REG - Workspace Grp PLC - WORKSPACE GROUP PLC HALF YEAR RESULTS
22/11/2024 07:00
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RNS Number : 2373N Workspace Group PLC 22 November 2024
22 November 2024
WORKSPACE GROUP PLC
HALF YEAR RESULTS
CONTINUED UNDERLYING INCOME AND DIVIDEND GROWTH FROM OUR UNIQUE AND SCALABLE
OPERATING PLATFORM
Workspace Group PLC ("Workspace"), London's leading owner and operator of
sustainable, flexible work space today announces its results for the half year
to 30 September 2024. The comments in this announcement refer to the period
from 1 April 2024 to 30 September 2024 unless otherwise stated.
Financial highlights: Underlying rental income growth driving increase in
dividend, valuation stabilised
· Underlying net rental income(†)(1) up 4.3% to £60.2m (September
2023: £57.7m), net rental income(†) down 0.8% (£0.5m) to £60.5m
(September 2023: £61.0m) following disposals
· Trading profit after interest(†) up 5.1% to £32.7m (September
2023: £31.1m)
· Interim dividend per share up 4.4% to 9.4p per share (September 2023:
9.0p)
· Like-for-like portfolio valuation stabilised, down 0.2%(2) with
equivalent yield out 9bps to 7.1%, offset by 1.3% growth in ERV
· Total portfolio valuation of £2,423m, an underlying(2) reduction of
0.8% (£20m) from 31 March 2024 (September 2023: underlying(2) reduction of
6.6%)
· Profit before tax of £10.2m, reflecting the movement in the property
valuation (September 2023: £147.9m loss)
· EPRA net tangible assets per share(†) down 1.9% to £7.85 (March
2024: £8.00)
· Robust balance sheet with £144m of cash and undrawn facilities
(March 2024: £145m) and LTV(†) stable at 35% (March 2024: 35%)
· Average cost of debt at 30 September was 3.6% with 89% of debt at
fixed rates.
· In November 2024, agreed extension of £135m credit facility to 2028
and additional £80m term loan facility
Scalable operating platform: customer demand driving continued pricing growth
· Good customer demand with 603 lettings completed in the half year
with a total rental value of £15.8m, highlighting the appeal of our flexible
offer
· Like-for-like rent per sq. ft. up 2.8% in the half year to £47.00
· Like-for-like rent roll down 1.3% in the half year to £109.0m,
reflecting a higher than usual level of larger customers vacating in the
period
· Like-for-like occupancy down 0.7% in the half year to 87.5%
Accretive asset management and sustainability activity targeted to customer
demand
· Active capital recycling with £29.9m of disposals completed in the
first half of the year, and a further £47.2m already exchanged and expected
to complete in the second half of the year
· Refurbishment and extension of Leroy House in Islington completed in
October 2024, our first net zero building, delivering 57,000 sq. ft. of new
space across 101 units
· Progressing the major refurbishment projects at Chocolate Factory and
The Biscuit Factory, with an additional c.1m sq. ft. of larger projects in the
pipeline
· Further 60,000 sq. ft. of refurbishment and unit subdivision projects
completed in the first half to meet customer demand, delivering strong income
returns
· Excellent performance against our environmental objectives, with a
10% reduction in operational energy intensity, 30% reduction in gas use and 5%
increase in EPC A and B rated space to 56% compared to the first half of last
year
Lawrence Hutchings, Chief Executive Officer, said:
"Workspace is a leader in the London flex market, with a deep understanding of
what our customers want from their work space and a focus on championing the
needs of the Capital's fastest growing businesses. Today's results, reflecting
good customer demand and continued pricing growth, demonstrate the enduring
appeal of the Workspace offer for these businesses.
With over 35 years of experience and a unique, scalable business model,
Workspace is well positioned for further success as we continue to capture
demand and, over the medium term, look to increase our share of London's
growing SME market. This is an exciting time for the business, and I am
delighted to be here as Workspace's new CEO to build on the great legacy left
by my predecessor Graham and drive the continued evolution of the business.
Over the coming weeks and months, I am looking forward to spending more time
in Workspace's centres across London, meeting our diverse range of customers
and getting to know the teams responsible for making Workspace the unique
place it is."
Summary Results
September September Change
2024 2023
Financial performance
Net rental income(†) £60.5m £61.0m -0.8%
Trading profit after interest(†) £32.7m £31.1m +5.1%
Profit/(loss) before tax £10.2m £(147.9)m
Interim dividend per share 9.4p 9.0p +4.4%
September March Change
2024 2024
Valuation
EPRA net tangible assets per share(†) £7.85 £8.00 -1.9%
Property valuation(†) £2,423m £2,446m -0.8%(2)
Financing
Loan to value(†) 35% 35%
Undrawn bank facilities and cash £144m £145m
† Alternative performance measure (APM). The Group uses a number of
financial measures to assess and explain its performance. Some of these which
are not defined within IFRS are considered APMs.
(1) Underlying change adjusted for disposals.
(2) Underlying change excluding capital expenditure and disposals.
For media and investor enquiries, please contact:
Workspace Group 020 7138 3300
PLC
Paul Hewlett, Director of Strategy & Corporate Development
Clare Marland, Head of Corporate Communications
FGS Global 020 7251 3801
Chris Ryall
Guy Lamming
Details of results presentation
Workspace will host a results presentation for analysts and investors on
Friday, 22 November 2024 at 9:00am. The venue for the presentation is
Eventspace, at Salisbury House, 114 London Wall, EC2M 5QA.
The presentation can also be accessed live via webcast at the following link:
https://secure.emincote.com/client/workspace/workspace026
(https://secure.emincote.com/client/workspace/workspace026)
Notes to Editors
About Workspace Group PLC:
Workspace is London's leading owner and operator of flexible workspace,
currently managing 4.3 million sq. ft. of sustainable space at 73 locations in
London and the South East.
We are home to some 4,000 of London's fastest growing and established brands
from a diverse range of sectors. Our purpose, to give businesses the freedom
to grow, is based on the belief that in the right space, teams can achieve
more. That in environments they tailor themselves, free from constraint and
compromise, teams are best able to collaborate, build their culture and
realise their potential.
We have a unique combination of a highly effective and scalable operating
platform, a portfolio of distinctive properties, and an ownership model that
allows us to offer true flexibility. We provide customers with blank canvas
space to create a home for their business, alongside leases that give them the
freedom to easily scale up and down within our well-connected, extensive
portfolio.
We are inherently sustainable - we invest across the capital, breathing new
life into old buildings and creating hubs of economic activity that help
flatten London's working map. We work closely with our local communities to
ensure we make a positive and lasting environmental and social impact,
creating value over the long term.
Workspace was established in 1987, has been listed on the London Stock
Exchange since 1993, is a FTSE 250 listed Real Estate Investment Trust (REIT)
and a member of the European Public Real Estate Association (EPRA).
Workspace® is a registered trademark of Workspace Group PLC, London, UK.
LEI: 2138003GUZRFIN3UT430
For more information on Workspace, visit www.workspace.co.uk
(http://www.workspace.co.uk)
BUSINESS REVIEW
CUSTOMER ACTIVITY
We have seen good customer demand with 603 lettings completed in the half year
with a total rental value of £15.8m, up 5.3% on the first six months of the
previous financial year.
Monthly Average Monthly Activity
H1 H1 FY 30 Sep 31 Aug 31 Jul
2024/25 2023/24 2023/24 2024 2024 2024
Enquiries 694 788 788 698 685 717
Viewings 492 509 524 476 457 525
Lettings 101 98 103 145 76 75
The good level of customer lettings has been offset by a higher than usual
level of customer vacations in the period, including a number of larger
customers. The majority of these have either grown with us successfully and
been acquired by large corporates or are at sites where we have not wanted to
offer the longer leases typically required by larger occupiers due to planned
redevelopment. While this churn is higher than usual, it is part of the
regular rhythm of our business and, in line with our model, represents an
opportunity to create value through subdividing many of these larger units
into smaller units, for which we see stronger demand and achieve higher
pricing.
The good demand that we saw in September has continued into the third quarter,
with 757 enquiries, 540 viewings and 78 deals in October 2024, delivered
against the backdrop of uncertainty in the lead-up to the Autumn Budget on 30
October.
RENT ROLL
Total rent roll, representing the total annualised net rental income at a
given date, was down 2.3% (£3.3m) in the six months to £140.1m at 30
September 2024.
Total Rent Roll £m
At 31 March 2024 143.4
Like-for-like portfolio (1.4)
Disposals (2.0)
Other 0.1
At 30 September 2024 140.1
The total Estimated Rental Value (ERV) of the portfolio, comprising the ERV of
the like-for-like portfolio and those properties currently undergoing
refurbishment or redevelopment (but only including properties at the design
stage and non-core properties at their current rent roll and occupancy), was
£194.3m at 30 September 2024.
Like-for-like portfolio
The like-for-like portfolio represents 78% of the total rent roll as at 30
September 2024. It comprises 42 properties with stabilised occupancy excluding
recent acquisitions, buildings impacted by significant refurbishment or
redevelopment activity, or contracted for sale.
Six Months Ended
Like-for-Like 30 Sep 24 31 Mar 24(1) 30 Sep 23(1)
Occupancy 87.5% 88.2% 88.4%
Occupancy change(2) (0.7%) (0.2%) (0.4%)
Rent per sq. ft. £47.00 £45.73 £44.19
Rent per sq. ft. change 2.8% 3.5% 6.9%
Rent roll £109.0m £110.4m £107.1m
Rent roll change (1.3%) 3.1% 6.7%
(1) Restated for the transfer in of Old Dairy, Shoreditch, where occupancy is
now stabilised post-acquisition and the transfer out of
The Biscuit Factory site in Bermondsey which is undergoing major refurbishment
and redevelopment activity
(2) Absolute change
We have continued to move pricing forward across our like-for-like portfolio
with rent per sq. ft. increasing by 2.8% in the half year to £47.00.
Like-for-like occupancy was down by 0.7% to 87.5% in the half year, with an
overall decrease in like-for-like rent roll of 1.3% (£1.4m) to £109.0m,
reflecting the higher than usual level of customer vacations in the period, as
noted above.
We have seen ERV per sq. ft. increase by 1.3% in the half year. If all the
like-for-like properties were at 90% occupancy at the CBRE estimated rental
values at 30 September 2024, the rent roll would be £127.0m, £18.0m higher
than the actual rent roll at 30 September 2024.
