Workspace Group PLC

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ABOUT US We believe that our distinctive oer, proven track record and ownership of an extensive, high-quality property footprint provide a compelling investment case that will deliver sustainable long-term growth. ABOUT THIS REPORT This report has been produced in landscape format to optimise the reading experience online. Go to www.workspace.co.uk/onlineannualreport2023 01 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information STRATEGIC REPORT 01 03 What drives performance 08 2023 highlights 10 Chair’s statement 12 Chief Executive Ocer’s statement 14 Our purpose 15 Our stakeholders 26 Our market 32 Our strategy 36 Sustainability 59 Our key performanceindicators 64 Our business model 69 Principal risks anduncertainties 77 Business review 87 Compliance statements 106 Governance driving long-term success 108 Chair’s introduction to Governance 113 Board leadership and company purpose 129 Division of responsibilities 141 Composition, succession and evaluation 159 Audit, risk and internalcontrol 172 ESG Committee report 178 Remuneration 212 Report of the Directors 215 Directors’ responsibility statement OUR GOVERNANCE 106 FINANCIAL STATEMENTS 216 216 Independent auditor’s report 224 Consolidated income statement 224 Consolidated statement of comprehensive income 225 Consolidated balance sheet 226 Consolidated statement ofchanges in equity 226 Consolidated statement of cash ﬂows 227 Notes to the ﬁnancial statements 251 Parent Company balance sheet 252 Parent Company statement of changes in equity 252 Notes to the Parent Company ﬁnancial statements ADDITIONAL INFORMATION 255 255 Five-year performance 256 Property portfolio 258 Glossary of terms 259 Investor information LOOK OUT FOR THESE THROUGHOUT THE REPORT: Reference to another page in the report Reference to further reading online Strong customer demand allowed us to quickly recover pre-Covid levels of occupancy this year Graham Clemett CEO Our wellbeing programme has proved popular with both customers and employees Stacy Lyden-Sauppé Events Manager 02 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information CONTENTS It all starts with the customer. Our target customers Pages 4 to 7 Mirror Works, Stratford Our purpose is to give businesses the freedom to grow. We believe that in the right space, teams can achieve more. That in environments tailored to their business, free from constraint and compromise, teams are best able to collaborate, build their culture and realise their potential together. We build long-term relationships with our customers to understand their evolving requirements and continually enhance the customer experience. 03 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information WHAT DRIVES PERFORMANCE Our space is a hub of sisterhood, innovation, creativity. We want women to feel inspired when they enter. Treasure Tress was born out of my desire to create a service I needed myself: I was tired of paying ridiculous prices for curly haircare products I couldn’t ﬁnd in the UK. We have built up a huge community of subscribers and we know what they like. It’s important that our space also represents the ethos, passion and energy of our brand. It was really important that our space felt like home. The building has a great community of business owners and brands who are all looking out for each other – we love ﬁnding ways to collaborate with our neighbours. Jamelia Donaldson Founder and CEO of Treasure Tress, Parma House, Wood Green Haircare product discovery box for women with naturally curly hair Financial Statements Additional InformationOur GovernanceStrategic ReportWorkspace Group PLC Annual Report and Accounts 2023 04 You really are not limited by space or time at Workspace, which allows me to create some incredibly individual work. Workspace allows me to be myself, which is essential for my photography because of its focus on diversity and inclusivity. My priority is for the people who I am photographing to feel welcome and comfortable in the space, so that they too can be themselves. This allows me to capture the moment through the lens. It’s my space to do with what I want, so I tend to leave it bare so that I can dress it ad hoc for shoots. I love using the massive windows for natural light work. Another of my favourite things about the space is that it is 24/7 and I can come and go as I please. Paul Nicholas Dyke Founder of PND Photography, Lock Studios, Bow Headshot and portrait photographer for the entertainment industry 05 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information It was really important to us that we approached our studio in the same way we build digital products: with inclusivity and sustainability in mind. Our meeting pods are made from recycled fabrics, our paint is eco-friendly and most of our furniture is second-hand – lots of it even comes from other oces in the building. We designed the space to accommodate all our team’s needs, including private meeting rooms, standing desks and a table for eating lunch together. And, of course, a comfy corner for our oce dogs! Sophie Aspden People Lead at Planes, Brickﬁelds, Hoxton A digital product design and development studio Financial Statements Additional Information 06 Our GovernanceStrategic ReportWorkspace Group PLC Annual Report and Accounts 2023 We are kind of mavericks in the interior design world: we do things our own way. We don’t go for the open-plan style of working but prefer individual areas so we can work uninterrupted. The free space is really important to us – we need to have lots of ﬂoor space and be able to make a mess. Every Tuesday our team comes together and we throw all of our materials on the ground and look at the latest prints. We love bringing people in and feeling proud of the space – the building feels professional and impressive and we love all of the natural light from the skylights and large windows. We ﬁrst took a studio with Workspace in 2018, and have upsized twice since, and plan to expand again soon. Workspace made it so easy to expand that it just made sense. Kierra Campbell Managing Director, Poodle & Blonde The Chocolate Factory, Wood Green Hand-designed luxury wallpaper and homewares 07 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Additional InformationFinancial Statements 1. A reconciliation of basic and diluted earnings to trading proﬁt after interest is in note 8 to the ﬁnancial statements. Equivalent IFRS measure is proﬁt before tax – 2023: £(37.5)m, 2022: £124.0m, 2021: £(235.7)m. 2. Equivalent IFRS measures are basic net assets per share – 2023: £9.34, 2022: £9.94, 2021: £9.50 and diluted net assets per share – 2023: £9.27, 2022: £9.89, 2021: £9.44. Despite the economic challenges, we have seen good momentum from rental growth, with high levels of occupancy from resilient customer demand from SMEs for our ﬂexible oer. Our distinctive oer, proven operating platform and track record, alongside ownership of an extensive, high quality property footprint across London position us to capture more of the signiﬁcant market opportunity ahead of us. London’s SME community has remained resilient over the past few years Stephen Hubbard Chair NET RENTAL INCOME £116.6m EPRA NTA PER SHARE 2 £9.27 UNDERLYING PROPERTY VALUATION -3.2% TRADING PROFIT AFTER INTEREST 1 £60.7m DIVIDEND PER SHARE 25.8p PROPERTY VALUATION £2.74bn 08 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information 2023 HIGHLIGHTS FINANCIAL 2023 2022 2021 116.6 86.7 81.5 2023 2022 2021 60.7 46.9 38.7 2023 2022 2021 2.74 2.40 2.32 2023 2022 2021 9.27 9.88 9.38 2023 2022 2021 25.8 21.5 17.75 OPERATIONAL GREEN FINANCING £700m SCOPE 1 AND 2 EMISSIONS REDUCTION SINCE 2019/20 29% RENEWABLE ELECTRICITY SOURCED 100% DONATED TO SINGLE HOMELESS PROJECT £110K AVERAGE LETTINGS PER MONTH 109 LIKE-FOR-LIKE OCCUPANCY 89.1% AVERAGE ENQUIRIES PER MONTH 798 NET ZERO CARBON BY AVERAGE VIEWINGS PER MONTH 518 LIKE-FOR-LIKE RENT ROLL GROWTH +7.1% 3 2 09 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information SUSTAINABILITY 2023 2022 2021 798 917 739 2023 2022 2021 89.1 89.6 81.6 2023 2022 2021 109 127 96 2023 2022 2021 518 598 328 2023 2022 2021 7.1 8.7 -23.9 Workspace’s business model has truly been put to the test over the past three years. I’m pleased to say that we have emerged in an even stronger position. Stephen Hubbard Chair £60.7m TRADING PROFIT AFTER INTEREST 25.8p DIVIDEND PER SHARE 10 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information CHAIR’S STATEMENT CHAIR’S STATEMENT CONTINUED This year has seen market volatility persist: global growth has continued to slow amidst the ongoing conﬂict in Ukraine, and in the UK interest rates have risen to combat inﬂation. Workspace, however, remains in a strong position and has produced robust results. While the UK has experienced little economic growth this year, London, our core market, has continued to grow by more than 4% 1 , reﬂecting its enduring status as a global hub for successful, innovative businesses. Indeed, London’s SME community has remained particularly resilient in the face of many challenges over the past few years. Our distinctive ﬂexible oer, the scalable operating platform, unique portfolio of properties and robust balance sheet mean we are well positioned to weather any further challenging market conditions. This strong position was illustrated by an excellent set of full-year results, with net rental income up 34.5% to £116.6m, and our centres again full of vibrant small businesses. Across real estate markets globally, increasing interest rates have resulted in yield expansion although in the case of Workspace this has been largely oset by our improved pricing, with EPRA NAV per share decreased by 6.2% to £9.27. I have conﬁdence that, in time, this strong performance will be reﬂected in our share price. We continued to make real strides in dierentiating our brand from others in the market, signiﬁcantly enhancing visibility of our brand across London and highlighting the key beneﬁts of taking space with us. The Your Space, Your Way campaign emphasised the blank canvas space we oer to our customers, 50% of whom use their space for more than just a desk. The campaign shines a light on how our oer allows them to personalise and ﬁt out their space as they want – a component of our oer that clearly dierentiates us from the serviced oce brands we have sometimes been conﬂated with. It’s great to see our brand work start to correct these historic misconceptions – although there is still work to be done. One of the many reasons Workspace has resonated with London’s small businesses is the level of choice we oer to increasingly discerning customers, who want a broad range of options in their search for space, location and community that’s right for them. Last year, we added 20 core properties, totalling almost one million sq. ft. of new space, to our portfolio, signiﬁcantly expanding that range of choice to customers. Our teams have done a fantastic job in integrating those new buildings into Workspace, with a particular focus on making our new London properties, for example, Portsoken House, consistent with the quality Workspace look and feel. A key component of our strategy in acquiring McKay was to dispose of the industrial properties within the portfolio. Following year end, I’m pleased that this has been substantially completed, along with material cost synergy savings well beyond our budget and the successful novation of the Aviva debt, avoiding a £13m budgeted break cost. The Board has had another busy year, and ESG has remained top of our agenda. Our sector has a vital role to play in mitigating climate change and we know that Governance is key in driving real impact – accountability should run through every level of the Company. This is why our new ESG Committee, comprising all eight members of the Board, is tasked with closely monitoring Workspace’s targets in its goals to become net zero carbon by 2030. We are conﬁdent that we are well ahead of the curve thanks to Workspace’s inherently sustainable model. I have also seen ﬁrst-hand just how passionate our teams are throughout the Company in delivering sustainable results. This enthusiasm and sense of responsibility is also echoed by our eco-conscious customers and is something we actively instil throughout Workspace’s carefully selected partners and supply chains. The all-important social element of ESG has also been an area where Workspace has made real progress. We relaunched our ‘InspiresMe’ programme, oering career support to underprivileged young people, and we continued to develop our popular customer and employee wellbeing programmes throughout the year. Earlier in the year, our Capital Market’s Day shone a light on our environmental and social sustainability strategy, demonstrating how sustainability is embedded throughout our business. The event highlighted how Workspace’s strategy of breathing new life into old buildings creates local hubs of economic activity that help ﬂatten London’s working map and deliver employment-led regeneration. Having served nine years on the Board, I will be stepping down as Chair at the upcoming AGM. I stepped into my role as Chair in July 2020, just a few months after the start of the pandemic, as Workspace’s business model was truly put to the test. I’m pleased to say that three years later we have emerged in an even stronger position. I am immensely grateful to everyone at Workspace for helping to make my time on the Board and as Chair so enjoyable. I am especially thankful to the Executive team, which has expanded over the last few years into the strong team it is today. It has been a pleasure being a part of Workspace’s upbeat, dynamic culture and working with all the diverse people who help deliver the Company’s success. I have been lucky enough to get to know many of Workspace’s employees at my quarterly Chair engagement sessions and their honest feedback has helped drive a range of improvements across the business. One of the achievements I am most proud of has been building a strong, supportive Board who are a key part of the Workspace family. One of the Board’s focuses this year has of course been ﬁnding a Chair successor, and I am absolutely delighted that the Board has appointed Duncan Owen, whose more than 30 years’ experience in the real estate sector will be an invaluable asset to Workspace. I am conﬁdent that I am handing over to Duncan with the Company and Board both in great shape and I wish him every success in the role. I am certain Workspace will continue to thrive, driven by its strong sense of purpose, sustainable business model and customer-ﬁrst ethos. Stephen Hubbard Chair It’s been a pleasure being part of Workspace’s dynamic culture Duncan Owen will be appointed as Chair in July 2023. To read more about his appointment go to page 146. 1. ONS, GDP ﬁrst quarterly estimate, UK: October to December 2022. 11 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information Our strong trading performance is testament to our truly ﬂexible oer and a customer base of vibrant SMEs. Graham Clemett Chief Executive Ocer £116.6m NET RENTAL INCOME 89.1% LIKE-FOR-LIKE OCCUPANCY 12 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information CHIEF EXECUTIVE OFFICER’S STATEMENT We entered the year with good momentum and strong levels of customer demand, and occupancy at our like-for-like properties back at pre-Covid levels of around 90%. The resulting pricing tension has enabled us to deliver a 9.4% increase in rent per sq. ft. over the year, with many of our business centres now back at, or ahead of, pricing levels last seen in 2019. Even with prices increasing our customers value our oer highly, and it was great to see 88% stay with us on renewal. We have also seen a good pace of occupancy increase at recently completed projects. Most notably, we have seen occupancy at our refurbished Mare Street property in Hackney move up 25% to 95% in the year, whilst Mirror Works, our new building in Stratford, saw occupancy increase 58% to 81%. These successes highlight both the quality of our buildings and the power of our marketing and sales platform in attracting demand to a broad range of locations and then converting this demand into lettings. Our extensive property portfolio across London continues to provide us with a rich opportunity to upgrade and reposition buildings to meet both the changing needs of our customers and higher environmental standards. This sustainable regeneration, at the heart of our business model, drives uplifts in income and values producing very attractive returns. We currently have a pipeline of refurbishment and redevelopment projects that will deliver around 1.3m sq. ft. of new and upgraded space. Our existing buildings are income earning, so we can selectively decide on the optimal timing for each project to ensure we can deliver as a minimum our benchmark returns. Our sustainability ambitions extend beyond simply meeting environmental standards, and we are proud of the regenerative impact of our business model. As we breathe new life into old buildings, we create hubs of economic activity across the Capital, providing signiﬁcant employment and social beneﬁts in what are often historically deprived areas. We hold our properties for the long term and our engagement with local communities is crucial to our social sustainability agenda. During the year, we started major refurbishment schemes at The Chocolate Factory in Wood Green, and The Biscuit Factory in Bermondsey. The scheme at Leroy House in Islington, which started in summer 2021, is now well progressed and we expect to complete this project in spring 2024. We also completed the sale of the residential component of our mixed-use redevelopment at Riverside, Wandsworth for £54m in March 2023, where we obtained planning permission for 433 ﬂats, highlighting our opportunity to add value and recycle capital. In May 2022 we acquired the previously publicly listed McKay Securities, adding good quality assets across London and the South East to our existing portfolio at a discount to book value. We completed the operational integration of the McKay portfolio in November 2022, and continue to make progress in our plan to add signiﬁcant value to the portfolio by adapting the buildings to our multi-let strategy and rolling out our ﬂexible lease oer. The market environment has unfortunately slowed the planned sale of identiﬁed non-core assets (principally light industrial and logistics properties). We sold one asset for £7m in July 2022 and exchanged on the sale of a further ﬁve in May 2023 for £82m. Overall we have delivered a strong trading performance in the year, with a 34% increase in net rental income, an increase of 17% on an underlying basis, and a 29% increase in trading proﬁt after interest. We maintained tight control over discretionary costs and while we saw an increase in interest costs from the McKay acquisition, we beneﬁtted from the majority of our debt being at ﬁxed rates. A resilient property valuation meant that we saw a relatively small decline of 6% in our net asset value per share to £9.27 over the year. Outward yield movement was largely oset by the increases in rental price levels, with an underlying fall of just 3.2% in the property valuation. Our strong trading performance is a testament to our business model: – We have been championing ﬂexibility in the commercial real estate market for over 35 years and it is great to see that it has now become ﬁrmly mainstream. Of course, it covers many dierent oers, but what makes ours stand apart is the complete ﬂexibility we give our customers – both in terms of the leases we oer and the ability to ﬁt out their own space. We have always understood the merits of giving our customers lease ﬂexibility, achieving strong retention by providing an unmatched quality of service rather than tying them into long leases. The other aspect of ﬂexibility, the ability for customers to ﬁt out their space to suit their individual needs, is sometimes overlooked. This freedom to personalise their space and to create their own identity is incredibly important. In fact, around half of our customers use their space in a very dierent way to a traditional oce occupier, meeting the needs of a diverse range of businesses such as fashion design, video production, etc. – Our focus is on creative and service-based SMEs, which we estimate represent some 21% of the working population in London. These SMEs are in a very broad range of business sectors and represent a dynamic and exciting opportunity for us. We estimate Workspace is home to around 3% of this fragmented market, so we still have plenty to go for. – We have a well-recognised brand, a scalable and technically advanced operating platform and an experienced and committed in-house team that provides a high level of service and support to customers. On that note, I would like to thank everyone at Workspace for their tremendous eorts through the year and congratulate them on the delivery of a great set of results. – With the strong improvement in trading performance and conﬁdence in the longer term prospects of the Company, the Board is recommending a ﬁnal dividend of 17.4p per share, taking the full-year dividend to 25.8p which is up 20% on last year. Lastly, I would like to thank our Chair Stephen Hubbard, who steps down at this year’s AGM having served as a Non-Executive Director for nine years, the last three as Chair. He has been a fantastic ambassador and champion of our business. On behalf of everyone at Workspace, I would like to thank him for his contribution to the business over the past nine years and wish him all the very best for the future. Graham Clemett Chief Executive Ocer CHIEF EXECUTIVE OFFICER’S STATEMENT CONTINUED Our property portfolio continues to provide rich opportunity to upgrade and reposition buildings 13 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information Our purpose is to give businesses the freedom to grow 1 We deliver our purpose by actively listening to our stakeholders to understand what matters most… 2 We believe that in the right space, teams can achieve more. We provide customers with a blank canvas to create their own unique space – liberating them to express their identity and culture in a space, building and location that is right for them. We work hard to continually enhance and reﬁne the customer experience, so that customers have the freedom to focus on growing their businesses. Our purpose has created a culture that puts our stakeholders ﬁrst. The conversations we have with our customers, people, investors, partners and communities, both in person and by collecting real-time data, directly inform our day-to-day decisions, help us to improve our oer and drive the growth of the business. How this drives our culture Pages 21 and 22 Stakeholder engagement Pages 15 to 25 …and put this at the heart of our strategy… 3 …while giving customers the space to grow sustainably 4 Our strong sense of purpose places an emphasis on delivering exceptional customer service. Ownership of our buildings, an extensive portfolio, a continual pipeline of upgrades ensures we provide an unparalleled customer oer, cementing our position as home to London’s brightest businesses. We know that our customers share the same values as us and prioritise sustainability. For them, it is important that their oce provider is responsible; it is only by working together that we can meet our 2030 net zero carbon target. Our purpose driven strategy Pages 32 to 35 Sustainability Pages 36 to 58 OUR PURPOSE PUTS OUR STAKEHOLDERS AT THE HEART OF THE WAY WE DO BUSINESS OUR INVESTMENT PROPOSITION We know London SMEs No one knows London SMEs – and how and where they want to work – better than Workspace. Pioneers of ﬂex We’ve been doing this for 35 years. We helped create the London ﬂex market. It’s a great time to be theleader Our market is expanding, and we plan to capture more of the signiﬁcant market opportunity ahead of us. We’re a great neighbour Our model is to repurpose distinctive buildings, revitalise local areas and have a positive environmental social impact in the areas weoperate. We’re not done until our customers are Our quality, in-person service oers daily face-to-face access and creates close relationships with strongretention. 14 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information WE ARE WELL POSITIONED IN A GROWING MARKET OUR STAKEHOLDERS Listening to our stakeholders so we make the right decisions. Our purpose – to give businesses the freedom to grow – has helped us create a culture that puts our stakeholders at the heart of the business. We listen both in person and by collecting real-time data, directly informing the way we make decisions. 1 Our customers Page 16 2 Our people Page 21 3 Our investors Page 23 4 Our partners and suppliers Page 23 5 Our communities Page 25 6 The environment Page 25 Section 172(1) Statement Our Section 172(1) Statement sets out how the Board has had regard to its stakeholders and other section 172(1) matters during the year. Page 125 The Biscuit Factory, Bermondsey STAKEHOLDER ENGAGEMENT We gather feedback and insight from all of our stakeholders so that we understand what matters most. 15 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information OUR STAKEHOLDERS T h e e n v i r o n m e n t O u r c u s t o m e r s O u r c o m m u n i t i e s O u r p a r t n e r s & s u p p l i e r s O u r p e o p l e O u r i n v e s t o r s OUR PURPOSE IS TO GIVE BUSINESSES THE FREEDOM TO GROW. Stakeholder: Our customers How we engage We maintain a continual dialogue with businesses from the moment they make an enquiry. Once customers have moved in, our centre teams foster close relationships with them. We also collect scheduled feedback from our 4,000 customers twice in the year. Our Customer Insight Manager collates and evaluates this mix of informal and formal feedback, aiming to enhance our customer service and building management, and ultimately informing our growth strategy, such as our refurbishments and acquisition decisions. How the Board engaged – Reviewed our brand and marketing campaigns – Reviewed customer experience initiatives – Considered the results of the customer survey – Evaluated key monthly customer metrics Signiﬁcant topics raised – Range of location choices – central and non-central – Strong performance of individual members of centre teams (over 800 formal ‘shout- outs’) – Social and environmental responsibility of Workspace – Satisfaction regarding Wi-Fi and Connectivity Services – Rent renewal process – Breakout areas, meeting rooms and phone booths – Frequency of events programmes – Points of contact when taking a lease – Quality of cafés Activity in the year – Created a feedback box – Delivered over 400,000 sq. ft. of new and upgraded space – Integrated McKay properties to our portfolio – Rolled out Inclusive Billing to 37 buildings – Launched formal feedback box – Company-wide customer service training – Invested in Wi-Fi upgrade programme – Added 10 new meeting rooms – Hosted 71 customer events with 2,500 attendees, including four popular London’s Brightest Businesses panel discussions – Further simpliﬁed the customer journey, reducing number of steps involved in taking a lease and streamlined renewals process – Launched three new in-house Coee Bars 84% OUR CUSTOMER SATISFACTION SCORE 62% BRAND AWARENESS #1 FIRST CHOICE FOR SMEs LOOKING TO MOVE OR EXPAND ATTRACTING CUSTOMERS WITH OUR LATEST ADVERTISING CAMPAIGN Listen to our latest customer advertising campaign Giandonato Rosa, Hospitality Manager, oversees our Workspace Coee Bars 16 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information OUR STAKEHOLDERS CONTINUED Our quarterly brand-tracker survey asks 300 London SME business leaders and decision makers what their priorities are when selecting a work space. We’ve analysed this data alongside our in-house customer survey results and identiﬁed 12 key priorities for SMEs. These are all areas for which we receive positive feedback from our customers. Of these 12, we have highlighted three key priority areas over the following pages: – Customisation, page 18 – Location, page 19 – Flexible leases, page 20 RESPONDING TO THE NEEDS OF OUR CUSTOMERS 100% OWNERSHIP OF OUR BUILDINGS PUTS US IN A UNIQUE POSITION WHEN RESPONDING TO CUSTOMER DEMAND FLEXIBLE OFFER Flexible lease Aordable Blank canvas TYPE OF PROPERTY Location Environmental credentials Natural light/ventilation QUALITY OF SERVICE On-site support Wi-Fi/connectivity Comfort/amenities SOCIAL ENGAGEMENT Networking and community environment Events Local community 17 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information OUR STAKEHOLDERS CONTINUED OUR CUSTOMERS CONTINUED What do our customers have in common? They tend to have creative minds and are deeply passionate, especially the ones I see in my East London buildings. They’re often architects, designers and video producers. Why is blank canvas space important? They want to stamp their own brand on the space. They also want to set it up in a way that works for how their team works – one thing that’s become popular is for customers to create their own phone booths. It’s important they can welcome clients and showcase their space. Do you have any favourite ﬁt-outs? At Mare Street Studios, The Fellas podcasters have created a variety of colourful sets that serve as backdrops for recording their social media videos, and wellbeing company Sweet Tees house massage and yoga studios as well as cinema rooms. When new customers are ﬁrst shown around the buildings, I can see that they’re often inspired by these other ﬁt-outs and start to picture what they can potentially do to their own space. What customer feedback do you receive? The business owners I speak with every day are very vocal about being able to brand their own space, and often say it is one of the reasons they chose Workspace. Those who put the time into making their space feel like home, tend to stay with us for longer and continue to expand over the years. How does Workspace help customers personalise their space? Firstly, we work with the customer to ﬁnd the right space in the right location. Next, we review the customers’ ﬁt-out proposals, looking at all elements of the works, while also considering health and safety, building regulations and sustainability. The customer then has free reign to create the space they like, either using one of our suggested contractors or one of their own. RESPONDING TO THE NEEDS OF OUR CUSTOMERS CONTINUED Ability to customise Customers value blank canvas space they can make their own Luisa Milazzo Centre Manager at Mare Street Studios and Brickﬁelds Q&A Luisa Milazzo, Centre Manager at Mare Street Studios and Brickﬁelds Planes Studio built wooden phone booths at their space in Brickﬁelds, Hoxton 18 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information OUR STAKEHOLDERS CONTINUED OUR CUSTOMERS CONTINUED RESPONDING TO THE NEEDS OF OUR CUSTOMERS CONTINUED Location In your experience, what do customers prioritise in their search for space? I spend 90% of my time out with prospective customers on viewings. What I’ve seen is that our oer appeals to such a diverse range of businesses that they are often looking for something slightly dierent – and usually very speciﬁc. For some customers, it’s important they have the right style of building and breakout space. For others, it’s about the right community of neighbours, or being close to transport links or where they live. This means they need as much choice as possible. And, of course, dierent buildings and areas each have their own characteristics, and so we’ll often show them two or three buildings in an area. How do we cater to that desire for choice? We are always expanding and improving what we oer. Just this year, we added seven new high-quality buildings to our London portfolio from the purchase of McKay. This means our customers now have 63 London buildings to choose from. Our pipeline of refurbishments will also give customers even more options, creating, for example, more meeting rooms, better breakout areas, improved cafés and additional bike storage. We strategically select properties for refurbishment based on the areas where my sales team is seeing the most customer demand. How do those new refurbishments aect pricing? They are beautifully designed and extremely popular – so this means we can lift pricing. For instance, our recent, relatively light-touch refurbishment at Metal Box Factory in London Bridge has seen a 30% increase in rents at the business centre. Our continually expanding portfolio of buildings is designed to oer the greatest spread of choice possible Charlie Fraser Head of Sales Q&A Charlie Fraser, Head of Sales Exmouth House, Clerkenwell 19 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information OUR STAKEHOLDERS CONTINUED OUR CUSTOMERS CONTINUED RESPONDING TO THE NEEDS OF OUR CUSTOMERS CONTINUED Flexibility What sort of leases do our customers want? Our SME customers are ambitious and often in a state of change, especially those with their sights set on rapid growth. Our typical two-year leases with a six-month rolling break clause give our customers both certainty and ﬂexibility to scale up or down as they need to. How do you and your Leasing team work with customers? This year, we’ve worked closely with over 500 customers to oer them ﬂexibility, as they chose to either expand into larger space, take additional space, or in some instances, contract into something smaller. Overall, it’s been a really strong year, with more than 380 expansions and 700 renewals. How are we developing our leasing oer? Our customers want to be free of unnecessary admin. The easier we make our leasing and expansion process, the freer our customers are to focus on the key task at hand: running their business. We are continually striving to improve the customer journey. For example, the introduction of a new inclusive, transparent billing structure, wrapping energy, Wi-Fi costs and rent and service charge under a single monthly payment, has proved popular with customers. Next year, we also plan to launch a new online customer checkout that will make the onboarding and moving process for our customers even smoother. Customers need ﬂexibility as they expand and contract Simon Webb Head of Leasing Q&A Simon Webb, Head of Leasing Chiswick Auctions in Barley Mow, a customer that has expanded this year 20 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information OUR STAKEHOLDERS CONTINUED OUR CUSTOMERS CONTINUED How our Board monitors culture Page 120 Stakeholder: Our people How we engage Employee feedback tells us that our strong culture and set of values are well received by our people, though we know there are always areas where we can improve. While we carry out an annual survey, which saw an 86% response rate, we also gather feedback from a series of face-to-face and virtual events throughout the year. Our quarterly Wrap Live town hall broadcasts provide a forum to hear from teams across the business. This year we introduced a bi-monthly Wrap on Tour, where our leadership team visits clusters of buildings to catch up with centre teams and gather informal feedback. How the Board engaged – Reviewed and discussed our new recruitment policies – Reviewed our new company value ‘Make It Fun’ – Our Chair hosted two employee engagement sessions with a mix of centre and head oce sta providing feedback Signiﬁcant topics raised – Communication from senior leaders – Diversity and inclusion, especially around recruitment – Intra-company collaboration and information sharing – Career development – Evolving our values – Recognition – Social activities – Health and wellbeing Activity in the year – Enhanced recruitment processes, encouraging more internal hires and greater diversity – Six Wrap Live town halls – mix of in-person and virtual events – Launched Wrap On Tour events – Increased frequency of Wrap newsletters and Sharepoint intranet articles to shine a spotlight on teams across the business – Launched employee suggestions scheme – Increased frequency of internal recognition ‘shout-out’, via informal and formal communications – Launched Diversity & Inclusion Networking Group – Delivered Unconscious Bias and Harassment training for all employees – Career Pathway programme for Relief Managers, Centre Coordinators and Assistant Centre Managers – New FM team restructure, creating clearer career structure and development opportunities – Charity, Wellbeing & Social Committee hosted frequent events, including the Tour de Workspace, Christmas Family Day and Carnival in the Car Park. Know your stu We like people who are serious about their subject; those who are open- minded, interested and ask questions. Show we care We value great social skills and those who instinctively build strong relationships. We think hard about how to give back to our communities. Find a way We look for those who are persistent and have the conﬁdence to move things forward when it is dicult. Flexibility and adaptability are key, but so are focus and determination. Make it fun We depend on the imagination and creativity of all our people. We like people who thrive on injecting enjoyment and colour into the day-to-day. Our values are central to our business and guide how we should treat each other, our customers and our partners. In our 2022 employee survey, people told us they felt the name of our Be A Little Bit Crazy value didn’t feel like the right ﬁt. We launched an internal competition and chose a simple, aspirational replacement – Make It Fun – a reminder for us to be creative, spontaneous and enjoy what we do. Our quarterly Workspace Winners awards celebrate those who have lived these values. OUR STAKEHOLDERS CONTINUED EVOLVING OUR VALUES 21 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information OUR STAKEHOLDERS CONTINUED OUR PEOPLE CONTINUED 5. 6. 7. 8. 9. 11. 10. 12. 13. 14. 15. 18. 21. 17. 19. 20. 16. 3. 1. 2. 4. RESPONDING TO THE NEEDS OF OUR PEOPLE Diversity and inclusion Why is diversity important at Workspace? Our success depends on our people. Having that breadth of experience and perspective helps us attract and retain talent and improves our decision making, customer focus and employee satisfaction. Why has it become a priority now? It has always been a priority but we wanted to further strengthen our diversity and inclusivity. It was great to see this reinforced by our annual employee survey, with people telling us that they are invested in the diversity of our Company. What steps have we taken to better understand our diversity? In response to the survey, we launched a project to gather data from our sta to start benchmarking our diversity. I was delighted to see our sta so engaged on the topic, with more than 90% completing our request for data. The data itself showed that we are more diverse than the national average, which we are extremely proud of. However, we know there are areas where we can improve. How do we plan to improve diversity? Our Recruitment Manager is ensuring all internal and external candidates have the same opportunities. Pulling from a mix of social media, job boards and agencies, we have widened our external recruitment pool to boost diversity and attract the best candidates. We have also launched a new internal Diversity & Inclusion Networking Group. The feedback for the ﬁrst two sessions has been really positive – people have welcomed a forum to discuss their personal challenges in a safe space. Read more on page 149. OUR STAKEHOLDERS CONTINUED OUR PEOPLE CONTINUED Our people value diversity and inclusion in the workplace Claire Dracup Director of People & Culture Q&A Claire Dracup, Director of People & Culture The annual sta ‘Workspace Walk’ 22 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information Stakeholder: Our investors How we engage – We regularly engage with existing and prospective shareholders through an active investor relations programme around our ﬁnancial results and corporate activity. The Board reviews a detailed bi-monthly investor relations report which includes notable views expressed by shareholders as well as wider market participants, alongside share register movements, broader sector and peer news and progress on various investor relations initiatives. How the Board engaged – Approved the sale of the residential component of Riverside Business Centre – Approved the appointment of Duncan Owen as Chair – Attended the AGM – Reviewed and discussed the monthly IR reports – Approved results statements – Approved payment of the interim and full-year dividend Signiﬁcant topics raised – Financial and trading performance – Our future ﬁnancing options – Growth strategies – Sale of McKay assets – Our sustainability approach – Brand and marketing capability Activity in the year – 150 investor meetings (in-person and virtual) – 19 sell-side analyst and buy-side investor site tours – Six real estate conferences attended globally – Sustainability Capital Markets Day – AGM OUR STAKEHOLDERS CONTINUED Stakeholder: Our partners and suppliers How we engage – We work with a broad range of long-term partners and have a strong track record of refurbishments and redevelopments where strong relationships with local government, communities and contractors are integral. These relationships are based on stringent ethical and sustainability standards. We always provide direct feedback to suppliers so that they can improve their products and services. How the Board engaged – Approved modern slavery statement – Reviewed new supplier code of conduct Signiﬁcant topics raised – Creating sustainable buildings – Compliance with building regulations and neighbourhood plans – Access for all user groups – Urban regeneration – Recycling and waste practices – London Living Wage Activity in the year – Introduced a new supplier code of conduct – Ensured suppliers and partners working on Workspace premises pay Real London Living Wage – Encouraged supply chain to use environmentally friendly products – Promoted recycling and sustainable waste practices 100% CONSTRUCTION & FACILITIES PARTNERS PAID REAL LONDON LIVING WAGE Leroy House, Islington 23 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information 5. 6. 7. 8. 9. 11. 10. 12. 13. 14. 15. 18. 21. 17. 19. 20. 16. 3. 1. 2. 4. RESPONDING TO THE NEEDS OF OUR INVESTORS Transparency How have we helped the investor community better understand our business? This year we’ve focused on more clearly articulating Workspace’s equity story to the wider market. In particular, we’ve made great progress in highlighting the importance of our unique customer proposition, outlining how our scale portfolio and ownership provides our customers with the only ﬂexible space and lease option for London’s SMEs. We also set out how our sustainable buildings help drive income growth whilst also positively inﬂuencing capital values over the longer term. How have we brought this story to life? Our communications have been enhanced by new materials designed speciﬁcally for investor engagement, which include photography showing our vast range of properties and how our customers use their space. How have we been engaging with the investor community? We have had a busy year engaging more regularly with analysts and investors, increasing our attendance at conferences, hosting more site tours and meeting and speaking to more decision makers across the market. What did the Capital Markets Day focus on? We hosted a very well-received sustainability market update early in our ﬁnancial year, highlighting our inherently sustainable business model and how we are well ahead of the curve with our net zero pathway, EPC upgrade plans and social impact strategy. A panel discussion with leaders from across Workspace demonstrated how sustainability is embedded within our business. Our investors value transparency and clear communication Paul Hewlett Director of Strategy & Corporate Development Q&A Paul Hewlett, Director of Strategy & Corporate Development Capital Markets Day, Exmouth House, Clerkenwell OUR STAKEHOLDERS CONTINUED OUR INVESTORS CONTINUED 24 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information [Building Name, Building Location] Stakeholder: Our communities How we engage – A key element of our strategy is creating a ﬂatter, fairer London. By providing high-quality, aordable space, we bring employment into the local areas and help create community hubs. We strongly believe in giving something back to the communities where we have a presence, which is why we oer employment-focused support to disadvantaged young people. How the Board engaged – Reviewed updates from our Social, Charity & Wellbeing Committee – Our Chair discussed social sustainability initiatives at his employee engagement sessions Signiﬁcant topics raised – Identifying community partners, such as local churches, schools, village halls, for our InspiresMe work experience programme – Fund raising opportunities for our charity partner, Single Homeless Project – Employment inequality Activity in the year – Re-launched InspiresMe programme, including work experience for local students at The Chocolate Factory, Kennington Park, Mare Street Studios, Brickﬁelds and Cargo Works centres – Assessed social value contribution (see page 56) – Hosted consultation events with local residents and businesses around development projects – Raised £110,000 for Single Homeless Project Stakeholder: The environment How we engage – We recognise that there is a climate emergency which requires drastic action from our industry. We have committed to becoming net zero carbon by 2030 and our focus on refurbishing buildings means we can signiﬁcantly reduce embodied carbon. Our in-house operating platform ensures we have access to live data on operational energy usage. Engaging directly with customers to enhance the sustainability of our buildings ultimately drives higher satisfaction scores and retention. How the Board engaged – Reviewed and approved updates to our net zero strategy from our Head of Sustainability – ESG Committee is chaired by six Non- Executive Directors Signiﬁcant topics raised – Energy management for customers – Natural light and ventilation – Solar panels – Sustainable transport – Measuring and monitoring air pollution and energy consumption Activity in the year – Reduced scope 1 and 2 emissions by 11% across like-for-like portfolio – Recycling rate of 79% – Optergy energy management platform rolled out to a further seven buildings – Electric Vehicle charging points used 3,000 times £110K RAISED FOR SHP The Tour De Workspace fundraiser 25 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information OUR STAKEHOLDERS CONTINUED OUR MARKET A clearly dierentiated customer oer in a growth market. Our target market comprises 138,000 London SMEs with more than one employee. With some 4,000 customers, we currently let space to 3% of this market. This target market continues to expand each year 1 . As the demand for ﬂexibility grows, we see signiﬁcant long-term opportunity to increase our market share. 1. BEIS Business Population Estimates 2022. Brickﬁelds, Hoxton 26 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information 1 3 4 2 2010 2012 2013 20142011 2015 2016 2017 2018 2019 2021 2022 2020 270 150 170 190 210 230 250 1 3 2 4 6 5 9 10 11 8 7 12 LEASE USE OF SPACE High ﬂexibilityLow ﬂexibility Low ﬂexibility High ﬂexibility OUR MARKET A GROWTH MARKET OUR DISTINCTIVE FLEXIBLE OFFER NUMBER OF LONDON SMES (1-249 EMPLOYEES) (000’s) Trends aecting our market We have helped pioneer the ﬂexible work space market for more than 35 years, and we continually evolve our oer to respond to changing market trends and customer requirements. Our unique in-house operating platform means we directly interact with our customers on a daily basis, giving us rich, live data on how customers’ expectations are changing. Attracting a diverse customer portfolio Our customers are owners and managers of ambitious SMEs, often creators, makers or innovators from a diverse range of sectors. Expressing their business’ individuality and personality is essential to them. 1. Information, Communication & Technology 14% 2. Wholesale & Retail 14% 3. Professional, Technical & Consultancy Services 13% 4. Arts, Entertainment & Recreation 11% 5. Marketing 7% 6. Financial Services 6% 7. Construction & Property 5% 8. Design 5% 9. Not For Proﬁt 4% 10. Administrative & Support Services 4% 11. Travel, Hospitality & Leisure 3% 12. Other 14% Trends 1. SMEs have remained resilient in the face of mounting economic pressures Page 28 2. SMEs and their employees are more selective than ever Page 29 3. Net zero carbon targets are now a priority to both landlords and customers Page 30 4. London remains a global hub for businesses and an increasingly creative SME community Page 31 4,000+ CUSTOMERS ACROSS A BROAD RANGE OF SECTORS THE WORKSPACE OFFER Traditional oer Large ﬂoor plates Unfurnished Turn-key oer Large ﬂoor plates Fully ﬁtted Serviced oer Oces/co-working Fully furnished 27 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information OUR MARKET CONTINUED Market trend 1: SMEs have remained resilient in the face of mounting economic pressures While the London economy has outperformed the UK as a whole 1 , growth across the UK is expected to slow during the ﬁnancial year 2022/23 2 . Rising energy costs and inﬂation have put pressure on consumers and businesses, exacerbated by strike action across rail and postal services. Despite these conditions, SMEs remain optimistic 3 . What this means for Workspace Despite the challenging market conditions, we have seen strong demand throughout the year, having completed 1,312 deals. Our diverse customers have demonstrated time and again that they are agile, innovative and resilient. We have a track record of successfully managing our business through economic cycles by dynamically adapting our space, oer and pricing. In challenging times, we can ﬂex pricing to recover occupancy where needed. Outside of those challenging periods, we are able to drive pricing. Equally, our strong balance sheet, distinctive ﬂexible oer and freehold ownership model means we are well positioned to weather any further market uncertainty. OUR MARKET CONTINUED 700+ RENEWALS 380 EXPANSIONS Mirror Works, Stratford 1. ONS, GDP ﬁrst quarterly estimate, UK: October to December 2022. 2. OBR Economic outlook March 2023. 3. FSB UK Small Business Index Q1 2023. 28 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information Market trend 2: SMEs and their employees are more selective than ever The UK has seen demand for ﬂexible space rise 22% in just one year 1 , with more choice and greater ﬂexibility in how teams work. To attract and retain talent, business owners need to provide high-quality space that competes not just with other work space providers but with employees’ homes. What this means for Workspace Our scale, ownership model, customer service and truly ﬂexible oer, developed over more than 35 years, set us apart from other providers in the market. Our centre teams build relationships with our customers and take the time to understand their expectations, informing improvements to our oer, buildings and the continuous pipeline of refurbishments and redevelopments. Crucially, we know that businesses value more than just ﬂexible leases – they want control and the freedom to express their own identity, making a home for their business. Our distinctive oer allows them tailor their own space for their teams and how they work. The ability to personalise their space creates a signiﬁcant draw for attracting and retaining talent. Our range of 76 buildings allows customers to choose a location, community and building that feels right to them, and they have the capability to easily scale up or down, or move elsewhere in our portfolio. Our ongoing investment in our brand and advertising campaigns continue to highlight these beneﬁts and clearly position Workspace in the market. OUR MARKET CONTINUED 5 mins AVERAGE WALK FROM A STATION TO OUR BUILDINGS Leather Market, London Bridge 1. UK Flex Market Review, Instant Oce, July 2022. 29 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information Market trend 3: Addressing climate change is a priority to both landlords and customers The built environment has improved its energy eciency by 27% over the past 10 years 1 . While newly constructed buildings are more energy ecient, it is estimated that 80% of buildings in 2050 will already have been built by now 1 . The impact of these buildings is therefore far greater than new builds, and so the industry must prioritise decarbonising existing buildings. Despite rising energy prices, public support for pursuing net zero carbon emission remains high. Our quarterly brand tracker survey of London SME decision makers saw 85% say sustainability is important to their business while more than 20% choose an oce provider based on sustainability credentials. What this means for Workspace Workspace’s model is inherently sustainable: we repurpose and preserve old buildings. For instance, at our Leroy House refurbishment, we will achieve this by retaining the building’s structure, using recycled construction materials and natural ventilation, installing state-of-the-art solar panels, and replacing gas boilers with air-source heat pumps. We keep our operational energy intensity across the portfolio, 129 kWhe/m 2 well below the industry benchmark, 160 kWhe/m 2 , and have reduced our scope 1 and 2 by 29% since 2019. For example, at new schemes we optimise glazing ratios to balance solar gains, reduce heat losses and maximise daylight levels. OUR MARKET CONTINUED 1. UKGBC Whole Life Carbon Roadmap, 2022. 20% OF SMEs CHOOSE THEIR OFFICE BASED ON SUSTAINABILITY CREDENTIALS Leroy House, Islington 30 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information Market trend 4: London remains a global hub for businesses, with an increasingly broad range of SME sectors London ranks ﬁrst among top global cities for entrepreneurial success thanks to its supportive ecosystem for early-stage businesses 1 . The capital generates an eclectic, thriving assortment of SMEs, with a keen focus on creation and innovation. This year, Workspace has seen strong demand from a diverse range of sectors, with the likes of fashion and digital video production prevalent alongside tech and digital sectors. What this means for Workspace We have a deep, long-term knowledge of London and we are well positioned as the ideal home to the capital’s diverse SME population. The blank canvas space we oer means we can cater to the eclectic uses of space they require. This is reﬂected in the fact that 50% of our customers use their space for more than just desk-based working – for example, video production, photography, fashion showrooms, AI and VR production, architecture, food production, clothing storage, and more. The scope and scale of our properties oers a wide range of choice to London’s diverse, selective SMEs, enabling them to ﬁnd the right space and community for their business. OUR MARKET CONTINUED 50% OF OUR CUSTOMERS USE OUR SPACE FOR MORE THAN JUST DESK- BASED WORKING Westbourne Studios, Ladbroke Grove 1. Oberlo’s Top Cities For Entrepreneurial Success, 2021. 31 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information Driven by our purpose and understanding what our stakeholders want. Our strategy creates value for our customers, people and communities. OUR STRATEGY Driving customer-led growth Our vision is to be the home to London’s brightest businesses and our growth plans are dependent on the strong SME demand for our ﬂexible oer and the customer experience we deliver. Page 33 Delivering operational excellence Our in-house platform means we have a uniquely scalable business. We actively manage our portfolio to deliver returns through like-for-like growth, projects, acquisitions and disposals, while maintaining a prudent approach to ﬁnancing. Page 34 Being sustainable We view every aspect of our business through a sustainability lens. Our aim is to create a climate-resilient portfolio, to continue to prioritise and look after our people and to have a positive impact on our local communities. Page 35 Key performance indicators There are clear links between our KPIs and our strategy. Regular measurement of our KPIs ensures we maintain discipline in strategic decisions. Page 59 Principal risks and uncertainties Risk management is an integral part of all our activities. We focus on key risks that could impact the achievement of our strategic goals. Page 69 32 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information OUR STRATEGY T h e e n v i r o n m e n t O u r c u s t o m e r s O u r c o m m u n i t i e s O u r p a r t n e r s & s u p p l i e r s O u r p e o p l e O u r i n v e s t o r s OUR PURPOSE IS TO GIVE BUSINESSES THE FREEDOM TO GROW. D r i v i n g c u s t o m e r - l e d g r o w t h a n d d e l i v e r i n g o p e r a t i o n a l e x c e l l e n c e w h i l s t a l w a y s b e i n g s u s t a i n a b l e London’s Brightest Businesses events for customers We hosted four of our London’s Brightest Businesses panel events throughout the year, boasting an average turnout of 100 customers. The ﬁrst event of the year saw TV personality Ben Fogle moderate a discussion on how innovative SMEs are helping make everyday lives more sustainable. Our Head of Sustainability, Sonal was joined on the panel by Workspace customers, Decent Packaging, a compostable packing supplier, and Buzzbike, a bicycle share scheme, as well as sustainability consultant Anthesis. Events later in the year covered topics including wellbeing and building a brand in a social world, moderated respectively by Love Island’s Dr Alex George and customer and inﬂuencer Grace Beverley. Glowing feedback has highlighted how customers value the insight and tips they can take away from the sessions and apply to their own businesses. Relevant KPIs Financial performance: 1, 5, 6 Non-ﬁnancial performance: 1, 2 Relevant principal risks and uncertainties 1, 2 Market trends 1, 2, 4 Strategic pillar: Driving customer-led growth CEMENT OUR POSITION AS HOME TO LONDON’S BRIGHTEST BUSINESSES CONTINUALLY ENHANCE CUSTOMER EXPERIENCE LEADING IN LONDON’S FLEXIBLE OFFICE MARKET Key priorities – Reinforce our dierentiated customer proposition to capture demand and grow market share – Raise our proﬁle amongst target customers and stakeholders Key priorities – Continue to improve our ﬂexible oer and service to retain customers and support occupancy – Focus on customer service, with centre teams creating vibrant communities Key priorities – Grow our portfolio of historic and character properties in the right locations 2022/23 key achievements – Continued to evolve brand marketing to raise awareness of our dierentiated oer, including digital and out-of-home advertising – 1,312 deals, almost at pre-Covid levels – 1,070 customer renewals and expansions – Signiﬁcantly expanded our customer events programme 2022/23 key achievements – Continued to improve the customer journey, including enhancements to the renewal processes and communications – Created 10 new meeting rooms, ﬁtted with state-of-the-art video conferencing – Improved cafés across the portfolio, including three new Workspace coee bars – Delivered 71 customer events, with 2,500 attendees 2022/23 key achievements – Completed latest refurbishments phases of Pall Mall Deposit and Barley Mow Centre in West London, and Metal Box Factory in London Bridge – Integration of 20 London and South East assets following the McKay acquisition 2023/24 aims – Continue to invest in our brand to enhance our visibility and proﬁle – Grow our community across social media 2023/24 aims – Continue to enhance the customer journey, including a new online customer portal – Ongoing improvement to cafés 2023/24 aims – Drive occupancy across our new refurbishments and acquisitions – Ongoing roll out of Workspace’s visual branding to our core new buildings OUR STRATEGY CONTINUED 4 PANEL EVENTS 33 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information Wi-Fi upgrades We have invested to signiﬁcantly improve Wi-Fi connectivity across 23 sites this year, which means our customers are now able to connect to superfast internet via the latest Wi-Fi 6 technology. The new service provides four times the capacity of the usual network, allowing customers seamless connectivity even in the more densely populated parts of our buildings, such as the café and breakout areas. We are starting to explore 5G in-building solutions, which will give customers more choice in how they like to work, opting for either Wi-Fi or mobile network throughout our buildings. Relevant KPIs Financial performance: 1, 5, 6 Non-ﬁnancial performance: 1, 2 Relevant principal risks and uncertainties 1, 2 Market trends 1, 2, 4 Strategic pillar: Delivering operational excellence ACTIVE PORTFOLIO MANAGEMENT EFFICIENT, SCALABLE OPERATING PLATFORM PRUDENT FINANCING AND STRICT INVESTMENT CRITERIA Key priorities – Continue to execute our rolling pipeline of refurbishment and redevelopment projects – Proactively identify opportunities to acquire – Selectively recycle capital through disposals Key priorities – In-house capability and expertise drives income growth – Focus on innovation, technology and customer experience – Ability to scale without signiﬁcant cost growth Key priorities – Maintain strong balance sheet – Strict focus on returns – Disciplined approach to gearing 2022/23 key achievements – Upgraded over 400,000 sq. ft. of space across the portfolio, including Metal Box Factory in London Bridge, Barley Mow in Chiswick and Park Hall in Dulwich – Sold Riverside Business Centre in Wandsworth – Sold Strawberry Hill Medical Centre in Newbury and Great Brighams Mead in Reading 2022/23 key achievements – Expanded our new Customer Experience team, dedicated to reviewing and improving the customer service – Integrated Asset Management, Development, FM and Sustainability teams to drive strategic, operational, design and sustainability improvements – Rolled out inclusive billing across majority of portfolio 2022/23 key achievements – Reﬁnanced the ESG-linked Revolving Credit Facility – Put in place acquisition facility for McKay – Reported on our allocation of assets under our Green Finance Framework 2023/24 aims – Obtain planning consent for Havelock Terrace in Battersea and Shaftesbury Centre in Ladbroke Grove – Complete Leroy House in Islington – Progress refurbishments pipeline, including Buswork in Islington, Salisbury House in Moorgate, Kennington Park in Oval 2023/24 aims – Continue to upgrade Wi-Fi across the portfolio to enhance customer connectivity – Optimise digital marketing capability 2023/24 aims – Improve credit metrics – Recycle capital to reduce gearing OUR STRATEGY CONTINUED 23 LOCATIONS WHERE WE DOUBLED WI-FI SPEEDS 34 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information How our approach to sustainability enhances customer engagement Sustainability is important to our customers. They are performance-driven and care about a range of issues, such as how much energy we use in our buildings and how we manage our waste. They also share our passion for supporting local communities and driving local economic and social impact through our business operations. Our approach to engaging with customers on sustainability helps build long-term customer relationships, resulting in higher customer satisfaction scores, engagement and retention. This year’s ESG Advocacy Score is at 71%, an increase of 5% year on year, reﬂecting our increased focus on ESG across the business and alignment with customer interests. We have seen that there is a strong correlation between ESG score and overall Customer Advocacy scores. Relevant KPIs Financial performance: 1, 5, 6 Non-ﬁnancial performance: 1, 2 Relevant principal risks and uncertainties 1, 2 Market trends 1, 2, 4 Strategic pillar: Being sustainable DELIVERING A CLIMATE- RESILIENT PORTFOLIO LOOKING AFTER OUR PEOPLE SUPPORTING OUR COMMUNITIES Key priorities – Reduce energy consumption across the portfolio and reduce greenhouse gas emissions in line with our net zero carbon pathway – Reduce waste generation across the portfolio – Achieve high environmental standards across all development and refurbishment activities Key priorities – Support and enhance the wellbeing of our employees and customers – Improve diversity across all levels of business and embed inclusive behaviours into our culture – Support professional development and career progression of our people Key priorities – Enhance the impact of our work with Single Homeless Project (SHP) – Roll out our local skills and employment programme, InspiresMe, in partnership with our customers – Create a social impact framework to monitor and enhance social value generated 2022/23 key achievements – 5% reduction in average energy intensity across the portfolio – 27% reduction in greenhouse gas emissions from gas consumption – 12% increase in spaces with A/B EPC ratings – 100% renewable electricity procured 2022/23 key achievements – 57 wellbeing events hosted, beneﬁtting 1,600 customers – Voluntarily paid Living Wage across the portfolio, including suppliers 2022/23 key achievements – 620 employee hours dedicated to volunteering for SHP – 180 students beneﬁtted from our InspiresMe programme – 17 food bank collections – Created our social value framework and targets – £110k raised for SHP – Delivered a £600k equivalent of social value 2023/24 aims – Drive further improvement in energy eciency – Further decarbonise heat – Enhance greenery and biodiversity credentials – Gain better visibility of water consumption 2023/24 aims – Improve diversity and inclusion across the business – Champion responsible and inclusive recruitment – Evolve our wellbeing oering in response to employee needs 2023/24 aims – Scale up InspiresMe in partnership with our customers – Roll out a place-based community impact programme across each of our centres – Evolve our SHP partnership OUR STRATEGY CONTINUED 71% ESG CUSTOMER ADVOCACY SCORE 35 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information Sustainability is inherent to Workspace and informs everything we do. Our environmental and social achievements this year demonstrate our performance-driven mindset and undeterred commitment to maximising stakeholder value. Sonal Jain Head of Sustainability SUSTAINABILITY 36 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information Highlights 2022/23 2021/22 2020/21 79% 75% 73% 2022/23 (lﬂ) 2021/22 2019/20 (baseline) 9,227,509 12,586,574 13,888,908 SUSTAINABILITY CONTINUED Ratings 81 Real Estate Assessment Score 96 Development Assessment Score A Public Disclosure Score A- GOLD EPRA Sustainability Best Practice Recommendations Award AA MSCI ESG rating Low Risk Sustainalytics ESG Risk Rating Membership RATINGS AND MEMBERSHIPS 27% YEAR ON YEAR REDUCTION IN FOSSIL FUEL CONSUMPTION (LIKE-FOR-LIKE PORTFOLIO) 12%% OF THE TOTAL PORTFOLIO’S FLOOR AREA WAS UPGRADED TO EPC A/B 71% CUSTOMER ESG ADVOCACY SCORE 1,600 CUSTOMERS BENEFITTED FROM OUR WELLBEING OFFERING 120 SUSTAINABILITY EVENTS DELIVERED 70 ELECTRONIC DEVICES DONATED TO LOCAL CHARITY PARTNER 79% RECYCLING RATE 180 STUDENTS AND 12 CUSTOMERS PARTICIPATED IN THE INSPIREME PROGRAMME ACROSS FIVE CENTRES £110K RAISED FOR SHP 620 EMPLOYEE HOURS DEDICATED TO VOLUNTEERING FOR SHP £600K SOCIAL VALUE GENERATED Highlights * kWh of gas used. 37 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information SUSTAINABILITY CONTINUED Our approach We have embedded sustainability throughout our business, driving how we design and operate our buildings and informing every strategic decision we take. Our three-pillar sustainability strategy – (1) Delivering a Climate-Resilient Portfolio, (2) Looking After Our People, (3) Supporting Our Communities – allows us to continually improve our environmental and social impact, whilst adding value to all our stakeholders. We have also mapped our strategy against the UN Sustainable Development Goals (SDGs) to ensure our objectives and targets are aligned with global ambitions. With a view to enhance the transparency of our reporting and adding to our existing annual publication of the EPRA report, we are now reporting on our environmental and social performance in accordance with the Global Reporting Initiative (GRI) 2021 and in line with the Sustainability Accounting Standards Board (SASB) guidelines (learn more in the Environmental Performance section of our investor website). Governance The highest level of responsibility for our sustainability strategy lies with our Chief Executive Ocer, and together with the rest of the Workspace Board, the group acts as a guardian of the strategy. In addition, an ESG Board Committee (refer to page 172) has been established to bolster our sustainability governance and drive further integration across business decisions. The Board is supported by the Executive Committee in setting and delivering our sustainability strategy. At an operational level, we have committees dedicated to both environmental sustainability and social sustainability, comprising senior representatives from across the business. The two committees are responsible for operationalising the delivery of our strategy. Progress is reported to the Board and Executive Committee monthly. We also have a number of sustainability champions across the business who help mobilise ground-up support. OUR THREE-PILLAR SUSTAINABILITY STRATEGY DELIVERING A CLIMATE-RESILIENT PORTFOLIO 1 Future prooﬁng our business by minimising our environmental impact and transitioning to net zero carbon by 2030. Relevant SDGs Read more Pages 41 to 49 LOOKING AFTER OUR PEOPLE 2 Looking after our people through our focus on wellbeing, responsible business practices, skills and employment. Relevant SDGs Read more Pages 50 to 53 SUPPORTING OUR COMMUNITIES 3 Creating lasting value for our communities through employment-led regeneration and meaningful partnerships with local community groups and charities. Relevant SDGs Read more Pages 54 to 57 This year our sta took on the Three Peaks Challenge 38 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information IMPACT ON WORKSPACE IMPORTANCE TO EXTERNAL STAKEHOLDERS Energy and carbon management Pages 41–49 Health and safety Page 90 Ethics and Conduct Pages 90–91 Regulatory compliance Page 75 Sustainable building design Pages 43, 46 Waste Page 44 Stakeholder engagement Page 25 Diversity and inclusion Page 52 Nature and biodiversity Page 45 Sustainable and responsible procurement Page 43 Water Page 45 Sustainable transport Page 45 Risk management Pages 69, 171, 92–105 Wellbeing Pages 51, 53 Charitable giving Pages 54–56 Skills and employment Pages 51, 57 Climate change adaptation Page 45 Human rights and fair pay Page 51 Local social and economic impact Page 56 SUSTAINABILITY CONTINUED Deﬁning what matters most Materiality assessment Our materiality assessment helps us understand the issues that matter most to our internal and external stakeholders. We identiﬁed and assessed a number of environmental, social and governance issues to reﬁne our approach. Stakeholder engagement We consulted with our internal and external stakeholders, including customers and employees through our bi-annual surveys and ongoing interactions with our suppliers to conﬁrm our material issues, as shown on the matrix. Our response Our sustainability strategy covers all issues identiﬁed as material to our business. Subsequent sections in the report highlight how we are positively impacting these issues. The process we followed: Step 1 Identify key stakeholders List material issues Step 2 Consult stakeholders – Social Sustainability Committee – Environmental Sustainability Committee – Employees – Customers – Suppliers Step 3 Analyse consultation outputs – Importance to stakeholders – Signiﬁcance of impacts – Ability of the business to inﬂuence Step 4 Prioritise issues and reﬁne our strategy OUR MATERIALITY MATRIX – KEY SUSTAINABILITY ISSUES Signiﬁcant Very signiﬁcant Very signiﬁcant Signiﬁcant Environmental issue Social issue Governance issue GRI reference Refer to the sustainability performance section on our investor website 39 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information SUSTAINABILITY CONTINUED Alignment to UN SDGs The aim of our sustainability strategy is to maximise value for all our stakeholders – our people, our customers, our suppliers, our investors and the environment. Our strategy is also aligned with several of the UN Sustainable Development Goals (SDGs) AFFORDABLE AND CLEAN ENERGY SUSTAINABLE CITIES AND COMMUNITIES CLIMATE ACTION GENDER EQUALITY QUALITY EDUCATION Relevant stakeholders: CUSTOMERS PARTNERS AND SUPPLIERS THE ENVIRONMENT Relevant stakeholders: CUSTOMERS COMMUNITIES Relevant stakeholders: CUSTOMERS PEOPLE INVESTORS PARTNERS AND SUPPLIERS THE ENVIRONMENT Relevant stakeholders: PEOPLE COMMUNITIES Relevant stakeholders: CUSTOMERS PEOPLE COMMUNITIES We invest in on-site renewable energy by installing roof-mounted solar panels across our portfolio, ensuring we generate clean power. We also source 100% of our electricity from renewable sources, through our REGO certiﬁed green contract. As custodian of some ofLondon’s most iconic buildings, we work to reduce the environmental impact of London’s built environment and build resilience for the long term. This is delivered through sustainable design, construction and the way we operate all of our buildings. The delivery of our 2030 net zero carbon commitment ensures we are decarbonising our business swiftly and thus playing our part in limiting global warming to 1.5°C. Our people practices actively support gender equality, including the use of gender-neutral language in all our policies and recruitment material. All our people have been trained on unconscious bias and we strive to create a truly inclusive work environment. We work hard to identify and address gaps within existing workplace policies, as well as oering professional development opportunities to all our employees. Through our InspiresMe programme, we work alongside our customers toprovide inspiration, knowledge, support and experience to individuals within our communities who are most at risk of NEET (Not in Education, Employment or Training) and help them to reach their full potential. INDUSTRY, INNOVATION AND INFRASTRUCTURE RESPONSIBLE CONSUMPTION AND PRODUCTION GOOD HEALTH AND WELL-BEING DECENT WORK AND ECONOMIC GROWTH REDUCED INEQUALITY Relevant stakeholders: PARTNERS AND SUPPLIERS THE ENVIRONMENT Relevant stakeholders: PARTNERS AND SUPPLIERS THE ENVIRONMENT Relevant stakeholders: CUSTOMERS PEOPLE Relevant stakeholders: CUSTOMERS PEOPLE INVESTORS PARTNERS AND SUPPLIERS COMMUNITIES Relevant stakeholders: CUSTOMERS PEOPLE COMMUNITIES By investing inclean technology and materials we are reducing ourenvironmental impact while driving innovation in the industry. Investment in energyecient equipment and eective management ensures our energy consumption is optimised. We also work hard to reduce waste in operations and construction, aiming to divert 100% from landﬁll. Provision of safe and healthy workplaces for our employees and customers is paramount. We do this by ensuring health and wellbeing considerations are fully incorporated into our building design. We also run an extensive wellbeing support programme for all our employees and customers. We provide quality ﬂexible space for SMEs across London. Our model also creates hubs of economic activity that beneﬁt entire communities through employment- led regeneration of the area. We are also an accredited Living Wage Employer, ensuring that all our employees and contractors are paid at Real London Living Wage. Our InspiresMe programme aims to tackle youth unemployment and the ethnicity gap by building relationships with schools and youth organisations across London to oer work experience placements, career talks, CV workshops and interview practices. 40 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information SUSTAINABILITY CONTINUED Strategic pillar: 1 Delivering a climate resilient portfolio In 2019, we made a commitment to delivering a net zero carbon portfolio by 2030, covering all scopes of carbon. We also signed the Better Buildings Partnership’s (BBP) Climate Commitment and published our net zero pathway, quantifying our emissions and outlining our decarbonisation trajectory for both our operational and embodied carbon. To make sure this goal is robust and in line with a 1.5°C future, we have aligned our emissions reduction trajectory with approved Science-based Targets (SBT), requiring: – 42% reduction in scope 1 emissions by 2030, from a 2019/20 base year – 20% reduction per square foot of Net Lettable Area (NLA) in scope 3 emissions from capital goods by 2030, from a 2019/20 base year – Sourcing of 100% renewable electricity through to 2030 Like-for-like performance (Workspace portfolio excluding major projects) Investment in energy eciency and decarbonisation of our portfolio has driven signiﬁcant progress on our net zero carbon pathway. For our like-for-like Workspace portfolio, we reduced our scope 1 emissions by 32% and our scope 2 emissions by 28% in 2022/23 against our 2019/20 baseline. Going forward, we aim to go beyond our SBTs and eliminate our operational emissions as much as we can across the entire portfolio, with minimal reliance on carbon osetting. A signiﬁcant proportion of our scope 3 emissions is attributed to our refurbishment and development activities. This means reducing the embodied carbon of our development projects is a priority for us. Our refurbishments are on average designed to achieve a 60%–70% reduction in embodied carbon when compared to current industry benchmarks of 1,000 kgCO 2 /m 2 . Whole portfolio performance (Workspace portfolio + McKay) Following the acquisition of McKay Securities, we have integrated emissions from the acquired properties into our greenhouse gas reporting this year. The absolute emissions reported for the 2022/23 period are therefore not comparable to the emissions covering the 2019/20 baseline period or previous years, as those only covered emissions from the historic Workspace portfolio. A detailed breakdown of our absolute greenhouse gas emissions can be found on page 101. Enhancing accountability This year, we have made great progress in increasing the accuracy of our energy data, notably through an accelerated roll-out of smart Building Energy Management Systems (BEMS) across the portfolio. This has enabled our facilities managers to better understand energy usage across the properties and target reduction initiatives that are most eective. To further drive action, we have embedded energy and carbon targets into various team’s objectives. This drove collective eort and streamlined collaboration between various teams, all working towards a common goal of energy and carbon reduction. Relevant UN SDGs 29% SCOPE 1 AND 2 REDUCTION IN LIKE-FOR-LIKE PORTFOLIO SINCE 2019/20 28 PROPERTIES EQUIPPED WITH BUILDING ENERGY MANAGEMENT SYSTEMS 41 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information SUSTAINABILITY CONTINUED DELIVERING A CLIMATE RESILIENT PORTFOLIO CONTINUED OUR GREENHOUSE GAS EMISSIONS As a signatory to BBP’s Climate Commitment and Science Based Targets initiative, we disclose progress against our net zero pathway annually. We have reported our absolute greenhouse gas emissions in line with the GHG Protocol Guidelines. Our scope 1 and 2 categories encompass emissions where we have operational control and therefore include tenant consumption where we procure gas, electricity or heat on their behalf. Although our electricity is REGO-backed, we report scope 2 emissions using a location-based methodology. We strive to reduce the carbon intensity of our portfolio by phasing out gas heating and implementing energy eciency measures Ariane Ephraim Sustainability Manager WORKSPACE PORTFOLIO LOCATION BASED SCOPE 1, 2, 3 GHG EMISSIONS (tCO 2 e) Scope 1 2,358 Scope 2 5,142 Scope 3 6,614 SCOPE 1 GHG EMISSIONS (tCO 2 e) 2022/23 2021/22 2020/21 2019/20 (baseline) 2,358 3,221 2,877 3,451 SCOPE 2 GHG EMISSIONS (tCO 2 e) 2022/23 2021/22 2020/21 5,142 5,229 4,719 2019/20 (baseline) 7,144 MCKAY PORTFOLIO LOCATION BASED SCOPE 1, 2, 3 GHG EMISSIONS (tCO 2 e) Scope 1 830 Scope 2 1,295 Scope 3 9,998 WHOLE PORTFOLIO LOCATION BASED SCOPE 1, 2, 3 GHG EMISSIONS (tCO 2 e) Scope 1 3,188 Scope 2 6,437 Scope 3 16,612 42 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information SUSTAINABILITY CONTINUED DELIVERING A CLIMATE RESILIENT PORTFOLIO CONTINUED ESG TARGETS Target Relevant material issue Relevant UN SDG Status Performance commentary Reduce energy intensity by 5% Energy & carbon management Achieved Like-for-like Workspace portfolio We achieved a 5% reduction in average energy intensity across the portfolio, compared to last year. This was mainly driven by signiﬁcant reduction in gas use across the portfolio, which oset a 3.6% increase in electricity consumption due to higher operational activity across our sites. We invested over £8m this year on various energy eciency initiatives across the portfolio, including LED lighting, presence detection sensors, smart building management systems, secondary glazing and heat pumps. We also ran extensive customer engagement campaigns to reduce whole building energy consumption including our successful participation to the CUBE UK energy savings competition. Whole portfolio Our portfolio is inherently energy ecient when compared to industry benchmarks. The average energy intensity across our combined portfolio is 129 kWhe/m 2 /year, which is 19% better than current UK Green Building Council energy performance target for net zero carbon buildings. Reduce scope 1 emissions by 5% across the portfolio Energy & carbon management Achieved Like-for-like Workspace portfolio We achieved a signiﬁcant reduction of 27% in gas related emissions across the portfolio. This was primarily driven by roll out of smart Building Energy Management Systems across a number of buildings, optimisation of temperature set points and timing controls and implementation of over 70 HVAC upgrade projects. Currently over 30% of our portfolio is fossil fuel free (all electric or served by district heating). All new developments and refurbishments designed to be net zero carbon, aiming to achieve embodied carbon of less than 500 kgCO 2 /m 2 Energy & carbon management Responsible procurement Achieved Like-for-like Workspace portfolio We continue to implement our sustainable development framework across all major constructions and refurbishments. This framework ensures all our projects meet the net zero carbon brief. We also undertake whole-life carbon analysis at key design stages to help us further reduce embodied carbon by optimising design and material choices. Estimated embodied carbon of our current projects at Leroy House, Havelock Terrace, Riverside and Chocolate Factory is 230 kgCO 2 /m 2 , 504 kgCO 2 /m 2 , 469 kgCO 2 /m 2 and 291 kgCO 2 /m 2 respectively. Overall, we achieved a 51% reduction in greenhouse gas emissions from capital goods per sq. ft. from a 2019/20 base year. Increase renewable energy supply and source 100% renewable electricity Sustainable procurement Achieved Like-for-like Workspace portfolio 12 sites are equipped with solar panels and generated 191,629 kWh of green electricity in the past year, equivalent to the annual electricity usage of 64 typical UK households. Three additional solar projects are currently being implemented, amounting to an annual generation capacity of 78,543 kWh once installed. We also continue to source 100% renewable electricity from our utility provider (REGO-backed). Whole portfolio 14 sites have solar panel installations. 43 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information Target Relevant material issue Relevant UN SDG Status Performance commentary Increase the % of EPC A and B rated areas in the portfolio by 10% Energy & carbon management Achieved Like-for-like Workspace portfolio This year we upgraded 620k sq. ft. of our portfolio to A/B rated energy performance certiﬁcates (EPC) by installing high eciency lighting and HVAC systems. Overall we increased A/B rated areas by 15%, bringing 43% of our portfolio holding to an A or B EPC rating. Whole portfolio Following the energy eciency upgrades, over 43% of our core portfolio is rated EPC A/B. All development projects to be BREEAM Excellent and EPC A (B for refurbishments) Energy & carbon management Not applicable Like-for-like Workspace portfolio A total of 20 buildings are BREEAM certiﬁed in our portfolio. No new projects were completed this year. All projects in the pipeline are being designed to achieve an ‘Excellent’ BREEAM certiﬁcation and A rated EPC (B for refurbishments). Achieve recycling rate of >76%, divert 100% waste from landﬁll and remove single use plastics from cafés Waste and recycling Achieved Like-for-like Workspace portfolio We achieved an average recycling rate of 79% across the portfolio. A total of 2,825 tons of waste was generated across the portfolio, comprising of 68% post consumer waste, 21% general waste, 6% food and 5% bottom ash. SUSTAINABILITY CONTINUED DELIVERING A CLIMATE RESILIENT PORTFOLIO CONTINUED ESG TARGETS CONTINUED Our approach to sustainable waste management Sustainable management of waste is both a priority for us and our customers. To ensure our people follow the right behaviours on waste management we ran 16 awareness events in 2022/23 and continued to advocate correct recycling via signage, posters and email communications, resulting in a signiﬁcant increase in our recycling rate across our centres to 79%. We have also teamed up with FareShare, a charity redistributing surplus food from the UK’s top food companies to charities and community groups. For every food waste collection, a meal is donated via FareShare to those most in need. So far 1,300 meals have been donated. 44 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information Target Relevant material issue Relevant UN SDG Status Performance commentary Benchmark water consumption and drive reduction in use Water Roll forward Like-for-like Workspace portfolio Our average water consumption intensity (where we have visibility) across the historic portfolio is within GRESB standard practice. We will continue to roll out water meters across the sites where we don’t have visibility with a view to accurately benchmarking our portfolio water consumption. Increase greenery and biodiversity across the portfolio, targeting at least 15% improvement in biodiversity net gain on development projects Nature and biodiversity Achieved Like-for-like Workspace portfolio We have reviewed industry guidance and developed a biodiversity policy setting out our approach to nature and biodiversity. We will be updating the document in line with TNFD guidance this coming year. Driven by our sustainable development framework, we will signiﬁcantly enhance Biodiversity Net Gain (BNG) across our two development projects – Havelock Terrace (100% BNG) and Shaftesbury (74% BNG). Reﬁne climate risk assessment and create adaptation plans for assets exposed to hazards Climate change adaptation and resilience Achieved Whole portfolio We have reassessed our core portfolio’s exposure to physical climate risk using latest climate models and used probabilistic models to assess value at risk to business. We have also reviewed transition risk to business taking into account the acquisition of the McKay portfolio. Find more detail in our TCFD section along with an explanation of our mitigation strategy on page 92. Enhance green travel infrastructure across the portfolio Sustainable transport Achieved Whole portfolio We have a total of 32 EV charging points across the portfolio, which were utilised over 3,000 times in the past year, saving 23 tCO 2 e. We have also upgraded site facilities to encourage green transport and have installed an additional 25 showers and 50 cycling racks across the portfolio. SUSTAINABILITY CONTINUED DELIVERING A CLIMATE RESILIENT PORTFOLIO CONTINUED ESG TARGETS CONTINUED 45 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information SUSTAINABILITY CONTINUED DELIVERING A CLIMATE RESILIENT PORTFOLIO CONTINUED The redevelopment of Chocolate Factory is a perfect example of how preserving the heritage of a building goes hand in hand with enhancing its environmental performance Bryony Gerega Head of Development CASE STUDY Redeveloping Chocolate Factory in Wood Green THE CHOCOLATE FACTORY IN NUMBERS 38,000 sq. ft. OF REFURBISHED SPACE Excellent TARGETING BREEAM EXCELLENT RATING 291 kgCO 2 e/m 2 NLA EMBODIED CARBON (71% LESS THAN INDUSTRY BENCHMARKS) 39% EXPECTED IMPROVEMENT ON PART L ENERGY STANDARDS FOR REFURBISHED SPACE The Chocolate Factory, Wood Green Bryony Gerega Head of Development Like many of Workspace’s buildings, Chocolate Factory has a long and rich history. Whilst it is now home to 40 customers, with activities ranging from luxury wallpaper designers to streetwear brands and artists, the site was a sweets manufacturing facility towards the end of the 19th century. Chocolate Factory is now one of Workspace’s main redevelopment projects, and will upgrade 38,000 sq. ft. of business space. Careful design considerations led us to preserve most of the old structure and give a second life to unique features such as the historic façade, exposed bricks and ironwork. These design choices both preserve the site’s heritage but also drastically reduce the project’s carbon emissions. The current design is estimated to emit 291 kCO 2 /m 2 in embodied carbon, a signiﬁcant reduction from the defacto option which entailed the demolition of an old water tower, an industrial-era enclosed bridge and low-rise storage buildings. All of these building elements will now be repurposed into meeting spaces and site amenities. Operational energy and carbon reduction is also central to the project’s design, which will include high performing windows and internal insulation, as well as decarbonised heating through the installation of heat pumps. The project is part of the wider mixed-use regeneration scheme at this location, including 230 residential units and 72 aordable housing units with a new public square and signiﬁcant landscaping improvements. 