------------------
20.4 - 22.3
Non -current
357.1 Other loans (secured) 419.4 326.5
3.6 Finance lease obligations (secured) 3.8 0.7
----------------------------------------------------------------------------------------
360.7 423.2 327.2
----------------------------------------------------------------------------------------
381.1 423.2 349.5
----------------------------------------------------------------------------------------
The Debenture Stocks were repaid on 30 June 2007.
b) Maturity
31 March 30 September 30 September
2007 2007 2006
£m £m £m
----------------------------------------------------------------------------------------
Secured (excluding finance leases)
20.4 Repayable in less than one year 45.0 22.3
- Repayable between one year and two years 150.0 -
132.7 Repayable between two years and three years 225.0 127.3
225.0 Repayable between three years and four years - 200.0
- Repayable between four years and five years - -
----------------------------------------------------------------------------------------
378.1 420.0 349.6
(0.6) Less cost of raising finance (0.6) (0.8)
----------------------------------------------------------------------------------------
377.5 419.4 348.8
Finance leases (secured)
3.6 Repayable in five years or more 3.8 0.7
----------------------------------------------------------------------------------------
381.1 423.2 349.5
----------------------------------------------------------------------------------------
12. Notes to cash flow statement
a) Reconciliation of profit for the period to cash generated from operations:
Year ended 6 months ended 6 months ended
31 March 30 September 30 September
2007 2007 2006 (restated+)
£m £m £m
-------------------------------------------------------------------------------------------
193.4 Profit for the period 19.6 48.8
(80.9) Tax 0.3 20.6
0.6 Depreciation 0.4 0.3
0.1 Amortisation of intangibles 0.1 0.1
(4.4) Profit on disposal of investment properties - (4.4)
(95.3) Net gain from fair value adjustments on (12.2) (59.7)
investment property
0.8 Diminution in value due to fire loss - 0.7
(0.9) Fair value gains on financial instruments - (0.4)
(0.1) Interest income (0.1) (0.1)
23.3 Interest expense 13.7 11.3
(1.7) Share in joint venture post tax profit (0.6) 1.4
Changes in working capital:
(1.1) Increase in trade and other receivables (1.1) (3.3)
3.3 Increase in trade and other payables 1.5 2.5
-------------------------------------------------------------------------------------------
37.1 Cash generated from operations 21.6 17.8
-------------------------------------------------------------------------------------------
+Refer to note 9(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 30 September 30 September
2007 2007 2006
£m £m £m
------------------------------------------------------------------------------------------
- Cash at bank and in hand 1.1 -
2.4 Restricted cash - tenants' deposit deeds 2.5 1.8
(0.9) Bank overdrafts - (2.8)
------------------------------------------------------------------------------------------
1.5 3.6 (1.0)
------------------------------------------------------------------------------------------
13. Provisions
31 March 30 September 30 September
2007 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.
14. Statement of changes in shareholders' equity
31
March Share Share Investment Other Retained 30 30
2007 capital premium in own reserves earnings September September
Total shares 2007 2006
equity Total Total
equity equity
£m £m £m £m £m £m £m £m
-----------------------------------------------------------------------------------------------------
390.3 Balance at start of period 17.4 30.7 (2.8) 1.3 536.0 582.6 390.3
0.3 Share issues - 0.1 - - - 0.1 0.1
2.3 ESOT shares net (purchase)/ - - (1.5) - - (1.5) 0.2
release
(6.4) Dividends paid - - - - (4.7) (4.7) (4.1)
2.0 Loan stock conversion - - - - - - 2.0
0.7 Value of employee services - - - 0.4 - 0.4 0.1
193.4 Profit for the period - - - - 19.6 19.6 48.8
-----------------------------------------------------------------------------------------------------
582.6 Balance at end of period 17.4 30.8 (4.3) 1.7 550.9 596.5 437.4
-----------------------------------------------------------------------------------------------------
On 18 July 2007 the Employee Share Ownership Trust (ESOT) purchased 500,000
shares in the Company for a cash consideration of £1.9m.
