11th Feb 2008 07:00
Workspace Group PLC11 February 2008 Workspace Group PLC 11 February 2008 WORKSPACE DRIVES RENTAL GROWTH AS LONDON SME MARKET REMAINS RESILIENT Workspace Group PLC ("Workspace") today announces its results for the ninemonths to 31 December 2007. Workspace provides 6.2 million sq. ft of flexiblebusiness accommodation to small and medium size enterprises ("SMEs") acrossLondon. •Total rent roll up 3.3% in the quarter and 8.4% in first nine months •Overall occupancy maintained at 86% •Portfolio valuation down 4.8% to £1,002m in the quarter •Reversionary yield out 50 bps to 7.2% •Diluted net asset value per share down 8.7% to 313p in the quarter •Major refurbishment scheme at Canterbury Court, Kennington Park, SW9 completed on schedule •Planning consents received at Thurston Road, Parmiter Industrial Estate, Linton House and Grand Union •Net cash from operations up 21% to £31.4m •Trading profits up 42% to £9.1m •Pre-tax loss of £33.0m after valuation reductions Commenting on the results, Harry Platt, Chief Executive, said, " The Group's trading performance demonstrates that the London SME marketremains resilient. Our key performance indicators of rent roll and occupancy areshowing progress, reflecting the demand for space from SMEs across the Capital.Enquiry levels remain robust and are continuing to convert into lettings. " The strengths of the Workspace business model are showing through. The tradingand valuation performance over the last nine months highlight the quality of ourbusiness model, significantly out-performing the sector as a whole. The strongoperating cashflows generated by the business and a sound capital base provide aplatform for both investment and dividend growth". " Looking forward, we remain confident that the long-term outlook for Workspaceis good. We are delivering rental growth and our portfolio offers manyopportunities to add further value. We have every reason to expect our trackrecord of out-performance through economic cycles to continue." -ends- Date: 11 February 2008 For further information:Workspace Group PLC cityPROFILEHarry Platt, Chief Executive Simon CourtenayGraham Clemett, Finance Director William Attwell020-7247-7614 020-7448-3244e-mail: [email protected]: www.workspacegroup.co.uk WORKSPACE GROUP PLC Quarterly Report Chairman's Statement-------------------- This is a good trading performance despite the uncertainties in the financialmarkets. As the leading supplier of space to small and medium sized enterprises(SMEs) across London, we are successfully growing rents, maintaining highoccupancy levels and capturing redevelopment potential. These are thefundamentals that create long-term value. This quarter has seen a significant softening in yields across the propertysector. While we are not immune to this, the strong growth in rents and rentalvalues achieved has reduced the impact with a net reduction of 4.8% in ouroverall property valuation in the quarter and a 1.5% reduction over the lastyear. This compares favourably with the reductions reported by IPD (InvestmentProperty Databank) for the UK property sector as a whole of 8.7% in the last 3months and a reduction of 8.6% over the last year, highlighting the resilienceof our customer base and the diversity of our property portfolio across London. Strong operating cashflow, sound financing and a position as a trusted partnerin mixed use development leave us well placed to take advantage of theopportunities that we expect to arise over the coming year. Chief Executive's Statement--------------------------- Trading Performance------------------- Our key performance indicators of rent roll and occupancy are both positivereflecting strong demand for space from SME customers across London. Rent roll has grown consistently quarter by quarter over the last year reaching£51.1m at December with average rent per square foot increasing by 2.3% in thequarter to £11.80. 3 months 9 months 12 months--------------------------------------------------------------------------------Rent Roll - total +3.3% +8.4% +17.0% - like-for-like +1.2% +5.5% +7.6% Occupancy levels have been broadly maintained over the quarter with ourlike-for-like occupancy level at 88.8%. At these levels we see the best overallrental growth, capturing rental increases from customer churn whilst stillretaining a strong underlying rental income base. An analysis of trends inoccupancy is set out below: December 2007 September 2007 March 2007--------------------------------------------------------------------------------Sites with greater than 90%occupancy 64 62 49Sites with 80% - 90% occupancy 19 17 28Sites with less than 80%occupancy 23 25 24----------------------- ---------- ----------- --------Headline average occupancy 86.2% 86.4% 84.8%----------------------- ---------- ----------- -------- Like-for-like estates 91 91 91----------------------- ---------- ----------- --------Like-for-like occupancy 88.8% 89.2% 87.6%----------------------- ---------- ----------- -------- The good progress we are making at sites recently refurbished, not yet includedin our like-for-like statistics, is set out below: Completion Date December 2007 September 2007 March 2007 Occupancy Occupancy