46 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information PROPERTIES 0 300 250 200 150 100 50 SUSTAINABILITY CONTINUED DELIVERING A CLIMATE RESILIENT PORTFOLIO CONTINUED APRIL 2022 TO MARCH 2023 ENERGY USE INTENSITY (kWhe/m 2 NLA) Driving energy reduction is a key priority for the business and we have invested over £8m this year in ecient lighting, presence- detection sensors, smart Building Energy Management Systems and heat pumps to remove reliance on gas boilers. We have closely monitored each property’s energy performance and optimised temperature controls and timers. As a result, we have decreased our portfolio energy intensity by 5% across the like-for-like Workspace portfolio. Taking into account the acquisition, the average energy intensity of our core portfolio is 129 kWhe/m 2 . This represents a 7.5% increase from last year’s average energy intensity due to high energy consumption associated with some of the properties we have recently acquired. We have also witnessed increased occupational activity across our centres compared to the last two years of the pandemic, which has also contributed to an increase in electricity use in customer occupied areas. Following integration of the McKay portfolio, we are creating a targeted energy reduction programme for the high consuming buildings which will be rolled out this coming year. We expect to see a signiﬁcant drop in the energy intensity proﬁle of these properties as a result. The graph shows the energy intensity of all properties in the oce portfolio. All buildings but 15 meet the 2020 UKGBC energy performance target for net zero carbon buildings (depicted by yellow line) and 30 buildings already meet 2030 target (depicted by blue line). DRIVING ENERGY REDUCTION ACROSS THE PORTFOLIO Electricity intensity (kWhe/m 2 ) 2025 UKGBC NZC target (kWhe/m 2 NLA) 2030 UKGBC NZC target (kWhe/m 2 NLA) 2035 UKGBC NZC target (kWhe/m 2 NLA) 47 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information SUSTAINABILITY CONTINUED DELIVERING A CLIMATE RESILIENT PORTFOLIO CONTINUED At every building I manage, I always look for the small operational improvements that will make a dierence in reducing energy consumption. Every kWh saved helps us to stay on track with our sustainability targets Domenico Pallucci Facilities Manager CASE STUDY Signiﬁcantly reduced energy intensity at Edinburgh House One of our ﬂagship buildings in South London, Edinburgh House, formerly a 1960s housing block, was redeveloped in 2019 into a bright and open business centre, home to 78 businesses. Whilst it achieved a BREEAM Very Good certiﬁcation and a B rated Energy Performance Certiﬁcate, it showed an unusually high energy intensity at the start of 2022. As a result, our Facilities Management team amended the heating and cooling controls strategy and operational schedules so as to precisely meet occupants’ needs and avoid superﬂuous out-of-hours energy consumption. For instance, the building’s chiller and boilers are respectively isolated in winter and summer months and are only operating when necessary, responding to seasonality and building occupancy patterns. These measures drove an 11% reduction in energy intensity across the building. This is a great example of how eective operational energy reduction initiatives can be. Whilst signiﬁcant retroﬁt investments are sometimes essential, cost-free operational optimisations on pre-existing equipment can also prove to be very powerful energy savers. EDINBURGH HOUSE IN NUMBERS 11% REDUCTION IN ENERGY INTENSITY SINCE THE START OF THE YEAR. 34% REDUCTION IN GAS CONSUMPTION IN 2022/23 VERSUS 2021/22. Edinburgh House, Vauxhall Domenico Pallucci Facilities Manager 48 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information SUSTAINABILITY CONTINUED DELIVERING A CLIMATE RESILIENT PORTFOLIO CONTINUED EPC R ATINGS Whilst our portfolio is already compliant with the current Minimum Energy Eciency Standards (MEES) regulation, requiring all units to hold a valid EPC with a minimum rating of E, the UK Government is planning to increase requirements to a minimum rating of B by 2030. We are working towards an annual increase of A/B rated space of 10% to 2030. This year, following an investment of over £8m in HVAC equipment, lighting upgrades and insulation works across 41 properties, we have increased the proportion of A/B rated spaces from 28% to 43%. Based on the projects we have already delivered, we estimate the total investment needed to upgrade our portfolio to EPC A/B by 2030 will be c.£45-60m (c.£7-8m each year). However, the actual additional investment needed each year will be lower as part of this expenditure is covered by our ongoing maintenance capex. 43% A/B RATED PROPERTIES £8m INVESTED IN 2022/23 IN EPC UPGRADES EPC SCHEDULE WORKSPACE PORTFOLIO A 14% B 29% C 31% D 23% E 3% EPC SCHEDULE McKAY PORTFOLIO A 16% B 29% C 22% D 26% E 7% EPC SCHEDULE WHOLE PORTFOLIO A 15% B 28% C 28% D 25% E 4% Print Rooms EPC C to B 21,000 sq. ft. project Phasing out our buildings’ reliance on gas boilers is core to our decarbonisation strategy. At Print Rooms, our teams removed the gas ﬁred heating system and installed a Variable Refrigerant Flow (VRF) system using heat pumps to provide decarbonised heating and cooling to the building. LED lights were also installed across the building in order to further reduce electricity demand. Leather Market EPC C to B 2,800 sq. ft. project A small but ambitious project, the refurbishment of the third ﬂoor in the Lafone House building at Leather Market is a great example of energy eciency improvements. Our team entirely removed the gas heating system to install heat pumps. LED lighting was also installed along with presence detection sensors. Operational optimisation is as important as ecient equipment. Our teams have therefore enhanced the metering infrastructure and added new automatic meters as part of Building Energy Management System installation. CASE STUDY EPC upgrades 49 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information SUSTAINABILITY CONTINUED Strategic pillar: 2 Looking after our people As an employer of 280 people, client of over 800 suppliers and oce space provider for over 4,000 customers, we have a responsibility to create a culture that fosters fairness, wellbeing, inclusion and diversity, and to support people to perform at their best. Our culture Change starts at home. Whilst our employees believe in our commitment to sustainability and our core values, our business is committed to delivering continuous improvement and fostering a cohesive culture, where everyone feels valued and knows how they can contribute to the Company’s goals. Initiatives such as town hall meetings and regular business unit updates, Executive Committee site visits, internal shadowing days, employee suggestion scheme and employee support networks are all contributing to a positive company culture. Diversity Our diversity is our strength and the ﬁrst step to improving on diversity is to measure it. 90% of our employee base provided personal diversity data, and we have now published our ﬁrst gender pay gap report. As part of our ongoing eorts, we continued to roll out our unconscious bias and anti-harassment training and have launched an employee support network. Building on our equal opportunities hiring policy, we are implementing inclusive recruitment practices (such as anonymised CVs) and utilising alternative hiring channels to widen access to profession. A breakdown of the number of directors, senior managers and all employees by gender is set out on pages 151 and 152. Wellbeing Workspace strive to provide spaces where people can thrive and enjoy coming to work. This applies both to our customers and our employees. From oering outstanding physical and mental health beneﬁts to our sta, to delivering a bespoke programme of wellbeing themed events to our customers (ranging from puppy therapy to ﬁnancial wellbeing and mindfulness awareness), we go above and beyond to support the wellbeing of our people. Listening to our people Whilst we gather employee feedback via an annual survey, our People Team have also launched an employee suggestion scheme to encourage feedback and idea sharing all year long. To keep delivering the best to our customers, we keep our ear to the ground and collect formal feedback twice a year. This helps us evolve our oer to best meet our customer needs. We have also introduced a customer feedback policy to ensure our customers have a direct line to communicate with us. Through this policy, we aim to cater to customer needs in a timely and consistent manner. Relevant UN SDGs 69% FAVOURABLE ENGAGEMENT SCORE 80% WORKSPACE INCLUSIVITY SCORE 1,600 CUSTOMERS BENEFITTED FROM WELLBEING INITIATIVES 50 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information SUSTAINABILITY CONTINUED LOOKING AFTER OUR PEOPLE CONTINUED ESG TARGETS Target Relevant material issue Relevant UN SDG Status Performance commentary Support and enhance the wellbeing of our employees and customers Wellbeing Achieved A total of 23 employee wellbeing events and initiatives were delivered, reaching a total of 600 attendees. Over 160 employees utilised our wellbeing cash back programme, with total claims value of c.£28k. We received an average employee wellbeing score of 79%, based on our annual employee survey. A number of wellbeing questions were included in the survey to gain a holistic understanding of employee expectations. These included questions on satisfaction with our wellbeing oering, work load management, stress management and managerial support. A total of 57 customer wellbeing events were hosted centrally (including 50 wellbeing events and seven sessions on ﬁnancial wellbeing), beneﬁtting over 1,600 customers. All events received very positive feedback with average score 4.9/5 star score. In addition, the centre teams partnered with local gyms and businesses to host a further 37 wellbeing focused initiatives. Based on insights from our mid-year customer survey, customers who attended wellbeing events were 15% more likely to be brand promoters. Improve diversity across all levels of business and embed inclusive behaviours into our culture Diversity and inclusion Achieved A key initiative for us this year was to better understand the diversity of our existing employees. Over 90% of our employees provided personal data which enabled us to benchmark our performance. We also published our ﬁrst gender pay gap report and created an action plan to address the gap. We continued to roll out unconscious bias and harassment training to a total of 105 employees. Throughout the year we celebrated dierent cultures and launched our ﬁrst employee network to support people with caring responsibilities. We were pleased to receive an inclusivity score of 80% in our recent employee survey. Champion compliance with living wage and modern slavery across the supply chain Human rights and fair pay Achieved Workspace are an accredited Living Wage employer and both our employees and contractors are paid at London Living Wage levels. This year we ensured new contractors that were onboarded as part of the McKay acquisition were also paid the living wage. To drive compliance, Workspace’s new supplier code of conduct is mandated across all contracts and formally included in our supplier on-boarding procedure. We also worked with a third party to conduct a modern slavery audit of our cleaning supplier. Support professional development and career progression of our people Skills and employment Achieved We supported over 17 employees to complete accredited training, including 10 employees who were sponsored for our newly launched Leadership and Management programme. In total we delivered 363 hours of professional training to our employees (women – 232 hours and men – 131 hours), including over 100 hours of Chartered Institute of Personal and Development coaching and people skills training. Widen access to profession and drive local employment within our operations and across our supply chain Skills and employment, Diversity and Inclusion Achieved As part of our new recruitment policy, we are implementing a number of inclusive recruitment practices (such as hiring managers training, anonymised CVs and utilising alternate recruitment channels). We also engaged with our charity partner Single Homeless Project (SHP) and supported the successful hiring of one of their clients with our cleaning contractor. This previously unemployed person is now permanently employed on our portfolio as a member of the cleaning team. We continued our engagement with SHP and delivered a successful employability workshop to support their clients with employability skills. Throughout the year we continued our engagement with our suppliers on employment related opportunities. We are pleased to see that a total of 23 apprentices are employed as part of our supply chain contracts. 51 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information CASE STUDY Creating a diverse and inclusive business SUSTAINABILITY CONTINUED LOOKING AFTER OUR PEOPLE CONTINUED We celebrate dierent experiences and perspectives Satpreet Dhariwal Senior HR Manager We are very proud of our business values and welcoming culture. We strongly believe that the success of our business depends on our people and are committed to providing a working environment which is inclusive of all cultures, where everyone feels welcome, and in which we celebrate dierent experiences and perspectives. We have launched a series of initiatives to support diversity and inclusion: – All our employees have completed unconscious bias training and we are rolling out anti-harassment training. – Our ﬁrst diversity network called ‘Supporting Others’ was launched, providing a safe space for colleagues to support each other and share their experience on balancing work and caring responsibilities. – We published our ﬁrst gender pay gap report (see investor website). – We implemented inclusive recruitment practices including anonymised CVs and hiring manager training. We are always striving to do better and build on current initiatives. To start monitoring our diversity performance and set a diversity and inclusivity improvement plan, it was important to get a deeper understanding of the diversity of our workforce. This year, for the ﬁrst time, we collected additional data from our employees to better understand our diversity. Although this was entirely voluntary, we achieved a 90% response rate which is a testament to our employees’ desire to support a strategy towards more diversity and inclusion within the business. 31% FIRST GENERATION OF THEIR FAMILY TO GO TO UNIVERSITY 11% 50+ YEARS OF AGE 30% UNDER 30 YEARS OF AGE 28% WITH CARING RESPONSIBILITIES 24% ENGLISH NOT AS A FIRST LANGUAGE 23% NATIONALITY OTHER THAN BRITISH 30% IDENTIFY AS BAME 6.5% IDENTIFY AS LGBTQ 57% IDENTIFY AS FEMALE 52 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information CASE STUDY Our approach to employee wellbeing CASE STUDY Our approach to customer wellbeing SUSTAINABILITY CONTINUED LOOKING AFTER OUR PEOPLE CONTINUED We prioritise the health and wellbeing of our employees. We are proud to oer a wide range of beneﬁts, including Health Shield, which subsidises wellbeing treatments. Over 160 employees utilised Health Shield, with a total claims value of c.£28k. We continue to oer seminars on mental and physical health, ﬁnancial wellbeing, and stress management. A total of 23 employee wellbeing events and initiatives were delivered, reaching a total of 600 attendees. Building on last year’s success, we have continued to deliver a series of wellbeing events for our customers. Our puppy therapy events were once again extremely popular. We have also diversiﬁed our oer to include more hands-on wellbeing sessions, which we call ‘wellbeing’, including pottery workshops and terrarium building, that have been shown to signiﬁcantly reduce stress. On average, our ‘wellbeing’ events received 5/5 star ratings from participants. EMPLOYEE WELLBEING IN NUMBERS 79% EMPLOYEES AGREE THAT WORKSPACE CARES ABOUT THEIR WELLBEING 23 WELLBEING EVENTS ATTENDED BY 600 EMPLOYEES CUSTOMER WELLBEING IN NUMBERS 5/5 POST EVENT STAR RATING AWARDED BY PARTICIPANTS 57 CUSTOMER WELLBEING EVENTS REACHING 1,600 PEOPLE Creating an environment that fosters wellbeing is in our DNA. We are proud of the stellar reviews our customers give following each wellbeing event Stacy Lyden-Sauppé Events Manager 53 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information SUSTAINABILITY CONTINUED Driving positive social impact As a major provider of oce space to over 4,000 of London’s brightest businesses, Workspace is in a unique position to address some of the most pressing social issues in the capital. Thanks to our provision of high quality work space in all parts of London, we support local employment opportunities for many SMEs. We also support independent businesses and enhance local economic activity through our operations and customer footfall. In London, homelessness has increased by 47% in the past 10 years, and the proportion of NEET 1 young people aged 16-17 has reached 3.4%. This is why we are committed to using our centres as hubs for driving positive social impact amongst local communities, through a focus on skills and education and homelessness prevention. 1. Not in education, employment or training. Relevant UN SDGs Strategic pillar: 3 Supporting our communities Social impact is inherent to Workspace’s business model. We support employment- led regeneration of London by investing in some of the most deprived areas of the capital, enabling employment opportunities for local people and boosting local spend. We have a strong culture of charitable giving and volunteering. Working closely with our charity partner Single Homeless Project, we have made signiﬁcant impact in alleviating homelessness across London. In London, we manage over 60 sites across 15 boroughs. Through our centre teams, we aim to build meaningful relationships with local communities and charities. We work closely with our customers to implement engagement initiatives that support the local communities. £ 600K SOCIAL VALUE GENERATED 620 VOLUNTEERING HOURS 180 BENEFICIARIES OF SKILLS AND EMPLOYMENT PROGRAMME Joe raised £985 for SHP as part of a skydiving challenge 54 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information ESG TARGETS Target Relevant material issue Relevant UN SDG Status Performance commentary Roll out our community skills and employment programme InspiresMe across ﬁve centres Skills and employment Local social and economic impact Achieved We successfully launched InspiresMe across ﬁve centres. These included Kennington Park, Brickﬁelds, Mare Street, Cargo Works and Chocolate Factory. Over 160 students beneﬁtted through our CV workshops and career sessions and 20 students were hosted for work placements. A total of 12 customers participated in the InspiresMe programme. The responses from school partners and customers were extremely positive with 100% of the schools who took part agreeing they were keen to continue with this initiative next year. Works in partnership with SHP to prevent homelessness in London Skills and employment Charitable giving Achieved We raised over £110,000 for SHP, including providing funding for a full-time employability coordinator. A number of our employees supported SHP throughout the year and delivered over 620 volunteering hours. This year we also hosted an employability workshop for SHP clients where we ran a daylong session on business and IT skills. Support local food banks and charities across our centres to drive greater community impact Local social and economic impact Charitable giving Achieved We ran 38 community engagement initiatives across our centres in partnership with local charities, including 17 food bank collections which were hugely popular with our customers. We also partnered with local charity, Community TechAid, and supported them with the donation of over 70 pieces of electronic equipment. Overall, we contributed £162k through our lettings in kind programme, providing free space and meeting rooms to local charities. Assess and enhance social value generated across our portfolio Local social and economic impact Charitable giving Wellbeing Skills and employment Diversity and Inclusion Human rights and fair pay Achieved We have created a social value framework that helps us align our activities to issues that are most material to the business. The framework also enables us to adopt a stakeholder value approach, ensuring we positively impact our employees, our customers, our suppliers and our local communities. To help us baseline our current performance, we worked with Social Value Portal to assess our social value contribution. In total we generated over £600k of direct social value across our material issues – wellbeing, responsible business practices, local community and charity partnerships, employment and skills and customer stewardship. We also worked with our suppliers and customers to drive additional social value (i.e. our indirect impact) worth £280k, mainly through our outreach on employment and skills. We plan to further enhance our social value in the coming year by setting actionable goals under each of the material issues. We really enjoyed participating in InspiresMe and spending time to pass on knowledge. It was great to see how it had beneﬁtted the students by the end of the week Customer at Kennington Park 55 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information SUSTAINABILITY CONTINUED SUPPORTING OUR COMMUNITIES CONTINUED 1 2 3 4 5 STRATEGIC FOCUS LOOKING AFTER OUR PEOPLE SUPPORTING OUR COMMUNITIES Employees Customers CommunitySuppliers Charity IMPACT BENEFICIARIES IMPACT THEMES Responsible and Inclusive practices Employment and skills Wellbeing Charity and community support SOCIAL VALUE WE HAVE CREATED 1. Responsible and Inclusive Practices £206,608 2. Charity and Community Support £188,447 3. Wellbeing £1 07,828 4. Innovation – Customer Stewardship £88,476 5. Skills and Employment – Direct £13,388 This is the ﬁrst year we have worked with Social Value Portal to quantify the social value we create. The National TOMs Framework has been used to calculate the ﬁnancial value associated with each of our initiatives, which is deemed ‘additional’ to business as usual. The table provides a breakdown of various initiatives and social value created by our direct business activities. Separately, we have also calculated the indirect value generated through our collaboration with our suppliers and customers. Picture caption SOCIAL VALUE CREATED – £604,747 WORKSPACE – SOCIAL VALUE FY 22/23 Area Social Value Created Wellbeing – £65.8k invested to deliver wellbeing events for customers (including event manager’s time) – £16.5k invested to deliver wellbeing campaigns for sta (including Charity, Wellbeing and Social Committee members’ time) – £25.5k delivered through all employees having access to a comprehensive wellbeing programme (Thrive, Health Shield, etc.) Responsible and Inclusive Practices – 33 employees received the unconscious bias training and 175 employees received the harassment training (£64.9k social value delivered) – 24 employees beneﬁtted from funding for further studies (£0.5k social value delivered) – £1.2m spent with non-proﬁt organisations as suppliers (£141k social value delivered) Charity and Community Support – 45 hours of skilled volunteering (SHP employability workshop, procurement training) – £4.5k social value delivered – 624 hours of unskilled volunteering – £10.6k social value delivered – 693 hours of CMs’ time spent to support the local community (foodbanks, fundraisers) – £11.7k social value delivered – £161.6k in-kind contributions (lettings, business rates, room bookings, electronic equipment, SHP donation) Innovation – Customer Stewardship – £88.5k invested to deliver four London’s Brightest Businesses breakfasts and seven master classes (including event manager’s time) Skills and Employment – Direct – 10 weeks of InspiresMe work placement supported by Workspace (£1.9k social value delivered) – 676 sta hours invested in delivering InspiresMe (£11.4K social value delivered) Skills and Employment – Indirect – £211k social value delivered through key suppliers hiring of homeless, NEET, ex-oenders and people with disabilities – 261 weeks of apprenticeships delivered by our key suppliers (£65.7k social value delivered) – 10 weeks of InspiresMe work placements with customers (£1.9k social value generated) WORKSPACE – SOCIAL VALUE FY 22/23 56 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information SUSTAINABILITY CONTINUED SUPPORTING OUR COMMUNITIES CONTINUED CASE STUDY SHP employability workshop CASE STUDY InspiresMe In October 2022, we were delighted to support the hiring of one of Single Homeless Project’s (SHP) clients by our cleaning contractor, Olivers Mill. We hope this success story is the ﬁrst of many, and we are continuing to focus several of our SHP volunteering opportunities around employability skills. In November 2022, 11 Workspace employees took part in an employability workshop with SHP clients. The aim of the session was to help SHP clients with creation of CVs and interview skills. Building from a positive initial feedback from SHP clients, our charity committee are looking to organise more employability workshops in the coming year. InspiresMe is Workspace’s community outreach programme, focused on skills and employment. The aim of the programme is to work alongside our customers to provide inspiration, knowledge, support and experience to individuals within our communities who are most at risk of NEET (Not in Education, Employment or Training) and to help them to reach their full potential. As a provider of oce space to a diverse range of SMEs, we are in a unique position to broker a partnership between local schools and our customers in order to improve the employability skills of underprivileged young Londoners. The programme gives our customers the opportunity to deliver CV workshops, interview training sessions, participate in career fairs and host work experience placements throughout the year. In the last year we launched InspiresMe across ﬁve centres in various London Boroughs – 180 secondary school students beneﬁtted from the programme and 12 customers participated. INSPIRESME IN NUMBERS 4.3/5 SATISFACTION SCORE FROM STUDENTS 4.3/5 SATISFACTION SCORE FROM SCHOOLS 100% CUSTOMER ENGAGEMENT SCORE 57 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information SUSTAINABILITY CONTINUED SUPPORTING OUR COMMUNITIES CONTINUED Looking ahead Q&A Sonal Jain Head of Sustainability Q: What has been your biggest achievement? I am incredibly proud of the progress we have made this year. We have reduced our total greenhouse gas emissions by 16% across our like-for-like portfolio, upgraded over 12% of our portfolio to EPC A/B, boosted our customer ESG advocacy score and delivered signiﬁcant social value through our wellbeing and skills and employment programme. However, for me personally the biggest highlight was collective ownership of our sustainability agenda. Right at the start of the year we set a number of business-wide sustainability targets, which were then translated into individual objectives. Each of our teams have worked with undeterred determination to achieve these targets. I am so pleased by the way each Workspace employee has embraced a sustainability mindset. Q: What are your plans for the coming year? Our inherently sustainable business model gives us an advantageous position in the industry, whether it’s our lower energy use intensity, lean embodied carbon refurbishments and the positive socio- economic impact we generate through our focus on employment led regeneration. However, we realise we need to continue to deliver high performance in order to maintain our market leadership position. To this end, we will continue to roll out an accelerated programme of refurbishment and ensure our portfolio is decarbonised and future proofed ahead of the 2030 deadline. Energy and carbon management continues to be our top priority and we will be focusing our eort to further reduce our energy intensity. With the launch of our social impact framework focused on social issues that are material to the business, we have set ourselves a number of actionable targets that will help us deliver enhanced social value in the coming year. This includes a key focus for us to champion skills and employment across our value chain. We are fortunate to be Home to London’s Brightest Businesses, many of them are in the green economy sector themselves. We realise our duty of care towards our customers, ensuring they have a productive and sustainable workspace. We ran a successful customer engagement programme this year and plan to further enhance it. In addition, we will actively explore collaboration opportunity with our customers to jointly deliver on sustainability programmes across the portfolio. As a team, we always think twice when it comes to energy, all our electricals have automatic standby mode, our oce lights are always turned o when the unit is not in use, and we open our windows before the aircon gets considered Owen O’Neill, founder at Uni Compare, winner of the energy savings competition at Frames 58 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information SUSTAINABILITY CONTINUED SUPPORTING OUR COMMUNITIES CONTINUED 2023 2022 2021 116.6 86.7 81.5 2023 2022 2021 60.7 46.9 38.7 2023 2022 2021 9.27 9.88 9.38 Financial performance Why this is important to Workspace Net rental income is the rental income receivable after payment of direct property expenses, including service charge costs and other direct unrecoverable property expenses. It is important to Workspace because it measures our operating performance. It is a key driver of trading proﬁt, which in turn determines dividend growth. Movement in 2022/23 Net Rental Income increased by 34.5% (£29.9m) to £116.6m. Underlying net rental income was up 17.4% (£14.6m), reﬂecting the strong increase in rent per sq. ft. achieved in the year, higher average occupancy resulting in a reduction in empty rates, other non-recoverable costs and unrecovered service charge. The net impact of acquisitions and disposals in the current and prior years was a £15.2m increase in net rental income. £116.6m Why this is important to Workspace Trading proﬁt after interest is net rental income, less administrative expenses and ﬁnance costs but excluding exceptional ﬁnance costs. It is a key measure for Workspace and determines dividend growth, and so the returns we provide to our shareholders. It measures the underlying performance of the business. The Executive Directors are incentivised on trading proﬁt after interest. Movement in 2022/23 Trading proﬁt after interest increased by 29% (£13.8m) to £60.7m. The main driver was the £29.9m growth in net rental income. Total administrative expenses increased by £2.2m to £21.5m which includes £2.1m in respect of the McKay business acquired in the year and a £0.2m reduction in share based costs, leaving a £0.3m underlying increase in administration costs. Net ﬁnance costs increased to £34.4m in the year, reﬂecting the increased level of debt following the McKay acquisition and the increase in SONIA during the period. £60.7m Why this is important to Workspace EPRA NTA per share is a deﬁnition of net tangible assets as set out by the European Public Real Estate Association. It represents net assets minus any intangible assets and ﬁnancial derivatives and excluding deferred taxation relating to valuation movements and derivatives, divided by the number of shares in issue. It is important to Workspace as it provides stakeholders with information on our net asset value. It is a key external measure for property companies and is used to benchmark against share price. Movement in 2022/23 Our EPRA NTA per share decreased by 6.2% (£0.61) to £9.27. This was driven by the underlying decrease in the valuation of our portfolio, dividends paid and share issue, oset by trading proﬁt in the year. £9.27 59 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information OUR KEY PERFORMANCE INDICATORS 1. NET RENTAL INCOME 2. TRADING PROFIT AFTER INTEREST 3. EPRA NTA PER SHARE Link to strategy Link to strategy Link to strategy Driving customer-led growth Driving customer-led growth Driving customer-led growth Delivering operational excellence Delivering operational excellence Delivering operational excellence Being sustainable Being sustainable Being sustainable 2023 2022 2021 25.8 21.5 17.75 2023 2022 -23.9 7.1 8.7 2021 2023 2022 2021 89.1 89.6 81.6 Why this is important to Workspace This is the dividend payment per share in issue. Dividend per share is a key measure of the returns we are providing to our investors. It is important to Workspace because we aim to provide good returns for our shareholders, and also to work within our REIT requirements for income distribution. Movement in 2022/23 The increase of 20% (4.3p) in dividend per share was due to the increased trading proﬁt in the year. 25.8p Why this is important to Workspace Like-for-like properties are those with stabilised occupancy, excluding recent acquisitions and buildings impacted by signiﬁcant refurbishment or redevelopment activity. Rent roll is the current annualised net rent receivable for occupied units at the date of reporting. Monitoring rent roll growth on the like-for-like portfolio is an important measure of the underlying performance of the business and a key driver of future net rental income. We monitor the like-for-like rent roll on a weekly basis in management meetings and it is also a key performance indicator in our monthly Board reporting. Movement in 2022/23 The like-for-like rent roll has increased by 7.1% (£6.5m) in the year, driven by a 9.4% uplift in rent per sq. ft. from £37.12 to £40.61. +7.1% Why this is important to Workspace Like-for-like occupancy is the area of let space within the like-for-like portfolio divided by the net lettable area of the like-for-like portfolio. It is important as it gives us vital information on the performance of our core properties. It drives pricing and operational decisions and can be a measure of customer demand for the space. Again, this is monitored on a weekly basis in management meetings and it is also a key performance indicator in our monthly Board reporting. Movement in 2022/23 Like-for-like occupancy stable at 89.1%. 89.1% Financial performance continued 60 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information OUR KEY PERFORMANCE INDICATORS CONTINUED 4. DIVIDEND PER SHARE 5. LIKE-FOR-LIKE RENT ROLL GROWTH 6. LIKE-FOR-LIKE OCCUPANCY Driving customer-led growth Driving customer-led growth Driving customer-led growth Delivering operational excellence Delivering operational excellence Delivering operational excellence Being sustainable Being sustainable Being sustainable Link to strategy Link to strategy Link to strategy 2023 2022 2021 2,741 2,402 2,324 2023 2022 -5.86 1.10 6.49 2021 2023 -12.3 2021 -34.0 2022 8.6 Why this is important to Workspace Our properties are critical to our business and the valuation demonstrates the value we are delivering to our shareholders and a measure of how well we are managing our buildings and driving rental income. The property portfolio is independently valued, currently by CBRE. We aim to enhance the value of our properties through active asset management, including refurbishment and redevelopment schemes. The movement in property valuation is a key driver in our EPRA NTA per share measure. Movement in 2022/23 There was an underlying reduction of 3.2% (£91m) in our property valuation, taking the valuation to £2,741m. This was mainly driven by an outward shift in valuation yields oset by increases in estimated rental values. See Property Valuation section of the Business Review on page 81 for more detail. £2,741m Why this is important to Workspace Total Property Return is the return for the year combining the valuation movement on our portfolio and the income achieved in the year. This ﬁgure is produced by MSCI, an independent Investment Property Databank (‘IPD’), and is compared to a benchmark group so that we can see how we are performing relative to similar companies. Total Property Return, and performance against the benchmark, form part of the bonus objectives for the Executive Directors and LTIPs for all people in schemes. Movement in 2022/23 The decrease in total returns in the year was driven by the decrease in the property valuation, although income returns increased, we have signiﬁcantly out performed the IPD benchmark demonstrating the resilience of our property portfolio. 1.10% Why this is important to Workspace Total Shareholder Return is the return obtained by a shareholder, calculated by combining both share price movements and dividend receipts. This is important to Workspace because it shows the value that our shareholders receive from investing in Workspace shares. We aim to create maximum value for our shareholders, and as such this measure forms part of the performance criteria within our LTIP schemes. Movement in 2022/23 Total Shareholder Return has decreased due to a reduction in the share price over the year, oset by dividends paid in the year. -34.0% Financial performance continued 61 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information OUR KEY PERFORMANCE INDICATORS CONTINUED 7. PROPERTY VALUATION 8. TOTAL PROPERTY RETURN 9. TOTAL SHAREHOLDER RETURN Driving customer-led growth Driving customer-led growth Driving customer-led growth Delivering operational excellence Delivering operational excellence Being sustainable Being sustainable Being sustainable Link to strategy Link to strategy Link to strategy 2023 2022 2021 798 917 739 2023 2022 2021 518 598 328 2023 2022 2021 315 322 247 Non-ﬁnancial performance Why this is important to Workspace Customer enquiries represent the number of enquiries we receive for our space. Enquiries come through our website, via brokers, via phone, from walk-ins or existing customers looking to expand, contract or move locations. Measuring enquiries helps us to assess the customer demand for our product. Our internal marketing platform generates enquiries, and by increasing marketing activity we can drive enquiries, for example around the launch of a new building. Movement in 2022/23 There was an average of 798 monthly enquiries over the year, with an average of 932 monthly enquiries in the ﬁnal quarter. 798 Why this is important to Workspace This is the number of viewings of individual units by new or existing customers looking for new or additional space. Viewings are important because they provide an opportunity to get customers into our centres to see ﬁrst-hand the quality of our space, and to drive lettings. It is important to monitor the conversion of enquiries to viewings and then of viewings to oer letters. Movement in 2022/23 There was an average of 518 monthly viewings over the year, with a good conversion rate from enquiry to viewing and, as with enquiries, a strong ﬁnal quarter. 518 Why this is important to Workspace Once they have completed a viewing, if they are interested in the space, prospective customers can request an oer letter containing pricing information and lease terms. Tracking the number of oer letters is important as it allows us to assess the success of our viewings and the demand for our product. Movement in 2022/23 On average 315 oer letters were issued each month in the year, which represents 61% of viewings. 315 62 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information OUR KEY PERFORMANCE INDICATORS CONTINUED 1. CUSTOMER ENQUIRIES 2. VIEWINGS 3. OFFER LETTERS Driving customer-led growth Driving customer-led growth Driving customer-led growth Delivering operational excellence Delivering operational excellence Delivering operational excellence Being sustainable Being sustainable Being sustainable Link to strategy Link to strategy Link to strategy 2023 2022 2021 109 127 96 2023 2022 2021 61 15 13 2023 2022 2021 78 68 10 Why this is important to Workspace This is the number of lettings that we complete. It is a key measure for Workspace because lettings drive our net rental income and therefore trading proﬁt. Lettings set the tone for estimated rental values, and so impact our property valuation too. Movement in 2022/23 We saw a good level of lettings, reﬂecting customer demand in the year. This, alongside strong renewal activity, drove rental pricing growth in the year. 109 Why this is important to Workspace This is the number of lease renewals we sign with existing customers per month. These are important as they demonstrate how sticky our customers are, track customer retention and allow us to capture reversion within our portfolio. Movement in 2022/23 The average number of renewals per month increased from 15 in the prior year to 61. This helped drive the uplift in rent roll in the year. 61 Why this is important to Workspace This is the number of days that our employees spent volunteering or fundraising for our selected charities. Supporting our communities is a key part of our sustainability strategy and it is important for our employees to get involved. Movement in 2022/23 The number of volunteering days increased signiﬁcantly from 68 to 78. We worked closely with our charity partner Single Homeless Project. For example, we delivered a range of employability sessions, support for local foodbanks and upgrades to hostel accommodation. 78 Non-ﬁnancial performance continued 63 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information OUR KEY PERFORMANCE INDICATORS CONTINUED 4. LETTINGS 5. RENEWALS 6. EMPLOYEE VOLUNTEERING DAYS Driving customer-led growth Driving customer-led growth Delivering operational excellence Delivering operational excellence Being sustainable Being sustainable Being sustainable Link to strategy Link to strategy Link to strategy OUR SIX KEY STRENGTHS 1 Unique portfolio Owning and actively manage a predominantly London-based portfolio of high-quality assets. Page 65 2 Customer proposition Providing SMEs with blank canvas spaces in dynamic London locations. Page 65 3 Talented people Our teams have the right skills and experience to deliver an excellent customer experience. Page 65 4 A sustainable approach Creating high-quality, energy-ecient buildings that have a positive environmental and social impact. Page 66 5 Prudent ﬁnancing Managing our balance sheet and focusing on generating sustainable, long-term income. Page 66 6 Operating platform Managing all interactions with customers through our proprietary platform. Page 66 THE VALUE WE CREATE Customer value Page 67 Broader value creation Page 68 Six key strengths help deliver our purpose and stakeholder value Our sustainable business model creates a ﬂatter, fairer, more sustainable London. Our business model is 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. Metal Box, Southwark 64 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information OUR BUSINESS MODEL UNIQUE PORTFOLIO Built up over more than 35 years, we own a predominantly London-based portfolio of high-quality assets. Generally distinctive, low-rise buildings of 30,000 sq. ft. or more, they are well located around major transport hubs and vibrant neighbourhoods, and are often landmarks in their areas. We actively manage the portfolio to generate value over the long term. We target 90% occupancy on our like-for-like properties and, as occupancy rises, we can enhance pricing. Our ownership model gives us the ﬂexibility to enhance the quality of space and implement the latest sustainability features. We achieve this through our refurbishment and redevelopment pipeline, expanding our footprint and driving rental uplift. We also continue to grow our pipeline through strategic acquisitions, drawing on our deep knowledge of the London property market to help accelerate our growth plans. TALENTED PEOPLE Our employees are the drivers of our success. We have a vibrant, diverse and inclusive culture, underpinned by a clear purpose and set of values, which continue to score well amongst our sta in annual surveys. Our dynamic culture helps attract and retain people who align with these values and have a broad range of skills, experience and backgrounds. In 2022/23, we introduced a range of initiatives to directly address employee feedback to improve communications, collaboration, diversity and wellbeing. For example, we launched informal face-to-face engagement sessions between our Leadership team and small groups of centre sta, where they can provide direct feedback. We are always looking for ways to upskill our teams, having rolled out customer-ﬁrst training across the business this year. We are starting to trial a Government-sponsored Career Pathway programme to help junior centre sta develop their careers. How we deliver long-term stakeholder value Customer value Our purpose is to give businesses the freedom to grow. Owning our buildings means we are able to oer customers real freedom – to personalise and ﬂex their space as required. Because we believe that in the right space, teams can achieve more. Broader value creation We repurpose iconic buildings, invest in revitalising communities and prioritise the wellbeing of our customers and people. Shareholder value We drive capital appreciation and rental growth from our expertise in urban regeneration in London and active asset management. 400k+ SQ. FT. OF NEW AND UPGRADED SPACE Record Hall, Hatton Garden CUSTOMER PROPOSITION We provide companies with blank canvas space on ﬂexible terms within inspiring buildings in dynamic London locations. We cater to customers who are creative, passionate owners of SMEs, and being able to express their individuality and personality is part and parcel of their business. We continually enhance and reﬁne the customer experience: this year we rolled out inclusive pricing, created a smoother customer journey and upgraded the quality of space across over 400,000 sq. ft. of our portfolio. We dedicate around 30% of our buildings to attractive well-designed communal space, including meeting rooms, showers, cycle storage and cafés. Our ongoing brand campaign, refreshed on a quarterly basis, clearly articulates our oer and highlights our position as home to London’s brightest businesses, with brand awareness at 62%. 65 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information OUR BUSINESS MODEL CONTINUED PRUDENT FINANCINGA SUSTAINABLE APPROACH We are focused on generating sustainable, long-term income, which we reinvest in enhancing the portfolio and return to shareholders as dividends. We prudently manage our balance sheet and maintain low levels of gearing. The balance sheet includes a mixture of bank debt, private placements and loans and a corporate bond. Most of our debt is long-term, unsecured and bears interest at ﬁxed rates. We are committed to maintaining conservative leverage, which we expect to reduce further through our disposals programme, and we have signiﬁcant headroom to our ﬁnancial covenants. Our continuous programme of refurbishments and redevelopments drives rental growth and enhances valuations. It is this combination of income and capital value growth that makes Workspace a compelling investment. Our ecient and scalable platform enables us to grow the business over time without signiﬁcantly increasing operating costs. Through our inherently sustainable business model we create a ﬂatter, fairer, more sustainable London. We repurpose historic buildings, breathing new life into them and future prooﬁng them for generations to come. This results in signiﬁcantly lower embodied carbon, while also installing the most ecient systems to reduce operational carbon. We play a key role in the employment-led regeneration of areas across London: our buildings become hubs of economic activity, ﬂattening London’s working map and bringing prosperity into emerging areas. We also oer employment-focused support to disadvantaged young people. We prioritise the wellbeing of our customers and people, and work closely with them to drive more sustainable behaviours in our centres. OPERATING PLATFORM Our proprietary, in-house marketing operating platform enables us to manage a huge volume of customer activity in-house, from enquiries and viewings through to lettings, facilities management, billing and renewals. Direct relationships with our customers means we can work with them to enhance the sustainability of our buildings. These ongoing interactions, as well as our regular surveys provide real-time market intelligence. This year we have introduced new customer touchpoint surveys to generate more regular feedback. Our platform is scalable which means we can grow our portfolio without incurring signiﬁcant operating cost growth, as shown by our recent purchase of McKay. This platform gives us a major competitive strength and insight on the SME market. Dealing with such high levels of customer activity requires a dynamic culture and ﬁrst-class in-house expertise. Metal Box, Southwark 66 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information OUR BUSINESS MODEL CONTINUED CREATING CUSTOMER VALUE Location Fuel Tank, Deptford How have you made your space your own? As a Scandinavian homeware business, it was important for us to the make the space feel homely and cosy. We designed the space ourselves, wanting clients to see our space and envisage how their home could look. We painted the walls, laid down herringbone ﬂoors, added soft furniture and used rugs to create small living room set ups. Why did you choose this space? We needed a space large enough to show o our many products – everything from vases and lamps to curtains and rugs. We liked the fact we could easily mould the space and move things around when, for example, new ranges arrive. We also loved the way you can enter our showroom via three glass doors from the ground ﬂoor, which gives o an air of professionalism. Was the location important? Both my co-founder and I live locally in south east London and love being a stone’s throw from Greenwich Village and Deptford. It’s home to so many artists and creative types and felt like a perfect ﬁt for us. Att Pynta at Fuel Tank, Deptford We love the fact we can easily mould the space Kai Price Co-founder & Director, Att Pynta FUEL TANK IN NUMBERS 83% CUSTOMER ADVOCACY SCORE 15 MWh ELECTRICITY SAVED B EPC R ATING 95% OCCUPANCY LEVEL 67 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information OUR BUSINESS MODEL CONTINUED CREATING BROADER VALUE Founder of Bokit’la French food kiosk, opposite Kennington Park Location St Mary’s Churchyard, opposite Kennington Park business centre How have you seen Bokit’la grow in Oval? We’ve had a food stall in this area selling our French Caribbean food for 11 years. We’ve built a great niche of customers who know and love our food. We considered other London locations but we’ve decided to focus on Oval as it’s such a growing, vibrant area. Do you receive custom from Workspace’s centre? Our new position, located between Oval Station and Workspace’s Kennington Park business centre, means lots of people walk past our stall on the way to work – a fair amount of our week-day footfall comes from Workspace’s centre. We know other local businesses value the contribution the centre makes to the livelihood of the area. What is next for Oval? The Kennington Park centre has contributed to growing a small economy in Oval and I think it will now continue to become an even more vibrant area. We love sharing our cuisine and I am conﬁdent about Bokit’la’s growth within the area. We know local businesses value Workspace’s contribution to the local area Nicolas Baptise Founder of Bokit’la, French-Caribbean street-food vendor KENNINGTON PARK IN NUMBERS 85% CUSTOMER ADVOCACY SCORE 91.1% OCCUPANCY LEVEL 13 MWh ELECTRICITY GENERATED BY SOLAR PANELS 945 ELECTRIC VEHICLE CHARGERS 68 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information OUR BUSINESS MODEL CONTINUED Risk management is an integral part of all Workspace activities. Our culture drives us to consider the risks and opportunities of any new business decision. We focus on key risks which could impact the achievement of our strategic goals and therefore on the performance of our business. Risks are considered at every level of the business including when approving corporate transactions, property acquisitions and disposals and whenever undertaking refurbishment and redevelopment projects. We have created a positive culture within Workspace which encourages open communication and engagement. This enables sta from all areas of the business to feel free to raise risks or opportunities, no matter how small, to their managers and teams. This culture means that information is communicated across the business well. We make every eort to engage sta with risk-related issues, particularly those which are new and emerging so that we are managing our lower-level risks as well as the more strategic ones. 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 ﬁnancial year has seen a period of political uncertainty and challenging macroeconomic conditions with high inﬂation and increasing interest rates. Whilst the combination of these factors presents an increased risk of recession and potential adverse impact on property values and construction costs, the key risks that could aect 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 2022. Workspace recognises that climate change will have an impact on our business. Our properties are at risk from physical climate related issues and as a business, we are also at risk from the transition to a net zero economy in the form of increasing regulation and changes in customer demand. While we have a portfolio that is well-positioned to withstand the impact of climate change, we are actively managing our climate change risk and have put in place mitigation measures for the most material impacts. EMERGING RISKS Emerging risks are discussed monthly and promptly escalated to the Board as required. Emerging risks considered during this year included: employee recruitment and retention; the war in Ukraine; the macroeconomic environment including inﬂation, rising interest rates and potential impact on property valuations and operating performance; the acquisition and integration of the McKay estate; political disruption caused by instability within the UK government and ongoing industrial strikes across the UK. FINANCIAL POSITION During the year the Group continued to control costs and manage capital expenditure to protect its strong ﬁnancial position. Management regularly reviewed performance reports and forecasts to understand the impact on cash ﬂows and debt covenants. Following the acquisition of McKay Securities in May 2022, the Group amended two existing McKay facilities, a £65m loan from Aviva and a £135m bank revolving credit facility(‘RCF’). This £135m McKay RCF and the Group’s existing £200m RCF were both extended by one year in December 2022 further strengthening our ﬁnancial position and leaving no material debt maturities until June 2025. As of 31 March 2023, the Group had cash and undrawn credit facilities of £148m along with substantial headroom on its ﬁnancial covenants and met all loan covenants throughout the year. CLIMATE CHANGE Workspace recognises that climate change is having, and will continue to have an increasing impact on our business. Similar to other owners of real assets, our properties are at risk from physical climate-related issues including changes in temperature extremes leading to increased cooling and heating loads, changes in precipitation leading to ﬂash ﬂooding, and physical damage to buildings from extreme weather events, which in turn can lead to greater stresses on our properties. It is now widely recognised that climate change issues present a ﬁnancial risk to the global economy. To improve transparency, the Task Force on Climate-related Financial Disclosures (TCFD) framework provides guidance to companies on how to improve reporting on climate-related ﬁnancial risks and opportunities. Workspace supports the TCFD recommendations and is committed to implementing them. The TCFD framework includes risk management. A separate risk register for climate change-related risks is managed by the Head of Sustainability. Details of the risks considered are provided on pages 96 to 99. EMPLOYEES The health, safety and well-being of our employees remain a top priority. For the majority of our employees, we are able to oer a ﬂexible working environment to enable a healthy work-life balance alongside a competitive beneﬁts package for all. Our risk management framework Pages 170 to 171 69 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information PRINCIPAL RISKS AND UNCERTAINTIES IMPACT PROBABILITY (POST-MITIGATION) ProbableUnlikely Low Severe Driving customer-led growth Delivering operational excellence Being sustainable KEY: PRINCIPAL RISKS 1. Customer demand Page 70 2. Financing Page 71 3. Valuation Page 71 4. Acquisition pricing Page 72 5. Customer payment default Page 73 6. Cyber security Page 73 7. Resourcing Page 74 8. Third-party relationships Page 75 9. Regulatory Page 75 10. Climate change Page 76 Impact Severe Probability (post-mitigation) Possible Change from last year No change, however, this may be impacted by other ongoing economic factors including the war in Ukraine, inﬂation and interest rate rises Risk appetite Medium Link to strategy CHANGES TO PRINCIPAL RISKS CUSTOMER DEMAND Relevant KPIs Financial 1, 2, 5, 6, 8 Non-ﬁnancial 1, 2, 3, 4, 5 Principal risk Opportunities for growth could be missed without a clear branding strategy to meet the changing demands of ﬂexible working models. Whilst the uncertainty from the Covid pandemic has signiﬁcantly reduced there are other macroeconomic factors including the war in Ukraine, weak economic growth, current levels of inﬂation and interest rate rises that could also impact potential customers. Risk impact – Fall in occupancy levels at our properties – Reduction in rent roll – Reduction in property valuation Mitigation – Broad mix of buildings across London with dierent oce experiences at various price points to match customer requirements – Pipeline of refurbishment and redevelopments to further enhance the portfolio – Weekly meeting to track enquiries, viewings and lettings to closely track customer trends and amend pricing as demand changes – Centre sta maintain ongoing relationships with our customers to 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 – Marketing campaigns maintain awareness of Workspace’s oer and content and messaging are regularly reviewed to remain relevant and appealing There have been two signiﬁcant changes to the principal risks over the course of the last year, the disclosure of climate change as a separate principal risk (previously included in ‘Regulatory’) and the removal of speciﬁc references to Covid following full removal of Government restrictions. 70 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information 1 PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED 6 9 8 2 No change Increase New risk 1 4 3 7 5 10 Driving customer-led growth Delivering operational excellence Being sustainable Driving customer-led growth Delivering operational excellence Being sustainable Impact Severe Probability (post-mitigation) Unlikely Change from last year No change Risk appetite Low Link to strategy Impact High Probability (post-mitigation) Possible Change from last year No change, with the risk impact from inﬂation and interest rate rises remaining elevated Risk appetite Medium Link to strategy FINANCING VALUATION Relevant KPIs Financial 2, 4, 9 Relevant KPIs Financial 3, 5, 7, 8, 9 Principal risk Macroeconomic uncertainty, increasing costs or rising interest rates could have an impact on asset valuations, whereby property yields increase and valuations fall. This may result in a reduction in return on investment, project viability and negative impact on covenant testing. Risk impact – Financing covenants linked to loan to value (‘LTV ’) ratio – Impact on share price Mitigation – Market-related valuation risk is largely dependent on independent, external factors. We maintain a conservative LTV ratio which can withstand a severe decline in property values without covenant breaches – We monitor changes in sentiment in the London real estate market, yields and pricing to track possible changes in valuation. CBRE, a leading full-service real estate services and investment organisation, provides twice yearly valuations of all our properties – Typically our building or unit refurbishment projects are completed within short time frames, giving us good visibility on costs, expected rents and property values at completion. We continually assess the viability of our refurbishment and development projects for optimal timing and cost management opportunities, and have ﬂexibility on when to commence development. Alternative use opportunities, including mixed-use developments, are actively pursued across the portfolio Principal risk There may be a reduction in the availability of long-term ﬁnancing due to an economic recession, which may result in an inability to grow the business and impact Workspace’s ability to deliver services to customers. Risk impact – Inability to fund business plans and invest in new opportunities – Increased interest costs – Negative reputational impact amongst lenders and in the investment community Mitigation – We regularly review funding requirements for business plans, and we have a wide range of options to fund our forthcoming plans. We also prepare a ﬁve-year business plan which is reviewed and updated annually. Further detail is provided in the Viability Statement on page 87 – We have a broad range of funding relationships in place and regularly review our reﬁnancing strategy. We also maintain a speciﬁc interest rate proﬁle via the use of ﬁxed rates on our loan facilities so that our interest payment proﬁle is stable – Loan covenants are monitored and reported to the Board on a monthly basis and we undertake detailed cash ﬂow monitoring and forecasting – During the ﬁrst six months of 2022/23 we reﬁnanced the McKay RCF and Aviva loan providing further certainty over our funding position going forwards – During the second half of the year we extended the maturity of the McKay RCF and the Group’s existing RCF by a further year, providing the Group with adequate funds for future plans 71 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information 2 3 PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED Driving customer-led growth Delivering operational excellence Being sustainable Impact High Probability (post-mitigation) Possible Change from last year No change Risk appetite Medium Link to strategy ACQUISITION PRICING Relevant KPIs Financial 3, 7, 8, 9 Principal risk Inadequate appraisal and due diligence of a new acquisition could lead to paying above market price leading to a negative impact on valuation and rental income targets. Risk impact – Negative impact on valuation – Impact on overall shareholder return Mitigation – We have an acquisition strategy determining key criteria such as location, size and potential for growth. These criteria are based on the many years of knowledge and understanding of our market and customer demand – A detailed appraisal is prepared for each acquisition and is presented to the Investment Committee for challenge and discussion prior to authorisation by the Board. The acquisition is then subject to thorough due diligence prior to completion, including capital expenditure and risks associated with ESG concerns – 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 Mirror Works, Stratford 72 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information 4 PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED Driving customer-led growth Driving customer-led growth Delivering operational excellence Delivering operational excellence Being sustainable Being sustainable Impact High Probability (post-mitigation) Possible Change from last year No change Risk appetite Low Link to strategy Impact High Probability (post-mitigation) Possible Change from last year Probability increased due to the level and sophistication of cyber-attacks increasing Risk appetite Low Link to strategy CUSTOMER PAYMENT DEFAULT CYBER SECURITY Relevant KPIs Financial 1, 2, 4, 8, 9 Relevant KPIs Financial 2, 4, 8, 9 Non-ﬁnancial 4, 5 Principal risk There remains a risk of an economic downturn given the broader geopolitical climate, inﬂation and interest rate rises. This could result in pressure on rent collection ﬁgures with a prolonged period of companies failing, leading to a decline in occupancy and an increase in oce vacancies. Risk impact – Negative cash ﬂow and increasing interest costs – Breach of ﬁnancial covenants Mitigation – Rent collections have improved following removal of Government restrictions on rent collection introduced in response to Covid, however the economic environment remains challenging – The risk continues to be mitigated by strong credit control processes and an experienced team of credit controllers, able to make quick decisions and negotiate with customers for payment. In addition, we hold a three-month deposit for the majority of customers – Centre sta maintain relationships with customers and can identify early signs of potential issues Principal risk A cyber attack could lead to a loss of access to Workspace systems or a network disruption for a prolonged period of time. This could damage Workspace’s reputation and inhibit our ability to run the business. Risk impact – Inability to process new leases and invoice customers – Reputational damage – Increased operational costs Mitigation – Cyber security risk is managed using a mitigation framework comprising network security, IT security policies and third-party risk assessments. Controls are regularly reviewed and updated and include technology such as next-generation ﬁrewalls, multi layered access control through to people solutions such as user awareness training and mock-phishing emails – Assurance over the framework’s performance is gained through an independent maturity assessment, penetration testing and network vulnerability testing, all performed annually 73 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information 5 6 PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED Driving customer-led growth Delivering operational excellence Being sustainable Impact High Probability (post-mitigation) Low Change from last year No Change Risk appetite Medium Link to strategy RESOURCING Relevant KPIs Financial 1, 2, 4, 5, 6, 8, 9 Non-ﬁnancial 1, 2, 3, 4, 5, 6 Principal risk Ineective succession planning, recruitment and people management could lead to limited resourcing levels and a shortage of suitably skilled individuals to be able to achieve Workspace objectives and grow the business. Inadequate resourcing may also result in management being spread too thinly and a decline in eectiveness. Risk impact – Increased costs from high sta turnover – Delay in growth plans – Reputational damage Mitigation – We have a robust recruitment process to attract new joiners and established interview and evaluation processes with a view to ensuring a good ﬁt with the required skill set and our corporate culture – Various incentive schemes align employee objectives with the strategic objectives of the Group to motivate employees to work in the best interests of the Group and its stakeholders. This is supported by a formal appraisal and review process for all employees – Our HR and Support Services teams run a broad training and development programme designed to ensure employees are supported and encouraged to progress with learning and study opportunities We have a strong internal culture which encourages independent thought and initiative which is articulated in our four key values: COMPANY VALUES Know your stu Show we care Find a way Make it fun Mirror Works, Stratford 74 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information 7 PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED Driving customer-led growth Delivering operational excellence Being sustainable Driving customer-led growth Delivering operational excellence Being sustainable Impact High Probability (post-mitigation) Low Change from last year No change Risk appetite Low Link to strategy Impact Medium Probability (post-mitigation) Low Change from last year No change Risk appetite Low Link to strategy THIRD-PARTY RELATIONSHIPS REGULATORY Relevant KPIs Financial 1, 2, 4, 5, 6, 8, 9 Non-ﬁnancial 2, 4, 5 Relevant KPIs Financial 2, 4, 9 Non-ﬁnancial 4, 5 Principal risk Poor performance from one of Workspace’s key contractors or third-party partners could result in an interruption to or reduction in the quality of our service oering to customers or could lead to signiﬁcant disruptions and delays in any refurbishment or redevelopment projects. Risk impact – Decline in customer conﬁdence – Increase project or operational costs – Fall in customer demand – Weaker cash ﬂow – Reputational damage Mitigation – Workspace has in place a robust tender and selection process for key contractors and partners. Contracts contain service level agreements which are monitored regularly and actions are taken in the case of underperformance – For key services, Workspace maintains relationships with alternative providers so that other solutions would be available if the main contractor or third party was unable to continue providing their services. Processes are in place for identifying key suppliers and understanding any speciﬁc risks that require further mitigation – Workspace is London Living Wage compliant for all service providers since April 2022 Principal risk A failure to keep up to date and plan for changing regulations in key areas such as health and safety could lead to ﬁnes or reputational damage. Risk impact – Increased costs – Reputational damage Mitigation – Health and safety are one of our primary concerns, with strong leadership promoting a culture of awareness throughout the business. We have well-developed policies and procedures in place to help ensure that any workers, employees or visitors on site comply with strict safety guidelines and we work with well-respected suppliers who share our high-quality standards in health and safety – Health and safety management systems are reviewed and updated in line with changing regulations and regular audits are undertaken to identify any potential improvements – Sustainability requirements have an increasing importance for the Group and it is a responsibility we take seriously. We have committed to a net zero Carbon target of 2030 and we are implementing the TCFD recommendations. We manage our properties to ensure they are compliant with or exceed the Minimum Energy Eciency Standards (MEES) for EPCs 75 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information 8 9 PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED Driving customer-led growth Delivering operational excellence Being sustainable CLIMATE CHANGE Impact High Probability (post-mitigation) Possible Change from last year New Principal Risk Risk appetite Low Link to strategy Relevant KPIs Financial 2, 4, 5, 6, 8, 9 Non-ﬁnancial 1, 2, 4, 5 Principal risk A failure to recognise that climate change presents a ﬁnancial risk to our business alongside changes to our customers’ expectations could lead to a signiﬁcant impact on the business. Risk impact – Loss of rent roll – Negative impact on value – Reduced occupancy levels – Reputational damage Brickﬁelds, Hoxton Mitigation The inherent risk from climate change is universal, with a high likelihood of risk materialising in the near future resulting in potentially signiﬁcant impact on businesses in general. For Workspace, our risk is lower when compared to many other real estate businesses, in particular our exposure to physical risk. However, transition risk is an industry-wide risk and is impacting all real estate businesses due to the signiﬁcant environmental impact associated with the sector. In response to this, Workspace has been proactively managing its risk exposure. Our mitigation strategy includes: – Annual assessment of our climate risk exposure, using climate modelling to inform our risk management plan – Ongoing review of control measures and their eectiveness by our Risk Management Group and Environmental Sustainability Committee – Active management of acute physical risks such as ﬂoods and storms across the portfolio through emergency preparedness, site maintenance surveys and business continuity planning – Delivery of an accelerated net zero and EPC upgrade plan across the portfolio to manage transition risk – Introduction of climate objectives linked with remuneration, to incentivise focused action – 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 oset costs 76 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information 10 PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED £140.1m TOTAL RENT ROLL £60.7m TRADING PROFIT AFTER INTEREST £2.7bn PROPERTY VALUATION Brickﬁelds, Hoxton 77 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information BUSINESS REVIEW Customer activity We have seen resilient demand over the year with an average of 109 lettings per month, despite the extreme hot weather over the summer and disruption caused by tube and rail strikes. Good activity levels have continued into the ﬁrst quarter of 2023/24. Monthly average Q4 22/23 Q3 22/23 Q2 22/23 Q1 22/23 Enquiries 932 724 780 757 Viewings 589 479 495 508 Lettings 114 110 106 108 Alongside our new lettings, we have seen strong renewal activity in the year, with over 700 customers renewing at a retention rate of 88%. Rent roll Total rent roll, representing the total annualised net rental income at a given date, was up 6.5% to £140.1m at 31 March 2023. Rent Roll £m At 31 March 2022 1 131.6 Like-for-like portfolio 6.5 Completed projects 3.4 Projects underway and design stage (1.2) McKay – London 0.8 McKay – South East 0.1 McKay – Non-core 0.7 Disposals (1.8) At 31 March 2023 140.1 1. Adjusted for McKay portfolio acquired in May 2022. 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 at their current rent roll and occupancy) was £194.6m at 31 March 2023. Like-for-like portfolio The like-for-like portfolio represents 70% of the total rent roll as at 31 March 2023. It comprises 38 properties with stabilised occupancy excluding recent acquisitions, buildings impacted by signiﬁcant refurbishment or redevelopment activity or contracted for sale. As occupancy levels have stabilised, we have been able to move pricing forward across our like-for-like portfolio with rent per sq. ft. increasing by 9.4% in the year to £40.61. Like-for-like occupancy was marginally down by 0.4% to 89.1% in the year, with an overall increase in like-for-like rent roll of 7.1% (£6.5m) to £97.7m. We have seen ERV per sq. ft. increase by 13.6% in the year and if all the like-for-like properties were at 90% occupancy at the CBRE estimated rental values at 31 March 2023, the rent roll would be £116.7m, £19.0m higher than the actual rent roll at 31 March 2023. Completed projects There are ten projects in the completed projects category, with overall rent roll increasing by 36.5% (£3.4m) in the year to £12.8m, with rent per sq. ft. up 19.7% and occupancy up 10.3% to 80.2%. If the buildings in this category were all at 90% occupancy at the ERVs at 31 March 2023, the rent roll would be £17.2m, an uplift of £4.4m. Six months ended Like-for-like 31 Mar 23 30 Sep 22 31 Mar 22 Occupancy 89.1% 89.6% 89.5% Occupancy change (0.5%) 0.1% 3.8% Rent per sq. ft. £40.61 £38.59 £37.12 Rent per sq. ft. change 5.2% 4.0% 2.8% Rent roll £97.7m £94.5m £91.2m Rent roll change 3.4% 3.6% 6.4% The Light Bulb, Wandsworth 78 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information BUSINESS REVIEW CONTINUED Projects underway – refurbishments We are currently underway on three refurbishment projects that will deliver 210,000 sq. ft. of new and upgraded space. As at 31 March 2023, rent roll was £1.7m, down £0.4m in the year. Assuming 90% occupancy at the ERVs at 31 March 2023, the rent roll at these three buildings once they are completed would be £7.8m, an uplift of £6.0m. Projects at design stage These are properties where we are planning a refurbishment or redevelopment that has not yet commenced. As at 31 March 2023 the rent roll at these properties was £5.8m. McKay Securities In May 2022, we completed the acquisition of the McKay portfolio. As at 31 March 2023 the rent roll at these properties was £22.0m, an underlying increase of £1.6m since acquisition. The integration is now complete with all operational activity utilising the Workspace platform. As at 31 March 2023 the rent roll at the seven London assets was £8.2m, an increase of £0.8m since acquisition with occupancy at 72.6%. A number of these properties are being refurbished, including sub-division to adapt to the Workspace multi-let model. We have seen ERV per sq. ft. increase by 8% since acquisition and assuming 90% occupancy at the ERVs at 31 March 2023, the rent roll at these seven buildings, would be £11.6m, an uplift of £3.4m. As at 31 March 2023 the rent roll of the South-East oce and business park portfolio, comprising thirteen buildings, was £8.5m, an increase of £0.1m since acquisition with occupancy steady at 88.3%. Assuming 90% occupancy (or current occupancy if higher) at the ERVs at 31 March 2023 the rent roll would be £11.2m, an uplift of £2.7m. We are progressing with the disposal of the nine non-core light industrial and logistics assets with the timing dependent on market conditions. Contracts have been exchanged for the sale of ﬁve of these properties in May 2023. Overall occupancy across these sites at 31 March 2023 was 87.7% with a rent roll of £5.2m, an increase of £0.7m since acquisition. Assuming 90% occupancy (or current occupancy if higher) at the ERVs at 31 March 2023, the rent roll at these buildings, would be £6.5m, an uplift of £1.7m. Disposals In July 2022 we completed the sale of a medical centre in Newbury, which had rent roll of £0.2m, from the McKay portfolio for £7.2m (£1.1m ahead of the March 2022 valuation). In March 2023 we completed on the sale of the Riverside residential component in Wandsworth for £54m (in line with the September 2022 valuation) and expect to commence the construction of the new commercial buildings (comprising 153,000 sq. ft. of workshop and oce space), at our cost, on a phased basis in the second half of 2023. Proﬁt performance Trading proﬁt after interest for the year was up 29.4% (£13.8m) on the prior year to £60.7m. £m 31 Mar 2023 31 Mar 2022 Net rental income 116.6 86.7 Administrative expenses – underlying (18.0) (17.7) Administrative expenses – acquisitions (2.1) – Administrative expenses – share based costs 1 (1.4) (1.6) Net ﬁnance costs (34.4) (20.5) Trading proﬁt after interest 60.7 46.9 1. These relate to both cash and equity settled costs. Net rental income was up 34.5% (£29.9m) to £116.6m. £m 31 Mar 2023 31 Mar 2022 Underlying rental income 110.7 97.9 Unrecovered service charge costs (4.0) (4.4) Empty rates and other non-recoverable costs (8.3) (10.4) Services, fees, commissions and sundry income – 0.7 Underlying net rental income 98.4 83.8 Rent discounts and waivers – 0.3 Expected credit losses (1.1) (1.5) Acquisitions 18.5 1.2 Disposals 0.8 2.9 Net rental income 116.6 86.7 The £12.8m increase in underlying rental income to £110.7m reﬂects the strong increase in average rent per sq. ft. achieved over the last year. With energy costs hedged until October 2024 and higher average occupancy levels compared to the prior period there was a decrease of £0.4m in unrecovered service charge costs. Higher average occupancy has also contributed to a reduction in empty rates with non-recoverable costs decreasing by £2.1m to £8.3m. Net revenue from services, fees, commissions and sundry income decreased by £0.7m driven by the cost of our enhanced customer events programme. Rent collection for the year has remained strong with 98% of rent collected to date with the charge for expected credit losses reducing to £1.1m in the year. 9 Greyfriars Road, ReadingBiscuit Factory, Bermondsey (CGI) 79 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information BUSINESS REVIEW CONTINUED Growth in net rental income included a £18.5m contribution from recent acquisitions, primarily the McKay portfolio acquired in May 2022. Underlying administrative expenses remained under tight control, increasing by £0.3m to £18.0m, which included inﬂationary pay rises of 3% but with higher increases in more junior roles Administrative expenses also included £2.1m in respect of the McKay business, with synergies realised ahead of original expectations. Share based costs decreased by £0.2m to £1.4m driven by lower vesting levels and assumptions. Net ﬁnance costs increased by £13.9m to £34.4m in the year reﬂecting the increased level of debt following the McKay acquisition and the increase in SONIA during the period. The average net debt balance over the year was £281m higher than the prior year, whilst the average interest cost increased from 3.1% to 3.7%. Loss before tax was £37.5m compared to a proﬁt of £124.0m in the prior year. £m 31 Mar 2023 31 Mar 2022 Trading proﬁt after interest 60.7 46.9 Change in fair value of investment properties (93.1) 68.7 (Loss)/gain on sale of investment properties (0.7) 7.8 Exceptional costs (4.3) – Other items (0.1) 0.6 (Loss)/proﬁt before tax (37.5) 124.0 Adjusted underlying earnings per share 31.7p 25.8p The change in fair value of investment properties, including assets held for sale, was £93.1m compared to an increase of £68.7m in the prior year. The loss on sale of investment property of £0.7m resulted from costs associated with the disposal of the residential scheme at Riverside, Wandsworth and the proﬁt on disposal of the medical centre at Newbury from the McKay portfolio. Exceptional costs include one-o items relating to the acquisition and integration of McKay, including the cost of buying-out the McKay pension scheme, and implementation of a new ﬁnance and property management system. Adjusted underlying earnings per share, based on EPRA earnings adjusted for non-trading items and calculated on a diluted share basis, was up 22.9% to 31.7p. 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 strong improvement in trading performance and conﬁdence in the longer term prospects of the Company, the Board is recommending a ﬁnal dividend of 17.4p per share, taking the full year dividend to 25.8p (2022: 21.5p), to be paid on 4 August 2023 to shareholders on the register at 7 July 2023. The dividend will be paid as a REIT Property Income Distribution (PID) net of withholding tax where appropriate. Clerkenwell Workshops, Clerkenwell 80 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information BUSINESS REVIEW CONTINUED WALTHAM FOREST REDBRIDGE HARINGEY BARNET BRENT CAMDEN EALING NEWHAM GREENWICH LEWISHAM SOUTHWARK LAMBETH WANDSWORTH RICHMOND UPON THAMES TOWER HAMLETS HACKNEY ISLINGTON CITY OF LONDON CITY OF WESTMINSTER HAMMERSMITH AND FULHAM KENSINGTON AND CHELSEA ENFIELD HOUNSLOW EARLS COURT PADDINGTON BATTE R S E A VICTORIA WATERLO O KENNINGTON BETHNAL GREEN LONDON BRIDGE KING’S CROSS OLD STREET SHOREDITCH ISLINGTON STRATFORD FARRINGDON CANARY WHARF Like-for-like Refurbishments Mixed-use redevelopments Acquisition Property valuation At 31 March 2023, our property portfolio was independently valued by CBRE at £2,741m, an underlying decrease of 3.2% (£91m) in the year. The main movements in the valuation are set out below: £m Valuation at 31 March 2022 2,402 Capital expenditure 56 Acquisitions 434 Disposals (60) Revaluation – H1 8 Revaluation – H2 (99) Valuation at 31 March 2023 2,741 There was an underlying revaluation decrease of 3.5% (£99m) in the second half of the year compared to an increase of 0.3% (£8m) in the ﬁrst half. A summary of the full year valuation and revaluation movement by property type is set out below: Like-for-like properties There was a 0.3% (£6m) underlying decrease in the valuation of like-for-like properties to £1,887m. This was driven by a 13.6% increase in the ERV per sq. ft. (£216m) reﬂecting the pricing of recent lettings and renewals, oset by a 55bps outward shift in equivalent yield (£222m). This outward shift typically ranged from 25bps to 90bps depending upon location. 