Completed Projects
There are six projects in the completed projects category. Rent roll reduced
overall by £0.1m in the six months to £7.0m.
If the buildings in this category were all at 90% occupancy at the ERVs at 30
September 2024, the rent roll would be £10.0m, an uplift of £3.0m.
Projects Underway - Refurbishments
We are currently underway on nine refurbishment projects that will deliver
553,500 sq. ft. of new and upgraded space. As at 30 September 2024, rent roll
was £12.8m, up £0.3m in the last six months.
Assuming 90% occupancy at the ERVs at 30 September 2024, the rent roll at
these nine buildings once they are completed would be £24.9m, an uplift of
£12.1m.
Projects at Design Stage
These are properties where we are well advanced in planning a refurbishment or
redevelopment that has not yet commenced. As at 30 September 2024, the rent
roll at these five properties was £3.6m, in line with 31 March 2024.
South East Office
As at 30 September 2024, the rent roll of the South East office portfolio,
comprising eight buildings, was down £0.1m to £6.7m.
Assuming 90% occupancy (or current occupancy if higher) at the ERVs at 30
September 2024, the rent roll would be £9.3m, an uplift of £2.6m.
Non-core
As at 30 September 2024, the rent roll of the non-core portfolio, comprising
four properties, was £1.0m, up £0.1m.
Disposals
In July, we exchanged on the sale of Ashcombe House, Leatherhead and The
Planets, Woking for a combined total of £15.7m, in line with the March 2024
valuation.
In November, we exchanged on the sale of Rainbow Industrial Estate, Raynes
Park for £20.3m, in line with the September 2024 valuation.
We received a total of £29.9m in cash during the first half of the year from
the completions of non-core disposals; Poplar Business Park in Poplar, Mallard
Court and Cygnet House in Staines and 5 Acre Estate in Folkestone, with a
further £47.2m of disposals already exchanged and expected to complete in the
second half of the year with an aggregate net initial yield of 4.6%.
PROFIT PERFORMANCE
Trading profit after interest for the half year was up 5.1% (£1.6m) on the
prior half year to £32.7m.
£m 30 Sep 30 Sep
2024 2023
Underlying rental income 68.7 65.4
Unrecovered service charge costs (3.1) (2.8)
Empty rates and other non-recoverable costs (5.4) (5.3)
Services, fees, commissions and sundry income - 0.4
Underlying net rental income 60.2 57.7
Disposals 0.3 3.3
Net rental income 60.5 61.0
Administrative expenses - underlying (10.9) (10.4)
Administrative expenses - share based costs(1) (1.5) (1.2)
Net finance costs (15.4) (18.3)
Trading profit after interest 32.7 31.1
(1) These relate to both cash and equity settled costs
Underlying rental income increased £3.3m to £68.7m, reflecting the strong
increase in average rent per sq. ft. achieved over the last year. Net rental
income was down 0.8% (£0.5m) to £60.5m following the disposals made over the
last year.
Unrecovered service charge costs, empty rates and other non-recoverable costs
both increased slightly reflecting underlying inflation and the slight fall in
occupancy, which also impacted net revenue from services, fees, commissions
and sundry income.
Underlying administrative expenses increased by £0.5m to £10.9m, reflecting
underlying inflation. Share-based costs increased by £0.3m to £1.5m.
Net finance costs decreased by £2.9m to £15.4m in the half year, reflecting
the decrease in SONIA over the last six months, a reduction in average net
debt following asset disposals and an increase in capitalised interest due to
the step up in activity on major projects. The average net debt balance in the
period was £28m lower than the first six months of the prior year, whilst the
average interest cost decreased from 3.8% to 3.4%.
Profit before tax was £10.2m compared to a £147.9m loss in the prior year.
£m 30 Sep 30 Sep
2024 2023
Trading profit after interest 32.7 31.1
Change in fair value of investment properties (20.3) (177.4)
Loss on sale of investment properties (1.1) (1.2)
Other costs (1.1) (0.4)
Profit/(loss) before tax 10.2 (147.9)
Adjusted underlying earnings per share 16.9p 16.1p
The change in fair value of investment properties, including assets held for
sale, was a decrease of £20.3m compared to a decrease of £177.4m in the
prior year.
The loss on sale of investment properties of £1.1m resulted from costs
associated with disposals in the first half.
Other costs include one-off items relating to the implementation of our new
finance and property management and CRM systems.
Adjusted underlying earnings per share, based on EPRA earnings adjusted for
non-trading items and calculated on a diluted share basis, was up 0.8p to
16.9p. The calculation of adjusted, basic, diluted and EPRA earnings per share
is shown in note 7 to the financial statements.
INTERIM DIVIDEND
Our dividend policy is based on trading profit after interest, taking into
account our investment and acquisition plans and the distribution requirements
that we have as a REIT, with our aim being to ensure the total dividend per
share in each financial year is covered at least 1.2 times by adjusted
underlying earnings per share.
With the solid trading performance in the first half and confidence in the
longer-term prospects of the Company, the Board is pleased to announce that
this year an interim dividend of 9.4p per share (2023: 9.0p) will be paid on 3
February 2025 to shareholders on the register at 10 January 2025. The dividend
will be paid as a normal dividend (not a REIT Property Income Distribution).
PROPERTY VALUATION
At 30 September 2024, our property portfolio was independently valued by CBRE
at £2,423m, an underlying decrease of 0.8% (£20m) in the half year. The main
movements in the valuation are set out below:
£m
Valuation at 31 March 2024 2,446
Capital expenditure 27
Disposals (30)
Revaluation (20)
Valuation at 30 September 2024 2,423
A summary of the half year valuation and revaluation movement by property type
is set out below:
£m Valuation Movement
Like-for-like properties 1,813 (3)
Completed projects 138 -
Refurbishments 349 (10)
Redevelopments 18 (2)
South East office 78 (5)
Non-core 27 -
Total 2,423 (20)
Like-for-like Properties
There was a 0.2% (£3m) underlying decrease in the valuation of like-for-like
properties to £1,813m. This was driven by a 9bps outward shift in equivalent
yield (-£26m), offset by a 1.3% increase in the ERV per sq. ft. (+£23m).
ERV growth has returned to a lower, historically more normal level, with
pricing at most centres now back at or above pre-Covid levels. We saw stronger
growth in ERV for smaller space, which represents the majority of our letting
activity, with an increase of 3.0% in the half year for units under 1,000 sq.
ft., compared to larger spaces where ERVs remained stable. This reflects our
approach to implement a wide range of smaller unit refurbishments and
subdivisions to align our spaces with customer demand.
30 Sep 31 Mar
2024 2024(1) Change
ERV per sq. ft. £50.78 £50.11 1.3%
Rent per sq. ft. £47.00 £45.73 2.8%
Equivalent yield 7.1% 7.0% 0.1%(2)
Net initial yield 5.4% 5.5% -0.1%(2)
Capital value per sq. ft. £652 £651 0.2%
(1) Restated for the transfer in of Old Dairy, Shoreditch, where occupancy is
now stabilised post-acquisition and the transfer out of
The Biscuit Factory site in Bermondsey which is undergoing major refurbishment
and redevelopment activity
(2) Absolute change
A 2.5% increase in ERV would increase the valuation of like-for-like
properties by approximately £45m whilst a 25bps decrease in equivalent yield
would increase the valuation by approximately £66m.
Completed Projects
The underlying value of the six completed projects was stable at £138m. This
was driven by a 9bps outward shift in equivalent yield, offset by a 1.0%
increase in the ERV per sq. ft. The overall valuation metrics for completed
projects are set out below:
30 Sep
2024
ERV per sq. ft. £34.11
Rent per sq. ft. £30.10
Equivalent yield 7.4%
Net initial yield 4.6%
Capital value per sq. ft. £423
Current Refurbishments and Redevelopments
There was an underlying decrease of 2.8% (£10m) in the value of our current
refurbishments to £349m and a reduction of 10.0% (£2m) in the value of our
current redevelopments to £18m.
The decreases in respect of refurbishments largely reflected the movement in
market yields, with redevelopment valuations also impacted by a decline in
expected residential values and increases in expected build costs.
South East Office
There was a 6.0% (£5m) underlying decrease in the valuation of the South East
office portfolio to £78m, with a 33bps outward shift in equivalent yield,
offset by a 1.6% increase in ERV per sq. ft. The overall valuation metrics are
set out below:
30 Sep
2024
ERV per sq. ft. £29.53
Rent per sq. ft. £23.29
Equivalent Yield 10.8%
Net Initial Yield 8.2%
Capital Value per sq. ft. £236
REFURBISHMENT ACTIVITY
A summary of the status of the refurbishment pipeline at 30 September 2024 is
set out below:
Projects Number Capex spent Capex to spend Upgraded and new space (sq. ft.)
Underway 9 £70m £40m 553,500
Design stage 8 £0m £454m 717,000
Design stage (without planning) 4 £0m £112m 222,000
We completed the refurbishment and extension of Leroy House in Islington in
October 2024, delivering 57,000 sq. ft. of new space across 101 units. This is
a great example of our refurbishment-first, sustainable approach and was
designed to be our first Net Zero building in construction and operation. The
building, which has a striking double height entrance and fantastic
light-filled communal space, has captured the imagination of London's SMEs,
with 13 leases signed already. We are also on site with major upgrades and
extensions at Chocolate Factory, Wood Green, and at The Biscuit Factory,
Bermondsey.
We have commenced work at Atelier House, at the northern end of our Centro
property, where we are transforming the traditional office building into a
Workspace business centre, delivering over 40 units, a café and meeting rooms
to meet demand from Camden's creative SME base. Strip-out is complete and
completion is scheduled for summer next year.
SUSTAINABILITY
We have an inherently green property portfolio with energy intensity already
10% lower than industry best practice for net zero carbon offices(1). Further
improving the energy efficiency of our buildings is key in helping us to
achieve our target of being a net zero carbon business. The Workspace
portfolio is currently 56% EPC A and B rated, an increase of 5% in the half
year, and we are on track to upgrade the remainder of our portfolio to these
categories by 2030.
We are also targeting a 50% reduction in our emissions by 2030, whilst
continuing to procure 100% renewable electricity. Since February 2024,
two-thirds of our electricity is sourced directly from a solar plant in Devon,
recognised for its high-quality renewable supply. In the half year we also
achieved a 10% reduction in operational energy intensity and a 29% reduction
in gas use compared to the first six months of the previous financial year.