Occupancy--------------------------------------------------------------------------------Enterprise House May 2006 97% 98% 89%Clerkenwell June 2006 94% 95% 89%The Light Box November 2006 84% 85% 81%Greville Street June 2007 66% 42% NilLombard House June 2007 41% 33% 23% The first phase of the redevelopment of Kennington Park, which was purchased for£56m in 2005, has now been completed. Canterbury Court, the largest building atthe complex, has been repositioned as a business centre with the works completedon schedule at a cost of £12m. The refurbished element comprises 102,000 sq.ft.of lettable space (75 business and studio units) with a new open plan atriumincorporating reception and cafe areas. It is now available to let and we havealready agreed lettings for 30% of the available space. Valuation---------- The property portfolio valuation undertaken independently by our valuers CBRichard Ellis reduced overall by £33m in the quarter with acquisitions andcapital expenditure of £18m offset by a revaluation reduction of £51m. Thiscomprised growth of 4.0% in estimated rental value (ERV) offset by a 50 bpssoftening in reversionary yields. December 2007 September 2007 March 2007-------------------------------------------------------------------------------Valuation (£m) 1,002 1,035 1,001ERV (£m) 72.1 69.3 65.3Reversionary Yield 7.20% 6.70% 6.52% Our continued success in growing rents from new lettings is reflected inreported ERVs which have grown consistently on both a total and like-for-likebasis over the last year. 3 Months 9 Months 12 Months-------------------------------------------------------------------------------ERV - total +4.0% +10.3% +19.6% - like-for-like +2.6% +7.5% +8.5% A summary of the movements in the portfolio valuation over the nine months maybe analysed as follows: £mValuation at 31 March 2007 1,001Acquisitions (including costs) 23Other expenditure on properties 17Valuation surplus - quarter to 30 June 2007 21 - quarter to 30 September 2007 (9) - quarter to 31 December 2007 (51) -------Valuation at 31 December 2007 1,002 ------ The majority of our properties are valued on a current use basis. Only a smallnumber have either planning approval or future development potential for changeof use reflected in their current valuations, as detailed below: December 2007 September 2007------------------------------------------------------------------------------Current use valuation------------------------ Number of properties 97 96- Valuation £876m £927m- Capital Value £200/sq.ft. £207/sq.ft.- Reversionary Yield 7.5% 6.9% With planning/redevelopment value------------------------------------ Number of properties 9 8- Valuation £126m £108m- Capital Value £196/sq.ft. £217/sq.ft.- Reversionary Yield 4.7% 4.3% We see significant potential for intensification and change of use at more thanhalf of our properties over the next 10 years. However, our valuation onlyreflects this potential at 9 sites where development plans are well advanced orplanning consent obtained. For the properties valued on a current use basis, the equivalent yield at ourtargeted 90% occupancy level is now 6.75%. The current yield on these propertiesis 5.0%, providing £16m of reversionary income that we would target to captureover the next four years, underpinning our income growth. The current use valuation can also be analysed between:* Business centres providing office space for small businesses, with some 70% (by value) located in our Southbank, West London and Clerkenwell property clusters. * Industrial centres supporting a broad range of light industrial customers in locations across London. Business Centres Industrial---------------------------------------------------------------------------Number of properties 61 36Valuation £671m £205mCapital Value £260/sq.ft. £113/sq.ft.Average rent £14.52/sq.ft. £7.23/sq.ft.Reversionary Yield 7.6% 7.5% This portfolio of business and industrial centres with low capital cost andrental per sq.ft. represents a continuing strength for the Group. On a number ofthese sites we also have plans for intensification or change of use. The phasingof our redevelopment plans for these properties are as follows: Number Current Valuation-----------------------------------------------------------------------------Planning expected to be achieved in next 18 months 10 £108mRedevelopment completed in next 5 years 15 £163m Redevelopment Update-------------------- We are making good progress on planning and received a revised planning consentin November at Thurston Road, Lewisham for 406 residential units (up from 270initially) and 40,000 sq.ft. of ground floor retail space and 4,000 sq.ft. oflive-work accommodation. This scheme replaces 46,000 sq.ft. of existingindustrial space. In January we received planning consent at our Parmiter estate, Bethnal Greenfor 106 apartments, 54 student studios and 27,000 sq.ft. of commercial spacereplacing 35,000 sq.ft. of existing industrial space. Contracts have beenexchanged to sell this site in February for its book value of £11m. At Linton House, Southwark we have received planning consent for a two floorextension providing an additional 17,000 sq.ft. of office space. Good progress has continued in our Glebe joint venture