31 Mar 2023 31 Mar 2022 Change ERV per sq. ft. £48.00 £42.23 13.6% Rent per sq. ft. £40.61 £37.12 9.4% Equivalent Yield 6.2% 5.6% 0.6% 1 Net Initial Yield 4.7% 4.2% 0.5% 1 Capital Value per sq. ft. £698 £679 2.8% 1. Absolute change. Revaluation increase/(decrease) £m Valuation 31 Mar 2023 Full year H2 H1 Like-for-like properties 1,887 (6) (21) 15 Completed projects 265 12 12 – Refurbishments 172 (25) (14) (11) Redevelopments 33 (17) (10) (7) McKay – London 154 1 (11) 12 McKay – South East 114 (13) (21) 8 McKay – Non-core 116 (41) (34) (7) Sold – (2) – (2) Total 2,741 (91) (99) 8 81 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information BUSINESS REVIEW CONTINUED A 5% increase in ERV would increase the valuation of like-for-like properties by approximately £94m whilst a 50bps increase in equivalent yield would decrease the valuation by approximately £140m. Completed projects There was an underlying increase of 4.7% (£12m) in the value of the ten completed projects to £265m. The overall valuation metrics for completed projects are set out below: 31 Mar 2023 ERV per sq. ft. £34.36 Rent per sq. ft. £28.70 Equivalent Yield 6.5% Net Initial Yield 4.3% Capital Value per sq. ft. £475 Current refurbishments and redevelopments There was an underlying decrease of 12.7% (£25m) in the value of our current refurbishments to £172m and a reduction of 34.0% (£17m) in the value of our current redevelopments to £33m. The most signiﬁcant movements in this category are a decrease of £8.4m at our light industrial property Havelock Terrace, Battersea, reﬂecting the outward movement in industrial yields and a £8.1m decrease at Rainbow Industrial Park, Raynes Park, reﬂecting the outward movement in industrial yields and reduction in expected residential values. McKay We completed the acquisition of McKay Securities PLC on 6 May 2022 for a total consideration of £267.6m, comprising £191.1m in cash and 10.5m Workspace shares, and £9.4m transaction costs, representing a 14% discount to NTA acquired (after seller’s transaction costs) of £310.5m. There was an underlying decrease of 12.1% (£53m) in the valuation of the McKay portfolio, compared to the acquisition cost. A summary of the full year valuation and underlying movements for the McKay portfolio from acquisition is set out below: £m Valuation (£m) Change (£m) Equivalent Yield Movement ERV Movement London 154 1 +25bps +8% South East 114 (13) +80bps +5% Non- core 116 (41) +235bps +6% Total 384 (53) The valuation metrics for the McKay portfolio are set out below: As at 31 March 2023 London South East Non-core No. properties 7 13 10 ERV per sq. ft. £44.36 £26.67 £10.13 Rent per sq. ft. £38.80 £21.68 £10.59 Equivalent Yield 6.9% 9.1% 6.4% Net Initial Yield 4.3% 6.8% 4.3% Capital Value per sq. ft. £528 £257 £176 Refurbishment activity A summary of the status of the refurbishment pipeline at 31 March 2023 is set out below: Our adaptive re-use of existing buildings for refurbishments delivers up to 70% reduction in embodied carbon compared to new build schemes. We are on-site at Leroy House, Islington where we are delivering a refurbished and extended 58,000 sq. ft. business centre which we expect to complete in spring 2024. We have recently commenced major upgrades and extensions at The Chocolate Factory, Wood Green and at The Biscuit Factory, Bermondsey. Projects Number Capex spent Capex to spend Upgraded and new space (sq. ft.) Underway 3 £14m £56m 210,000 Design stage 7 – £251m 438,000 Design stage (without planning) 7 – £382m 577,000 Chocolate Factory, Wood Green (CGI) Leroy House, Islington 82 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information BUSINESS REVIEW CONTINUED Redevelopment activity Many of our properties are in areas where there is strong demand for mixed-use redevelopment. Our model is to use our expertise, knowledge and local relationships to obtain a mixed-use planning consent and then typically to agree terms with a residential developer to undertake the redevelopment and construction at no cost and limited risk to Workspace. We receive back a combination of cash, new commercial space and overage in return for the sale of the residential scheme to the developer. A summary of the status of the redevelopment pipeline at 31 March 2023 is set out below: No. of properties Residential units New commercial space (sq. ft.) Design stage 3 539 77,000 The three schemes at design stage at The Chocolate Factory, Wood Green, Poplar and Rainbow, Raynes Park all have planning consent. Sustainability We have an inherently green property portfolio with energy intensity already 19% lower than the industry best practice standard. Further improving the energy eciency of our buildings is key in helping us to achieve our target of being a net zero carbon business by 2030. The Workspace portfolio is currently 43% EPC A and B rated, an increase of 12% in the year, and we are on track to upgrade the remainder of our portfolio to these categories by 2030. We are also targeting a reduction in Scope 1 gas emissions by a minimum of 5% each year, whilst continuing to procure 100% renewable electricity (REGO backed). In the year we also achieved a 5% reduction in operational energy intensity and a 27% reduction in gas use. Cash Flow The Group generates strong operating cash in line with trading proﬁt. A summary of cash ﬂows are set out below: There is a reconciliation of net debt in note 16(b) to the ﬁnancial statements. The overall increase of £344m in net debt reﬂects the acquisition of McKay in May 2022 for cash consideration of £201m (including fees) and net debt acquired of £162m. Rent collection remains robust with 98% of rent due for the year collected to date. The majority of the amounts still outstanding are covered by rent deposits or by the provision for doubtful debts. £m 31 Mar 2023 31 Mar 2022 Net cash from operations after interest 1 70 58 Dividends paid (44) (43) Capital expenditure (60) (31) Purchase of investment properties (201) (88) Net debt acquired (162) – Property disposals and cash receipts 49 122 Other 4 (11) Net movement (344) 7 Opening debt (net of cash) (558) (565) Closing debt (net of cash) (902) (558) 1. Excludes £8.8m of VAT receipts relating to sale of Riverside included in ‘Other’. Poplar Business Centre, Poplar (CGI) The Frames, Shoreditch 83 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information BUSINESS REVIEW CONTINUED Net assets Net assets decreased in the year by £13m to £1,787m. EPRA net tangible assets (NTA) per share at 31 March 2023 was down 6.2% (£0.61) to £9.27: EPRA NTA per share £ At 31 March 2022 9.88 Adjusted trading proﬁt after interest 0.31 Exceptional costs (0.02) Property valuation deﬁcit (0.48) Share issue (0.19) Dividends paid (0.23) At 31 March 2023 9.27 The calculation of EPRA NTA per share is set out in note 9 of the ﬁnancial statements. Total Accounting Return The total accounting return for the full year was (3.8)% compared to 8.0% in the year ended March 2022. The total accounting return comprises the growth 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 9 of the ﬁnancial statements. Financing As at 31 March 2023, the Group had £12m of available cash and £136m of undrawn facilities: Drawn amount £m Facility £m Maturity 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 249.0 385.0 2023- 2025 Total 914.0 1,050.0 The majority of the Group’s debt comprises 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 bank facilities totalling £385m which were £249m drawn as at 31 March 2023. The bank facilities comprise £335m of sustainability-linked Revolving Credit Facilities (RCFs) and a £50m acquisition facility put in place for the acquisition of McKay. During the year, our RCF bank facility maturities were extended, with £135m now maturing in April 2025 and £200m in December 2025, with both facilities having the potential to extend by a further year. The £200m RCF also has the option to increase the facility amount by up to £100m, subject to lender consent. All facilities, other than the Secured loan, are provided on an unsecured basis with an average drawn debt maturity of 4.1 years (31 March 2022: 4.2 years). At 31 March 2023, the eective interest rate was 4.0% based on SONIA at 4.2%, with 73% of the net debt (£665m) at ﬁxed rates. The average interest cost of our ﬁxed rate borrowings was 2.9% and our ﬂoating-rate bank facilities had an average margin of 1.78% over SONIA. A 1% increase in SONIA would increase the eective interest rate by 0.3% (at current debt levels). At 31 March 2023, loan to value (LTV) was 33% (31 March 2022: 23%) and interest cover, based on net rental income and interest paid over the last 12 month period, was 3.8 times (31 March 2022: 4.8 times), providing good headroom on all facility covenants. The Chocolate Factory, Wood Green 84 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information BUSINESS REVIEW CONTINUED Financial outlook for 2023/24 Over the last year we have seen stable like-for-like occupancy and continued rental growth driven by good levels of customer demand. Rental income in 2023/24 will be underpinned by the 7.1% growth in like-for-like rent roll we have seen over the last year. We continue to see good demand and expect to see further pricing growth. Rental income growth will also be supported by the letting up of recently completed projects and the letting up of refurbished and vacant space in the McKay portfolio. The current high levels of inﬂation will impact on both our service charge and administrative costs. In relation to service charge costs, where the majority of the cost is passed on to our customers, we have been able to limit the impact on customers by the hedging of our energy costs in October 2021. Sta costs are the most signiﬁcant driver of our administrative expenses and, whilst we have limited inﬂationary salary increases to 6% for sta earning more than £50,000, we have given higher increases for those on lower salary levels. The proceeds from the recently announced exchange for sale of ﬁve McKay non-core assets for £82m will be used to repay our short-term ﬂoating rate debt which currently has an eective interest rate of 6%. The disposal will result in a reduction in rent roll of £3.6m, a reduction in net debt of £82m and a net reduction of around £5m per annum in interest costs. On a proforma basis this sale reduces LTV by 2% to 31%, increases the percentage of ﬁxed-rate debt to 80% and reduces our average cost of debt to 3.8% and extends the average maturity of drawn debt to 4.4 years. We are progressing with the sale of the remaining non-core assets valued at £34m as at 31 March 2023. We expect capital expenditure of around £60m over the next year as we progress with a range of planned asset management projects, including the refurbishments of Leroy House, The Chocolate Factory and The Biscuit Factory. This investment incorporates the spend of some £10m per annum to meet our 2030 environmental commitments. Barley Mow, Chiswick 85 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information BUSINESS REVIEW CONTINUED Property statistics Half Year ended 31 Mar 2023 30 Sep 2022 31 Mar 2022 30 Sep 2021 Workspace portfolio Property valuation £2,741m £2,863m £2,402m £2,271m Number of locations 86 87 57 58 Lettable ﬂoorspace (million sq. ft.) 5.2 5.4 4.0 3.9 Number of lettable units 4,910 4,901 4,482 4,234 Rent roll of occupied units £140.1m £134.7m £111.0m £102.1m Average rent per sq. ft. £32.86 £30.03 £33.26 £32.28 Overall occupancy 81.5% 84.0% 84.3% 81.2% Like-for-like number of properties 38 38 39 39 Like-for-like lettable ﬂoor space (million sq. ft.) 2.7 2.7 2.8 2.9 Like-for-like rent roll growth 3.4% 3.6% 6.4% 2.1% Like-for-like rent per sq. ft. growth 5.2% 4.0% 2.5% (2.1%) Like-for-like occupancy movement (0.5%) 0.1% 4.0% 3.7% 1. The like-for-like category has been restated in the current ﬁnancial year for the following: – The transfer out of Riverside to the sold category. 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. 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. The Strategic Report on pages 1 to 105 was approved by the Board of Directors on 6 June 2023 andsigned on its behalf by: Graham Clemett Dave Benson Chief Executive Ocer Chief Financial Ocer Brickﬁelds, Hoxton 86 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information BUSINESS REVIEW CONTINUED Assessment of prospects The Group assesses its prospects primarily through the annual Strategic Review process which involves a debate of the Group’s strategy and business model, consideration of the Group’s principal risks and a review of the Group’s ﬁve-year plan. Particular attention is given to existing refurbishment and redevelopment commitments, long-term ﬁnancing arrangements, compliance with ﬁnancing and REIT covenants and existing macroeconomic factors. The most recent strategy day was held in October 2022 and the Board reviewed the business plan for the ﬁve years to 31 March 2027. Macroeconomic and political issues, including the war in Ukraine, high levels of inﬂation and increased interest rates continue to give rise to concerns around the UK economy meaning there is continuing risk of an economic downturn. Consideration has been given to a number of downside scenarios covering the period to 31 March 2028. The scenarios modelled include a severe but realistically possible downside scenario based on the following key assumptions: – A stalling of the UK economy, with low levels of GDP growth and inﬂationary pressure, resulting in a reduction in customer demand over the next two years, compared to current levels – Like-for-like occupancy reduces by c.5% to 85% over the next two years, with associated increase in void costs and downward pressure on pricing of new lettings, and thereafter a gradual recovery to c.90% by 31 March 2028 The Group’s activities, strategy and performance are explained in the Strategic Report on pages 1 to 105. Further detail on the ﬁnancial performance and ﬁnancial position of the Group is provided in the ﬁnancial statements on pages 224 to 250. The Directors have conducted an extensive review of the appropriateness of adopting the going concern basis. More details can be found on page 227. Following this review and having made appropriate enquiries, the Directors have a reasonable expectation that the Group and the Company have adequate resources and sucient headroom on the Group’s bank loan facilities to continue in operational existence. For this reason, the Directors believe that it is appropriate to continue to adopt the Going Concern basis in preparing the Group’s accounts. – New lettings at below the average price per sq. ft. of vacating customers resulting in an overall reduction in average rent per sq. ft. until like-for-like occupancy levels return to c.90% – Elevated levels of counterparty risk, with bad debt signiﬁcantly higher than pre- pandemic levels – Continued elevated levels of cost inﬂation – Further increases in SONIA rates 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 Group’s activities, strategy and performance are explained in the Strategic Report on pages 1 to 105, including a description of the Group’s strategy and business model on pages 32 to 35 and 64 to 68. Assessment of time period The Board has selected a review period of ﬁve years for the following reasons: a) The Group’s strategic review covers a ﬁve-year period. b) Our current project pipeline spans ﬁve years, covering the time for the currently planned major refurbishments and redevelopments to progress from initiation to completion. c) The average period to maturity of the Group’s committed facilities is 4.1 years. Although ﬁnancial performance is assessed over a period of ﬁve years, the strategy and business model are considered with the longer-term success of the Group in mind. The Directors believe they have no reason to expect a signiﬁcant adverse change in the Group’s viability immediately following the end of the ﬁve-year assessment period. Assessment of viability The Board has considered the key risks and mitigating factors that could impact the Group, details of which can be found on pages 69 to 76. Those risks that could have an impact on the ongoing success of the Group’s strategy, particularly in light of the current geopolitical situation, were identiﬁed and the resilience of the Group to the impact of these risks in severe, yet plausible downside scenarios has been evaluated. Sensitivity analyses have been prepared to understand the impact of the identiﬁed risks on solvency and liquidity. The speciﬁc risks which were evaluated are shown in the following table. GOING CONCERN VIABILITY STATEMENT 87 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPLIANCE STATEMENTS RISK SENSITIVITY ANALYSES Speciﬁc risk Risk category Sensitivity analysis Demand for space falls dramatically impacting occupancy and pricing levels, or customer defaults increase leading to a breach of loan covenants. – Customer demand – Valuation At the point in the severe scenario modelled where ICR is at its lowest, net rental income would need to reduce by 36% compared to the year to 31 March 2023. This represents a 30% reduction from the net rental income included in the severe scenario modelled. Property values are adversely impacted by the uncertainty in the economy leading to a breach of covenants. – Valuation At the point in the severe scenario modelled that LTV is at its highest, the property valuation would need to fall by 42% compared to the valuation as at 31 March 2023. Changes in the economic UK environment result in further increases in SONIA rates. – Financing At the point in the severe scenario modelled where ICR is at its lowest, SONIA rates would need to increase by 760bps compared to 31 March 2023. Changes in the economic and regulatory UK environment impact the availability and pricing of debt. – Financing £885m of the Group’s debt facilities expire within the viability period – see note 16 of the Financial Statements. Under the scenario modelled, the Group would need to either reﬁnance these facilities when they expire or implement other mitigating strategies to ensure full repayment. Risk sensitivity analyses The Group beneﬁts from a largely freehold property portfolio and a ﬂexible business model that allows the business to adapt to changing requirements of its customer base. This, coupled with a strong balance sheet, means the Group can withstand a signiﬁcant downturn in the economy and demand. In the scenarios tested, the most signiﬁcant impact on the viability of the Group would be to liquidity headroom resulting from an inability to reﬁnance both existing debt facilities. To mitigate this risk, the Group regularly reviews funding requirements and maintains a close relationship with existing and potential funding partners to facilitate the continuing availability of debt ﬁnance. The maturity of debt facilities is spread over a number of years to avoid a concentration of risk in one period and gearing is relatively low with LTV of 33% as at 31 March 2023. There are a number of mitigating factors that were not considered in the scenarios tested but which could be actioned: – Additional asset disposals – Cancellation or signiﬁcant reduction in dividend – Reduction in refurbishment programme Conclusion The sensitivity and stress analyses outlined above indicate that the Group would have adequate means to maintain headroom in its facilities and covenants to continue operations for the period under review. Taking into account the Group’s position and principal risks, the Board has assessed the prospects of the Group and has a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the ﬁve-year period stated above. 88 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPLIANCE STATEMENTS CONTINUED The table below, and the information it refers to, sets out our position on non-ﬁnancial reporting requirements in accordance with Sections 414CA and 414CB of the Companies Act 2006 as well as other key compliance areas. The time periods for reporting on the matters set out below have been informed by applicable law and prevailing market practice, taking into account the Group’s particular circumstances and the nature of its business. The description of our business model can be found on pages 64 to 68 and the description of our non-ﬁnancial key performance indicators can be found on pages 62 to 63. Policies and due diligence Outcomes of policies and impacts of activities Related principal risks (Pages 69 to 76) Climate and environmental matters – Our Sustainability strategy sets out our commitment to operating responsibly in all our dealings with our stakeholders. This is supported by an Environmental Policy and a Climate Change Policy which sets out our objectives and our commitment to a co-ordinated approach to improving the overall environmental performance of our portfolio – Our net zero carbon pathway sets out our roadmap to becoming a net zero carbon business by 2030 and our sustainable development brief sets minimum requirements for our development and refurbishment projects on energy, carbon, waste, water, materials, nature and wellbeing – We disclose our climate-related risks and opportunities, targets and KPIs and management processes in line with the TCFD recommendations – Our climate and environmental policies inform all our sustainability activities. See our Sustainability report on pages 36 to 58 for details of our commitment to environmental matters, including our net zero carbon pathway – See our ESG Committee Report on pages 172 to 177 for further details on our policies and how they support the implementation of our ESG strategies – Our TCFD disclosure can be found on pages 92 to 105 – Our green ﬁnance framework, along with the allocation report, is on our website Risk 10 – Climate change Social matters – Our Sustainability strategy sets out our approach to supporting our employees, customers and suppliers – Our social impact programme demonstrates our commitment to supporting communities in need across London – We pay our direct employees the London Living Wage and in April 2022 we also brought all third-party contractors onto the Living Wage – See pages 50 to 58 for details on how we are focusing on social matters, including our real Living Wage commitment, our social impact programme and the community and charity projects we have supported during the year Social matters are not deemed to be a principal risk for the Group; however, we are continuing to focus on social matters through our Sustainability strategy (see pages 50 to 58 for more details) Employees – Our Code of Conduct, approved by the Board, sets out the standards of behaviour expected of Group employees and stakeholders on behalf of the Board and demonstrates the Group’s commitment to maintaining the highest standard of ethical conduct and behaviour in our business practice – We are committed to diversity and inclusion at all levels of our business. See pages 22, 52 and 149 for more details on our Equal Opportunities and Dignity at Work Policy – The Group’s Health & Safety Committee meets twice per year. The Board receives regular reports and reviews our health and safety processes at least annually, and the Executive Committee receives monthly reports. See page 90 for more details on our health and safety policies and procedures – In July 2021, we introduced a Hybrid Working Policy in recognition of the importance of work-life balance – See pages 21 and 50 to 53 for details of how we looked after our employees during the year, including how we listened to them during the year, our health and wellbeing initiatives, our diversity and inclusion initiatives and our training and development initiatives – Employees receive induction training and regular reminders on the Code of Conduct Risk 7 – Resourcing Non-ﬁnancial information statement 89 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPLIANCE STATEMENTS CONTINUED Policies and due diligence Outcomes of policies and impacts of activities Related principal risks (Pages 69 to 76) Health & safety – Our Health & Safety Policy lays out our commitment to the health and safety of our employees, customers, visitors and others who may be aected by our activities and to fully comply with all health and safety legislation applicable to our business, by implementing HSG65 – All our site sta and facilities managers, as well as some key head oce personnel, use a compliance monitoring tool which is a proven software system that enables us to monitor statutory compliance and routine maintenance across the entire portfolio – We train our employees so that they are competent and conﬁdent to carry out their jobs in a safe and professional manner. Each new starter is given in-house induction training targeted to the health and safety responsibilities they will hold, with ongoing training provided via toolbox talks and regular formal meetings with managers – We undertake a series of formal internal health and safety audits every year to review our controls and to ensure they are suitable and sucient to manage risk in the business. Evaluations of the results from these audits are used to facilitate individual site safety improvements and to identify areas where we can enhance our safety procedures across the portfolio – We closely manage our contractors’ activities and the associated risks to the health and safety of customers and visitors, particularly where building works are being carried out in close proximity to common parts and customer-occupied areas – Our Health & Safety Policy was formally reviewed by our Health & Safety Committee twice in the year to ensure it remains appropriate and up-to-date – We have carried out a substantial amount of health and safety training, including, IOSH Managing Safely, NEBOSH Certiﬁcate and speciﬁc training around asbestos, water hygiene, ﬁre safety and the Construction Design and Management Regulations – For the seventh consecutive year, there have been no contractor-related accidents or incidents that have aected our customers – We monitored and reviewed our health and safety systems to promote continued compliance with HSE standards and best practice Risk 9 – Regulatory Human rights and modern slavery – Our Anti-Slavery Policy reﬂects our commitment to upholding human rights and eliminating all forms of forced, slave, bonded or involuntary labour both within our business and our supply chain. All new employees are given training on our Anti-Slavery Policy during inductions and our Employee Code of Conduct reinforces the message that we expect all of our sta to work with us to uphold our commitment to preventing modern slavery in our business and supply chains – We publish a Supplier Code of Conduct on our website, which sets out our expectations of our suppliers, including in respect of modern slavery and human rights. As part of our due diligence process, all new suppliers are expected to read and to abide by the Supplier Code of Conduct – We care about, respect and support internationally proclaimed human rights. We consider the risk of modern slavery and human tracking to be very low in our business, however, we regularly monitor and review our risk proﬁle and emerging regulatory guidance and we will take any necessary actions to improve and to strengthen our practices – Our modern slavery statement is approved by the Board and published on our website annually and it is available at https://www.workspace.co.uk/ investors/sustainability/our-policies. Our modern slavery statement sets out the steps the Group has taken and is taking to help prevent slavery and human tracking in our business and supply chains – We take a zero-tolerance approach to modern slavery and other breaches of fundamental human rights – All sta onboarding suppliers are aware of the requirement for suppliers to abide by the Supplier Code of Conduct – During the year we completed a modern slavery audit of our cleaning contractor. For more details, see page 51 – No incidences of human rights abuse or modern slavery have been identiﬁed (2022: Nil) Risk 7 – Resourcing Risk 9 – Regulatory 90 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPLIANCE STATEMENTS CONTINUED NON-FINANCIAL INFORMATION STATEMENT CONTINUED Policies and due diligence Outcomes of policies and impacts of activities Related principal risks (Pages 69 to 76) Anti-bribery and corruption – Our Anti-Bribery and Corruption Policy, which is reviewed by the Audit Committee annually, sets out the responsibilities and expectations of our employees for the prevention, detection and reporting of bribery and other forms of corruption. The Policy also contains our Gifts and Hospitality Policy, which requires employees to seek approval whenever oered or oering a gift or hospitality valued over £20 (whether they are accepted or refused) – We make suppliers aware of our zero-tolerance approach to bribery and we undertake due diligence on suppliers to conﬁrm that they are committed to the prevention of bribery and corruption – Our Code of Conduct further reinforces these messages – It is our policy to conduct all of our business in an honest and ethical manner. We take a zero- tolerance approach to bribery and corruption and we are committed to implementing and to enforcing eective systems to counter bribery – All sta receive training on the Anti-Bribery and Corruption Policy, including the Gifts and Hospitality Policy, as part of their induction and thereafter with annual refresher training – No incidences of bribery or corruption have been identiﬁed (2022: Nil) Risk 9 – Regulatory Political and charitable donations – Our policy is not to make any political donations. We only make charitable donations that are legal and ethical. Any charitable donations are made with the prior approval of the Company Secretary – The Group did not make any political donations or incur any political expenditure during the year (2022: Nil) Risk 9 – Regulatory Data privacy – We take our obligations under the retained EU law version of the General Data Protection Regulation (UK GDPR), the Data Protection Act 2018 and other applicable data privacy legislation very seriously. We monitor guidance and practice in this area and continue to embed data privacy into the heart of the business – We have a Data Protection Policy, as well as ancillary policies in speciﬁc areas (including security, data breaches, subject rights, appointment of data processors and data privacy impact assessments). We continue to monitor compliance with our policies and procedures and to review and update them where appropriate to reﬂect developing guidance and practice – The Board continues to place high value on data privacy, and privacy is embedded throughout the organisation. Regular reports are provided to the Executive Committee and the Board – Sta are aware of their duties in relation to data privacy. Mandatory data protection training is provided to all sta at induction and on an annual basis. We also provide more tailored, role-speciﬁc training to sta where appropriate – Data privacy is a key consideration whenever new projects are contemplated or changes to existing arrangements are proposed Risk 9 – Regulatory Conﬂicts of interest – In accordance with HR policies and the Code of Conduct, employees are required to notify the Company of any conﬂicts of interest. The Board is also subject to these policies and is regularly reminded of their duty to notify us of any interest in an existing or proposed transaction with the Group – All conﬂicts are recorded on a central register and we have procedures in place for managing conﬂicts of interest – Should a Director become aware that they, or their connected parties, have an interest in an existing or proposed transaction with the Group, they are required to notify the Board in writing or verbally at the next Board meeting – During the year, no Director had any beneﬁcial interest in any contract signiﬁcant to the Group’s business, other than a contract of employment (2022: Nil) Risk 9 – Regulatory Whistleblowing – We have a Whistleblowing Policy which provides employees with information on how they can report, anonymously if they wish, any concerns about impropriety or wrongdoing within the business – Employees have access to an independent telephone line for anonymous reporting of concerns – The Whistleblowing Policy is reviewed annually, and the Board receives updates from the Company Secretary on the operation of the whistleblowing system – During the year under review, we did not receive any whistleblowing messages (2022: Nil) Risk 7 – Resourcing Risk 9 – Regulatory 91 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPLIANCE STATEMENTS CONTINUED NON-FINANCIAL INFORMATION STATEMENT CONTINUED TCFD Workspace considers climate change as a principal risk and a material issue. In line with the ‘Task Force on Climate-related Financial Disclosures’ (TCFD) recommendations, since 2019 Workspace has provided information to stakeholders on its climate-related risks and opportunities, in turn helping them to make informed decisions. This year we have re-assessed our material climate risks and opportunities, and their potential impact using a number of climate change scenarios. This assessment has provided us with an in-depth view of the levels of risks across the portfolio and helped us test the resilience of our strategy. We also have a more robust understanding of the opportunities to Workspace, arising from the transition to a low carbon economy. We have used the ﬁndings of this assessment to update our approach to risk management, implement a strategy to mitigate material risks and maximise the opportunity. Aligned to this is our 2030 net zero carbon commitment, which ensures we are closely managing our transition risks and building resilience within the business. The following section includes our comprehensive TCFD disclosures, including details on climate change scenarios and how they may aect our business in the short and long term. As required by the Listing Rules (LR 9.8.6R), we conﬁrm that this report is consistent with all of the TCFD recommendations and recommended disclosures (four TCFD recommendations and 11 recommended disclosures). TCFD pillar and recommendation Recommended disclosures Compliance status Progress to date 2023/24 objectives 1. Governance Disclose the organisation’s governance around climate-related risks and opportunities – Describe the Board oversight of climate- related risks and opportunities Achieved – Board ESG Committee established to oversee climate-related risks, opportunities and goals – Executive ownership of climate-related objectives, with performance linked to their remuneration – Board ESG Committee to continue monitoring climate-related risks and opportunities – Stretching carbon related goals to be included in everyone’s objectives, including senior management and linked to remuneration – Describe management’s role in assessing and managing climate-related risks and opportunities Achieved 2. Strategy Disclose the actual and potential impacts of climate- related risks and opportunities on the organisation’s businesses, strategy and ﬁnancial planning where such information is material – Describe the climate-related risks and opportunities the organisation has identiﬁed over the short, medium and long term Achieved – In-depth assessment of climate-related risks and opportunities undertaken against 4°C and 1.5°C global temperature rise scenarios (page 95) Disclosure on potential impact and resilience of strategy on page 96 – Analysis on exposure to climate risk and resilience of business strategy to be re-assessed annually taking into account any new changes in drivers – Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy and ﬁnancial planning Achieved – Describe the resilience of the organisation’s strategy, taking into consideration dierent climate-related scenarios, including a 2°C or lower scenario Achieved 3. Risk management Disclose how the organisation identiﬁes, assesses, and manages climate-related risks – Describe the organisation’s processes for identifying and assessing climate-related risks Achieved – Risks identiﬁed using climate models, academic research and expert advise – Based on probability and impact scale, risk level assessed as low, moderate or high. – Utilising enterprise risk management framework to capture, document and manage risks – Climate risk is identiﬁed as a principal risk and will continue to be assessed as part of the overall risk management framework, including periodic review of eectiveness of controls – Describe the organisation’s processes for managing climate-related risks Achieved – Describe processes for identifying, assessing, and managing climate-related risks and integrating them into the organisation’s overall risk management Achieved 4. Metrics and targets Disclose the metrics and targets used to assess and manage relevant climate- related risks and opportunities where such information is material – Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process Achieved – Annual publication of energy consumption, renewable energy generation and procurement, carbon emissions (from fuels, waste, water), recycling rates, EPC split, voluntary green certiﬁcations, energy eciency projects, portfolio ﬂood exposure – Key metrics will be tracked on a monthly basis and presented to Board – Science-based carbon emissions reduction targets to be updated to reﬂect newly on-boarded properties – Disclose Scope 1, Scope 2, and if appropriate, Scope 3 greenhouse gas (GHG) emissions and the related risks Achieved – Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets Achieved 92 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPLIANCE STATEMENTS CONTINUED GOVERNANCE STRATEGY The role of the Board Our Chief Executive Ocer has the highest level of responsibility for climate-related risks and opportunities and together with the rest of the Workspace Board, ensures we maintain close oversight of climate-related issues. An ESG Committee comprising of six independent Non-Executive Directors, the Chief Executive Ocer and the Chief Financial Ocer is set up to assist the Board in incorporating climate-related considerations in business strategy and decision making. Ultimately, ensuring the long-term sustainable success of the business. The ESG Committee receives a detailed update on our sustainability and climate-related goals three times a year, from members of the Executive Committee and the Head of Sustainability. The update from the Committee and any associated recommendations are then put forward to the Board for consideration. During the year, the Board received updates from the ESG Committee three times and considered the following climate-related issues: alignment of McKay properties with the 2030 net zero target, assessment of revised budget to deliver on the commitment, compliance with changes to Minimum Energy Eciency Standard (MEES) and eectiveness of our climate-related policies. See page 172 for further details of climate-related topics considered by the Board and its Committees (including Audit and Remuneration Committees). The Board also received a technical brieﬁng on three topics as part of the ongoing upskilling drive, including climate risk assessment, renewable procurement and evolving sustainability reporting requirements. Following detailed deliberation, the Board made a decision to elevate climate risk as a principal business risk and reviewed the Climate change risk and opportunity As a responsible business, we consider climate-related risks and opportunities across our portfolio and business wide activities. We have identiﬁed the physical and transition risks arising from climate change and are committed to actively managing these risks. Due to the nature of our business model, Workspace is also in a position to capture several opportunities arising from the transition to a low carbon economy. We have worked with Willis Tower Watson (WTW) to identify and assess the impact of climate-related risks through quantitative and qualitative scenario analysis, considering short-term (to 2025), medium-term (2025– 2030) and long-term (to 2050 and beyond) time horizons. This short-term and medium- term time horizons align with our portfolio strategy and ﬁnancial planning. Our portfolio strategy categorises projects that are live and will be completed in the short term (1-2 years) and a medium-term development pipeline that extends out to 2030. We accordingly do our budgeting for short and medium term. We are also working on a rapid decarbonisation of the business over the medium term, as reﬂected in our 2030 net zero target. Anything longer than 2030 is considered long term given the regulatory and market uncertainty involved. The assessment we have conducted is based on two pre-deﬁned climate scenarios – a 4°C global temperature rise scenario in line with the Intergovernmental Panel on Climate Change (IPCC) Representative Concentration Pathway (RCP 8.5) and a 1.5°C global temperature rise scenario in line with RCP 2.6. mitigation strategy and eectiveness of controls as part of the principal risk register review. This information is provided to the Board and the Executive Committee via the Risk Management Group, comprising of senior members from dierent parts of the business. The Risk Management Group meets monthly and is responsible for monitoring and implementing risk management activities, including climate risk. We have also linked sustainability and climate-related performance measures to the Executive Directors’ remuneration, accounting for 24% of their bonus weighting. These targets are also incorporated into wider team objectives. The Board received a monthly report tracking progress against these goals. See page 204 for further details. Management responsibility The Head of Portfolio Management is the Executive owner of our climate strategy. He is supported by the Head of Sustainability and members of the Sustainability Committee in the day-to-day management and delivery of climate-related initiatives. The Sustainability Committee is made up of cross-functional members who head up various business departments, such as development, asset management, facilities management, investment and support functions. The Committee includes a number of other Executive Committee members, which ensures senior level ownership and oversight of implementation plans and also streamlines communication to the wider Executive team and the Board. The Sustainability Committee meets monthly and is responsible for setting and operationalising our climate-related objectives, and hence is well positioned to manage, report, communicate and inform our approach on climate-related issues. The 4°C warming scenario assumes that the markets, governments and society will continue business as usual with increasing adoption of energy and resource intensive lifestyles and abundant exploitation of fossil fuels. There will be limited action taken to mitigate climate change in this scenario and hence as a result in the period after 2030, the physical eects of climate change will begin to intensify rapidly. The 1.5°C warming scenario assumes proactive and sustained action to reduce carbon emissions over the next 30 years to build a low-carbon economy, in the form of stringent Government policies on stricter energy eciency building codes and carbon taxes. There will also likely be signiﬁcant public and private sector investment in low emissions technologies to help the global economy achieve net zero goals by 2050. Overall, this scenario would result in higher transition risk in the short and medium term. Given the warming over pre-industrial levels is going to be limited, the extent of physical risk will only be slightly higher than it is today. 93 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED 1 2 Our assessment considered all plausible climate-related risks and opportunities that are applicable for real estate businesses. These are identiﬁed in the table below. The impact of physical risks is mainly in the form of direct damage to property, business interruption or supply chain disruption. Impact of transition risks is mainly in the form of increased cost of business, property obsolescence or failure to meet customer expectations. RISKS RELATED TO THE PHYSICAL IMPACTS OF CLIMATE Acute Climate Risks Chronic Climate Risks Winter storm Heat stress Tornado Precipitation River ﬂood Drought Flash ﬂood Fire weather Coastal ﬂood Sea level rise Hailstorm Lightning RISKS AND OPPORTUNITIES RELATED TO THE TRANSITION TO A LOWER-CARBON ECONOMY Policy and Legal Risks/Opportunities – Pricing of GHG emissions – MEES requirements (EPC B by 2030) – Climate Change litigation – Enhanced emissions reporting obligations – Increasingly stringent planning requirements Technology Risks/Opportunities – Substitution of existing technology to lower emissions options Market Risks/Opportunities – Change in customer demands – Increased cost of raw materials – Increased cost and availability of electricity – Cost of capital – Emissions oset Reputation Risks/Opportunities – Investment risk – Employee risk WTW conducted an asset by asset exposure analysis for a range of climate risks (as shown in the table) at the present day, as well as for future years under the selected scenarios. Data used for the analysis includes state of the art models and databases within the insurance industry (including WTW Global Peril Diagnostic, MunichRe hazard database, SwissRe CatNet amongst others), climate models, published research and information from IPCC. The assessment was further supplemented with local information and data that we hold on the assets. To assess the transition risks, we conducted scenario analysis using the guidance issued by TCFD. The scenario used for the analysis aligns with projections to keep global warming below 1.5°C above pre-industrial temperatures and it was constructed based on a variety of sources including RCP 2.6 scenario from IPCC, International Energy Agency (IEA) and the Network for Greening the Financial System (NGFS). NGFS has also been used as a primary source for carbon price estimates. Potential transition risks to Workspace were identiﬁed and articulated using academic research and discussions with Workspace teams (as shown in the table). All the identiﬁed risks were assessed in terms of impact and probability via a series of subject matter expert interviews with Workspace teams (such as ﬁnance, investment, technology, legal, development, HR and leasing). Where the risk criteria allowed for quantiﬁcation, ﬁnancial impacts were estimated using assumptions and likelihood assessed and aligned to our Enterprise Risk Management (ERM) risk rating criteria (details of our ERM framework can be found on page 97). This helped us narrow down the material risks and opportunities applicable to Workspace as shown on page 95, along with risk levels. Our analysis showed that all of London and the South East could be exposed to a mix of acute and chronic climate risks such as ﬂooding, windstorm, drought and heat stress, thereby aecting our properties as well. The analysis showed that the chronic risk would become more evident in the long term, but the impact level will still be low and manageable under 1.5°C scenario. The impact level is deemed moderate under 4°C scenario, arising from failure to transition. Acute risk, on the other hand, could be felt today. Using catastrophe models such as Property Quantiﬁed and KatRisk, we simulated thousands of acute climate events to estimate the level of impact in terms of property damages and business interruption. Taking this probabilistics view and accounting for actual vulnerability of our locations have further provided rigour to our risk level projections. Overall, we estimate the level of impact from acute risks (such as ﬂooding, ﬂash ﬂoods and wind storms) is low. On transition risk, the impact is evident even now, and could be signiﬁcant under the 1.5°C warming scenario due to stringent policy requirements, increasing customer expectations and expected raw materials price increases. We have estimated the risk level to be moderate, considering impact in terms of increased cost, property obsolescence and customer demand. However, through our sustainable business model we hold an advantage over our peers and have committed to a 2030 net zero target (two decades earlier than UK’s commitment in Climate Change Act 2008 (2050 Target Amendment) Order 2019), thereby minimising our risk. We are also we1ositioned to capture the transition opportunities, such as operational cost eciencies, lower cost of capital and changing customer demands. 94 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED The table below shows the summary of material risks and opportunities, applicable to Workspace, across the various time horizons and considering the two warming scenarios. Short term (to 2025) Medium term (2025-2030) Long term (to 2050+) 1.5°C scenario Moderate transition risk resulting from: – MEES requirements for all commercial buildings to be EPC B by 2030, requiring investment in energy eciency upgrades across the portfolio – Changing customer demands on sustainability, requiring swift adaptation of our older buildings to meet high sustainability standards Moderate transition risk resulting from: – Continued MEES requirements – Increase in planning requirements, resulting in higher upfront investment in energy eciency or osetting – Increased costs of raw materials – Increased costs associated with osetting of scope 3 emissions Low transition risk in the long term, assuming the UK economy has already transitioned to a low carbon world Transition opportunity arising from: – Operational cost savings and eciencies from upgraded EPCs and implementation of low carbon technologies – Enhanced customer attractiveness due to our ability to meet their expectations on sustainability across many of our new and refurbished buildings – Access to green ﬁnance Transition opportunity continues to exist due to operational cost savings, customer expectations and access to green ﬁnance Low transition opportunity in the long term, assuming the UK economy has already transitioned to a low carbon world Low physical risk – Existing exposure to windstorm across the portfolio (unrelated to changing temperature). The impact in terms of physical damage and business disruption is low considering asset vulnerability – Flood risk exposure at six buildings and risk of localised ﬂash ﬂooding due to heavy precipitation across 11 buildings. The impact in terms of physical damage and business disruption is low considering asset vulnerability Low physical risk with no signiﬁcant changes to current risks proﬁle, other than the already existing exposure to windstorm and ﬂood risk Low physical risk, mainly due to smaller manageable changes in chronic risks such as drought and heat stress. The main impact from droughts is water scarcity and impact on green areas. Heat stress can impact running costs and customer wellbeing. On acute risk, windstorm continues to pose risk and eight properties become exposed to ﬂood risk. However, the impact in terms of physical damage and business disruption is low considering asset vulnerability 4°C scenario Transition risk non-existent in this scenario, in the short term Transition risk non-existent in this scenario, in the medium term Moderate physical risk arising from failure to transition: – Continued exposure to windstorm, ﬂood risk at nine buildings and localised ﬂash ﬂooding across 11 buildings – Increased drought risk across all buildings – Increased heat stress across all buildings Low physical risk, due to already existing exposure to windstorm (unrelated to changing temperature), ﬂood risk at six buildings and localised ﬂash ﬂooding across 11 buildings. The impact in terms of physical damage and business disruption is low considering asset vulnerability Low physical risk with no signiﬁcant changes to current risks proﬁle, other than the already existing exposure to windstorm and ﬂood risk 95 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED RISK MANAGEMENT Enterprise risk management framework Risk management continues to be an integral part of all our activities. Risks and opportunities are considered in every business decision we make. We speciﬁcally focus on key risks which could impact on the achievement of our strategic goals and therefore on the performance of our business. We have an established Risk Management Framework in place to help us capture, document and manage risks facing our business. The Audit Committee along with the full Board have overall responsibility for risk management. See our Risk Management Framework on page 171. Our aim is to manage each of our risks and mitigate them so that they fall within the risk appetite level we are prepared to tolerate for each risk area. Risk appetite reﬂects the overall level of risk acceptable with regards to our principal business risks. The Board is responsible for deciding the amount of risk it is willing to take. High risk, after considering the controls we have in place to mitigate risks, is not generally tolerated. We work towards a moderate to low risk proﬁle, ensuring that we have mitigating actions in place to bring each risk down to within the agreed risk appetite. Our Risk Management Framework is underpinned by close working relationships between the Executive Directors, senior management and other employees, which enhances our ability to eciently capture, communicate and action any risk issues identiﬁed. Strategy and ﬁnancial planning Our sustainability strategy has a key focus on climate change mitigation and adaptation, ensuring we are minimising the environmental impact of our portfolio and building resilience for the long term. We are delivering on this ambition by embedding climate considerations across the property life cycle: Development, Investment and Asset Management and the services we deliver to our customers. Development: As a business, our primary focus is on repurposing old buildings to higher standards and hence inherently our activity is less carbon intensive than some of our peers. However, we continue to focus on further minimising our environmental and carbon impact, ensuring what we build is ﬁt for the future. Our sustainable development brief requires all our development and refurbishment projects to meet high energy and carbon speciﬁcations, thereby minimising our exposure to risks such as MEES, stringent planning requirements, raw material costs and increased customer demands. We also ensure that we test our design brief against physical risks such as heat stress and ﬂooding. Investment: Climate considerations inform all our investment decisions, whether it’s spending capex on building upgrade or acquiring new properties. We conduct sustainability due diligence, taking into account a number of warming scenarios, prior to acquisition to assess climate-related risks associated with the building and forward plan the investment and interventions required to mitigate any material risks. Asset management: Our ﬂexible business model allows us to implement a rolling programme of refurbishments across the existing portfolio, to ensure we continue to improve the energy and carbon performance of all our buildings and remain compliant with legislation. Our ﬂood risk assessment has also helped us prioritise adequate defences and mitigation plans for exposed assets. Services to customer: Climate considerations are fully embedded in our operational platform, ensuring our site teams are delivering customer services sustainably. This includes initiatives to manage whole building energy consumption, raising awareness with our customers to reduce carbon and manage our waste sustainably. We are also actively upgrading our portfolio to be more sustainable, in line with changing customer expectations. Financial planning: Climate considerations inform our business ﬁnancial reporting and planning. The Board deem no material impact, considering valuation of properties, going concern and viability of Group and the capital expenditure required. The Board have approved a comprehensive investment plan to transition our portfolio to net zero carbon and upgrade EPC to A and B (see page 49) and this has enabled us to forward plan investments on interventions such as energy eciency technology, decarbonising heat, onsite renewables and sustainable materials and construction practices. To ensure we have access to capital at competitive rates, we have also linked our ﬁnancing to climate-related criteria (£300m Green Bond, £335m ESG- linked revolving credit facility and a £65m loan from Aviva). Resilience of strategy The climate scenario assessment undertaken has revealed that our overall exposure to climate-related risks is moderate, mainly arising from transition risk under 1.5°C scenario (see table on page 95). The geographic concentration of our portfolio in London and low vulnerability of assets to acute risks, such as windstorm and ﬂooding, means that the overall exposure to physical climate risks is low. Our transition risks whilst ranked moderate, are manageable because of our sustainable business model, whereby our carbon and energy intensity is lower compared to the industry average. Our focus on repurposing older buildings to meet high sustainability and performance standards ensures we are building in resilience to climate factors across the portfolio. Our robust operational platform and onsite management control, allows us to proactively manage environmental performance of our assets and mitigate both physical and transition risks. Given our long-term approach, coupled with our ﬂexible lease model which allows us to invest across our portfolio in a timely manner and actively address climate risks, we are conﬁdent that our strategy is resilient against plausible climate scenarios. Further, our pathway to become net zero carbon by 2030 (see pages 41 and 42), ensures we are aligning our business to a 1.5°C warming scenario and mitigating any potential risks. Our 2030 net zero carbon pathway ensures we are aligning our business to a 1.5°C warming scenario and mitigating any potential risks 96 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED 3 IMPACT LIKLIHOOD Almost certain Low Severe Identifying and assessing risk Overall, we identify risks across two key areas: Principal Business (Strategic) risks and Operational risks. Climate-related risks have been factored in both these categories. The low, moderate, high risk severity score is determined using the following calculation: Impact x Impact x Probability, which provides a weighted impact scoring. The impact is determined on a scale from 1 (low) to 4 (severe) based on revenue, property valuation, health and safety and reputational consequences. Probability is determined on a scale from 1 (unlikely) to 4 (almost certain), considering the likelihood of the risk materialising within a ﬁve-year period. The scenario analysis conducted with WTW helped us assess the level of exposure to climate risk, its likelihood (taking into account both existing and emerging regulatory and market risks), and determine its ﬁnancial materiality using a structured template (see impact criteria on the right) to capture any impact on revenue, costs or property valuation. This allowed us to map our risk levels as low, moderate or high, using our risk scoring matrix. In our case, we observed no signiﬁcant change in risk proﬁle between various time horizons and hence the mitigation strategy is focused on short to medium term actions, covering our response out to 2030, including delivery of our net zero carbon commitment. Depending on the extent of planned mitigation measures in place, as already captured in our net zero pathway and existing business processes, we were able to narrow down the material risks which had a level of residual impact (as listed on page 95) that we will continue to manage eectively. These are captured in the table opposite along with current mitigation strategy for the two climate scenarios we have assessed. Risk scoring matrix 4 3 2 1 1 2 3 4 Impact criteria Impact 1 – Low 2 – Medium 3 – High 4 – Severe Revenue/Cash Revenue <£2m Cash <£1m Revenue £2m-£15m Cash £1m-£5m Revenue 15m-£25m Cash £5m-£15m Revenue >£25m Cash >£15m Property valuation <2% unexpected reduction 2-5% unexpected reduction 5-10% unexpected reduction >10% unexpected reduction Hazard/Health & Safety Minor injury/ﬁrst aid required Minor reportable injury/ RIDDOR report required Major reportable injury Large scale injuries Reputational Third-party communications with no lasting impact on reputation Adverse local media attention which could lead to a small number of complaints and damage the brand locally Adverse national publicity resulting in short-term damage to public and/or political conﬁdence Adverse sustained national publicity resulting in loss of public and/or political conﬁdence Likelihood scale The following criteria should be used, considering the likelihood of the risk materialising within a ﬁve-year period. Likelihood 4 – Almost certain >80% 3 – Likely 50 -79% 2 – Possible 21-49% 1 – Unlikely <20% Unlikely Risk level: Low Moderate High 97 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED Risk Evaluation of residual risk Mitigation strategy Transition risks and opportunities in the short and medium term – 1.5°C warming scenario Policy and Legal – EPC rating requirements – 28% of the Workspace portfolio is rated C and 29% is rated D and E. Additional investment of £45–60m will be required to meet EPC A/B across the portfolio by 2030 (c.£7-8m annually) – However, taking into account the annual maintenance capex for ongoing refurbishments throughout the year, the actual additional investment required will be much lower than £5m – Opportunity: There will be an opportunity arising from higher operational savings due to upgraded environmental performance – Target set to upgrade a signiﬁcant proportion portfolio to EPC A/B each year. We successfully upgraded 12% of portfolio to EPC A/B this year. – A rolling programme of EPC and net zero audits are being undertaken to identify asset level upgrade plans and a process is in place to upgrade a unit once vacant – A detailed investment plan is created for annual budgeting purposes – Central register created to track EPC compliance status monthly Policy and Legal – Increasingly stringent planning requirements – Workspace is able to meet London Plan requirement of 35% emissions reduction over Part L – If the requirements were to get more stringent in future (say 50% reduction or inclusion of osetting for upfront carbon at planning stage), we would need to design buildings dierently, which could raise project costs – By implementing our net zero design brief, we are able to achieve over 35% reduction at minimal incremental cost – Continual tracking of planning requirements to inform our design brief – Strategy in place to minimise whole life carbon through responsible design and material choices Market – change in customer demands – Based on a recent survey, nearly 20% of our customers factor in sustainability as one of the top criteria in their choice of oce space – By 2030, our portfolio will be net zero carbon, ensuring we are well placed to meet changing customer expectations and capture more market share by being ahead of our peers – In the interim, there is some risk to our older properties which are not in the top tier of energy/carbon performance and are awaiting upgrades – Opportunity: There will also be an opportunity from increased customer demands (i.e. successful lettings, high occupancy) for our newly refurbished or developed buildings that meet high sustainability standards – Our net zero pathway ensures we continue to enhance our portfolio to meet changing customer demands – Through continual collection of customer preferences and data, we intend to proactively manage customer expectations – Improved communications with customers on our sustainability eorts further strengthen customer satisfaction Market – increased cost of raw materials – We expect the costs of carbon intensive raw materials (such as cement, steel) will increase in the future – The resulting impact will depend on our build activity in a year and the percentage of cost passed on by suppliers – Our focus on repurposing limits our exposure to raw materials and associated cost increased – Continued eorts to explore new materials and technologies will help further reduce embodied carbon of our developments Market – emissions oset – Our current emissions footprint is around 26,000 tonnes of CO 2 . We expect our net zero pathway to reduce our scope 1 and 2 emissions by at least 90% with osetting for the residual emissions only – Applying UCL projected cost of carbon at $50 per tonne, this could cost us up to £700k annually (assuming worst case scenario for scope 3 reduction) – Continue to drive progress on our net zero pathway to eliminate scope 1 and 2 emissions – Continued eorts to explore new materials and technologies to reduce embodied carbon of our developments and hence limit osetting needed for scope 3 emissions * Source: https://www.ucl.ac.uk/news/2021/jun/ten-fold-increase-carbon-oset-cost-predicted 98 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED Risk Evaluation of residual risk Mitigation strategy Physical risks in the short and medium term – 1.5°C warming scenario Windstorm – Most of our buildings could be exposed to risk of windstorm and missile impact from ﬂying debris. However, given the solid facade and relatively lower height of our buildings, we estimate level of impact in property damages and business interruption to be low (less than £1m, assuming worst case scenario). The risk proﬁle will likely remain within the current levels of variability, with changing temperatures – Business continuity and emergency response planning measures in place to minimise potential impact in case of storm warnings – Protection against portable and not secured items in building vicinity is being incorporated River ﬂood – Flood defences provide an adequate level of protection however, there are some local areas at risk which exposes six of our buildings (eight buildings become exposed by 2050). The impacts could be water ingress, damage in lower ﬂoor and some level of interruption to the business. Taking into account our ﬂood mitigation strategy and emergency preparedness plans, we estimate level of impact in property damages and business interruption to be low (less than £2m, assuming worst case scenario). The risk proﬁle only moderately changes with time or changing temperatures – Comprehensive ﬂood risk management plans created for exposed assets – Business continuity and emergency response planning measures put in place in case of ﬂooding – Flood mitigation measures being incorporated in design of new projects – Insurance protection in place in case of physical damage or interruption Localised ﬂash ﬂooding – Whilst the precipitation stress due to heavy rainfall is likely to stay the same, a handful of our buildings could be exposed to localised ﬂash ﬂooding due to local terrain features which could cause water ingress and damage in lower ﬂoors. A deeper dive of these buildings has revealed lower vulnerability to localised ﬂash ﬂooding and hence we estimate level of impact in property damages and business interruption to be low (less than £1m, assuming worst case scenario). The risk proﬁle is not likely to change with time or changing temperatures – Comprehensive ﬂash ﬂood risk assessment being undertaken across the portfolio – Business continuity and emergency response planning measures put in place to minimise impact in case of high precipitation warning – Regular drainage survey being undertaken across select buildings to ensure sucient water attenuation on site – Flood mitigation measures being incorporated in design of new projects, including blue roofs and rain water harvesting systems Physical risks in the long term – 4°C warming scenario Drought – Under this climate scenario, London and the South East of the UK could be exposed to drought stress, aecting all our properties in the long term. Whilst our water consumption is not material, this would result in slightly increased utility costs and impact on green areas. – We are installing water ecient ﬁttings across our buildings – Our landscaping has been designed to bear warmer climates in mind Heat stress – In this scenario, by the end of the century, London and the South East of the UK could be exposed to medium level of exposure to heat stress resulting in the number of heatwave days increasing to 20 days per year, thereby aecting all our properties. On average, there will be an increase in our cooling demand. The scenario will also result in milder winters, which would in turn reduce our heating demand on average. In the short term, heat stress will not be a signiﬁcant issue despite slight increase in heatwave days – A rolling programme of air conditioning is being implemented across the portfolio to ensure customers are comfortable in high temperatures – Additional measures such as outdoor greenery and shade being incorporated to provide ‘refuges’ in hotter weather conditions – Review of current heating and cooling usage being undertaken to ensure we continue to optimise consumption, in response to outdoor temperatures * Note: Under the 4°C warming scenario – windstorm, ﬂood risk and ﬂash ﬂood risk will exist as well, and potentially could edge further. However, the risk proﬁle will not change signiﬁcantly. The mitigation strategy listed above will continue to be eective . 99 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED METRICS AND TARGETS Kennington Park, Oval Metrics used to assess climate-related risks and opportunities To understand our climate-related impact and performance we report on a wide range of consumption and intensity metrics relating to energy, carbon, waste and water, such as: – Total energy consumption (page 101) – Total electricity consumption, including proportion generated from renewables (page 101) – Proportion of electricity sourced from renewable sources (page 43) – Total fuel consumed on site (page 101) – Building emissions intensity by ﬂoor area (page 101) – Total emissions from water consumption (page 101) – Total emissions from waste, waste recycled and diverted from landﬁll (page 101) – EPC split of the portfolio by ﬂoor area page 49) – Number of buildings with sustainability certiﬁcation (page 44) – Number of energy eciency projects implemented and associated capital expenditure (page 49) – Number of buildings exposed to ﬂooding (page 95) – ESG metrics linked to remuneration and performance against these (page 204) Pages 43 to 45 provide further detail on targets we have set against all climate-related metrics and progress made to date. Scope 1, 2, 3 GHG emissions and related risks Carbon emissions represent one of our largest environmental impacts and we are actively working to reduce our sources of carbon where possible (see our net zero carbon pathway on page 41). Signiﬁcant contributors to our operational carbon emissions are the electricity and gas consumed within our buildings and by improving the energy eciency of our buildings and electrifying the heating systems we aim to reduce our overall carbon footprint. Following an in-depth analysis of our scope 3 emissions, we now have a much better understanding of the emissions associated with our development and refurbishment activities which make up a signiﬁcant portion of our scope 3 emissions. Refer to page 101 for our scope 1, 2 and 3 greenhouse gas emissions data and year on year changes (calculated using GHG protocol). Targets used to manage climate-related risks and opportunities To reduce our carbon emissions, we continue to focus on designing low-carbon buildings and implementing energy eciency initiatives throughout the portfolio, whilst actively engaging with both our site sta and customers. Our main target is to deliver a net zero carbon business by 2030 (see page 41 for the scope of our commitment). This is underpinned by the following emissions reduction targets: – Reduce scope 1 and 2 emissions by at least 90% by 2030 (Note: it’s our intention to go beyond our science-based targets, requiring only 42% reduction in scope 1 emissions) – Decarbonise heating from our portfolio by 2030 – Source 100% energy from renewable sources – Undertake whole life carbon assessment of all development and refurbishment projects – Reduce scope 3 emissions from capital goods by 20% per square foot of net lettable area by 2030, from a 2020 base year 100 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED 4 GREENHOUSE GAS (‘GHG’) EMISSIONS AND ENERGY USE DATA FOR STREAMLINED ENERGY & CARBON REPORTING (SECR) Source of emissions 2019/20 (baseline Year) 2021/22 2022/23 LfL portfolio 2022/23 Whole portfolio 2022/23 vs 2021/22 % change 2022/23 vs 2021/22 LfL portfolio Scope 1 (Direct) 3,451 3,221 2,358 3,188 -1% -27% Gas (tCO 2 e) 2,620 2,305 1,684 2,336 +1% -27% Fugitive Emissions (tCO 2 e) 828 916 674 852 -7% -26% Vehicle Emissions (tCO 2 e) 3 – – – – – Scope 2 (Energy Indirect) 7,144 5,229 5,142 6,437 +23% -2% Electricity (location based) (tCO 2 e) 7,021 5,069 5,005 6,300 +24% -1% Electricity (market based) (tCO 2 e) – – – – – – Purchased Heat (location based) (tCO 2 e) 123 160 137 137 -14% -14% Total Scope 1 & 2 (location based) 10,595 8,450 7,500 9,625 +14% -11% Energy consumption used to calculate above emissions (kWh) 42,430,031 37,400,667 35,913,161 46,183,607 +23% -4% Intensity Ratio: Net Lettable Area tCO 2 e/sq. ft. 0.00181 0.00209 0.00194 0.00183 -13% -7% Intensity Ratio: Gross Internal Area tCO 2 e/sq. ft. 0.00177 0.00144 0.00140 0.00137 -5% -3% Scope 3 (Other Indirect) 21,264 8,398 6,614 16,612 +98% -21% Purchased Electricity Transmission & Distribution (tCO 2 e) 596 449 458 576 +28% +2% Customer Direct Energy (tCO 2 e) 3,515 2,015 1,581 3,296 +64% -22% Water Supply (tCO 2 e) 91 29 29 34 +16% 0% Water Treatment (tCO 2 e) 187 53 53 61 +16% 0% Waste Management (tCO 2 e) 82 59 55 64 +9% -6% Heat – Transmission & Distribution (tCO 2 e) 6.5 8 7 7 -10% -10% Embodied carbon in development projects (tCO 2 e) 8,982 1,642 4,430 5,744 +250% +170% Purchased goods and services (tCO 2 e) 7,647 4,013 not available 6,511 +62% N/A Employee Commuting (tCO 2 e) 84 130 not available 288 +121% N/A Business Travel (tCO 2 e) 74 0.5 not available 31 +5,567% N/A Total Scope 1, 2 & 3 (tCO 2 e) 31,860 16,848 14,114 26,238 +56% -16% Total gas use – whole building (kWh) 15,617,931 13,956,418 10,597,353 16,137,792 +16% -24% Total electricity use – whole building (kWh) 38,801,849 31,480,001 32,764,485 46,475,822 +48% +4% Total purchased heat – whole building (kWh) 700,922 939,261 805,247 805,247 -14% -14% Total energy consumption – whole building (kWh) 55,120,702 46,375,680 44,167,085 63,418,861 +37% -5% Self generated renewable electricity (kWh) 129,533 160,976 191,629 191,629 +19% +19% * Note: All ﬁgures reported relate to emissions and energy consumed in the United Kingdom. 101 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED Performance In addition to our operational emissions, of which the boundaries are explained above, we have voluntarily reported our like-for-like portfolio GHG performance, which excludes the 30 properties acquired from McKay Securities in May 2022. We achieved a 27% reduction in scope 1 emissions on this like-for- like portfolio, which is a result of investment in high eciency heat pump installation across a number of properties and optimisation of system controls and setpoints. We also rolled out a number of energy eciency upgrades across the portfolio such as LED lighting, presence detection sensors, smart BEMS and ran several energy awareness campaigns with customers. Due to these measures our electricity consumption remained stable (scope 2 decreased slightly by 2%), despite signiﬁcantly higher levels of occupancy in our buildings compared to the 2021/22 period where oce working patterns were still impacted by the pandemic. Overall, Workspace procured energy consumption reduced by 4% across the like-for-like portfolio, thanks to granular energy data analysis, continued roll out of smart BEMS and investment HVAC and lighting upgrades. Following the acquisition of McKay Securities in May 2022, our portfolio has increased by 1,400,000 sq. ft. which has resulted in a sizeable increase in our GHG emissions. Hence the numbers reported for the whole portfolio are not comparable with the previous years. Our market-based electricity ﬁgure is zero because all of the electricity we purchase is now on a renewable energy contract backed by Renewable Energy Guarantees of Origin (REGOs). Energy eciency actions taken during 2022/23 We have proactively identiﬁed and delivered a range of energy eciency projects across our portfolio (invested £8m across 41 properties), such as LED and PIR lighting upgrades, installation of secondary glazing and a rolling programme of high eciency heat pumps. We have also beneﬁtted from improved data management and customer engagement initiatives across a number of our buildings. We have continued to roll out our Building Energy Management System (BEMS), Optergy, which is a smart metering technology that has enabled real-time energy monitoring at the building level right down to individual plant equipment. The data provided by the BEMS is used by our in-house Facility Management teams to improve energy management practices and reduce GHG emissions. The Optergy portal is now live at 28 sites and enables us to view and monitor our energy consumption proﬁles, down to the unit level. REPORTING FRAMEWORK Reporting period: 1 April 2022 – 31 March 2023 Reporting Frequency – Annual, aligned with ﬁnancial reporting Regulatory: Part 7 of The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013. Boundary: Our GHG emissions have been prepared using the ‘operational control’ approach, in compliance with the Greenhouse Gas Protocol guidance. Scope 1 and 2 emissions include tenant consumption where we procure gas, electricity or heat on their behalf. Where electricity is directly purchased by our tenants (c.64% of NLA), we have estimated usage and corresponding emissions have been included under our scope 3 reporting. Following the acquisition of McKay Securities in May 2022, our portfolio now comprises 86 properties (whole portfolio), covering 5,300,000 sq. ft., representing a 1,400,000 sq. ft. increase from our previous reporting period. We have reported environmental performance for Workspace like-for-like portfolio and Workspace whole portfolio (including McKay). In cases where a property has been acquired or sold during the reporting period, we report its greenhouse gas emissions up to the sale date or from the acquisition date. We exclude properties from greenhouse gas reporting for the duration of any major refurbishment or construction project. Reporting standards: World Resources Institute/World Business Council for Sustainable Development Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard, Revised Edition (the GHG Protocol). World Resources Institute/World Business Council for Sustainable Development Greenhouse Gas Protocol: Corporate Value Chain (scope 3). We have also aligned our reporting with: – EPRA ‘Sustainability Best Practice Recommendations’ (sBPR). Published in the sustainability performance section of our investor website – Sustainability Accounting Standards Board (SASB) real estate metrics. Pages 104 and 105 – Global Reporting Initiative (GRI) 2021 Standard. Published in the sustainability performance section of our investor website Veriﬁcation: Accenture were appointed for independent third-party veriﬁcation of our carbon data. The veriﬁcation has been performed to the international standard ISO 14064-3:2019 Speciﬁcation. Limited level of assurance, based upon a 5% materiality threshold. The full assurance statement can be found in the sustainability performance section of our investor website. Further, our social value data has been veriﬁed by Social Value Portal. Other: When reporting totals, the location-based emissions are used. All market-based emissions are backed by Renewable Energy Guarantees of Origin (REGOs). Any questions about the reported information, please contact: [email protected] 102 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED Method for data collection We collect utility data across our operational portfolio from manual meters, automated meters and invoices, which are all collated on our energy reporting and billing platform. Our site teams are responsible for reading manual meters and log consumption data onto our energy and billing management platform on a monthly basis. To remove reliance on manual meter reading, we continuously look at upgrading to automatic meters, which are currently in place across the majority of our main incomers. An in-house energy analyst role was created to review the accuracy of energy reporting and to analyse monthly performance trends and prioritise properties for energy eciency improvements. Due to increased data availability and reliable information on heating source types, a small proportion of energy consumption previously reported under gas (scope 1) has now been reported under heat (scope 2). We estimate electricity consumption data where tenants have their own utility supplier. Where this relates to units in a building where we otherwise have access to energy consumption, we estimate ‘tenant direct’ electricity usage based on the energy usage of the rest of the building, using a ﬂoor area pro rating method. Where this relates to a single-let building, energy consumption is estimated based on the average energy usage of the portfolio. Whilst our ‘tenant direct’ gas consumption is very low, this year we have included estimations for gas consumption where we have been made aware of tenants managed gas supplies, and added corresponding GHG emissions to the 2019/20 and 2021/22 reported GHG ﬁgures. GHG emissions calculated from ‘tenant direct’ electricity and gas consumption are included in our scope 3 reporting. Fugitive emissions stem from the use of refrigerants and have been calculated based on refrigerant leak event schedules provided by our air conditioning contractors. Vehicle emissions are calculated from the expense schedule listing car mileage claims by employees using their personal vehicles for business purposes. Waste data is captured by our waste contractor, who weighs recycled and general waste across the portfolio at each waste collection and provides us with a monthly tonnage report. Embodied carbon in development projects relates to GHG emissions stemming from our construction and refurbishment activities. Since 2021, we systematically carry out whole-life carbon analysis for all developments and major refurbishment projects, and therefore have project speciﬁc embodied carbon data on our most recent projects. Whilst there is no standardised carbon emission factor for calculating embodied carbon emissions from buildings, embodied carbon factors advised by our consultant’s research team have allowed us to estimate embodied carbon emissions for projects carried out prior to 2021, representative of standard market practice (770 kgCO 2 e/m 2 for oce construction, 480 kgCO 2 e/m 2 for logistics construction, 196 kgCO 2 e/m 2 for oce retroﬁts involving heat decarbonisation, 77kgCO 2 e/m 2 for light oce retroﬁts). The 2019/20 and 2021/22 embodied carbon calculations have been updated in line with these carbon factors. We have also restated the 2019/20 and 2021/22 embodied carbon ﬁgures to include light refurbishment projects. Purchased goods and services relate to the upstream emissions from the business’ use of products and services. Emissions were calculated using a spend-based method, applying carbon factors from the EPA database. Where in previous years, we had only included our capital spend in emissions calculations, we are now also including operational spend, explaining the change in 2019/20 and 2021/22 reported emissions ﬁgures. We intend to move towards an activity-based method for our upstream emissions as more supply chain data becomes available. This will provide greater accuracy of the purchased goods and services emissions. Business travel data includes journeys in our company cab and plane journeys used for business travel for all direct employees. Emissions from commuting include carbon emissions from homeworking in addition to oce commuting. Following our ﬂexible working policy implementation, we assumed the Head Oce employees to be working in the oce three days a week and at home two days a week. All site employees are assumed to be working on-site ﬁve days a week. Assumption on modes of transportation used by commuters came from the Department of Transport statistics. With the exception of embodied carbon and purchased goods and services, GHG emissions were calculated using DEFRA (Department for Environment, Food & Rural Aairs) 2022 factors. 