(1)2025 UKGBC target for net zero carbon offices
CASH FLOW
A summary of cash flows is set out below:
£m 30 Sep 30 Sep
2024 2023
Net cash from operations after interest(†) 32 20
Dividends paid (35) (32)
Capital expenditure (28) (36)
Property disposals and capital receipts 29 92
Other 1 (9)
Net movement (1) 35
Opening debt (net of cash) (855) (902)
Closing debt (net of cash) (856) (867)
† 2023 excludes £8.8m of VAT payments relating to sale of Riverside
included in 'Other'
There is a reconciliation of net debt in note 13(b) in the financial
statements.
Net debt was broadly unchanged in the period with the prior year final
dividend largely funded from operating profit and disposal receipts funding
capital expenditure.
NET ASSETS
Net assets decreased slightly in the half year by £25m to £1,524m. EPRA net
tangible assets (NTA) per share at 30 September 2024 was down 1.9% (£0.15) to
£7.85.
EPRA NTA per share
£
At 31 March 2024 8.00
Adjusted trading profit after interest 0.17
Dividends paid (0.19)
Property valuation deficit (0.11)
Other (0.02)
At 30 September 2024 7.85
The calculation of EPRA NTA per share is set out in note 8 of the financial
statements.
TOTAL ACCOUNTING RETURN
The total accounting return for the half year was 0.5% compared to (8.4)% in
the half year ended September 2023. The total accounting return comprises the
change in absolute EPRA net tangible assets per share plus dividends paid in
the year as a percentage of the opening EPRA net tangible assets per share.
The calculation of total accounting return is set out in note 8 of the
financial statements.
FINANCING
As at 30 September 2024, the Group had £3m of available cash and £141m of
undrawn facilities.
Drawn amount Facility Maturity
£m £m
Private placement notes 300.0 300.0 2025-2029
Green bond 300.0 300.0 2028
Secured loan 65.0 65.0 2030
Bank facilities 193.8 335.0 2026
Total 858.8 1,000.0
The majority of the Group's debt comprises long-term fixed-rate committed
facilities including a £300m green bond, £300m of private placement notes,
and a £65m secured loan facility.
Shorter-term liquidity and flexibility is provided by floating-rate
sustainability-linked Revolving Credit Facilities (RCFs) totalling £335.0m,
which at 30 September 2024 comprised a £135m facility maturing in April 2026
and a £200m facility maturing in December 2026. The facilities were £193.8m
drawn at 30 September 2024 and the average maturity of drawn debt was 3.1
years (31 March 2024: 3.6 years).
In February 2024, £100m of the floating rate bank borrowings were swapped to
an all-in fixed rate of 6.1% for two years. At 30 September 2024, the Group's
effective interest rate was 3.6% based on SONIA at 4.95%, with 89% (£765m) of
the debt at fixed or hedged rates. The average interest cost of our fixed-rate
borrowings was 3.4% and our un-hedged floating-rate bank borrowings had an
average margin of 1.8% over SONIA. A 1% change in SONIA would change the
effective interest rate by 0.1% (at current debt levels).
At 30 September 2024, loan to value (LTV) was 35% (31 March 2024: 35%) and
interest cover, based on net rental income and interest paid over the last 12
month period, was 3.8 times (31 March 2024: 3.7 times), providing good
headroom on all facility covenants.
Following the period end, the terms of the £135m RCF have been amended to
extend the maturity to 30 November 2028, with options to extend by up to a
further two years and an option to increase the facility amount to £255m,
subject to lender consent. In addition, an £80m term loan facility has been
agreed with an initial maturity of November 2026 and options to extend by up
to two further years, subject to lender consent. The amendments make no
significant change to the Company's average cost of debt but on a proforma
basis increase undrawn facilities and cash to £224m and extend the average
maturity of drawn debt to 3.4 years.
FINANCIAL outlook FOR 2024/25
In the first half of the year, we were operating in a quieter market impacted
by ongoing macro-economic uncertainty, particularly in the run-up to the UK
Budget in October. Against that backdrop, we have seen good underlying rental
growth with continued pricing increases, with this being partly offset by a
drop in occupancy and rent roll as noted above.
Whilst the immediate, direct impact of the Budget on Workspace and the
majority of our, typically service-based, SME customers is likely to be
limited, it may take some time for broader market sentiment to adjust. Our
focus will be on driving occupancy and rent roll in the second half, although
much of the rental growth from the refurbishment and subdivision of the larger
units vacated in the first half is likely to be realised in the next financial
year, once the work to alter the space has been completed.
The high levels of inflation we have seen over recent years have been
reducing, albeit wage inflation is expected to remain above historic norms
following increases to the Living Wage and National Insurance announced in the
Budget. We continue to invest in our platform to drive productivity and
efficiency to mitigate inflationary pressures and enhance profitability.
We expect capital expenditure to be around £30m in the second half as we
continue to progress with planned asset management projects, including
completing the refurbishment of Chocolate Factory, progressing work at The
Biscuit Factory, and the ongoing refurbishment and subdivision of larger units
across the portfolio.
With planned capital expenditure largely offset by asset disposals and with
89% of our debt at fixed rates or hedged, we expect interest costs in the
second half to be broadly stable.
Over the longer-term, we expect to deliver significant earnings and dividend
growth, with the £36m of reversion across our existing portfolio augmented by
delivery of our extensive project pipeline and the potential for further
expansion through increasing our share of London's growing SME market.
property statistics
Half Year ended
30 Sep 31 Mar 30 Sep 31 Mar
2024 2024 2023 2023
Workspace Portfolio
Property valuation £2,423m £2,446m £2,505m £2,741m
Number of locations 73 77 79 86
Lettable floorspace (million sq. ft.) 4.3 4.5 4.7 5.2
Number of lettable units 4,650 4,678 4,718 4,910
Rent roll of occupied units £140.1m £143.4m £141.9m £140.1m
Average rent per sq. ft. £40.27 £38.21 £36.81 £32.86
Overall occupancy 81.5% 83.0% 83.5% 81.5%
Like-for-like number of properties 42 43 42 38
Like-for-like lettable floor space (million sq. ft.) 2.7 2.9 2.9 2.7
Like-for-like rent roll growth (1.3%) 3.0% 6.4% 3.4%
Like-for-like rent per sq. ft. growth 2.8% 3.4% 6.8% 5.2%
Like-for-like occupancy movement (0.7%) (0.4%) (0.6%) (0.5%)
1) The like-for-like category has been restated in the current financial
year for the transfer in of Old Dairy, Shoreditch, where occupancy is now
stabilised post-acquisition, and the transfer out of The Biscuit Factory site
in Bermondsey which is undergoing major refurbishment and redevelopment
activity.
2) Like-for-like statistics for prior years are not restated for the
changes made to the like-for-like property portfolio in the current financial
year.
3) Occupancy is the area of space let divided by the total net lettable
area (excluding land used for open storage) expressed as a percentage. Net
lettable area is the internal area of a building that is available to let.
4) Overall rent per sq. ft. and occupancy statistics includes the
lettable area at like-for-like properties and all refurbishment and
redevelopment projects, including those projects recently completed and also
properties where we are in the process of obtaining vacant possession.
PRINCIPAL RISKS AND UNCERTAINTIES
The Board assesses and monitors the principal risks of the business and
considers how these risks could best be mitigated, where possible, through a
combination of internal controls and risk management. The first six months of
the financial year has seen a period of continued challenging macro-economic
conditions, albeit with inflation reducing and interest rates stabilising.
The key risks that could affect the Group's medium-term performance and the
factors which mitigate these risks have not materially changed from those set
out in the Group's Annual Report and Accounts 2024.
These risks have been assessed in line with the 2018 UK Corporate Governance
Code requirements and are shown below. The Board is satisfied that we continue
to operate within our risk profile.
Risk Area Mitigating activities
Customer demand · Marketing campaigns maintain awareness of Workspace's offer and
the content and messaging are regularly reviewed to remain relevant and
Opportunities for growth could be missed without a clear brand positioning appealing.
strategy to meet the evolving demands of target customers. Macroeconomic
factors, including political instability and geopolitical tensions, weak · Broad mix of buildings across London with different work space
economic growth, inflationary pressures and high interest rates, could also offerings, at various price points to match customer requirements
impact our customers.
· Pipeline of refurbishment and redevelopments to further enhance
RISK IMPACT the portfolio
· Fall in occupancy levels at our properties · Weekly meeting to track enquiries, viewings and lettings to
closely track customer trends and amend pricing in response as demand changes
· Reduction in rent roll
· Centre staff maintain ongoing relationships with our customers to
· Reduction in property valuation understand their requirements and implement change to meet their needs.
· Business plans are stress tested to assess the sensitivity of
forecasts to reduced levels of demand and implement contingency measures.
Financing · We regularly review funding requirements for business plans, and
we have a wide range of options to fund our forthcoming plans. We also prepare
There may be a reduction in the availability of long-term financing due to an a five-year business plan which is reviewed and updated annually.
economic recession, which may result in an inability to grow the business and
impact Workspace's ability to deliver services to customers. · We have a broad range of funding relationships in place and
regularly review our refinancing strategy. We also maintain a specific
RISK IMPACT interest rate profile via the use of fixed rates on the majority of our debt
facilities so that our interest payment profile is broadly stable
· Inability to fund business plans and invest in new opportunities
· Loan covenants are monitored and reported to the Board on a
· Increased interest costs monthly basis, and we undertake detailed cash flow monitoring and forecasting.
· Negative reputational impact amongst lenders and in the · During 2023/24 we extended our Revolving Credit Facilities (RCF)
investment community to 2026 and put in place a £100m interest rate hedge to manage our interest
costs.
· In November 2024 we extended the maturity of the £135m of RCF to
November 2028 and put in place an £80m term loan to November 2026,
providing further certainty over our funding position going forwards.
Valuation · Market-related valuation risk is largely dependent on
independent, external factors. We maintain a conservative LTV ratio which can
Macroeconomic uncertainty, reductions in occupancy or pricing, or failure to withstand a severe decline in property values without covenant breaches.
meet Energy Performance Certificate (EPC) targets could have an impact on
asset valuations, whereby property yields increase and valuations fall. This · We monitor changes in sentiment in the London real estate market,
may result in a reduction in return on investment and negative impact on yields, and pricing to track possible changes in valuation. CBRE, a leading
covenant testing. full-service real estate services and investment organisation, provides
twice-yearly independent valuations of all our properties.
RISK IMPACT
· We manage and invest in our properties, planning and undertaking
· Financing covenants linked to loan to value ('LTV') ratio. upgrades where necessary, to ensure they are compliant with current and future
Minimum Energy Efficiency Standards (MEES) for EPCs.