in line with the originalbusiness plan. In addition to the planning consent we received at WandsworthBusiness Village last quarter, we obtained outline planning consent in Decemberat Grand Union, North Kensington for 110,000 sq.ft. of new office space, 11,000sq.ft. of retail space and 145 residential units replacing the existing 51,000sq.ft. of commercial space. Acquisitions and Disposals--------------------------In the current market there is limited stock available that meets our investmentcriteria. Only two acquisitions were made in the quarter and no disposals. Name of Property Description Acquisition Price Income Market Rent Date £m £000 £000 Neil House, 45,000 sq. ft London E1 retail and offices 16 October 10.8 415 879 Quicksilver Place, 28,000 sq. ft London N22 single 29 October 2.0 102 136 industrial unitTotal 12.8 517 1,015Yield 4.0% 7.9% • Neil House, on the edge of Brick Lane, is a site near to our existing Whitechapel Technology Centre. We have been monitoring this property for many years. Local demand offers good opportunity for upgrading and repositioning as a business centre to significantly improve both occupancy and rents. • The acquisition of Quicksilver Place in Wood Green complements our existing cluster of properties in this regeneration area adjacent to The Chocolate Factory. We expect to see more property become available on financially attractive termsfor the Group, sourcing many of these directly from our extensive propertydatabase. Financial ReviewA summary of performance in the nine months is set out below: Nine months ended 31 December -------------------------------£m 2007 2006-----------------------------------------------------------------------------Trading - net rental income 35.0 30.7Trading - operating profit 30.4 23.3Interest costs (21.1) (16.8) Trading - profit 9.1 6.4Revaluation (loss)/gain (38.6) 72.3Joint venture (loss)/profit (3.1) 0.2Other (loss)/profits (0.4) 6.3 Total (loss)/profit before tax (33.0) 85.2 Cash generated from operations 31.4 25.9 The first nine months has seen a strong growth in net rental income up 14.0% onlast year. This increase combined with the £2m non-refundable option feereceived in September and flat administrative costs has resulted in an increaseof 30.5% in trading operating profits. Operating profit has translated into strong growth for operating cashflow whichis up 21.2% year on year. There has been no discernible deterioration in thecredit quality of our customer base and bad debts continue to run at less than0.5% of rental income, in line with the long term trend. Interest costs have risen year on year with debt at December £93m higher than in2006 and interest rates averaging 6.9% in the current year compared to 6.1% lastyear. The interest rate cost moderated somewhat in the third quarter at 6.8%compared to 7.0% in the first half reflecting a reduction in libor rates and the£150m fixed rate hedge taken out in November at an all-in cost of 6.4%. The joint venture loss includes a revaluation reduction of £4.3m in the lastquarter (£3.4m reduction in the year to date), with ERV growth of 2.9% offset bya softening in reversionary yield of 40 bps from 6.2% to 6.6%. Trading profits have grown strongly to £9.1m, up £2.7m (42%) on last year. At atotal PBT level, the revaluation reduction on both the Workspace and JointVenture portfolios results in a net loss in the nine months of £33.0m. Net assets at £542m are down £55m in the quarter and £9m on last year as aresult of the revaluation reductions seen in the last quarter. On a diluted netasset value per share basis this equates to 313p at December compared to 343p inSeptember, a reduction of 8.7%. Total bank debt at December is £437m. This is supported by banking facilities of£499m, £270m falling due in August 2010, £150m due in November 2012 with theremaining £79m of facilities rolling on a yearly basis. Interest cover based ontrading profits in the nine months is 1.44 and loan to value is 44%. As atDecember the Group had £62m of available facilities together with £133m ofuncharged assets. Prospects The fundamental dynamics of London as a global city underpin our business model,comprising: • an increasing population which is younger, more diverse and more entrepreneurial;* a concentration of successful and fast growing businesses growing in number;* an ever increasing demand on finite land in London; and* continuing rejuvenation and regeneration. The trading performance and valuation highlight the resilience of this model.Strong operating cashflows generated by the business and a sound capital baseprovide a platform for both investment and dividend growth. We and our customers cannot be immune to the effects of the currentuncertainties in the financial markets. However, we have every reason to expectour track record of out-performance through economic cycles to continue. Ourknowledge of the London property market, the location of our properties, ourskills in managing our portfolio and our position as a trusted partner formixed-use developments, make us well placed to exploit acquisition andredevelopment opportunities that will arise over the coming years. Your Board remains positive on the prospects for the Group. Key