103 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED Topic Accounting Metric Code Comment Energy Management Energy consumption data coverage as a percentage of total ﬂoor area, by property subsector IF-RE-130a.1 The energy consumption reported on page 101, falling within our scope 1 and 2 emissions, cover 36% for our portfolio’s total nettable ﬂoor area and corresponds to the areas where Workspace have operational control. Energy data falling outside of our procurement control is estimated and corresponding carbon emissions are reported under scope 3 on page 101. Majority of this consumption is associated with the industrial assets in the portfolio which are on FRI lease. (1) Total energy consumed by portfolio area with data coverage (2) percentage grid electricity (3) percentage renewable, by property subsector IF-RE-130a.2 (1) See ‘Energy Consumption used to calculate above emissions (kWh)’ on page 101. (2) 99% of electricity consumed was purchased from the grid, the rest was self-generated by on-site solar panels. (3) 100% of electricity procured was from certiﬁed renewable sources (REGO-backed). Additionally we have 12 sites that are equipped with solar panels. Refer to page 43 for more information on our renewable electricity procurement. Like-for-like percentage change in energy consumption for the portfolio area with data coverage, by property subsector IF-RE-130a.3 Refer to Ele-LfL, Fuel-LfL and DH&C-LfL metrics in our EPRA report. Percentage of eligible portfolio that (1) has an energy rating and (2) is certiﬁed to ENERGY STAR, by property subsector IF-RE-130a.4 Refer to Cert-Tot metric in our EPRA report. Energy Performance certiﬁcates (EPCs) and BREEAM certiﬁcation have been used as the relevant UK alternative to ENERGY STAR. Description of how building energy management considerations are integrated into property investment analysis and operational strategy IF-RE-130a.5 Energy management is identiﬁed as one of the key material issues for the business and underpins the delivery of our net zero carbon pathway. As a result, stretching energy reduction targets directly inﬂuence Executive remuneration. Refer to pages 43, 47, 49, 96 in this report for more information on our strategy and approach to energy management, along with impact delivered. Water Management Water withdrawal data coverage as a percentage of (1) total ﬂoor area and (2) ﬂoor area in regions with High or Extremely High Baseline Water Stress, by property subsector IF-RE-140a. (1) Our water consumption data coverage amounts to 75% of our portfolio’s ﬂoor area. (2) 100% of our oce properties and 85% of our logistics properties are located in areas classiﬁed as under high water stress according to the World Resource Institute’s (WRI) Water Risk Atlas tool. 15% of our logistics properties are located in a medium-high water stress zone. (1) Total water withdrawn by portfolio area with data coverage and (2) percentage in regions with High or Extremely High Baseline Water Stress, by property subsector IF-RE-140a.2 (1) Refer to Water-Abs metric in our EPRA report. (2) 100% of our oce properties and 82% of our logistics properties are located in areas classiﬁed as under high water stress according to the World Resource Institute’s (WRI) Water Risk Atlas tool. 18% of our logistics properties are located in a medium-high water stress zone. Like-for-like percentage change in water withdrawn for portfolio area with data coverage, by property subsector IF-RE-140a.3 Refer to Water-LfL metric in our EPRA report. Description of water management risks and discussion of strategies and practices to mitigate those risks IF-RE-140a.4 We include emissions associated with water supply and water treatment in our scope 3 footprint and intend to address it as part of our net zero carbon pathway. Our climate risk assessment also indicated water stress as a key risk in the long term and we have put in place a mitigation strategy in the form of water ecient design brief and adaptive landscaping around our sites (page 99). We are also rolling out metering to gain better coverage of our water data. 104 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPLIANCE STATEMENTS CONTINUED SASB SUSTAINABILITY ACCOUNTING STANDARD – REAL ESTATE METRICS Topic Accounting Metric Code Comment Management of Tenant Sustainability Impacts (1) Percentage of new leases that contain a cost recovery clause for resource eciency related capital improvements (2) Associated leased ﬂoor area, by property subsector IF-RE-410a.1 Our new leases are inclusive of rent and all bills, including utilities. A responsible energy consumption clause has been included in those leases, which allows us to charge an excessive usage fee in instances of consistent high energy consuming behaviour. Those inclusive leases represented 46% of our total sales volume in 2022/23. (1) Percentage of tenants that are separately metered or submetered for grid electricity consumption (2) Percentage of tenants that are separately metered or submetered for water withdrawals, by property subsector IF-RE-410a.2 (1) 63% of tenant spaces on the like-for-like Workspace portfolio (which represent 74% of the whole portfolio) are submetered for grid electricity consumption. Submetering coverage for the newly acquired McKay portfolio is yet to be conﬁrmed. (2) Customers are billed for water usage on a ﬂoor area pro rating basis. A small number of tenants manage their own water meter (gyms and restaurant units) in addition to single-let properties’ tenants. Discussion of approach to measuring, incentivising, and improving sustainability impacts of tenants IF-RE-410a.2 Our operational platform allows us to maintain a close working relationship with our customers and collaborate on whole building initiatives. We have a multi-faceted customer engagement strategy on sustainability, whereby we send quarterly sustainability newsletters to tenants of each of our properties, share building-level sustainability performance data, and guidance on how to operate buildings sustainably. This year we delivered 120 sustainability-themed customer events ranging from energy savings awareness to and recycling and zero-waste workshops. Climate Change Adaptation Area of properties located in 100-year ﬂood zones, by property subsector IF-RE-450a.1 1,356,640 sq. ft. lettable area of oces and 356,687 sq. ft. of industrial spaces are located in a 100-year ﬂood zone according to the Environment Agency ﬂood map. Description of climate change risk exposure analysis, degree of systematic portfolio exposure, and strategies for mitigating risks IF-RE-450a.2 Refer to the TCFD section of this report on pages 92 to 100. Activity Metric Code Comment Number of assets, by property subsector IF-RE-000.A 74 oces 11 industrial assets 1 other (leisure) Leasable ﬂoor area, by property subsector IF-RE-000.B 4,524,063 sq. ft. of oces 648,800 sq. ft. of industrial assets 98,255 of leisure assets Percentage of indirectly managed assets, by property subsector IF-RE-000.C 0% of oce space ﬂoor area is indirectly managed 71% of industrial ﬂoor area is indirectly managed Average occupancy rate, by property subsector IF-RE-000.D 85% average occupancy rate across oces 87% average occupancy rate across industrial properties 105 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPLIANCE STATEMENTS CONTINUED SASB SUSTAINABILITY ACCOUNTING STANDARD – REAL ESTATE METRICS LENGTH OF TENURE FOR THE BOARD AS AT 31 MARCH 2023 Year joined 2007 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Graham Clemett Dave Benson Stephen Hubbard Rosie Shapland Lesley-Ann Nash Duncan Owen Manju Malhotra Nick Mackenzie 50-59 6 70-79 60-69 1 1 BOARD SKILLS AND EXPERIENCE BOARD DIVERSITY AGE DIVERSITY OF THE BOARD AS AT 31 MARCH 2023 BOARD INDEPENDENCE The Board and its Committees continue to have a strong mix of experienced individuals who are not only able to oer anexternal perspective on the business, but also provide constructive challenge to review the Group’s strategy. Executive and Leadership Property and Real Estate Financial Corporate Governance Customer and Marketing People ESG Executive Directors Graham Clemett Dave Benson Non-Executive Directors Stephen Hubbard Rosie Shapland Lesley-Ann Nash Duncan Owen Manju Malhotra Nick Mackenzie 1 NON-EXECUTIVE CHAIR 2 EXECUTIVE DIRECTORS 5 INDEPENDENT NON-EXECUTIVE DIRECTORS A Board made up of people with a wide range of backgrounds and experiences, combined with our culture of openness and respect will contribute to our long-term success Stephen Hubbard Chair We recognise that a group that is diverse in nature, irrespective of gender, ethnicity, skills, experience andbackground, is able to provide diering perspectives and challenge to debates and decisions. GENDER DIVERSITY OF THE BOARD AS AT 31 MARCH 2023 3 Female 37.5% 5 Male 62.5% ETHNIC DIVERSITY OF THE BOARD AS AT 31 MARCH 2023 6 White 75% 2 Minority ethnic 25% 106 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information GOVERNANCE DRIVING LONG-TERM SUCCESS 2022/23 HIGHLIGHTS BOARD ACTIVITIES Our customers Our people Our investors Our partners & suppliers Our communities The environment More information 1. Strategy Annual strategic review Page 118 Sustainability agenda Page 118 2. Operations Asset management Page 118 Portfolio valuation Page 118 Portfolio growth Page 119 3. Purpose, values and culture Purpose Page 119 Values Page 119 Culture Page 119 4. Stakeholders Investor engagement Page 121 Employee engagement Page 122 Business relationship engagement Page 123 Community and environment engagement Page 123 5. Finance Structure, forecasts, budgets Page 123 Reﬁnancing Page 123 Dividend payments Page 123 6. Reporting Full, half-year and trading statements Page 123 Viability and Going Concern statements Page 123 7. Risks Principal risks Page 123 Emerging risks Page 123 8. Succession Appointment of new Chair Page 124 9. Governance Board eectiveness review Page 124 Gender pay gap Page 124 Regulatory and legal updates Page 124 Committee membership and terms of reference Page 124 Workforce policies and practices Page 124 DIVIDEND PER SHARE 2022–2023 25.8p 2023 2022 2021 25.8 21.5 17.75 BOARD MEETINGS 2022–2023 7 REMUNERATION POLICY REVIEW 2022–2023 12 shareholders engaged SHAREHOLDER ENGAGEMENT 2022–2023 304 institutional investors engaged 2023 2022 2021 304 264 292 RIVERSIDE DISPOSAL 2022–2023 £54m 107 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information GOVERNANCE DRIVING LONG-TERM SUCCESS CONTINUED 108 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information Our approach to corporate governance aims to preserve and strengthen stakeholder conﬁdence in our business integrity and provide a working foundation of accountability. Stephen Hubbard Chair QUICK LINKS Chair’s introduction to governance Page 108 Board leadership and company purpose Page 113 Division of responsibilities Page 129 Composition, succession and evaluation Page 141 Audit, risk and internal control Page 159 ESG Committee report Page 172 Remuneration Page 178 Report of the Directors Page 212 Statement of Directors’ responsibilities Page 215 CHAIR’S INTRODUCTION TO GOVERNANCE Dear shareholder, This will be my last message as Chair as I will be stepping down from the Board in July 2023. I have very much enjoyed being on the Workspace Board for the last nine years. When I took over as Chair three years ago, one of my objectives was to strengthen the Board and plan for my succession. In this regard, I am delighted that this has been successful with Duncan Owen taking over the Chair role. To read more about his appointment process see page 146. Our Purpose Our purpose – to give businesses the freedom to grow – runs through every part of our business, starting with our people and how they live our values, right up to how our Board delivers good governance. Throughout the year, our people supported our purpose, ultimately driving greater long-term sustainable success. During the year we approved a new company value, which had been introduced following employee feedback. For more details see page 21. Environmental, Social and Governance (ESG) We recognise the importance that our stakeholders place on ESG, and our commitment to delivering a climate-resilient portfolio, looking after our people and supporting our communities. This commitment is led by our Board and lived by our people every day. We have a fully embedded approach to sustainability, covering both our portfolio and all business-wide strategic decisions. An ESG Board Committee has been established to provide added focus and drive further integration across business decisions. We receive regular monthly updates from around the business against our ambitions. For more details, see page 172. Stakeholder Engagement We recognise that stakeholder engagement is critical to the long-term success of our business. We have continued with our practice of considering stakeholder voices in discussions and decision making, not only at Board level, but across the Company. For examples of how we have done this, please see pages 15 to 25 and 121 to 123. We support and encourage our senior managers in their relationships with respective stakeholder groups. This strong sense of purpose has created a culture that puts our stakeholders front and centre. A large proportion of our decision making is informed by listening to our stakeholders, both at the Board level and across the Company. Our Section 172(1) Statement, which can be found on page 125 demonstrates how the Board’s engagement with stakeholders has aected decision making. Our People and Culture Our people are essential to the delivery of our strategic objectives and our continued success. It is vital that we provide a work environment where everyone feels valued, motivated and able to thrive. We continue with our Board supported initiatives to support the wellbeing of our people and embrace diversity as a core value. For the past two years, employee survey feedback has shown that our teams strongly believe in our culture and clear set of values. We monitor employee engagement and satisfaction through annual surveys. I have also carried out in person engagement sessions with sta, a forum in which candid feedback is provided. This year, the Board has been particularly mindful of the impact of the cost-of-living crisis on our sta. Sta salaries were increased by at least 6% from 1 April 2023. Further details can be found on page 181. Future Outlook The Board strongly believes that good governance is a key part of the strength of our business and that by continually reviewing and monitoring our existing practices we can ensure that our governance continues to evolve and is aligned to our business. I would like to take this opportunity to wish the Board and all Workspace sta success for the future. Stephen Hubbard Non-Executive Chair 6 June 2023 CHAIR APPOINTED Duncan Owen, who joined the Board in July 2021, to become the newly appointed Chair with eect from 6 July 2023 Chair succession Page 146 BOARD EFFECTIVENESS Board and Committee eectiveness review carried out by the Chair and Company Secretary with the assistance of Fidelio Board evaluation Page 155 ESG COMMITTEE CREATED Creation of the ESG Committee to help progress the Group’s ESG plans and further integrate ESG across the business REMUNERATION POLICY REVIEW Review of the Company’s Remuneration Policy, including engagement with shareholders Remuneration Policy Page 190 RISK REVIEW Assessment of the Group’s principal and emerging risks with particular reference to climate change. Principal risks and uncertainties Page 69 We have fully embedded our approach to sustainability, covering both our portfolio and business-wide strategic decisions GOVERNANCE HIGHLIGHTS 109 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information CHAIR’S INTRODUCTION TO GOVERNANCE CONTINUED Compliance statement The Board conﬁrms that, for the year ended 31 March 2023, we have complied with all of the provisions of the UK Corporate Governance Code 2018 other than Provision 32 of the Code. Lesley-Ann Nash was appointed as Chair of the Remuneration Committee with eect from 10 September 2021 and on appointment had served nine months as a member of the Remuneration Committee. While we note the requirement of Provision 32 that remuneration committee chairs should have served on a remuneration committee for at least 12 months prior to their appointment, Lesley-Ann has now served on the Remuneration Committee for over two years and the Board continues to have every conﬁdence that Lesley-Ann has the skills and experience to carry out the role. The application of the Code’s Principles is evidenced throughout the Annual Report and the table overleaf shows how the Governance section has been structured around the Code Principles (A to R). Further information on the Code can be found on the Financial Reporting Council’s website at www.frc.org.uk. About this report The Governance section has been structured around the Code Principles (A to R). I am excited about taking up the position of Chair from July 2023. Workspace is in a great position and it’s an exciting time for everyone in the business Duncan Owen Chair elect Chair succession Page 146 Stephen Hubbard pictured with Chair elect, Duncan Owen Principles of the UK Corporate Governance Code 2018 More information Board leadership and company purpose 111 Division of responsibilities 111 Composition, succession and evaluation 112 Audit, risk and internal control 112 Remuneration 112 UK CORPORATE GOVERNANCE CODE 2018 110 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information CHAIR’S INTRODUCTION TO GOVERNANCE CONTINUED Pages 129 to 140 Principle F The chair leads the board and is responsible for its overall eectiveness in directing the company. The chair should demonstrate objective judgement throughout their tenure and they should promote a culture of openness and debate. In addition, the chair facilitates constructive board relations and the eective contribution of all non-executive directors, and the chair ensures that directors receive accurate, timely and clear information. Board roles and responsibilities Page 130 Chair’s governance letter Page 109 Board evaluation Page 155 Principle G The board should include an appropriate combination of executive and non-executive (and, in particular, independent non-executive) directors, such that no one individual or small group of individuals dominates the board’s decision making. There should be a clear division of responsibilities between the leadership of the board and the executive leadership of the company’s business. Board roles and responsibilities Page 130 Non-Executive Directors Page 133 The relationship between the Board and the Executive Committee Page 135 Principle H Non-executive directors should have sucient time to meet their board responsibilities. They should provide constructive challenge, strategic guidance, oer specialist advice and hold management to account. Board roles and responsibilities Page 130 Non-Executive Directors Page 133 Principle I The board, supported by the company secretary, should ensure that it has the policies, processes, information, time and resources it needs in order to function eectively and eciently. Our governance framework Page 132 Information ﬂow to the Board Page 139 Pages 113 to 128 Principle A A successful company is led by an eective and entrepreneurial board, whose role is to promote the long-term sustainable success of the company, generating value for shareholders and contributing to wider society. Our Board Page 114 Chair succession Page 146 Board evaluation Page 155 Principle B The board should establish the company’s purpose, values and strategy, and satisfy itself that these and its culture are aligned. All directors must act with integrity, lead by example and promote the desired culture. Our purpose Page 14 Our strategy Page 32 Sustainability Page 36 Principle C The board should ensure that the necessary resources are in place for the company to meet its objectives and measure performance against them. The board should also establish a framework of prudent and eective controls, which enable risk to be assessed and managed. Our business model Page 64 Our governance framework Page 132 Principal risks and uncertainties Page 69 Principle D In order for the company to meet its responsibilities to shareholders and stakeholders, the board should ensure eective engagement with, and encourage participation from, these parties. Our stakeholders Pages 15 and 121 Section 172(1) statement Page 125 Principle E The board should ensure that workforce policies and practices are consistent with the company’s values and support its long-term sustainable success. The workforce should be able to raise any matters of concern. Our purpose Page 14 Sustainability Page 36 Whistleblowing Policy Page 91 BOARD LEADERSHIP AND COMPANY PURPOSE DIVISION OF RESPONSIBILITIES 111 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information HOW WE COMPLY WITH THE UK CORPORATE GOVERNANCE CODE 2018 CONTINUED Pages 141 to 158 Principle J Appointments to the board should be subject to a formal, rigorous and transparent procedure, and an eective succession plan should be maintained by the board and by senior management. Both appointments and succession plans should be based on merit and objective criteria and, within this context, should promote diversity of gender, social and ethnic backgrounds, cognitive and personal strengths. Chair succession Page 146 Inclusion and diversity Page 148 Principle K The board and its committees should have a combination of skills, experience and knowledge. Consideration should be given to the length of service of the board as a whole and membership regularly refreshed. Board composition Page 148 Principle L Annual evaluation of the board should consider its composition, diversity and how eectively members work together to achieve objectives. Individual evaluation should demonstrate whether each director continues to contribute eectively. Board evaluation Page 155 Pages 178 to 211 Principle P Remuneration policies and practices should be designed to support strategy and promote long-term sustainable success. Executive remuneration should be aligned to company purpose and values, and be clearly linked to the successful delivery of the company’s long-term strategy. Remuneration Committee Chair’s letter Page 181 Remuneration at a glance Page 185 Our remuneration policy Page 190 Principle Q A formal and transparent procedure for developing policy on executive remuneration and determining director and senior management remuneration should be established. No director should be involved in deciding their own remuneration outcome. Remuneration Committee Chair’s letter Page 181 Our remuneration policy Page 190 Principle R Directors should exercise independent judgement and discretion when authorising remuneration outcomes, taking account of company and individual performance, and wider circumstances. Remuneration Committee Chair’s letter Page 181 Our approach to fairness and wider workforce considerations Page 198 Pages 159 to 171 Principle M The board should establish formal and transparent policies and procedures to ensure the independence and the eectiveness of internal and external audit functions. The board should satisfy itself on the integrity of ﬁnancial and narrative statements. Audit Committee Report Page 159 Principle N The board should present a fair, balanced and understandable assessment of the company’s position and its prospects. Fair, balanced and understandable assessment Page 167 Principle O The board should establish procedures to manage risk, to oversee the internal control framework, and to determine the nature and the extent of the principal risks the company is willing to take in order to achieve its long-term strategic objectives. Our governance framework Page 132 Audit Committee Report Page 159 Principal risks and uncertainties Page 69 AUDIT, RISK AND INTERNAL CONTROLCOMPOSITION, SUCCESSION AND EVALUATION REMUNERATION 112 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information HOW WE COMPLY WITH THE UK CORPORATE GOVERNANCE CODE 2018 CONTINUED The Board provides strong leadership and support to the Executive Committee as it delivers the Group’s strategic aims. Graham Clemett Chief Executive Ocer QUICK LINKS Our Board Page 114 Board and Committee membership Page 117 The Board comprises the CEO, the CFO and Non-Executive Directors and it is chaired by Stephen Hubbard. Details of individual attendance at Board meetings held during the year are set out below. More information on the skills and the experience of the Board members can be found on pages 115 to 116. Board Audit Remuneration Nominations ESG Stephen Hubbard 7/7 – 6/6 3/3 2/2 4 Graham Clemett 7/7 – – – 2/2 4 Dave Benson 7/7 – – – 2/2 4 Rosie Shapland 7/7 4/4 3 6/6 3/3 2/2 4 Lesley-Ann Nash 7/7 4/4 3 6/6 3/3 2/2 4 Duncan Owen 1 7/7 – – 2/3 5 2/2 4 Manju Malhotra 7/7 4/4 3 – 3/3 2/2 4 Nick Mackenzie 6/7 6 – – 3/3 2/2 4 Damon Russell 2 3/3 – – 1/1 – 1. Duncan Owen was appointed as Chair of the ESG Committee on 21 April 2022. 2. Damon Russell stepped down from the Board with eect from the close of the Company’s AGM on 21 July 2022. 3. The Audit Committee meeting in January 2023 was a joint meeting with the ESG Committee. 4. The ESG Committee meeting in January 2023 was a joint meeting with the Audit Committee. 5. Duncan Owen did not attend the Nominations Committee meeting where his appointment as Chair was discussed. 6. Nick Mackenzie did not attend the September 2022 Board meeting due to pre-existing commitments. 113 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information BOARD LEADERSHIP AND COMPANY PURPOSE 1 64 2 75 3 8 Led by our Chair, Stephen Hubbard, the Board provides the leadership of the Company. The Board is collectively responsible and it is accountable to shareholders for the Company’s long-term success, strategy, values, culture, control and management. Stephen Hubbard Non-Executive Chair Duncan Owen Non-Executive Director Rosie Shapland Non-Executive Director Graham Clemett Chief Executive Ocer Manju Malhotra Non-Executive Director Lesley-Ann Nash Non-Executive Director Dave Benson Chief Financial Ocer Nick Mackenzie Non-Executive Director Our Board 114 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED CHAIR STEPHEN HUBBARD INDEPENDENT NON-EXECUTIVE DIRECTOR 1 Committee membership REMUNERATION NOMINATIONS (CHAIR) ESG Appointed Board: July 2014 Chair: July 2020 Current external appointments Stephen is a member of the advisory board of Redevco, a pan-European property holding company, and a Non-Executive Director of AustralianSuper where he is their representative on the board of the BL/Aus Super JV for Canada Water. Relevant skills, business experience and contribution Stephen has many years’ experience of operating within the property sector. He was previously Chair of CBRE UK until he retired in December 2019, having joined Richard Ellis in 1976 and held the position of Head of EMEA and UK Capital Markets from 1998 to 2012. He was also previously Non-Executive Chair of LXI REIT PLC. He has an outstanding track record in the investment market and has advised on several landmark transactions involving international capital. Stephen has a broad range of knowledge and experience at board level, including leadership and executive management, operation of public companies, regeneration and development projects, as well as strong ﬁnancial skills. EXECUTIVE DIRECTOR GRAHAM CLEMETT CHIEF EXECUTIVE OFFICER 2 Committee membership ESG EXECUTIVE (CHAIR) INVESTMENT (CHAIR) DISCLOSURE (CHAIR) Appointed Board: July 2007 CEO: September 2019 Current external appointments Graham is the Senior Independent Non-Executive Director at The Restaurant Group PLC. Relevant skills, business experience and contribution Graham has detailed knowledge of the Company’s operations and extensive experience of the property sector gained through his ﬁfteen years’ experience with the Group, having joined as CFO in 2007. Prior to joining the Group, he was Finance Director for UK Corporate Banking at RBS Group plc and before that spent eight years at Reuters Group plc, latterly as Group Financial Controller. Graham has extensive experience in leadership and management, strong commercial, strategic and communication skills, extensive investor relations experience and strong ﬁnancial skills with signiﬁcant experience of ﬁnancing and capital raising. He is a Chartered Accountant. EXECUTIVE DIRECTOR DAVE BENSON CHIEF FINANCIAL OFFICER 3 Committee membership ESG EXECUTIVE INVESTMENT DISCLOSURE Appointed April 2020 Current external appointments Dave does not have any current external appointments. Relevant skills, business experience and contribution Prior to joining Workspace, Dave was the Corporate Finance Director of Whitbread PLC. He previously held senior ﬁnance roles at Kier Group plc and Keller Group plc, having qualiﬁed as a Chartered Accountant with Deloitte. He has strong ﬁnancial skills, having gained experience in a series of dynamic businesses as well as a good understanding of technology and its commercial applications plus strong communication and leadership skills. He has experience in strategy development, infrastructure and development projects, corporate transactions, acquisitions and integrations, investor relations and detailed knowledge of risk management and internal control systems. NON-EXECUTIVE DIRECTOR ROSIE SHAPLAND SENIOR INDEPENDENT NON-EXECUTIVE DIRECTOR 4 Committee membership REMUNERATION NOMINATIONS AUDIT (CHAIR) ESG Appointed November 2020 1 Current external appointments Rosie is a Non-Executive Director at Foxtons Group plc, where she is Senior Non-Executive Director, Chair of their Audit Committee, and a member of their Remuneration, Nomination and ESG Committees and PayPoint plc, where she is Chair of their Audit Committee and a member of their Nomination and Remuneration Committees. Relevant skills, business experience and contribution Rosie is a Chartered Accountant and was previously an audit partner at PwC. She has many years’ experience of operating within the ﬁnance sector as well as a broad range of public company board experience, in addition to experience of governance, risk management, investment and corporate transactions and strong ﬁnancial skills. 1. Rosie was appointed Senior Independent Director in February 2022 and Chair of the Audit Committee in July 2021. 115 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED OUR BOARD CONTINUED NON-EXECUTIVE DIRECTOR NICK MACKENZIE INDEPENDENT NON-EXECUTIVE DIRECTOR 8 Committee membership NOMINATIONS ESG Appointed January 2022 Current external appointments Nick is CEO at Greene King, the pub retailer and brewer. Relevant skills, business experience and contribution Prior to joining Greene King, Nick spent 17 years at Merlin Entertainments plc, most recently as Managing Director of Midway Attractions, the largest division within the group, having started his career in pubs at Bass and Allied. He was also previously a Non-Executive Director at Daniel Thwaites PLC. He has signiﬁcant expertise in strategy, real estate and business development and experience of public company boards. Nick currently sits on the board of the BBPA and is also an advisory board member of WiHTL. NON-EXECUTIVE DIRECTOR MANJU MALHOTRA INDEPENDENT NON-EXECUTIVE DIRECTOR 7 Committee membership NOMINATIONS AUDIT ESG Appointed January 2022 Current external appointments Manju is CEO at Harvey Nichols, the luxury department store, a Non-Executive Director at abrdn UK Smaller Companies Growth Trust plc and a Non-Executive Director at London & Partners, an international trade and investment agency for London. Relevant skills, business experience and contribution Manju joined Harvey Nichols in 1998 and progressed through various roles, including CFO and co-COO, before her appointment as CEO. She has extensive experience in customer-focus, developing a values-led culture, strategy, operations, ﬁnance and technology. She is a Chartered Accountant. NON-EXECUTIVE DIRECTOR DUNCAN OWEN INDEPENDENT NON-EXECUTIVE DIRECTOR 6 Committee membership NOMINATIONS ESG (CHAIR) Appointed July 2021 1 Current external appointments Duncan is the Chair of Sellar, the large scale London oce developer of schemes such as the Shard and Paddington Square. Relevant skills, business experience and contribution Duncan has over 30 years’ experience in the real estate investment and development sector. He has a deep understanding of the central London Oce sector and listed capital markets, including leadership of IPOs and corporate acquisitions. He was previously a director of LaSalle Investment Management, on the board of Insight Investment, CEO of Invista Real Estate Investment Management plc, Global Head of Real Estate at Schroders PLC, and then the CEO of Immobel Capital Partners until 31 March 2023. He was also previously a Governor of the board of the Church Commissioners. He is a member of the Royal Institution of Chartered Surveyors, sat on the policy committee of the BPF (British Property Federation) for 14 years and studied at INSEAD. NON-EXECUTIVE DIRECTOR LESLEY-ANN NASH INDEPENDENT NON-EXECUTIVE DIRECTOR 5 Committee membership REMUNERATION (CHAIR) NOMINATIONS AUDIT ESG Appointed January 2021 1 Current external appointments Lesley-Ann is a Non-Executive Director of St. James’s Place plc, where she is a member of their Risk and Remuneration Committees. She is also a member of the boards of Homes England and London First. Relevant skills, business experience and contribution Lesley-Ann was previously a Director in the Cabinet Oce of HM Government and a Managing Director at Morgan Stanley, as well as having previously worked at UBS and Midland Bank. She has deep global capital markets experience on both buy and sell sides, extensive knowledge of central and local government and experience of policy development, procurement and major programme delivery and a track record of promoting inclusion and diversity and delivering meaningful cultural change, as well as public company board experience. She also has deep ﬁnancial ﬂuency gained as a fellow of the Chartered Institute of Management Accountants (CIMA). She was also previously on the board of North London Hospice. 1. Lesley-Ann was appointed Chair of the Remuneration Committee in September 2021. 1. Duncan was appointed Chair of the ESG Committee in April 2022. 116 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED OUR BOARD CONTINUED Board Nominations Committee Audit Committee Remuneration Committee ESG Committee Executive Committee Investment Committee Disclosure Committee Chair Stephen Hubbard Non-Executive Chair Executive Directors Graham Clemett Chief Executive Ocer Dave Benson Chief Executive Ocer Non-Executive Directors Rosie Shapland Senior Independent Non-Executive Director Lesley-Ann Nash Non-Executive Director Duncan Owen Non-Executive Director Manju Malhotra Non-Executive Director Nick Mackenzie Non-Executive Director Members of the Executive Committee Will Abbott Chief Customer Ocer Carmelina Carfora Company Secretary Claire Dracup Director of People and Culture Paul Hewlett Director of Strategy & Corporate Development Leo Shapland Head of Portfolio Management Richard Swayne Investment Director COMPANY SECRETARY CARMELINA CARFORA Appointed March 2010 Carmelina is Secretary to the Board and its Nominations, Remuneration, Audit and ESG Committees, she monitors compliance with procedures and provides advice on governance matters. At the direction of the Chair, she is responsible for making sure the Board receives accurate, timely and relevant information. She also co-ordinates the induction of new Board members and the provision of ongoing training and development of the Board. Carmelina’s other responsibilities include corporate governance, compliance with legislation and the administration of share schemes. BOARD AND COMMITTEE MEMBERSHIP AS AT 31 MARCH 2023 117 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED OUR BOARD CONTINUED Board activities 2022/23 1. Strategy Page 118 2. Operations Pages 118 to 119 3. Purpose, values and culture Pages 119 to 120 4. Stakeholders Pages 121 to 123 5. Finance Page 123 6. Reporting Page 123 7. Risks Page 123 8. Succession Page 124 9. Governance Page 124 STRATEGY ANNUAL STRATEGIC REVIEW Relevant stakeholders CUSTOMERS PEOPLE INVESTORS PARTNERS AND SUPPLIERS COMMUNITIES ENVIRONMENT The Board held its annual strategic review in September 2022 to approve the ﬁve-year plan. External speakers and members of the Executive Committee joined the Board to stimulate discussion in a number of areas, including the Group’s sustainability ambitions, people and culture and operational priorities. Following the strategy day, several ideas and initiatives were developed for incorporation into the business plan. Our strategy Pages 32 to 35 SUSTAINABILITY AGENDA Relevant stakeholders CUSTOMERS PEOPLE INVESTORS PARTNERS AND SUPPLIERS COMMUNITIES ENVIRONMENT The Board established a Board ESG Committee in April 2022 to provide a dedicated forum for discussion of ESG- related matters. During the year, discussions included ESG strategy and governance, progress against our science-based targets to transition to net zero carbon and the addition of climate change as a principal risk to the Group. Throughout the year the Board also requested updates from the sustainability team on the Group’s sustainability activities. Sustainability Pages 36 to 58 OPERATIONS ASSET MANAGEMENT Relevant stakeholders CUSTOMERS INVESTORS PARTNERS AND SUPPLIERS The Board receives regular updates on asset management and leasing activities. This year, the focus has been on the integration of the McKay portfolio, improving the overall portfolio oering and improving the customer experience, through targeted customer surveys, the results of which are used to drive improvements in our customer processes. Read more about our engagement with customers on pages 16 to 20 and 123. PORTFOLIO VALUATION Relevant stakeholders INVESTORS The Board reviewed and approved the full and half-year valuations of the Group’s property portfolio in May and November 2023 respectively. 118 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED 1 2 PURPOSE, VALUES AND CULTURE PURPOSE Relevant stakeholders CUSTOMERS PEOPLE INVESTORS PARTNERS AND SUPPLIERS COMMUNITIES ENVIRONMENT Our purpose is to give businesses the freedom to grow. Our purpose provides the framework for making decisions and for engaging with our stakeholders. The Board sets the Group’s strategy and makes decisions through the lens of our purpose. The Board has continued to monitor how our purpose is articulated and understood by our customers, employees, investors and other stakeholders, and how our values are embedded throughout our business. This is achieved through regular engagement with our stakeholders, more information on which can be found on pages 121 to 123. The Board also approves the Group’s key policies and practices so that they underpin our purpose. The Executive Committee is responsible for communicating these policies throughout our business. CULTURE Relevant stakeholders CUSTOMERS PEOPLE INVESTORS PARTNERS AND SUPPLIERS COMMUNITIES ENVIRONMENT Our culture is one of integrity, transparency and openness, where independent thought and taking initiative are encouraged. The Board recognises the importance of our culture to the business of the Group and sets the ‘tone from the top’ by demonstrating and encouraging values-driven behaviour. This is underpinned by our compliance policies and Code of Conduct, which are reviewed by the Board annually. The Board is keen to recognise employees who exemplify our culture. Our Workspace Winners scheme rewards sta who live our values throughout their role at Workspace. Spotlight on culture Page 120 VALUES Relevant stakeholders CUSTOMERS PEOPLE INVESTORS PARTNERS AND SUPPLIERS COMMUNITIES ENVIRONMENT Our purpose informs our values: ‘know your stu’, ‘show we care’, ‘ﬁnd a way’ and ‘make it fun’. The Board encourages all employees to live our values in their work for the Group and especially in their dealings with each other and our other stakeholders. Graham Clemett, CEO, sits on the judgement panel for our employee recognition programme, Workspace Winners, where employees are given awards and prizes for demonstrating one or more of our values. Our values Page 21 2. OPERATIONS CONTINUED PORTFOLIO GROWTH Relevant stakeholders CUSTOMERS PEOPLE INVESTORS PARTNERS AND SUPPLIERS COMMUNITIES ENVIRONMENT During the year the Board also approved the disposal of the residential component of its Riverside mixed-use redevelopment in Wandsworth for £54 million. Read more on page 128. The Board is also provided with regular updates on planned refurbishment and development projects. This year, key development projects have included The Chocolate Factory and Leroy House. Read more about these projects on pages 30 and 46. 119 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED BOARD ACTIVITIES 2022/23 CONTINUED 3 Chair breakfast sessions Stephen Hubbard meets with sta in his role as Non-Executive Director for employee engagement and reports back to the Board Diversity & inclusion The Board and the Nominations Committee regularly monitor diversity at Workspace, including reviewing our ﬁrst gender pay gap report, published in March 2023 ‘Town hall’ events Our CEO, CFO and members of the Executive Committee lead ‘town hall’ events to provide business updates to employees, with the opportunity for sta to ask questions Remuneration The Remuneration Committee reviews the Group’s employee pay structures and their alignment with our purpose, values and strategy Site visits Members of the Board regularly visit our business centres and engage with our centre sta during site visits Whistleblowing reports Our Whistleblowing Policy, applicable to all sta, encourages openness in reporting misconduct. Any reports made would be investigated and reported to the Board. No reports were made during the year Annual employee survey Seeks detailed feedback from sta in a wider range of areas. Results from the survey are reviewed and discussed by the Board and progress on actions arising from the feedback is tracked Informal feedback Any signiﬁcant informal sta feedback is reported to the Board by the Executive Committee Sta suggestion board This year we introduced an online sta suggestion board, allowing our employees to share ideas and feedback for improvements to our business HOW OUR BOARD MONITORS CULTURE HOW OUR BOARD MONITORS CULTURE The Board sets the ‘tone from the top’ and uses a variety of tools to assess and monitor the Group’s culture. 86% RESPONSE RATE TO 2023 EMPLOYEE SURVEY 74% FAVOURABLE ENGAGEMENT SCORE FROM 2023 SURVEY 2 CHAIR BREAKFAST SESSIONS 12 WORKSPACE WINNERS 6 TOWN HALL EVENTS 120 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED BOARD ACTIVITIES 2022/23 CONTINUED STAKEHOLDERS INVESTOR ENGAGEMENT Relevant stakeholders INVESTORS Market engagement We regularly engage with existing and prospective shareholders through an active investor relations programme. The Board reviews a detailed bi-monthly investor relations report which includes notable views expressed by shareholders as well as wider market participants, alongside share register movements, broader sector and peer news and progress on various investor relations initiatives. Our Investor Relations team manages a comprehensive calendar of engagements, including formal announcements, AGM, results presentations, results roadshows, ad hoc equity and debt investor meetings (including institutional, private client and retail investors), equity sales team meetings, conferences, ﬁnancial analyst and investor site tours, capital market days, business media, industry events, as well as ad hoc outreach contact with stakeholders to ensure our strategy and value creation are well understood by the market and wider stakeholder community. See page 23 for details of the topics raised by investors. During 2022/2023 we engaged with 304 institutional investors via one-to-one and group meetings; most in person, supplemented by virtual meetings. Investor meetings are attended by various senior executives, including the CEO, CFO, Chair and Executive Committee members, as well as the Investor Relations Analyst and Group Financial Controller. Key investor engagement during the year included the following: – 150 investor meetings (in-person and virtual) – 19 site tours – 6 real estate conferences attended globally – Sustainability Capital Markets Day – Annual General Meeting In May 2022, we held a Capital Markets Day for investors and analysts focusing on our ESG strategy. The event was hosted by our Head of Sustainability, CEO and CFO and included a live Q&A. It was attended by 22 investors and analysts. Our investor website is www.workspace.co. uk/investors. It contains our Annual Reports, half and full-year results presentations and our ﬁnancial and dividend calendar for the upcoming year. Our website also outlines our company strategy, business model, property portfolio and has a detailed section covering our ESG activities. Lesley-Ann Nash, as Chair of the Remuneration Committee, engaged with shareholders in respect of our proposed changes to our Remuneration Policy this year. For further details see page 190. All Committee Chairs are available to engage with shareholders as appropriate. If shareholders have any concerns, which the normal channels of communication to the CEO, the CFO or the Chair have failed to resolve, or for which contact is inappropriate, then our Senior Independent Director, Rosie Shapland, is available to address them. Contact details for our Investor Relations team, Company Secretary and Company Registrars can be found at the back of this Report as well as on our website. INVESTOR RELATIONS CALENDAR OF EVENTS 2022/23 Events Investor Meetings Investor Tours April – Q4 Business update May – Capital Markets Day June – Full-year results – Investor roadshow July – AGM & Q1 Business Update August September – Global real estate conference October – Q2 Business Update November – Half-year results – Investor roadshow December – UK investor conference January – Q3 Business Update – UK investor conference February March – Year end – Global real estate conference Apr-22 17 May-22 8 Jun-22 101 Jul-22 2 Aug-22 2 Sep-22 2 Oct-22 0 Nov-22 106 Dec-22 33 Jan-23 9 Feb-23 6 Mar-23 18 INVESTOR MEETINGS 121 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED BOARD ACTIVITIES 2022/23 CONTINUED 4 4. STAKEHOLDERS CONTINUED EMPLOYEE ENGAGEMENT Relevant stakeholders PEOPLE The Board recognises the crucial importance of our employees to the success of the Group. Throughout the year the Board meets and receives feedback from a wide range of employees across the business, including reviewing results from our annual employee survey. The Board and the Executive Committee review and approve key policies, practices and strategic decisions, making sure that they reﬂect our culture and align to the Group’s key values and purpose. Stephen Hubbard is our designated Non- Executive Director responsible for employee engagement, as the Board considers this the most eective method to ensure the employee voice is heard at the very top of the organisation. Stephen held two breakfast sessions with sta during the year. See pages 21 and 139 for further details of the Chair breakfast sessions and topics raised. Stephen reports back to the Board after every session to ensure the feedback gained from our sta is eectively communicated to the Board as a whole. Employees are also invited to town hall sessions led by the CEO or other members of the Executive Committee. During the year there were site tours arranged for our Non-Executive Directors to visit our business centres and to meet employees. Employee engagement Pages 21 to 22 Chair’s breakfast, Brickﬁelds, Hoxton INVESTOR ENGAGEMENT CONTINUED Relevant stakeholders INVESTORS Annual Report and Website Our Annual Report is available to all shareholders. Shareholders can opt to receive a hard copy in the post or PDF copies via email or from our website. Additionally, if a shareholder holds their shares via a nominee account and that shareholder encounters diculty receiving our Annual Report via their nominee provider, they are welcome to contact the Company Secretary to request a copy. Our investor website is www.workspace.co.uk/ investors. It contains our Annual Reports, half- and full-year results presentations and our ﬁnancial and dividend calendar for the upcoming year. Our website also outlines our company strategy, business model, property portfolio and it has a detailed section covering our ESG activities. AGM Our 2022 AGM was held on 21 July 2022 and all resolutions passed with over 90% of votes in favour. Our 2023 AGM will be held at the Company’s registered oce at Canterbury Court, Kennington Park, 1-3 Brixton Road, London SW9 6DE on Thursday 6 July 2023 at 11.00am and we look forward to welcoming our shareholders there. The Notice of Meeting, together with an explanation of the business to be dealt with at the Meeting, is included as a separate document sent to shareholders who have elected to receive hard copies of shareholder information and it is also available on the Company’s website. Following shareholder engagement, since 2019 we have sought approval for a resolution authorising political donations up to £20,000 in aggregate, which was a lower amount than we had sought in previous years. This year we are again proposing a resolution with an upper limit of £20,000 in aggregate. This resolution is proposed as a precaution to prevent the Company’s normal business activities being inadvertently caught by the broad deﬁnitions used in the relevant provisions of the Companies Act 2006. It remains the policy of the Company not to make political donations or to incur political expenditure within the ordinary meaning of those words and the Board has no intention of using the authority for that purpose. In addition, and in line with the resolution approved at last year’s AGM, the Directors are again proposing a single resolution disapplying pre-emption rights for the 2023 Annual General Meeting that would apply only in very limited circumstances. The proposed disapplication resolution is limited to allotments and/or sales: (i) in connection with pre-emptive oers and oers to holders of equity securities other than ordinary shares (if required by the rights of those securities or as the Directors otherwise consider necessary); and (ii) in connection with the terms of any employees’ share scheme for the time being operated by the Company. 122 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED BOARD ACTIVITIES 2022/23 CONTINUED FINANCE REPORTING4. STAKEHOLDERS CONTINUED RISKS STRUCTURE, FORECASTS, BUDGETS Relevant stakeholders INVESTORS The Board regularly reviews the Group’s ﬁnancial structure and rolling forecasts. The Board approved the Group’s 2022/23 budget. REFINANCING Relevant stakeholders INVESTORS The Board reviewed reﬁnancing arrangements related to two McKay loan facilities, and the extension of the McKay £135m RCF and the Group’s existing £200m RCF. See page 34 for further details. DIVIDEND PAYMENTS Relevant stakeholders INVESTORS The Board recommended the payment of the ﬁnal dividend paid to shareholders in August 2022 and it approved the payment of the interim dividend paid to shareholders in February 2023. FULL, HALF-YEAR AND TRADING STATEMENTS Relevant stakeholders INVESTORS The Board reviewed and approved the full and half-year results and trading statements. VIABILITY AND GOING CONCERN STATEMENTS Relevant stakeholders INVESTORS The Board conducted a review of the Company’s viability over the next ﬁve-year period and it approved the viability statement and going concern statement. Viability statement Page 87 Going concern statement Page 87 PRINCIPAL RISKS Relevant stakeholders CUSTOMERS PEOPLE INVESTORS PARTNERS AND SUPPLIERS COMMUNITIES ENVIRONMENT The Board reviewed the Group’s principal risks which could impact the implementation of the Group’s strategy. See pages 69 to 76 for details of our principal risks and uncertainties. The Board requested updates from the Chair of the Audit Committee on the key areas of risk discussed during the year. EMERGING RISKS Relevant stakeholders CUSTOMERS PEOPLE INVESTORS PARTNERS AND SUPPLIERS COMMUNITIES ENVIRONMENT The Board heard updates from the Chair of the Audit Committee on emerging risks which have been highlighted and debated during meetings of the Committee. Principal risks and uncertainties Page 69 BUSINESS RELATIONSHIP ENGAGEMENT Relevant stakeholders CUSTOMERS PARTNERS AND SUPPLIERS Positive relationships with our customers, suppliers and other business partners are essential to the Group’s ongoing success. Customer-facing teams provide daily feedback from customers while views from suppliers and partners are captured by dialogue with the relevant business team. These views from our customers, suppliers and partners are collated and fed back to the Board, and incorporated into decision making. Business relationship engagement Pages 16 to 20 and 23 COMMUNITY AND ENVIRONMENT ENGAGEMENT Relevant stakeholders COMMUNITIES ENVIRONMENT The Board remains committed to reaching our target of becoming a net zero carbon business by 2030. All new Board members receive an induction on the Group’s approach to sustainability. This year, a Board-level ESG Committee was introduced, providing a forum for the Board to dedicate discussion to our progress with our sustainability objectives and to review updates from our sustainability team. The Board is also regularly updated on our community and social impact work and our fundraising activities for our charity partner, Single Homeless Project. 123 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED BOARD ACTIVITIES 2022/23 CONTINUED 765 GOVERNANCESUCCESSION BOARD EFFECTIVENESS REVIEW Relevant stakeholders CUSTOMERS PEOPLE INVESTORS PARTNERS AND SUPPLIERS COMMUNITIES ENVIRONMENT The Board has progressed the recommendations made following the internal Board eectiveness review facilitated by Fidelio last year. Read more about how the recommendations from last year’s external evaluation have been progressed during the year on pages 157 to 158. Internal Board eectiveness review Pages 155 to 156 GENDER PAY GAP Relevant stakeholders PEOPLE INVESTORS The Board reviewed and approved the Company’s ﬁrst gender pay gap report, which was published on 30 March 2023 and can be found on our website at www.workspace. co.uk/investors/about-us/governance/ our-policies/gender-pay-gap-report-2023. REGULATORY AND LEGAL UPDATES Relevant stakeholders INVESTORS The Board discussed legal updates and advice from the Company’s legal advisers. The Board also reviewed regular legal and governance updates from the Company Secretary. COMMITTEE MEMBERSHIP AND TERMS OF REFERENCE Relevant stakeholders INVESTORS During the year, the Board reviewed the structure of its Committees. For more information on changes to the Committee structure and membership see page 157. The Board also reviewed the schedule of matters reserved to the Board (see page 135) and the terms of reference applicable to each Committee. WORKFORCE POLICIES AND PRACTICES Relevant stakeholders PEOPLE The Board reviews and approves all key policies and practices which could impact our employees and inﬂuence their behaviours. Policies are reviewed to check that they are aligned with the Group’s purpose, culture and values. The Board recognises that eective and honest communication is essential to maintain our business values, and we encourage our employees to speak out if they witness any wrongdoing. This stance is reinforced in our whistleblowing procedures and in our Code of Conduct. Further information on the Group’s key compliance policies can be found on pages 89 to 91. All policies are available to employees and are published on the Group’s intranet. All new employees are provided with training on our policies at induction sessions and we provide annual refresher training to all sta in key areas. APPOINTMENT OF NEW CHAIR Relevant stakeholders CUSTOMERS PEOPLE INVESTORS PARTNERS AND SUPPLIERS COMMUNITIES ENVIRONMENT During the year the Board approved the appointment of Duncan Owen to succeed Stephen Hubbard as Chair of the Board. Recruitment process Page 146 124 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED BOARD ACTIVITIES 2022/23 CONTINUED 98 A The likely consequences of any decision in the long term D The impact of the Company’s operations on the community and the environment F The need to act fairly as between members of the Company E The desirability of the Company maintaining a reputation for high standards of business conduct B The interests of the Company’s employees C The need to foster the Company’s business relationships with suppliers, customers and others Section 172(1) statement RELEVANT DISCLOSURES The Board of Workspace Group PLC (‘the Board’) is required to act in good faith to promote the long-term success of the Company (and its Group) for the beneﬁt of its shareholders, while having due regard to the matters set out in Section 172(1) of the Companies Act 2006. The Board has identiﬁed the Company’s key stakeholders to be its shareholders, employees, customers, suppliers, debt ﬁnanciers and local communities. The Board also considers the impact of operations on the environment to be of key importance. A The likely consequences of any decision in the long term Our purpose Page 14 Our business model Pages 64 to 68 Our strategy Pages 32 to 35 Dividend Page 80 C The need to foster the Company’s business relationships with suppliers, customers and others Customer proposition Page 65 Customer and supplier engagement Pages 16 to 20, 23 and 123 Anti-bribery & corruption and modern slavery Page 91 E The desirability of the Company maintaining a reputation for high standards of business conduct Compliance policies Pages 89 to 91 Culture and values Page 21 Whistleblowing Page 91 Internal controls Page 170 B The interests of the Company’s employees Employee engagement Pages 21 to 22 and 122 Looking after our people Pages 50 to 53 Diversity and inclusion Pages 148 to 154 D The impact of the Company’s operations on the community and the environment Supporting our communities Pages 54 to 58 Sustainability Pages 36 to 58 TCFD Pages 92 to 103 F The need to act fairly as between members of the Company Shareholder engagement Pages 23 and 121 AGM Page 122 125 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED BOARD INFORMATION BOARD DISCUSSION AND DECISION MAKING MONITORING – All members of the Board are aware of the Board’s responsibilities and their individual duties as Directors and the need to consider Section 172(1) factors is embedded in the Matters Reserved to the Board and Committee terms of reference – The Board receives regular updates from the sustainability team on ESG matters (see pages 118 and 172 to 177) – The Board directly engages with employees and investors, and it receives feedback from the CEO and CFO on meetings with investors and analysts (see pages 121 to 122) – The Board receives regular reports from the Executive Committee and external advisers on engagement with other stakeholders such as customers, suppliers and the wider community (see page 123) – Decision making is informed by the information received by the Board, with consideration given to Section 172(1) factors relevant to the decision at hand – Sustainability matters are considered in each decision the Board makes – A Board strategy day is held each year where the Board discusses long-term strategy (see page 118) – The Board regularly considers the Group’s purpose, values and policies related to business conduct (see pages 119 to 120) – The Board monitors the short, medium and long-term impact of key decisions through regular updates from the Executive Committee – Stephen Hubbard, Chair of the Board, holds focus groups with employees in his role as the designated Non-Executive Director for employee engagement (see page 122) – A stakeholder impact analysis, setting out the expected impacts of the proposed decision on dierent stakeholder groups and how any negative impacts might be mitigated, is conducted and that analysis feeds into the Board’s discussions when key strategic decisions are proposed – The Board and the Audit Committee oversee the Company’s risk management framework and the actions that are in place to mitigate risk in the short, medium and long term (see page 171) – The Board considers stakeholder interests when determining the level of dividend – Feedback and engagement from stakeholder groups is collated and used to inform future decision making HOW THE BOARD CONSIDERS SECTION 172(1) MATTERS 126 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED SECTION 172(1) STATEMENT CONTINUED Key Board decisions in 2022/23 Some of the key decisions considered by the Board in 2022/23, and how the Board had regard to Section 172(1) matters when discussing them, are outlined to the right and on the following page. INTEGRATION OF McKAY Description Following completion of the acquisition of McKay in May 2022, during the year the Board monitored the successful integration of the McKay business into the Group’s operations Relevant Section 172(1) decision criteria A, B, C, D, E, F Relevant stakeholders – Employees – Customers – Suppliers – Investors – Communities – Debt ﬁnance providers Decision-making process – The Board was aware that the integration of the McKay business into the Group would impact upon multiple stakeholder groups and be essential to delivering long-term value from the acquisition for all stakeholders – The Board requested regular reports from management on progress with the integration plan, focusing on aligning the McKay operations – Areas of focus included a review of security and health & safety policies and processes to ensure the safety of employees, customers, suppliers and visitors to McKay buildings, and integrating building, ﬁnance and customer data and processes into the Group’s systems to promote synergies – In particular, the Board considered progress with collation of information related to sustainability matters and the creation of a net zero transition plan for the McKay portfolio – The Board reviewed updates on sta communications relating to the acquisition and the integration plan – The Board reviewed proposals for amendments to ﬁnancing arrangements with lenders Values Know your stu Show we care Find a way A: The likely consequences of any decision in the long term. B: The interests of the Company’s employees. C: The need to foster the Company’s business relationships with suppliers, customers and others. D: The impact of the Company’s operations on the community and the environment. E: The desirability of the Company maintaining a reputation for high standards of business conduct. F: The need to act fairly as between members of the Company. 127 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED DISPOSAL OF RIVERSIDE RESIDENTIAL SCHEMECUSTOMER EXPERIENCE Description During 2022, the Board reviewed and considered updates on the progress of the Group’s customer experience project. The project is focused on collating customer feedback and using that feedback to improve the experience of our customers Relevant Section 172(1) decision criteria A, C, E Relevant stakeholders – Customers – Investors Decision- making process – The Board recognises that, as well as improving the experience of customers as a stakeholder group, continually improving the customer experience is vital to the long-term success of the Group – During the year, the Board reviewed and discussed feedback collated from customers and the proposed areas of focus for improvements – The Board monitored progress on the areas of focus, which included the introduction of a new complaints policy, changes to streamline the processes for renewals, moving within Workspace and licences to alter, and adjustments to the responsibilities of centre managers to free up more time for them to focus on customers – The Board was updated on provision of ‘Customer First’ training to all sta, designed to support the above initiatives, underline the importance of a positive customer experience and understand how sta can contribute within their individual roles Values Know your stu Show we care Find a way Make it fun Description The Board approved the disposal of the residential component of the Group’s Riverside property Relevant Section 172(1) decision criteria A, B, C, D, E, F Relevant stakeholders – Employees – Customers – Suppliers – Investors – Communities Decision- making process – In March 2023, the Group completed the sale of the residential component of the Group’s Riverside mixed-use redevelopment in Wandsworth for £54 million – The scheme is an example of the Group’s mixed-use regeneration approach, and the Group will construct a new major business centre providing 153,000 sq. ft. of net lettable space – creating employment opportunities and delivering on the Group’s strategy of employment-led regeneration in the areas in which it operates – The new residential and commercial space will be built to the highest sustainability standards and with signiﬁcant landscaping and public realm enhancements, beneﬁtting residents and the local community – Further information can be found on page 13 Values Know your stu Show we care Find a way Description The Board approved the appointment of Duncan Owen to succeed Stephen Hubbard as Chair of the Board with eect from the close of the Company’s AGM in 2023 Relevant Section 172(1) decision criteria A, B, C, D, E, F Relevant stakeholders – Employees – Customers – Suppliers – Investors – Communities Decision- making process – As Stephen Hubbard was approaching nine years’ tenure on the Board, the Nominations Committee had for some time been considering succession planning – The Committee was conscious of the signiﬁcance of the Chair’s role in leading the Group and the potential for the decision to impact on all the Group’s stakeholders – Duncan Owen’s appointment as Non- Executive Director in July 2021 formed part of that succession planning, with the role speciﬁcation being created with a view to identifying candidates who could be suitable for the Chair role when it became vacant – The Board formally approved Duncan’s appointment as Chair in February 2023, on the recommendation of the Nominations Committee – Further information can be found on page 146 Values Know your stu Show we care Find a way CHAIR SUCCESSION 128 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED KEY BOARD DECISIONS IN 2022/23 CONTINUED Our strong governance framework and clear delineation of Board roles enables the Chair and Non-Executive Directors to provide oversight and constructive challenge as the Executive Committee continues to deliver our strategy. Carmelina Carfora Company Secretary QUICK LINKS Board roles and responsibilities Page 130 Our governance framework Page 132 How we govern Page 133 129 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information DIVISION OF RESPONSIBILITIES Board roles and responsibilities The roles and responsibilities of the Chair and the Chief Executive Ocer are separate, with a clear division of responsibilities between them. The Chair is responsible for the leadership of the Board, and the Chief Executive Ocer manages and leads the business. Our governance framework can be found on page 132. In addition, the role speciﬁcations described on the right set out the clear division of responsibility between Executive and Non-Executive members of the Board. NON-EXECUTIVE CHAIR: STEPHEN HUBBARD Leading the eective operation and governance of the Board – Setting agendas which support ecient and balanced decision making – Ensuring that the Board plays a full and constructive part in the development of the Group’s strategy and making sure that there is sucient time for boardroom discussion – Ensuring eective Board relationships and fostering a culture that supports constructive debate – Facilitating the eective contribution of the Non-Executive Directors and monitoring that all Directors receive accurate, timely and clear information – Overseeing the annual Board evaluation and identifying key actions required – With the Nominations Committee, monitoring that the Board remains appropriately balanced to deliver the Group’s strategic objectives and ensuring that the Nominations Committee meets the requirements of good corporate governance – Promoting eective engagement with the Group’s shareholders and other key stakeholders – Leading initiatives to assess the culture across Workspace and ensuring that the Board sets the correct tone – Reviewing, with the Board, diversity and inclusion initiatives The Chair is not involved in an executive capacity with any of the Group’s activities. DESIGNATED NON-EXECUTIVE DIRECTOR FOR EMPLOYEE ENGAGEMENT: STEPHEN HUBBARD – Representing the Board in discussions with employees and communicating Board decisions on speciﬁc matters – Developing, implementing and feeding back on employee engagement initiatives in conjunction with management – Communicating to employees the outcomes and the developments made by the Board on speciﬁc matters SENIOR INDEPENDENT DIRECTOR: ROSIE SHAPLAND – Being available and providing an alternative communication channel for shareholders and other stakeholders, if required, and being available to meet with investors on request – Providing a sounding board for the Chair – If necessary, deputises for the Chair in his absence and counsels all Board colleagues – Acts as an intermediary for Non-Executive Directors when necessary – At least annually, leads a meeting of the Non-Executive Directors without the Chair present, to appraise the Chair’s performance and to address any other matters which the Directors might wish to raise. The outcomes of these discussions are then conveyed to the Chair INDEPENDENT NON-EXECUTIVE DIRECTORS: ROSIE SHAPLAND, LESLEY-ANN NASH, DUNCAN OWEN, MANJU MALHOTRA AND NICK MACKENZIE – Constructively challenging and assisting in the development of strategy – Scrutinising, measuring and reviewing the performance of the Executive Directors and senior management against agreed performance objectives – Promoting the highest standards of integrity and corporate governance – Reviewing the succession plans for the Board and key members of senior management – Determining appropriate levels of remuneration for the senior executives – Reviewing the integrity of ﬁnancial reporting and the systems of risk management and ﬁnancial controls – Serving on or chairing various Committees of the Board 130 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information DIVISION OF RESPONSIBILITIES CONTINUED EXECUTIVE CHIEF EXECUTIVE OFFICER: GRAHAM CLEMETT – Proposing and directing the delivery of strategy as agreed by the Board through leadership of the Group’s Executive Committee – Responsible for leading and managing the business and accountable to the Board for the ﬁnancial and operational performance of the Group – Leading the Group Executive Committee in the day-to-day running of the Group’s business in order to execute objectives successfully – Regularly reviewing the Group’s organisational structure and recommending changes as appropriate – Setting overall policies for recruitment, management, sta development and succession planning and providing updates to the Remuneration Committee – Overseeing employee initiatives, diversity and inclusion, and employee wellbeing – Together with the Chair and the CFO, representing the Company to its customers, suppliers, shareholders and other stakeholders – Leading on the Group’s sustainability strategy and the Group’s net zero carbon pathway – Corporate communications and the IR strategy CHIEF FINANCIAL OFFICER: DAVE BENSON – Supports the CEO in developing the strategic direction of the Group and works closely with the CEO and the Board to develop and implement the Group’s strategy – Provides ﬁnancial leadership to the Group and aligns the Group’s business and ﬁnancial strategy and management of the Company’s capital structure – Responsible for ﬁnancial planning and analysis, treasury and tax – Leads and monitors the eectiveness of the key ﬁnance functions and facilitates the appropriate development of the ﬁnance team – Responsible for the IT function and co-ordinates and delivers IT projects to support the growth and strategic priorities of the Group COMPANY SECRETARY: CARMELINA CARFORA – Secretary to the Board and to the Board’s Committees – Responsible for ensuring compliance with Board procedures and for supporting the Chair – Advising and keeping the Board updated on corporate governance developments – Ensuring that the Board has high-quality information, adequate time and the appropriate resources – Considering the Board’s eectiveness in conjunction with the Chair – Facilitating the Directors’ induction programmes and assisting with their professional development – Providing advice, services and support to all Directors as and when required – Responsible for organising the Annual General Meeting 131 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information DIVISION OF RESPONSIBILITIES CONTINUED BOARD ROLES AND RESPONSIBILITIES CONTINUED The Board delegates certain matters to its four principal committees. SUPPORTING COMMITTEES The Executive Committee operates a number of supporting committees that provide oversight on key business activities and risk. BOARD OF DIRECTORS The role of the Board is to promote the long-term success of Workspace by setting a clear purpose and the Group’s strategy for delivering the long-term value to our shareholders and other stakeholders. NOMINATIONS COMMITTEE Chaired by Stephen Hubbard AUDIT COMMITTEE Chaired by Rosie Shapland REMUNERATION COMMITTEE Chaired by Lesley-Ann Nash ESG COMMITTEE Chaired by Duncan Owen EXECUTIVE COMMITTEE The Executive Committee is responsible for the execution of the Company’s strategy and the day-to-day management of the business. DISCLOSURE COMMITTEE Identiﬁes and controls inside information or information which could become inside information and determines how and when that information is disclosed in accordance with applicable legal and regulatory requirements. Our governance framework Our governance framework supports the development of good governance practices across the Group. The Board has overall responsibility for governance within the Group. The Board delegates certain of its responsibilities to its Nominations, Remuneration, Audit and ESG Committees. Further details of the work, composition, role and responsibilities of these Committees are provided in separate reports on pages 141, 159, 172 and 178. Each of the Committees has terms of reference which were reviewed by the Committees and the Board during the year. The performance of each of the Committees is assessed annually as part of the evaluation process described later in this report. The Board delegates all operational matters to the Executive Committee, except for matters speciﬁcally reserved to the Board. The schedule of matters reserved for the Board is reviewed at least once a year and can be accessed on the Company website at www.workspace.co.uk/investors/about-us/ governance/committee-terms-of-reference. Further information on the matters reserved and the relationship between the Board and the Executive Committee can be found on page 135. The terms of reference of each Board Committee are available on the Company’s website at www.workspace.co.uk/investors/ about-us/governance/committee-terms-of- reference. Membership 6 Independent Non-Executive Directors Key responsibilities: – Reviews succession plans for the Board and its Committees and considers its structure, size, composition and diversity – Supports the development of an inclusive and diverse talent pipeline, and reviews supporting initiatives to increase diversity – Monitors that the Board has the appropriate knowledge, skills and experience to operate eectively and deliver our strategy – Recommends to the Board the appointment of a Non- Executive Director for employee engagement Nominations Committee Pages 141 to 158 Membership 3 Independent Non-Executive Directors Key responsibilities: – Oversees the Group’s ﬁnancial reporting – Maintains and manages the relationship with the External Auditor, including monitoring their performance and reappointment – Reviews and monitors management of risks other than those related to real estate, development and valuation Audit Committee Pages 159 to 171 Membership 3 Independent Non-Executive Directors Key responsibilities: – Determines the Remuneration Policy for Executive Board Directors and considers whether there is a clear link between performance and remuneration – Considers senior management remuneration presented by the CEO – Reviews workforce remuneration and related policies – Reviews remuneration policies and practices to ensure they support clarity, simplicity, transparency and alignment with culture Remuneration Committee Pages 178 to 211 Membership 8 Directors Key responsibilities: – Oversees the Group’s ESG strategy – Monitors ESG risk and opportunities – Sets ESG objectives and monitors progress against the objectives – Ensures reporting of ESG issues is in line with market best practice ESG Committee Pages 172 to 177 132 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information DIVISION OF RESPONSIBILITIES CONTINUED How we govern Non-Executive Directors Page 133 Re-election and election of Directors Page 134 Relationship between the Board and the Executive Committee Page 135 Composition of the Executive Committee Page 136 Information ﬂow to the Board Page 139 NON-EXECUTIVE DIRECTORS The Non-Executive Directors have a broad mix of business skills, knowledge and experience acquired across dierent business sectors. This combination enables them to provide independent and external perspectives to Board discussions. The Non-Executive Directors provide constructive challenge to the Executives. The Non-Executive Directors also help to develop proposals on strategy and they monitor performance. Independence of Non-Executive Directors During the year, the Board considered the independence of all of the Non-Executive Directors, save for the Chair who was deemed independent by the Board at the date of his appointment. The Board has reconﬁrmed that the Non-Executive Directors remain independent from executive management and that the Non-Executive Directors are free from any business or other relationship which could materially interfere with the exercise of their independent judgement. This independence is protected by a number of mechanisms including: – Meetings between the Chair and the Non-Executive Directors, individually and collectively, without the Executive Directors being present. These meetings are typically held before each Board meeting and they are used to discuss areas relevant to the operation of the Board and the Group in a more private setting. This year, seven of these meetings were held – Separate and clearly deﬁned roles for the Chair, as head of the Board, and the Chief Executive Ocer, as head of executive management, as set out on pages 130 to 131 The Nominations Committee oversees the independence of the individual Non-Executive Directors all of whom are deemed to be independent in line with the recommendations of the Code. Further details of this supporting evaluation can be found on page 148. Time commitment and external appointments The expected time commitment of the Chair and the Non-Executive Directors is agreed and set out in writing in the letter of appointment to the position, at which time the existing external demands on an individual’s time are assessed to conﬁrm that individual’s capacity to take on the role. Further appointments which could impair the ability to meet these arrangements can only be accepted following approval of the Board. When assessing additional directorships, the Board considers the number of public directorships held by the individual already and their expected time commitment for those roles (see biographies on pages 115 to 116). The Board considers guidance published by institutional investors and proxy advisers as to the maximum number of public appointments which can be managed both eectively and eciently. Executive Directors may accept a non- executive role at another company with the approval of the Board. Graham Clemett is the Senior Independent Non-Executive Director at The Restaurant Group PLC. The Board is satisﬁed that each of the Non-Executive Directors can devote sucient time to the Company’s business to discharge their responsibilities eectively. The Non- Executive Directors oer strategic guidance to Board discussions and they provide independent decisions to their respective Board succession Pages 146 to 147 Board skills and experience The biographies of all of the members of the Board, outlining their experience, can be found on pages 115 to 116 100% NON-EXECUTIVE DIRECTOR INDEPENDENCE 133 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information DIVISION OF RESPONSIBILITIES CONTINUED Board and Committee duties (see the table on page 113 for Board meeting attendance). The biographies of all of the members of the Board, outlining their experience and external appointments, can be found on pages 115 to 116. Stephen Hubbard As in previous years, the independence of Stephen Hubbard was speciﬁcally considered during the year. Stephen was previously Chair of CBRE UK, who are the Group’s external independent valuers. Stephen retired from CBRE UK in December 2019. Furthermore, while he remained as Chair of CBRE UK, he had no involvement in any discussions or decisions regarding the appointment of CBRE or the fees paid to them. The appointment of CBRE is by the Directors of the Company, acting through the Executives, and any communication with CBRE is entirely with them. The Board is satisﬁed and it continues to conclude that Stephen remains independent both in character and in judgement, including in relation to his responsibilities as Chair of the Company. In July 2020, Stephen stepped down from the Audit Committee on his appointment as Chair of the Company. NON-EXECUTIVE DIRECTORS CONTINUED RE-ELECTION OF DIRECTORS In accordance with the Code, all of the Directors will submit themselves for re-election at the AGM on 6 July 2023, except for Stephen Hubbard who will be stepping down from the Board and as Chair and who will not seek re-election. Following the Board evaluation review, detailed on page 155, and taking into account the Directors’ skills and experience (set out on pages 115 to 116), the Board believes that the re-election of the Directors is in the best interests of the Company. The Nominations Committee of the Group has considered their commitments and it has concluded that the Non-Executive Directors have sucient time to meet their Board responsibilities. The explanatory notes in the Notice of Meeting for the AGM state the reasons why the Board believes that the Directors proposed for re-election at the AGM should be reappointed. Duncan Owen was appointed as Chair of the newly formed ESG Board Committee in April 2022. Mr Clemett and Mr Benson each have service contracts, details of which can be found on page 209. None of the Non-Executive Directors have service contracts. Rather, the Non-Executive Directors are given letters of appointment. The appointments of Rosie Shapland, Lesley- Ann Nash, Duncan Owen, Manju Malhotra and Nick Mackenzie may be terminated by either the Company, or any one of them, giving three months’ notice in writing. The appointment of Stephen Hubbard may be terminated by either him or the Group giving six months’ notice in writing. With eect from his appointment as Chair, which will take eect at the close of the Company’s AGM on 6 July 2023, the appointment of Duncan Owen may be terminated by either him or the Group giving six months’ notice in writing. The terms and conditions of appointment of Non-Executive Directors, including the expected time commitment, are available for inspection at the Company’s registered oce. 134 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information DIVISION OF RESPONSIBILITIES CONTINUED HOW WE GOVERN CONTINUED BOARD OF DIRECTORS THE EXECUTIVE COMMITTEE The relationship between the Board and the Executive Committee The Board considers there to be an appropriate balance between Executive and Non-Executive Directors required to lead the business and safeguard the interests of shareholders. As at 31 March 2023, the Board comprised the Chair, ﬁve Non-Executive Directors (all of whom are independent) and two Executive Directors. This composition meets the requirement of the Code for at least half the Board, excluding the Chair, to be independent Non-Executive Directors. The Board delegates all operational matters to the Executive Committee except for the matters reserved to the Board. Executive Committee – managing the business The Executive Committee, which is chaired by Graham Clemett, supports the Board by providing executive management of Workspace within the strategy approved by the Board. The Executive Committee is accountable to the Board for implementation of the agreed strategy. The Executive Committee monitors customer and market trends, assesses the implications and beneﬁts of asset management initiatives and oversees the eectiveness of the governance framework. The Executive Committee is responsible for managing the business, making day-to-day operational decisions and delivering the strategy set by the Board. Our strategy Pages 32 to 35 The Board is responsible for contemplating market trends and their impact on our strategy, assessing appropriate levels of risk and setting the objectives for the business, including the approach to ESG matters. The Board delegates the delivery of the strategy to the Executive Committee. Key responsibilities: Develop the Group strategy and budget for approval by the Board Receive regular feedback from centre sta and take responsibility for implementing suggestions for improvements Collectively responsible for the day-to-day running of the business Analyse and review initiatives of particular interest to the Group and present these to the Board as appropriate Monitor operational and ﬁnancial results against plans and budgets Review and approve capital expenditure within the authorities delegated by the Board Develop leadership skills and the future talent of the business so that strong succession plans are in place as the Group develops Receive updates on the Company’s sustainability strategy Consider regulatory developments Focus on the eectiveness of risk management and control procedures Driving customer-led growth Delivering operational excellence Being sustainable Key responsibilities: – review and approval of the Group’s strategy, business objectives and annual budgets – approval of the Group’s dividend policy and the payment and recommendation of interim and ﬁnal dividends – approval of full-year and half-year results, including the review and approval of the going concern basis of accounting and the viability assessment – health and safety performance across the Group – on the advice of the Nominations Committee, reviewing succession plans for the Board and the senior management team – review and approval of corporate transactions – setting the Group’s purpose, values and standards – approval of decisions likely to have a material impact on the Company or Group from any perspective, including, but not limited to, ﬁnancial, operational, strategic or reputational – setting the risk appetite and tolerance of the Group 135 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information DIVISION OF RESPONSIBILITIES CONTINUED HOW WE GOVERN CONTINUED The Board comprises eight people: the Chair, ﬁve Non-Executive Directors and two Executive Directors 8 1 64 2 75 3 8 Composition of the Executive Committee The Executive Committee is collectively responsible for day-to-day operations and performance and successful implementation of the Company’s strategy. Graham Clemett Chief Executive Ocer Graham Clemett Chief Executive Ocer Paul Hewlett Director of Strategy & Corporate Development Will Abbott Chief Customer Ocer Dave Benson Chief Financial Ocer Leo Shapland Head of Portfolio Management Claire Dracup Director of People & Culture Carmelina Carfora Company Secretary Richard Swayne Investment Director 136 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information DIVISION OF RESPONSIBILITIES CONTINUED HOW WE GOVERN CONTINUED EXECUTIVE DIRECTOR GRAHAM CLEMETT CHIEF EXECUTIVE OFFICER 1 EXECUTIVE DIRECTOR DAVE BENSON CHIEF FINANCIAL OFFICER 2 CARMELINA CARFORA COMPANY SECRETARY 3 For full details of Graham’s, Dave’s and Carmelina’s responsibilities and experience, go to pages 115 to 117. WILL ABBOTT CHIEF CUSTOMER OFFICER 4 Speciﬁc responsibilities: Marketing, brand development and customer engagement. Background and relevant experience: Will joined Workspace in 2020, having spent over 20 years in marketing roles across a diverse range of businesses. After beginning his career in advertising, Will worked in digital media, FMCG, ﬁnancial services and travel sectors. Prior to Workspace, Will was Marketing Director at Hiscox during a signiﬁcant period of growth for the insurer, and more recently was Chief Marketing Ocer of Neilson Active Holidays. CLAIRE DRACUP DIRECTOR OF PEOPLE & CULTURE 5 Speciﬁc responsibilities: HR; training and sta development; management of the head oce, personal assistants and admin teams; internal culture; business centre support including management of the relief team; health and safety; monitoring of customer service; Chair of the Social Sustainability Committee and responsible for delivery of all social sustainability initiatives. Background and relevant experience: Claire joined Workspace in 1995, initially as a Centre Manager before progressing to Portfolio Manager. In 2008, Claire became Head of Support Services and she was responsible for facilities management, security, health and safety and business centre support, which included recruitment, training and improvements to service and quality control. PAUL HEWLETT DIRECTOR OF STRATEGY & CORPORATE DEVELOPMENT 6 Speciﬁc responsibilities: Corporate strategic initiative development and execution; investor relations strategy. Background and relevant experience: Paul joined Workspace as Director of Strategy & Corporate Development in 2021. He was previously Executive Director of the UK investment Banking Real Estate team at J.P. Morgan Cazenove. Paul has over 20 years of Corporate Finance advisory and Corporate Broking experience, advising companies across the real estate sector on corporate strategy and a wide variety of transactions, most notably focused on Mergers & Acquisitions and Equity Capital Markets. LEO SHAPLAND HEAD OF PORTFOLIO MANAGEMENT 7 Speciﬁc responsibilities: Asset management, development and operational performance of the portfolio including lettings, lease renewals, property management, management of the centre and facilities team and ESG matters. Background and relevant experience: Leo joined Workspace in March 2022 from Aviva Investors, where he was Head of UK Real Estate Asset Management, responsible for the strategy and ﬁnancial performance of a large, diversiﬁed national property portfolio. Prior to that, Leo spent ten years at Tishman Speyer, holding a number of roles in investment, development and asset management in the ﬁrm’s London, San Francisco and Seattle oces. RICHARD SWAYNE INVESTMENT DIRECTOR 8 Speciﬁc responsibilities: Investment strategy, acquisitions and disposals, and valuations. Background and relevant experience: Richard joined Workspace in November 2014 as an Investment Manager. He was promoted to Head of Investment in October 2017 and to Investment Director in April 2020. Prior to joining Workspace, Richard qualiﬁed as a chartered surveyor and he worked for Cushman & Wakeﬁeld Investors and LFF Real Estate Partners. 137 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information DIVISION OF RESPONSIBILITIES CONTINUED HOW WE GOVERN CONTINUED GENDER DIVERSITY OF EXECUTIVE COMMITTEE 1 AND DIRECT REPORTS AS AT 31 MARCH 2023 Female 10 Male 15 ETHNIC DIVERSITY OF EXECUTIVE COMMITTEE 2 AND DIRECT REPORTS AS AT 31 MARCH 2023 Asian/Asian British – Indian 2 Black/African/Caribbean/Black British – Other 1 White – Other 1 White – English/Welsh/Scottish/Northern Irish/British 21 THE RIGHT SKILLS AND EXPERIENCE TO DRIVE LONG-TERM SUCCESS THE RIGHT BALANCE TO DRIVE LONG-TERM SUCCESS Executive and Leadership Property and Real Estate Financial Corporate Governance Customer and Marketing People ESG Executive Directors Graham Clemett Dave Benson Executive Committee members Carmelina Carfora Will Abbott Claire Dracup Paul Hewlett Leo Shapland Richard Swayne 1. We consider the Executive Committee to be ‘senior management’ as deﬁned by the UK Corporate Governance Code 2018. 2. We consider the Executive Committee to be ‘senior management’ as deﬁned by the UK Corporate Governance Code 2018. 138 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information DIVISION OF RESPONSIBILITIES CONTINUED HOW WE GOVERN CONTINUED SCHEDULED BOARD INPUTS 2022/2023 One-to-one meetings One-to-one meetings are held between new Directors and senior management as part of the induction process. The CEO and the CFO meet with senior management individually to discuss operations and performance, after which, the CEO and/or the CFO will report back to the Board on matters that require discussion. Board presentations Employees below Board level are invited to present to the Board on operational topics. During the year, our Director of Strategy & Corporate Development gave several Board updates on our integration of McKay and our Head of Portfolio Management updated the Board on the key development projects being undertaken by the Group. There were also updates from our Head of Sustainability and Chief Customer Ocer. Employee engagement The Chair held several meetings with sta as part of his role as Non-Executive Director responsible for employee engagement and our annual employee survey also collected feedback from sta during the year. Further details on these and the Group’s other employee engagement initiatives during the year can be found on pages 21, 122 and 139. Feedback from these initiatives was then presented to the Board. 