· Impact on share price.
· Alternative use opportunities, including mixed-use developments,
are actively pursued across the portfolio.
Acquisition pricing · We have an acquisition strategy determining key criteria such as
location, size and potential for growth. These criteria are based on the many
Inadequate appraisal and due diligence of a new acquisition could lead to years of knowledge and understanding of our market and customer demand.
paying above market price leading to a negative impact on valuation and rental
income targets. · A detailed appraisal is prepared for each acquisition and is
presented to the Investment Committee for challenge and discussion prior to
RISK IMPACT authorisation by the Board. The acquisition is then subject to thorough due
diligence prior to completion, including capital expenditure and risks
· Negative impact on valuation associated with ESG concerns.
· Impact on overall shareholder return · Workspace will only make acquisitions that are expected to yield
a minimum return and will not knowingly overpay for an asset.
· For all corporate acquisitions we undertake appropriate property,
financial and tax due diligence including a review of ESG.
Customer payment default · Rent collection and customer payment levels have remained strong
throughout the first half of the year, however the economic environment
There remains uncertainty around the macroeconomic environment given broader remains challenging.
geopolitical events and interest rate pressures. This could result in further
pressure on rent collection figures. · The risk impact continues to be mitigated by strong credit
control processes and an experienced team of credit controllers who are able
RISK IMPACT to make quick decisions and negotiate with customers for payment. In
addition, we hold a three-month deposit for the majority of customers.
· Negative cash flow and increasing interest costs
· Centre staff maintain relationships with customers and can
· Breach of financial covenants identify early signs of potential issues.
Cyber security · Cyber security risk is managed using a mitigation framework
comprising network security, IT security policies and third-party risk
A cyber-attack could lead to a loss of access to Workspace systems or a assessments. Controls are regularly reviewed and updated and include
network disruption for a prolonged period of time which could damage technology such as next generation firewalls, multi layered access control
Workspace's reputation and inhibit our ability to run the business. through to people solutions such as user awareness training and mock-phishing
emails.
RISK IMPACT
· Assurance over the framework's performance is gained through an
· Inability to process new leases and invoice customers independent maturity assessment, penetration testing and network vulnerability
testing, all performed annually.
· Reputational damage
· We're committed to continue the adoption of the NIST
· Increased operational costs Cybersecurity Framework to enhance our cyber security maturity. This adoption
will strengthen risk management, improve controls, fortify incident response,
and ensure consistent protection and recovery, validated through external
independent assessments.
Resourcing · We have a robust recruitment process to attract new joiners and
established interview and evaluation processes with a view to ensuring a good
Ineffective succession planning, recruitment, and people management could lead fit with the required skill set and our corporate culture.
to limited resourcing levels and a shortage of suitably skilled individuals
able to achieve Workspace's objectives and grow the business. Inadequate · We are diversifying our recruitment pools, including launching a
resourcing may also result in management being spread too thinly and a decline new apprenticeship program to support our succession plans and ensure we have
in effectiveness. a diverse talent pool.
RISK IMPACT · Various incentive schemes align employee objectives with the
strategic objectives of the Group to motivate employees to work in the best
· Increased costs from high staff turnover interests of the Group and its stakeholders. This is supported by a formal
appraisal and review process for all employees.
· Delay in growth plans
· Our HR and People teams run a broad training and development
· Reputational damage programme designed to ensure employees are supported and encouraged to
progress with learning and study opportunities.
· The Workspace recruitment manager coordinates all activities to
attract talented employees.
Third party relationships · Workspace has in place a robust tender and selection process for
key contractors and partners. Contracts contain service level agreements which
Poor performance from one of Workspace's key contractors or third party are monitored regularly and actions are taken in the case of underperformance.
partners could result in an interruption to or reduction in the quality of our
service offering to customers or could lead to significant disruptions and · For key services, Workspace maintains relationships with
delays in any refurbishment or redevelopment projects. alternative providers so that other solutions would be available if the main
contractor or third party was unable to continue providing their services.
RISK IMPACT Processes are in place for identifying key suppliers and understanding any
specific risks that require further mitigation.
· Decline in customer confidence
· Workspace is London Living Wage compliant for all service
· Increased project or operational costs providers since April 2022.
· Weaker cash flow
· Fall in customer demand
· Reputational damage
Regulatory · Health and safety is one of our primary concerns, with strong
leadership promoting a culture of awareness throughout the business. We have
A failure to keep up to date and plan for changing regulations in key areas well-developed policies and procedures in place to help ensure that any
such as health and safety and sustainability could lead to fines or workers, employees or visitors on site comply with strict safety guidelines
reputational damage and we work with well-respected suppliers who share our high-quality standards
in health and safety.
RISK IMPACT
· Health and safety management systems are reviewed and updated in
· Increased costs line with changing regulations and regular audits are undertaken to identify
any potential improvements.
· Reputational damage
· Sustainability requirements have an increasing importance for the
Group, and it is a responsibility we take seriously. We have committed to
becoming a net zero carbon business and being climate resilient. We undertake
an annual review of all ESG regulation, our policies and procedures to ensure
compliance.
Climate change · Annual assessment of our climate risk exposure, using climate
modelling to inform our risk management plan.
Failure to recognise that climate change presents a financial risk to our
business alongside changes to our customers' expectations could have a · Ongoing review of control measures and their effectiveness by our
significant impact on the business. Risk Management Group and Environmental Sustainability Committee.
RISK IMPACT · Active management of acute physical risks such as floods and
storms across the portfolio through emergency preparedness, site maintenance
· Loss of rent roll surveys and business continuity planning.
· Increased operating costs · Delivery of an accelerated net zero carbon and EPC upgrade plan
across the portfolio to manage transition risk.
· Negative impact on value
· Introduction of climate objectives linked with remuneration, to
· Reduced occupancy levels incentivise focused action
· Reputational damage · Long-term energy contracts in place to hedge price and
availability risk.
· Stretching carbon targets for our development projects to
minimise reliance on raw materials and exposure to increasing offset costs
CONSOLIDATED INCOME STATEMENT
FOR THE Six Months ENDED 30 September 2024
Notes Unaudited 6 months ended 30 September 2024 Unaudited 6 months ended 30 September 2023 Audited
£m £m Year ended
31 March 2024 £m
Revenue 2 92.4 90.7 184.3
Direct costs(1) 2 (31.9) (29.7) (58.1)
Net rental income 2 60.5 61.0 126.2
Administrative expenses (12.4) (11.6) (25.3)
Trading profit 100.9
48.1 49.4
Loss on disposal of investment properties 3(a) (1.1) (1.2) (2.3)
Other expenses 3(b) (1.1) (0.4) (1.2)
Change in fair value of investment properties 9 (20.0) (170.8) (251.2)
Impairment of assets held for sale 9 (0.3) (6.6) (4.1)
Operating profit/ (loss) 25.6 (129.6) (157.9)
Finance costs 4 (15.4) (18.3) (34.9)
Profit/ (loss) before tax (192.8)
10.2 (147.9)
Taxation 5 - - 0.3
Profit/ (loss) for the period after tax (192.5)
10.2 (147.9)
Basic earnings/ (loss) per share 7 5.3p (77.2p) (100.4p)
Diluted earnings/ (loss) per share 7 5.3p (77.2p) (100.4p)
(1) Direct costs include impairment of receivables of £0.7m (31 March 2024:
£0.8m, 30 September 2023: £0.6m). See note 2 for further information.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE six months ENDED 30 September 2024
Unaudited 6 months ended 30 September 2024 Unaudited 6 months ended 30 September 2023 Audited
£m £m Year ended
31 March 2024
£m
Profit/ (loss) for the period 10.2 (147.9) (192.5)
Other comprehensive income:
Items that may be classified subsequently to profit or loss:
Change in fair value of other investments - - 1.1
Change in fair value of derivative (0.5) - 0.2
Other comprehensive (loss)/ income in the period (0.5) - 1.3
Total comprehensive income/ (loss) for the period (191.2)
9.7 (147.9)
CONSOLIDATED BALANCE SHEET
AS AT 30 September 2024
Notes Unaudited 30 September 2024 Audited 31 March 2024 Unaudited 30 September 2023
£m £m £m
Non-current assets
Investment properties 9 2,404.0 2,408.5 2,471.7
Intangible assets 2.2 2.2 2.1
Property, plant and equipment 2.9 3.0 3.9
Other investments 3.2 3.2 2.1
Derivative financial instruments 13(e) - 0.2 -
Deferred tax 0.3 0.3 -
2,417.4
2,412.6 2,479.8
Current assets
Trade and other receivables 10 37.2 36.7 58.1
Assets held for sale 47.2 65.7 60.5
Cash and cash equivalents 11 9.0 11.6 10.3
114.0
93.4 128.9
Total assets 2,531.4
2,506.0 2,608.7
Current liabilities
Trade and other payables 12 (91.9) (93.0) (99.1)
Borrowings 13(a) (79.9) - -
(93.0)
(171.8) (99.1)
Non-current liabilities
Borrowings 13(a) (775.5) (854.8) (867.3)
Lease obligations 14 (34.7) (34.7) (34.7)
Derivative financial instruments 13(e) (0.3) - -
(889.5)
(810.5) (902.0)
Total liabilities (982.5)
(982.3) (1,001.1)
Net assets 1,548.9
1,523.7 1,607.6
Shareholders' equity
Share capital 16 192.1 191.9 191.9
Share premium 295.5 296.6 296.6
Investment in own shares (9.6) (9.9) (9.9)
Other reserves 91.0 93.0 89.8
Retained earnings 954.7 977.3 1,039.2
Total shareholders' equity 1,548.9
1,523.7 1,607.6
Consolidated Statement of Changes in Equity
FOR THE period ENDED 30 September 2024
Attributable to owners of the Parent
Unaudited 6 months to Notes Share Share Investment Other Retained Total Shareholders'
equity
30 September 2024 capital premium in own reserves earnings
£m
£m £m shares £m £m
£m
Balance at 1 April 2024 191.9 296.6 (9.9) 93.0 977.3 1,548.9
Profit for the period - - - - 10.2 10.2
Other comprehensive income - - - (0.5) - (0.5)
Total comprehensive (loss)/ income - - - (0.5) 10.2 9.7