Statistics Quarter Quarter Quarter Quarter Quarter ending ending ending ending ending 31/12/2007 30/09/2007 30/06/2007 31/03/2007 31/12/2006Workspace Groupdirectly owned portfolioNumber of estates 106 104 101 101 99Lettable floorspace(million sq ft)+ 5.0 5.0 4.9 4.9 4.8Number of lettable units 4,522 4,441 4,394 4,304 4,233ERV £72.1m £69.3m £66.5m £65.3m £60.3mReversionary Yield* 7.2% 6.7% 6.5% 6.5% 6.4%Net annual rent roll ofoccupied units £51.1m £49.5m £48.2m £47.2m £43.7mAverage rentper sq ft £11.80 £11.54 £11.47 £11.34 £10.85Overall occupancy 86.2% 86.4% 85.8% 84.8% 83.9%Like-for-like lettablefloor space (million sq ft) 4.1 4.1 4.1 4.1 4.1Like-for-like net annualrent roll £40.4m £39.9m £39.1m £38.2m £37.5mLike-for-like average rent (£ per sq ft) £11.05 £10.85 £10.74 £10.61 £10.37Like-for-like occupancy 88.8% 89.2% 88.5% 87.6% 87.7% Workspace Glebe jointventure portfolioNumber of estates 17 16 15 15 14Lettable floorspace(million sq ft)+ 1.2 1.2 1.2 1.2 1.2Number of lettable units 866 823 813 813 811ERV £10.7m £10.4m £10.3m £10.3m £10.2mReversionary Yield* 6.6% 6.2% 6.3% 6.3% 6.5%Net annual rent roll ofoccupied units £7.2m £7.8m £7.9m £8.1m £8.1mAverage rent per sq ft £7.64 £7.87 £7.77 £7.81 £7.84Overall occupancy 81.7% 85.3% 87.7% 89.7% 89.9% Financial Performance (£m)Net rental income 11.8 11.4 11.8 10.9 9.6Trading profit before interest 9.7 11.0 9.7 10.2 6.9Revaluation (reduction)/surplus (50.8) (8.8) 21.0 23.0 12.6(Loss)/profit before taxation (52.9) (5.0) 24.9 27.3 15.8Investment property valuation 1,003 1,035 1,028 1,002 940Net assets 542 597 608 583 550Net asset value per share (£) £3.16 £3.48 £3.54 £3.40 £3.23Diluted adjusted net asset value per share (£) £3.13 £3.43 £3.49 £3.36 £3.32Trading interest cover 1.44x 1.52x 1.45x 1.44x 1.39x(cumulative)Gearing (%) 81% 71% 63% 65% 62%Loan to value (%) 44% 41% 39% 38% 37%Available borrowing facilities (£m) 62 79 118 65 99 +Excludes storage space* Based on ERV divided by valuation The like-for-like portfolio is defined as properties that have been heldthroughout a 12 month period and have not been subject to a refurbishmentprogramme in the last 24 months. Consolidated Income Statement Audited Unaudited UnauditedYear ended 9 months ended 9 months ended31 March 2007 31 December 2007 31 December 2006(restated+) (restated+) £m Notes Trading Other Total £m operations items* £m £m £m 59.9 Revenue 1 49.4 - 49.4 44.2(18.3) Direct costs 1 (14.4) - (14.4) (13.5)------------------------------------------------------------------------------ 41.6 Net rental income 1 35.0 - 35.0 30.7(10.0) Administrative expenses (6.8) (0.1) (6.9) (7.2) 95.3 Change in fair value - (38.6) (38.6) 72.3 of investment property 1.8 Other income 2a 2.2 - 2.2 0.9 Profit on disposal 4.4 of investment properties 2b - - - 4.5 ------------------------------------------------------------------------------133.1 Operating profit 30.4 (38.7) (8.3) 101.2 Finance income - interet 0.1 receivable 0.1 - 0.1 0.1 Finance costs - interest 3 (23.3) payable (21.2) - (21.2) (16.9)------------------------------------------------------------------------------109.9 9.3 (38.7) (29.4) 84.4 Change in fair value of 0.9 derivative financial instruments - (0.3) (0.3) 0.6 Share of joint venture post-tax 1.7 (loss)/profit 12 (0.2) (3.1) (3.3) 0.2------------------------------------------------------------------------------ 112.5 (Loss)/profit before tax 9.1 (42.1) (33.0) 85.2 80.9 Taxation (0.2) (0.1) (0.3) 75.0------------------------------------------------------------------------------ 193.4 (Loss)/profit for the period 8.9 (42.2) (33.3) 160.2 after tax and attributable to equity shareholders------------------------------------------------------------------------------ 115.1p Basic earnings per share 4 5.2p (24.6)p (19.4)p 95.8p112.5p Diluted earnings per share 4 5.1p (24.3)p (19.2)p 93.0p * Other items - the definition of other items is consistent with that noted inthe Annual Report and Accounts 2007 and in previous quarters. + Refer to note 2(a) Consolidated Statement of Recognised Income and Expense (SORIE) Audited Unaudited Unaudited Year ended 9 months ended 9 months ended 31 March 2007 31 December 31 December 2007 2006 £m £m £m 193.4 (Loss)/profit for the financial (33.3) 160.2 period - Fair value movement on (1.9) - derivatives ------------------------------------------------------------------------------- 193.4 Total recognised income and (35.2) 160.2 expense for the period ------------------------------------------------------------------------------- Consolidated Balance Sheet Audited Unaudited Unaudited 31 March 2007 31 December 31 December 2007 2006 £m Notes £m £m Non-current assets 1,001.6 Investment properties 6 1,003.2 940.1 0.3 Intangible assets 0.4 0.2 3.3 Property, plant and equipment 3.1 3.4 18.5 Investment in joint venture 12 15.1 17.8------------------------------------------------------------------------------ 1,023.7 1,021.8 961.5------------------------------------------------------------------------------ Current assets 8.8 Trade and other receivables 10.9 9.6 0.1 Financial assets - derivative - 0.1 financial instruments 2.4 Cash and cash equivalents 2.7 2.1------------------------------------------------------------------------------ 