7 Board meetings in 2022/23 AD HOC BOARD INPUTS IN 2022/23 Presentations from brokers External speaker on broader market trends Updates from legal advisers Information ﬂow to the Board 2 BREAKFAST SESSIONS HELD Q: How do you ensure the employee voice is heard in the boardroom? This is my third year as the designated Non-Executive Director for employee engagement and our breakfast sessions this year, were each attended by an eclectic mix of centre and head oce sta. These sessions provide a vital link between our employees and the Board and have proved a great opportunity to hear feedback directly from employees and get an insight into our culture. I’ve really enjoyed seeing Workspace’s dynamic culture and values in action. Following the breakfast sessions, I report to the Board on the discussions held and the key themes raised. As a Board we also receive regular updates on our sta and their feedback from the Executive Committee, including the results of our annual sta survey. Q: What were the key themes raised this year? It was great to gain insight on our day-to-day operations and the many ideas and areas for improvement shared by our sta. The issues raised ranged from how to continue to improve customer experience, communications and the impact of energy prices on our customers. I was pleased to hear overwhelming positive feedback on our initiatives to promote our culture and collaboration across the business, including our inaugural employee shadowing days, town hall events and training facilities. See page 21 for further details. Q: What does the Board want to focus on in the next year? We plan to continue building on the Group’s open and transparent culture, and focus on how we can support our sta in their roles at the Group. We are also continuing our focus on diversity and inclusion, with a number of new initiatives planned to further our commitment in this area. I look forward to hearing feedback from sta on those new initiatives. Q&A Stephen Hubbard Non-Executive Director for employee engagement 139 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information DIVISION OF RESPONSIBILITIES CONTINUED HOW WE GOVERN CONTINUED The Directors are expected to attend all meetings of the Board, the Committees on which they serve and the AGM, and to devote sucient time to the Group’s aairs, to enable them to fulﬁl their duties as Directors. Should the Directors be unable to attend meetings, they would be provided with papers to allow them to make their views known to the Chair ahead of that meeting. Prior to each Board meeting, and periodically, the Chair meets the Non-Executive Directors without the Executive Directors present, and maintains regular contact with the CEO, CFO and with other members of the management team. If any Director has concerns about the running of the Group or proposed action which cannot be resolved, these concerns are recorded in the Board minutes. No such concerns arose during the year under review. Training and development With the ever-changing environment in which Workspace operates, it is important that the Board maintains a good working knowledge of the property industry and how the Group operates within its sector, as well as remaining aware of recent and upcoming developments in the wider legal and regulatory environment. Directors attend external seminars and brieﬁngs in areas considered appropriate for their own professional development. This training is designed to build upon the diverse range of experience that each Director brings to the Board. The Company Secretary provides regular updates on legal, regulatory and corporate governance matters. As required, Workspace invites external professional advisers to provide training and updates on their specialist areas. Updates and training are not solely reserved for legislative developments but they aim to cover a range of issues including, but not limited to, market trends, the economic and political environment, ESG, technology and social considerations. The Directors are invited to identify areas in which they would like additional information or training, following which the Company Secretary will arrange for the necessary resources to be put in place. The resulting sessions may be internally or externally facilitated. This year, the Directors have received updates and presentations on the following areas: – Governance and regulatory developments – ESG commitments and net zero carbon pathway – Data protection compliance – Executive remuneration trends and best practice, including ESG in remuneration – Inclusion and diversity – Conﬂicts of interest – Market updates Information and support to the Board The Board and its Committees are provided with comprehensive papers in a timely manner to enable members to be fully briefed on matters to be discussed at their meetings. In consultation with the Chair, the CEO and CFO, the Company Secretary manages the provision of information to the Board for their formal Board meetings and at other appropriate times. The CEO and CFO keep the Board appraised of business matters relating to the Group on a timely basis. They provide various updates to the Board on many aspects of the business, ranging from trading performance, progress being made on our refurbishment and redevelopment projects, the rationale for acquisitions and disposals and how these are aligned to strategy. The CEO and CFO also inform the Board on the discussions held with analysts, investors and other stakeholders. The Chair of each Committee separately engages with Executive Committee members and other sta relevant to their roles, as well as meeting with relevant external advisers. The Company Secretary and external advisers periodically update the Board on regulatory changes. This year, these have included the introduction of the Register of Overseas Entities, recent FCA enforcement decisions and updates in corporate governance guidance. The Board utilises an electronic Board paper system which provides immediate and secure access to Board papers and materials. Prior to each Board meeting, the Directors receive the agenda and supporting papers through this system meaning that they have the latest and the most relevant information in advance of the meeting. After each Board meeting, the Company Secretary operates a comprehensive follow- up procedure to enable actions to be completed as agreed by the Board. The Directors have access to the advice of the Company Secretary, Carmelina Carfora. Her biography can be found on page 117. At the direction of the Chair, Carmelina is responsible for advising the Board on matters of corporate governance and compliance with Board procedures. How the Board discharges its responsibilities The Board discharges its responsibilities through an annual programme of Board and Committee meetings which are scheduled throughout the year, with main meetings timed around the Group’s ﬁnancial calendar. Additional meetings are convened to consider an annual cycle of topics, including the annual strategy day, key management and ﬁnancial updates, review of risk as well as the approval of acquisitions and refurbishment programmes. In the year ended 31 March 2023, the Board met formally on seven occasions, including a strategy day in September 2022. Supplementary meetings or conference calls are held between formal Board meetings as required. The Board engaged with the Group’s advisers during the year and there was a presentation from the Group’s brokers and PR advisers in September 2022. The Group’s valuer, CBRE, presented to the Board in May 2022 and November 2022. The CBRE presentation covered the valuation of the property portfolio and the wider market in which the Group operates. Knight Frank, the Group’s former valuer for the McKay portfolio of properties, presented to the Board in November 2022. 140 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information DIVISION OF RESPONSIBILITIES CONTINUED HOW WE GOVERN CONTINUED 141 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information The Nominations Committee is responsible for monitoring that the Board, its Committees and Workspace’s senior management have a good balance of skills and experience, to lead Workspace eectively both now and in the longer term. Stephen Hubbard Chair of the Nominations Committee QUICK LINKS Membership and attendance at Nominations Committee meetings Page 142 Chair’s letter Page 143 The role of the Nominations Committee Page 145 COMPOSITION, SUCCESSION AND EVALUATION The Committee comprises the Non-Executive Directors and is chaired by Stephen Hubbard. Details of individual attendance at the meetings held during the year are set out below. More information on the skills and experience of all Committee members can be found on pages 115 to 116. Member since Meetings attended Stephen Hubbard (Chair) 2014 3/3 Rosie Shapland 2020 3/3 Lesley-Ann Nash 2021 3/3 Duncan Owen 2 2021 2/3 Manju Malhotra 2022 3/3 Nick Mackenzie 2022 3/3 Damon Russell 1 2013 1/1 1. Damon Russell retired from the Board on 21 July 2022. 2. Duncan Owen did not attend the January Nominations Committee. Board Composition Considered the composition of the Board to ensure that the Board has the right balance of skills, knowledge, experience, diversity and attributes required of existing and any future Non-Executive Directors. Chair Succession Rosie Shapland, Senior Independent Director, led the appointment process for a successor to Stephen Hubbard, who will be stepping down from the Board in July 2023. Membership of the Board Committees Implemented new Board Committee structure. An ESG Board Committee was established to provide a higher level of focus and visibility on sustainability at Board level and involved all members. Board Eectiveness Review Oversaw the annual Board eectiveness review, which tracked the development of key aspects of governance and provided the opportunity for the Board to consider in depth its contribution to strategy and horizon scanning. Diversity and Inclusion Policy Reviewed the Diversity and Inclusion Policy and considered the progress against Board diversity and inclusion principles. MEMBERSHIP AND ATTENDANCE AT NOMINATIONS COMMITTEE MEETINGS KEY TOPICS CONSIDERED BY THE COMMITTEE DURING THE YEAR 142 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPOSITION, SUCCESSION AND EVALUATION CONTINUED Dear shareholder, On behalf of the Board, I am pleased to present the report of the Nominations Committee. This year, a key focus for the Committee was to identify my successor as Chair. On 28 February 2023 we were pleased to announce the appointment of Duncan Owen as my successor. More information on the appointment process is highlighted in Rosie Shapland’s letter, which can be found on page 144. Rosie, as Senior Independent Non-Executive Director led the Chair recruitment process. Duncan will assume the role following the conclusion of the AGM on 6 July 2023. I am delighted the Board has identiﬁed an excellent successor. Duncan, who joined the Board in 2021, has over 30 years’ experience in the real estate sector. He has served as the CEO of both public and private companies and his roles have included the Global Head of Real Estate at Schroders plc, and the CEO of Immobel Capital Partners, a pan-European specialist ‘Green’ real estate investor in the oce and residential sectors. Until recently, Duncan was on the Board of Governors for the Church Commissioners and chaired its Property Investment Committee. Nominations Committee Chair’s letter The Committee plays a key role in supporting the Board within the Governance Framework in reviewing the composition of the Board and its Committees. During the year, the Committee oversaw the evaluation of the Board as well as progress on the implementation of recommendations from previous evaluations. This includes assessing whether the balance of skills, diversity, experience, knowledge and independence on the Board is appropriate to enable it to operate eectively. Read more on page 155. The Board remains focused on promoting broader diversity and creating an inclusive culture. See pages 148 to 154 for details on the Board’s activities on diversity this year. Looking forward, the Nominations Committee will continue to develop and monitor succession plans both at Board and senior management level. Please read on for more information about the work of the Committee. Stephen Hubbard Chair of the Nominations Committee 6 June 2023 The Nominations Committee has continued to play a key role in supporting Workspace’s long- term sustainable success and monitoring the tenure of Non- Executive Directors to eectively manage succession planning Stephen Hubbard Chair of the Nominations Committee 143 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPOSITION, SUCCESSION AND EVALUATION CONTINUED GENDER DIVERSITY OF THE BOARD 1 APRIL 2020 – 31 MARCH 2023 2020 2023 2020 2023 Men (including those self identifying as men) 67.0% 62.5% Women (including those self identifying as women) 33.0% 37.5% Representation of women (including self identifying as women) on the Board has increased 4.5% since April 2020. ETHNIC DIVERSITY OF THE BOARD 1 APRIL 2020 – 31 MARCH 2023 2020 2023 2020 2023 White British or other White (including minority-white groups) 100% 75% Asian/Asian British 0 12.5% Black/African/Caribbean/ Black British 0 12.5% +25% BOARD ETHNIC DIVERSITY SINCE APRIL 2020 Rosie Shapland Senior Independent Non-Executive Director While the Board will miss Stephen’s guidance, I am delighted that Duncan is taking over the role of Chair of the Company Chair succession Page 146 Duncan Owen’s biography Page 116 Stephen Hubbard was appointed to the Board in July 2014 and has held the role of Chair since 9 July 2020. Consequently, Stephen will have served on the Board for nine years in July 2023, the maximum time that the UK Corporate Governance Code 2018 recommends that the Chair should remain in post from the date of their initial appointment. Given Stephen’s tenure and the likelihood that he would step down from the Board at the end of nine years, the Nominations Committee had for some time been considering succession planning for the Chair. Duncan Owen was appointed as a Non-Executive Director of the Company in July 2021, with his appointment forming part of the Company’s long-term succession planning. A thorough search was conducted by the Company’s Board-level external search agency, Fidelio, identifying a number of diverse and suitable candidates and through a robust process, coming to the successful selection and appointment of Duncan Owen. As part of that process, a candidate brief had been prepared which speciﬁed the experience that the Company was looking for, including deep property knowledge, long- term expertise in asset management and utilisation, understanding of capital markets and investor communications. Although this recruitment process was primarily for a Non-Executive Director role, the speciﬁcs of the brief were designed in part because the Nominations Committee was conscious that Stephen’s nine-year maximum tenure on the Board would be reached in 2023, and consequently the Committee was keen to identify candidates who could potentially be suitable for the Chair role when it became vacant. The Nominations Committee considered carefully who would be an appropriate successor to Mr Hubbard and concluded that Mr Owen has the appropriate knowledge, experience and time available to undertake the role of Chair. Mr Owen will be appointed Non-Executive Chair of the Company at the conclusion of the Company’s 2023 Annual General Meeting. On behalf of the Board, I would like to take the opportunity to thank Stephen for his support and guidance since joining the Board and for his excellent chairship over the past three years. He has played a key role in the growth of the Company and was especially instrumental in helping us successfully navigate the challenges during the pandemic and in refreshing the composition of the Board. Stephen leaves the business with our very best wishes. Rosie Shapland Senior Independent Non-Executive Director 6 June 2023 BOARD DEVELOPMENT SINCE 2020 LETTER FROM THE SENIOR INDEPENDENT DIRECTOR 144 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPOSITION, SUCCESSION AND EVALUATION CONTINUED Key activities Pages 146 to 158 Board succession Page 147 The role of the Nominations Committee How the Committee operates The Committee held three meetings, primarily to progress the appointment of our new Chair. – The meetings are usually held immediately prior to or following a Board meeting, although the Committee also meets on other occasions on an ad hoc basis, as required – Only members of the Committee have the right to attend meetings. However, an invitation to attend meetings is, on occasion, extended to the Chief Executive Ocer, in order that the Committee can understand his views, particularly on key talent within the business – All Directors can, for the purpose of discharging their duties, obtain independent professional advice at the Company’s expense. No Director had reason to use this facility during the year Nominations Committee responsibilities The Nominations Committee considers the structure, size and composition of the Board, its Committees and members of the Executive Committee. The Nominations Committee also receives oversight from the Chief Executive Ocer on the Company’s leadership roles, which include the Executive Committee members and their direct reports. The Committee’s responsibilities include: – Leading the process for new Board appointments and reviewing succession for Directors and senior management – Regularly reviewing the structure, size and composition of the Board and its Committees – Facilitating an eectiveness review of the Board, its Committees and Directors – Reviewing the time commitment expected from the Chair and Non-Executive Directors – Recommending the election and re- election by shareholders of the Directors, having due regard to their performance and ability to continue to contribute to the Board, taking into consideration the skill, experience and knowledge required along with the need for progressive refreshing of the Board The Nominations Committee is responsible for monitoring that the Board, its Committees and Workspace’s senior management have a good balance of skills, knowledge, alignment to the needs of the business and experience, to lead Workspace eectively both now and in the long term. This is achieved through succession planning and talent development, and an understanding of the changing competencies required to support the Group’s strategy, purpose, vision, culture and values. The way in which this is supported through the current Board composition is set out on page 148. The Committee also plays a key role in supporting inclusion and diversity at Workspace, which at Board level involves reviewing and monitoring processes and initiatives in the Group, with employee engagement playing an important role. The Committee is responsible for recommending candidates for the role of Non- Executive Director responsible for employee engagement. The Committee also oversees the development of Board members who are keen to expand their competency and knowledge. 145 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPOSITION, SUCCESSION AND EVALUATION CONTINUED Nominations Committee activities in 2022/23 1. Chair succession Page 146 2. Board Succession Planning Page 147 3. Performance of the Nominations Committee Page 147 4. Board composition Page 148 5. Diversity & inclusion Page 148 6. Board evaluation Page 155 CHAIR SUCCESSION During the year, the Committee continued to fulﬁl its core responsibilities of reviewing the structure of the Board and its Committees. A key focus of the Committee has been to identify a successor to Stephen Hubbard, who will have completed nine years on the Board in July 2023. The Committee determined that Duncan Owen should succeed Stephen. Duncan was appointed as a Non-Executive Director of the Company in July 2021, with his appointment forming part of the Company’s long-term succession planning. On his appointment in 2021, Duncan underwent a formal appointment and induction process. At that time, a thorough recruitment and selection process had been undertaken, assisted by the Company’s Board-level external search agency Fidelio Partners Board Development & Executive Search Ltd (‘Fidelio’). Fidelio is an external and independent board consultancy which specialises in building board capability and is recognised for its commitment to ESG, diversity and inclusion. Fidelio has been accredited for the sixth year in succession by the FTSE Women Leaders Review (formerly the Hampton-Alexander Review) for their contribution towards achieving greater gender balance including for FTSE 350 boards and leadership teams. Fidelio also supports the work of the Parker Review. Fidelio’s commitment to identifying the most qualiﬁed and inclusive candidates for roles has resulted in strong and diverse shortlists for each of the Board appointments Workspace made over the last three years. Fidelio has also supported with regard to Board eectiveness but has no other connection with the Company or the individual Directors. Key considerations for the search process conducted in 2021 which resulted in the appointment of Duncan Owen. The Nominations Committee discussed the skills and experience required for new members joining the Board. It was concluded that the successful candidate would bring the following attributes: – Deep property expertise and familiarity with tenant and occupier trends. – An understanding of the investment markets. – Strong operational focus and ability to contribute to Workspace’s ambition to develop its customer-centric business model. – The ability to draw on long-term, relevant experience of driving value for the customer. – An ability to constructively challenge and support the management team and the Board while maintaining a highly collaborative approach and collegiate style. – Familiarity with the requirements of being a Board member of a listed company. – A keen awareness of stakeholder interests and a strong interest in ESG and how it is shaping the work of the Board and the impacts on the business. – A good understanding of the parameters of being a Non-Executive Director and possess a strong capability to add value to the role. – Understand the importance of diversity and inclusion agendas and the value this brings to an organisation. – Excellent judgement, able to lead logical and evidence-based discussions. In addition, there was a clear expectation that candidates would be able to devote sucient time to the role. Our extensive search and selection process Fidelio were engaged to conduct the selection process. They were asked to draw up a detailed role speciﬁcation. This was reviewed with the Chair who then engaged with the Nominations Committee. Final role speciﬁcation was then approved. In follow-up discussions held between the Chair and the Committee, they reﬂected upon the experience of the candidates and their speciﬁc skill sets. The Nominations Committee considered that given Duncan’s experience and the roles he was performing at that time, he would bring a fresh and complementary perspective to an existing Board of Directors, who already bring valuable knowledge, expertise and diversity from roles in property, ﬁnance and government. Further details of the recruitment process for Duncan Owen can be found on pages 131 to 132 of the 2022 Annual Report. Recommendation In February 2023, after taking all of the above into consideration, the Nominations Committee concluded that it should recommend to the Board that Duncan be appointed to the role of Chair. The Board formally approved the appointment in February 2023. 146 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPOSITION, SUCCESSION AND EVALUATION CONTINUED 1 BOARD SUCCESSION PLANNING Board succession The Committee regularly reviews the composition of the Board to ensure it continues to have the appropriate balance of skills to support the Company in achieving its strategy. When considering any future appointments the Committee will continue to make decisions in consideration of our Board diversity principles, detailed on page 154. Following refreshment of the Board in the last three years, with ﬁve new Non-Executive Directors joining the Board during that time, this year the focus of the Committee was on Chair succession as detailed on page 146. No new Directors were appointed during this year. The Group has initiatives to develop sta with leadership potential which are detailed on page 149. Time commitments The Directors have demonstrated a strong commitment to their roles on our Board and Committees. The Directors attended meetings of the Board and Committees scheduled in 2022/23 as well as additional ad hoc meetings. For further details of attendance at meetings see page 113. The Directors have also given careful consideration to their external time commitments to conﬁrm that they are able to devote an appropriate amount of time to their roles on our Board and Committees. For each of the Directors, the Board considers that the time commitment that he or she is required to devote to those external roles does not compromise their role at Workspace. The Nominations Committee reviews, on an ongoing basis, Directors’ time commitments and conﬁrmed that they were fully satisﬁed with the amount of time each Director devoted to the business. The Committee also recognises that there is value in the Non-Executive Directors being active on other Boards in an Executive or Non-Executive Director capacity. Directors’ induction programmes All new Non-Executive and Executive Directors joining the Board undertake a formal and personalised induction programme, designed to provide an understanding of the Company’s business, strategy, culture, ESG, governance, management and stakeholders. This covers the operation and activities of the Company, such as site visits, meeting members of the senior management team across our key business areas and operations, the Company’s principal strategic risks, the role of the Board, the decision-making matters reserved to the Board, and the responsibilities of Board Committees. This is tailored to take into account a Director’s previous experience and responsibilities. The Company Secretary assists the Chair in designing and facilitating an induction programme for new Directors and ongoing training. Directors are also briefed on their roles and responsibilities as a director of a listed company. For Non-Executive Directors, speciﬁc committee responsibilities relevant to their committee membership are covered, to enable them to function eectively as quickly as possible. In addition, Directors are oered follow-up sessions in any areas in which they want to increase their knowledge. We also oer ongoing bespoke development for Directors and Committee Chairs. Directors are encouraged to continue to meet with management after their induction on an ongoing basis to support them and pass on their experience. A diverse workforce that brings an appropriate balance of skills, experience and knowledge, as well as fresh perspectives, enriches our business and contributes to our long-term success Stephen Hubbard Chair Key activities Pages 146 to 158 Chair succession Page 146 PERFORMANCE OF THE NOMINATIONS COMMITTEE The performance of the Nominations Committee was assessed during the year. From the responses provided, it was concluded that the Nominations Committee was operating eectively. 147 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2022/23 CONTINUED 32 DIVERSITY & INCLUSIONBOARD COMPOSITION Our Diversity & Inclusion Policy applies both to the Board and the wider business. Workspace’s purpose is to give businesses the freedom to grow. We know that a workforce made up of people with a wide range of backgrounds and experiences will contribute to our long-term success and help to achieve our strategy (see page 32 for further details on our strategy). We are committed to supporting diversity and to creating an inclusive culture that attracts the best individuals to our workforce. We value diversity in all its richness and work hard to create an environment where talented people can thrive, without regard to gender, gender reassignment, race, ethnicity, age, religious or spiritual beliefs, sexual orientation, marital and civil partnership status, disability, education or social background. A diverse organisation beneﬁts from the dierent perspectives inclusivity in these areas can bring, as well as from variety in skills, industry experience and personality. We want to build a diverse pipeline of talented employees and senior managers to support us as we continue to grow and achieve our purpose. It is our policy to appoint the best person for the role and we are committed to ensuring that our processes and initiatives encourage diversity and allow a diverse group of potential candidates to be identiﬁed at both Board and Executive-level. Reviewing the Board and Committee composition As part of the Board’s annual eectiveness review, described on page 155, the Committee considers the composition of the Board and its Committees in terms of balance of skills, experience, length of service and wider diversity considerations. The Board and its Committees continue to have a strong mix of experienced individuals on the Board who are not only able to oer an external perspective on the business, but also provide constructive challenge to review the Group’s strategy. The Nominations Committee is satisﬁed that each Director continues to make an eective contribution to the Board and to fulﬁl their duty to promote the success of the Company. Furthermore, the respective skills of the Directors were found to complement one another, enhancing the overall operation of the Board. The Board has carefully considered the guidance criteria regarding the composition of the Board under the UK Corporate Governance Code. In the opinion of the Board, the Chair and all the Non-Executive Directors bring independence of judgement and character, a wealth and diversity of experience and knowledge and the appropriate balance of skills. The Directors give sucient time to enable them to carry out eectively their responsibilities and duties to the Board and the Committees on which they sit. They are suciently independent of management and are free from any other circumstances or relationships that could interfere with the exercise of their judgement. With eect from the close of the 2023 AGM, no Non-Executive Directors will have been on the Board for more than six years. As at 31 March 2023, the Board comprised the Chair, two Executive Directors and ﬁve Non-Executive Directors. Further details on the independence of the Directors and their re-election can be found on pages 133 to 134 and on pages 3 to 4 of the 2023 Notice of Annual General Meeting. In accordance with the Code, with the exception of Stephen Hubbard, all the Directors will retire and oer themselves for re-election by shareholders at the 2023 Annual General Meeting. Having served on the Board for nine years in July 2023, Stephen Hubbard will retire following the conclusion of the AGM. The biographies of all members of the Board, outlining the skills and experience they bring to their roles, are set out on pages 115 to 116. Stephen Hubbard was appointed as the Non-Executive Director for employee engagement in July 2020. Further details can be found on page 130. Chair’s evaluation for 2022/23 The Senior Independent Director chaired a meeting of Non-Executive Directors, without the Chair present, to appraise the Chair’s performance and to address any other matters which the Directors might wish to raise. The outcome of these discussions was conveyed by the Senior Independent Director to the Chair. It was concluded that the Chair is highly respected and is valued for his industry knowledge and experience. The Board is satisﬁed that the Chair continued to be eective and shows a high level of commitment in discharging his responsibilities. Our plans for next year We are committed to continually progressing our initiatives to improve diversity. In the next year we plan to: – Introduce further employee support networks – Review our beneﬁts and policies and implement any changes recommended – Introduce ‘back to work’ inductions and coaching for those returning from parental leave – Further increase the awareness of our sta in all areas of diversity & inclusion, for example by making greater use of external speakers and developing social impact projects that connect our business centres with their local communities – Trial job sharing in certain roles – Oer apprenticeships in certain roles – Review job descriptions to ensure the language used is fully inclusive and attracts a diverse pool of talent – Expand our career pathways to other roles within the organisation where applicable 148 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2022/23 CONTINUED 54 RECRUITMENT AND SELECTIONCULTURE TRAINING AND DEVELOPMENT HOW WE PROMOTE DIVERSITY & INCLUSION DIVERSITY & INCLUSION CONTINUED Every employee has the right to be treated with respect and dignity throughout their employment with us and not to be discriminated against. We have a zero tolerance attitude to bullying, harassment or victimisation of any kind Our recruitment and selection, training and development, performance reviews and promotion processes are all based solely on individual merit and free from bias We monitor and analyse the diversity of our employees so that we can track and progress our diversity initiatives. This year, we made changes to how we collect diversity information from our sta in order to improve the quantity and quality of data available to us Our Board and Executive Committee are regularly updated on our progress with diversity initiatives and external guidance and recommendations for improving diversity. We provide unconscious bias and harassment training for all employees We oer ﬂexible working options (including hybrid working) to support employees with family and/or caring commitments This year we introduced an employee support network aiming to provide a forum for parents and carers, including how Workspace can better support them. In the coming year, we will factor any feedback from this network into our processes for supporting returners to work In 2022 we hired a Recruitment Manager to oversee our entire recruitment activity and process and we introduced a new recruitment policy which sets out fair and consistent recruitment procedures We review and change job titles where appropriate. This year we changed the role of Receptionist to Centre Co-ordinator to better reﬂect the role and to appeal to a wider pool of candidates We review job speciﬁcations to ensure we consistently use inclusive language that encourages both male and female candidates We provide unconscious bias and interview skills training for all hiring managers. In the coming year we intend to introduce further training for line managers, including managing dicult conversations Guidance and support notes are provided to hiring managers to promote fair and thorough processes We advertise all vacancies internally before undertaking any external advertisement, to encourage internal applications When we do advertise externally, we have increased our use of social media and other direct recruitment methods in order to reach a wider pool of talent, including encouraging applications from people who may be returning to work and from local communities via local job centres, universities and schools Where we use recruitment agencies, we ensure they have a commitment and track record in diverse appointments When a senior role becomes available, we seek to encourage diverse applications and to shortlist an equal number of men and women where possible We promote progressive career development through encouraging lateral job moves where opportunities arise This year, we introduced bi-monthly meetings between the HR team and senior managers with a view to identifying opportunities for sta development During our annual appraisal process, we identify employees who have strong potential for development, and put training and development plans in place for them We provide a Group-wide internal training programme to oer employees opportunities to learn and develop skills such as organisation, people management and managing dicult situations During this year, we have started to oer Institute of Leadership & Management training for line managers We support sta with further studies by sponsoring external learning and development where appropriate We trialled ‘career pathways’, for our centre team roles, to make it clearer to sta how they can progress their careers at Workspace 149 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2022/23 CONTINUED Q: What made you want to set up a group for those with caring responsibilities and how will it support our sta? As someone who has caring responsibilities myself, I could really relate to this topic and putting this network together was important to me. It can be very dicult to balance caring responsibilities while working as you are juggling two worlds. People can sometimes feel like they are alone and that others don’t understand the challenges they face. The Supporting Others group provides a forum for people to share their experiences – both the positives and the challenges – and learn from and support each other in a safe space. It’s an invaluable forum for discussing ideas on how Workspace can support those with caring responsibilities. Q: What have been the key matters raised by the network so far? Support on return from parental leave has been a key topic. Parents highlighted the challenges of coming back to work after an extended period, including switching your mindset back to work and understanding the changes that will inevitably have arisen in their absence. As a result we are planning to introduce some new initiatives for those returning to work, including mini back-to-work inductions and training on any new systems and processes that have been implemented while they have been on parental leave. There has also been a focus on the importance of ‘me time’ amongst your work and caring responsibilities. Q: What are your plans for the network in the next year? We plan to build on what we have achieved this year, continuing to provide a space for employees to talk openly and support each other. We would also love to invite some guest speakers, perhaps someone who has reached the very top of their career while juggling caring responsibilities, so that they can share their experience and insights into the challenges they faced and the key to their success. Q&A Satpreet Dhariwal Senior HR Manager and Chair of our Supporting Others group SPOTLIGHT ON SUPPORT FOR PARENTS AND CARERS It was very important to me that we provide a forum for those with caring responsibilities to share experiences and support each other Satpreet Dhariwal Senior HR Manager and Chair of our Supporting Others group 150 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2022/23 CONTINUED GENDER AND ETHNIC DIVERSITY AT BOARD AND EXECUTIVE COMMITTEE LEVEL The Board is fully supportive of the recommendations of both the FTSE Women Leaders Review (the successor to the Hampton-Alexander Review) and the Parker Review, and of the new requirements of LR 9.8.6R(9). The tables to the right set out the numerical data required to be disclosed in accordance with LR 9.8.6R(9), as at 31 March 2023. There have been no changes between 31 March 2023 and the date of this Report. As at 31 March 2023, the Group has met two of the three targets set by LR 9.8.6R(9). Rosie Shapland is Senior Independent Director and the Group therefore meets the LR 9.8.6R(9) target to have at least one of the senior Board positions held by a woman. Two members of the Board are from a minority ethnic background, meeting the LR 9.8.6R(9) target that at least one member of the Board should be from a minority ethnic background. As of 31 March 2023, the Board consists of three women and ﬁve men, meaning the Board comprises 37.5% women, narrowly missing the LR 9.8.6R(9) target that women should represent at least 40% of the Board. This represents an improvement from 33% as at 1 April 2022. In addition, Stephen Hubbard will be stepping down from the Board from the end of the Company’s AGM in July 2023, at which point women will represent 42.9% of the Board. Board positions are, by their nature, limited in number meaning that vacancies are less common, but when vacancies do become available the Board will continue to recruit in a manner which attracts a diverse mix of candidates and to shortlist an equal number of men and women wherever possible. For more information on our Board diversity principles and processes see page 148. The data contained in the disclosures to the right was self-reported by members of the Board and Executive Committee. The Executive Committee were asked to specify their gender identity and ethnic origin via our HR system, with each question using a dropdown menu with options to select. The Board were separately each asked the same questions with the same options. Graham Clemett and Dave Benson are members of both the Board and the Executive Committee and therefore are included in both the calculations relating to the Board and those relating to executive management. Board composition Page 148 37.5% FEMALE REPRESENTATION AT BOARD LEVEL AS AT 31 MARCH 2023 GENDER Number of Board members Percentage of the Board Number of senior positions on the Board (CEO, CFO, SID and Chair) Number in executive management Percentage of executive management Men (including those self identifying as men) 5 62.5% 3 6 75% Women (including those self identifying as women) 3 37.5% 1 2 25% Non-binary 0 0% 0 0 0% Not speciﬁed/prefer not to say 0 0% 0 0 0% ETHNICITY Number of Board members Percentage of the Board Number of senior positions on the Board (CEO, CFO, SID and Chair) Number in executive management Percentage of executive management White British or other White (including minority-white groups) 6 75% 4 8 100% Mixed/Multiple Ethnic Groups 0 0% 0 0 0% Asian/Asian British 1 12.5% 0 0 0% Black/African/Caribbean/ Black British 1 12.5% 0 0 0% Other ethnic group, including Arab 0 0% 0 0 0% Not speciﬁed/prefer not to say 0 0% 0 0 0% Further information on the composition of the Board can be found on page 114 and on the composition of the Executive Committee on page 136. 151 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2022/23 CONTINUED Male: 123 42.0% Female: 170 58.0% The above disclosure is made in accordance with section 414C(8)(c)(iii) of the Companies Act 2006. The Board breakdown required by section 414C(8)(c)(i) of the Companies Act 2006 is set out on page 151. In addition, for the purposes of disclosure under section 414C(8)(c)(ii) of the Companies Act 2006, the Group had four male and two female senior managers as at 31 March 2023, calculated in accordance with sections 414C(9) and (10)(b) of the Companies Act 2006. White: 206 70.3% – English/Welsh/Scottish/Northern Irish/British – White – Irish – White – Other 151 5 50 Black: 26 8.9% – Black/African/Caribbean/Black British – Caribbean – Black/African/Caribbean/Black British – African – Black/African/Caribbean/Black British – Other 14 10 2 Asian: 37 12.6% – Asian/Asian British – Indian – Asian/Asian British – Bangladeshi – Asian/Asian British – Pakistani – Asian/Asian British – Chinese – Asian/Asian British – Other 14 5 2 2 14 Mixed: 23 7.9% – Mixed – White and Black Caribbean – Mixed – White and Black African – Mixed – White and Asian – Mixed – Other – Mixed 4 4 1 13 1 Other ethnic group: 1 0.3% 18–29: 76 25.9% 30–39: 123 42.0% 40–49: 62 21.2% 50–59: 20 6.8% 60–69: 11 3.8% 70–79: 1 0.3% DIVERSITY IN THE WIDER WORKFORCE GENDER DIVERSITY OF ALL EMPLOYEES AS AT 31 MARCH 2023 AGE DIVERSITY OF ALL EMPLOYEES AS AT 31 MARCH 2023 ETHNIC DIVERSITY OF ALL EMPLOYEES AS AT 31 MARCH 2023 152 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2022/23 CONTINUED SPOTLIGHT ON PROGRESSION & DEVELOPMENT I have been at Workspace for seven years. I joined in March 2016 as Centre Manager of The Light Bulb and Morie Street Studios and demonstrated great work ethic and commitment to prove myself in that role. Just under two years later, I was entrusted with the management of the Group’s largest site, Kennington Park business centre. The site requires a meticulous approach due to the range of spaces available, from traditional oce and studio space to commercial kitchens and industrial workshops. It usually has several appraisals and projects ongoing at any one time. Managing it requires a greater level of knowledge and skill and I was glad for the opportunity to step up to the challenge. In 2021, I decided to undertake the qualiﬁcation to become an Associate of RICS in the commercial property path, in order to learn additional skills and open up future opportunities for my career. Workspace were extremely supportive of me doing the qualiﬁcation. Not only did they provide ﬁnancial funding for my studies, but my line managers and other senior colleagues dedicated their time to help me with any questions I had, and gave me the opportunity to work on real business projects that I could then submit as case studies for my ﬁnal assessment. In late 2022 I saw the role of Associate Asset Manager advertised internally. With the knowledge I have developed from my RICS studies and my Centre Manager roles, I decided to apply for the promotion and was delighted when I was successful. I started my new role as Associate Asset Manager in April 2023 and I am looking forward to the fresh challenges and opportunities it will bring. I was given the opportunity to work on real life business projects that also helped with my studies as well as my development at Workspace Ewelina Vale Associate Asset Manager KEY FACTS £61k EMPLOYEE TRAINING SPONSORED 25 UNCONSCIOUS BIAS AND HARASSMENT TRAINING SESSIONS 9 INTERNAL LATERAL JOB MOVES 29 INTERNAL PROMOTIONS 12 WORKSPACE WINNERS Kennington Park Business Centre, Oval 153 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2022/23 CONTINUED BOARD DIVERSITY PRINCIPLES AND PROGRESS At Board level, we recognise that a group that is diverse in nature, irrespective of characteristics such as gender, ethnicity, skills, experience and background, is able to provide diering perspectives and challenge to debates and decisions. When recruiting new Board members, the Nominations Committee makes all decisions in consideration of this policy and the principles below. The principles have been agreed with the aim of increasing diversity within our Board and its Committees, and developing a pipeline of high potential diverse leaders and senior managers. PRINCIPLES IMPLEMENTATION PROGRESS AGAINST OBJECTIVES Ensure the Board comprises an appropriate balance of skills and brings a balance of diverse characteristics including in terms of gender, ethnicity, skills, experience and background in order to bring fresh perspectives and to enrich our business and contribute to our long-term success. The diversity of the Board, in a number of respects, is continually reviewed by the Nominations Committee and is considered annually by the wider Board as part of the Board evaluation process to ensure the Board is continuing to enrich the business and contribute to its long-term success. In March 2023, the Board discussed this year’s Board evaluation process. An important part of the discussion related to the value of diversity, including cognitive diversity. No concerns were raised in connection with the diversity of the Board. 37.5% female representation on our Board as at 31 March 2023 (2022: 33%). 25% ethnic minority representation on our Board as at 31 March 2023 (2022: 22%). Ensure the recruitment process, including advertisements and use of recruitment agencies, allows for a diverse group of potential candidates to be identiﬁed. The Board places importance on ensuring the recruitment process is fair and is based solely on individual merit. The Board instructs executive search ﬁrms to assist with sourcing the best candidates for the role. When instructing an executive search ﬁrm, the Board will explicitly request that a diverse mix of individuals are identiﬁed for the role. The Board actively seeks diverse candidates. Over the last three years, ﬁve new Non-Executive Directors have been recruited. A thorough recruitment and selection process was undertaken, assisted by the Company’s Board-level external search agency, Fidelio. As part of that process, candidate briefs were prepared and a diverse long and short-list was presented for each Non-Executive Director position. In making these appointments, the Board considered its Diversity & Inclusion Policy. The Board and Nominations Committee will only engage with executive search ﬁrms that have signed up to the Standard Voluntary Code of Conduct for Executive Search Firms. The Board will continue to engage executive search ﬁrms that have signed up to the Standard Voluntary Code of Conduct. During 2022/23, Fidelio were the only executive search ﬁrm engaged by the Board. Fidelio is accredited under the Hampton-Alexander Enhanced Code of Conduct and has signed up to the Standard Voluntary Code of Conduct in order to provide sucient support to the Board in enhancing diversity. Board attention and focus is given to initiatives designed to develop a pipeline of talented, high potential employees and senior managers from a diverse range of backgrounds including in terms of gender, ethnicity, skills, experience and background. The HR team has been tasked with continuing to progress our existing initiatives to support development of a diverse pipeline of talent (see page 149 for further details) as well as delivering the new initiatives detailed on page 148. During the year, the HR team continued to introduce and progress a number of initiatives aimed at increasing diversity across the workforce. See page 149 for more details for our diversity initiatives. 154 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2022/23 CONTINUED BOARD EVALUATION We conducted an internal Board evaluation for 2023 in line with best practice corporate governance requirements. This followed an internal evaluation facilitated by Fidelio in 2022 and an external evaluation conducted by Fidelio in 2021, the outcomes of which are detailed on page 156. The evaluation focused on the overall eectiveness of the Workspace Board, building on the prior year’s evaluation which enabled the Board to monitor progress on key aspects of governance, including the composition of the Board. In addition, the 2023 evaluation provided a deep dive into how eectively the Board is contributing to strategy and horizon scanning. Fidelio prepared a tailored Board questionnaire, including both a quantitative and qualitative element, comprising open questions around the Board’s oversight of strategy and emerging risk. Fidelio has supported with regard to Board composition. They have no other connection with the Company or individual Directors. In conducting this evaluation, the Board was conscious of ensuring that the process met the requirements of the Code and had a clear focus on enhancing the eectiveness of the Board. Following Fidelio’s evaluation in 2021 and 2022 and the ongoing Board refreshment, the Board decided to leverage this momentum and conduct a review that would lead to meaningful insights and enable the Board to make further progress in enhancing performance and its eectiveness. Fidelio worked with the Company to develop an innovative approach to the internal evaluation which met the needs of the Code through the combination of a tailored questionnaire and facilitated Board discussion to explore the ﬁndings from the questionnaire. An established timeline with incremental improvements made each year Stephen Hubbard Chair of the Nominations Committee 2020/21 2021/22 2022/23 EXTERNAL BOARD EVALUATION The Board eectiveness review was conducted against a backdrop of change, with new appointments to the Board combined with the impact of the pandemic on both the business and the work of the Board. INTERNAL BOARD EVALUATION This process was developed with a clear focus on the ‘high-performing Board‘ and how the Board adds value. This approach built on the prior Board evaluation and the progress made and also contributed to the momentum and potential of a relatively new Board. INTERNAL BOARD EVALUATION The evaluation covered the eectiveness of the Workspace Board, and how this has developed over the past year. Looking ahead it has a clear focus on the Board’s contribution to strategy and horizon- scanning. 155 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2022/23 CONTINUED 6 APRIL 2023 Key outcomes agreed FEBRUARY 2023 Focused questionnaire JANUARY 2023 Board discussion MARCH 2023 Meeting with the Board BOARD EVALUATION – SPOTLIGHT ON DEVELOPING A HIGH-PERFORMANCE BOARD CONTINUED BOARD DISCUSSION A discussion was held by the Board to consider key subject areas for this external review. Key questions – Is there scope to develop the Board’s contribution to strategy and horizon scanning? – How can Board Members and the Executive Committee engage further beyond the formal Board Meetings? – How eective are the various Board Committees and does the Committee structure remain appropriate? – What is the quality of Board learning? – What are the next steps for the Workspace Board to enhance performance and eectiveness? FOCUSED QUESTIONNAIRE ISSUED TO THE BOARD Fidelio developed a tailored questionnaire, focused on Board eectiveness and contribution to strategy and horizon scanning. Key focus areas The quantitative questionnaire enabled the Board to provide feedback on eight key aspects on governance. This was broadly comparable with the prior year and provided the opportunity to monitor progress. The qualitative questionnaire enabled a deep dive on four key aspects of strategy and horizon scanning including examples of best practice. MEETING WITH THE BOARD The Board then had the opportunity to explore the ﬁndings during its meeting in March. Discussion points The discussion was designed to review progress on key aspects of governance and to consider whether speciﬁc steps needed to be taken. In addition the discussion enabled a good debate around strategy formation, horizon scanning and where there were opportunities to increase eectiveness. KEY OUTCOMES AGREED The feedback from this year’s Board evaluation was positive and concluded that the Board worked well and the Committee structure continued to evolve. Speciﬁc development themes – The Board will continue to develop its oversight of strategy and horizon scanning – Holding more regular strategy updates – Inviting external and internal speakers to focus on a particular area of interest. Following the recommendations from this external review, an implementation plan and progress tracker will be developed by Gillian Karran-Cumberlege from Fidelio and the Company Secretary which will be reviewed by the Board. 156 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2022/23 CONTINUED PROGRESS AGAINST THE EXTERNAL BOARD EFFECTIVENESS REVIEW CONDUCTED IN 2022 Item discussed by the Board Focus area Progress Strategy Continue to develop its oversight of strategy and horizon scanning. The Board continues to consider the Group strategy at each Board meeting. An annual strategy day was held in September 2022 and this was attended by some members of the Executive Committee. Actions from the strategy day were then circulated to the Board. This will remain a focus for the Board going forward. Board Committee structure Review of the Board Committee structure and membership for the next phase of Workspace’s development. Consider the formation of an ESG Board Committee and the disbandment of the Risk Committee, with responsibilities to be integrated into the Board and Audit Committee’s remits. A review of the Board Committee structure was undertaken during the year. It was concluded that membership of the Audit Committee would include Rosie Shapland (Chair), Lesley-Ann Nash and Manju Malhotra. Previously, the Audit Committee consisted of all Non- Executive Directors. Other NEDs are invited to attend those meetings of the Audit Committee convened to review the full and half-year results, typically held in May and November. No changes were proposed to either the Remuneration or Nominations Committees. The ESG Committee was formed during the year, with its ﬁrst meeting held in September 2022. The Committee is chaired by Duncan Owen. More details can be found on pages 172 to 177. The Risk Committee was disbanded during the year, with the ﬁnal Risk Committee Report included in the 2022 Annual Report. The responsibilities of the Risk Committee have been integrated into the Board and Audit Committee remits. Employee engagement Continue to focus on eective workforce engagement. During the year we continued with a programme of events outside of Board meetings at which members of the Board and the Executive Committee can build relationships on a more informal basis. The Chair also held breakfast meetings with sta during the year. Further details can be found on page 139. The Director of People and Culture attended the Board meeting in November 2022, where the Board were provided with feedback received from sta on the employee survey conducted during the year. The CEO provides the Board with oversight of the broader people agenda, succession planning, development and changes in sta across the business. This includes updates from town hall meetings. 157 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2022/23 CONTINUED PROGRESS AGAINST THE EXTERNAL BOARD EFFECTIVENESS REVIEW CONDUCTED IN 2022 CONTINUED Item discussed by the Board Focus area Progress Board learning Continuous learning for Board members to enhance understanding of the Company and the business it operates in. The Board strategy day oers an opportunity for members of the Board to hear from internal and external speakers on a variety of topics, including market trends and developments as well as strategic planning across areas of the business. Whilst the approach to Board learning will be kept under review, we shall continue to develop a dynamic programme of relevant subject areas that reﬂect strategic priorities or challenges. Bespoke Board learning programmes will also continue, as appropriate. Diversity, inclusion and ESG Review progress on diversity and inclusion and ESG both at Board level and throughout the business. For details of our progress with diversity and inclusion, see pages 148 to 154. A commitment to acting sustainably is one of the three pillars to our strategy which demonstrates how deeply it is embedded and ensures we consider sustainability in all business decisions. The ESG Committee was established during the year and will review our sustainability strategy, governance, and science-based targets to transition to net zero. We have continued to progress our social impact through initiatives such as the InspiresMe programme and employee wellbeing activities. Read more on pages 50 to 57. 158 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2022/23 CONTINUED AUDIT COMMITTEE REPORT The Audit Committee plays a key role in promoting the maintenance of a strong and transparent control environment at Workspace. Rosie Shapland Chair of the Audit Committee QUICK LINKS Membership and attendance at Audit Committee meetings Page 160 Key topics considered Page 160 Chair’s letter Page 161 Role of the Audit Committee Page 163 Signiﬁcant matters considered Page 164 Developing a robust Viability Statement Page 166 Fair, balanced and understandable Page 167 External audit Page 168 Risk management and internal controls Page 170 159 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information AUDIT, RISK AND INTERNAL CONTROL Portfolio valuation – Considered the objectivity and independence of the external valuers – Discussed the presentation of the portfolio valuation by the external valuers Financial and Narrative Reporting – Reviewed the year-end ﬁnancial statements including key judgements, estimates and assumptions External Audit – Reviewed and discussed reports from KPMG, summarising their ﬁndings arising from the 2021/22 audit and the half-year review of the results of the Group for the six months ended 30 September 2022 – Assessed the independence and objectivity of the external auditors Changes to principal risks – Reviewed management’s proposal to include climate risk as a principal risk Internal controls and risk management – Reviewed and discussed an update from the Group’s Head of Technology on the Group’s business continuity plan and cyber security – Reviewed the eectiveness of the Company’s control environment and the Company’s process for self-certiﬁcation of the operating eectiveness of controls Governance – Reviewed terms of reference – Discussed assessment of the eectiveness of the Audit Committee The Committee is made up entirely of Non-Executive Directors and each Committee member has considerable commercial knowledge and broad industry expertise. The Committee is chaired by Rosie Shapland. Details of individual attendance at the meetings held during the year are set out below. More information on the skills and the experience of all Committee members can be found on pages 115 to 116. Member since Meetings attended Rosie Shapland (Chair) 1,2 2020 4/4 3 Lesley-Ann Nash 2 2021 4/4 3 Manju Malhotra 2 2022 4/4 3 1. In accordance with the UK Corporate Governance Code 2018, the Board considers that Rosie Shapland has signiﬁcant recent and relevant ﬁnancial experience. 2. Following Board discussions on the structure of its Committees, it was agreed that from 21 April 2022, the Committee will be made up of three members, Rosie Shapland, Lesley-Ann Nash and Manju Malhotra. Other Non-Executive Directors are welcome to attend meetings should they wish to do so. All Non-Executive Directors attended meetings held in May and November 2022 to review the full and half-year results and the ﬁrst joint meeting of the Audit and ESG Committee meeting held in January 2023. 3. The Audit Committee meeting in January 2023 was a joint meeting with the ESG Committee. KEY TOPICS CONSIDERED BY THE COMMITTEE DURING THE YEARMEMBERSHIP AND ATTENDANCE AT AUDIT COMMITTEE MEETINGS 160 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information AUDIT, RISK AND INTERNAL CONTROL CONTINUED Dear shareholder, On behalf of the Board, I am pleased to present the Audit Committee Report. This report is intended to provide shareholders with an understanding of the work we have done to provide assurance on the integrity of the Annual Report and Financial Statements for the year ended 31 March 2023. Much of the work of the Committee is necessarily targeted around the key areas of ﬁnancial reporting, external audit, internal control and risk management, all of which is underpinned by a robust governance framework. This has been a busy period for the ﬁnance team, with the McKay acquisition and preparation for the implementation of a new ﬁnance system. Review of material issues The Audit Committee has a key role in checking that the Group’s narrative reporting gives a fair, balanced and understandable assessment of the Group’s position and prospects and establishing that the ﬁnancial statements provide a true and fair view of the Group’s ﬁnancial aairs. As part of this process, we considered the signiﬁcant ﬁnancial judgements made during the year, along with other key ﬁnancial reporting issues. In this context and in conjunction with the Board, we considered the twice annual valuation of the investment portfolio, the valuation process and the key assumptions made by the valuers and their independence. Following our review, we are satisﬁed that the valuation process is robust, the assumptions and estimates used in the valuation are appropriate and that the valuers remain independent. Further details can be found on page 164. Audit Committee Chair’s letter MONITORING FUTURE DEVELOPMENTS Continue to focus on climate change and its potential impact on the ﬁnancial statements, review mitigation strategies whilst monitoring risk across business decisions including assurance from Accenture on our carbon emissions disclosures. See page 101 for more details. Jointly, with the ESG Committee, review the programme of activity being undertaken to ensure the eectiveness of ESG policies and procedures. Continue to focus on the Company’s protection against cyber threats. Monitor proposed changes to the UK Corporate Governance Code, particularly with respect to internal controls. We also considered, as we do on a regular basis, the potential for fraud in revenue recognition, scope for management override of controls and compliance with regulations. We found no concerns arising from this review. A description of the main activities that the Committee considered during the year can be found on page 160. Climate change As the Group is committed to being net zero carbon by 2030, it is important that our ﬁnancial reporting reﬂects and supports this goal. The Board discussed the impact of climate change on the Group’s ﬁnancial reporting and ﬁnancial statements and it considered the requirement for companies to disclose, on a comply or explain basis, against the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). The Board received updates on the Company’s progress against this requirement from our Head of Sustainability. More information can be found on page 118. As part of its review of Principal Risks, and following the joint meeting with the ESG Committee in January 2023, the Audit Committee agreed that climate change be included as a principal risk. Cyber security Cyber security remains a focus area for the Committee. The Head of Technology attended the March Audit Committee to give an assessment of cyber risk and update on progress made in protecting the Group against evolving threats. The Audit Committee has a key role in checking that the Group’s narrative reporting gives a fair, balanced and understandable assessment of the Group’s position and prospects and establishing that the ﬁnancial statements provide a true and fair view of the Group’s ﬁnancial aairs Rosie Shapland Chair of the Audit Committee The role of the Audit Committee Pages 163 to 164 Risk management and internal controls Pages 170 to 171 161 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information AUDIT, RISK AND INTERNAL CONTROL CONTINUED Viability and going concern statements The Committee considered the going concern statements in the interim statement and the Annual Report, and the viability statement in the Annual Report. This included reviewing the work undertaken by management, which considered plausible downside forecasts factoring in the Group’s principal risks and certain uncertainties, and the appropriateness of the ﬁve-year viability assessment period. Following this review, we were satisﬁed that management had conducted robust viability and going concern assessments and recommended approval of these to the Board. See our viability and going concern statements on pages 87 to 88. 2023 Annual Report The External Auditor conﬁrmed that they had found no unadjusted material misstatements in the course of their work. After reviewing the reports from management, and following discussions with the External Auditor and valuers, the Committee is satisﬁed that: – the process used to determine the property valuation was satisfactory – the ﬁnancial statements appropriately address the key judgements and the key estimates – the Group has adopted appropriate accounting policies – both the External Auditor and the valuers remain independent and objective in their work The Board as a whole is responsible for assessing the Group’s position, performance, business model and strategy. The Committee’s role in this assessment is covered on page 167. For the year ended 31 March 2023, the Committee conﬁrmed to the Board it was satisﬁed that the Annual Report and Accounts was fair, balanced and understandable. Committee eectiveness The Company undertook an internally facilitated Board eectiveness evaluation this year, which assessed our performance as a Committee. I am pleased that this concluded that we operate eectively and that the Board takes assurance from the quality of our work. Risk, control and assurance The Group has several processes in place to provide eective internal control, including self-certiﬁcation of controls by risk owners, reviews of fraud, anti-bribery and whistleblowing policies and a risk management framework under which controls, and their eectiveness, are managed and evaluated. Between the Audit Committee and the full Board, we have reviewed the eectiveness of the Group’s risk management and internal control systems where we have not identiﬁed any signiﬁcant failings or weaknesses. In January 2023, the Audit Committee held a joint meeting with the newly established ESG Committee. At this meeting, the Audit and ESG Committees reviewed the Company’s policies and procedures that support the implementation of our ESG strategy, as well as the programme of assurance being undertaken to ensure the eectiveness of these policies and procedures. Both Committees were satisﬁed that the Company’s policies and procedures in this area operate eectively, and that adequate assurance is undertaken. The Committees also considered whether climate risk should be identiﬁed as a Principal Risk. Whilst the Company has an active programme of managing its climate risk exposures through ongoing assessment of risk, the establishment of control measures and active management of physical risk, it was concluded that given the nature of climate risk, which will require greater oversight of mitigation strategies and monitoring of risk across business decisions, it should be considered as a Principal Risk. We do not have a formal internal audit function, a matter which is kept under review by the Audit Committee. The Group has, however, appointed a Head of Security and Risk Management whose remit includes maintaining our risk management and control framework and conducting regular independent assurance. During the year the Head of Security and Risk Management chaired monthly Risk Management meetings attended by senior management, conducted bi-annual self- certiﬁcation of controls across the Group, completed a principal risk review and mapped out our internal and external assurance activities. The focus for the following 12 months is to evolve our internal assurance programme with additional independent reviews across the business. I hope that you ﬁnd this report informative and can take assurance from the work undertaken by the Committee during the year to deliver its key responsibilities. Rosie Shapland Chair of the Audit Committee 6 June 2023 The Committee was satisﬁed that management had conducted robust viability and going concern assessments Developing a robust Viability Statement Page 166 Fair, balanced and understandable reporting Page 167 162 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information AUDIT, RISK AND INTERNAL CONTROL CONTINUED FORWARD PLANNING Subjects include climate change, ESG eectiveness, monitoring recommendations from BEIS, changes to the UK Corporate Governance Code AUDIT COMMITTEE Assess and discuss topics with senior management and External Auditor Regular inputs received from: Workspace management and the External Auditor The role of the Audit Committee The Audit Committee reviews and monitors the integrity of the Group’s ﬁnancial reporting in advance of its consideration by the Board. The Committee oversees the relationship with the External Auditor in order to assess their eectiveness and to annually assess their independence and objectivity. Following the changes in Committee structure, the Audit Committee now also reviews and monitors the Group’s risk management and internal controls framework. Through our ongoing programme we identiﬁed that, while the Company has an active programme of managing its climate risk exposures, climate change should be considered a Principal Risk AUDIT COMMITTEE RESPONSIBILITIESHOW THE COMMITTEE OPERATES Financial reporting – Review the year-end and interim ﬁnancial statements and monitor the reporting process, including key judgements, estimates and assumptions and the presentation of signiﬁcant transactions. Information on signiﬁcant matters in relation to the ﬁnancial statements that were considered by the Committee can be found on page 164 – Review the appropriateness of accounting policies and practices – Advise the Board on the Group’s viability and going concern statements including the assumptions in plans, key risks considered, and the sensitivities tested. More information on the Committee’s assessment of the Group’s viability and going concern status can be found on pages 166 to 167 – Review the content of the Annual Report and Accounts and advise the Board on whether, taken as a whole, they are fair, balanced and understandable and provide the information necessary for shareholders to assess performance, the business model and strategy. The Group’s strategy and business model are explained on pages 32 to 35 and 64 to 68 respectively External audit – Assess the work of the External Auditor in relation to signiﬁcant ﬁnancial judgements made by management. More information is available on pages 168 to 169 – Assess the eectiveness of the external audit process and the ongoing relationship with the External Auditor. This is done by considering their approach to the audit and understanding of our business, discussing their reporting and any issues identiﬁed and obtaining the views of management The Audit Committee is composed solely of independent Non-Executive Directors, with a wide diversity of experience. Rosie Shapland, as a Chartered Accountant with many years of senior ﬁnancial experience, satisﬁes the requirement of having appropriate recent and relevant ﬁnancial experience. The Committee as a whole has competence in the sector in which the Group operates. Meetings of the Audit Committee coincide with key dates in the ﬁnancial reporting and audit cycle. During the year, the Committee met on four occasions, in May and November 2022 and in January and March 2023. The meeting in January was a joint meeting with the ESG Committee to review the Group’s ESG related policies and procedures that support the implementation of our ESG strategy. A forward plan of agenda items guides the business to be considered at each meeting and is regularly reviewed and developed. This pre-planning facilitates the work of the Committee, enabling it to give thorough consideration to matters of particular importance to the Group. The Committee receives information in advance of its meetings including information from management and detailed reports from the External Auditor including the audit report. The Committee meets privately with the External Auditor, at least annually, and it liaises with Company management in considering areas for review. The Committee regularly invites the external audit lead partner, the Chair of the Board, the Chief Executive Ocer, the Chief Financial Ocer, the Group Financial Controller and the Head of Security and Risk Management to attend Committee meetings. Representatives from our external valuers, CBRE, attend Board meetings twice per year to present the half- and full-year valuation reports. Meetings of the Committee are held in advance of the Board meetings to allow the Committee Chair to provide a report on the key matters discussed to the Board, and for the Board to consider any recommendations made. All of this, along with ongoing challenge, debate and engagement, allows the Committee to discharge its responsibilities eectively. 163 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information AUDIT, RISK AND INTERNAL CONTROL CONTINUED AUDIT COMMITTEE RESPONSIBILITIES CONTINUED – Review and monitor the objectivity and the independence of the External Auditor, including its policy governing the provision of non-audit services. Refer to page 169 for more information on our process for maintaining their independence – Agree the remuneration of the External Auditors Portfolio valuation – Consider the objectivity and independence of the external valuers – Review and challenge the methodology, assumptions and judgements used by the external valuers to ensure they are appropriate – Review the External Auditor’s assessment of the valuation, including an explanation as to how the valuation is audited Internal controls and risk management – Review the adequacy and eectiveness of the Group’s overall risk assessment processes that inform the Board’s decision making, including the design, implementation and eectiveness of those processes – Advise the Board on the Group’s overall risk appetite, tolerance and strategy, and the principal and emerging risks the Company is willing to take to achieve its long-term strategic objectives. See page 170 for details of how the Committee has considered risk appetite and strategy during the year – Advise the Board on the likelihood and impact of principal risks materialising, and the management and mitigation of principal risks to reduce the likelihood of their incidence or their impact. See pages 69 to 76 for information on the Committee’s consideration of principal risks – Review the eectiveness of the Group’s control environment, including the adequacy of key ﬁnancial controls – Review whistleblowing arrangements whereby employees may, in conﬁdence, raise concerns about possible improprieties in ﬁnancial reporting or other matters, to receive assurance that there are proportionate and independent procedures in place. See page 91 for more information on our Whistleblowing Policy – Review the Group’s procedures for preventing and/or detecting fraud – Review the Group’s procedures for the prevention and detection of bribery and monitor the reports generated by such procedures. See page 91 for more information on our Anti-Bribery Policy – Consider whether the Group should have an internal audit function Governance, best practice and development – Keeping up to date with expected changes to the Code, speciﬁcally regarding the control environment following the recommendations of the BEIS consultation – Keeping up to date on investor, shareholder and market sentiment (with advice from the Company’s brokers) – Ensuring compliance with applicable accounting standards, monitoring developments in accounting regulations as they aect the Group and reviewing the appropriateness of accounting policies and practices in place – Keeping up to date with regulatory and legislative matters relevant to the Group – Considering ESG matters in all decision making – Approve the Committee timetable and planner which detail the areas of focus for the Committee each year – Discuss the assessment of the eectiveness of the Committee – Review and approve changes to the Committee’s terms of reference Internal controls More information on the Group’s internal controls and risk management process is available: Pages 170 to 171 Signiﬁcant matters considered by the Committee Valuation of the investment property portfolio The valuation of the investment property portfolio is inherently subjective, requiring signiﬁcant judgement. The outcome is signiﬁcant for the Group in terms of its investment decisions, results and remuneration, and is a major component of Total Property Return and Total Accounting Return, two of our KPIs. Therefore, this matter is considered by both the Board and the Audit Committee. The valuation is conducted externally by independent valuers, CBRE, one of the world’s largest commercial real estate services ﬁrms. CBRE presented the year-end and interim valuations to the Board and Committee, who reviewed the methodology and the outcomes of the valuation, challenging the key assumptions and judgements. The Audit Committee also considered the objectivity and independence of the valuers. Following the acquisition of McKay in May 2022, the Board and Committee also reviewed the half-year McKay valuation prepared by their previous valuers Knight Frank. KPMG met with the valuers and they presented their views on the valuation to the Committee, as well as an explanation of how the valuation is audited. The Board and Committee considered that they were satisﬁed that the methodology, assumptions and judgements used by the valuers were appropriate, that the valuations were suitable for inclusion in the ﬁnancial statements and the work of the External Auditor was appropriate. 164 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information AUDIT, RISK AND INTERNAL CONTROL CONTINUED The Committee considers all ﬁnancial information published in the full and interim ﬁnancial statements and considers accounting policies adopted by the Group, presentation and disclosure of the ﬁnancial information and it challenges the key judgements and estimates made by management in preparing the ﬁnancial statements. The Committee pays close attention to matters it considers to be important by virtue of their impact on the Group’s results, or the level of complexity, judgement or estimation involved in their application on the consolidated ﬁnancial statements. The Committee reviewed a number of other key matters which have been considered by management and discussed with KPMG, including the uncertainty relating to collection of trade receivables and the accounting for the McKay acquisition and for the costs of the new ERP system implementation. Portfolio valuation Our property portfolio, is independently valued twice annually by our external valuers, CBRE Limited. Our properties are critical to our business and the valuation demonstrates the value that we are delivering to our shareholders. It is a measure of how well we are managing our buildings and driving rental income. Furthermore, the valuation is a signiﬁcant part of both our net asset value and Total Property Return, which are both key performance indicators. Given its signiﬁcance, management, the Board and the Committee monitor the objectivity and independence of the valuers, and review the methodology and outcomes of the valuation, challenging the key assumptions and judgements. A number of meetings are held between key management and CBRE ahead of the valuation at which the inputs and methodology of the valuation are discussed. Key discussions include: – London commercial property market: current trends and circumstances expected to aect the market are discussed – comparable market evidence: recent transactions are considered and compared to assumptions made in valuing our portfolio – development projects: we provide CBRE with any updates to ongoing or future schemes and we discuss the assumptions CBRE has made, particularly for more complex schemes where more signiﬁcant levels of judgement are required – estimated rental values: the estimated rental values proposed by CBRE are discussed and reviewed, with management ensuring that these are in line with our recent rental activity – property information: we provide CBRE with information on any changes to properties that may aect the valuation – other inputs used by the valuers are reviewed and discussed £2.7bn PORTFOLIO VALUATION 76 CORE LOCATIONS 165 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information AUDIT, RISK AND INTERNAL CONTROL CONTINUED THE PROCESS WE UNDERTOOK WAS AS FOLLOWS: Developing a robust Viability Statement As part of the Group’s Viability Statement, the following factors were considered: – the Group’s current ﬁnancial and operational position and the current economic outlook – the Group’s cash ﬂows, ﬁnancing headroom and ﬁnancial ratios – reassessment of key risks and their potential impact on the business model Our Viability Statement Pages 87 to 88 Our Going Concern Statement Page 87 STAGE 1: Risk identiﬁcation Responsibility Executive Committee Risk Management Group Heads of Department The strategic and operational risks were reviewed to identify the principal risks to viability over the period under consideration. The risks that would impact solvency and liquidity, either individually or in combination with other risks, were considered STAGE 2: Risk assessment Responsibility Executive Committee Risk Management Group Heads of Department For each risk, the following factors were considered: – our risk appetite (the level of risk the Board is willing to take) – the controls in place to mitigate the risk – the quantum of risk STAGE 3: Scenario sensitivity analysis Responsibility Executive Committee Heads of Department For those risks identiﬁed as being severe enough to impact the viability of the Group, sensitivity analysis was performed to understand the potential impact on liquidity and ﬁnancial ratios STAGE 4: Conclusions Responsibility The Board Audit Committee Executive Committee Heads of Department External Auditor The Audit Committee considered the ﬁndings from this analysis and made their recommendations to the Board, which was given the opportunity to question the process and the ﬁndings 166 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information AUDIT, RISK AND INTERNAL CONTROL CONTINUED On behalf of the Board, the Committee has considered whether, in its opinion, this Annual Report and Accounts, taken as a whole, is fair balanced and understandable and whether it provides the information necessary for shareholders to assess the Group’s position, performance, business model and strategy. Our strategy Pages 32 to 35 THE PROCESS WE FOLLOWED 2 REPORT FROM THE CFO AND GROUP FINANCIAL CONTROLLER 1 AUDIT COMMITTEE REVIEW 4 EXTERNAL AUDIT REVIEW 5 RECOMMENDATION TO BOARD AND BOARD’S CONCLUSION 3 FAIR, BALANCED AND UNDERSTANDABLE ASSESSMENT The Committee discussed a report from the CFO and the Group Financial Controller covering the ﬁnancial statements within the Annual Report and Accounts: this highlighted the signiﬁcant changes and the areas of focus in the ﬁnancial statements and commented on any new accounting standards in the period. The Committee reviewed the Annual Report at an early stage, and throughout the process, to enable sucient time for comment and review and to check overall balance and consistency. The External Auditor presented the results of its audit work to the Committee. The Board consider the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy. A fair, balanced and understandable assessment was prepared by the management team and circulated to the Committee. This assessment highlights factors which support the responsibility of the Committee. Fair, balanced and understandable reporting Andrew Dodson Group Financial Controller 167 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information AUDIT, RISK AND INTERNAL CONTROL CONTINUED QUESTIONS WERE POSED AROUND THE FOLLOWING SUBJECTS: As part of the eectiveness review following the March 2022 year end, a questionnaire was issued to Committee members, regular attendees of the Committee and those involved in the external audit process. OUTCOMES From its discussions during the year, the challenges presented to the External Auditor and a review of the reporting received, the Committee considers that the External Auditor provides appropriate professional challenge and reports its ﬁndings in an open and direct manner. The Committee remains satisﬁed: with the eectiveness of the external audit and the interaction between the External Auditor and the Committee and with the External Auditor’s qualiﬁcations, expertise and resources. The Committee discussed a summary of the key ﬁndings and results at its meeting in November 2022 and no signiﬁcant concerns were identiﬁed. The results of the review were discussed with the External Auditor to monitor the continuing quality of audit services. The External Auditor, the Committee and management agreed to focus on improving communications going forward. The Committee’s relationship with the External Auditor is one of openness and professionalism. Eectiveness Eectiveness of the external audit process, the quality and scope of the audit plan, advising, on a timely basis, about any new developments regarding risk management, corporate governance, ﬁnancial accounting and related risks Delivery Delivery and execution of the agreed external audit process for the 2021/22 ﬁnancial year Eciency Eciency and performance of the audit team as well as relevant and qualiﬁed specialists involved in the audit process and continuity of sta during the audit process Communication Communication and engagement between the senior management team, the ﬁnance team, KPMG and the Committee Contact Contact with the audit team outside of the audit Following a competitive tender process, KPMG were appointed by shareholders as the Workspace External Auditor for the ﬁnancial year ended 31 March 2018 and KPMG continue to be Workspace’s External Auditor. Following the completion of the former lead audit partner’s ﬁve-year tenure, a new lead audit engagement partner, Bano Sheikh, was appointed for this reporting period. Audit and non-audit fees Fees payable to the External Auditor for audit and non-audit services are set out in note 2 on page 232. This year, the non-audit services performed by KPMG included the review of the Group’s half-year results and Green Bond use of proceeds assurance. Audit quality An important part of the Committee’s work consists of overseeing the relationship with, and performance of, the External Auditor, in particular with regards to the independence, quality, rigour and challenge of the external audit process. The Committee reviews the eectiveness of the audit throughout the year taking into account: – the detailed audit strategy for the year and coverage of any risks, scope, and level of fees for the audit – the quality, knowledge and expertise of the engagement team – insight around the key accounting and the audit judgements – the quality of reporting and discussions at the Audit Committee meetings – the outcome of the review of eectiveness of the External Auditor and the audit process discussed below Annually, the Committee assesses the qualiﬁcations, expertise, resources and independence of the Group’s External Auditor, as well as the eectiveness of the audit process. The Chair of the Committee also meets with the KPMG partner. AUDIT AND NON-AUDIT FEES 2022–2023 £440k Audit Non-audit 370 70 AUDIT AND NON-AUDIT FEES 2021–2022 £335k Audit Non-audit 280 55 AUDIT AND NON-AUDIT FEES 2020–2021 £336k Audit Non-audit 240 96 THE EFFECTIVENESS OF EXTERNAL AUDIT External audit 168 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information AUDIT, RISK AND INTERNAL CONTROL CONTINUED In addition to the annual review of eectiveness, the Committee considered the independence and objectivity of the External Auditor through a combination of assurances provided by the External Auditor on the safeguards in place to maintain independence; oversight of the Non-Audit Services Policy and fees paid. KPMG LLP have conﬁrmed to the Committee that: – the audit of the consolidated ﬁnancial statements is undertaken in accordance with the UK ﬁrm’s internal policies and procedures – they have internal procedures in place to identify any aspects of non-audit work which could compromise its role as auditor and to ensure the objectivity of their audit report – they believe that, in their professional judgement, the safeguards they have in place suciently guard against the threats to independence – the total fees paid by the Group during the year do not represent a material part of the ﬁrm’s fee income – they consider that they have maintained audit independence throughout the year – As required by the Code, the Audit Committee has a formal policy governing the engagement of our External Auditor, KPMG, to supply non-audit services and to assess the threats of self-review, self-interest, advocacy, familiarity and management. KPMG has discontinued the provision of all non-audit services (other than those closely related to the audit) to all FTSE 350 companies, meaning non-audit services will be conﬁned to a more limited scope of work than that deﬁned by the Audit Committee’s terms of reference The Committee is satisﬁed that the External Auditor is independent. The Audit Committee will continue to review the eectiveness and the independence of the External Auditor each year. The Group complies with the Competition and Markets Authority Order 2014 relating to audit tendering and the provision of non-audit services, and it is the Group’s intention to put the audit out to tender at least every ten years as required by applicable law and regulation. The external audit was last tendered in 2017 following which the External Auditor changed from PricewaterhouseCoopers LLP (PwC) to KPMG. It is currently anticipated that an audit tender will be conducted before the end of the ﬁnancial year ending 31 March 2024 in respect of the audit for the year ending 31 March 2025 to allow sucient time for a handover period if required. There are no contractual obligations which restrict the Committee’s choice of external auditor or which put in place a minimum period for their tenure. – During the year, KPMG was asked to provide additional services in the form of assurance over the allocation of proceeds from the green bond – If the External Auditor is to be considered for the provision of non-audit services, the scope of work and the fees must be approved in advance by the Chief Financial Ocer, the Company Secretary and the Chair of the Audit Committee. For larger assignments, in excess of £100,000, this would involve a competitive tender process, unless there are compelling commercial or timescale reasons to use the External Auditor or another speciﬁc accountancy ﬁrm AUDITOR INDEPENDENCE AND OBJECTIVITY SAFEGUARDING AUDITOR INDEPENDENCE 169 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information AUDIT, RISK AND INTERNAL CONTROL CONTINUED Risk management and internal controls The Committee, on behalf of the Board, keeps under review the eectiveness of the Group’s risk management and internal control systems through management updates and output from the Group’s Risk Management Group to ensure that the controls in place are eective. This framework is designed to manage rather than eliminate business risks and to provide reasonable assurance against material misstatement in the ﬁnancial statements. On the basis of the processes outlined on this page and having regard to the ‘Guidance on Risk Management, Internal Control and Related Financial and Business Reporting’ issued by the FRC in September 2014, the Board, supported by the Audit Committee, has reviewed the eectiveness of the risk management and internal control systems. No signiﬁcant control failings or weaknesses were identiﬁed during the period under review. The Directors conﬁrm that the processes described below have been in place during the 2022/23 ﬁnancial year and up to the date of approval of the Annual Report and Accounts. AUDIT COMMITTEE THE BOARD The Audit Committee has a key role in developing appropriate governance and challenge around risk management and considering processes and assurance. It also sets the tone and culture within the organisation regarding risk management and internal control. The Board has deﬁned its risk appetite for strategic and operational risks. A standard methodology for risk assessment is applied across the Group to assist with monitoring inherent and residual risk and to assist with comparing residual risk against target risk. The Group had the following key procedures and monitoring processes in place during the year to provide eective internal control: – an ongoing process to identify, evaluate and manage risks, including the self-certiﬁcation of controls by risk owners, which is monitored and regularly reviewed by the Risk Management Group and executive team. Signiﬁcant issues are presented to the Board and Audit Committee – the Group’s key controls include appropriate segregation of duties that are embedded across the organisation – on behalf of the Board, the Audit Committee reviews fraud and anti-bribery policies and procedures; annual anti-bribery training is in place for all employees and there have been no reported instances of whistleblowing, bribery or corruption during the period under review – the Group has in place a system for planning, reporting and reviewing ﬁnancial performance, including performance against strategy and its business plan – in April 2022, the Board formed an ESG Committee which reviews the Group’s environmental and social related risks – the Audit Committee reviews technology risks including IT systems and cyber risk, to ensure that the Group’s IT function eectively implements preventative and detective controls to monitor and to mitigate risk As required by the Code, the Board, through the Audit Committee has carried out a robust assessment of the principal and emerging risks facing the Group, including those that could threaten its business model, future performance, solvency or liquidity. This assessment is further described in the Strategic Report on pages 69 to 76. 