Transactions with owners:
Dividends paid 6 - - - - (36.5) (36.5)
Cost of shares awarded to employees - - 0.3 - - 0.3
Share based payments 0.2 (1.1) - (1.5) 3.7 1.3
Balance at 30 September 2024 192.1 295.5 (9.6) 91.0 954.7 1,523.7
Unaudited 6 months to
30 September 2023
Balance at 1 April 2023 191.6 295.5 (9.9) 91.0 1,219.5 1,787.7
Loss for the period - - - - (147.9) (147.9)
Other comprehensive income - - - - - -
Total comprehensive loss - - - - (147.9) (147.9)
Transactions with owners:
Dividends paid 6 - - - - (33.3) (33.3)
Share based payments 0.3 1.1 - (1.2) 0.9 1.1
Balance at 30 September 2023 191.9 296.6 (9.9) 89.8 1,039.2 1,607.6
Audited 12 months to
31 March 2024
Balance at 1 April 2023 191.6 295.5 (9.9) 91.0 1,219.5 1,787.7
Loss for the year - - - - (192.5) (192.5)
Other comprehensive income - - - 1.3 - 1.3
Total comprehensive income/ (loss) - - - 1.3 (192.5) (191.2)
Transactions with owners:
Dividends paid 6 - - - - (50.6) (50.6)
Share based payments 0.3 1.1 - 0.7 0.9 3.0
Balance at 31 March 2024 191.9 296.6 (9.9) 93.0 977.3 1,548.9
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD 30 September 2024
Notes Unaudited Unaudited Audited
6 month ended 30 September 2024 6 months ended 30 September 2023 Year ended
£m £m 31 March
2024
£m
Cash flows from operating activities
Cash generated from operations 15 43.4 26.7 87.7
Interest paid (11.3) (15.2) (33.8)
Net cash inflow from operating activities 32.1 11.5 53.9
Cash flows from investing activities
Capital expenditure on investment properties (28.0) (35.9) (71.7)
Proceeds from government grants - - 1.5
Proceeds from disposal of investment properties (net of sales costs) - 3.5 22.3
Proceeds from disposal of assets held for sale (net of sale costs) 29.4 88.0 96.2
Purchase of intangible assets (0.5) (0.4) (0.8)
Purchase of property, plant and equipment (0.7) (0.3) (0.4)
Other expenses - (0.4) (1.2)
Net cash inflow from investing activities 0.2 54.5 45.9
Cash flows from financing activities
Finance costs of new/amended borrowing facilities - - (0.8)
Settlement of share schemes (0.4) (0.2) -
Proceeds from disposal of own shares 0.3 - -
Repayment of bank borrowings (89.2) (134.5) (211.0)
Draw down of bank borrowings 89.0 92.0 156.0
Dividends paid 6 (34.6) (31.5) (50.7)
Net cash outflow from financing activities (34.9) (74.2) (106.7)
Net decrease in cash and cash equivalents (2.6) (8.2) (6.9)
Cash and cash equivalents at start of period 11 11.6 18.5 18.5
Cash and cash equivalents at end of period 11 9.0 10.3 11.6
NOTES TO THE FINANCIAL STATEMENTS
FOR THE period ENDED 30 September 2024
1. Accounting policies
Basis of preparation
The half year report has been prepared in accordance with the Disclosure and
Transparency Rules and with IAS 34 'Interim Financial Reporting' as adopted
for use in the UK. The half year report should be read in conjunction with the
annual financial statements for the year ended 31 March 2024, which have been
prepared in accordance with UK adopted international accounting standards.
The condensed consolidated financial statements in the half year report,
presented in Sterling, are unaudited and do not constitute statutory accounts
within the meaning of Section 434 of the Companies Act 2006. The Annual Report
and Accounts for the year to 31 March 2024, were prepared and approved by the
Directors on a going concern basis, in accordance with UK adopted
international accounting standards ("IFRS"). A copy of the statutory accounts
for the year ended 31 March 2024 has been delivered to the Registrar of
Companies. The Company elected to prepare its Parent Company financial
statements in accordance with FRS 101. The auditor's opinion on those accounts
was unqualified, did not contain an emphasis of matter paragraph and did not
contain any statement made under Section 498 of the Companies Act 2006.
There have been no changes in estimates of amounts reported in prior periods
which have a material impact on the current half year period.
As with most other UK property companies and REITs, the Group presents many of
its financial measures in accordance with the guidance criteria issued by the
European Public Real Estate Association ('EPRA'). These measures, which
provide consistency across the sector, are all derived from the IFRS figures
in notes 7 and 8.
Going concern
The Directors are required to assess the appropriateness of applying the going
concern basis in the preparation of the financial statements. The current
macro-economic environment and geopolitical issues heighten concerns around
the UK economy and increase the risk of an economic downturn. In this context,
the Directors have fully considered the business activities and principal
risks of the Company.
In preparing the assessment of going concern, the Board has reviewed a number
of different scenarios over the 12 month period from the date of signing of
these financial statements. These scenarios include a severe, but
realistically possible, scenario which includes the following key assumptions:
· A reduction in occupancy, reflecting weaker customer demand for
office space.
· A reduction in the pricing of new lettings, resulting in a
reduction in average rent per sq. ft.
· Elevated levels of counterparty risk, with bad debt significantly
higher than pre-pandemic levels.
· Continued elevated levels of cost inflation.
· Interest rates remaining at current levels, impacting the cost of
variable rate borrowings.
· Estimated rental value reduction in-line with the decline in
average rent per sq. ft. and outward movement in investment yields resulting
in a lower property valuation.
The appropriateness of the going concern basis is reliant on the continued
availability of borrowings, sufficient liquidity and compliance with loan
covenants. All borrowings require compliance with LTV and Interest Cover
covenants. As at the tightest test date in the scenarios modelled, the Group
could withstand a reduction in Net Rental Income of 39% compared to the
September 2024 Net Rental Income and a fall in the asset valuation of 40%
compared to 30
September 2024 before these covenants are breached, assuming no mitigating
actions are taken.
As at 30 September 2024, the Company had significant headroom with £144m of
cash and undrawn facilities. The majority of the Group's debt is long-term
fixed-rate committed facilities comprising a £300m Green Bond, £300m of
private placement notes, and a £65m secured loan facility. Shorter term
liquidity and flexibility is provided by floating rate sustainability-linked
revolving credit facilities (RCFs) totalling £335m, with £135m due in April
2026 and £200m due in December 2026. The £200m RCF also has the option to
increase the facility amount by up to £100m, subject to lender consent.
Following the period end, the terms of the £135m RCF have been amended to
extend the maturity to 30 November 2028, with options to extend by up to a
further two years and an option to increase the facility amount to £255m,
subject to lender consent. In addition, an additional £80m term loan facility
has been agreed with an initial maturity of November 2026 and options to
extend by up to two further years, subject to lender consent.
For the full period of assessment under the scenario tested, the Group
maintains sufficient liquidity and loan covenant headroom.
Consequently, the Directors have a reasonable expectation that the Group and
Company will have sufficient funds to continue to meet its liabilities as they
fall due for at least 12 months from the date of approval of the consolidated
set of financial statements and therefore the financial statements have been
prepared on a going concern basis.
This report was approved by the Board on 21 November 2024.
Change in accounting policies
The accounting policies adopted are consistent with those of the annual
financial statements for the year ended 31 March 2024, with the exception of
the following standards, amendments and interpretations endorsed by the UK
which were effective for the first time for the Group's current accounting
period and had no material impact on the financial statements.
· Amendments to IFRS 16 Leases: Lease Liability in a Sale and
Leaseback;
· Amendments to IAS 1: Classification of Liabilities as Current or
Non-current.
Standards in issue but not yet effective
The following standards, amendments and interpretations were in issue at the
date of approval of these financial statements but were not yet effective for
the current accounting period and have not been adopted early. Based on the
Group's current circumstances, the Directors do not anticipate that their
adoption in future periods will have a material impact on the financial
statements of the Group.
· Amendments to the Classification and Measurement of Financial
Instruments - Amendments to IFRS 9 and IFRS 7
· IFRS 18 Presentation and Disclosure in Financial Statements
· IFRS 19 Subsidiaries without Public Accountability: Disclosures
2. Analysis of net rental income
Unaudited 6 months ended 30 September 2024 Unaudited 6 months ended 30 September 2023
Revenue Direct costs(1) Net rental income Revenue Direct costs Net rental income
£m £m £m £m £m £m
Rental income 72.9 (3.9) 69.0 71.8 (2.8) 69.0
Service charges 16.0 (19.1) (3.1) 15.9 (18.7) (2.8)
Empty rates and other non-recoverable costs - (5.4) (5.4) - (5.5) (5.5)
Services, fees, commissions and sundry income 3.5 (3.5) - 3.0 (2.7) 0.3
92.4 (31.9) 60.5 90.7 (29.7) 61.0
Audited Year ended 31 March 2024
Revenue Direct Net rental
£m costs(1) income
£m £m
Rental income 145.0 (4.9) 140.1
Service charges 32.6 (37.5) (4.9)
Empty rates and other non-recoverable costs - (10.2) (10.2)
Services, fees, commissions and sundry income 6.7 (5.5) 1.2
184.3 (58.1) 126.2
(1)There are two properties within the current period (30 September 2023: two;
31 March 2024: two) that are non-rent producing
A charge of £0.7m (31 March 2024: £0.8m, 30 September 2023: £0.6m) for
expected credit losses in respect of receivables from customers is recognised
in direct costs of rental income in the period.
All of the properties within the portfolio are geographically close to each
other and have similar economic features and risks. Management information
utilised by the Executive Committee to monitor and assess performance is
reviewed as one portfolio. As a result, management have determined that the
Group operates a single operating segment of providing business space for rent
in and around London.
3(a). Loss on disposal of investment properties
Unaudited 6 months ended 30 September 2024 Unaudited 6 months ended 30 September 2023 Audited Year
£m £m ended
31 March
2024
£m
Proceeds from sale of investment properties (net of sale costs) - 3.4 12.3
Proceeds from sale of assets held for sale (net of sale costs) 29.4 88.1 96.2
Book value at time of sale (30.5) (92.7) (110.8)
Loss on disposal (1.1) (1.2) (2.3)
3(b). Other income/(expenses)
Unaudited 6 months ended 30 September 2024 Unaudited 6 months ended 30 September 2023 Audited Year
£m £m ended
31 March
2024
£m
Change in fair value of deferred consideration - 0.1 -
Other expenses (1.1) (0.5) (1.2)
(1.1) (0.4) (1.2)
The change in fair value of deferred consideration (cash and overage) of £nil
from the sale of investment properties has been revalued by CBRE Limited at 30
September 2024 (31 March 2024: £nil; 30 September 2023: £0.1m increase).