11.3 13.6 11.8------------------------------------------------------------------------------ Current liabilities (20.4) Financial liabilities - 8 (62.0) (21.2) borrowings (0.3) Financial liabilities - (2.4) (0.6) derivative financial instruments (32.3) Trade and other payables (30.5) (30.9) (17.6) Current tax liabilities 7 - (21.8)------------------- ----------------------------------------------------------- (70.6) (94.9) (74.5)------------------------------------------------------------------------------- (59.3) Net current liabilities (81.3) (62.7) Non-current liabilities (360.7) Financial liabilities - 8 (377.9) (323.2) borrowings (0.2) Deferred tax liabilities (0.2) (25.5) (20.9) Provisions 10 (20.9) -------------------------------------------------------------------------------- (381.8) (399.0) (348.7)------------------------------------------------------------------------------- 582.6 Net assets 541.5 550.1------------------------------------------------------------------------------- Shareholders' equity 17.4 Ordinary shares 11 17.4 17.4 30.7 Share premium 11 30.8 30.6 (2.8) Investment in own shares 11 (4.5) (3.8) 1.3 Other reserves 11 (0.2) 0.8 536.0 Retained earnings 11 498.0 505.1------------------------------------------------------------------------------- 582.6 Total shareholders' equity 11 541.5 550.1------------------------------------------------------------------------------- £3.40 Net asset value per share 5 £3.16 £3.23 (basic) £3.36 Diluted adjusted net asset 5 £3.13 £3.32 value per share Consolidated Cash Flow Statement Audited Unaudited Unaudited Year ended 9 months ended 9 months ended31 March 2007 31 December 2007 31 December 2006 £m Notes £m £m Cash flows from operating activities 37.1 Cash generated from 9a 31.4 25.9 operations 0.1 Interest received 0.1 0.1 (23.0) Interest paid (25.6) (16.7) 0.1 Tax (paid)/refunded (18.9) ------------------------------------------------------------------------------ 14.3 Net cash from operating activities (13.0) 9.3 Cash flows from investing activities (74.6) Purchase of investment properties (23.8) (44.9) (20.3) Capital expenditure on (15.3) (14.8) investment properties 160.3 Net proceeds from disposal - 159.9 of investment properties (4.8) Tax paid on disposal of (0.4) (2.7) investment properties (0.2) Purchase of intangible assets (0.2) (0.1) (0.3) Purchase of property, (0.4) (0.3) plant and equipment (19.5) Investment and loan to joint venture - (19.5)------------------------------------------------------------------------------ 40.6 Net cash from investing activities (40.1) 77.6 Cash flows from financing activities 0.3 Net proceeds from issue of 0.1 0.2 ordinary share capital - Net proceeds from issue of 57.6 - bank borrowings (47.0) Net repayment of bank borrowings - (81.6) 1.7 ESOT shares net (purchase)/release (0.8) 0.9 (0.1) Finance lease principal payments (0.1) - (6.4) Dividends paid to shareholders (4.7) (4.1)------------------------------------------------------------------------------ (51.5) Net cash from financing activities 52.1 (84.6)------------------------------------------------------------------------------ 3.4 Net (decrease)/increase in (1.0) 2.3 cash and cash equivalents ------------------------------------------------------------------------------ (1.9) Cash and cash equivalents 9b 1.5 (1.9) at start of period 1.5 Cash and cash equivalents 9b 0.5 0.4 at end of period ----------------------------------------------------------------------------- Notes to the Quarterly ReportFor the 9 months ended 31 December 2007 1. Analysis of net rental income Year ended 9 months ended 9 months ended 31 March 2007 31 December 2007 31 December 2006 (restated+) Revenue Direct Net Revenue Direct Net Revenue Direct Net costs rental cots rental costs rental income income income £m £m £m £m £m £m £m £m £m 45.6 (0.2) 45.4 Rental 37.9 (0.3) 37.6 33.6 (0.2) 33.4 income 12.3 (17.1) (4.8) Service 10.1 (13.3) (3.2) 9.2 (12.5) (3.3) charges and other recoveries 2.0 (1.0) 1.0 Services, 1.4 (0.8) 0.6 1.4 (0.8) 0.6 fees, commissions and sundry income ------------------------------------------------------------------------------- 59.9 (18.3) 41.6 49.4 (14.4) 35.0 44.2 (13.5) 30.7------------------------------------------------------------------------------- + Refer to note 2(a) The Group operates a single business segment, providing business accommodationfor rent in London, which is continuing. 2(a). Other income Year ended 9 months ended 9 months ended 31 March 2007 31 December 31 December 2007 2006 (restated+) £m (restated+) £m £m 1.1 Non-refundable option fees for 2.2 - potential sale of property 0.7 Insurance proceeds less diminution - 0.9 in value at Westwood Business Centre---------------------------------------------------------------------------- 1.8 2.2 0.9---------------------------------------------------------------------------- +Prior period comparatives have been restated for the following: i) the March2007 comparatives have been restated to include £1.1m non refundable optionfees, these fees were formerly disclosed in Revenue - Services, fees,commissions and sundry income in previous periods. ii) the December 2006comparatives have been restated with regard to the accounting for the fire atWestwood Business Centre to be consistent with the presentation in the 2007Annual Report and Accounts. 