170 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information AUDIT, RISK AND INTERNAL CONTROL CONTINUED Whistleblowing policy Page 91 With eect from 21 April 2022, the activities of the Risk Committee were integrated into the Audit Committee, with the Board retaining overall responsibility for risk management, and in particular for risks relating to valuation, development and real estate. This updated risk management framework reﬂects the new structure from 21 April 2022. Due to its size, the Group does not have an internal audit function, a matter reviewed by the Audit Committee during the year. The Committee has advised the Board that, currently, it considers there to be no need for an internal audit function. The External Auditor has conﬁrmed this currently has no impact on their audit approach. The Group has a Head of Security and Risk Management whose responsibilities include maintenance of our risk management and control processes. To supplement reviews of risk management and internal control, a programme of operational, facilities management and health and safety reviews are undertaken across our properties by qualiﬁed senior head oce personnel. Any signiﬁcant ﬁndings will then be reported to the Audit Committee. In addition, all key controls are recorded on a central register and control owners are required to certify the eectiveness of controls for which they are responsible and to provide details of further actions to address any identiﬁed ineectiveness. No signiﬁcant issues were identiﬁed during the year. INTERNAL AUDIT Board of Directors – Sets the Group’s overall risk appetite, tolerance and strategy – Oversees the Group’s principal risks, including property valuation, development and real estate risks – Receives advice and recommendations from the Audit Committee and Executive Committee Audit Committee – Oversees the Group’s risk management framework – Advises the Board on risk appetite, tolerance and strategy – Oversees all risks except risks related to property, valuation, development and real estate which are overseen by the Board Executive Committee – Oversees and manages the Group’s day-to-day risk management procedures – Reports to the Board and Audit Committee on the operation and eectiveness of controls Risk Management Group – Responsible for the implementation and embedding of risk management activities – Reviews and challenges the risk information provided by Risk Owners – Reports to the Executive Committee, although the Audit Committee has the power to request attendance or reports from the Risk Management Group directly if it is felt this is necessary Risk owners – Each risk identiﬁed by the Group is assigned a Risk Owner – Risk Owners are responsible for monitoring, managing and reporting on their risks, as well as identifying any emerging risks Risk identiﬁcation 1 – Risks are identiﬁed when projects are being considered or through being raised organically by members of sta – Identiﬁed risks are captured in Risk Registers – A Risk Owner is assigned to each risk and has responsibility for assessing and monitoring that risk Risk assessment 2 – Each risk is assessed and scored according to the potential impact and likelihood of it materialising – Each risk is given an Inherent Risk Score (pre-controls) and a Residual Risk Score (post-existing controls) – Each risk is also assigned a Target Risk Score representing the Group’s risk tolerance for that risk Risk response 3 – Each Residual Risk Score is compared to its Target Risk Score – If the Residual Risk Score is higher than the Target Risk Score, action is taken to reduce it towards the target – Controls are assigned an owner who is responsible for monitoring whether the controls operate eectively Risk monitoring and reporting 4 – Risks are regularly monitored by the Risk Owners – Control owners regularly certify that their controls continue to operate eectively – The Risk Management Group oversees this activity and escalates signiﬁcant changes and new risks to the Executive Committee, Audit Committee and/or Board as appropriate OUR RISK MANAGEMENT FRAMEWORK OUR RISK MANAGEMENT PROCESS 171 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information AUDIT, RISK AND INTERNAL CONTROL CONTINUED The ESG Committee’s role is to promote long-term sustainable success of the Company by ensuring environmental and social factors are fully integrated in business strategy and decision making. Duncan Owen Chair of the ESG Committee QUICK LINKS Membership and attendance at ESG Committee meetings Page 173 Key topics considered by the Committee during the year Page 173 Chair’s letter Page 174 Governance of ESG matters at Workspace Page 175 Spotlight on Net Zero Pathway Page 176 ESG policies, procedures and related assurance Page 177 172 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information ESG COMMITTEE REPORT The Committee consists of six independent Non-Executive Directors, the Chief Executive Ocer and the Chief Financial Ocer (biographies are available on pages 115 to 116). At the request of the Committee, members of the Executive Committee, the senior management team and/or external advisers may be invited to attend all or part of any meeting, as and when appropriate. Meetings of the ESG Committee During the year under review, the Committee held two meetings (in September 2022 and in January 2023). The September meeting established the Committee and approved its terms of reference. Moving forwards, the Committee has agreed to hold three meetings a year. These meetings are expected to be held in January, April and September. Member since Meetings attended Duncan Owen (Chair) 2022 2/2 1 Rosie Shapland 2022 2/2 1 Lesley-Ann Nash 2022 2/2 1 Manju Malhotra 2022 2/2 1 Nick Mackenzie 2022 2/2 1 Stephen Hubbard 2022 2/2 1 Graham Clemett 2022 2/2 1 Dave Benson 2022 2/2 1 1. The ESG Committee meeting in January 2023 was a joint meeting with the Audit Committee. Progress on net zero carbon – Reviewed net zero carbon pathway and progress made across all scopes of carbon – Discussed appropriateness of interim milestones and key metrics that should be prioritised – Reviewed the overall investment plan to 2030 – Considered key dependencies for successful delivery of net zero carbon commitment Evidence of social impact – Reviewed the approach to social impact, key focus areas and progress made to date – Agreed key social programmes, as a key focus for the year along with performance indicators to measure progress – Reviewed industry best practice on social impact and identiﬁed improvement opportunities – Discussed the ambition to have a long-term ﬂagship social impact target ESG risk mitigation – Reviewed climate risk exposure of the business against a number of warming scenarios – Assessed the level of residual risk and mitigation strategy – Considered elevating climate risk as a principal risk for business Governance and reporting – Established the ESG Committee and agreed the terms of reference – Agreed how sustainability will be governed at all levels of business, and set ﬁve ESG targets at Board level which are linked to remuneration – Reviewed and approved information reported on sustainability – Reviewed all ESG policies and eectiveness of programmes and audit procedures KEY TOPICS CONSIDERED BY THE COMMITTEE DURING THE YEARMEMBERSHIP AND ATTENDANCE AT ESG COMMITTEE MEETINGS 173 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information ESG COMMITTEE REPORT CONTINUED Dear shareholder, I am pleased to present to you the ﬁrst report of the ESG Committee for the year ended 31 March 2023. The Committee was established in April 2022 to strengthen the Board’s oversight of environmental and social issues. The Board, recognising the increasing stakeholder focus on ESG matters, considered it prudent to have a dedicated forum in which to discuss ESG-related matters. The proposal for establishing a Board-level ESG Committee was put forward in March 2022 when the Board was exploring the characteristics that would make it a high performing Board. The ESG Committee was established the following month. From the beginning, the Committee agreed that there would be four key themes for it to focus on: (i) having a clear and a credible path to net zero; (ii) evidencing long-term commitment to social welfare; (iii) active management of ESG risks and opportunities; and (iv) maintaining high standards of corporate governance and reporting. Undeniably, the business has an inherent sustainable business model, and as a Committee our role is to ensure Workspace continues to stay at the forefront of sustainability performance. In its ﬁrst-year establishment, the Committee has eectively delivered on several tasks we had set out, including establishing a robust governance structure with clear terms of reference, deeper dive into the Company’s net zero pathway and climate risk proﬁle, prioritising social impact alongside ESG Committee Chair’s letter environmental commitment and conducting a critical review of ESG policies and procedures. The Committee also received technical brieﬁngs from subject matter experts on a number of topics, including evolving sustainability reporting requirements. I detail on page 173 an overview of the activities which we have carried out. Net zero carbon transition In 2019, Workspace made a commitment to becoming a net zero carbon business by 2030. Workspace has signed up to the Better Buildings Partnership (‘BBP’) Climate Commitment to deliver net zero carbon real estate portfolios by 2030. Following a detailed analysis of the emissions across the business and the value chain, Workspace have also developed a set of science-based targets which are aligned to the goals of the Paris Agreement and the IPCC’s 1.5°C report. These targets have been approved by the Science Based Targets initiative (SBTi) and cover both our operational emissions and our embodied carbon emissions. Embedding ESG into the workings of other Committees To ensure the ESG agenda is not siloed, we also identiﬁed ways in which ESG considerations are embedded within the workings of other Committees. This year we held a joint meeting with the Audit Committee to review the ESG policies and eectiveness of the audit programme in place. ESG input is also informing discussions at the Nominations Committee regarding requisite expertise at Board level and with the Remuneration Committee regarding aligning compensation with ESG targets. I am proud to chair the ESG Committee at Workspace, a business where sustainability, social impact and strong governance is at the heart of everything. There is a real potential within the business to be a market leader on sustainability and making a positive impact for our customers. I am committed to supporting the long-term sustainable success of the Company Duncan Owen Chair of the ESG Committee 174 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information ESG COMMITTEE REPORT CONTINUED GOVERNANCE OF ESG MATTERS AT WORKSPACE THE BOARD NOMINATIONS COMMITTEE Chaired by Stephen Hubbard AUDIT COMMITTEE Chaired by Rosie Shapland REMUNERATION COMMITTEE Chaired by Lesley-Ann Nash ESG COMMITTEE Chaired by Duncan Owen Looking forward Given the fast-evolving pace of the ESG agenda, the Committee recognises that it needs to be future-focused and evolve its priorities to maintain oversight of both existing ﬂagship initiatives and capturing new opportunities. As such, we will be revisiting the materiality assessment for the business each year to identify new frontiers to focus on. Undeniably, the urgency will remain on driving net zero carbon transition at pace and the Committee will continue to closely monitor the Company’s progress on its net zero pathway. However, our responsibility towards our people, our customers and our communities take equal priority. We believe there is both a moral and a commercial imperative to maximise broader stakeholder value, ensuring the business is leading the way on responsible and inclusive practices for its employees, customers, suppliers, and local communities. To this end, the Committee will focus on setting a framework for social impact alongside long-term ambitious goals. Duncan Owen Chair of the ESG Committee 6 June 2023 Key responsibilities: – Ensuring requisite strength of Board ESG expertise Key responsibilities: – Integrity of ESG reporting & targets – Strategic risk management, including reputational risk Key responsibilities: – Aligning compensation with ESG goals – Ensuring clarity of ESG metrics and KPIs Key responsibilities: – Detailed scrutiny and oversight of ESG – Ensuring adequate resource – Driving Board focus on ESG The role of the Board The Chief Executive Ocer along with the Workspace Board have the highest level of responsibility on all ESG matters. The role of the Board is to maintain close oversight of the ESG programme, ensuring long-term sustainable success of the business. An ESG Committee comprising of six independent Non-Executive Directors, the Chief Executive Ocer and the Chief Financial Ocer is set up to assist the Board in incorporating ESG considerations in business strategy and decision making. The ESG Committee receives a detailed update on our sustainability and climate- related goals three times a year, from members of the Executive Committee and the Head of Sustainability. The update from the Committee and any associated recommendations are then put forward to the Board for consideration. The ESG Committee also informs the working of other Board Committees with ESG considerations as it pertains to remuneration, nominations and audit functions. Management responsibility The Executive Committee at Workspace are responsible for creating the ESG strategy for the business and individual Executive Committee members are responsible for leading on the delivery of environmental and social programmes. The Executive Committee receives monthly updates on ESG matters, including progress against the annual ESG targets. At operational level, the day-to-day management of ESG initiatives is managed by the members of the Environmental and Social Sustainability Committee, a cross function group comprising of heads of departments who are responsible for individual workstreams. Both these Committees include several Executive Committee members, which ensures senior level ownership and oversight of implementation plans and streamlines communication to the wider Executive Committee and the Board. Ownership and accountability ESG considerations are embedded across the business, ensuring there is clear oversight and accountability at each level – at Board level, at Executive level and at operational delivery level. Further, the core ESG targets for the business have been translated into performance objectives for all employees and are linked to their remuneration. Terms of reference The Committee’s role and responsibilities are set out in the terms of reference, which were last updated in September 2022 and which are available on the Company’s website at workspace.co.uk/investors/about-us/ governance/board-committees. 175 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information ESG COMMITTEE REPORT CONTINUED ESG COMMITTEE CHAIR’S LETTER CONTINUED SPOTLIGHT ON NET ZERO PATHWAY TRACKING PROGRESS ON NET ZERO CARBON PATHWAY During the year, the Committee conducted a deeper dive of the net zero pathway for the business to ensure it is on track to achieving full decarbonisation by 2030. Whilst this will not be an easy undertaking, I am pleased with the progress the business has already made by reducing its like-for-like scope 1 and 2 emissions by 11% compared to last year, particularly the signiﬁcant reduction achieved in fossil fuel use and achieving market-leading performance on embodied carbon associated with its development and construction activity. Despite owning several historic buildings, Workspace has successfully refurbished a signiﬁcant proportion of the portfolio to all electric, highly sustainable buildings, resulting in a signiﬁcant 27% reduction of scope 1 emissions this year. It is also very encouraging to see the level of knowledge within various teams on the topic and a real dedication towards driving positive impact. It is important that Workspace continues to maintain a lead on its decarbonisation journey and hence the Committee made a decision to govern progress on net zero pathway, as described below. I am pleased with the progress made on the net zero pathway, particularly the signiﬁcant reduction in embodied carbon associated with development activities Duncan Owen Chair of the ESG Committee 1 REVIEW OF EXISTING NET ZERO PATHWAY 2 ESTABLISHING TARGETS AT BOARD LEVEL 3 NET ZERO DUE DILIGENCE 4 INVESTMENT DECISIONS The Committee reviewed the scope of Workspace’s net zero commitment and the proposed net zero pathway. Four key workstreams were identiﬁed as key levers for achieving net zero carbon by 2030. Within each workstream, annual milestones were set and progress against these tracked at each Committee meeting Given the strategic importance of net zero carbon to the business, the Remuneration Committee decided to link energy and carbon reduction targets to Director’s remuneration It was agreed to implement detailed climate risk and net zero due diligence to inform all new acquisitions and establish alignment with the existing net zero pathway. The existing pathway was subsequently updated to reﬂect the acquisition of the McKay portfolio The Board considered attainment of high energy and carbon performance as a key factor when evaluating and approving all capex decisions Leroy House, Islington 176 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information ESG COMMITTEE REPORT CONTINUED ESG COMMITTEE CHAIR’S LETTER CONTINUED ESG policies, procedures and related assurance Workspace has a robust assurance programme, supported by internal and external checks to ensure compliance with policies Once a year, Workspace holds a joint Audit Committee and ESG Committee meeting. The objective of this meeting is to review and to approve a programme of assurance aimed at assessing the eectiveness of policies and processes relating to ESG matters. The detailed review conducted by the Committee gave conﬁdence that Workspace has a robust assurance programme, supported by internal and external checks to ensure compliance with policies. This year the Company also launched its Supplier Code of Conduct which ensures all the suppliers are aligned with Workspace’s expectations and ambitions, especially when it comes to issues such as living wage, modern slavery, anti-bribery, health and safety, equal opportunities, and sustainability. The table to the right shows the list of policies and procedures that support the implementation of our ESG strategy: Environmental Climate change policy Ensures that Workspace conduct their business in a climate responsible way Environmental policy Ensures that Workspace conduct their business in an environmentally responsible way Sustainable development brief Sets minimum requirements for our development and refurbishment projects on energy, carbon, waste, water, materials, nature and wellbeing Net zero pathway Ensures that Workspace have quantiﬁable emission reduction targets and a clear plan to achieve net zero carbon in alignment with a 1.5°C future Green ﬁnance framework A framework used by Workspace to issue a green debt instrument including green bonds, private placement, and green loans Social Health and safety policy Ensures that Workspace delivers its obligations under health and safety legislation. The policy aims to reduce accidents and it endeavours to control health and safety risks to employees and others who may be aected by Workspace’s activities Supplier Code of Conduct Sets Workspace’s principles for ethical conduct and behaviour in business practices. The Supplier Code of Conduct also ensures that Workspace’s suppliers, contractors, service providers and representatives live up to our values and standards Modern slavery statement Sets out a zero-tolerance stance towards slavery and human tracking for Workspace’s operations and amongst its suppliers Equal opportunities and dignity at work policy Sets Workspace’s expectations and standards regarding equal opportunities and dignity at work. The policy also outlines managerial and sta responsibilities to ensure the business’ principles are observed Governance Risk management framework A ﬁve-step approach to ensure Workspace has a robust process to assess and to manage risks Anti-Bribery and Corruption, and Gifts and Hospitality policy Sets out standards and expectations for employees to ensure relationships with suppliers are conducted in an ethical way which is compliant with relevant legislation and provides guidance on how to recognise and deal with corruption issues Whistleblowing policy Ensures that sta are aware of how to raise serious concerns. The policy provides guidance, and it ensures a robust process exists to enable an adequate response to the concerns raised. Ensures that sta will be protected from retribution Inclusion and diversity policy Ensures that Workspace is committed to supporting diversity and to creating an inclusive culture 177 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information ESG COMMITTEE REPORT CONTINUED 178 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information Our approach to Remuneration is designed to be simple and transparent and to support the Company’s strategy, values, and our purpose to give businesses the freedom to grow. Remuneration for 2023 has been framed by the Company’s excellent operational performance and the broader stakeholder experience. Lesley-Ann Nash Chair of the Remuneration Committee QUICK LINKS Membership and attendance at Remuneration Committee meetings Page 179 Chair’s letter Page 181 Remuneration at a glance Page 185 REMUNERATION The Committee consists of Non-Executive Directors and is chaired by Lesley-Ann Nash. Details of individual attendance at the meetings held during the year are set out below. More information on the skills and experience of all Committee members can be found on pages 115 to 116. Member since Meetings attended Lesley-Ann Nash (Chair) 2021 6/6 Stephen Hubbard 2014 6/6 Rosie Shapland 2020 6/6 Support for the Remuneration Committee During the year, we sought external support from PwC and internal support from the CEO, whose attendance at Committee meetings was by invitation from the Chair, to advise on speciﬁc questions raised by the Committee and on matters relating to the performance and remuneration of the senior management team. The Company Secretary attended each meeting as Secretary to the Committee. No Director was present for any discussions that related directly to their own remuneration. Remuneration Policy (the ‘Policy’) 2023 As part of the triennial review of the Directors’ Remuneration Policy, the Committee undertook a review of the remuneration arrangements for the Executive Board Directors. This included a review of our key remuneration principles and a review of the current policy in order to agree initial proposals for the new Policy. Shareholders and proxy agencies were approached and consulted, with feedback reviewed and responded to by the Committee (further details can be found on page 190). The proposals were put forward and the changes were approved by the Committee. Wider workforce remuneration The Committee reviewed wider workforce remuneration arrangements and took these into account when reviewing remuneration for the Executive Directors. One particular area of focus during the year was the Committee’s approval of management proposals for sta in response to the increased cost of living. Executive and senior management remuneration framework The Committee reviewed annual bonus outcomes for 2021/22 and reviewed performance outcomes under the 2019 LTIP. The Committee also set performance metrics and targets for the 2022/23 annual bonus, including appropriate sustainability and ESG metrics, and approved the 2022 LTIP awards. This year included a review of performance metrics for 2023/24 incentives against our strategy, including ESG, and a review of annual monitoring of shareholding guidelines. Reﬂecting ESG targets under the annual bonus and the LTIP The Committee approved appropriate sustainability metrics in both the annual bonus for 2022/23 and for the 2023 LTIP grant. Gender Pay Gap 2022 was the ﬁrst year in which we met the requirement regarding employee numbers to publish our gender pay gap. The Committee received a presentation from Human Resources which outlined our gender pay gap and this was published in March 2023. Committee Governance The Committee considered key executive remuneration trends and market practice including updates on the current executive pay environment, shareholder guidelines and corporate governance. A review of the results of the internal performance evaluation of the Remuneration Committee was conducted as well as a review of the Committee terms of reference. During the year, the Committee approved the Directors’ Remuneration Report; Directors’ Remuneration Policy; and Gender Pay Gap Report. KEY TOPICS CONSIDERED BY THE COMMITTEE DURING THE YEARMEMBERSHIP AND ATTENDANCE AT REMUNERATION COMMITTEE MEETINGS 179 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED T h e e n v i r o n m e n t O u r c u s t o m e r s O u r c o m m u n i t i e s O u r p a r t n e r s & s u p p l i e r s O u r p e o p l e O u r i n v e s t o r s OUR PURPOSE IS TO GIVE BUSINESSES THE FREEDOM TO GROW. D r i v i n g c u s t o m e r - l e d g r o w t h a n d d e l i v e r i n g o p e r a t i o n a l e x c e l l e n c e w h i l s t a l w a y s b e i n g s u s t a i n a b l e Aligning our purpose and strategy with our remuneration principles and the experience of all our stakeholders OUR KEY REMUNERATION PRINCIPLES Alignment with our strategy and purpose Workspace has worked hard to articulate and deﬁne our purpose, alongside our established values and corporate strategy. Our remuneration is aligned with the Group’s objectives and long-term strategy through a mix of short and long-term performance metrics. This aligns with the ‘alignment to culture’ principle under Provision 40 of the UK Corporate Governance Code. A focus on risk A signiﬁcant part of an Executive’s reward is linked to performance with a clear line of sight between business performance and the delivery of Shareholder value. Performance measures applicable to the 2023 LTIP grant have been reviewed and are based on a combination of ﬁnancial, share price, ESG and strategic measures aligned with the Company’s strategic plan. This aligns with the ‘risk’ and ‘proportionality’ principles under the UK Corporate Governance Code. Acting in a sustainable way Incorporating ESG into our incentive arrangements strongly aligns to the sustainability pillar of our strategy. Staying ahead of the sustainability curve and delivering on our net zero carbon commitments is a fundamental part of Workspace’s long-term strategy. This aligns with the ‘alignment to culture’ principle under Provision 40 of the UK Corporate Governance Code. Transparency and simplicity for the beneﬁt of all our stakeholders The Committee seeks to embed simplicity and transparency in the design and delivery of Executive reward. The remuneration structure is simple to understand for both participants and Shareholders and is aligned to the strategic priorities of the business. This aligns with the ‘clarity’, ‘simplicity’ and ‘predictability’ principles under Provision 40 of the UK Corporate Governance Code. Consistency of application Short and long term incentive plans, operated across the organisation, reward the delivery of the business strategy. A high percentage of rewards are delivered in the form of equity, meaning that Executives are strongly aligned with Shareholders. Executives are also required to build signiﬁcant shareholdings in Workspace. This aligns with the ‘risk’ principle under Provision 40 of the UK Corporate Governance Code. Stakeholder experiences in 2023 Pages 181 to 182 and 184 OUR PURPOSE, STRATEGY AND STAKEHOLDERS 180 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED Dear shareholder, As Chair of the Remuneration Committee and on behalf of the Board, I am pleased to present our 2023 Remuneration Report. The report is split into: – Remuneration at a glance: highlighting how executive pay, simply and transparently, incentivises delivery of our strategy and promotion of our values – pages 185 to 188 – Our new Directors’ Remuneration Policy that will be put to shareholders at our 2023 AGM – pages 189 to 196 – Annual Report on Directors’ remuneration explaining how our policy aligns with our objectives and strategy including the implementation of pay for 2023/24 – pages 197 to 211 We as a Committee are highly conscious of our role in underpinning the Company’s ability to develop long-term value for all stakeholders and none more so than at a time of signiﬁcant economic uncertainty. The Committee continues to be guided by its key principles which are detailed on page 180. Business performance This year has seen market volatility persist with increases in interest rates against a backdrop of slow global growth and the ongoing conﬂict in Ukraine. The increases of interest rates has aected most real estate markets globally resulting in higher yields and correspondingly lower values. This economic environment is a challenge for the real estate sector and only agile businesses which continue to evolve and provide excellent operational performance will succeed. Despite these challenges facing the market, Workspace has made good progress against its strategic priorities and key performance indicators. A strong trading performance during the year resulted in a 29% increase Remuneration Committee Chair’s letter in trading proﬁt alongside a 34% increase in net rental income. This has been fuelled by resilient levels of customer demand, as our ﬂexible oer is an increasingly attractive option for successful innovative businesses in London’s SME community. The increased interest rates, in the case of Workspace, have therefore been largely oset by our improved ability to drive higher levels of occupation through operational excellence. The integration of McKay has also been a focus for Workspace over the year. We have successfully completed the operational integration of the McKay portfolio. We continue to make progress in our plan to add value to the portfolio by adapting the former McKay buildings to ﬁt our strategy, rolling out our ﬂexible lease oer. We have also now disposed of the majority of the non-core McKay assets. Initial delays did however mean the sales were a signiﬁcant challenge for the management team, against the negative backdrop of rising interest rates and reduced investor conﬁdence. Notwithstanding the above, we remain mindful that the negative valuation change has resulted in a falling EPRA NAV per share of 6.2% for shareholders. We are aware of the challenges our customers and business partners are facing in the current economic environment. Therefore, we must remain focused on continuously oering good value and great service. The experience of our stakeholders We as a Committee actively considered various aspects of the wider context in reviewing outcomes for the 2022/23 remuneration of our Executive Directors, including the experience of all the Company’s stakeholders during the year, such as our employees, customers and suppliers. Our key priorities as a Remuneration Committee are to ensure that remuneration arrangements attract and retain a high-calibre team of Executive Directors and senior management and to oer them every encouragement to successfully deliver our strategy and to create shareholder value in a sustainable and responsible manner Lesley-Ann Nash Chair of the Remuneration Committee 29% INCREASE IN TRADING PROFIT AFTER INTEREST 20% INCREASE IN DIVIDEND PER SHARE 84% CUSTOMER SATISFACTION Gender pay gap report Page 124 181 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED We remained mindful of the pressures and challenges faced by many of our employees in the current economic climate. As part of this, the Company determined that our 2023/24 sta salaries would increase by 6%, with a minimum uplift of £3,000 for sta earning below £50,000, as well as that payment being accelerated to April. More information about other beneﬁts that are oered to employees can be found on page 198. This year we also published our inaugural gender pay gap report which can be found on our website. The Board and the Committee are fully committed to eectively promoting diversity throughout the business as an integral part of our corporate culture and purpose. We are fully aware that a diverse workforce that brings an appropriate balance of skills, experience and knowledge, as well as fresh perspectives, enriches our business and contributes to our long-term success. A summary of how the remuneration outcomes align with the experience of our other stakeholders is set on page 184. Remuneration outcomes in 2022/23 After very careful consideration, and taking into account all relevant factors as described and detailed throughout this Annual Report, the Committee took the following decisions in respect of remuneration for the Executive Directors: Base salary Executive Directors will receive a base salary increase of 3% which is below the level awarded to the wider workforce (as set out above), and this will take eect from 1 April 2023. Annual bonus 2022/23 Despite the challenges facing the market, it has been a productive year across the Company. We delivered a strong trading performance in the year leading to above target outcomes under this measure of the bonus. With ESG at the top of the Company’s agenda, we have made real progress against a number of objectives set in this area. We are also pleased to report various achievements under our strategic ﬁnancial and operational eciency metrics, including the delivery of integration cost savings from the McKay acquisition and successful integration of McKay’s sta and processes. This detail is set out on page 204. As a result, the formulaic outcome under the bonus was 89% of maximum (106.4% of salary). The Committee assessed the outcome in the context of ensuring it is reﬂective of corporate performance as well as the experience and expectation of shareholders. The Committee has decided to use its discretion to apply a reduction to the overall bonus outturn for the CEO of 20% of salary. This results in a bonus outcome of 72% of maximum (86.4% of salary) for the CEO. This equates to £448,589 for Graham Clemett and £380,167 for Dave Benson. Of the bonus award, 33% will be deferred in shares for three years under the Deferred Bonus Plan. Vesting of 2020 Long Term Incentive Plan The LTIP awards granted to Graham Clemett and Dave Benson in 2020 were subject to performance conditions measured over the three ﬁnancial years from 1 April 2020 to 31 March 2023. The vesting of 50% of the awards was subject to Total Shareholder Return (TSR) performance relative to FTSE 350 real estate companies (excluding agencies), with the remaining 50% subject to Total Property Return (TPR) versus the IPD Benchmark. Having tested the performance conditions, TPR performance was above upper quartile, meaning this element vested in full. Therefore, the overall formulaic outcome is 50%. SUMMARY OF EXECUTIVE DIRECTORS’ TOTAL REMUNERATION The tables below set out a single ﬁgure for the total remuneration received by each Executive Board Director for the year ended 31 March 2023. The full table can be found on page 200. GRAHAM CLEMETT Chief Executive Ocer 2022/23 £000 FIXED PAY BASE SALARY 519.2 PENSION 1 51.9 BENEFITS 2 22.5 TOTAL FIXED 593.6 VARIABLE PAY ANNUAL BONUS 3 448.6 LTIP 4,5 391.1 OTHER – SAYE, SIP 0 TOTAL VARIABLE 839.7 TOTAL 1,433.3 OF WHICH SHARE PRICE GROWTH £0 DAVE BENSON Chief Financial Ocer 2022/23 £000 FIXED PAY BASE SALARY 357.3 PENSION 1 35.2 BENEFITS 2 0 TOTAL FIXED 392.5 VARIABLE PAY ANNUAL BONUS 3 380.2 LTIP 4,5 269.1 OTHER – SAYE, SIP 0 TOTAL VARIABLE 649.3 TOTAL 1,041.8 OF WHICH SHARE PRICE GROWTH £0 1. Pension: During 2022/23 each of Messrs Clemett and Benson received a cash allowance in lieu of pension contribution. 2. Beneﬁts: Taxable value of beneﬁts received in the year by Executive Directors includes a car allowance, private health insurance and death in service cover. 3. Annual bonus: This is the total bonus earned in respect of performance during the relevant year. For 2022/23, the Committee set a minimum deferral requirement of 33% of the bonus earned. For 2022/23, this deferral was equivalent to £148,034 for Mr Clemett and £125,455 for Mr Benson. 4. None of the LTIP single ﬁgure is attributable to share price growth. 5. The 2022/23 ﬁgure includes the estimated value of 50% of the 2020 LTIP shares that vested based on performance to 31 March 2023. The share price used is the three-month average to 31 March 2023 of £4.88. This will be updated in next year’s report to reﬂect the share price on the date of vesting. As allowable under the relevant plan rules and approved Policy, the Committee determined that dividend equivalents are payable under the 2020 LTIP award – this ﬁgure therefore includes the value of dividend equivalents accrued on the shares that are vesting over the relevant performance period. 182 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED REMUNERATION COMMITTEE CHAIR’S LETTER CONTINUED This equates to a total of £391,084 for Graham Clemett and £269,114 for Dave Benson (these ﬁgures include dividend equivalents). The net vested shares will be subject to a two-year holding period. The Committee considered that the LTIP performance outturns were fair and reasonable relative to the ﬁnancial performance of the business and also stakeholder experience. As disclosed in our 2020 Directors’ Remuneration Report, the Committee was mindful of the context prevailing on grant of the 2020 LTIP awards. We concluded that the awards would be granted on the normal timetable but committed to remaining mindful of guarding against windfall gains as a result of share price movements over the period. Taking into consideration a number of factors, including the current share price compared to that at the time of the grant and share price movements over the period, the Committee has concluded that participants will not beneﬁt from a windfall gain on the 2020 LTIP awards and therefore has determined that no adjustment is required. Proposed changes to the Directors’ Remuneration Policy Our current Directors’ Remuneration Policy was approved by shareholders at our 2020 AGM with a vote in favour of 99.54%. In line with the regulatory timeline for Policy reviews, we will be seeking shareholder approval for a new Policy at our AGM in July this year. Having carried out a detailed review, the Remuneration Committee believes that whilst our current Policy has worked well for us and our stakeholders and remains strategically aligned, the review provides us an opportunity to further enhance this alignment with limited change in a couple of areas. As part of the Policy review, the Committee completed a comprehensive programme of shareholder engagement to ensure their views were reﬂected in the new Policy and I would like to thank them for their highly valued time. I outline a summary of the key changes here, and the full Policy is on pages 189 to 196. Maximum annual bonus opportunity for the CEO The outcome of our Policy review this year determined that, whilst the measures and structure of our annual bonus Policy remain ﬁt for purpose, the current opportunity for the CEO is materially behind that of companies within the FTSE 250 and the FTSE 350 real estate sector. Whilst the Committee does not solely base the remuneration of Workspace on the comparison with its peers, it is essential that the CEO package remains competitive in the context of a complex and growing business such as Workspace. As such, we are proposing to increase the maximum bonus opportunity for the CEO from 120% to 150% of salary. This change enhances the portion of the CEO’s total remuneration that is subject to stretching performance targets, ensuring Workspace rewards for strong business performance. The CFO’s maximum bonus opportunity will remain at 120% of salary. The current annual bonus deferral of 33% of the award into shares for three years will be retained, which alongside the CEO’s shareholding requirement of 200% of salary, ensures full alignment with the experience of shareholders. LTIP performance measures For the past ﬁve years, awards granted under the LTIP have been subject to TSR and TPR performance measures with equal weighting. Following careful consideration, we are proposing to remove TPR from the LTIP and introduce three new measures to better align our LTIP with our strategic priorities. No changes are proposed to the existing TSR measure. The proposed LTIP measures and weightings for the 2023 LTIP grant are: – TSR relative to FTSE 350 Real Estate companies (excluding agencies) (25%) – Earnings per Share (‘EPS’) growth (25%) – Total Accounting Return (‘TAR’) (25%) – Environmental, Social and Governance (‘ESG’) metrics (25%) The combination of these measures better reﬂects the alignment with strategy and purpose. EPS growth is an important headline measure of Workspace’s ﬁnancial performance, with outcomes better aligned to our success in active portfolio management and investment. Including TAR as a measure in our LTIP ensures we reward the creation of value for shareholders in the form of dividends paid and growth in Net Asset Value. Incorporating ESG strongly aligns to the sustainability pillar of our strategy, which includes focus on creating sustainable environments and achieving net zero by 2030. Full details on the targets for the 2023 LTIP grant can be found on page 207. The Committee determined that 2023 LTIP awards would be granted at the normal level of 200% of salary for the CEO and CFO. When making this decision, the Committee was mindful of our share price performance over the year, particularly since awards were last granted, and determined that at the end of the performance period, careful consideration will be given as to whether any windfall gains have arisen from these awards. Further to this, as with previous awards, a performance underpin will apply to the awards which allows the Committee to reduce vesting should the Committee believe that the outturn is inconsistent with the overall performance of the business. No other changes are proposed to our Policy which is set out on pages 189 to 196. A full summary of the implementation of Policy, including annual bonus measures for the 2023/24 ﬁnancial year, is set out on page 206. Changes to below Board remuneration Although the remuneration of below Board employees does not fall in the remit of the Policy, the Committee believes it is important to communicate the proposed changes as part of our open dialogue with shareholders. It is a priority of the Committee to ensure that employees below Board are rewarded appropriately for their continued contributions to the business, incentivised to remain with Workspace, and are fully aligned to the experience of our shareholders. We are therefore proposing to grant restricted share awards (‘RSAs’) below Board in place of the performance based LTIP structure. Executive Directors will not receive RSAs. Engagement with our shareholders We are grateful for the feedback and support we receive from shareholders, and believe that regular engagement with our stakeholders is key to our commitment to achieving the highest standards of corporate governance and integrity. As I mentioned above, in line with this, the Committee consulted with our largest investors ahead of the renewal of our Policy at our 2023 AGM. I am pleased to say that the shareholders that engaged with us appreciated our approach. I look forward to your continued engagement and I hope you will join the Board in supporting our Directors’ Remuneration Report and Directors’ Remuneration Policy at the upcoming 2023 AGM. Lesley-Ann Nash Chair of the Remuneration Committee 6 June 2023 183 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED REMUNERATION COMMITTEE CHAIR’S LETTER CONTINUED T h e e n v i r o n m e n t O u r c u s t o m e r s O u r c o m m u n i t i e s O u r p a r t n e r s & s u p p l i e r s O u r p e o p l e O u r i n v e s t o r s OUR PURPOSE IS TO GIVE BUSINESSES THE FREEDOM TO GROW. D r i v i n g c u s t o m e r - l e d g r o w t h a n d d e l i v e r i n g o p e r a t i o n a l e x c e l l e n c e w h i l s t a l w a y s b e i n g s u s t a i n a b l e Consideration of the experience of our stakeholders Stakeholder experiences in 2023 Pages 181 and 182 OUR PURPOSE, STRATEGY AND STAKEHOLDERS Our investors We believe in an open dialogue with investors. As part of our Directors’ Remuneration Policy review, the Committee consulted with major shareholders and investor bodies, receiving helpful and positive feedback. We ensure that shareholders’ experience is reﬂected in remuneration outcomes as demonstrated by our exercise of discretion to the overall bonus outturn for the CEO this year. During the year, the Committee reviewed the LTIP performance measures to ensure these continue to align to our strategic priorities. Subsequently, the Committee approved the introduction of an EPS growth measure for the 2023 LTIP grant. EPS is an important headline measure of Workspace’s ﬁnancial performance and proﬁtability. The existing relative TSR condition remains a performance measure for the 2023 LTIP grant and a key measure in ensuring outcomes from the LTIP align with the experience of our shareholders. Our partners and suppliers We work with a broad range of long-term partners and these relationships are governed by stringent ethical and sustainability standards. As an accredited Living Wage employer ourselves, we are committed to paying the Real London Living Wage to 100% of our suppliers and partners working on Workspace premises. Our communities We create a ﬂatter, fairer London: by providing high-quality, aordable space, we bring employment into the local areas and help create community hubs. We strongly believe in giving something back to the communities where we have a presence, which is why we oer employment support to disadvantaged young people. As part of our annual bonus sustainability metrics, our InspiresMe programme was launched to local schools, colleges and youth organisations where students beneﬁtted from career sessions and work experience. The environment Sustainability is at the heart of our strategy and this is reﬂected in incentives for our Executive Directors. Whilst sustainability objectives are part of our annual bonus, during the year the Committee discussed and approved the inclusion of ESG metrics within the LTIP for the 2023 grant. The measures include key objectives which directly support our strategy in focusing on creating sustainable environments and achieving net zero by 2030. Our customers Our customers are at the heart of our business and this is reﬂected in our strategy, with one of our three strategic pillars relating to customer-led growth. Customer satisfaction is a measure within our annual bonus for our Executive Directors and the Committee was satisﬁed that the bonus outcomes for the year accurately reﬂected the experience of our customers at Workspace. Our people Mindful of the challenging economic environment faced by our employees, the Committee oversaw the decision to award salary increases of 6% with a minimum uplift of £3,000 to those earning below £50,000. The introduction of the restricted share award for senior employees below board level ensures these individuals can share directly in the success of Workspace and are fully aligned with shareholders’ experience. Employee engagement and wellbeing are reﬂected in our sustainability objectives as part of our Executive Directors’ bonuses. The Committee set objectives on employee wellbeing initiatives, achieved through the roll-out of a series of successful events. 184 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED All sta in the Company are eligible to participate in the Company’s annual bonus plan, all-employee share schemes, pension scheme, life assurance arrangements and medical insurance beneﬁts. While the Executive Directors participate in the Company’s LTIP, the rest of the Executive Committee and some senior employees receive the Company’s new Restricted Share Awards (‘RSA’). Executive Directors and Executive Committee members are also required to adhere to the Company’s shareholding guidelines. When making remuneration decisions for the Executive Directors, the Committee considers pay and employment conditions elsewhere in the Group. The Committee receives regular updates from the Executive Directors on employee feedback. The Committee also monitors bonus payout and share award data. In respect of share ownership we operate the following: LTIP: Reinforces a strong performance culture at more senior levels and delivery of long-term sector outperformance. Restricted Share Awards: Supports retention and motivation by providing greater line of sight over outcomes and fully aligns participants to shareholders’ experience. SAYE and SIP: Provides all employees with the opportunity to become shareholders of the Company. Remuneration at a glance WORKSPACE’S APPROACH TO REMUNERATION AND HOW WE INCENTIVISE AT ALL LEVELS WITHIN THE COMPANY ELEMENTS OF PAY AT WORKSPACE BASE SALARY PENSION BENEFITS ANNUAL BONUS SHARE OWNERSHIP Executive Directors 2 LTIP SAYE and SIP Executive Committee 6 Restricted share awards SAYE and SIP Other senior employees 65 Restricted share awards SAYE and SIP Rest of employees 220 SAYE and SIP Salaries are set to reﬂect market value of the role and aid recruitment and retention. Employees are eligible for a 2:1 match on employee pension contributions of 3% or 5% of salary. Employees receive a combination of beneﬁts relevant for their role including life assurance arrangements and medical insurance beneﬁts. Opportunities and performance conditions are tailored to reﬂect an individual’s role and responsibilities. Share ownership enables all employees to share in the long-term success of the Group and aligns them with shareholder interests. ELIGIBILITY WITHIN WORKSPACE 185 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED How our variable pay aligns to our strategic pillars – In executing our strategy we aim to create value and positive outcomes for our shareholders and all other stakeholders. – We frequently consider the performance measures we use for our incentives to check that they support the delivery of our strategy. OUR THREE STRATEGIC PILLARS: 2023/24 ANNUAL BONUS AND LINK TO STRATEGY 2023 LTIP AND LINK TO STRATEGY We have amended the measures for 2023/24, as we believe there is an opportunity to better align our LTIP with our strategy. ANNUAL BONUS The component measures provide a good balance of reward against the three pillars of our strategy which are the foundations of Workspace’s future growth. Measures shown as % of award Total: 10 0% LTIP The balance of the measures is well aligned to our strategy of driving income growth and enhancing shareholder value over the longer term whilst always acting in a sustainable way. Measures shown as % of award Total: 10 0% THE 2022 LTIP MEASURES WERE AS FOLLOWS Measure and % weighting Link to strategy 50%: Total Shareholder Return (TSR) relative to FTSE 350 Real Estate companies (excluding agencies) 50%: Total Property Return (TPR) versus IPD benchmark Measure: Total Shareholder Return (TSR) relative to FTSE 350 Real Estate companies (excluding agencies) Measure: Total Accounting Return (TAR) Measure: Earnings Per Share (EPS) Growth Measure: Environmental, Social and Governance (ESG) metrics Measure: Financial objectives (Trading proﬁt after interest (50%), Strategic ﬁnancial (10%)) Measure: Sustainability Measure: Operational eciency Measure: Customer satisfaction Weighting: 60% Weighting: 25% Weighting: 25% Weighting: 25% Weighting: 25% Weighting: 20% Weighting: 10% Weighting: 10% Driving customer-led growth Delivering operational excellence Being sustainable 186 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED REMUNERATION AT A GLANCE CONTINUED Summary of Executive Directors’ Total Remuneration Graham Clemett Chief Executive Ocer FIXED COMPONENTS OF EXECUTIVE PAY £000 BASE SALARY 519.2 PENSION 51.9 BENEFITS 22.5 TOTAL FIXED 593.6 VARIABLE COMPONENTS OF EXECUTIVE PAY £000 ANNUAL BONUS 448.6 LTIP 391.1 OTHER – SAYE, SIP 0 TOTAL VARIABLE 839.7 SINGLE FIGURE FOR 2022/23 1,433.3 ANNUAL BONUS OUTCOMES UNDER THE 2022/23 ANNUAL BONUS Measure: Threshold (0% payable) Maximum (100% payable) Outcome (% of salary) CEO actual £000 TRADING PROFIT AFTER INTEREST £57. 3m £62.3m 51.0% 60% 264.8 Actual: £61.4m 1 STRATEGIC FINANCIAL OBJECTIVES 0% 100% 9.0% 12% 46.7 Actual: 75% SUSTAINABILITY OBJECTIVES 0% 100% 24% 24% 124.6 Actual: 100% OPERATIONAL EFFICIENCY 0% 100% 11.1% 12% 57.6 Actual: 92.5% CUSTOMER SATISFACTION 72% 80% 11.3% 12% 58.6 Actual: 84% 2 FORMULAIC OUTTURN 106.4% 120% 552.4 DISCRETIONARY REDUCTION APPLIED TO OUTTURN OF 20% OF SALARY 86.4% 448.6 1. This excludes the impact of the McKay acquisition. 2. With adjustment, see page 201. Measure: Threshold (20% payable) Maximum (100% payable) Formulaic outcome (% of award) CEO actual £000 TOTAL SHAREHOLDER RETURN (TSR) RELATIVE TO FTSE 350 REAL ESTATE COMPANIES (EXCLUDING AGENCIES) MEDIAN UPPER QUARTILE 0% 50% £340.7 OF WHICH SHARE PRICE: £NIL Actual: 5th percentile TOTAL PROPERTY RETURN (TPR) VERSUS IPD MEDIAN UPPER QUARTILE 50% 50% £50.4 DIVIDEND EQUIVALENT: Actual: 77th percentile TOTAL 50% 100% £391.1 LTIP OUTCOMES UNDER THE 2020 LTIP PERFORMANCE MEASURES OVER THE PERIOD 1 APRIL 2020 TO 31 MARCH 2023 187 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED REMUNERATION AT A GLANCE CONTINUED Summary of Executive Directors’ Total Remuneration Dave Benson Chief Financial Ocer FIXED COMPONENTS OF EXECUTIVE PAY £000 BASE SALARY 357.3 PENSION 35.2 BENEFITS 0 TOTAL FIXED 392.5 VARIABLE COMPONENTS OF EXECUTIVE PAY £000 ANNUAL BONUS 380.2 LTIP 269.1 OTHER – SAYE, SIP 0 TOTAL VARIABLE 649.3 SINGLE FIGURE FOR 2022/23 1,041.8 ANNUAL BONUS OUTCOMES UNDER THE 2022/23 ANNUAL BONUS Measure: Threshold (0% payable) Maximum (100% payable) Formulaic outcome (% of salary) CFO actual £000 TRADING PROFIT AFTER INTEREST £57. 3m £62.3m 51.0% 60% 182.2 Actual: £61.4m 1 STRATEGIC FINANCIAL OBJECTIVES 0% 100% 9.0% 12% 32.2 Actual: 75% SUSTAINABILITY OBJECTIVES 0% 100% 24% 24% 85.8 Actual: 100% OPERATIONAL EFFICIENCY 0% 100% 11.1% 12% 39.7 Actual: 92.5% CUSTOMER SATISFACTION 72% 80% 11.3% 12% 40.3 Actual: 84% 2 BONUS OUTTURN 106.4% 120% 380.2 1. This excludes the impact of the McKay acquisition. 2. With adjustment, see page 201. Measure: Threshold (20% payable) Maximum (100% payable) Formulaic outcome (% of award) CFO actual £000 TOTAL SHAREHOLDER RETURN (TSR) RELATIVE TO FTSE 350 REAL ESTATE COMPANIES (EXCLUDING AGENCIES) MEDIAN UPPER QUARTILE 0% 50% 234.5 OF WHICH SHARE PRICE: £NIL Actual: 5th percentile TOTAL PROPERTY RETURN (TPR) VERSUS IPD MEDIAN UPPER QUARTILE 50% 50% 34.7 DIVIDEND EQUIVALENT: Actual: 77th percentile TOTAL 50% 100% 269.1 LTIP OUTCOMES UNDER THE 2020 LTIP PERFORMANCE MEASURES OVER THE PERIOD 1 APRIL 2020 TO 31 MARCH 2023 188 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED REMUNERATION AT A GLANCE CONTINUED This section sets out the Directors’ Remuneration Policy and Annual Report on Remuneration. A binding shareholder resolution to approve the Directors’ Remuneration Policy (pages 190 to 196) will be put forward at the 2023 Annual General Meeting (‘AGM’) of the Company on 6 July 2023. 189 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED Our new Remuneration Policy This section sets out the Directors’ Remuneration Policy. A binding shareholder resolution to approve this section will be proposed at the 2023 Annual General Meeting (‘AGM’) of the Company on 6 July 2023. The Policy will be eective from the 2023 AGM subject to shareholder approval and will be available to view at workspace.co.uk/investors in the corporate governance section. CONSIDERATION OF SHAREHOLDER VIEWS The Committee values ongoing dialogue with shareholders and welcomes feedback on Directors’ remuneration. As part of the Policy review, the Committee directly consulted with major shareholders. A letter setting out our proposals was shared with investors reﬂecting over two-thirds of our issued share capital, as well as with investor bodies, including ISS, Glass Lewis and the Investment Association. Through this process, the Committee responded to questions raised and held meetings where requested to further clarify the proposals. We were grateful for the feedback received and pleased that this was positive overall. FIXED COMPONENTS OF EXECUTIVE PAY PURPOSE AND LINK TO STRATEGY OPERATION MAXIMUM OPPORTUNITY PERFORMANCE METRICS CHANGES FROM PREVIOUS POLICY BASE SALARY To reﬂect market value of the role and an individual’s experience, performance and contribution. 2023/24 2024/25 2025/26 2026/27 2027/28 Salaries are normally reviewed annually. Salary levels take account of: – Role, performance and experience. – Business performance and the external economic environment. – Salary levels for similar roles at relevant comparators. – Salary increases across the Group. Increases are applied in line with the outcome of the review. There is no prescribed maximum. Increases for Executive Board Directors will typically be in line with those of the wider workforce. Both Company and individual performance are considered when setting Executive Director base salaries. None. PENSION To provide market competitive pensions. 2023/24 2024/25 2025/26 2026/27 2027/28 Directors participate in adeﬁned contribution pension scheme or may receive a cash allowance in lieu of pension contribution. Up to 10% of salary. For individuals with less than a year’s service with Workspace, this will be 6% of salary. None. None. BENEFITS To provide market competitive beneﬁts. 2023/24 2024/25 2025/26 2026/27 2027/28 Beneﬁts typically include carallowance, private health insurance, and death in service cover. Where appropriate, other beneﬁts may be oered including, but not limited to, allowances for relocation. In addition, Directors are eligible to participate in all-employee share plans, currently the SAYE and Share Incentive Plan. Beneﬁts may vary by role and individual circumstance, and are reviewed periodically. There is no overall maximum. Include car allowance, private health insurance and other beneﬁts. None. None. REMUNERATION POLICY TABLE The table below describes the Policy in relation to the components of remuneration for Executive Directors. 190 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED VARIABLE COMPONENTS OF EXECUTIVE PAY PURPOSE AND LINK TO STRATEGY OPERATION MAXIMUM OPPORTUNITY PERFORMANCE METRICS CHANGES FROM PREVIOUS POLICY ANNUAL BONUS To reinforce and reward delivery of annual strategic business priorities, based on performance measures relating to both Group and individual performance. Bonus deferral provides alignment with shareholder interests. 2023/24 2024/25 2025/26 2026/27 2027/28 A portion of the annual bonus is deferred into shares for a period of three years. The deferral is 33% of bonus earned. Dividend equivalents may be accrued on deferred shares. The Committee may apply malus and clawback in circumstances of gross misconduct, material misstatement of the Group’s results, an error in calculation, serious reputational damage, and corporate failure up to the end of the deferral period. The maximum bonus potential for Executive Board Directors is asfollows: CEO: 150% of salary p.a. CFO: 120% of salary p.a. Performance is measured relative to ﬁnancial, operational, ESG, strategicandindividual objectives in the year aligned with theCompany’s strategic plan. Performance measures and weightings are reviewed each year to ensure they remain appropriate and reinforce the business strategy. Atleast 60% of the total bonus will be based on ﬁnancial measures. Bonus awards are at the Committee’s discretion and the Committee will consider the Company’s performance in the round. The Committee may override the formulaic bonus outcome within the limits of the plan where it believes the outcome is not reﬂective of performance, to ensure fairness to both shareholders and participants. The bonus pays out on a straight-line basis from threshold to 100% at maximum performance. The maximum bonus potential for the CEO is now 150% of salary, the maximum bonus potential for the CFO remains at 120% ofsalary. LONG TERM INCENTIVE PLAN (LTIP) To reward and align to the delivery of sustained long-term performance and to align the interests of participants with those of shareholders 2023/24 2024/25 2025/26 2026/27 2027/28 The Committee may grant annualawards of Performance Shares which vest after three years, subject to performance conditions. Vested shares are subject to a further two-year holding period. The Committee has discretion to apply malus and clawback to awards (circumstances as listed in the Annual Bonus row above) up to the end of the holding period. Dividend equivalents may be accrued on shares in respect ofthe performance and holdingperiod. Normal maximum award of up to 200% of salary p.a. An award of 300% of salary p.a. may be made in exceptional circumstances. Performance share plan awards will be based on a combination ofﬁnancial, share price, ESG and strategic measures aligned with the Company’sstrategic plan. For 2023 awards the performance measures will be: – Total Shareholder Return (TSR) relative to FTSE 350 Real Estate companies (excluding agencies) (25%) – Earnings Per Share (EPS) Growth (25%) – Total Accounting Return (TAR) (25%) – Environmental, Social and Governance (ESG) (25%) A performance underpin will apply which allows the Committee to reduce vesting if performance is inconsistent with the overall performance of the business. For threshold performance, vesting is typically 20% of maximum. The Committee may, in the context of the underlying business strategy, use dierent measures and/or vary the weightings of the measures. The Committee would consult with major shareholders prior to making any signiﬁcant changes. None. 191 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED OUR NEW REMUNERATION POLICY CONTINUED Notes to the Remuneration Policy table Share awards will be operated in accordance with the rules of the relevant plan. In accordance with those rules, the Committee has discretion in the following areas: – In the event of a variation of share capital or a demerger, delisting, special dividend, rights issue or other similar event which may, in the Committee’s opinion, aect the current or future value of shares, the number of shares subject to an award and/ or any performance condition attached to awards, may be adjusted – The Committee may determine that awards may be settled in cash – The Committee may determine the basis on which dividends will be calculated which may include notional reinvestment. The Committee may increase the time horizons for deferral or holding periods REMUNERATION POLICY TABLE CONTINUED PURPOSE AND LINK TO STRATEGY OPERATION CHANGES FROM PREVIOUS POLICY SHAREHOLDING REQUIREMENT 2023/24 2024/25 2025/26 2026/27 2027/28 Shareholding guideline for Executive Board Directors of 200% of salary. Post-cessation shareholding requirement of 200% of salary for two years post-departure. In the event a leaver has not met the relevant shareholding requirement at the point of cessation of employment, they would be required to retain their full pre-cessation shareholding for the two-year period. None. NON-EXECUTIVE DIRECTORS’ REMUNERATION PURPOSE AND LINK TO STRATEGY OPERATION CHANGES FROM PREVIOUS POLICY FEES To reﬂect the time commitment in performing the duties and responsibilities of the role. 2023/24 2024/25 2025/26 2026/27 2027/28 The Chair receives an annual fee. Non-Executive Directors receive an annual base fee. Additional fees are paid to Non-Executive Directors for additional responsibilities such as chairing a Board Committee. Fees are reviewed from time to time, taking into account time commitment, responsibilities and fees paid by companies of a similar size and complexity. Expenses incurred in the performance of non-executive duties for the Company may be reimbursed or paid for directly by the Company, including any tax due on the expenses. Non- Executive Directors do not normally receive any beneﬁts, however these may be provided in the future if in the view of the Board this was considered appropriate. Total fees paid to Non-Executive Directors will remain within the limit stated in the Articles of Association. None. 192 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED OUR NEW REMUNERATION POLICY CONTINUED As part of the review of the Policy, the Committee gave careful consideration to performance measures and targets for incentives to ensure that they are aligned to the Company’s strategy and to performance for our shareholders. To that end, no changes to the annual bonus measures are proposed at this stage. The annual bonus measures are intended to provide a good balance of rewarding operational excellence, customer relationships and building deep market knowledge which are the foundations of the Company’s future growth, whilst ensuring a greater focus on sustainability. To better align with Workspace’s strategy, the performance measures for the 2023 LTIP award will be: – Total Shareholder Return (TSR) relative to FTSE 350 Real Estate companies excluding agencies (25%) – Earnings Per Share (EPS) Growth (25%) – Total Accounting Return (TAR) (25%) – Environmental, Social and Governance (ESG) (25%) The Committee may, in the context of the underlying business strategy, use dierent performance measures and/or vary the weightings of the measures. Major shareholders would be consulted prior to any signiﬁcant changes. The Committee will set Group ﬁnancial targets for the annual bonus with reference to the prior year and forward-looking business forecasts, ensuring the levels of performance required are appropriately challenging. The measurement of performance against performance targets is at the Committee’s discretion, which may include appropriate adjustments to ﬁnancial or non-ﬁnancial elements and/or consideration of overall performance in the round. Performance conditions and targets may be varied if an event occurs or circumstances arise which cause the Committee to determine that they have ceased to be appropriate. If they are varied, they must, in the opinion of the Committee, be fair, reasonable and materially no less dicult than the original condition when set. PERFORMANCE MEASURES AND TARGETS RECRUITMENT AND PROMOTION POLICY The Committee will appoint new Executive Board Directors with a package that is in line with the Remuneration Policy in place and agreed by shareholders at the time. Component Approach BASE SALARY The base salaries of new appointees will be determined by reference to the individual’s role and responsibilities, experience and skills, relevant market data, internal relativities and their current basic salary. Base salary may be higher or lower than the previous incumbent. Salaries may be set at an initially lower level with the intention of increasing salary at a higher than usual rate as the executive gains experience in the role. PENSION New appointees will be eligible to participate in the Group’s deﬁned contribution pension plan or receive a cash alternative, in line with the Policy. BENEFITS New appointees will be eligible to receive beneﬁts in line with the Policy, including relocation beneﬁts if appropriate (relocation beneﬁts are subject to a maximum time limit of two years). ANNUAL BONUS The structure described in the Policy table will normally apply to new appointees with the relevant maximum being pro-rated to reﬂect the proportion of the year served. The Committee retains the ﬂexibility to determine that for the ﬁrst year of appointment any annual incentive award will be subject to such terms as it may determine. LTIP New appointees will be eligible for awards under the LTIP which will normally be on the same terms as other executives, as described in the Policy table. The maximum aggregate value of incentives (excluding buyouts) on appointment will be in line with the aggregate maximums in the Policy table. 193 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED OUR NEW REMUNERATION POLICY CONTINUED RECRUITMENT AND PROMOTION POLICY CONTINUED TERMINATION POLICY To facilitate recruitment the Committee may need to ‘buy out’ remuneration forfeited on joining the Company. This will be considered on a case-by-case basis and may comprise cash or shares. In general: – If such remuneration was in the form of shares, compensation would be in the Company’s shares – If remuneration was subject to achievement of performance conditions, compensation would normally be subject to performance – The timing of any compensation will, where practicable, match the vesting schedule of the remuneration forfeited The over-riding principle would be that the value of any replacement buy out awards should be no more than the commercial value of awards which have been forfeited. For any buyout award, the leaver provisions may be determined at the time of the award. The approach in cases of appointing a new Executive Board Director by way of internal promotion will be consistent with the policy for external appointees detailed above. Where such an individual has contractual commitments made prior to their promotion to Executive Board Director level, the Company will continue to honour these arrangements. Similarly, if an Executive Board Director is appointed following a merger or an acquisition of a company by Workspace, legacy terms and conditions may be honoured. For interim positions a cash supplement may be paid rather than salary (for example a Non-Executive Director taking on an executive function on a short-term basis). Payments of basic salary, beneﬁts and pension made up to the termination date are in line with contractual notice periods. Payments in lieu of notice are limited to the Executive Board Director’s basic salary for the unexpired portion of the notice period. A payment may be made in lieu of unused holiday entitlement. The Company may make phased payments which are paid in monthly instalments and subject to mitigation. The Committee reserves the right to make any other payments in connection with a Director’s cessation of oce or employment where the payments are made in good faith in discharge of an existing legal obligation (or by way of damages for breach of such an obligation) or by way of a compromise or settlement of any claim arising in connection with the cessation of a Director’s oce or employment. Any such payment may include but is not limited to paying reasonable relocation costs, any reasonable level of fees for outplacement assistance and/or the Director’s legal or professional advice fees in connection with his cessation of oce or employment. In the event that a participant ceases to be an employee of Workspace, treatment of outstanding awards under the Group’s incentive plans will be determined based on the relevant plan rules. Component Approach ANNUAL BONUS There is no automatic entitlement to an annual bonus. The Committee retains discretion to award bonuses for leavers taking account of the circumstances of departure. Leavers during the plan year normally lose any entitlement to bonus unless the individual is considered a ‘good leaver’ 1 . Good leavers are eligible for an award to the extent that performance conditions have been satisﬁed and pro-rated for the proportion of the ﬁnancial year served, with Committee discretion to treat otherwise. DEFERRED BONUS SHARES Deferred bonus shares normally lapse unless the individual is considered a ‘good leaver’ 1 , in which case awards normally continue and are released at the usual time, although the Committee has the discretion to allow earlier release. On death, awards typically vest immediately. LTIP Under the LTIP, unvested shares normally lapse unless the individual is considered a ‘good leaver’ 1 , in which case awards are normally tested for performance over the full performance period and pro-rated for time based on the proportion of the vesting period served, with Committee discretion to treat otherwise. On death, awards will typically vest immediately subject to the satisfaction of performance conditions as determined by the Committee. LTIP awards which are subject to an additional holding period will typically be retained and released at either (a) the end of the holding period; or (b) two years from cessation – whichever is soonest, although the Committee has the discretion to allow earlier release. ALL-EMPLOYEE PLANS For all-employee HMRC registered plans such as SAYE and SIP, leavers will be treated in accordance with the approved rules of these plans. 1. A good leaver is deﬁned as an employee who ceases to hold employment during the plan year by reason of: injury, ill-health or disability proved to the satisfaction of the Committee; retirement with the agreement of the Group Company by which he is employed; the participant’s employing Company ceasing to be a Group Company; the business or part of the business to which the participant’s employment relates being transferred to a person who is not a Group Company; or any other reason which the Committee in its absolute discretion so permits. 194 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED OUR NEW REMUNERATION POLICY CONTINUED TREATMENT OF CORPORATE EVENTS CONSIDERATION OF EMPLOYMENT CONDITIONS ELSEWHERE IN THE COMPANY LEGACY COMMITMENTS MINOR AMENDMENTS In the event of a change of control or winding up of the Company, the LTIP awards will vest based on the extent to which the Committee determines that the performance conditions have been or would have been met. Pro-rating for service in the vesting period will apply unless the Committee decides otherwise. Outstanding deferred bonus awards will vest in full as soon as practicable in such circumstances. In the event of a variation of share capital, demerger, special dividend or any other transaction which will materially impact the value of shares the Committee may, at its discretion, allow deferred bonus and LTIP awards to vest on the same basis as for a change of control described above. Alternatively, an adjustment may be made to the number of shares if considered appropriate. When setting remuneration for Executive Directors the Committee takes into account contextual information about pay and conditions within the Group, including salary increases and bonus awards for all employees. The Committee members receive regular updates from the Executive Directors in relation to employee feedback, and on pay and employment conditions elsewhere in the Company. Our Chair, Stephen Hubbard, is our designated Non-Executive Director responsible for overseeing employee engagement. During the last ﬁnancial year, employees were not formally consulted on the design of the Executive Directors’ Policy but were informed of the Company’s performance and key remuneration decisions. We are committed to sharing business success across the organisation with all employees participating in a short-term incentive plan. At more senior levels, remuneration is more long term and larger proportions are dependent on both Group and individual performance and paid in the form of shares. We operate both an SAYE and a SIP open to all employees. The illustration on page 185 provides an overview of remuneration throughout Workspace and the way in which our share incentive plans cascade through the organisation. The Committee may make minor amendments to the Policy (for regulatory, exchange control, tax or administrative purposes or to take account of a change in legislation) without obtaining shareholder approval. The Committee reserves the right to make any remuneration payments and payments for loss of oce (including exercising any discretions available to it in connection with such payments) notwithstanding that they are not in line with the Policy set out above where the terms of the payment were agreed: (i) before 16 July 2014 (the date the Company’s ﬁrst shareholder-approved Directors’ Remuneration Policy came into eect); (ii) before the Policy set out above came into eect, provided that the terms of the payment were consistent with the shareholder-approved Directors’ Remuneration Policy in force at the time they were agreed; or (iii) at a time when the relevant individual was not a Director of the Company and, in the opinion of the Committee, the payment was not in consideration for the individual becoming a Director of the Company. For these purposes ‘payments’ include the Committee satisfying awards of variable remuneration and, in relation to an award over shares, the terms of the payment are ‘agreed’ at the time the award is granted. 195 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED OUR NEW REMUNERATION POLICY CONTINUED £000 Fixed pay On-target Maximum Maximum with 50% share price appreciation £000 Fixed pay On-target Maximum Maximum with 50% share price appreciation Possible payouts under policy Based on our proposed Remuneration Policy, we set out below scenarios for the potential remuneration to be earned by our Executive Directors under the Policy for various performance assumptions. In line with the Companies (Miscellaneous Reporting) Regulations 2018, we have included the impact of a potential scenario of a 50% share price appreciation on the LTIP. A high proportion of the Executive Board Directors’ packages are made up of shares, supporting the alignment of executive pay with the interests of our shareholders. The increased value in remuneration from share price appreciation is beneﬁcial for both Executive Directors and shareholders. Salary as at 1 April 2023. Salary as at 1 April 2023. Current contribution rate of 10% of salary. Current contribution rate of 10% of salary. As provided in the single ﬁgure table on page 200. As provided in the single ﬁgure table on page 200. Impact of 50% share price appreciation over three years (on the LTIP). Impact of 50% share price appreciation over three years (on the LTIP). Minimum – no bonus payable; On-target – 50% of maximum potential bonus; Maximum – maximum potential bonus. Minimum – no bonus payable; On-target – 50% of maximum potential bonus; Maximum – maximum potential bonus. Minimum – no LTIP vesting; On-target – 20% of maximum (threshold vesting); Maximum – maximum LTIP vesting. Minimum – no LTIP vesting; On-target – 20% of maximum (threshold vesting); Maximum – maximum LTIP vesting. Base salary Base salary Pension Pension Beneﬁts Beneﬁts Share price growth Share price growth Annual bonus Annual bonus LTIP LTIP 0 03,500 3,5003,000 3,0002,500 2,5002,0002,000 1,5001,500 1,0001,000500 500 SINGLE FIGURE SCENARIOS Graham Clemett, CEO SINGLE FIGURE SCENARIOS Dave Benson, CFO 196 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED OUR NEW REMUNERATION POLICY CONTINUED Annual report on remuneration WHAT WE PAID OUR DIRECTORS IN 2022/23 TOTAL TARGET COMPENSATION COMPARED TO OUR PEERS Chart A below shows the relative position of target total compensation for our Executive Directors compared to our peers. When we set the target total compensation for the Executive Directors, one of the factors the Committee considers is the competitive market for our Executive Directors, which we believe is the FTSE 250 and FTSE 350 Real Estate companies, and the size of the Company compared to these peers. The Committee has been pleased to report above target-performance against market benchmark has been achieved over recent years. BOTTOM QUARTILE THIRD QUARTILE SECOND QUARTILE TOP QUARTILE FTSE 350 REAL ESTATE FTSE 250 CHART A (I) — GRAHAM CLEMETT CHIEF EXECUTIVE OFFICER Positioning of total remuneration of the Company relative to market benchmarks. BOTTOM QUARTILE THIRD QUARTILE SECOND QUARTILE TOP QUARTILE FTSE 350 REAL ESTATE FTSE 250 CHART A (II) — DAVE BENSON CHIEF FINANCIAL OFFICER Positioning of total remuneration of the Company relative to market benchmarks. OUR SHAREHOLDING REQUIREMENTS (AUDITED) Our Executive Directors are encouraged to hold a high number of shares in order to align their interests to those of the shareholders, and to encourage a long-term view of the sustainable performance of the Company. As such, our Directors are impacted by the share price over the year in the same way as our shareholders. Chart B below shows that, in the year, the CEO met his minimum shareholding requirements. The CFO joined in April 2020 and is building his shareholding. 0% 100% MINIMUM SHAREHOLDING REQUIREMENT 200% 400%300% 1. All shares that are either unvested and not subject to performance or subject to performance have been included on a net of tax basis (i.e. at a 50% discount). 2. This is based on a share price of £5.2854 being the average share price over the year to 31 March 2023 and salaries of £519,200 and £357,300 for Graham Clemett and Dave Benson respectively. CEO CFO % OF SALARY CHART B OUR SHAREHOLDING REQUIREMENT HAS BEEN MET Owned outright or vested. Unvested and not subject to performance. Subject to performance. OVERALL LINK TO REMUNERATION AND EQUITY OF THE EXECUTIVE DIRECTORS Table A below sets out the single ﬁgure for 2022/23, the number of shares held by the Director at the beginning and end of the ﬁnancial year, and the impact on the value of these shares taking the opening price and closing price for the year. TABLE A Graham Clemett Dave Benson 2022/23 single ﬁgure (£000) 1,433.3 1,041.8 Shares held at start of year 135,311 20,085 Shares held at end of year 141,930 39,765 Value of shares at start of year (£000) 1 926.9 137.6 Value of shares at end of year (£000) 2 620.2 173.8 Dierence (£000) (306.7) 36.2 1. Based on a closing share price on 31 March 2022 of £6.85. 2. Based on a closing share price on 31 March 2023 of £4.37. This section sets out the Annual Report on Remuneration. An advisory shareholder resolution to approve this section, together with the Chair’s statement on pages 180 to 183 will be put forward at the 2023 AGM of the Company on 6 July 2023. 