Other expenses include one-off costs relating to the replacement of our
finance and property and CRM systems. These costs are outside the Group's
normal trading activities.
4. Finance costs
Unaudited 6 months ended 30 September 2024 Unaudited 6 months ended 30 September 2023 Audited Year
£m £m ended
31 March
2024
£m
Interest payable on bank loans and overdrafts (6.4) (7.7) (15.0)
Interest payable on other borrowings (9.7) (9.7) (19.3)
Amortisation of issue costs of borrowings (0.8) (0.9) (1.7)
Interest on lease liabilities (0.9) (0.9) (2.1)
Interest capitalised on property refurbishments (note 9) 2.3 0.8 3.0
Interest receivable 0.1 0.1 0.2
Total finance costs (15.4) (18.3) (34.9)
All finance costs have been calculated in accordance with IFRS 9,
re-estimating the cash flows based on the original effective interest rate
with the adjustment being taken through profit and loss.
5. Taxation
Unaudited 6 months ended 30 September 2024 Unaudited 6 months ended 30 September 2023 Audited Year
£m £m ended
31 March
2024
£m
Current tax:
UK corporation tax - - -
Deferred tax:
On origination and reversal of temporary differences - - (0.3)
(0.3)
Total taxation charge - - (0.3)
The Group is a Real Estate Investment Trust (REIT). The Group's UK property
rental business (both income and capital gains) is exempt from tax. The
Group's other income is subject to corporation tax. No tax charge has arisen
on this other income for the half year (31 March 2024: (£0.3m), 30 September
2023: £nil).
6. Dividends
Ordinary dividends paid Payment Per Unaudited 6 months ended Unaudited 6 months ended 30 September 2023 Audited Year
date share 30 September £m ended
2024 31 March
£m 2024
£m
For the year ended 31 March 2023:
Final dividend August 2023 17.4p 33.3 33.3
For the year ended 31 March 2024:
Interim dividend February 2024 9.0p - - 17.3
Final dividend August 2024 19.0p 36.5 - -
Dividends for the period 36.5 33.3 50.6
Timing difference on payment of withholding tax (1.9) (1.8) 0.1
Dividends cash paid 34.6 31.5 50.7
The Directors are proposing an interim dividend in respect of the financial
year ending 31 March 2025 of 9.4 pence per ordinary share which will absorb an
estimated £18.1m of revenue reserves and cash. The dividend will be paid on 3
February 2025 to shareholders who are on the register of members on 10 January
2025. The dividend will be paid as a normal dividend (not a REIT Property
Income Distribution), net of withholding tax where appropriate.
7. Earnings per share
Earnings used for calculating earnings per share: Unaudited 6 months ended 30 September 2024 Unaudited 6 months ended 30 September 2023 Audited Year
£m £m ended 31 March
2024
£m
Basic and diluted earnings 10.2 (147.9) (192.5)
Change in fair value of investment properties 20.0 170.8 251.2
Impairment of assets held for sale 0.3 6.6 4.1
Loss on disposal of investment properties 1.1 1.2 2.3
EPRA earnings 31.6 30.7 65.1
Adjustment for non-trading items:
Other expenses (note 3(b)) 1.1 0.4 1.2
Taxation - - (0.3)
Adjusted trading profit after interest 32.7 31.1 66.0
Earnings have been adjusted to derive an earnings per share measure as defined
by the European Public Real Estate Association (EPRA) and an adjusted
underlying earnings per share measure.
Number of shares used for calculating earnings per share: Audited Year ended 31 March
Unaudited 6 months ended 30 September 2024 Unaudited 6 months ended 30 September 2024
2023
Weighted average number of shares (excluding own shares held in trust) 191,908,584 191,594,236 191,676,994
Dilution due to share option schemes 1,539,059 1,177,892 1,537,856
Weighted average number of shares for diluted earnings per share 193,447,643 192,772,128 193,214,850
Unaudited 6 months ended Unaudited 6 months ended Audited Year ended
30 September 2024 30 September 2023 31 March
2024
Basic earnings/ (loss) per share 5.3p (77.2p) (100.4p)
Diluted earnings/ (loss) per share 5.3p (77.2p) (100.4p)
EPRA earnings per share 16.3p 16.0p 34.0p
Adjusted underlying earnings per share(1) 16.9p 16.1p 34.1p
(1) Adjusted underlying earnings per share is calculated by dividing adjusted
trading profit after interest by the diluted weighted average number of shares
of 193,447,643 (31 March 2024: 193,214,850, 30 September 2023: 192,772,128).
For the prior periods, the diluted loss per share has been restricted to a
loss of 100.4p per share at 31 March 2024 and 77.2p per share for 30 September
2023, as the loss per share cannot be reduced by dilution in accordance with
IAS 33 Earnings per Share.
8. Net assets per share
Number of shares used for calculating net assets per share: Unaudited 30 September Audited 31 March Unaudited 30 September
2024 2024 2023
Shares in issue at period-end 192,143,004 191,910,392 191,897,854
Less own shares held in trust at period-end (57,289) (139,649) (135,461)
Number of shares for calculating basic net assets per share 192,085,715 191,770,743 191,762,393
Dilution due to share option schemes 1,681,592 1,637,759 1,269,278
Number of shares for calculating diluted net assets per share 193,767,307 193,408,502 193,031,671
EPRA Net Asset Value Metrics
Unaudited 30 September 2024 Audited 31 March 2024
EPRA NRV EPRA NTA EPRA NDV EPRA NRV EPRA NTA EPRA NDV
£m £m £m £m £m £m
IFRS Equity attributable to shareholders 1,523.7 1,523.7 1,523.7 1,548.9 1,548.9 1,548.9
Fair value of derivative financial instruments 0.3 0.3 - (0.2) (0.2) -
Intangibles per IFRS balance sheet - (2.2) - - (2.2) -
Excess of book value of debt over fair value - - 47.7 - - 59.3
Purchasers' costs(1) 164.7 - - 166.4 - -
EPRA measure 1,688.7 1,521.8 1,571.4 1,715.1 1,546.5 1,608.2
Number of shares for calculating diluted net assets per share (millions) 193.8 193.8 193.8 193.4 193.4 193.4
EPRA measure per share £8.72 £7.85 £8.11 £8.87 £8.00 £8.32
Unaudited 30 September 2023
EPRA NRV EPRA NTA EPRA NDV
£m £m £m
IFRS Equity attributable to shareholders 1,607.6 1,607.6 1,607.6
Intangibles per IFRS balance sheet - (2.1) -
Excess of fair value of debt over book value - - 103.1
Purchasers' costs(1) 170.4 - -
EPRA measure 1,778.0 1,605.5 1,710.7
Number of shares for calculating diluted net assets per share (millions) 193.0 193.0 193.0
EPRA measure per share £9.21 £8.32 £8.87
(1) EPRA NTA and EPRA NDV reflect IFRS values which are net of purchasers'
costs. Purchasers' costs are added back when calculating EPRA NRV.
Total Accounting Return
Total Accounting Return Unaudited 30 September Audited 31 March Unaudited 30 September
2024 2024 2023
Opening EPRA net tangible assets per share (A) 8.00 9.27 9.27
Closing EPRA net tangible assets per share 7.85 8.00 8.32
Decrease in EPRA net tangible assets per share (0.15) (1.27) (0.95)
Ordinary dividends paid in the period 0.19 0.26 0.17
Total return (B) 0.04 (1.01) (0.78)
Total accounting return (B/A) 0.5% (10.9%) (8.4%)
The total accounting return for the period comprises the reduction in absolute
EPRA net tangible assets per share plus dividends paid in the period as a
percentage of the opening EPRA net tangible assets per share.
9. Investment Properties
Unaudited 30 September 2024 Audited 31 March 2024 Unaudited 30 September 2023
£m £m £m
Balance at 1 April 2,408.5 2,643.3 2,643.3
Capital expenditure 23.7 68.4 33.5
Capitalised interest on refurbishments (note 4) 2.3 3.0 0.8
Disposals during the period - (12.5) (3.6)
Change in fair value of investment properties (20.0) (251.2) (170.8)
Disposed properties tenant incentives recognised in advance under IFRS 16 0.2 1.4 1.4
Less: Classified as assets held for sale (10.7) (43.9) (32.9)
Total investment properties 2,404.0 2,408.5 2,471.7
Investment properties represent a single class of property being business
premises for rent in and around London.
Capitalised interest is included at a rate of capitalisation of 6.9% (31 March
2024: 6.8%, 30 September 2023: 6.6%). The total amount of capitalised interest
included in investment properties is £20.4m (31 March 2024: £18.1m, 30
September 2023: £15.9m).
The change in fair value of investment properties is recognised in the
consolidated income statement.
Five of the properties classified as held for sale at the end of the prior
year were not sold during the half-year. Four of these are retained within
current assets as they are still expected to sell within the next 12 months of
30 September 2024 and have been subject to an impairment charge of £0.3m
following the valuation carried out at 30 September 2024. One (31 March 2024:
six, 30 September 2023: six) additional property was reclassified as held for
sale at 30 September 2024.
Valuation
The Group's investment properties are held at fair value and were revalued at
30 September 2024 by the external valuer, CBRE Limited, for the properties
held throughout the period. They are independent qualified valuers in
accordance with the Royal Institution of Chartered Surveyors Valuation -
Global Standards. All the properties are revalued at period end regardless of
the date of acquisition. In line with IFRS 13, all investment properties are
valued on the basis of their highest and best use.
The valuation of like-for-like properties (which are not subject to
refurbishment or redevelopment) and completed projects are based on the income
capitalisation method which applies market-based yields to the Estimated
Rental Values (ERVs) of each of the properties. Yields are based on current
market expectations depending on the location and use of the property. ERVs
are based on estimated rental potential considering current rental streams and
market comparatives whilst also considering the occupancy and timing of rent
reviews at each property. Although occupancy and rent review timings are
known, and there is market evidence for transaction prices for similar
properties, there is still a significant element of estimation and judgement
in estimating ERVs. As a result of adjustments made to market observable data,
the significant inputs are deemed unobservable under IFRS 13.
When valuing properties being refurbished, the residual value method is used.
The completed value of the refurbishment is determined as for like-for-like
properties above. Capital expenditure required to complete the building is
then deducted and a discount factor is applied to reflect the time period to
complete construction and allowance made for construction and market risk to
arrive at the residual value of the property.