15. 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 30 September 30 September
2007 2007 2006
£m £m £m
-----------------------------------------------------------------------------------------
78.8 Investment properties 81.2 74.9
2.2 Current assets 2.1 2.3
-----------------------------------------------------------------------------------------
81.0 Total assets 83.3 77.2
-----------------------------------------------------------------------------------------
(1.8) Current liabilities (1.7) (1.9)
(60.7) Non-current liabilities (62.5) (59.1)
-----------------------------------------------------------------------------------------
(62.5) Total liabilities (64.2) (61.0)
-----------------------------------------------------------------------------------------
18.5 Group share of joint venture net assets 19.1 16.2
-----------------------------------------------------------------------------------------
Income Statement:
Year ended 6 months ended 6 months ended
31 March 30 September 30 September
2007 2007 2006
£m £m £m
-----------------------------------------------------------------------------------------
4.2 Revenue 2.6 1.5
(1.1) Direct costs (0.7) (0.4)
-----------------------------------------------------------------------------------------
3.1 Net rental income 1.9 1.1
(0.1) Administrative expenses - -
1.4 Change in fair value of investment 0.9 (1.6)
property
(3.1) Finance costs - interest payable (2.0) (1.2)
1.2 Change in fair value of derivative 0.1 (0.2)
financial instruments
-----------------------------------------------------------------------------------------
2.5 Profit/(loss) before tax 0.9 (1.9)
(0.8) Taxation (0.3) 0.5
-----------------------------------------------------------------------------------------
1.7 Profit/(loss) after tax 0.6 (1.4)
-----------------------------------------------------------------------------------------
Transactions between the Group and its joint venture are related party
transactions as defined in IAS 24. Net recharges to the joint venture in the
period to 30 September 2007 were £0.1m (31 March 2007 £0.2m, 30 September 2006
£nil).
Balances with joint venture at period end:
31 March 30 September 30 September
2007 2007 2006
£m £m £m
----------------------------------------------------------------------------------------
(0.7) Amounts payable (0.3) (1.2)
----------------------------------------------------------------------------------------
16. Capital commitments
At the period end the Company had exchanged contracts to purchase property for
£12.6m.
17. Post balance sheet events
On 16 October 2007 the Group acquired Neil House, London, E1, a 45,000 sq.ft.
retail and office building for a cash consideration of £10.8m. On 29 October
2007 the Group acquired Quicksilver Place, London, N22 a 28,000 sq.ft.
industrial unit for a cash consideration of £2.0m.
Risks and uncertainties
The Board continuously assesses and monitors the key risks of the business. The
key risks that could affect the Group's medium-term performance, and the factors
which mitigate these risks, have not changed from those set out on page 69 of
the Group's 2007 Annual Report, a copy of which is available on the Group's
website www.workspacegroup.co.uk. The Chief Executive's Review includes
consideration of uncertainties affecting the Group in the remaining six months
of the year.
Half Year Report
Copies of this statement will be dispatched to shareholders on 19 November 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.
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 .
Statement of directors' 'Interim Financial Reporting' responsibilities
The directors' confirm that this condensed set of financial statements has been
prepared in accordance with IAS 34 as adopted by the European Union, and that
the interim management report herein includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8.
The directors of Workspace Group are listed in the Workspace Group Annual Report
for 31 March 2007, with the exception of the following changes in the period:
Mark Taylor resigned on 31 July 2007, Graham Clemett was appointed on 31 July
2007 and Madeleine Carragher resigned on 12 October 2007. A list of current
directors is maintained on the Workspace Group website:
www.workspacegroup.co.uk.
By order of the Board
H Platt
Chief Executive
16 November 2007
G Clemett
Finance Director
16 November 2007
Independent review report to Workspace Group PLC
Introduction
We have been engaged by the company to review the condensed set of financial
statements in the half year report for the six months ended 30 September 2007,
which comprises the income statement, balance sheet, statement of recognised
income and expense, cash flow statement and related notes. We have read the
other information contained in the half year report and considered whether it
contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
Directors' responsibilities
The half year report is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the half year report in
accordance with the Disclosure and Transparency Rules of the United Kingdom's
Financial Services Authority.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half year report has been
prepared in accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half year report based on our review. This
report, including the conclusion, has been prepared for and only for the company
for the purpose of the Disclosure and Transparency Rules of the Financial
Services Authority and for no other purpose. We do not, in producing this
report, accept or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we
do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half year report for the
six months ended 30 September 2007 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by the European
Union and the Disclosure and Transparency Rules of the United Kingdom's
Financial Services Authority.
PricewaterhouseCoopers LLP
Chartered Accountants
London
16 November 2007
This information is provided by RNS
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