197 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED OUR APPROACH TO FAIRNESS AND WIDER WORKFORCE CONSIDERATIONS THE YEAR ON YEAR CHANGE IN OUR DIRECTORS’ REMUNERATION When making remuneration decisions for the Executive Board Directors, the Committee considers pay, policies and practices elsewhere in the Group. We receive regular updates from the Executive Board Directors, and we monitor bonus payout and share award data. In this section, we provide context to our Executive Board Director remuneration by explaining our employee policies and our approach to fairness, as well as the ratio of CEO pay to that of the wider workforce. Communication and engagement with employees The Board is committed to an open dialogue with our employees over various decisions. Our Chair, Stephen Hubbard, is our designated Non-Executive Director responsible for overseeing employee engagement. During the last ﬁnancial year, employees have been informed about activities, performance and the Company’s response to the increased cost of living through sta brieﬁngs held by the CEO and other members of the Executive team. Mr Hubbard also held three informal sta events during the year. Employees are kept informed about activities and performance not only through these brieﬁngs but also by the circulation of corporate announcements and other relevant information to all sta, supplemented by updates on the intranet. Share schemes Share schemes are a long-established and successful part of our total reward package, encouraging and supporting employee share ownership. In particular, all employees are invited to participate in the Company’s Savings Related Share Option Scheme and the Share Incentive Plan. Equal opportunities Workspace is committed to an active Equal Opportunities Policy from recruitment and selection, through training and development and in performance reviews and promotion. All decisions relating to employment practices are objective, free from bias and based solely upon work criteria and individual merit. We consider the needs of all employees, customers and the community. We use everyone’s talents and abilities, and we value diversity. The Company aims to make our promotion and recruitment practices fair and objective. We encourage continuous development and training, as well as the provision of equal opportunities and career development for employees. Further details of this are shown on pages 148 to 154. Retirement beneﬁts The Company provides pension beneﬁts for the majority of its employees. The Company’s commitment to pension contributions, consistent with last year, ranges from 6% to 10% of an employee’s salary. The pension scheme is open to every employee in accordance with the new Government auto-enrolment rules. The table below sets out the changes year on year between our Director pay and average employee pay. As per our Policy, salary increases applied to Executive Directors will typically be in line with those of the wider workforce. Table B below shows the percentage change in Director remuneration, comprising salary, taxable beneﬁts and annual bonus, and comparable data for the average of employees within the Company. The comparator group is based on all employees (excluding the CEO, CFO and Non-Executive Directors), normalised for joiners and leavers during the year. The average number of people employed by the Company during the year was 291 (2022: 249). All employees are eligible for consideration for an annual bonus. TABLE B 2023 2022 2021 Director Salary/ fees Taxable beneﬁts Annual variable Salary/ fees Taxable beneﬁts Annual variable Salary/ fees Taxable beneﬁts Annual variable Executive Directors Graham Clemett 3% 4% -11% 2% 1% 157% 9% -15% -54% Dave Benson 3% n/a 10% 2% n/a 157% n/a n/a n/a Non-Executive Directors Stephen Hubbard 6% n/a – 24% n/a – 198% n/a – Damon Russell 1 -65% n/a – 10% n/a – 10% n/a – Rosie Shapland 31% n/a – 194% n/a – n/a n/a – Lesley-Ann Nash 15% n/a – 345% n/a – n/a n/a – Duncan Owen 2 73% n/a – n/a n/a – n/a n/a – Nick Mackenzie 2 491% n/a – n/a n/a – n/a n/a – Manju Malhotra 2 491% n/a – n/a n/a – n/a n/a – All other employees 19% -4% -11% 5% -24% 58% 5% -5% -5% 1. Damon Russell stepped down from the Board on 22 July 2022, therefore the above information reﬂects his time in role. 2. Duncan Owen joined the Board in July 2021 with both Nick Mackenzie and Manju Malhotra joining the Board in January 2022, and therefore were paid a partial fee in the prior year. 3. This increase is a result of the acquisition of McKay Securities and the inclusion of these employees in the ﬁgures for 2023. 198 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED PAY COMPARISONS Chart C shows the single ﬁgure of remuneration for our CEO over time, and the pay of our average employee, each rebased to 2013. We have also included our TSR performance over this period. FTSE 350 Real Estate Supersector Index FTSE 250 Index Workspace Group PLC TSR CEO single ﬁgure TABLE C CEO single ﬁgure of total remuneration £000 31 Mar 2014 31 Mar 2015 31 Mar 2016 31 Mar 2017 31 Mar 2018 31 Mar 2019 31 Mar 2020 31 Mar 2021 31 Mar 2022 31 Mar 2023 Graham Clemett 1 – – – – – – 1,349.9 764.4 1,080.0 1,433.3 Jamie Hopkins 2 966.9 3,533.1 2,262.7 2,205.6 1,674.2 1,728.2 490.9 – – – Annual bonus payout Graham Clemett (% of maximum opportunity) – – – – – – 78% 33% 83% 72% Jamie Hopkins (% of maximum opportunity) 97.8% 97.2% 95.3% 100% 100% 95.8% – – – - LTIP vesting Graham Clemett (% of maximum opportunity) – – – – – – 87.24% 0% 0% 50% Jamie Hopkins (% of maximum opportunity) – 100% 100% 88.7% 62.7% 50.7% 87.24% – – – Ratio of single total remuneration ﬁgure shown to employees as a whole to employee lower quartile 3 – – – – – 53x 47x 23x 32x 43x to employee median 34x 128x 79x 72x 48x 33x 43x 15x 23x 29x to employee upper quartile 3 – – – – – 23x 23x 11x 15x 20x 1. Mr Clemett assumed the role of Interim CEO on 1 June 2019 and was appointed CEO on 24 September 2019. 2. Mr Hopkins was appointed as an Executive Director on 12 March 2012 and stepped down from the Board on 31 May 2019. 3. See next page for details on calculation. CHART C 0 600 500 400 300 200 100 199 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED PAY COMPARISONS CONTINUED SINGLE FIGURE OF EXECUTIVE DIRECTORS (AUDITED) Chief Executive’s Pay Ratio The table below compares the single total ﬁgure of remuneration for the CEO with that of the Group employees who are paid at the 25th percentile (lower quartile), 50th percentile (median) and 75th percentile (upper quartile) of its employee population. Despite voluntarily disclosing the ratio of CEO pay to workforce pay in previous years (see page 199, this is the ﬁrst year in which Workspace meets the requirement regarding employee numbers as per the Companies (Miscellaneous Reporting) Regulations 2018. Year Methodology 25th percentile ratio 50th percentile ratio 75th percentile ratio 2023 Option A 43:1 29:1 20:1 Option A, as set out under the reporting regulations, was used to calculate remuneration for 2023, as well as 2022 and 2021. The UK employees included are those employed on 31 March 2023 and remuneration ﬁgures are determined with reference to the ﬁnancial year ending on 31 March 2023. We have chosen Option A as we believe that it is the most robust methodology for calculating these ﬁgures. The value of each employee’s total pay and beneﬁts was calculated using the single ﬁgure methodology consistent with the CEO, with the exception of the annual bonus, which was calculated using 2021/22 ﬁnancial year bonuses (which were paid during 2022/23) as the individual 2022/23 ﬁnancial year bonus information was not available at the last practical date before the ﬁnalisation of this report. For employees who joined during the 2022/23 ﬁnancial year (82 employees), we’ve included their bonus as nil as they were not entitled to receive a 2021/22 ﬁnancial year bonus. This means that the ratios are higher than if we were able to include a bonus amount for these employees. No elements of pay have been omitted. Where required, remuneration was approximately adjusted to be full-time and full-year equivalent basis based on the employee’s average full-time equivalent hours for the year and the proportion of the year they were employed. No other adjustments were made. The table below sets out the salary and total pay and beneﬁts of the employee at the lower quartile, median and upper quartile for the 2022/23 ﬁnancial year. 25th percentile 50th percentile 75th percentile Salary £28,300 £41,200 £58,500 Total pay and beneﬁts £33,286 £48,886 £73,350 There is signiﬁcant volatility in this ratio, caused by the following: – Our CEO pay was made up of a higher proportion of incentive pay than that of our employees, in line with shareholder expectations. This introduces a higher degree of variability in his pay each year versus that of our employees – Long-term incentives, which make up a signiﬁcant proportion of our CEO’s pay, are provided in shares, and their value on vesting, included in his single ﬁgure, reﬂects the movement in share price over the three years prior to vesting. This outcome can add signiﬁcant volatility to the CEO’s pay and this is reﬂected in the ratio For these reasons, we believe the median pay ratio this year is consistent with pay, reward and progression policies for UK colleagues. The illustrations below set out a single ﬁgure for the total remuneration received by each Executive Board Director for the year ended 31 March 2023 and the prior year. Graham Clemett, CEO Dave Benson, CFO 2022/23 £000 2021/22 £000 2022/23 £000 2021/22 £000 Fixed pay Base salary 519.2 504.0 357.3 346.8 Pension 1 51.9 50.4 35.2 30.8 Beneﬁts 2 22.5 21.6 0 0 Total ﬁxed 593.6 576.0 392.5 377.6 Variable pay Annual bonus 3 448.6 502.0 380.2 345.4 LTIP 5 391.1 0 269.1 – Other – SAYE, SIP 4 0 2.0 0 2.0 Total variable 839.7 504.0 649.3 347.4 Total 1,433.3 1,080.0 1,041.8 725.0 Of which share price growth 0 0 0 0 1. Pension: During 2022/23 each of Messrs Clemett and Benson received a cash allowance in lieu of pension contribution. 2. Beneﬁts: Taxable value of beneﬁts received in the year by Executive Directors includes a car allowance, private health insurance and death in service cover. 3. Annual bonus: This is the total bonus earned in respect of performance during the relevant year. For 2021/22 and 2022/23, the Committee set a minimum deferral requirement of 33% of the bonus earned. For 2022/23, this deferral was equivalent to £148,034 for Mr Clemett and £125,455 for Mr Benson. 4. SIP awards granted in September 2021. See page 211 for details. 5. The 2022/23 ﬁgure includes the estimated value of 50% of the 2020 LTIP shares that vested based on performance to 31 March 2023. The share price used is the three-month average to 31 March 2023 of £4.88. This will be updated in next year’s report to reﬂect the share price on the date of vesting. As allowable under the relevant plan rules and approved Policy, the Committee determine that dividend equivalents are payable under the 2020 LTIP award – this ﬁgure includes accrued dividends on vested shares. 200 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED Annual bonus payout in respect of 2022/23 (Audited) For 2022/23 the maximum bonus opportunity for the Executive Directors was 120% of salary. Payouts are subject to the assessment of performance against stretching ﬁnancial, strategic and business performance targets, and are calculated on a straight-line basis from 0% at threshold to 100% at maximum performance. Both Graham Clemett and Dave Benson are required to defer 33% of their bonus into Company shares for three years. The targets are set based on our budgeting process, which takes account of market expectations, planned acquisitions and disposals of assets, and aspirations around Company growth. The performance measures, targets and outcomes for each measure are shown to the right. ANNUAL BONUS OUTCOMES UNDER THE 2022/23 ANNUAL BONUS Measure: Threshold (0% payable) Maximum (100% payable) Formulaic outcome and opportunity as a % of salary TRADING PROFIT AFTER INTEREST £57. 3m £62.3m 51.0% 60% Actual: £61.4m 1 STRATEGIC FINANCIAL OBJECTIVES 0% 100% 9.0% 12% Actual: 75% SUSTAINABILITY OBJECTIVES 0% 100% 24% 24% Actual: 100% OPERATIONAL EFFICIENCY 0% 100% 11.1% 12% Actual: 92.5% CUSTOMER SATISFACTION 72% 80% 11.3% 12% Actual: 84% of this element 2 TOTAL 106.4% 120% OUTCOME (£000) GRAHAM CLEMETT, CEO FORMULAIC OUTTURN £552.4 DISCRETIONARY REDUCTION APPLIED TO OUTTURN OF 20% OF SALARY BONUS OUTTURN £448.6 86.4% TOTAL BONUS £148.0 OF WHICH IS DEFERRED BONUS OUTCOME (£000) DAVE BENSON, CFO BONUS OUTTURN £380.2 106.4% TOTAL BONUS £125.5 OF WHICH IS DEFERRED BONUS 1. This excludes the impact of the McKay acquisition. 2. The overall outcome was reduced as there was a 0.6% increase in the number of disagree/strongly disagree categories. ANNUAL BONUS PAYOUT IN RESPECT OF 2022/23 201 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED Strategic ﬁnancial, operational eciency and sustainability objectives 2022/23 A summary of the strategic ﬁnancial, operational eciency and sustainability objectives is shown to the right. Full details for each performance measure are set out on pages 203 and 204. STRATEGIC FINANCIAL, OPERATIONAL EFFICIENCY, SUSTAINABILITY OBJECTIVES (AUDITED) Strategic ﬁnancial objectives 1 Activity Disposal of non-core assets Delivery of integration cost savings from McKay acquisition Complete debt reﬁnancing post McKay acquisition Continue to build Workspace brand proﬁle Operational eciency objectives 2 Activity Integration of McKay sta and processes Roll-out of new ﬁnance system New customer complaints policy and process Continued roll-out of Workspace Inclusive oer Sustainability objectives 3 Activity Progress our pathway to net zero carbon by 2030 All lettable units to be A and B rated by 2030 Improve customer advocacy of our sustainable credentials Launch our new InspiresMe programme to local schools, colleges and youth organisations Employee and customer well-being initiatives Page 203 Page 203 Page 204 Opportunity 24% Outcome 24% Opportunity 12% Outcome 11.1% Opportunity 12% Outcome 9% 202 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED STRATEGIC FINANCIAL OBJECTIVES – OUTCOME 9%/12% 1 Target Achievement Disposal of non-core assets – Sale of McKay industrial portfolio – Exchanged for sale of 5 of the 9 non-core industrial assets on 16 May 2023 for £82m – Sale of other McKay non-core assets – Disposal of Newbury medical centre for £7m in July 2022 – Sale of Riverside residential scheme – Sale of Riverside residential scheme completed for £54m in March 2023 Delivery of integration cost savings from McKay acquisition – 50% reduction in McKay corporate costs by exit 22/23 – Costs reduced from £6.4m p.a. prior to acquisition to £0.9m p.a. based on average cost in Q4 (80% reduction) Complete debt reﬁnancing post McKay acquisition – Rollover of Aviva debt facility – Completed transfer of Aviva facility in September 2022 avoiding £13m break cost – Replacement of short-term acquisition facilities with long-term debt – Acquisition facility replaced by £135m of McKay revolver facilities transferred to Workspace on same terms as existing facilities with maturity subsequently extended to April 2025 Continue to build Workspace brand proﬁle – Raise brand awareness by 2% (average awareness in 21/22 of 11%) – Now reached 14% average spontaneous brand awareness (based on Opinium brand research) OPERATIONAL EFFICIENCY OBJECTIVES – OUTCOME 11.1%/12% 2 Target Achievement Integration of McKay sta and processes – Completed successfully by December 22 – Integration completed in November 2022 Roll-out of new ﬁnance system – Completed successfully by April 23 – System design, build, data load and testing substantially complete with end-user training under way by the end of April 2023. – System went live on 16 May 2023. New customer complaints policy and process – Roll-out new policy and process across Company by December 22 – Processes established and customer feedback portal launched 13 December 2022 – 56 cases raised to date – Monthly reporting in place with resolution of cases being monitored to ensure SLA’s being met Continued roll-out of Workspace inclusive oer – Roll-out to further 10 centres by March 23 – This has been rolled out to 9 out of 10 of the remaining centres in scope of the Workspace Inclusive Oer – The only exception is Canalot Studios which is undergoing refurbishment where the required Wi-Fi roll-out will be installed as part of the building upgrade 203 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED SUSTAINABILITY OBJECTIVES – OUTCOME: 24%/24% 3 Target Achievement Progress of our pathway to net zero carbon by 2030 – Reduce energy intensity across the portfolio by 5% – 5% reduction in energy intensity – Reduce scope 1 emissions (gas) per sq. ft. by 5% – 27% reduction in gas consumption (subject to minor adjustment for emissions from refrigerant leaks) All lettable units to be A and B rated by 2030 – Eliminate all F and G rated units – No F, G or unrated units remaining – Increase the percentage of A and B rated area in the portfolio by 10% – 12% of ﬂoor area upgraded to EPC A/B Improve customer advocacy of our sustainable credentials – Improve our ‘agree and strongly agree’ customers satisfaction score to 70% (currently 66%) – The percentage of customers who agree or strongly agree that Workspace is a socially and environmentally responsible business has increased from 66% to 70.5% Source: Workspace 2023 customer survey Launch our new InspiresMe programme to local schools, colleges and youth organisations – Successful roll-out at four centres – Achieved roll-out of InspiresMe at ﬁve pilot centres: Kennington Park, Brickﬁelds, Cargo Works, The Chocolate Factory and Mare Street – 182 students beneﬁtted from CV workshops, career sessions and 20 students were hosted for work experience – The responses from school partners and customers were extremely positive with 100% of the schools who took part agreeing they were keen to continue with this initiative next year Employee and customer well-being initiatives – Continued roll-out of a variety of wellbeing events, both virtual and physical Employees – 23 employee wellbeing and mental health events delivered with 600 attendees at these sessions – Over 160 employees utilised our wellbeing cashback programme (Healthshield) with claim back of circa £28,000 – We received an average score from the recent annual employee survey of 75% on employee wellbeing across six wellbeing questions Customers – Our central events team hosted 71 events of which 50 were wellbeing focused. This includes Paws in Work, cocktail master-classes, Leafage terrarium building, yoga classes, art for wellbeing initiatives, and were attended by 1,600 customers – In addition centre teams hosted 37 wellbeing themed events 204 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED LTIP AWARD VESTING IN RESPECT OF 2022/23 (AUDITED) LTIP AWARDS MADE DURING THE 2022/23 FINANCIAL YEAR (AUDITED) The 2020 LTIP awards measured performance over the period 1 April 2020 to 31 March 2023. Details of the performance targets and achievement against them are set out below. On this basis, 50% of the 2020 LTIP will vest. The 2021 LTIP awards are based on the same targets and weightings as the 2020 LTIP award shown below, measured over the period 1 April 2021 to 31 March 2024. TABLE D Measure Threshold (20% payable) Maximum (100% payable) Actual Formulaic outcome (% of award) TOTAL SHAREHOLDER RETURN (TSR) RELATIVE TO FTSE 350 REAL ESTATE COMPANIES (EXCLUDING AGENCIES) MEDIAN UPPER QUARTILE 5th PERCENTILE 0%/50% TOTAL PROPERTY RETURN (TPR) VERSUS IPD MEDIAN UPPER QUARTILE 77th PERCENTILE 50%/50% LTIP (% MAXIMUM) VESTING 50%/100% CEO CFO NUMBER OF SHARES VESTING (AUDITED) 69,819 48,044 Under the current Policy conditional share awards under the LTIP are granted to a maximum of 200% of salary. Awards under the 2022 LTIP are subject to the performance conditions detailed in Table E below measured over the period 1 April 2022 to 31 March 2025. TABLE E Relative TSR vs. sector group 1 (50% of the award) Total Property Return versus London IPD index (50% of the award) Threshold 3 (20% vesting) Median Median Maximum 3 (100% vesting) Upper Quartile Upper Quartile 1. The comparator group for the 2022 LTIP cycle is FTSE 350 Real Estate companies excluding agencies. 2. For any shares to vest on relative TSR, the Company’s TSR outcome must exceed the median TSR of the comparator group over the performance period. 3. There is straight-line vesting between the ‘Threshold’ and ‘Maximum’ performance levels. The following awards were granted during the year under the 2022 LTIP: Performance share award Director Date of grant Market price at date of award 1 Number of shares Face value £ % of salary Graham Clemett 24 June 2022 £6.2800 165,350 1,038,398 200% Dave Benson 24 June 2022 £6.2800 113,789 714,594 200% 1. The share price for calculating the levels of awards was £6.2800, the average mid-market closing price over the three dealing days 21, 22 and 23 June 2022, in accordance with the LTIP rules. Deferred shares were granted (as conditional share awards) under the 2021/22 bonus of 25,380 shares to Mr Clemett and 17,463 shares to Mr Benson (33% of bonus awarded) on 27 June 2022. The share price on the date of grant was £6.475 which represented the average mid-market closing price. 205 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED 2023/24 ANNUAL BONUS AND LINK TO STRATEGY Measure: Financial objectives (Trading proﬁt after interest (50%), Strategic ﬁnancial (10%)) Measure: Sustainability Measure: Operational eciency Measure: Customer satisfaction Bonus weighting: 60% Bonus weighting: 20% Bonus weighting: 10% Bonus weighting: 10% How we will apply the policy in 2023/24 As explained in the Remuneration Committee Chair’s letter, we are seeking shareholder approval for a new Directors’ Remuneration Policy at the AGM on 6 July 2023. On the basis that it is approved by shareholders, it will be implemented as set out below. BASE SALARY The Executive Directors will be awarded a 3% salary increase which is below the average applied to the wider workforce. Salaries will be as follows: CEO £534,800 CFO £368,100 PENSION In line with the proposed Policy set out in this report, the Executive Directors will receive a contribution to a deﬁned contribution plan or a cash allowance in lieu of contribution of 10% of salary respectively. ANNUAL BONUS As per the proposed Policy, there is a change to the CEO’s annual bonus maximum potential in 2023/24 and this will be 150% of salary. There is no change to the CFO’s annual bonus maximum potential in 2023/24, and this will continue to be 120% of salary. 33% of the total bonus paid will be deferred into shares for three years. Dividend equivalents may be accrued on deferred shares. Whilst we believe that disclosing the exact performance conditions and targets for all measures would not be in the best interests of shareholders, we remain committed to best practice disclosure. We therefore set out to the right some examples of the objectives that the Committee will consider in respect of evaluating the strategic ﬁnancial and operational eciency and sustainability objectives. Full disclosure on the targets, performance achieved and resulting bonus payouts for 2023/24 will be provided in next year’s report. Operational eciency objectives will include elements which optimise value and service such as centre and asset management. Strategic ﬁnancial targets will cover key drivers of our commercial success including capital management and brand awareness. ESG metrics will align to our core sustainability focus including the reduction in energy intensity and an increase in social value impact. Full disclosure on the targets, performance achieved and resulting bonus payouts for 2023/24 will be provided in next year’s report. LINK TO STRATEGY Driving customer-led growth Delivering operational excellence Being sustainable 206 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED HOW WE WILL APPLY THE POLICY IN 2023/24 LONG-TERM INCENTIVE PLAN (LTIP) Following careful consideration, we have decided to amend the performance measures of the 2023 LTIP, to better align with Workspace’s strategy. Maximum award 200% of salary. The performance measures and targets for the four elements are as follows: Total Shareholder Return relative to FTSE 350 Real Estate companies (excluding agencies) Earnings Per Share (EPS) Growth Total Accounting Return (TAR) Environmental, Social and Governance (ESG) Weighting (% of award) 25% 25% 25% 25% Threshold (20% vesting) Median 5% p.a. 4.5% p.a. See below Maximum (100% vesting) Upper Quartile 10% p.a. 10% p.a. See below A holding period of two years will apply to any net vested shares under the LTIP. To allow any payouts to be fully reﬂective of underlying performance, the LTIP underpin allows the Committee to reduce vesting should the Committee believe that the performance is inconsistent with the overall performance of the business. ESG LTIP THREE YEAR TARGETS Environmental, social and governance (ESG) Threshold (20% vesting) Maximum (100% vesting) Weighting Reduction in scope 1 gas emissions 15% 20% 50% Increase in percentage of EPC A or B rated space 20% 27% 50% LINK TO STRATEGY Driving customer-led growth Delivering operational excellence Being sustainable Weighting: 25% Weighting: 25% Weighting: 25% Weighting: 25% 2023 PERFORMANCE MEASURES AND LINK TO STRATEGY Measure: Total Shareholder Return (TSR) relative to FTSE 350 Real Estate companies (excluding agencies) Measure: Earnings Per Share (EPS) Growth Measure: Total Accounting Return (TAR) Measure: Environmental, Social and Governance (ESG) metrics NON-EXECUTIVE DIRECTOR FEES The fees for Non-Executive Directors are reviewed and agreed annually. The fees, which are eective from 1 April 2023, are set out in the table below. 2023/24 fee 2022/23 fee % change Chair £200,000 £200,000 0% NED base fee £55,000 £55,000 0% Chair of Audit Committee fee £10,800 £10,800 0% Chair of Remuneration Committee fee £10,800 £10,800 0% Chair of ESG Committee fee £10,800 £10,800 0% Senior Independent Director fee £10,800 £10,800 0% 207 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED SINGLE FIGURE FOR NON-EXECUTIVE DIRECTORS (AUDITED) Table F below sets out a single ﬁgure for the total remuneration received by each Non-Executive Director for the year ended 31 March 2023 and the prior year: TABLE F Stephen Hubbard Damon Russell Duncan Owen Rosie Shapland Lesley-Ann Nash Manju Malhotra Nick Mackenzie Non-Executive Director 2022/23 £000 2021/22 £000 2022/23 £000 2021/22 £000 2022/23 £000 2021/22 £000 2022/23 £000 2021/22 £000 2022/23 £000 2021/22 £000 2022/23 £000 2021/22 £000 2022/23 £000 2021/22 £000 Base fee 200.0 188.0 19.2 51.0 55.0 35.4 55.0 51.0 55.0 51.0 55.0 9.3 55.0 9.3 Additional fees – – 2.7 10.8 6.3 – 21.6 7.6 10.8 6.3 – – – – Total 200.0 188.0 21.9 61.8 61.3 35.4 76.6 58.6 65.8 57.3 55.0 9.3 55.0 9.3 1. Expenses incurred by Non-Executive Directors represent the cost to the Group, being gross of taxation. In 2022/23 Nick Mackenzie was reimbursed for out of pocket expenses incurred in attending meetings, in connection with the discharge of his duties of £1,111.70. 2. Additional fees were paid during the year to Non-Executive Directors serving as Chairs of the Remuneration, Audit and ESG Committees. An additional fee is also paid to the Senior Independent Non-Executive Director. SHARE OWNERSHIP AND SHARE INTERESTS (AUDITED) The table below shows the interests of the Directors and connected persons in shares (owned outright or vested). There have been no changes in the interests in the period between 31 March 2023 and 6 June 2023. TABLE G 31 March 2023 31 March 2022 Chair Stephen Hubbard 41,500 23,640 Executive Directors Graham Clemett 141,930 135,311 Dave Benson 39,765 20,085 Non-Executive Directors Rosie Shapland Nil Nil Lesley-Ann Nash Nil Nil Nick Mackenzie 12,400 Nil Manju Malhotra Nil Nil Duncan Owen 9,410 5,560 Past Directors Damon Russell 1 See note Nil 1. Damon Russell stepped down from the Board on 22 July 2022. As at the date of leaving, Damon Russell did not hold any shares. Dave Benson, who joined the Company on 1 April 2020, acquired 19,850 shares in September 2020. Mr Benson was subsequently awarded 235 ordinary shares under the Workspace Group PLC Share Incentive Plan and acquired a further 19,680 shares on 1 September 2022. Table H below shows the Executive Directors’ interest in shares. TABLE H Executive Director Type Owned outright or vested 2 Unvested and not subject to performance 3 Subject to performance 4 Total Graham Clemett Shares 141,930 123,143 282,393 547,466 Market value options 1 Nil 3,389 Nil 3,389 Dave Benson Shares 39,765 70,757 194,330 304,852 Market value options 1 Nil 5,649 Nil 5,649 1. Market value options include SAYE options outstanding and not yet matured as at 31 March 2023. The exercise price of these was set at 80% (in accordance with HMRC and the plan rules) of the market value of a share at the invitation date. See page 211 for further details. 2. The total shares owned outright or vested. 3. This ﬁgure includes the deferred bonus shares awarded in 2020, 2021 and 2022 for Mr Clemett and the deferred bonus shares awarded in 2021 and 2022 for Mr Benson and the number of shares vesting, (gross), pursuant to the 2020 LTIP award. 4. The interest in shares of 282,393 for Mr Clemett consists of LTIP awards made in 2021 and 2022. The interest in shares of 194,330 for Mr Benson consists of LTIP awards made in 2021 and 2022, details of which can be found on page 210 in this report. 208 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED External appointments It is the Board’s policy to allow Executive Directors to take up one Non-Executive position on the board of another company, subject to the prior approval of the Board. Any fee earned in relation to outside appointments is retained by the Executive Director. Mr Clemett was appointed a Non-Executive Director of The Restaurant Group PLC, eective 1 June 2016 and as Senior Independent Director on 6 November 2020. Mr Clemett is paid an annual fee of £69.3k. Mr Benson does not hold any external appointments. Relative importance of spend on pay Chart D below shows the Company’s actual expenditure on shareholder distributions (including dividends and share buybacks) and total employee pay expenditure for the ﬁnancial years ended 31 March 2022 and 31 March 2023. CHART D EMPLOYEE REMUNERATION DISTRIBUTION TO SHAREHOLDERS 2023 £29.5m 2023 £49.4m 2022 £21.8m 2022 £40.5m +35% +22% The estimated total dividend as reported in the ﬁnancial statements for the year to 31 March 2023 was £49.4m. Payments for loss of oce (audited) None. Payments to past Directors (audited) None. Service contracts of Directors serving in the year Executive Directors are employed under contracts of employment with Workspace Group PLC. The principal terms of the Executive Directors’ service contracts are as follows. Notice period Executive Director Position Eective date of contract From Company From Director Graham Clemett Chief Executive Ocer 31 July 2007 12 months 12 months Dave Benson Chief Financial Ocer 1 April 2020 12 months 12 months Graham Clemett joined the Company as CFO in July 2007 and was appointed as CEO on 24 September 2019. Mr Clemett served as Interim CEO and CFO from 31 May 2019 until September 2019. The Chair and Non-Executive Directors have letters of appointment. Dates of the Directors’ letters of appointment are set out below: Name Date of original appointment (date of reappointment) Date of appointment/ last reappointment at AGM Notice period Stephen Hubbard 16 July 2014 (23 January 2020) 2022 6 months Rosie Shapland 6 November 2020 (n/a) 2022 3 months Lesley-Ann Nash 1 January 2021 (n/a) 2022 3 months Duncan Owen 22 July 2021 (n/a) 2022 3 months Manju Malhotra 26 January 2022 (n/a) 2022 3 months Nick Mackenzie 26 January 2022 (n/a) 2022 3 months The Directors are subject to annual re-election at the AGM. Non-Executive Directors’ letters of appointment and Executive Directors’ contracts are available to view at the Company’s registered oce. Mr Hubbard’s reappointment letter dated 23 January 2020 stated that his appointment would be for a period of three years commencing on the conclusion of the 2020 AGM. The AGM was held on 9 July 2020. Mr Owen, as Chair designate, signed a new letter of appointment dated 27 February 2023 which will take eect from the conclusion of the AGM on 6 July 2023. ADDITIONAL INFORMATION 209 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED Committee advisers During the year, PwC LLP acted as independent adviser to the Committee. PwC LLP was appointed by the Committee in 2018 following a selection process. PwC LLP is a founding member of the Remuneration Consultants Group and voluntarily operates under the Code of Conduct in relation to Executive remuneration consulting in the UK. The Committee is satisﬁed that the PwC LLP engagement partner and team, which provide remuneration advice to the Committee, do not have connections with the Group that may impair their objectivity and independence. The fees charged by PwC LLP for the provision of independent advice to the Committee during the year were £113,605 (based on hourly rates). PwC LLP provided no other services during the ﬁnancial year. Voting at the Company’s AGMs The table below sets out the results of the most recent shareholder votes on the Policy Report and the advisory vote on the 2021/22 Annual Report on Remuneration at the 2022 AGM on 21 July 2022. The Committee views this level of shareholder support as a strong endorsement of the Company’s Policy and its implementation. Percentage of votes cast Number of votes cast For and Discretion Against For and Discretion Against Withheld 1 Policy Report (2020 AGM) 99.54 0.46 116,307,019 539,870 1,666 Annual Report on Remuneration (2022 AGM) 98.55 1.45 144,279,654 2,123,283 4,663 1. A withheld vote is not a vote in law and is not counted in the calculation of the proportion of votes cast for and against a resolution. ADDITIONAL INFORMATION CONTINUED Share based awards and dilution The Company’s share schemes are funded through a combination of shares purchased in the market and new-issue shares, as appropriate. The Company monitors the number of shares issued under these schemes and their impact on dilution limits. The Company’s usage of shares compared to the relevant dilution limits set by the Investment Association in respect of all-share plans (10% in any rolling ten-year period) and Executive share plans (5% in any rolling ten-year period) as at 31 March 2023 is detailed below. As of 31 March 2023, around 2.3% and 2.0% shares have been, or may be, issued to settle awards made in the previous ten years in connection with all-share schemes and executive share schemes respectively. Awards that are made but then lapse or are forfeited are excluded from the calculations. ALL-SHARE PLANS EXECUTIVE SHARE PLANS LIMIT 10% LIMIT 5% ACTUAL 2.3% ACTUAL 2% Outstanding LTIP awards Details of current awards outstanding to Graham Clemett and Dave Benson are detailed below. Executive Director At 1 April 2022 Performance 2 Lapsed during the year Performance Vested during the year Performance At 31 March 2023 Performance Graham Clemett 18/06/2019 71,814 71,814 – – 18/06/2020 139,638 – – 139,638 24/06/2021 117,043 – – 117,043 24/06/2022 – – – 165,350 Dave Benson 18/06/2020 96,089 – – 96,089 24/06/2021 80,541 – – 80,541 24/06/2022 – – – 113,789 1. Awards will vest subject to the satisfaction of performance conditions detailed on page 207 over the three-year performance period. 2. LTIP awards made to the Executive Directors. In June 2020, 2021 and 2022 awards were in respect of 200% of salary based on a share price at date of award of £7.0767, £8.6117 and £6.2800 respectively. The 2020 LTIP awards vested at 50%. 210 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED Share options The following table shows, for the Directors who served during the year, the interests in outstanding awards under the HMRC-approved Savings Related Share Option Plan and SIP Awards. Executive Director At 01/04/2022 Granted during the year Lapsed during the year Vested in year At 31/03/2023 Exercise price Normal exercise date From To Graham Clemett 107 – – – 107 18.09.18 228 – – – 228 30.08.20 233 – – – 233 05.09.22 235 – – 235 29.09.24 3,389 – – – 3,389 £5.31 01.09.23 01.03.24 Dave Benson 5,649 – – – 5,649 £5.31 01.09.25 01.03.26 235 – – – 235 29.09.24 1. Mr Clemett was granted awards under the Share Incentive Plan on 18 September 2015 (107); 30 August 2017 (228); 5 September 2019 (233) and 29 September 2021 (235). 2. Mr Benson was granted an awards under the Share Incentive Plan on 29 September 2021 (235). There have been no changes in Directors’ interests over options in the period between the balance sheet date and 6 June 2023. The Directors’ Remuneration Report has been approved by the Board of Workspace Group PLC. By order of the Board Lesley-Ann Nash Chair of the Remuneration Committee 6 June 2023 ADDITIONAL INFORMATION CONTINUED 211 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED The Directors present their report on the aairs of the Group together with the audited ﬁnancial statements for the year ended 31 March 2023. Workspace Group PLC is incorporated in the UK and registered as a public limited company in England and Wales with company number 02041612 and registered oce at Canterbury Court, Kennington Park, 1-3 Brixton Road, London SW9 6DE. It is listed on the main market of the London Stock Exchange. It is the ultimate holding company of the Group, a full list of its subsidiaries is set out in note 27 to the ﬁnancial statements set out on pages 249 and 250. Where reference is made in this Directors’ Report to other sections of the Annual Report, those sections are incorporated by reference into this Directors’ Report. Certain disclosures required to be contained in the Directors’ Report have been incorporated into the Strategic Report as set out in ‘Other information’ below. Dividends An interim dividend of 8.4 pence was paid in February 2023 (2022: 7.0 pence) and the Board is recommending the payment of a ﬁnal dividend of 17.4 pence (2022: 14.5 pence) per share to be paid on 4 August 2023 to shareholders whose names are on the Register of Members at the close of business on 7 July 2023. This makes a total dividend of 25.8 pence (2022: 21.5 pence) for the year. Disclosure of information to auditors The Directors who held oce at the date of approval of this Directors’ Report conﬁrm that, so far as they are each aware, there is no relevant information of which the Company’s auditor is unaware; and each Director has taken all the steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Company’s auditor is aware of that information. Directors’ indemnities Under the Company’s Articles of Association the Company may, to the extent permitted by law, indemnify any Director, Secretary or other Ocer of the Company against any liability and the Company may also purchase and maintain insurance against such liability. The Board considers that the provision of such indemniﬁcation is in keeping with current market practice and the Board believes that it is in the best interest of the Company to provide such indemnities in order to attract and to retain high-calibre Directors and Ocers. The Company purchased and maintained Directors’ and Ocers’ liability insurance during the year under review and at the date of approval of the Directors’ Report. Qualifying third-party indemnity provisions (as deﬁned by Section 234 of the Companies Act 2006) were in force during the period and these provisions remain in force in relation to certain losses and liabilities which the Directors may incur to third parties in the course of acting as Directors or employees of the Company or of any associated company. Employment policies Workspace recognises that a diversity of skills and experiences in our workforce will provide a competitive advantage. The Company has various employment policies, including in relation to recruitment, diversity & inclusion, health & safety and wellbeing. We monitor these practices to ensure that they are fair and objective. This includes giving full and fair consideration to applications from prospective employees who are disabled, having regard to their aptitudes and abilities, and not discriminating against employees under any circumstances (including in relation to applications, training, career development and promotion) on the grounds of any disability. In the event that an employee, worker or contractor becomes disabled in the course of their employment or engagement, Workspace aims to ensure that reasonable steps are taken to accommodate their disability by making reasonable adjustments to their existing employment or engagement. Further detail on our employment policies and how we invest in our workforce can be found on pages 50 to 53 and 149. Details of how we reward our employees can be found on pages 181 and 198 and in notes 23 and 24 to the ﬁnancial statements. Share capital As at 31 March 2023, the Company’s issued share capital comprised a single class of 191,638,357 ordinary shares of £1.00 each. Details of the Company’s issued share capital are set out on page 246. Restrictions on transfer of shares There are no restrictions on the transfer of ordinary shares in the Company other than restrictions that are imposed by law or regulation (for example, insider trading laws). In addition, pursuant to the Company’s Dealing Code, Directors and certain employees of the Group require the approval of the Company to deal in ordinary shares of the Company. The Company is not aware of any agreements between shareholders that may result in restrictions on the transfer of securities. 212 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REPORT OF THE DIRECTORS Substantial shareholdings in the Company As at 31 March 2023 and 15 May 2023, the following interests in voting rights over the issued share capital of the Company had been notiﬁed: Shareholder 31 March 2023 15 May 2023 Number of shares Percentage held Number of shares Percentage held The London & Amsterdam Trust Company Limited 53,749,281 28.05% 53,749,281 28.05% BlackRock, Inc. 23,204,769 12.11% 22,449,889 11.72% Janus Henderson Investors 10,933,585 5.71% 11,004,298 5.74% Columbia Threadneedle Investments 9,246,497 4.82% 9,410,346 4.91% The Vanguard Group Inc 7,258,575 3.78% 7,291,439 3.80% Legal & General Investment Management Ltd 5,846,861 3.05% 5,496,379 2.87% Articles of Association The following description summarises certain provisions of the Company’s Articles of Association and applicable English law concerning companies. Any amendment to the Articles of Association of the company may be made in accordance with the provisions of the Companies Act 2006, by way of special resolution. Directors Unless otherwise determined by ordinary resolution of the Company, the Board shall be comprised of not less than two or more than ten Directors. The Board may exercise all powers of the Company, subject to the Company’s Articles of Association, the Companies Act 2006 and other applicable legislation. Directors may be elected by the members in a general meeting or appointed by the Board. The Company’s Articles of Association require any new Directors to stand for election at the next AGM following their appointment. The Articles of Association also require each Director to stand for re-election every three years following their election. However, in accordance with the Code and the Company’s current practice, all continuing Directors will oer themselves for election or re-election (as applicable) at the AGM on 6 July 2023. In addition to any power of removal conferred by the Companies Act 2006, the Company may by ordinary resolution remove any Director before the expiry of their period of oce. Voting and other rights Subject to the provisions of the Companies Act 2006, to any special terms on which shares may have been issued or to any suspension or abrogation of voting rights pursuant to the Articles of Association, every member who is present in person shall have one vote on a show of hands or, on a poll, one vote for each share of which they are a holder. The Company is not aware of any agreements between shareholders that may result in restrictions on voting rights. The Company may, by ordinary resolution, declare dividends but no dividend shall exceed the amount recommended by the Board. Subject to the provisions of the Companies Act 2006, the Board may also declare and pay such interim dividends as appears to the Board to be justiﬁed by the proﬁts of the Company available for distribution. Except as otherwise provided by the rights attached to shares, all dividends shall be paid to shareholders according to the amounts paid up on the shares on which the dividend is paid. Subject to the terms of allotment of shares, the Board may only make calls on shareholders in respect of any amounts unpaid on the shares held by them. All shares are fully paid. Purchase of own shares and issuing shares Under the Company’s Articles of Association, the Company may purchase any of its own shares. The Company was granted authority at the 2022 Annual General Meeting to make market purchases of its own ordinary shares. This authority will expire at the conclusion of the 2023 Annual General Meeting and a resolution will be proposed to renew this authority. No ordinary shares were purchased under this authority during the year. The Company was granted authority at the 2022 Annual General Meeting to allot and/or grant rights to subscribe for, or convert securities into, shares in the Company up to an aggregate nominal amount as set out in the Notice of Annual General Meeting 2022. This authority will expire at the conclusion of the 2023 Annual General Meeting and a resolution will be proposed to renew this authority. Signiﬁcant agreements on change of control The Group’s borrowing facilities and other ﬁnancial instruments (details of which can be found in note 16 to the ﬁnancial statements) are agreements that could allow counterparties to terminate or to alter those arrangements in the event of a change of control of the Company. Compensation for loss of oce in the event of a takeover There are no agreements in place between the Company and its employees or Directors for compensation for loss of oce or employment that occur because of a takeover bid. 213 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REPORT OF THE DIRECTORS CONTINUED Employee Share Trusts The Company operates an Employee Share Ownership Trust (‘ESOT’) and a trust for the Share Incentive Plan (‘SIP’). The trusts are used to purchase Company shares in the market from time to time and hold them for the beneﬁt of employees, including for satisfying awards that vest under the Company’s various share incentive plans. The ESOT also holds some Company shares in particular ringfenced accounts for speciﬁc employees who have options over such shares vest under the Company’s share incentive plans but have not yet exercised those options. The trustee of the ESOT may vote the shares it holds in the Company at its discretion, but where it holds any shares in a ringfenced account for particular employees it will seek their instructions on how it exercises the votes attached to those shares. The trustee of the SIP trust does not vote the rights attached to shares held in the trust. Information required under LR9.8.4R Interest capitalised Note 10 to the ﬁnancial statements Details of long-term incentive schemes Remuneration Report, pages 187 and 188, 191 and 205 There is no further information required to be disclosed under LR9.8.4R. Other information Other information relevant to the Directors’ Report may be found in the following sections of the Annual Report: Information Location in Annual Report Corporate governance statement, prepared in accordance with rule 7.2 of the Financial Conduct Authority’s Disclosure Guidance and Transparency Rules Corporate Governance Report, pages 106 to 215 Principal risks and uncertainties, pages 69 to 76 Culture, purpose, values and strategy Strategic Report, pages 14 and 32 to 35 Corporate Governance Report, pages 118 to 120 Directors Directors’ biographies, pages 115 and 116 Our Board, page 113 Directors’ training and development Corporate Governance Report, page 140 Diversity & inclusion Corporate Governance Report, pages 148 to 154 Employee share schemes Note 23 to the ﬁnancial statements Engagement with employees Strategic Report, page 21 Stakeholder engagement, page 122 Section 172(1) Statement, page 125 Engagement with suppliers, customers and others Strategic Report, pages 16 to 25 Stakeholder engagement, pages 121 to 123 Section 172(1) Statement, page 125 Financial risk management Note 18 to the ﬁnancial statements Principal risks and uncertainties, pages 69 to 76 Future developments Chair’s Letter, page 11 CEO Letter, page 13 Our business model, pages 64 to 68 Our strategy, pages 32 to 35 Greenhouse gas emissions and energy consumption GHG/SECR Emissions, page 101 Political donations Compliance Statements, page 91 Post balance sheet events Note 29 to the ﬁnancial statements Principal risks and uncertainties Principal risks and uncertainties, pages 69 to 76 Research and development The Company does not undertake research and development activities By Order of the Board Carmelina Carfora Company Secretary 6 June 2023 214 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information REPORT OF THE DIRECTORS CONTINUED The Directors are responsible for preparing the Annual Report and the Group and parent Company ﬁnancial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Group and parent Company ﬁnancial statements for each ﬁnancial year. Under that law they are required to prepare the Group ﬁnancial statements in accordance with UK-adopted international accounting standards and applicable law and have elected to prepare the parent Company ﬁnancial statements in accordance with UK accounting standards and applicable law, including FRS 101 Reduced Disclosure Framework. Under company law the directors must not approve the ﬁnancial statements unless they are satisﬁed that they give a true and fair view of the state of aairs of the Group and parent Company and of the Group’s proﬁt or loss for that period. In preparing each of the Group and parent Company ﬁnancial statements, the Directors are required to: – select suitable accounting policies and then apply them consistently; – make judgements and estimates that are reasonable, relevant, reliable and prudent; – for the Group ﬁnancial statements, state whether they have been prepared in accordance with UK-adopted international accounting standards; – for the parent Company ﬁnancial statements, state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the parent Company ﬁnancial statements; – assess the Group and parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and – use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations or have no realistic alternative but to do so. The directors are responsible for keeping adequate accounting records that are sucient to show and explain the parent Company’s transactions and disclose with reasonable accuracy at any time the ﬁnancial position of the parent Company and enable them to ensure that its ﬁnancial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of ﬁnancial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report, Directors’ Report, Directors’ Remuneration Report and Corporate Governance Statement that complies with that law and those regulations. The directors are responsible for the maintenance and integrity of the corporate and ﬁnancial information included on the company’s website. Legislation in the UK governing the preparation and dissemination of ﬁnancial statements may dier from legislation in other jurisdictions. In accordance with Disclosure Guidance and Transparency Rule 4.1.14R, the ﬁnancial statements will form part of the annual ﬁnancial report prepared using the single electronic reporting format under the TD ESEF Regulation. The auditor’s report on these ﬁnancial statements provides no assurance over the ESEF format. Responsibility statement of the directors in respect of the annual ﬁnancial report We conﬁrm that to the best of our knowledge: – the ﬁnancial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, ﬁnancial position and proﬁt or loss of the Company and the undertakings included in the consolidation taken as a whole; – the strategic report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and – we consider the Annual Report and Accounts, taken as a whole, is fair, balanced and unstandable and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy. Signed on behalf of the Board on 6 June 2023 by: Graham Clemett Chief Executive Ocer Dave Benson Chief Financial Ocer 215 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS 1. OUR OPINION IS UNMODIFIED We have audited the ﬁnancial statements of Workspace Group PLC (“the Company”) for the year ended 31 March 2023 which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated and Parent Company Balance Sheet, the Consolidated and Parent Company Statement of Changes in Equity, the Consolidated Statement of Cash Flows, and the related notes, including the accounting policies on pages 229 to 231 for the Group and Note A for the Parent Company ﬁnancial statements. In our opinion: – the ﬁnancial statements give a true and fair view of the state of the Group’s and of the Parent Company’s aairs as at 31 March 2023 and of the Group’s loss for the year then ended; – the Group ﬁnancial statements have been properly prepared in accordance with UK-adopted international accounting standards; – the Parent Company ﬁnancial statements have been properly prepared in accordance with UK accounting standards, including FRS 101 Reduced Disclosure Framework; and – the ﬁnancial statements have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We believe that the audit evidence we have obtained is a sucient and appropriate basis for our opinion. Our audit opinion is consistent with our report to the audit committee. We were ﬁrst appointed as auditor by the shareholders on 14 July 2017. The period of total uninterrupted engagement is for the 6 ﬁnancial years ended 31 March 2023. We have fulﬁlled our ethical responsibilities under, and we remain independent of the Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities. No non-audit services prohibited by that standard were provided. Overview Materiality: Group ﬁnancial statements as a whole £28.0m (2022: £24.5m) 0.99% (2022: 0.98%) of Total Assets Coverage 100% (2022: 100%) of Total Group’s Assets Key audit matters vs 2022 Recurring risks Group: Valuation of Investment Property Parent Company: Recoverability of Investments in subsidiaries 2. KEY AUDIT MATTERS: OUR ASSESSMENT OF RISKS OF MATERIAL MISSTATEMENT Key audit matters are those matters that, in our professional judgement, were of most signiﬁcance in the audit of the ﬁnancial statements and include the most signiﬁcant assessed risks of material misstatement (whether or not due to fraud) identiﬁed by us, including those which had the greatest eect on: the overall audit strategy; the allocation of resources in the audit; and directing the eorts of the engagement team. We summarise below the key audit matters (unchanged from 2022), in decreasing order of audit signiﬁcance, in arriving at our audit opinion above, together with our key audit procedures to address those matters and, as required for public interest entities, our results from those procedures. These matters were addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the ﬁnancial statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on these matters. 216 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WORKSPACE GROUP PLC 2. KEY AUDIT MATTERS: OUR ASSESSMENT OF RISKS OF MATERIAL MISSTATEMENT CONTINUED The risk Our response Valuation of investment property (Group) Investment properties: (£2,643.3 million; 2022: £2,366.7 million) Assets Held for Sale: (£123.0m; 2022: £65.9m) Refer to page 159 (Audit Committee Report), page 229 (accounting policy) and page 236 (ﬁnancial disclosures). Subjective valuation Investment properties (incorporating Assets held for sale) is the largest balance in the ﬁnancial statements and is held at fair value in the Group’s ﬁnancial statements. The portfolio is externally valued by a qualiﬁed independent valuer. Each property is unique and determining fair value requires signiﬁcant judgement and estimation, in particular over the key assumptions of the estimated rental value and the yield. The key assumptions will be impacted by a number of factors including location, quality and condition of the building and occupancy. Valuing investment properties either under development or with development potential can be further complicated by the need to assess the likelihood of planning consent, an allowance for developer’s proﬁt and forecast of construction costs. Whilst comparable market transactions can provide valuation evidence, the ﬂexible oce sector is still maturing and the unique nature of each property means that a key factor in the property valuations are the assumptions made by the external valuer. Furthermore, each property valuation includes source data provided by management and relied on as accurate by the external valuer, primarily the database of tenancy contracts. For some properties, the relatively short average lease length in the Workspace portfolio and reduced market comparable information for such ﬂexible oce space means the external valuer is more reliant on tenancy data to support their market rent assumptions than may be the case in other property sectors. Therefore the valuation is more sensitive to the source data than may be the case for more mature sectors with longer leases. The eect of these matters is that, as part of our risk assessment, we determined that the valuation of investment properties has a high degree of estimation uncertainty, with a potential range of reasonable outcomes greater than our materiality for the ﬁnancial statements as a whole, and possibly many times that amount. We performed the tests below rather than seeking to rely on any of the Group’s controls because the nature of the balance meant that detailed testing is inherently the most eective means of obtaining audit evidence. Our procedures, assisted by our own property valuation specialist, included: Assessing valuer’s credentials: We assessed the external valuers objectivity, independence, professional qualiﬁcations and experience through research, discussions with them and reading their valuation report. Methodology choice: We critically assessed the methodology used by the external valuer by using our own property valuation specialist to assist us in checking whether the valuation report is in accordance with the RICS Valuation Professional Standards ‘the Red Book’, IFRS and that the valuation methodology adopted is appropriate by reference to acceptable valuation practice. Benchmarking assumptions: We held discussions with the external valuer and challenged their assumptions used in valuing the investment properties including the market evidence used by them to support their assumptions. For a sample of properties selected using various criteria including analysis of the value of a property as well as correlation with movements in market rent, we evaluated and challenged the appropriateness of the key assumptions upon which these valuations were based, including those relating to forecast market rents and yields, by making a comparison to our own understanding of the market and to industry benchmarks. Retrospective review: We performed a retrospective review by comparing disposals during the year to the latest valuation performed and challenged management on material dierences. Test of detail: We compared a sample of key inputs used in the valuations, such as rental income and lease length, to lease contracts. For redevelopment properties, we assessed the future construction costs and agreed a sample of contractual costs to contracts. We assessed the completeness of the year end tenancy schedule and compared this to the post year end schedule. We challenged management on any material dierences in leases. We assessed the appropriateness of adjustments made by the external valuer to the tenancy data provided by management. For a sample of adjustments, we challenged the external valuer and assessed whether the adjustments were reasonable. Our results We found the resulting estimate of valuation of investment properties to be acceptable (2022: acceptable). 217 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WORKSPACE GROUP PLC CONTINUED The risk Our response Recoverability of Parent Company’s investments in subsidiaries (£1,313.2 million; 2022: £929.8 million) Refer to page 159 (Audit Committee Report), page 252 (accounting policy) and page 253 (ﬁnancial disclosures). Low risk, high value: The carrying amount of the Parent Company’s investments in subsidiaries represents 70.8% (2022: 66.6%) of the Company’s total assets. Their recoverability is not at a high risk of signiﬁcant misstatement or subject to signiﬁcant judgement. However, due to their materiality in the context of the Parent Company ﬁnancial statements, this is considered to be the area that had the greatest eect on our overall Parent Company audit. We performed the tests below rather than seeking to rely on any of the Company’s controls because the nature of the balance is such that we would expect to obtain audit evidence primarily through the detailed procedures described. Our procedures included: Test of detail: We compared the carrying amount of 100% of investments with the relevant subsidiaries’ prior year ﬁnancial statements and current year draft balance sheets to identify whether their net assets, being an approximation of their recoverable amount, were in excess of their carrying amount. Our results We found the Company’s conclusion that there is no impairment of its investments in subsidiaries to be acceptable (2022: acceptable). 218 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WORKSPACE GROUP PLC CONTINUED 3. OUR APPLICATION OF MATERIALITY AND AN OVERVIEW OF THE SCOPE OF OUR AUDIT Materiality for the Group ﬁnancial statements as a whole was set at £28.0 million (2022: £24.5 million), determined with reference to a benchmark of total Group Assets, of which it represents 0.99% (2022: 0.98%). Materiality for the Parent Company ﬁnancial statements as a whole was set at £18.50 million (2022: £14.03 million), determined with reference to a benchmark of Company total assets, of which it represents 1% (2022: 1%). In addition, we applied materiality of £2.9 million (2022: £2.45 million) to certain components of adjusted trading proﬁt after interest which comprises net rental income, administrative expenses and net ﬁnance costs for which we believe misstatements of lesser amounts than materiality for the ﬁnancial statements as a whole could be reasonably expected to inﬂuence the Company’s members’ assessment of the ﬁnancial performance of the Group. In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to a material amount across the ﬁnancial statements as a whole. Performance materiality was set at 75% (2022: 75%) of materiality for the ﬁnancial statements as a whole, which equates to £21.0 million (2022: £18.4 million) for the Group and £13.8 million (2022: £10.52 million) for the Parent Company. We applied this percentage in our determination of performance materiality because we did not identify any factors indicating an elevated level of risk. We agreed to report to the audit committee any corrected or uncorrected identiﬁed misstatements exceeding £1.40 million (2022: £1.23 million) for the Group and exceeding £0.93 million (2022: £0.70 million) for the Parent Company; or £0.15 million (2022: £0.12 million) for misstatements relating to accounts to which the lower materiality was applied, in addition to other identiﬁed misstatements that warranted reporting on qualitative grounds. The Group team performed the audit of the Group as if it was a single aggregated set of ﬁnancial information. The Group team performed the Parent Company audit. The audit was performed using the materiality levels set out above. The scope of the audit work performed was fully substantive as we did not rely upon the Group’s internal control over ﬁnancial reporting. Total Group assets and Materiality TOTAL GROUP ASSETS £2,839.1m (2022: £2,511.9m) GROUP MATERIALITY £28.0m (2022: £24.5m) £28.0m Whole ﬁnancial statements materiality (2022: £24.5m) Total Group assets £21.0m Whole ﬁnancial statements performance materiality (2022: £18.4m) £2.9m Materiality applied to Group components of adjusted trading proﬁt after interest. (2022: £2.45m) £1.40m Misstatements reported to the audit committee (2022: £1.23m) Group materiality 219 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WORKSPACE GROUP PLC CONTINUED 4. THE IMPACT OF CLIMATE CHANGE ON OUR AUDIT In planning our audit we have considered the potential impacts of climate change on the Group’s business and its ﬁnancial statements. Climate change impacts the Group in a number of ways: – through its own operations (including potential reputational risk associated with the Group’s delivery of its climate related initiatives), – through its portfolio of investment properties and the greater emphasis on climate related narrative and disclosure in the Annual Report. The Group’s main potential exposure to climate change in the ﬁnancial statements is primarily through its investment properties as the key valuation assumptions and estimates may be impacted by climate risks. As part of our audit we have made enquiries of Directors and the Group’s Corporate Sustainability team to understand the extent of the potential impact of climate change risk on the Group’s ﬁnancial statements and the Group’s preparedness for this. We have performed a risk assessment of how the impact of climate change may aect the ﬁnancial statements and our audit, in particular with respect to the valuation of investment properties. Given that these valuations are largely based on comparable market evidence we assessed that the impact of climate change was not a signiﬁcant risk for our audit nor does it constitute a key audit matter. We held discussions with our own climate change professionals to challenge our risk assessment. We have also read the Group’s disclosure of climate related information in the front half of the Annual Report as set out on pages 92 to 103, and considered consistency with the ﬁnancial statements and our audit knowledge. We have not been engaged to provide assurance over the accuracy of these disclosures. 5. GOING CONCERN The directors have prepared the ﬁnancial statements on the going concern basis as they do not intend to liquidate the Group or the Company or to cease their operations, and as they have concluded that the Group’s and the Company’s ﬁnancial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast signiﬁcant doubt over their ability to continue as a going concern for at least a year from the date of approval of the ﬁnancial statements (“the going concern period”). We used our knowledge of the Group, its industry, and the general economic environment to identify the inherent risks to its business model and analysed how those risks might aect the Group’s and Company’s ﬁnancial resources or ability to continue operations over the going concern period. The risks that we considered most likely to adversely aect the Group’s and Company’s available ﬁnancial resources, liquidity and covenant compliance over this period were: – A fall in customer demand as a result of economic downturn over the next two years and reduction in the like for like occupancy over the period of March 2024, with a gradual recovery by March 2028; – New lettings at below the average price per sq. ft. of vacating customers; – Higher levels of counterparty risk, with increased levels of bad debt; – Higher level of cost inﬂation. We considered whether these risks could plausibly aect the liquidity, covenant compliance or availability of borrowings and debt reﬁnancing in the going concern period by assessing the degree of downside assumption that, individually and collectively, could result in a liquidity issue, taking into account the Group’s current and projected cash and facilities (a reverse stress test). We assessed the completeness of the going concern disclosure. Our conclusions based on this work: – we consider that the directors’ use of the going concern basis of accounting in the preparation of the ﬁnancial statements is appropriate; – we have not identiﬁed, and concur with the directors’ assessment that there is not, a material uncertainty related to events or conditions that, individually or collectively, may cast signiﬁcant doubt on the Group’s or Company’s ability to continue as a going concern for the going concern period; – we have nothing material to add or draw attention to in relation to the directors’ statement in the basis of preparation note in the ﬁnancial statements on the use of the going concern basis of accounting with no material uncertainties that may cast signiﬁcant doubt over the Group and Company’s use of that basis for the going concern period, and we found the going concern disclosure in the basis of preparation note to be acceptable; and – the same statement is materially consistent with the ﬁnancial statements and our audit knowledge. However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Group or the Company will continue in operation. 220 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WORKSPACE GROUP PLC CONTINUED 6. FRAUD AND BREACHES OF LAWS AND REGULATIONS – ABILITY TO DETECT Identifying and responding to risks of material misstatement due to fraud To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included: – Enquiring of directors and inspection of policy documentation as to the Group’s high-level policies and procedures to prevent and detect fraud, including the Group’s channel for “whistleblowing”, as well as whether they have knowledge of any actual, suspected or alleged fraud. – Reading Board minutes, Executive Committee minutes and attending Group audit committee meetings. – Considering remuneration incentive schemes and performance targets for management, including total shareholder return, total property return compared to IPD and growth in trading proﬁt after interest targets for management remuneration. We communicated identiﬁed fraud risks throughout the audit team and remained alert to any indications of fraud throughout the audit. As required by auditing standards, and taking into account possible pressures to meet proﬁt targets and our overall knowledge of the control environment, we perform procedures to address the risk of management override of controls, in particular the risk that Group management may be in a position to make inappropriate accounting entries and the risk of bias in accounting estimates and judgements such as signiﬁcant assumptions used in the valuation of investment properties, including estimated rental values and market based yields. On this audit we do not believe there is a fraud risk related to revenue recognition because of the relative simplicity of revenue streams. We did not identify any additional fraud risks. We performed procedures including: – Identifying journal entries and other adjustments to test based on risk criteria and comparing the identiﬁed entries to supporting documentation. These included those with unusual account combinations. – Assessing whether the judgements made in making accounting estimates are indicative of a potential bias. Identifying and responding to risks of material misstatement due to non-compliance with laws and regulations We identiﬁed areas of laws and regulations that could reasonably be expected to have a material eect on the ﬁnancial statements from our general commercial and sector experience, through discussion with the directors and other management (as required by auditing standards), and discussed with the directors the policies and procedures regarding compliance with laws and regulations. We communicated identiﬁed laws and regulations throughout our team and remained alert to any indications of noncompliance throughout the audit. The potential eect of these laws and regulations on the ﬁnancial statements varies considerably. Firstly, the Group is subject to laws and regulations that directly aect the ﬁnancial statements including ﬁnancial reporting legislation (including related companies legislation), distributable proﬁts legislation and taxation legislation (including conditions to maintain UK Real Estate Investment Trust (“REIT”)) status in accordance with the REIT regime) and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related ﬁnancial statement items. Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance could have a material eect on amounts or disclosures in the ﬁnancial statements, for instance through the imposition of ﬁnes or litigation. We identiﬁed the following areas as those most likely to have such an eect: landlord and tenant legislation, property laws and building legislation, environmental and sustainability legislation and certain aspects of company legislation recognising the ﬁnancial nature of the Group’s activities and its legal form. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of the directors and other management and inspection of regulatory and legal correspondence, if any. Therefore if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach. Context of the ability of the audit to detect fraud or breaches of law or regulation Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the ﬁnancial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed noncompliance with laws and regulations is from the events and transactions reﬂected in the ﬁnancial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remained a higher risk of non-detection of fraud, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect noncompliance with all laws and regulations. 221 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WORKSPACE GROUP PLC CONTINUED 7. WE HAVE NOTHING TO REPORT ON THE OTHER INFORMATION IN THE ANNUAL REPORT AND ACCOUNTS The directors are responsible for the other information presented in the Annual Report together with the ﬁnancial statements. Our opinion on the ﬁnancial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether, based on our ﬁnancial statements audit work, the information therein is materially misstated or inconsistent with the ﬁnancial statements or our audit knowledge. Based solely on that work we have not identiﬁed material misstatements in the other information. Strategic report and directors’ report Based solely on our work on the other information: – we have not identiﬁed material misstatements in the strategic report and the directors’ report; – in our opinion the information given in those reports for the ﬁnancial year is consistent with the ﬁnancial statements; and – in our opinion those reports have been prepared in accordance with the Companies Act 2006. Directors’ remuneration report In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006. Disclosures of emerging and principal risks and longer-term viability We are required to perform procedures to identify whether there is a material inconsistency between the directors’ disclosures in respect of emerging and principal risks and the viability statement, and the ﬁnancial statements and our audit knowledge. Based on those procedures, we have nothing material to add or draw attention to in relation to: – the directors’ conﬁrmation within the viability statement on page 87 that they have carried out a robust assessment of the emerging and principal risks facing the Group, including those that would threaten its business model, future performance, solvency and liquidity; – the Principal Risks and Uncertainties disclosures describing these risks and how emerging risks are identiﬁed, and explaining how they are being managed and mitigated; and – the directors’ explanation in the viability statement of how they have assessed the prospects of the Group, over what period they have done so and why they considered that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualiﬁcations or assumptions. We are also required to review the viability statement, set out on page 87 under the Listing Rules. Based on the above procedures, we have concluded that the above disclosures are materially consistent with the ﬁnancial statements and our audit knowledge. Our work is limited to assessing these matters in the context of only the knowledge acquired during our ﬁnancial statements audit. As we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the absence of anything to report on these statements is not a guarantee as to the Group’s and Company’s longer-term viability. Corporate governance disclosures We are required to perform procedures to identify whether there is a material inconsistency between the directors’ corporate governance disclosures and the ﬁnancial statements and our audit knowledge. Based on those procedures, we have concluded that each of the following is materially consistent with the ﬁnancial statements and our audit knowledge: – the directors’ statement that they consider that the annual report and ﬁnancial statements taken as a whole is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy; – the section of the annual report describing the work of the Audit Committee, including the signiﬁcant issues that the audit committee considered in relation to the ﬁnancial statements, and how these issues were addressed; and – the section of the annual report that describes the review of the eectiveness of the Group’s risk management and internal control systems. We are required to review the part of the Corporate Governance Statement relating to the Group’s compliance with the provisions of the UK Corporate Governance Code speciﬁed by the Listing Rules for our review. We have nothing to report in this respect. 8. WE HAVE NOTHING TO REPORT ON THE OTHER MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION Under the Companies Act 2006, we are required to report to you if, in our opinion: – adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or – the Parent Company ﬁnancial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or – certain disclosures of directors’ remuneration speciﬁed by law are not made; or – we have not received all the information and explanations we require for our audit. We have nothing to report in these respects. 222 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WORKSPACE GROUP PLC CONTINUED 9. RESPECTIVE RESPONSIBILITIES Directors’ responsibilities As explained more fully in their statement set out on page 215, the directors are responsible for: the preparation of the ﬁnancial statements including being satisﬁed that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of ﬁnancial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and Parent 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 they either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities Our objectives are to obtain reasonable assurance about whether the ﬁnancial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to inﬂuence the economic decisions of users taken on the basis of the ﬁnancial statements. A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities. The Company is required to include these ﬁnancial statements in an annual ﬁnancial report prepared using the single electronic reporting format speciﬁed in the TD ESEF Regulation. This auditor’s report provides no assurance over whether the annual ﬁnancial report has been prepared in accordance with that format. 10. THE PURPOSE OF OUR AUDIT WORK AND TO WHOM WE OWE OUR RESPONSIBILITIES This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed. Bano Sheikh (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants 15 Canada Square London, E14 5GL 6 June 2023 223 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WORKSPACE GROUP PLC CONTINUED CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH 2023 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2023 Notes 2023 £m 2022 £m Revenue 1 17 4.2 132.9 Direct costs 1 1 (57 .6) (46.2) Net rental income 1 116.6 86. 7 Administrative expenses 2 (21.5) (19.3) Trading proﬁt 9 5 .1 6 7. 4 (Loss)/proﬁt on disposal of investment properties 3(a) (0.7) 7. 8 Other income 3(b) – 0.6 Other expenses 3(c) (3.8) – Change in fair value of investment properties 10 (88.0) 68.7 Impairment of assets held for sale 10 (5. 1) – Operating (loss)/proﬁt (2.5) 144.5 Finance costs 4 (34.4) (20.5) Exceptional ﬁnance costs 4 (0.6) – (Loss)/proﬁt before tax (37 .5) 124.0 Taxation 6 (0 .3) (0. 1) (Loss)/proﬁt for the ﬁnancial year after tax (37 .8) 123.9 Basic (loss)/earnings per share 8 (19.9p) 68.5p Diluted (loss)/earnings per share 8 (19 .9p) 68. 1p 1. Direct costs in 2023 includes impairment of receivables of £1. 1m (2022: £1.5m). See note 1 for additional information. Notes 2023 £m 2022 £m (Loss)/proﬁt for the ﬁnancial year (37 .8) 123.9 Other comprehensive income: Items that may be reclassiﬁed subsequently to proﬁt or loss: Change in fair value of other investments 0. 4 – Fair value of investments recycled to retained earnings – 2 .1 Cash ﬂow hedge – transfer to income statement – (0.3) Items that will not be reclassiﬁed subsequently to proﬁt or loss: Pension fund movement 24 0. 9 – Other comprehensive income in the year 1.3 1.8 Total comprehensive (loss)/income for the year (36.5) 125.7 The notes on pages 227 to 250 form part of these ﬁnancial statements. 224 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information CONSOLIDATED BALANCE SHEET AS AT 31 MARCH 2023 Notes 2023 £m 2022 £m Non-current assets Investment properties 10 2,643.3 2,366.7 Intangible assets 2.0 1.9 Property, plant and equipment 11 4.4 2.9 Other investments 12 2 .1 1 .7 Deferred tax 6 – 0.3 2,651.8 2,37 3.5 Current assets Trade and other receivables 13 45.8 23.5 Assets held for sale 123.0 65.9 Cash and cash equivalents 14 18.5 49.0 187 .3 138.4 Total assets 2,839. 1 2,511.9 Current liabilities Trade and other payables 15 (107 .8) (85.8) Borrowings 16(a) (49.8) – (157 .6) (85.8) Non-current liabilities Borrowings 16(a) (859. 1) (595.5) Lease obligations 17 (34.7) (31.0) (893.8) (626.5) Total liabilities (1,051.4) (712.3) Net assets 1,787.7 1, 799.6 Notes 2023 £m 2022 £m Shareholders’ equity Share capital 20 191.6 181. 1 Share premium 20 295.5 295.5 Investment in own shares 22 (9.9) (9.9) Other reserves 21 91.0 32.6 Retained earnings 1,219.5 1,300.3 Total shareholders’ equity 1,787.7 1, 799.6 The notes on pages 227 to 250 form part of these ﬁnancial statements. The ﬁnancial statements on pages 224 to 250 were approved and authorised for issue by the Board of Directors on 6 June 2023 and signed on its behalf by: Graham Clemett Dave Benson Director Director Company registration number – 02041612 225 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2023 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 MARCH 2023 Attributable to owners of the Parent Notes Share capital £m Share premium £m Investment in own shares £m Other reserves £m Retained earnings £m Total share- holders’ equity £m Balance at 31 March 2021 181. 1 295.5 (9.6) 33. 1 1,219.4 1,719.5 Proﬁt for the ﬁnancial year – – – – 123.9 123.9 Other comprehensive income for the year – – – – 1.8 1.8 Total comprehensive income – – – – 125. 7 125.7 Transactions with owners: Purchase of own shares 22 – – (0.3) – – (0.3) Dividends paid 7 – – – – (44.8) (44.8) Share based payments 23 – – – 1.6 – 1.6 Recycled OCI to retained earnings 21 – – – (2. 1) – (2. 1) Balance at 31 March 2022 181. 1 295.5 (9.9) 32.6 1,300 .3 1,7 99.6 Loss for the ﬁnancial year – – – – (3 7 .8) (3 7 .8) Other comprehensive income for the year – – – 0. 4 0.9 1.3 Total comprehensive income – – – 0.4 (36.9) (36.5) Transactions with owners: Shares issued 20 10.5 – – 56.6 – 6 7. 1 Dividends paid 7 – – – – (43.9) (43.9) Share based payments 23 – – – 1.4 – 1.4 Balance at 31 March 2023 191.6 295.5 (9.9) 91. 0 1,219.5 1,787.7 The notes on pages 227 to 250 form part of these ﬁnancial statements. Notes 2023 £m 2022 £m Cash ﬂows from operating activities Cash generated from operations 19 110.5 80.5 Interest paid (31.7) (22.6) Net cash inﬂow from operating activities 78.8 5 7. 9 Cash ﬂows from investing activities Purchase of investment properties (184.4) (88.4) Capital expenditure on investment properties (56.2) (29.8) Proceeds from disposal of investment properties (net of sale costs) 7. 1 117 .3 Proceeds from disposal of assets held for sale (net of sale costs) 41.4 – Purchase of intangible assets (0.8) (0.5) Purchase of property, plant and equipment (3. 1) (0.7) Other (expenses)/income (2.9) 4.5 Settlement of deﬁned beneﬁt pension scheme (1.3) – Proceeds from sale of investments 3(b)/12 – 6.8 Net cash (outﬂow)/inﬂow from investing activities (200 .2) 9.2 Cash ﬂows from ﬁnancing activities Finance costs for new/amended borrowing facilities (1.6) (1.3) Exceptional ﬁnance costs – (16.4) Settlement of derivative ﬁnancial instruments – 0.7 Repayment of bank borrowings and Private Placement Notes 16(g) (150.0) (17 3.5) Draw down of bank borrowings 16(g) 286. 0 25.0 Own shares purchase (net) – (0 .3) Dividends paid 7 (43.5) (43.3) Net cash inﬂow/(outﬂow) from ﬁnancing activities 90.9 (209. 1) Net decrease in cash and cash equivalents (30.5) (142.0) Cash and cash equivalents at start of year 14 49.0 191.0 Cash and cash equivalents at end of year 14 18.5 49.0 The notes on pages 227 to 250 form part of these ﬁnancial statements. 226 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2023 Workspace Group PLC (the ‘Company’) and its subsidiaries (together ‘the Group’) are engaged in property investment in the form of letting of high-quality business accommodation to businesses across London. The Company is a public limited company which is listed on the London Stock Exchange and is incorporated and domiciled in the UK. The registered number of the Company is 02041612. BASIS OF PREPARATION These ﬁnancial statements are presented in Sterling, which is the Company’s functional currency and the Group’s presentational currency , and have been prepared and approved by the Directors on a going concern basis, in accordance with United Kingdom adopted international accounting standards . The Company has elected to prepare its Parent Company ﬁnancial statements in accordance with FRS101; these are presented on pages 251 to 254. The Board is required to assess the appropriateness of applying the going concern basis in the preparation of the ﬁnancial statements. Macroeconomic and political issues, including the war in Ukraine, have heightened wider concerns around the UK economy meaning there is a continuing risk of an economic downturn. In this context, the Directors have fully considered the business activities and principal risks of the Company and Group. Further details of the principal risks can be found on pages 69 to 76. In preparing the assessment of going concern, the Board has reviewed a number of diered 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 oce spacomer 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. – Further increases in SONIA rates 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, sucient liquidity and compliance with loan cwings, 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 36% compared to the March 2023 Net Rental Income and a fall in the asset valuation of 42% compared to 31 March 2023 before these covenants are breached, assuming no mitigating actions are taken. As at 31 March 2023, the Company had signiﬁcant headroom with £150.0m of cash and undrawn facilities. The majority of the Group’s debt is long-term ﬁxed-rate committed facilities comprising a £300.0m green bond, £300.0m of private placement notes, and a £65.0m secured loan facility. Shorter-term liquidity and ﬂexibility is provided by ﬂoating-rate bank facilities which comprise £335.0m of sustainability-linked revolving credit facilities (RCFs), £2.0m overdraft facility and £50.0m of facilities put in place for the acquisition of McKay Securities (formerly McKay Securities PLC) which matures in September 2023. The RCF facilities comprise £135.0m due in April 2025 and £200.0m due in December 2025, with both facilities having the potential to extend by a further year. The £200.0m RCF also has the option to increase the facility amount by up to £100.0m, subject to lender consent. For the full period of assessment under the scenarios tested, the Group maintains sucient ed, the Group maintains sufficient headroom in its cash and loan facilities. Consequently, the Directors have a reasonable expectation that the Group and Company will have sucient funds to ce sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of the ﬁnancial statements and therefore the ﬁnancial statements have been prepared on a going concern basis. Consideration of climate change In preparing the ﬁnancial statements, the Directors have considered the impact of climate change, particularly in the context of the risks identiﬁed in the TCFD disclosure on pages 92 to 103 this year. There has been no material impact identiﬁed on the ﬁnancial reporting judgements and estimates. In particular, the Directors considered the impact of climate change in respect of the following areas: – The potential impact on the valuation of our investment properties due to transition risks; – Going concern and viability of the Group over the next three years; – The capital expenditure required to upgrade our assets EPC ratings and deliver our net zero targets. Whilst there is currently minimal medium-term impact expected from climate change, the Directors are aware of the ever-changing risks attached to climate change and will regularly assess these risks against judgements and estimates made in preparation or the Group’s ﬁnancial statements. 