The discount factor used is the property yield that is also applied to the ERV
to determine the value of the completed building. Other risks such as
unexpected time delays relating to planned capital expenditure are assessed on
a project-by-project basis, looking at market comparable data where possible
and the complexity of the proposed scheme.
Redevelopment properties are also valued using the residual value method. The
completed proposed redevelopment which would be undertaken by a residential
developer is valued based on the market value for similar sites and then
adjusted for costs to complete, developer's profit margin and a time discount
factor. Allowance is also made for planning and construction risk depending on
the stage of the redevelopment. If a contract is agreed for the
sale/redevelopment of the site, the property is valued based on agreed
consideration.
For all methods the valuers are provided with information on tenure, letting,
town planning and the repair of the buildings and sites.
The reconciliation of the valuation report total to the amount shown in the
consolidated balance sheet as investment properties, is as follows:
Unaudited 30 September 2024 Audited 31 March Unaudited 30 September
£m 2024 2023
£m £m
Total per CBRE valuation report 2,422.8 2,446.5 2,505.2
Deferred consideration on sale of property (0.6) (0.6) (0.6)
Head lease obligations 34.7 34.7 34.7
Less: reclassified as held for sale (47.2) (65.7) (60.5)
Less: tenant incentives recognised in advance under IFRS 16 (5.7) (6.4) (7.1)
Total investment properties per balance sheet 2,404.0 2,408.5 2,471.7
The Group's Investment properties are carried at fair value and under IFRS 13
are required to be analysed by level depending on the valuation method
adopted. The different valuation methods are as follows:
Level 1 - Quoted prices (unadjusted) in active markets for identical
assets or liabilities that the entity can access at the measurement date.
Level 2 - Use of a model with inputs (other than quoted prices included
in Level 1) that are directly or indirectly observable market data.
Level 3 - Use of a model with inputs that are not based on observable
market data.
Property valuations are complex and involve data which is not publicly
available and involves a degree of judgement. All the investment properties
are classified as Level 3, due to the fact that one or more significant inputs
to the valuation are not based on observable market data. If the degree of
subjectivity or nature of the measurement inputs changes then there could be a
transfer between Levels 2 and 3 of classification. No changes requiring a
transfer have occurred during the current or previous years.
CBRE have made enquiries to ascertain any sustainability factors which are
likely to impact on value, consistent with the scope of their terms of
engagement. Sustainability encompasses a wide range of physical, social,
environmental, and economic factors that can affect the value of an asset,
even if not explicitly recognised. This includes key environmental risks; such
as flooding, energy efficiency, climate, design, legislation and management
considerations - as well as current and historic land use. Where CBRE
recognise the value impacts of sustainability, they reflect their
understanding of how market participants include sustainability factors in
their decisions and the consequential impact on market valuations.
The following table summarises the valuation techniques and inputs used in the
determination of the property valuation at 30 September 2024.
Key unobservable inputs:
ERVs - per sq. ft. Equivalent yields
Property category Valuation Valuation Range Weighted Range Weighted
£m technique average average
Like-for-like 1,800.4 1 £24 - £83 £51 5.8% - 8.6% 7.1%
Completed projects 138.0 1 £25 - £54 £34 6.7% - 8.4% 7.4%
Refurbishments / Redevelopments 358.3 2 £17 - £75 £35 5.2% - 9.9% 7.2%
South East Offices 78.3 1 £25 - £40 £30 8.4% - 12.4% 10.8%
Head leases 34.7 N/A
IFRS 16 adjustment (5.7) N/A
Total 2,404.0
1 = Income capitalisation method.
2 = Residual value method.
Developer's profit is a key unobservable input for properties that are valued
using the residual value method. The range is 10%-16% with a weighted average
of 14%.
Costs to complete is a key unobservable input for properties that are valued
using the residual value method. The range is £225-£389 per sq. ft. and a
weighted average of £328 per sq. ft.
The following table summarises the valuation techniques and inputs used in the
determination of the property valuation at 31 March 2024.
Key unobservable inputs:
ERVs - per sq. ft. Equivalent yields
Property category Valuation Valuation Range Weighted Range Weighted
£m technique average average
Like-for-like 1,833.2 1 £24 - £81 £49 4.9% - 8.4% 7.0%
Completed projects 137.4 1 £25 - £53 £35 6.6% - 7.2% 7.3%
Refurbishments 318.5 2 £24 - £75 £38 5.0% - 9.9% 7.3%
Redevelopments 18.9 2 £18 - £30 £19 4.8% - 8.7% 7.4%
South East Offices 72.2 1 £25 - £40 £30 8.0% - 11.4% 10.4%
Head leases 34.7 N/A
IFRS 16 adjustment (6.4) N/A
Total 2,408.5
A key unobservable input for redevelopments at planning stage and
refurbishments is developer's profit. The range is 10%-19% with a weighted
average of 15%.
Costs to complete is a key unobservable input for redevelopments at planning
stage with a range of £273-£416 per sq. ft. and a weighted average of £325
per sq. ft.
Costs to complete are not considered to be a significant unobservable input
for refurbishments due to the high percentage of costs that are fixed.
The following table summarises the valuation techniques and inputs used in the
determination of the property valuation at 30 September 2023.
Key unobservable inputs:
ERVs - per sq. ft. Equivalent yields
Property category Valuation Valuation Range Weighted Range Weighted
£m technique average average
Like-for-like 1,880.9 1 £20 - £79 £48 5.0% - 8.2% 6.7%
Completed projects 177.3 1 £24 - £53 £31 5.9% - 7.0% 6.9%
Refurbishments 289.9 2 £24 - £56 £37 4.8% - 9.8% 7.0%
Redevelopments 19.7 2 £12 - £17 £15 5.0% - 9.9% 7.1%
South East Offices 76.3 1 £25 - £35 £29 7.3% - 11.6% 9.9%
Head leases 34.7 N/A
IFRS 16 adjustment (7.1) N/A
Total 2,471.7
1 = Income capitalisation method.
2 = Residual value method.
Developer's profit is a key unobservable input for properties that are valued
using the residual value method. The range is 10%-19% with a weighted average
of 14%.
Costs to complete is a key unobservable input for properties that are valued
using the residual value method. The range of £222-£425 per sq. ft. and a
weighted average of £270 per sq. ft.
10. Trade and other receivables
Current trade and other receivables Unaudited 30 September 2024 Audited 31 March Unaudited 30 September 2023
£m 2024 £m
£m
Trade receivables 17.8 18.7 20.3
Prepayments, other receivables and accrued income 18.3 16.9 26.5
Deferred consideration on sale of investment properties 1.1 1.1 11.3
37.2 36.7 58.1
Included within trade receivables is the provision for impairment of
receivables of £4.5m (31 March 2024: £3.9m, 30 September 2023: £4.3m).
The deferred consideration arising on the sale of investment properties
relates to cash and overage. The overage has been fair valued by CBRE Limited
on the basis of residual value, using appropriate discount rates, and will be
revalued on a regular basis. This is a Level 3 valuation of a financial
asset, as defined by IFRS 13. The change in fair value recorded in the
Consolidated income statement was £nil (31 March 2024: £nil, 30 September
2023: £0.1m) (note 3(b)).
Receivables at fair value:
Included within deferred consideration on sale of investment properties is
£0.6m (31 March 2024: £0.6m, 30 September 2023: £0.6m) of overage or cash
which is held at fair value through profit and loss.
Receivables at amortised cost:
The remaining receivables are held at amortised cost. There is no material
difference between the above amounts and their fair values due to the
short-term nature of the receivables. All the Group's trade and other
receivables are denominated in Sterling.
11. Cash and cash equivalents
Unaudited 30 September 2024 Audited 31 March Unaudited 30 September 2023
£m 2024 £m
£m
Cash at bank and in hand 2.5 4.1 4.0
Restricted cash 6.5 7.5 6.3
9.0 11.6 10.3
£6.2m (31 March 2024: £6.7m; 30 September 2023: £6.2m) of the restricted
cash relates to tenants' deposit deeds which represent returnable cash
security deposits received from tenants which are held in ring-fenced bank
accounts in accordance with the terms of the individual lease contracts. The
remaining balance relates to restricted cash under terms of development
projects funding.
12. Trade and other payables
Unaudited 30 September 2024 Audited 31 March Unaudited 30 September 2023
£m 2024 £m
£m
Trade payables 7.9 7.4 13.6
Other tax and social security payable 6.7 4.8 6.8
Tenants' deposit deeds 8.1 8.2 6.3
Tenants' deposits 31.7 32.0 31.3
Accrued expenses 25.7 28.5 28.0
Deferred income - rent and service charges 11.8 12.1 13.1
91.9 93.0 99.1
There is no material difference between the above amounts and their fair
values due to the short-term nature of the payables.
13. Borrowings
(a) Balances
Unaudited 30 September 2024 Audited 31 March Unaudited 30 September 2023
£m 2024 £m
£m
Current
3.07% Senior Notes 2025 (unsecured) 79.9 - -
Non-current
Bank loans (unsecured) 192.6 192.3 205.1
Other loans (secured) 64.2 64.1 64.0
3.07% Senior Notes 2025 (unsecured) - 79.9 79.9
3.19% Senior Notes 2027 (unsecured) 119.9 119.9 119.8
3.6% Senior Notes 2029 (unsecured) 99.9 99.9 99.9
Green Bond (unsecured) 298.9 298.7 298.6
855.4 854.8 867.3
(b) Net Debt
Unaudited 30 September 2024 Audited 31 March Unaudited 30 September 2023
£m 2024 £m
£m
Borrowings per (a) above 855.4 854.8 867.3
Adjust for:
Cost of raising finance 3.4 4.2 4.2
858.8 859.0 871.5
Cash at bank and in hand (note 11) (2.5) (4.1) (4.0)
Net Debt 856.3 854.9 867.5
At 30 September 2024, the Group had £141.2m (31 March 2024: £141.0m, 30
September 2023: £129.0m) of undrawn bank facilities, a £2.0m overdraft
facility (31 March 2024: £2.0m, 30 September 2023: £2.0m) and £2.5m of
unrestricted cash (31 March 2024: £4.1m, 30 September 2023: £4.0m).
Net debt represents borrowing facilities drawn, less cash at bank and in hand.
It excludes lease obligations and any cost of raising finance as they have no
future cash flows.