2(b). Profit on disposal of investment properties Year ended 9 months ended 9 months ended 31 March 2007 31 December 31 December 2007 2006 £m £m £m 168.3 Gross proceeds from sale of - 168.3 investment properties (161.2) Book value at time of sale plus - (161.1) sale costs ---------------------------------------------------------------------------- 7.1 - 7.2 (2.7) Unrealised profits on sale of - (2.7) properties to joint venture ------------------------------------------------------------------------------ 4.4 Pre tax profit on sale - 4.5------------------------------------------------------------------------------ 3. Finance costs Year ended 9 months ended 9 months ended 31 March 2007 31 December 31 December 2007 2006 £m £m £m 20.9 Interest payable on bank loans 20.8 15.2 and overdrafts 0.5 Amortisation of issue costs of 0.3 0.4 bank loans 0.1 Interest payable on finance 0.1 - leases 2.2 Interest payable on 11.125% and 0.6 1.6 11.625% Debenture Stock 2007 0.1 Interest payable on 11% - 0.1 Convertible Loan Stock 2011 (0.5) Interest capitalised on property (0.6) (0.4) refurbishments ----------------------------------------------------------------------------- 23.3 21.2 16.9----------------------------------------------------------------------------- 4. Earnings per share Basic earnings per share is calculated by dividing the earnings attributable toordinary shareholders by the weighted average number of ordinary sharesoutstanding during the period, excluding those held in the employee shareownership trust (ESOT). For diluted earnings per share the weighted average number of ordinary shares inissue is adjusted to assume conversion of all dilutive potential ordinaryshares. Following the conversion of the 11% Convertible Loan Stock in 2006 theGroup has only one class of dilutive potential ordinary shares: those shareoptions granted to employees. Reconciliations of the earnings and weighted average number of shares used inthe calculations are set out below: Profit Earnings Profit Earnings per share per share Year Year Earnings used for 9 months 9 months 9 months 9 months ended ended calculation of earnings ended 31 ended 31 ended 31 ended 3131 March 31 March per share December December December December 2007 2007 2007 2006 2007 2006 193.4 115.1 Earnings used for (33.3) 160.2 (19.4) 95.8 basic earnings per share 0.1 (1.1) Interest saving - 0.1 - (1.2) net of taxation on 11% Convertible Loan Stock dilution - (1.5) Share option - - 0.2 (1.6) scheme dilution ------------------------------------------------------------------------------- 193.5 112.5 Total diluted (33.3) 160.3 (19.2) 93.0 earnings (182.7) (106.2) Less non trading items 42.2 (154.8) 24.3 (89.8) ------------------------------------------------------------------------------ 10.8 6.3 Trading diluted earnings 8.9 5.5 5.1 3.2------------------------------------------------------------------------------ Year ended Weighted average number of shares 9 months ended 9 months ended 31 March used for calculating earnings 31 December 31 December 2007 per share 2007 2006 Number Number Number 168,083,460 Weighted average number of shares 171,406,733 167,203,011 (excluding shares held in the ESOT) 2,179,100 Dilution due to Share Option 2,469,892 2,947,264 Schemes 1,651,507 Dilution due to Convertible Loan - 2,192,000 Stock------------------------------------------------------------------------------ 171,914,067 Used for calculating diluted 173,876,625 172,342,275 earnings per share ------------------------------------------------------------------------------ 5. Net assets per share 31 March 2007 Net assets used for calculation of net 31 December 31 December assets per share 2007 2006 £m £m £m 582.6 Net assets at end of period (basic) 541.5 550.1 (0.9) Derivative financial instruments at fair value* 2.4 - - Deferred tax on accelerated tax - 0.2 depreciation 0.4 Deferred tax on fair value change of (0.6) 25.3 investment properties* 0.3 Deferred tax on derivative financial - - instruments* ------------------------------------------------------------------------------ 582.4 Adjusted net assets 543.3 575.6------------------------------------------------------------------------------*Including share of joint venture (comparatives have been restated). 31 March 2007 Number of shares used for 31 December 31 December Number calculating net assets per share 2007 2006 Number Number 174,221,087 Shares in issue at period end 174,311,997 174,080,087 (2,738,360) Less ESOT shares (2,941,069) (3,718,410)---------------- -------------------------------------------------------------- 171,482,727 Number of shares for calculating 171,370,928 170,361,677 basic net assets per share 2,179,100 Dilution due to Share Option 2,262,545 2,947,264 Schemes ------------------------------------------------------------------------------- 173,661,827 Number of shares for calculating 173,633,473 173,308,941 diluted adjusted net assets per share------------------------------------------------------------------------------- 6. Investment properties 31 March 2007 31 December 31 December 2007 2006 (restated+) £m £m £m 954.0 Balance at beginning of period 1,001.6 954.0 102.1 Additions during the period 39.6 63.6 0.5 Capitalised interest on 0.6 0.4 refurbishments (149.5) Disposals during the period - (149.5) (0.8) Diminution in value due to fire loss+ - (0.7) 95.3 Change in fair value of investment (38.6) 72.3 property+ ------------------------------------------------------------------------------- 1,001.6 Balance at end of period 1,003.2 940.1------------------------------------------------------------------------------- +Refer to note 2(a) Valuation The Group's investment properties were revalued at 31 December 2007 by CBRichard Ellis, Chartered Surveyors, a firm of independent qualified valuers. Thevaluations were undertaken in accordance with the Royal Institution of CharteredSurveyors Appraisal and Valuation Standards on the basis of market value. Marketvalue is defined as the estimated amount for which a property should exchange onthe date of valuation between a willing buyer and willing seller in an arm'slength transaction. The reconciliation of the valuation report to the total shown in theConsolidated Balance Sheet as non-current assets, investment properties, is asfollows: 31 March 31 December 31 December 2007 2007 2006 £m £m £m 1,000.9 Total per CB Richard Ellis valuation report 1,002.2 942.2 (2.5) Owner occupied property (2.8) (2.4) 3.6 Head leases treated as finance leases under 4.1 0.7 IAS 17 (0.4) Short leases valued as head leases (0.3) (0.4)------------------------------------------------------------------------------ 1,001.6 Total per balance sheet 1,003.2 940.1------------------------------------------------------------------------------ 7. Current tax liabilities 31 March 2007 31 December 2007 31 December 2006 £m £m £m 17.6 Current tax liabilities - 21.8------------------------------------------------------------------------------- The liability at 31 December 2006 and 31 March 2007 included the REIT conversioncharge of £18.8m which was paid on 14 July 2007. The Group currently has a taxdebtor of £1.4m which represents an overpayment of tax in prior years and whichis considered recoverable. This is included under trade and other receivables onthe balance sheet. 8. Financial liabilities - borrowings 31 March 2007 31 December 2007 31 December 2006 £m £m £m 20.4 Current liabilities 62.0 21.2 360.7 Non-current liabilities 377.9 323.2---------------- ------------------------------------------------------------- 381.1 439.9 344.4------------------------------------------------------------------------------ Maturity: 31 March 2007 31 December 2007 31 December 2006 £m £m £m Secured (excluding finance leases) 20.4 Repayable in less than one year 62.0 21.2 - Repayable between one year and two years - - 132.7 Repayable between two years and three years 225.0 123.1 225.0 Repayable between three years and four years - 200.0 - Repayable between four years and five years 150.0 - years ------------------------------------------------------------------------------- 378.1 437.0 344.3 (0.6) Less cost of raising finance (1.2) (0.6)----------------------------------------------------------------------------- 377.5 435.8 343.7 Finance leases (part secured) 3.6 Repayable in five years or more 4.1 0.7------------------------------------------------------------------------------ 381.1 439.9 344.4------------------------------------------------------------------------------ 9. Notes to cash flow statement a) Reconciliation of profit for the period to cash generated from operations: Year ended 9 months ended 9 months ended 31 March 2007 31 December 31 December 2007 2006 (restated+) £m £m £m 193.4 (Loss)/profit for the period (33.3) 160.2 (80.9) Tax 0.3 (75.0) 0.6 Depreciation 0.5 0.5 0.1 Amortisation of intangibles 0.1 0.1 (4.4) Profit on disposal of investment - (4.5) properties (95.3) Change in fair value of investment 38.6 (72.3) property 0.8 Diminution in value due to fire - 0.7 loss (0.9) Fair value changes on financial 0.3 (0.6) instruments (0.1) Interest income (0.1) (0.1) 23.3 Interest expense 21.2 16.9 (1.7) Share in joint venture post tax 3.3 (0.2) loss/(profit) Changes in working capital: (1.1) Increase in trade and other (0.8) (2.3) receivables 3.3 Increase in trade and other 1.3 2.5 payables ------------------------------------------------------------------------------- 37.1 Cash generated from operations 31.4 25.9------------------------------------------------------------------------------ +Refer to note 2(a) b) Reconciliation of cash and cash equivalents: For the purposes of the cash flow statement, the cash and cash equivalentscomprise the following: 31 March 2007 31 December 31 December 2007 2006 £m £m £m - Cash at bank and in hand - - 2.4 Restricted cash - tenants' deposit deeds 2.7 2.1 (0.9) Bank overdrafts (2.2) (1.7)-------------- --------------------------------------------------------------- 1.5 0.5 0.4------------------------------------------------------------------------------ 10. Provisions 31 March 2007 31 December 31 December 2007 2006 £m £m £m - Balance at start of period 20.9 - 20.9 Provision for tax indemnity - ---------------------- -------------------------------------------------------- 20.9 Balance at end of period 20.9 ------------------------------------------------------------------------------- On the formation of the joint venture with Glebe (which was created by a mergerand so triggered no tax liabilities) the Group gave an indemnity that should atax liability arise in the future on the disposal of any of the properties thathave been transferred, then the Group would pay to the joint venture aproportion of the liability based on the pre-merger gain. An appropriateprovision under current tax law has been made for this liability. 