The Group has a loan to value covenant applicable to the Bank Loans and Senior
Debt Borrowings of 60%, Green Bond of 65% and Aviva Loan of 55%. Loan to value
at 30 September 2024 was 35% (31 March 2024: 35%, 30 September 2023: 34%).
The Group also has an interest cover covenant of 2.0x applicable to the Bank
Loan and Senior Debt Borrowings, 1.75x applicable for the Green Bond and 2.25x
applicable for the Aviva Loan. This is calculated as net rental income divided
by interest payable on loans and other borrowings. At 30 September 2024
interest cover was 3.8x (31 March 2024: 3.7x, 30 September 2023: 3.5x).
(c) Maturity
Unaudited Audited Unaudited
30 September 2024 31 March 30 September
£m 2024 2023
£m £m
Repayable within one year 80.0 - -
Repayable between one and two years 30.0 80.0 157.5
Repayable between two and three years 283.8 194.0 129.0
Repayable between three years and four years 300.0 420.0 120.0
Repayable between four years and five years 100.0 100.0 300.0
Repayable in five years or more 65.0 65.0 165.0
858.8 859.0 871.5
Cost of raising finance (3.4) (4.2) (4.2)
855.4 854.8 867.3
(d) Interest rate and repayment profile
Principal at Interest Interest Repayable
period end rate payable
£m
Current
Bank overdraft due within one year or on demand - Base + 2.25% Variable On demand
Non-current
Private Placement Notes:
3.07% Senior Notes 80.0 3.07% Half Yearly August 2025
3.19% Senior Notes 120.0 3.19% Half Yearly August 2027
3.6% Senior Notes 100.0 3.60% Half Yearly January 2029
Bank Loan 163.8 SONIA + 1.77%(1) Monthly December 2026
Bank Loan 30.0 SONIA + 1.77%(1) Monthly April 2026
Other Loan (secured) 65.0 4.02% Quarterly May 2030
Green Bond 300.0 2.25% Yearly March 2028
858.8
(1) The base margin can be adjusted by up to 4.5bps dependent upon achievement
of three ESG-linked metrics.
(e) Derivative financial instruments
The Group uses a mixture of fixed rate and variable rate facilities to manage
its interest rate exposure appropriately to provide operational and budget
certainty. To manage the interest rate risk arising on variable rate debt,
£100m of the debt has been swapped to fixed rate GBP using an interest rate
swap.
The hedged item is designated as the variability of the cash flows of the
specific debt instrument arising from future changes in the SONIA rate, which
is an eligible hedged item.
Hedge effectiveness is assessed on critical terms (amount, interest rate,
interest settlement dates, currency and maturity date). The critical terms of
this hedging relationship perfectly matched at origination, so for the
prospective assessment of effectiveness a qualitative assessment was
performed. The interest rate swap creates an equal and opposite interest
receipt and a fixed interest payment, therefore creating an exact offset for
this transaction resulting in a net fixed interest payable. Potential sources
of hedge ineffectiveness include significant change in the credit risk of
either party or a reduction in the hedged item as such will impact the
economic relationship between the fair value changes of the hedged item and
the swap.
Unaudited Audited Unaudited
30 September 2024 31 March 30 September
£m 2024 2023
£m £m
Carrying amount of derivative (0.3) 0.2 -
Change in fair value of designated hedging instrument (0.5) 0.2 -
Notional amount £m 100 100 -
Rate payable (%) 4.285 4.285 -
Maturity 31 January 2026 31 January 2026 -
Hedge ratio 1:1 1:1 -
(f) Financial instruments and fair values
Unaudited Unaudited Audited Audited Unaudited Unaudited
30 September 2024 30 September 2024 31 March 31 March 30 September 2023 30 September 2023
Book Value Fair Value 2024 2024 Book Value Fair Value
£m £m Book Value Fair Value £m £m
£m £m
Financial liabilities held at amortised cost
Bank loans (unsecured) 192.6 192.6 192.3 192.3 205.1 205.1
Other loans (secured) 64.2 62.2 64.1 61.6 64.0 57.0
Private Placement Notes 299.7 288.0 299.6 285.4 299.6 270.1
Lease obligations 34.7 34.7 34.7 34.7 34.7 34.7
Green Bond 298.9 264.9 298.7 256.1 298.6 232.0
890.1 842.4 889.4 830.1 902.0 798.9
Financial assets at fair value
through other comprehensive income
Financial derivative (0.3) (0.3) 0.2 0.2 - -
Other Investments 3.2 3.2 3.2 3.2 2.1 2.1
2.9 2.9 3.4 3.4 2.1 2.1
Financial assets at fair value through profit or loss
Deferred consideration (overage) 1.1 1.1 1.1 1.1 11.3 11.3
1.1 1.1 1.1 1.1 11.3 11.3
In accordance with IFRS 13 disclosure is required for financial instruments
that are carried or disclosed in the financial statements at fair value. The
fair values of all the Group's financial derivatives, bank loans, other loans
and Private Placement Notes have been determined by reference to market prices
and discounted expected cash flows at prevailing interest rates and are Level
2 valuations. There have been no transfers between levels in the year. The
different levels of valuation hierarchy as defined by IFRS 13 are set out in
note 9.
The total change in fair value of derivative financial instruments recorded in
other comprehensive income was (£0.5m) (31 March 2024: £0.2m, 30 September
2023: £nil).
14. Lease obligations
Lease liabilities in respect of leased investment property are recognised in
accordance with IFRS 16.
Unaudited Audited Unaudited
30 September 2024 31 March 30 September 2023
£m 2024 £m
£m
Minimum lease payments under leases fall due as follows:
Within one year 2.1 2.1 2.1
Between one and five years 8.4 8.4 8.4
Between five and fifteen years 20.8 17.2 18.1
Beyond fifteen years 175.8 180.5 180.7
207.1 208.2 209.3
Future finance charges on leases (172.4) (173.5) (174.6)
Present value of lease liabilities 34.7 34.7 34.7
Following the adoption of IFRS 16, lease obligations are shown separately on
the face of the balance sheet. The balance represents a non-current liability
as the payment shown within one year of £2.1m is offset by future finance
charges on leases of £2.1m. All lease obligations are long leaseholds,
therefore, the majority of the obligations fall beyond fifteen years.
15. Notes to cash flow statement
Reconciliation of profit for the year to cash generated from operations:
Unaudited 6 months ended 30 September 2024 £m Unaudited 6 months ended 30 September 2023 £m Audited Year ended
31 March 2024
£m
Profit/ (loss) before tax 10.2 (147.9) (192.8)
Depreciation 0.8 0.8 1.7
Amortisation of intangibles 0.5 0.3 0.6
Letting fees amortisation 0.2 0.2 0.3
Loss on disposal of investment properties 1.1 1.2 2.3
Other expenses - 0.4 1.2
Net loss from change in fair value of investment property 20.0 170.8 251.2
Impairment of assets held for sale 0.3 6.6 4.1
Equity-settled share based payments 1.5 1.2 3.3
Finance expense 15.4 18.3 34.9
Changes in working capital:
Increase in trade and other receivables (0.8) (13.6) (2.9)
Decrease in trade and other payables (5.8) (11.6) (16.2)
Cash generated from operations 43.4 26.7 87.7
For the purposes of the cash flow statement, cash and cash equivalents include
restricted cash - tenants' deposit deeds (note 11).
16. Share Capital
Unaudited Audited Unaudited
30 September 2024 31 March 30 September
£m 2024 2023
£m £m
Issued: fully paid ordinary shares of £1 each 192.1 191.9 191.9
Movements in share capital were as follows: Unaudited Audited Unaudited
30 September 31 March 30 September
2024 2024 2023
Number of shares at 1 April 191,910,392 191,638,357 191,638,357
Issue of shares 232,612 272,035 259,497
Number of shares at period end 192,143,004 191,910,392 191,897,854
In the period there were 232,612 scheme options issued with net proceeds £nil
(31 March 2024: 272,035 options issued with £nil proceeds, 30 September 2023:
259,497 options issued with £nil proceeds).
17. Capital commitments
At the period end the estimated amounts of contractual commitments for future
capital expenditure not provided for were:
Unaudited Audited Unaudited
30 September 2024 31 March 30 September
£m 2024 2023
£m £m
Construction or refurbishment of investment properties 20.8 18.8 30.3
18. Post balance sheet events
In November 2024, the Group's £135m RCF bank facilities were refinanced
extending maturity to 30 November 2028, with options to extend by up to a
further two years and an option to increase the facility amount to £255m,
subject to lender consent. In addition, an additional £80m term loan facility
has been agreed with an initial maturity of November 2026 and options to
extend by up to two further years, subject to lender consent.
The Group has exchanged for sale on Rainbow Industrial Estate in November
2024, for a total consideration of £20.3m.
Responsibility statement of the directors in respect of the half-yearly
financial report
We confirm that to the best of our knowledge:
• the condensed set of financial statements has been prepared in accordance
with IAS 34 Interim Financial Reporting as adopted for use in the UK;
• the interim management report includes a fair review of the information
required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties for the
remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes in
the related party transactions described in the last annual report that could
do so.
The Directors of Workspace Group PLC are listed in the Workspace Group PLC
Annual Report and Accounts for 31 March 2024. A list of current Directors is
maintained on the Workspace Group website: www.workspace.co.uk
(http://www.workspace.co.uk) .
Approved by the Board on 21 November 2024 and signed on its behalf by
D Benson
Director
INDEPENDENT REVIEW REPORT TO Workspace Group plc
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-yearly
financial report for the six months ended 30 September 2024 is not prepared,
in all material respects, in accordance with UK adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
September 2024 which comprises the Consolidated Income Statement, Consolidated
Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated
Statement of Change in Equity, and the Consolidated Statement of Cash Flows
and the related explanatory notes.
Basis for conclusion
We conducted our review in accordance with Revised International Standard on
Review Engagements (UK) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" ("ISRE (UK) 2410
(Revised)"). 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 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.
As disclosed in the notes of the annual financial statements of the Group are
prepared in accordance with UK adopted International Accounting Standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410 (Revised), however future events or conditions may cause the
Group to cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
Auditor's responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statements in the
half-yearly financial report. Our conclusion, including our conclusions
relating to going concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting the requirements of the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority and for
no other purpose. No person is entitled to rely on this report unless such a
person is a person entitled to rely upon this report by virtue of and for the
purpose of our terms of engagement or has been expressly authorised to do so
by our prior written consent. Save as above, we do not accept responsibility
for this report to any other person or for any other purpose and we hereby
expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants
London, UK
21 November 2024
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
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