11. Statement of changes in shareholders' equity 31 Share Share InvestmentOther Retained 31 31 March capital premium in own reservesearnings Dec Dec 2007 shares 2007 2006Total Total Totalequity equity equity £m £m £m £m £m £m £m £m390.3 Balance at start 17.4 30.7 (2.8) 1.3 536.0 582.6 390.3 of period 0.3 Share issues - 0.1 - - - 0.1 0.2 2.3 ESOT shares net - - (1.7) - - (1.7) 1.3 (purchase)/release (6.4) Dividends paid - - - - (4.7) (4.7) (4.1) 2.0 Loan stock - - - - - - 2.0 conversion 0.7 Value of - - - 0.4 - 0.4 0.2 employee services - Fair value - - - (1.9) - (1.9) - movement on derivatives 193.4 (Loss)/profit - - - - (33.3) (33.3) 160.2 for the period -------------------------------------------------------------------------------582.6 Balance at end 17.4 30.8 (4.5) (0.2) 498.0 541.5 550.1 of period ------------------------------------------------------------------------------- On 18 July 2007 the Employee Share Ownership Trust (ESOT) purchased 500,000shares in the Company for a cash consideration of £1.9m. 12. Joint Venture Workspace Group PLC holds 50% of the ordinary share capital of a joint venturecompany, Workspace Glebe Limited. Its interest in this joint venture has beenequity 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 shownbelow: Assets and liabilities: 31 March 2007 31 December 31 December 2007 2006 £m £m £m 78.8 Investment properties 78.7 76.7 2.2 Current assets 1.6 2.1 ------------------------------------------------------------------------------ 81.0 Total assets 80.3 78.8 ------------------------------------------------------------------------------ (1.8) Current liabilities (2.4) (1.7) (60.7) Non-current liabilities (62.8) (59.3) ------------------------------------------------------------------------------ (62.5) Total liabilities (65.2) (61.0) ------------------------------------------------------------------------------ 18.5 Group share of joint venture net assets 15.1 17.8------------------------------------------------------------------------------- Income and expenses: Year ended 9 months ended 9 months ended 31 March 2007 31 December 31 December £m 2007 2006 £m £m 4.2 Revenue 3.8 2.9 (1.1) Direct costs (1.0) (0.8) ----------------------------------------------------------------------------- 3.1 Net rental income 2.8 2.1 (0.1) Administrative expenses - - 1.4 Change in fair value of investment (3.4) (0.1) property (3.1) Finance costs - interest payable (2.9) (2.2) 1.2 Change in fair value of derivative (1.1) 0.5 financial instruments ------------------------------------------------------------------------------- 2.5 (Loss)/profit before tax (4.6) 0.3 (0.8) Taxation 1.3 (0.1) ------------------------------------------------------------------------------ 1.7 (Loss)/profit after tax (3.3) 0.2 ------------------------------------------------------------------------------ 13. Post balance sheet events A sales contract was exchanged in March 2007 for the sale of Parmiter Industrial Estate a 35,000 sq.ft. industrial estate in London, E2 dependent on planning consent. After the period end planning consent was granted for a mixeduse development and the sale of the asset is now expected to complete in February 2008. 14. Basis of preparation The financial information reflects the current versions of the standards of theInternational Accounting Standards Board (IASB) and interpretations of theInternational Financial Reporting Interpretations Committee (IFRIC) as currentlyadopted by the European Union. The Group's accounting policies are unchanged from those set out in the AnnualReport and Financial Statements for the year ended 31 March 2007 and have beenapplied in preparing the financial information contained in this report. This report was approved by the Board on 8 February 2008. This report is unaudited and does not constitute statutory accounts within themeaning of Section 240 of the Companies Act 1985. The financial statements forthe year to 31 March 2007, which were prepared under IFRS have been delivered to the Registrar of Companies. The auditors' opinion on those financial statements was unqualified and did not contain a statement made under Section 237(2) or Section 237(3) of the Companies Act 1985. 15. Quarterly Report Copies of this statement will be dispatched to shareholders on 11 February 2008and will be available from the Group's registered office at Magenta House, 85Whitechapel Road, London, E1 1DU and on the Group's websitewww.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'sAnnual Report and Accounts 2007, available on the Group's websitewww.workspacegroup.co.uk . This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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