227 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information NEW ACCOUNTING STANDARDS, AMENDMENTS AND GUIDANCE a) During the year to 31 March 2023 the Group adopted the following accounting standards and guidance: IFRS Standards 2018-2020 Annual Improvements to IFRS Standards 2018-2020 IAS 37 (amended): Onerous Contracts Cost of Fulﬁlling a Contract IAS 16 (amended) Property, Plant and Equipment – Proceeds before Intended Use IFRS 3 (amended) Reference to the Conceptual Framework There was no material impact from the adoption of these accounting standard amendments on the ﬁnancial statements. b) The following accounting standards and guidance are not yet eective not yet effective but are not expected to have a signiﬁcant impact on the Group’s ﬁnancial statements or result in changes to presentation and disclosure only. They have not been adopted early by the Group: IAS 12 (amended) Deferred Tax related to Assets and Liabilities arising from a Single Transaction IAS 8 (amended) Accounting Policies, Changes in Accounting Estimates and Errors: Deﬁnition IAS 1 (amended) and IFRS Practice Statement 2 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements IFRS 17 Insurance Contracts IFRS 9 Comparative Information IAS 1 (amended) Classiﬁcation of Liabilities as Current or Non-Current; Non-Current Liabilities with Covenants; Deferral of EectEffective Date Amendment IFRS 16 (amended) Lease Liability in a Sale and Leaseback SIGNIFICANT JUDGEMENTS AND CRITICAL ESTIMATES The preparation of ﬁnancial statements in conformity with generally accepted accounting principles requires the use of estimates and judgements that aect the reportt affect the reported amounts of assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results ultimately may dier from those estimay differ from those estimates. The Group’s signiﬁcant accounting policies are stated below. Not all of these accounting policies require management to make subjective or complex judgements or signiﬁcant estimates. The following is intended to provide an understanding of the signiﬁcant estimates within the accounting policies that management consider critical because of the assumptions or estimation involved in their application and their impact on the consolidated ﬁnancial statements. Critical Estimate: Investment property valuation The Group uses the valuation performed by its independent valuer as the fair value of its investment properties. The valuation is based upon the key assumptions of estimated rental values and market-based yields. With regard to redevelopments and refurbishments, future development costs and an appropriate discount rate are also used. In determining fair value, the valuers make reference to market evidence and recent transaction prices for similar properties. Management consider the signiﬁcant assumptions to the valuation of investment properties to be estimated rental values and market-based yields. Sensitivities on these assumptions are provided in note 10. Signiﬁcant Judgement: McKay Securities acquisition IFRS 3: Business Combinations outlines a series of steps to establish whether a company purchase is an asset acquisition or a business combination. The Group considered whether substantially all of the fair value of the gross assets acquired were concentrated in a single asset or group of similar assets and reviewed the relevant criteria to determine whether there were substantive processes present at the point of acquisition. Following this review, the Group concluded that the transaction should be treated as an asset acquisition, refer to note 10. Accordingly, no goodwill or additional deferred tax relating to pre-acquisition valuation gains arises. 228 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED SIGNIFICANT ACCOUNTING POLICIES The signiﬁcant accounting policies adopted in the preparation of these consolidated ﬁnancial statements are set out below. These policies have been consistently applied to all years presented unless stated otherwise. Basis of consolidation The consolidated ﬁnancial statements include the ﬁnancial statements of the Company and all its subsidiary undertakings up to 31 March 2023. Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to aect those rability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group until the date that control ceases. A list of subsidiaries has been disclosed in note 27. Inter-company transactions, balances and unrealised gains from intra-group transactions are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Investment properties Investment properties are those properties owned or leased by the Group that are held either to earn rental income or for capital appreciation, or both, and are not occupied by the Company or subsidiaries of the Group. Investment property is measured initially at cost, including related transaction costs. After initial recognition, investment property is held at fair value based on a valuation by an independent professional external valuer at each reporting date. The valuation methods and key assumptions applied are explained in note 10. Changes in fair value of investment property at each reporting date are recorded in the consolidated income statement. Investment properties acquired under leases are capitalised at the lease’s commencement at the lower of the fair value of the leased property and the net present value of the minimum lease payments. The investment properties acquired under leases are subsequently carried at fair value plus an adjustment for the carrying amount of the lease obligation. The corresponding rental obligations, net of ﬁnance charges, are included in current and non-current borrowings. Each lease payment is allocated between liability and ﬁnance charges so as to achieve a constant rate on the outstanding ﬁnance balance. The interest element of the ﬁnance cost is charged to the consolidated income statement. Properties are treated as acquired at the point which the Group assumes the signiﬁcant risks an1wards of ownership and are treated as disposed when they are transferred outside of the Group’s control. Existing investment properties which undergo redevelopment and refurbishment for continued future use remain in investment property where the purpose of holding the property continues to meet the deﬁnition of investment property as deﬁned above. Subsequent expenditure is charged to the asset’s carrying amount only when it is probable that future economic beneﬁts associated with the expenditure will ﬂow to the Group, and the cost of each item can be reliably measured. Certain internal sta cosertain internal staff costs directly attributable to capital/redevelopment projects are capitalised. All other repairs and maintenance costs are charged to the consolidated income statement during the period in which they are incurred. Capitalised interest on refurbishment/redevelopment expenditure is added to the asset’s carrying amount. Capitalised borrowing costs are calculated by reference to the actual interest rate payable on borrowings or, if ﬁnanced out of general borrowings, by reference to the average rate payable on funding the assets employed by the Group and applied to the direct redevelopment expenditure. Interest is capitalised from the date of commencement of the redevelopment activity until the date when all the activities necessary to prepare the asset for its intended use are substantially complete. Investment properties are recognised as ‘assets held for sale’ when it is considered highly probable that sale completion will take place. This is assumed when the property has been actively marketed for a buyer, supported by either the exchange of a contract or agreement of terms with a buyer by the balance sheet date and it is highly probable that its carrying amount will be recovered within one year. Income from the sale of assets is recognised when the signiﬁcant risks and returns have been transferred to the buyer. In the case of sales of properties this is generally taken on completion of the contract. In the case of a part disposal agreement, the part of the asset being disposed will be derecognised from investment property when completion is reached or when a lease agreement is signed (i.e. when the risks and rewards of this part of the site transfer to the developer). Proﬁt or loss on disposal is calculated as the consideration receivable (net of costs) less the latest valuation (net book value) and is shown in other income/expense. Consideration can take the form of cash, new commercial buildings and a right to future overage (generally being a share in the proceeds of any future sale of the residential development to be constructed by the developer). Revenue is recognised in the period when all relevant criteria in IFRS 15 are met under the ﬁve-step model. Consideration (including overage) is measured at the fair value of the consideration received/ receivable. Commercial property to be received is fair valued using the residual method described in note 10 and is included in investment property. Changes in fair value are recognised through the consolidated income statement in accordance with IAS 40. 229 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED Overage is only recognised once an agreement has been signed with a residential developer. Overage represents a ﬁnancial asset and is designated as a ﬁnancial asset at fair value through proﬁt or loss upon initial recognition. The carrying value of overage is assessed at each period end and changes in fair value are taken to other income/expense. Acquisitions An acquisition is recognised when the risks and rewards of ownership have transferred, usually on completion of the transaction. The acquisition method measures assets based on their cost, which is allocated to the property assets on a fair value basis, and includes directly related acquisition costs. Business combinations are accounted for using the acquisition method. Any discount received or acquisition-related costs are recognised in the consolidated income statement. Intangible assets Intangible assets are stated at historical cost, less accumulated amortisation. Acquired computer software licences and external costs of implementing or developing computer software programmes and websites are capitalised. These costs are amortised over the asset’s estimated useful life of ﬁve years on a straight-line basis. Costs associated with maintaining computer software programmes including Software as a Service (SaaS) are recognised as an expense as they fall due. Property, plant and equipment Equipment and ﬁxtures are stated at historical purchase cost less accumulated depreciation and impairment. Historical cost includes the original purchase price of the asset and the costs attributable to bringing the asset to working condition for its intended use. Subsequent expenditure is charged to the asset’s carrying amount or recognised as a separate asset only when it is probable that future economic beneﬁts associated with the expenditure will ﬂow to the Group and the cost of each item can be reliably measured. All other repairs and maintenance costs are charged to the consolidated income statement during the period in which they are incurred. Depreciation is provided using the straight-line method to allocate the cost less estimated residual value over the assets’ estimated useful lives which range from four to ten years. The assets’ residual values and useful lives are reviewed and adjusted, if appropriate, at least at each ﬁnancial year end. An asset’s carrying amount is written down immediately to its recoverable amount if its carrying amount is greater than its estimated recoverable amount. Other investments Investments in unlisted shares are accounted for under IFRS 9 at fair value, using a valuation multiple and ﬁnancial information. Changes in fair value are shown in the consolidated statement of comprehensive income. Trade and other receivables Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost less provision for impairment based on the expected credit loss, which uses a lifetime expected loss allowance for all trade receivables based on the individual occupier’s circumstance. The amount of the provision is the dierencvision is the difference between the asset’s carrying amount and the present value of estimated future cash ﬂows. The provision is recorded in the consolidated income statement. Deferred consideration on the disposal of investment properties is included within trade and other receivables. It is fair valued on recognition and at each year end with any movement taken to other expense. Trade and other payables Trade and other payables are initially recognised at fair value and subsequently held at amortised cost. Cash and cash equivalents Cash is represented by cash in hand, restricted cash in the form of tenants’ deposit deeds and deposits held on call with banks and money market funds. Cash equivalents are highly liquid investments that mature in no more than three months from the date of acquisition and that are readily convertible to known amounts of cash with insigniﬁcant risk of change in value. Bank overdrafts are included in current liabilities but within cash and cash equivalents for the purpose of the consolidated cash ﬂow statement. Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost, with any dit amortised cost, with any difference between the initial amount (net of transaction costs) and the redemption value being recognised in the income statement over the period of the borrowings, using the eectivwings, using the effective interest method, except for interest capitalised on redevelopments. Share capital Ordinary shares are classiﬁed as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Investment in own shares The Group operates an Employee Share Ownership Trust (‘ESOT’) and a trust for the Share Incentive Plan (‘SIP’). When the Group funds these trusts in order to purchase Company shares, the loan is deducted from shareholders’ equity as investment in own shares. 230 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED Operating segments Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker is the person or group that allocates resources to and assesses the performance of the operating segments of an entity. The Group has determined that its chief operating decision maker is the Executive Committee of the Company. As at 31 March 2023, the Group considers that it has only one operating segment, being a single portfolio of commercial property providing business accommodation for rent in and around London. Revenue recognition Revenue comprises rental income, service charges and other sums receivable from the Group’s investment properties. Other sums comprise insurance charges as an agent (in line with IFRS 15), supplies of utilities, premia associated with surrender of tenancies, commissions, fees and other sundry income. All the Group’s properties are leased out under operating leases and are included in investment property in the consolidated balance sheet. In accordance with IFRS 16, rental income from leases is recognised in the consolidated income statement on a straight-line basis over the lease term. Rent received in advance is deferred in the consolidated balance sheet and recognised in the period to which it relates. If the Group provides signiﬁcant incentives to its customers the incentives are recognised over the lease term on a straight-line basis. Service charges and other sums receivable from tenants are recognised on an accruals basis by reference to the stage of completion of the relevant service or transactions at the reporting date. These services generally relate to a 12-month period. Direct costs Direct costs comprise service charges and other costs directly recoverable from tenants and non-recoverable costs directly attributable to investment properties and other revenue streams. Exceptional items Exceptional items are those items that, in the Directors’ view, are required to be separately disclosed by virtue of their size or incidence to enable a full understanding of the Group’s ﬁnancial performance. Share based payments The Group operates a number of share schemes under which the Group receives services from employees as consideration for equity instruments of the Company. The fair value of the employee services received in exchange for the grant of share awards and options is recognised as an expense over the vesting period. Fair value is measured by the use of Black-Scholes and Binomial Option Pricing modelling techniques. In valuing equity-settled transactions, assessment is made of any vesting conditions to categorise these into market performance conditions, non-market performance conditions and service conditions. Pensions The Group operates a deﬁned contribution pension scheme. Contributions are charged to the consolidated income statement on an accruals basis. As part of the McKay Securities PLC acquisition in May 2022 the Group took over all responsibilities in relation to the existing McKay deﬁned beneﬁt pension scheme. Subsequent to this, the Group entered into a pension buy-out transaction whereby an insurance company took on all current and future liabilities of this deﬁned beneﬁt pension scheme, along with related assets. Taxation Current income tax is tax payable on the taxable income for the year and any prior year adjustment, and is calculated using tax rates that are relevant to the ﬁnancial year. Deferred tax is provided in full on temporary divided in full on temporary differences between the tax base of an asset or liability and its carrying amount in the balance sheet. Deferred tax is determined using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised when it is probable that taxable proﬁts will be available against which the deferred tax asset can be utilised. Compliance with the Real Estate Investment Trust (‘REIT’) taxation regime The Group is a REIT and is thereby exempt from tax on both rental proﬁts and chargeable gains from its UK property rental business. In order to retain REIT status, certain ongoing criteria must be maintained. The main criteria are as follows: – At the start of each accounting period, the assets of the tax-exempt business must be at least 75% of the total value of the Group’s assets. – At least 75% of the Group’s total proﬁts must arise from the tax-exempt business. – At least 90% of the tax-exempt business earnings must be distributed. Dividend distributions Final dividend distributions to the Company’s shareholders are recognised as a liability in the Group’s ﬁnancial statements in the period in which the dividends are approved, while interim dividends are recognised when paid. 231 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED 1. ANALYSIS OF NET RENTAL INCOME AND SEGMENTAL INFORMATION 2023 2022 Revenue £m Direct costs 1 £m Net rental income £m Revenue £m Direct costs 1 £m Net rental income £m Rental income 136.7 (4.2) 132.5 104.3 (2.9) 101.4 Service charges 30.0 (35.7) (5.7) 21.1 (25.9) (4.8) Empty rates and other non- recoverable costs – (10.6) (10.6) – (10.6) (10.6) Services, fees, commissions and sundry income 7.5 (7.1) 0.4 7.5 (6.8) 0.7 174.2 (57.6) 116.6 132.9 (46.2) 86.7 1. There are no properties within the current or prior period that are non-rent producing. Included within direct costs for rental income is a charge of £1.0m (2022: £1.5m) and within direct costs for service charges is a charge of £0.1m (2022: £nil) for expected credit losses in respect of receivables from customers 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 review performance is presented as one portfolio. As a result, for the year ended 31 March 2023, management have determined that the Group operates a single operating segment providing business accommodation for rent in and around London. 2. OPERATING (LOSS)/PROFIT The following items have been charged in arriving at operating (loss)/proﬁt: 2023 £m 2022 £m Depreciation 1 (note 11) 1.6 1.8 Sta costff costs (including share based costs) 1 (note 5) 25.3 19.6 Repairs and maintenance expenditure on investment properties 5.4 2.0 Trade receivables impairment (note 13) 1.1 1.5 Amortisation of intangibles 0.7 0.9 Audit fees payable to the Company’s Auditor 0.4 0.3 1. Charged to direct costs and administrative expenses based on the underlying nature of the expenses. Auditor’s remuneration: services provided by the Company’s Auditor and its associates 2023 £000 2022 £000 Audit fees: Audit of Parent Company and consolidated ﬁnancial statements 330 245 Audit of subsidiary ﬁnancial statements 40 35 370 280 Fees for other services: Audit-related assurance services 1 70 55 Total fees payable to Auditor 440 335 1. Audit-related assurance services consist of £56k for half year review (2022: £40k); and £14k for Green Bond use of Proceeds Assurance (2022: £15k). 2023 £m 2022 £m Total administrative expenses are analysed below: Sta cosStaff costs 13.4 10.7 Equity settled share based payments 1.4 1.6 Other 6.7 7.0 Total administrative expenses 21.5 19.3 3(a). (LOSS)/PROFIT ON DISPOSAL OF INVESTMENT PROPERTIES AND ASSETS HELD FOR SALE 2023 £m 2022 £m Proceeds from sale of investment properties (net of sale costs) 7.0 117.3 Proceeds from sale of assets held for sale (net of sale costs) 52.1 – Book value at time of sale (59.8) (109.5) (Loss)/proﬁt on disposal (0.7) 7.8 3(b). OTHER INCOME 2023 £m 2022 £m Sale of investment – 0.6 – 0.6 In the prior year, the Group disposed of the investment in Lovespace Ltd, resulting in a gain of £0.6m in the year. 232 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED 3(c). OTHER EXPENSES 2023 £m 2022 £m Change in fair value of deferred consideration (0.1) – Other expenses (3.7) – (3.8) – The value of deferred consideration (cash and overage) from the sale of investment properties has been revalued by CBRE Limited at 31 March 2023 and 31 March 2022. This resulted in a reduction in the fair value of deferred consideration of £0.1m at 31 March 2023 (31 March 2022: £nil). The amounts receivable are included in the consolidated balance sheet under current trade and other receivables (note 13). Other expenses include exceptional one-o cxceptional one-off costs relating to the acquisition and integration of McKay Securities Limited (formerly McKay Securities PLC) (£1.9m), including the cost of buying out the McKay Securities Limited deﬁned beneﬁt pension scheme (see note 24) and the implementation costs to date of replacing our ﬁnance and property system (£1.8m). These costs are outside the Group’s normal trading activities. 4. FINANCE COSTS 2023 £m 2022 £m Interest payable on bank loans and overdrafts (11.9) (1.4) Interest payable on other borrowings (19.0) (16.7) Amortisation of issue costs of borrowings (2.0) (1.1) Interest payable on leases (1.9) (1.7) Interest capitalised on property refurbishments (note 10) 0.2 0.4 Interest receivable 0.2 – Finance costs (34.4) (20.5) Exceptional ﬁnance costs (0.6) – Total ﬁnance costs (35.0) (20.5) The exceptional ﬁnance costs in the year related to unamortised ﬁnance costs for McKay Securities Limited’s previous bank loan which were written o when this was re written off when this was reﬁnanced in September 2022. All ﬁnance costs have been calculated in accordance with IFRS 9, re-estimating the cash ﬂows based on the original eectivon the original effective interest rate with the adjustment being taken through proﬁt and loss. 5. EMPLOYEES AND DIRECTORS Sta coaff costs for the Group during the year were: 2023 £m 2022 £m Wages and salaries 23.3 17.4 Social security costs 3.8 2.0 Other pension costs (note 24) 1.0 0.8 Equity-settled share based costs (note 23) 1.4 1.6 29.5 21.8 Less costs capitalised (4.2) (2.2) 25.3 19.6 The monthly average number of people employed during the year was: 2023 Number 2022 Number Head oceHead office sta ( staff (including Directors) 154 124 Estates and property management staaff 137 125 291 249 The emoluments and pension beneﬁts of the Directors are determined by the Remuneration Committee of the Board and are set out in detail in the Directors’ Remuneration Report on pages 178 to 211. These form part of the ﬁnancial statements. Total Directors’ emoluments for the ﬁnancial year were £3.0m (2022: £2.3m), comprising of £2.2m (2022: £2.2m) of Directors’ remuneration, £0.7m (2022: £nil) gain on exercise of share options and £0.1m (2022: £0.1m) of cash contributions in lieu of pension in respect of two Directors (2022: two). 6. TAXATION 2023 £m 2022 £m Current tax: UK corporation tax – – Adjustments to tax in respect of previous periods – – – – Deferred tax: On origination and reversal of temporary dieifferences 0.3 0.1 0.3 0.1 Total taxation charge 0.3 0.1 Taxation chargeable in the year relates to income from non-REIT activities such as overage, meeting room income and utilities recharges. 233 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED 6. TAXATION CONTINUED The tax on the Group’s proﬁt for the year diers from the standarear differs from the standard applicable corporation tax rate in the UK of 19% (2022: 19%). The die in the UK of 19% (2022: 19%). The differences are explained below: 2023 £m 2022 £m (Loss)/proﬁt before taxation (37.5) 124.0 Tax at standard rate of corporation tax in the UK of 19% (2022: 19%) (7.1) 23.6 EeEffects of: REIT exempt income (12.1) (11.3) Changes in fair value not subject to tax as a REIT 17.7 (13.1) Share based payment adjustments (0.3) 0.4 Unrecognised losses carried forward 1.8 0.4 Other non-taxable expenses 0.3 0.1 Total taxation charge 0.3 0.1 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 estimates that as the majority of its future proﬁts will be exempt from tax, future tax charges are likely to be low. An increase in the rate of corporation tax was enacted on 24 May 2021 and, from 1 April 2023, the corporation tax rate will increase to 25%. This will increase the Company’s future current tax charge accordingly. The Group currently has an unrecognised asset in relation to tax losses from the non-REIT business carried forward of £7.4m (2022: £7.3m) calculated at a corporation tax rate of 25% (2022: 25%). 2023 £m 2022 £m Deferred tax assets: – Deferred tax to be recovered within 12 months – 0.4 Deferred tax liabilities: – Deferred tax liabilities to be realised within 12 months – (0.1) Deferred tax assets (net) – 0.3 The movement in deferred tax assets and liabilities during the year, without taking into consideration the osetting of balances within the same tax jurisdiction, is as folloation the offsetting of balances within the same tax jurisdiction, is as follows: Deferred tax liabilities Other income (overage receipts) £m At 1 April 2021 0.1 Credited to income statement – At 31 March 2022 0.1 Credited to income statement (0.1) At 31 March 2023 – Deferred tax assets Expenses (share based payment) £m At 31 March 2021 (0.5) Charged to income statement 0.1 At 31 March 2022 (0.4) Charged to income statement 0.4 At 31 March 2023 – 7. DIVIDENDS Payment date Per share 2023 £m 2022 £m For the year ended 31 March 2021: Final dividend August 2021 17.75p – 32.1 For the year ended 31 March 2022: Interim dividend February 2022 7.0 p – 12.7 Final dividend August 2022 14.5p 27.8 – For the year ended 31 March 2023: Interim dividend February 2023 8.4p 16.1 – Dividends for the year 43.9 44.8 Timing dieifference on payment of withholding tax (0.4) (1.5) Dividends cash paid 43.5 43.3 The Directors are proposing a ﬁnal dividend in respect of the ﬁnancial year ended 31 March 2023 of 17.4 pence per ordinary share, which will absorb an estimated £33.3m of retained earnings and cash. If approved by the shareholders at the AGM, it will be paid on 4 August 2023 to shareholders who are on the register of members on 7 July 2023. The dividend will be paid as a REIT Property Income Distribution (‘PID’) net of withholding tax where appropriate. 234 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED 8. EARNINGS PER SHARE Earnings used for calculating earnings per share: 2023 £m 2022 £m Basic and diluted earnings (37.8) 123.9 Decrease/(increase) in fair value of investment properties 88.0 (68.7) Impairment of assets held for sale 5.1 – Loss/(proﬁt) on disposal of investment properties 0.7 (7.8) EPRA earnings 56.0 47.4 Adjustment for non-trading items: Other expenses/(income) 3.8 (0.6) Exceptional ﬁnance costs 0.6 – Taxation 0.3 0.1 Trading proﬁt after interest 60.7 46.9 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: 2023 Number 2022 Number Weighted average number of shares (excluding own shares held in trust) 190,470,363 180,983,916 Dilution due to share option schemes 1,129,310 998,280 Weighted average number of shares for diluted earnings per share 191,599,673 181,982,196 In pence: 2023 2022 Basic (loss)/earnings per share (19.9p) 68.5p Diluted (loss)/earnings per share (19.9p) 68.1p EPRA earnings per share 29.4p 26.2p Adjusted underlying earnings per share 1 31.7p 25.8p 1. Adjusted underlying earnings per share is calculated by dividing trading proﬁt after interest by the diluted weighted average number of shares of 191,599,673 (2022: 181,982,196). The diluted loss per share for the period to 31 March 2023 has been restricted to a loss of 19.9p per share, as the loss per share cannot be reduced by dilution in accordance with IAS 33 Earnings per Share. 9. NET ASSETS PER SHARE AND TOTAL ACCOUNTING RETURN Number of shares used for calculating net assets per share: 2023 Number 2022 Number Shares in issue at year end 191,638,357 181,125,259 Less own shares held in trust at year end (152,550) (162,113) Dilution due to share option schemes 1,201,277 1,078,852 Number of shares for calculating diluted adjusted net assets per share 192,687,084 182,041,998 EPRA Net Asset Value Metrics The Group measures ﬁnancial position with reference to EPRA Net Tangible Assets (NTA), Net Reinvestment Value (NRV) and Net Disposal Value (NDV). March 2023 March 2022 EPRA NRV £m EPRA NTA £m EPRA NDV £m EPRA NRV £m EPRA NTA £m EPRA NDV £m IFRS Equity attributable to shareholders 1,787.7 1,787.7 1,787.7 1,799.6 1,799.6 1,799.6 Intangibles per IFRS balance sheet – (2.0) – – (1.9) – Excess of book value of debt over fair value – – 86.6 – – 13.0 Purchasers’ costs 186.4 – – 163.3 – – EPRA measure 1,974.1 1,785.7 1,874.3 1,962.9 1,797.7 1,812.6 EPRA measure per share £10.24 £9.27 £9.73 £10.78 £9.88 £9.96 Total accounting return Total Accounting Return 2023 £ 2022 £ Opening EPRA net tangible assets per share (A) 9.88 9.38 Closing EPRA net tangible assets per share 9.27 9.88 (Decrease)/Increase in EPRA net tangible assets per share (0.61) 0.50 Ordinary dividends paid in the year 0.23 0.25 Total return (B) (0.38) 0.75 Total accounting return (B/A) (3.8%) 8.0% The total accounting return for the year comprises the movement 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 total return for the year ended 31 March 2023 was -3.8% (31 March 2022: 8.0%). 235 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED 10. INVESTMENT PROPERTIES 2023 £m 2022 £m Balance at 1 April 2,366.7 2,349.9 Purchase of investment properties 426.6 88.4 Capital expenditure 55.8 30.0 Change in value of lease obligations 3.7 4.7 Capitalised interest on refurbishments (note 4) 0.2 0.4 Disposals during the year (5.5) (109.5) Change in fair value of investment properties (88.0) 68.7 Less: Classiﬁed as assets held for sale (116.2) (65.9) Balance at 31 March 2,643.3 2,366.7 Investment properties represent a single class of property, being business accommodation for rent in and around London. Capitalised interest is included at a rate of capitalisation of 3.9% (2022: 3.0%). The total amount of capitalised interest included in investment properties is £15.1m (2022: £14.9m). The change in fair value of investment properties is recognised in the consolidated income statement. Investment properties include buildings with a carrying amount of £321.9m (2022: £315.4m) for which there are lease obligations of £34.7m (2022: £31.0m). Investment property lease commitment details are shown in note 17. During the period, the Group acquired McKay Securities Limited (formerly McKay Securities PLC) adding 32 properties in and around London to the portfolio. One of the properties classiﬁed as held for sale at the end of the prior year was not sold during the year. It is retained within current assets as it is still expected to sell within the next 12 months of 31 March 2023 and has been subject to an impairment charge of £5.1m following the valuation carried out at 31 March 2023. Ten (2022: two) additional properties were reclassiﬁed as held for sale at year-end. Five of these properties have exchanged for sale and are likely to complete within the next 12 months. The transfer value is their year-end valuation per CBRE. Valuation The Group’s investment properties are held at fair value and were revalued at 31 March 2023 by the external valuer, CBRE Limited, a ﬁrm of 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. For like-for-like properties, their current use equates to the highest and best use. For properties undergoing refurbishment or redevelopment, most of these are still being used for business accommodation in their current state. However, the valuation at the balance sheet date includes the impact of the potential refurbishment and redevelopment as this represents the highest and best use. The Executive Committee and the Board both conduct a detailed review of each property valuation to review appropriate assumptions have been applied and that valuations are appropriate. Meetings are held with the valuers to review and challenge the valuations, to conﬁrm that they have considered all relevant information. The valuation of like-for-like properties (which are not subject to refurbishment or redevelopment) is 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 by Workspace, 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 make allowance 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 estimated rental value 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. 236 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED 10. INVESTMENT PROPERTIES CONTINUED Valuation continued Redevelopment properties are also valued using the residual value method. The 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 non-current assets, investment properties, is as follows: 2023 £m 2022 £m Total per CBRE valuation report 2,741.1 2,402.2 Deferred consideration on sale of property (0.5) (0.6) Head leases treated as leases under IFRS 16 34.7 31.0 Less: tenant incentives recognised under IFRS 16 (8.8) – Less: Reclassiﬁed as assets held for sale (123.2) (65.9) Total investment properties per balance sheet 2,643.3 2,366.7 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 dierent vhe 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. As noted in the signiﬁcant judgements and critical estimates section, 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 aect the vactors that can affect the value of an asset, even if not explicitly recognised. This includes key environmental risks; such as ﬂooding, energy eciencyenergy 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 31 March 2023. Key unobservable inputs: ERVs – per sq. ft. Equivalent yields Property category Valuation £m Valuation technique Range Weighted average Range Weighted average Like-for-like 1,886.9 A £21-£79 £48 5.0%-7.7% 6.2% Completed projects 264.8 A £24-£51 £34 5.8%-6.8% 6.5% Refurbishments 171.9 A/B £21-£53 £35 4.5%-6.7% 5.8% Redevelopments 25.4 A/B £16-£35 £28 4.8%-6.9% 5.5% Acquisitions 268.4 A £13-£70 £34 5.2%-10.8% 7.4% Less : tenant incentives (8.8) N /A – – – – Head leases 34.7 N /A – – – – Total 2,643.3 A = Income capitalisation method. B = Residual value method. 237 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED 10. INVESTMENT PROPERTIES CONTINUED Valuation continued A key unobservable input for redevelopments at planning stage and refurbishments is developer’s proﬁt. The range is 10%–16% with a weighted average of 13%. Costs to complete is a key unobservable input for redevelopments at planning stage with a range of £262–£448 per sq. ft. and a weighted average of £356 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. Sensitivity analysis: A +/- 10% movement in ERVs or a +/- 25 basis points movement in yields would result in the following increase/decrease in the valuation. £m +/- 10% in ERVs +/- 25 bps in yields Like-for-like +189/-189 -76/+83 Completed projects +27/-27 -10/+11 Refurbishments +23/-23 -10/+11 Redevelopments +6/-6 -3/+3 Acquisitions +27/-27 -9/+9 The following table summarises the valuation techniques and inputs used in the determination of the property valuation at 31 March 2022. Key unobservable inputs: ERVs – per sq. ft. Equivalent yields Property category Valuation £m Valuation technique Range Weighted average Range Weighted average Like-for-like 1,865.1 A £20-£66 £42 4.1%-7.3% 5.5% Completed projects 185.6 A £21-£44 £28 4.9%-6.4% 5.6% Refurbishments 161.3 A/B £18-34 £25 3.6%-6.4% 5.3% Redevelopments 35.3 A/B £13-25 £16 4.5%-6.5% 6.0% Acquisitions 88.4 A £33-£53 £40 4.9%-5.8% 5.4% Head leases 31.0 N /A – – – – Total 2,366.7 A = Income capitalisation method. B = Residual value method. A key unobservable input for redevelopments at planning stage and refurbishments is developer’s proﬁt. The range is 13%–19% with a weighted average of 14%. Costs to complete is a key unobservable input for redevelopments at planning stage with a range of £213–£280 per sq. ft. and a weighted average of £250 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. Sensitivity analysis: A +/- 10% movement in ERVs or a +/- 25 basis points movement in yields would result in the following increase/decrease in the valuation. £m +/- 10% in ERVs +/- 25 bps in yields Like-for-like +186/-186 -82/+90 Completed projects +19/-19 -8/+9 Refurbishments +17/-17 -8/+9 Redevelopments +4/-4 -1/+1 Acquisitions +9/-9 -4/+4 238 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED 11. PROPERTY, PLANT AND EQUIPMENT Cost or valuation Equipment and ﬁxtures £m 1 April 2021 10.6 Additions during the year 0.7 Disposals during the year (1.8) Balance at 31 March 2022 9.5 Additions during the year 3.3 Disposals during the year (0.3) Balance at 31 March 2023 12.5 Accumulated depreciation 1 April 2021 6.6 Charge for the year 1.8 Disposals during the year (1.8) Balance at 31 March 2022 6.6 Charge for the year 1.6 Disposals during the year (0.1) Balance at 31 March 2023 8.1 Net book amount at 31 March 2023 4.4 Net book amount at 31 March 2022 2.9 12. OTHER INVESTMENTS The Group holds the following investments: 2023 £m 2022 £m 2.8% of share capital of Wavenet Limited 2.1 1.7 2.1 1.7 In the prior year, Wavenet Limited purchased the entire share capital in Excell Holdings Limited. As a result, the Group received cash of £6.2m and acquired 2.8% of share capital in Wavenet Limited. In accordance with IFRS 9 the shares in Wavenet Limited have been valued at fair value, resulting in £0.4m movement in the ﬁnancial year (2022: no movement), recognised in the consolidated statement of comprehensive income. In addition, included within other income (note 3(b)) in the prior year is £0.6m for the sale of investment in Lovespace Ltd which was previously written oen off. 13. TRADE AND OTHER RECEIVABLES Current trade and other receivables 2023 £m 2022 £m Trade receivables 16.9 11.9 Less provision for impairment of receivables (4.6) (5.2) Trade receivables – net 12.3 6.7 Prepayments, other receivables and accrued income 22.3 16.2 Deferred consideration on sale of investment properties 11.2 0.6 45.8 23.5 Receivables at fair value Included within deferred consideration on sale of investment properties is £0.5m (2022: £0.6m) of overage which is held at fair value through proﬁt and loss. As the amounts receivable are expected within the following 12 months they have been classiﬁed as current receivables. The deferred consideration arising on the sale of investment properties relates to cash and overage. The overage has been fair valued by CBRE Limited 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 a £0.1m decrease (31 March 2022: £nil) (note 3(c)). 2023 £m 2022 £m Deferred consideration on sale of investment properties: Balance at 1 April 0.6 5.1 Cash received – (4.5) Additions 10.7 – Change in fair value (0.1) – Balance at 31 March 11.2 0.6 Receivables at amortised cost The remaining receivables are held at amortised cost. There is no material dierencerial difference between the above amounts and their fair values due to the short-term nature of the receivables. Trade receivables are impaired when there is evidence that the amounts may not be collectable under the original terms of the receivable. All the Group’s trade and other receivables are denominated in Sterling. 239 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED 13. TRADE AND OTHER RECEIVABLES CONTINUED Movements on the provision for impairment of trade receivables are shown below: 2023 £m 2022 £m Balance at 1 April 5.2 4.6 Increase in provision for impairment of trade receivables 1.1 1.5 Receivables written o dten off during the year (1.7) (0.9) Balance at 31 March 4.6 5.2 14. CASH AND CASH EQUIVALENTS 2023 £m 2022 £m Cash at bank and in hand 12.0 42.3 Restricted cash – tenants’ deposit deeds 6.5 6.7 18.5 49.0 Tenants’ deposit deeds represent returnable cash security deposits received from tenants and are held in ring-fenced bank accounts in accordance with the terms of the individual lease contracts. 15. TRADE AND OTHER PAYABLES 2023 £m 2022 £m Trade payables 15.4 13.2 Other tax and social security payable 15.9 3.8 Tenants’ deposit deeds (note 14) 6.5 6.7 Tenants’ deposits 30.5 26.5 Accrued expenses 26.1 27. 4 Deferred income – rent and service charges 13.4 8.2 107.8 85.8 There is no material diere is no material difference between the above amounts and their fair values due to the short- term nature of the payables. 16. BORROWINGS (a) Balances 2023 £m 2022 £m Current Bank loans (unsecured) 49.8 – Non-current Bank loans (unsecured) 197.2 (2.1) Other loans (secured) 63.9 – 3.07% Senior Notes (unsecured) 79.9 79.9 3.19% Senior Notes (unsecured) 119.8 119.8 3.6% Senior Notes (unsecured) 99.9 99.8 Green Bond (unsecured) 298.4 298.1 859.1 595.5 Total borrowings 908.9 595.5 (b) Net debt 2023 £m 2022 £m Borrowings per (a) above 908.9 595.5 Adjust for: Cost of raising ﬁnance 5.1 4.5 914.0 600.0 Cash at bank and in hand (note 14) (12.0) (42.3) Net debt 902.0 557.7 At 31 March 2023, the Group had £136.0m (2022: £400.0m) of undrawn bank facilities, a £2.0m overdraft facility (2022: £2.0m) and £12.0m of unrestricted cash (2022: £42.3m). 240 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED 16. BORROWINGS CONTINUED (c) Maturity 2023 £m 2022 £m Repayable within one year 50.0 – Repayable between one and two years – – Repayable between two and three years 279.0 – Repayable between three years and four years – 80.0 Repayable between four years and ﬁve years 420.0 80.0 Repayable in ﬁve years or more 165.0 440.0 914.0 600.0 Cost of raising ﬁnance (5.1) (4.5) Total 908.9 595.5 (d) Interest rate and repayment proﬁle Principal at period end £m Interest rate Interest payable Repayable Current Bank overdraft due within one year or on demand – Base + 2.25% Variable On demand Bank Loan 50.0 SONIA + 1.75% 1 Monthly September 2023 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 123.0 SONIA + 1.77% 2 Monthly December 2025 Bank Loan 76.0 SONIA + 1.80% 2 Monthly April 2025 Other Loan (Secured) 65.0 4.02% Monthly May 2030 Green Bond 300.0 2.25% Yearly March 2028 914.0 1. This is an average over the life of the facility. The margin increases from 1.5% to 2.0% over the facility availability period. 2. The base margin is dependent upon the LTV as reported in the client certiﬁcate, which is submitted twice a year. The base margin can be adjusted further by up to 4.5bps dependent upon achievement of three ESG-linked metrics. (e) Financial instruments and fair values 2023 Book value £m 2023 Fair value £m 2022 Book value £m 2022 Fair value £m Financial liabilities held at amortised cost Bank loans 247.0 247.0 (2.1) (2.1) Other loans 63.9 63.5 – – Private Placement Notes 299.6 287.8 299.5 301.8 Lease obligations 34.7 34.7 31.0 31.0 Green Bond 298.4 224.0 298.1 282.8 943.6 857.0 626.5 613.5 Financial assets at fair value through other comprehensive income Other investments 2.1 2.1 1.7 1.7 2.1 2.1 1.7 1.7 Financial assets at fair value through proﬁt or loss Deferred consideration (overage) 11.2 11.2 0.6 0.6 11.2 11.2 0.6 0.6 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 bank 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 dierThe different levels of valuation hierarchy as deﬁned by IFRS 13 are set out in note 10. 241 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED 16. BORROWINGS CONTINUED (f) Financial instruments by category Assets 2023 £m 2022 £m a) Assets at fair value through proﬁt or loss Deferred consideration (overage) 0.5 0.6 0.5 0.6 b) Loans and receivables Cash and cash equivalents 18.5 49.0 Trade and other receivables excluding prepayments 1 31.7 8.4 50.2 57.4 c) Assets at value through other comprehensive income Other investments 2.1 1.7 2.1 1.7 Total 52.8 59.7 Liabilities 2023 £m 2022 £m Other ﬁnancial liabilities at amortised cost Borrowings 908.9 595.5 Lease liabilities 34.7 31.0 Trade and other payables excluding non-ﬁnancial liabilities 2 78.5 73.8 1,022.1 700.3 1. Trade and other receivables exclude prepayments of £13.6m (2022: £14.5m) and non-cash deferred consideration of £0.5m (2022: £0.6m). 2. Trade and other payables exclude other tax and social security of £15.9m (2022: £3.8m), corporation tax of £nil (2022: £nil) and deferred income of £13.4m (2022: £8.2m). (g) Changes in liabilities from ﬁnancing activities Bank loans and borrowings £m Lease liabilities £m Balance at 1 April 2022 595.5 31.0 Changes from ﬁnancing cash ﬂows: Proceeds from bank borrowings 286.0 – Repayment of bank borrowings (150.0) – Finance costs for new/amended borrowing facilities (1.6) – Finance costs assumed on asset acquisition (1.6) – Total changes from cash ﬂows 132.8 – Exceptional ﬁnance costs 0.6 – Amortisation of issue costs of borrowing 2.0 – Debt assumed on asset acquisition 178.0 – Changes in leases – 3.7 Total other changes 180.6 3.7 Balance at 31 March 2023 908.9 34.7 Bank loans and borrowings £m Lease liabilities £m Derivatives used for hedging-assets £m Balance at 1 April 2021 752.8 26.3 8.7 Changes from ﬁnancing cash ﬂows: Proceeds from bank borrowings 25.0 – – Repayment of bank borrowings and Private Placement Notes (173.5) – – Finance costs for new/amended borrowing facilities (1.3) Repayment of derivatives – – (0.7) Total changes from cash ﬂows (149.8) – (0.7) Foreign exchange dige differences (8.6) – (8.0) Amortisation of issue costs of borrowing 1.1 – – Changes in leases – 4.7 – Total other changes (7.5) 4.7 (8.0) Balance at 31 March 2022 595.5 31.0 – 242 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED 17. LEASE OBLIGATIONS Lease liabilities are in respect of leased investment property. Minimum lease payments under leases fall due as follows: 2023 £m 2022 £m Within one year 2.1 1.9 Between two and ﬁve years 8.4 7.4 Between ﬁve and ﬁfteen years 19.0 18.6 Beyond ﬁfteen years 180.8 162.4 210.3 190.3 Future ﬁnance charges on leases (175.6) (159.3) Present value of lease liabilities 34.7 31.0 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 (2022: £1.9m) is oset b1m (2022: £1.9m) is offset by future ﬁnance charges on leases of £2.1m (2022: £1.9m). All lease obligations are long leaseholds, therefore, the majority of the obligations fall beyond ﬁfteen years. 18. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICY The Group has identiﬁed exposure to the following ﬁnancial risks: – Market risk – Credit risk – Liquidity risk – Capital risk management The policies for managing each of these risks and the principal eThe policies for managing each of these risks and the principal effects of these policies on the results for the year are summarised below: (a) Market risk Market risk is the risk that changes in market conditions will aect the Group’et conditions will affect the Group’s interest rates. Borrowings at variable rates expose the Group to cash ﬂow interest rate risk. Borrowings at ﬁxed rates expose the Group to fair value interest rate risk. The Group ﬁnances its operations through a mixture of retained proﬁts and borrowings. The Group borrows at both ﬁxed and ﬂoating rates of interest. At 31 March 2023, 73% (2022: 100%) of Group borrowings were ﬁxed. All transactions entered into are approved by the Board and are in accordance with the Group’s treasury policy. The Board also monitors variances on interest rates to budget and forecast rates to ensure that the risk relating to interest rates is being suciently safeguarded. As at yes is being sufficiently safeguarded. As at year end, a reasonably possible interest rate movement of +/-1.0% would have increased or decreased net interest payable by £2.5m (2022: £nil). The interest cover covenant in relation to Group borrowings is a ratio of 2.0x and the Group targets a minimum cover of 2.5x. As at 31 March 2023 interest cover was 3.8x. Interest cover is calculated as net rental income divided by ﬁnance costs (excluding exceptional ﬁnance costs). (b) Credit risk The Group’s main ﬁnancial assets are cash and cash equivalents, deposits with banks and ﬁnancial institutions and trade and other receivables. Credit risk is the risk of ﬁnancial loss if a tenant or a counterparty to a ﬁnancial instrument fails to meet its contractual obligations. The Group’s exposure to this risk principally relates to the receivables from tenants, deferred consideration on the sale of investment property and cash and cash equivalent balances held with counterparties. 243 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED 18. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICY CONTINUED (b) Credit risk continued The Group’s exposure to credit risk in relation to receivables from tenants is inﬂuenced mainly by the characteristics of individual tenants occupying its rental properties. The Group has around 4,910 lettable units at 86 properties with overall occupancy of 81.5%. The largest 10 single tenants generate around 10.3% of net rent roll. As such, the credit risk attributable to individual tenants is low. The Group’s credit risk in relation to tenants is further mitigated by requiring that tenants provide a deposit equivalent to three months’ rent on inception of lease as security against default. Total tenant deposits held are £37.0m (2022: £33.2m). The Group monitors aged debt balances and any potential bad debts every week, the information being reported to the Executive Committee every month as part of the performance monitoring process. The Group’s debt recovery is consistently high and as such is deemed a low risk area. Deferred consideration (cash and overage) on the sale of investment properties is contractual and valued regularly by the external valuer based on current and future market factors. Cash and cash equivalents and ﬁnancial derivatives are held with major UK high street banks and strict counterparty limits are operated on deposits. The carrying amount of ﬁnancial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was: 2023 £m 2022 £m Cash and cash equivalents (note 14) 18.5 49.0 Trade receivables – current (note 13) 12.3 6.7 Deferred consideration – current (note 13) 11.2 0.6 42.0 56.3 The Group’s assessment of expected credit losses involves estimation given its forward-looking nature. Assumptions used in the forward-looking assessment are continually reviewed to take into account likely rent deferrals. (c) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its ﬁnancial obligations as they fall due. The Group’s approach to managing liquidity is to target a minimum headroom on loan facilities of £50.0m, so as to have sucient funds to meet ﬁnancial obligations as they fe sufficient funds to meet ﬁnancial obligations as they fall due. This is performed via a variety of methods including daily cash ﬂow review and forecasting, monthly monitoring of the maturity proﬁle of debt and the regular revision of borrowing facilities in relation to the Group’s requirements and strategy. The Board reviews compliance with loan covenants which include agreed interest cover and loan to value ratios, alongside review of available headroom on loan facilities. To manage its liquidity eectivo manage its liquidity effectively, the Group has an overdraft facility of £2.0m (2022: £2.0m), two revolving loan facilities totalling £335.0m (2022: one facility of £200.0m) and an acquisition loan facility of £50.0m (2022: £200.0m). At 31 March 2023 headroom excluding overdraft and cash was £136.0m (31 March 2022: £400.0m). The following is an analysis of the contractual undiscounted cash ﬂows payable under ﬁnancial liabilities, derivative ﬁnancial instruments and trade and other payables existing at the balance sheet date. Contracted cash ﬂows are based upon the loan balances and applicable interest rates payable on these at each year end. 31 March 2023 Carrying 2 amount £m Due within 1 year £m Due between 1 and 2 years £m Due between 2 and 3 years £m Due 3 years and beyond £m Total contracted cash ﬂows £m Financial liabilities Private Placement Notes 300.0 9.9 9.9 88.3 234.5 342.6 Green Bond 300.0 6.8 6.8 6.8 312.9 333.3 Other loans 65.0 2.6 2.6 2.6 75.4 83.2 Lease liabilities 34.7 2.1 2.1 2.1 204.0 210.3 Trade and other payables 1 78.5 78.5 – – – 78.5 778.2 99.9 21.4 99.8 826.8 1,047.9 31 March 2022 Carrying 2 amount £m Due within 1 year £m Due between 1 and 2 years £m Due between 2 and 3 years £m Due 3 years and beyond £m Total contracted cash ﬂows £m Financial liabilities Private Placement Notes 300.0 9.9 9.9 9.9 322.6 352.3 Green Bond 300.0 6.8 6.8 6.8 319.5 339.9 Lease liabilities 31.0 1.9 1.9 1.9 187.8 193.5 Trade and other payables 1 73.8 73.8 – – – 73.8 704.8 92.4 18.6 18.6 829.9 959.5 1. Trade and other payables exclude other tax and social security of £15.9m (2022: £3.8m), corporation tax of £nil (2022: £nil) and deferred income of £13.4m (2022: £8.2m). 2. Excludes unamortised borrowing costs . 244 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED 18. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICY CONTINUED (d) Capital risk management The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, and monitor an appropriate mix of debt and equity ﬁnancing. Equity comprises issued share capital, reserves and retained earnings as disclosed in the consolidated statement of changes in equity. Debt comprises the Green Bond, Revolving Credit Facilities from banks, Private Placement Notes less cash at bank and in hand. At 31 March 2023, Group equity was £1,787.7m (2022: £1,799.6m) and Group net debt (debt less cash at bank and in hand) was £902.0m (2022: £557.7m). Group gearing at 31 March 2023 was 50% (2022: 31%). The Group’s borrowings are all unsecured apart from £65.0m. The loan to value covenant applicable to these borrowings is 60% and compliance is being met comfortably. Loan to value at 31 March 2023 was 33%. This is calculated using the total CBRE investment property valuation (as per note 10) and the current net debt (as per note 16(b)). Our target is to maintain loan to value below 30%. This may from time-to-time be exceeded up to a maximum of 40% as steps are taken to reduce loan to value to below 30%. 19. NOTES TO CASH FLOW STATEMENT Reconciliation of proﬁt for the year to cash generated from operations: 2023 £m 2022 £m (Loss)/proﬁt before tax (37.5) 124.0 Depreciation 1.6 1.8 Amortisation of intangibles 0.7 0.9 Letting fees amortisation 0.5 – Loss/(proﬁt) on disposal of investment properties 0.7 (7.8) Other expenses/(income) (note 3c) 3.8 (0.6) Net loss/(proﬁt) from change in fair value of investment property 88.0 (68.7) Impairment of assets held for sale 5.1 – Equity-settled share based payments 1.4 1.6 Finance costs 34.4 20.5 Exceptional ﬁnance costs 0.6 – Changes in working capital: (Increase)/decrease in trade and other receivables (6.4) 1.4 Increase in trade and other payables 17.6 7.4 Cash generated from operations 110.5 80.5 For the purposes of the cash ﬂow statement, cash and cash equivalents include restricted cash – tenants’ deposit deeds (note 14). 245 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED 20. SHARE CAPITAL AND SHARE PREMIUM 2023 £m 2022 £m Issued: Fully paid ordinary shares of £1 each 191.6 181.1 Movements in share capital were as follows: 2023 Number 2022 Number Number of shares at 1 April 181,125,259 181,113,594 Issue of shares 10,513,098 11,665 Number of shares at 31 March 191,638,357 181,125,259 The Group issued 10,513,098 shares as part of the consideration for the acquisition of McKay Securities Limited (formerly McKay Securities PLC) during the year. The average share price on issue was £6.38 leading to an increase in the merger reserve of £56.6m in the period. In the year there were no share scheme options issued (31 March 2022: 11,665 with net proceeds £nil). Share capital Share premium 2023 £m 2022 £m 2023 £m 2022 £m Balance at 1 April 181.1 181.1 295.5 295.4 Issue of shares 10.5 – – 0.1 Balance at 31 March 191.6 181.1 295.5 295.5 21. OTHER RESERVES Other investment reserve £m Equity-settled share based payments £m Merger reserve £m Total £m Balance at 1 April 2021 2.1 22.3 8.7 33.1 Share based payments – 1.6 – 1.6 Issue of shares – – – – Recycled to retained earnings (2.1) – – (2.1) Balance at 31 March 2022 – 23.9 8.7 32.6 Share based payments – 1.4 – 1.4 Issue of shares (note 20) – – 56.6 56.6 Change in fair value 0.4 – – 0.4 Balance at 31 March 2023 0.4 25.3 65.3 91.0 In the prior year, the Group sold its investment in Excell Holdings Limited realising a gain recognised in previous periods which has been recycled to retained earnings. 22. INVESTMENT IN OWN SHARES The Company has an Employee Share Ownership Trust (‘ESOT’) and a trust for the Share Incentive Plan (‘SIP’). Shares are purchased in the market for distribution at a later date in accordance with the terms of the various share schemes. The shares are held by independent trustees. At 31 March 2023, the number of shares held by the ESOT totalled 75,226 (2022: 75,226). The SIP is governed by HMRC rules (note 23). At 31 March 2023, the number of shares held for the SIP totalled 77,324 (2022: 86,887). 2023 £m 2022 £m Balance at 1 April 9.9 9.6 Shares purchased for the trusts – 0.3 Balance at 31 March 9.9 9.9 23. SHARE BASED PAYMENTS The Group operates a number of share schemes: (a) Long Term Incentive Plan (‘LTIP’) The LTIP scheme is a performance award scheme whereby shares are issued against Group performance measures which are assessed over the three-year vesting period. The performance measures are: – Relative TSR – Total Property Return compared to the IPD benchmark The shares are issued at nil cost to the individuals provided the performance conditions are met. Under the 2022 LTIP scheme, 848,199 performance shares were awarded in June 2022 to Directors and Senior Management (2021 LTIP scheme: 495,474 were awarded in June 2021 and 25,781 in November 2021). Details of the movements for the LTIP scheme during the year were as follows: LTIP Number At 1 April 2021 1,366,292 Granted 521,255 Exercised – Lapsed (500,681) At 31 March 2022 1,386,866 Granted 848,199 Exercised – Lapsed (470,877) At 31 March 2023 1,764,188 246 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED 23. SHARE BASED PAYMENTS CONTINUED (a) Long Term Incentive Plan (‘LTIP’) continued The 2019 LTIP scheme was due to vest in June 2022 but did not, therefore, no shares were exercised during the year. The average closing share price at the date of exercise of shares exercised during the year was therefore £nil (2018 LTIP scheme: £nil). A binomial model was used to determine the fair value of the LTIP grant for the Relative TSR element of the schemes. Assumptions used in the model were as follows: 202 2 LTIP November 202 1 LTIP June 2021 LTIP 2020 LTIP 2019 LTIP Share price at grant 642p 841p 842p 706p 862p Exercise price Nil Nil Nil Nil Nil Average expected life (years) 3 3 3 3 3 Risk-free rate 1.96% 0.49% 0.16% 0.61% 0.52% Average share price volatility 41.5% 42.6% 39.5% 35% 21% Correlation 46% 47% 45% 46% 49% TSR starting factor 0.85 1.14 1.11 0.65 0.92 Fair value per option – Relative TSR element 333p 446p 475p 207p 322p The Total Property Return compared to the IPD benchmark is a non-market based condition and the intrinsic value is therefore the share price at date of grant of 642p for the 2022 LTIP Scheme in June. At each balance sheet date, the Directors will assess the likelihood of meeting the conditions under this element of the scheme. The impact of the revision to original estimates, if any, is recognised in the income statement with a corresponding adjustment to equity. The assessment at year end for the 2022 LTIP Scheme was that 75% of the Total Property Return element will vest (LTIP 2021: 50%, LTIP 2020: 100%). The expected Workspace share price volatility was determined by taking account of the daily share price movement over a three-year period. The respective FTSE 250 Real Estate share price volatility and correlations were also determined over the same period. Assessment is made of any vesting conditions to categorise these into market performance conditions, non-market performance conditions and service conditions to value equity-settled transactions. The risk-free rate has been determined from market yield curves for government zero-coupon bonds with outstanding terms equal to the average expected term to exercise for each relevant grant. (b) Employee share option schemes The Group operates a Save As You Earn (‘SAYE’) share option scheme. Grants under the SAYE scheme are normally exercisable after three or ﬁve years’ saving. In accordance with UK practice, the majority of options under the SAYE schemes are granted at a price 20% below the market price ruling at the date of grant. Details of the movements for the SAYE schemes during the year were as follows: SAYE Options outstanding Number Weighted exercise price At 1 April 2021 363,849 £5.60 Options granted 46,554 £6.70 Options exercised (11,665) £7.44 Options lapsed (71,357) £5.78 At 31 March 2022 327,381 £5.65 Options granted 132,890 £5.59 Options exercised – – Options lapsed (173,364) £5.75 At 31 March 2023 286,907 £5.56 The average closing share price at the date of exercise for the SAYE options exercised (for the three-year 2019 and the ﬁve-year 2017 schemes) during the year was not applicable because no shares were exercised (2022: £8.69). The fair value has been calculated using the Black-Scholes model. Inputs to the model are summarised as follows: 2023 SAYE 3 year 2023 SAYE 5 year 2022 SAYE 3 year 2022 SAYE 5 year Weighted average share price at grant 559p 559p 846p 846p Exercise price 508p 508p 670p 670p Expected volatility 41% 34% 38% 35% Average expected life (years) 3 5 3 5 Risk free rate 2% 2% 0% 0% Expected dividend yield 4% 4% 2% 2% Possibility of ceasing employment before vesting 25% 25% 25% 25% The expected life is the average expected period to exercise. The risk free rate of return is the yield on zero-coupon UK Government bonds of a term consistent with the assumed option life. The expected dividend yield is based on the present value of expected future dividend payments to expiry. 247 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED 23. SHARE BASED PAYMENTS CONTINUED (b) Employee share option schemes continued Fair values per share of these options were: 2023 2022 Grant date Fair value of award Grant date Fair value of award SAYE – three year 27 July 2022 144p 23 July 2021 261p SAYE – ﬁve year 27 July 2022 136p 23 July 2021 261p (c) Share Incentive Plan (‘SIP’) All sta wAll staff were granted £1,000 worth of shares in September 2015, £2,000 in August 2017, £2,000 in September 2019 and £2,000 in September 2021. These shares are held in trust under an HMRC-approved SIP. The shares can be exercised following three years of employment but must be held for a further two years in order to qualify for tax advantages. No shares were granted in the year (2022: 52,170), 15,259 (2022: 6,124) shares were exercised in the year and 9,619 (2022: 9,587) shares lapsed. (d) Year-end summary At 31 March 2023, in total there were 2,111,777 (2022: 1,850,331) share awards/options exercisable on the Company’s ordinary share capital. These are analysed below: Date of grant Exercise price Ordinary shares Number Vested and exercisable Exercisable between LTIP 18 June 2020 – 519,141 – 18.06.2023 – 18 June 2021 – 469,238 – 18.06.2024 – 24 June 2022 – 775,810 – 24.06.2025 – SAYE 26 July 2018 – ﬁve year £8.60 – – 01.09.2023 01.03.2024 25 July 2019 – ﬁve year £ 7.02 – – 01.09.2024 01.03.2025 27 July 2020 – three year £5.31 135,193 – 01.09.2023 01.03.2024 27 July 2020 – ﬁve year £5.31 7,116 – 01.09.2025 01.03.2026 23 July 2021 – three year £6.70 27,813 – 01.09.2024 01.03.2025 23 July 2021 – ﬁve year £6.70 894 – 01.09.2026 01.03.2027 27 July 2022 – three year £5.59 96,230 – 01.09.2025 01.03.2026 27 July 2022 – ﬁve year £5.59 19,661 – 01.09.2027 01.03.2028 SIP 5 September 2019 1 – 21,436 21,436 05.09.2022 – 29 September 2021 1 – 39,245 – 29.09.2024 – Total 2,111,777 21,436 1. The number of ordinary shares in the SIP scheme does not include 16,643 unallocated shares. The share awards/options outstanding at 31 March 2023 had a weighted average remaining contractual life of: LTIP – 1.4 years (2022: 1.3 years), SAYE – 1.5 years (2022: 1.4 years), SIP – 1.0 year (2022: 1.1 years). (e) Cash-settled share based payments National Insurance payments due on the exercise of non-approved ESOS options and shares from the LTIP are considered cash-settled share based payments. The estimated fair value of the National Insurance cash-settled share based payments have been calculated using the share price at the balance sheet date. At each balance sheet date, the Group revises its estimates of the number of options that are expected to vest. It recognises the impact of the revision to original estimates, if any, in the income statement. (f) Share based payment charges The Group recognised a total charge in relation to share based payments as follows: 2023 £m 2022 £m Equity-settled share based payments 1.4 1.6 Cash-settled share based payments – – 1.4 1.6 The total liability at the end of the year in respect of cash-settled share based schemes was £0.3m (2022: £0.4m). 248 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED 24. PENSIONS The Group operates a deﬁned contribution pension scheme. The assets of the scheme are held separately from those of the Group in an independently administered fund. The pension cost charge for this scheme in the year was £1.0m (2022: £0.8m) representing contributions payable by the Group to the fund and is charged through trading proﬁt. The Group’s commitment with regard to pension contributions, consistent with the prior year, ranges from 6.0% to 16.5% of an employee’s salary. The pension scheme is open to every employee in accordance with the Government auto-enrolment rules. The number of employees, including Directors, in the scheme at the year end was 261 (2022: 238). As part of the McKay Securities Limited (formerly McKay Securities PLC) acquisition in May 2022 the Group became liable for the existing McKay deﬁned beneﬁt pension scheme. Subsequent to this, on 12 October 2022, the Group entered into a pension buy-out transaction whereby an insurance company took on all current and future liabilities of the scheme in exchange for the assets of the scheme, valued at £5.4m at that date, and a cash contribution from the Company of £1.3m. The scheme had a deﬁcit of £0.3m at the half year with the excess settlement charge of £0.9m included within other expenses in the consolidated statement of comprehensive income. The scheme is currently being wound up with completion expected within the next few months. 25. RELATED PARTY TRANSACTIONS Key management for the purposes of related party disclosure under IAS 24 are taken to be the Executive Board Directors, the non-Board Executive Directors and the Non-Executive Directors. Key management compensation is set out below: Key management compensation: 2023 £m 2022 £m Short-term employee beneﬁts 5.7 4.7 Total 5.7 4.7 26. CAPITAL COMMITMENTS At the year end the estimated amounts of contractual commitments for future capital expenditure not provided for were: 2023 £m 2022 £m Investment property construction 34.4 4.6 For both current and prior period, there were no material obligations for the repair or maintenance of investment properties. All material contracts for enhancement are included in the capital commitments. 27. SUBSIDIARY AND OTHER RELATED UNDERTAKINGS The Company’s subsidiary and other related undertakings at 31 March 2023, and up to the date of signing the ﬁnancial statements, are listed below. Except where indicated otherwise, the Company owns 100% of the ordinary share capital of the following subsidiary undertakings incorporated and operating in the UK, all of which are consolidated in the Group’s ﬁnancial statements. UK subsidiaries The registered address of all UK subsidiaries is Canterbury Court, Kennington Park, 1-3 Brixton Road, London SW9 6DE. Name Company Number Nature of business Workspace 12 Limited 05764838 Property Investment Workspace 13 Limited 05834824 Property Investment Workspace 14 Limited 05834831 Property Investment Omnibus Workspace Limited 1,3 01444827 Non-trading United Workspace Limited 1,3 01749661 Non-trading Busworks Limited 1, 3 04108036 Holding Company Workspace Glebe Limited 3 05834811 Non-trading Glebe Three Limited 3 05830231 Non-trading LI Property Services Limited 3 02134039 Insurance Agents Workspace Management Limited 02841232 Property Management Workspace 1 Limited 03726272 Dormant Workspace 10 Limited 02985018 Dormant Workspace 11 Limited 05764848 Dormant Workspace 15 Limited 05834840 Dormant Workspace Holdings Limited 3 03729646 Non-trading Anyspacedirect.co.uk Limited 3 07117982 Non-trading Workspace Newco 1 Limited 10195676 Dormant Workspace Newco 2 Limited 10195681 Dormant McKay Securities Limited 2 00421479 Property Investment Baldwin House Limited 2,3 00692181 Non-trading Workspace Projects (KP) Limited 14186009 Property Investment 1. 100% of the ordinary share capital of this subsidiary is held by other Group companies. 2. McKay Securities Limited (formerly McKay Securities PLC) and Baldwin House Limited were acquired on 6 May 2022. 3. The following subsidiary undertakings are exempt from the Companies Act 2006 requirements relating to the audit of their individual accounts by virtue of Section 479A of the Act as Workspace Group PLC has guaranteed the subsidiary companies under Section 479C of the Act. 249 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED 27. SUBSIDIARY AND OTHER RELATED UNDERTAKINGS CONTINUED Non-UK subsidiaries Name Country of incorporation Registered address Nature of business Workspace 16 (Jersey) Limited Jersey Gaspé House, 66-72 The Esplanade, St Helier, Jersey JE2 3QT Non-trading Workspace 17 (Jersey) Limited Jersey 44 Esplanade, St Helier, Jersey JE4 9WQ Holding Company Workspace Salisbury Limited 1 Jersey 44 Esplanade, St Helier, Jersey JE4 9WQ Property Investment Centro Property Limited 1 Guernsey Martello Court, Admiral Park, St Peter Port, Guernsey GY1 3HB Non-trading Stamfordham Road (IOM) Limited 1 Isle of Man 33-37 Athol Street, Douglas, Isle of Man, IM1 1LB Non-trading 1. 100% of the ordinary share capital of these subsidiaries is held by other Group companies. 28. LEASES The majority of the Group’s tenant leases are granted with a rolling three to six-month tenant break clause, although property acquisitions have included customer leases which are much longer, with fewer break clauses. The future minimum rental income under leases granted to tenants are shown below. Land and buildings: 2023 £m 2022 £m Within one year 85.0 61.1 Between one and two years 28.4 15.9 Between two and three years 16.3 9.6 Between three and four years 9.5 6.5 Between four and ﬁve years 8.0 4.4 Beyond ﬁve years 18.4 13.3 165.6 110.8 29. POST BALANCE SHEET EVENTS On 16 May 2023 the Group announced the exchange for sale of ﬁve light industrial and logistics properties in the South East of England for a total consideration of £82.0m. The sale price is in line with the 31 March 2023 valuation and is at a net initial yield of 4.5%. 250 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED Notes 2023 £m 2022 £m Fixed assets Investments C 1,313.2 929.8 1,313.2 929.8 Current assets Debtors: amounts falling due within one year D 534.1 439.1 Cash and cash equivalents 7.0 34.3 541.1 473.4 Total assets 1,854.3 1,403.2 Current liabilities Creditors: amounts falling due within one year E (255.2) (168.9) Borrowings F (50.0) – (305.2) (168.9) Creditors: amounts falling due after more than one year Borrowings F (719.4) (595.5) Total liabilities (1,024.6) (764.4) Net assets 829.7 638.8 Capital and reserves Share capital 191.6 181.1 Share premium 295.6 295.6 Investment in own shares (9.9) (9.9) Other reserves G 90.6 32.6 Retained earnings 1 261.8 139.4 Total shareholders’ equity 829.7 638.8 1. Retained earnings for the Company include proﬁt for the year of £166.3m (2022: £7.5m loss). The notes on pages 252 to 254 form part of these ﬁnancial statements. The ﬁnancial statements on pages 251 to 254 were approved by the Board of Directors on 6 June 2023 and signed on its behalf by: Graham Clemett Dave Benson Director Director Workspace Group PLC Registered number 02041612 PARENT COMPANY BALANCE SHEET AS AT 31 MARCH 2023 251 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information A. ACCOUNTING POLICIES These ﬁnancial statements were prepared in accordance with Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (‘FRS 101’). Basis of accounting The ﬁnancial statements are prepared and approved by the Directors on a going concern basis under the historical cost convention and in accordance with Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (‘FRS 101’). In preparing these ﬁnancial statements, the Company applies the recognition, measurement and disclosure requirements of UK-adopted international accounting standards (‘Adopted IFRSs’), but makes amendments where necessary in order to comply with Companies Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions has been taken. The ﬁnancial statements are presented in Sterling. a) The requirements of IAS 7 to provide a statement of cash ﬂows and related notes for the year. b) The requirements of IAS 1 to provide a statement of compliance with IFRS. c) The requirements of IAS 1 to disclose information on the management of capital. d) The requirements of paragraphs 30 and 31 of IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ to disclose new IFRSs that have been issued but are not yet eective. e) The requirements in IAS 24 ‘Related Party Disclosures’ to disclose related party transactions entered into between two or more members of a Group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member. f) The requirements of IFRS 7 on ﬁnancial instruments disclosures. g) The requirements of paragraphs 91-99 of IFRS 13 ‘Fair Value Measurement’ to disclose information of fair value valuation techniques and inputs. The above disclosure exemptions are allowed because equivalent disclosures are included in the Group’s consolidated ﬁnancial statements. NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2023 Share capital £m Share premium £m Investment in own shares £m Other reserves £m Retained earnings £m Total share- holders’ equity £m Balance at 31 March 2021 181.1 295.6 (9.6) 31.0 191.7 689.8 Loss for the year – – – – (7.5) (7.5) Total comprehensive loss – – – – (7.5) (7.5) Transactions with owners: Dividends paid – – – – (44.8) (44.8) Own shares – – (0.3) – – (0.3) Share based payments – – – 1.6 – 1.6 Balance at 31 March 2022 181.1 295.6 (9.9) 32.6 139.4 638.8 Proﬁt for the year – – – – 166.3 166.3 Total comprehensive income – – – – 166.3 166.3 Transactions with owners: Shares issued 10.5 – – 56.6 – 67.1 Dividends paid – – – – (43.9) (43.9) Share based payments – – – 1.4 – 1.4 Balance at 31 March 2023 191.6 295.6 (9.9) 90.6 261.8 829.7 The notes on pages 252 to 254 form part of these ﬁnancial statements. PARENT COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2023 252 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information B. PROFIT FOR THE YEAR As permitted by the exemption in Section 408 of the Companies Act 2006, the proﬁt and loss account of the Company is not presented as part of these ﬁnancial statements. The proﬁt attributable to shareholders, before dividend payments, is £166.3m (2022: £7.5m loss). £179.5m were received in the year from subsidiary undertakings (2022: nil). Dividend payments are disclosed in note 7 to the consolidated ﬁnancial statements. C. INVESTMENTS Investment in subsidiary undertakings £m Cost Balance at 31 March 2022 1,064.1 Additions in the year 383.4 Balance at 31 March 2023 1,447.5 Impairment Balance at 31 March 2022 and 31 March 2023 134.3 Net book value at 31 March 2023 1,313.2 Net book value at 31 March 2022 929.8 An impairment test has performed at the year end by comparing the carrying amount of 100% of investments with the relevant subsidiary ﬁnancial information to identify whether their net assets, being an approximation of their recoverable amount, are in excess of their carrying amount. D. DEBTORS Amounts falling due within one year 2023 £m 2022 £m Amounts owed by Group undertakings 533.5 438.0 Corporation tax asset 0.6 1.1 534.1 439.1 Amounts owed by Group undertakings are unsecured and repayable on demand. Interest is charged to Group undertakings. At the balance sheet date, there is no expectation of any material credit losses on accounts owed by Group undertakings. A. ACCOUNTING POLICIES CONTINUED Signiﬁcant accounting policies i. Investments Investments are carried in the Company’s balance sheet at cost less impairment. Impairment reviews are performed by the Directors when there has been an indication of potential impairment. Impairment and reversal of impairment is taken to the proﬁt and loss account. ii. Share based payment and investment in own shares Incentives are provided to employees under share option schemes. The Company has established an Employee Share Ownership Trust (‘ESOT’) to satisfy part of its obligation to provide shares when Group employees exercise their options. The Company provides funding to the ESOT to purchase these shares. The Company has also established an employee Share Incentive Plan (‘SIP’) which is governed by HMRC rules. The Company itself has no employees. When the Company grants share options to Group employees as part of their remuneration, the expense of the share options is reﬂected in a subsidiary undertaking, Workspace Management Limited. The Company recognises this as an investment in subsidiary undertakings with a corresponding increase to equity. The disclosure requirements for share based payments are met in note 23 of the Group’s consolidated ﬁnancial statements. iii. Borrowings Details of borrowings are described in note F to the Parent Company ﬁnancial statements. Costs associated with the raising of ﬁnance are capitalised, amortised over the life of the instrument and charged as part of interest costs. Taxation Current income tax is tax payable on the taxable income for the year and any prior year adjustment, and is calculated using tax rates that are relevant to the ﬁnancial year. Deferred tax is provided in full on temporary dierences between the tax base of an asset or liability and its carrying amount in the balance sheet. Deferred tax is determined using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised when it is probable that taxable proﬁts will be available against which the deferred tax asset can be utilised. Dividend distributions Final dividend distributions to the Company’s shareholders are recognised as a liability in the Group’s ﬁnancial statements in the period in which the dividends are approved, while interim dividends are recognised when paid. 253 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED E. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR 2023 £m 2022 £m Amounts owed to Group undertakings 250.8 165.0 Withholding tax 1.9 1.5 Accruals and deferred income 2.5 2.4 255.2 168.9 Amounts owed to Group undertakings are unsecured and repayable on demand. Interest is paid to Group undertakings. F. BORROWINGS Borrowings and ﬁnancial instruments Interest rate Repayable 2023 £m 2022 £m Creditors: amounts falling due within one year Bank overdraft due within one year or on demand Base + 2.25% On demand – – Bank Loan SONIA + 1.75% 1 September 2023 50.0 – Creditors: amounts falling due after more than one year 3.07% Senior Notes 3.07% August 2025 80.0 80.0 3.19% Senior Notes 3.19% August 2027 120.0 120.0 3.6% Senior Notes 3.60% January 2029 100.0 100.0 Bank Loan SONIA + 1.77% 2 December 2025 123.0 – Green Bond 2.25% March 2028 300.0 300.0 Total borrowings 773.0 600.0 Less cost of raising ﬁnance (3.6) (4.5) Foreign exchange dierences – – Net borrowings 769.4 595.5 1. This is an average over the life of the debt. The margin increases from 1.5% to 2.0% over the facility availability period. 2. The base margin is dependent upon the LTV as reported in the client certiﬁcate, which is submitted twice a year. The maximum margin is 2.15%. The base margin can be adjusted further by up to 4.5bps dependent upon achievement of three ESG-linked metrics. All the above borrowings are unsecured. Maturity analysis of borrowings: 2023 £m 2022 £m Repayable within one year 50.0 – Repayable between one and two years – – Repayable between two and three years 203.0 – Repayable between three and four years – 80.0 Repayable between four and ﬁve years 420.0 80.0 Repayable in ﬁve years or more 100.0 440.0 773.0 600.0 G. CAPITAL AND RESERVES Movements and notes applicable to share capital, share premium account, investment in own shares, other reserves and share based payment reserve are shown in notes 20 to 23 on pages 246 to 248 and in the statement of changes in equity. Other reserves: Equity-settled share based payments £m Merger reserve £m Total £m Balance at 31 March 2021 22.3 8.7 31.0 Share based payments 1.6 – 1.6 Balance at 31 March 2022 23.9 8.7 32.6 Share based payments 1.4 – 1.4 Issue of shares – 56.6 56.6 Balance at 31 March 2023 25.3 65.3 90.6 254 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED 31 March 2023 £m 31 March 2022 £m 31 March 2021 £m 31 March 2020 £m 31 March 2019 £m Rents receivable 136.7 104.3 118.0 132.7 123.7 Service charges and other income 37.5 28.6 24.3 28.7 25.7 Revenue 174.2 132.9 142.3 161.4 149.4 Trading proﬁt before interest 95.1 67.4 62.5 104.3 93.9 Net interest payable 1 (34.4) (20.5) (23.8) (23.3) (21.5) Trading proﬁt after interest 60.7 46.9 38.7 81.0 72.4 Proﬁt/(loss) before taxation (37.5) 124.0 (235.7) 72.5 137.3 Proﬁt/(loss) after taxation (37.8) 123.9 (235.7) 72.1 137.3 Basic earnings/(loss) per share (19.9)p 68.2p (130.3)p 40.0p 78.9p Dividends per share 25.8p 21.5p 17.75p 36.16p 32.87p Dividends (total) 49.4 40.6 32.1 65.4 59.3 Investment properties 2,643.3 2,366.7 2,349.9 2,586.3 2,591.4 Other assets less liabilities 46.4 (9.4) (65.5) (47.1) (29.2) Net debt (902.0) (557.7) (564.9) (541.2) (580.2) Net assets 1,787.7 1,799.6 1,719.5 1,998.0 1,982.0 Gearing 50% 31% 33% 27% 29% Loan to value 33% 23% 24% 21% 22% EPRA Net Tangible Assets (NTA) £9.27 £9.88 £9.38 £10.88 £10.85 1. Excludes exceptional items. 31 March 2023 £m 31 March 2022 £m 31 March 2021 £m 31 March 2020 £m 31 March 2019 £m Workspace Group: Number of estates 86 57 58 59 64 Lettable ﬂoorspace (million sq. ft.) 5.2 4.0 3.9 3.9 3.9 Number of lettable units 4,910 4,482 4,196 4,009 4,796 Average unit size (sq. ft.) 1,065 844 942 922 975 Rent roll of occupied units £140.1m £111.0m £103.9m £132.8m £127.5m Overall rent per sq. ft. £32.86 £33.26 £33.90 £39.18 £38.45 Overall occupancy 81.50% 84.3% 77.8% 87.0% 84.8% Enquiries (number) 10,563 11,007 8,870 13,041 12,575 Lettings (number) 1,312 1,520 1,146 1,454 1,238 EPRA Measures EPRA Earnings per share 29.4p 26.2p 21.3p 44.5p 40.3p EPRA Net Tangible Asset per share £9.27 £9.88 £9.38 £10.88 £10.85 255 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information FIVE-YEAR PERFORMANCE (UNAUDITED) 2019–2023 PERFORMANCE METRICS (UNAUDITED) Property name Postcode Category Lettable ﬂoor area sq. ft. Net rent roll of occupied units £ Ancells Road GU51 2UN Acquisitions 34,577 422,979 Archer Street Studios W1D 7AZ Like-for-like 14,984 854,489 Ashcombe House KT22 8LQ Acquisitions 17,452 148,468 Barley Mow Centre W4 4PH Refurbishment 77,995 1,856,864 Blackthorne Road SL3 0AH Acquisitions 73,507 814,741 Brickﬁelds E2 8HD Like-for-like 56,755 2,236,916 Brunel Road RG7 4XE Acquisitions 135,094 1,361,312 Building 329 RG12 8PE Acquisitions 32,516 547,097 Busworks N7 9DP Refurbishment 104,571 1,280,589 Canalot Studios W10 5BN Like-for-like 48,030 1,173,776 Cannon Wharf SE8 5EN Like-for-like 32,619 608,021 Cargo Works SE1 9PG Like-for-like 65,942 3,277,690 Castle Lane SW1E 6DR Acquisitions 14,254 796,923 Centro Buildings NW1 0DU Like-for-like 203,183 8,329,087 China Works SE1 7SJ Like-for-like 68,809 2,225,162 Chiswick Studios W4 5PY Like-for-like 11,378 375,441 Chocolate Factory (part) N22 6XJ Refurbishment 28,752 493,928 Clerkenwell Workshops EC1R 0AT Like-for-like 52,879 2,393,340 Columbia House GU14 0GT Acquisitions 40,756 660,000 Corinthian House CR0 2BX Acquisitions 43,749 647,426 Crown Square GU21 6HR Acquisitions 47,97 1 668,778 Cygnet House TW18 4RH Acquisitions 3,437 76,727 E1 Studios E1 1DU Like-for-like 40,430 913,514 East London Works E1 1DU Like-for-like 38,333 936,022 Edinburgh House SE11 5DP Like-for-like 64,513 2,578,617 Evergreen Studios TW9 1QE Acquisitions 17,323 920,000 Exmouth House EC1R 0JH Like-for-like 51,106 2,531,786 Five Acre Site CT19 5DR Acquisitions 60,536 327,489 160 Fleet Street EC4A 2DQ Refurbishment 42,566 1,458,694 Fuel Tank SE8 3DX Like-for-like 35,189 702,685 Property name Postcode Category Lettable ﬂoor area sq. ft. Net rent roll of occupied units £ Gainsborough House SL4 1TX Acquisitions 18,661 548,417 338 Goswell Road EC1V 7LQ Like-for-like 41,490 1,952,558 Grand Union Studios W10 5AD Like-for-like 62,958 1,742,997 60 Gray’s Inn Road WC1X 8AQ Like-for-like 36,139 1,918,031 9 Greyfriars Road RG1 1NU Acquisitions 38,493 918,503 20-30 Greyfriars Road RG1 1NL Acquisitions 33,344 586,000 Havelock Terrace SW8 4AS Refurbishment 58,164 1,252,217 Ink Rooms WC1X 0DS Like-for-like 22,235 887,176 Kennington Park SW9 6DE Like-for-like 348,879 10,088,945 Leroy House N1 3QP Refurbishment 0 0 Lock Studios E3 3YD Redevelopment 54,237 1,060,164 Lower Cherwell Street OX16 5AY Acquisitions 40,060 277,498 Mallard Court TW18 4RH Acquisitions 22,176 335,058 Mare Street Studios E8 3QE Refurbishment 54,863 1,419,496 Metal Box Factory SE1 0HS Like-for-like 106,316 6,433,969 Mirror Works E15 2NH Redevelopment 39,669 668,478 Morie Street SW18 1SL Like-for-like 21,707 445,183 Oakwood Trade Park RH10 9AZ Acquisitions 51,834 838,924 Pall Mall Deposit W10 6BL Refurbishment 60,092 1,373,871 Parkhall Business Centre SE21 8EN Refurbishment 122,665 1,967,982 Parma House / Chocolate Factory N22 6XF Redevelopment 34,983 179,660 Peer House WC1X 8LZ Like-for-like 9,739 272,663 Pegasus Place RH10 9AY Acquisitions 50,544 1,128,060 Pill Box E2 6GG Like-for-like 50,409 1,133,569 Poplar Business Park E14 9RL Like-for-like 65,178 1,030,806 Portsoken House EC3N 1LJ Acquisitions 49,640 1,604,519 Prospero House RH1 1LP Acquisitions 48,934 1,208,782 Q West TW8 0GP Redevelopment 54,960 610,119 Rainbow Industrial Park (Part) SW20 0JK Like-for-like 21,180 428,461 Rainbow Industrial Park (Phase 2) SW20 0JK Redevelopment 89,934 250,707 256 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information PROPERTY PORTFOLIO 2023 (UNAUDITED) Property name Postcode Category Lettable ﬂoor area sq. ft. Net rent roll of occupied units £ Rivergate House RG14 2PZ Acquisitions 61,396 1,244,886 Riverside (Commercial) SW18 4UQ Refurbishment 43,000 0 Salisbury House EC2M 5QQ Like-for-like 215,594 10,555,322 ScreenWorks N5 2EF Like-for-like 63,974 2,116,254 Sopwith Drive KT13 0UZ Acquisitions 62,198 0 Swan Court SW19 4JS Acquisitions 57,543 1,679,741 The Switchback SL6 7RJ Acquisitions 36,817 715,629 The Biscuit Factory (Cocoa Studios) SE16 4DG Like-for-like 39,298 1,045,538 The Biscuit Factory (Part) SE16 4DG Like-for-like 122,724 2,184,430 The Biscuit Factory (J Block) SE16 4DG Refurbishment 83,811 1,240,566 The Frames EC2A 4PS Like-for-like 51,864 3,099,879 The Leather Market SE1 3ER Like-for-like 146,925 5,069,539 The Light Box W4 5PY Like-for-like 74,135 1,780,953 The Light Bulb (part) SW18 4GQ Like-for-like 52,699 1,218,489 The Light Bulb (Phase 2) SW18 4WW Redevelopment 17,226 317,091 The Mille TW8 9DW Acquisitions 96,698 2,085,628 The Planets GU21 6HR Acquisitions 98,255 0 Three Acre Site CT19 5FG Acquisitions 44,300 349,525 Old Dairy EC2A 4HT Refurbishment 56,983 2,180,261 The Print Rooms SE1 0LH Like-for-like 45,622 2,457,785 The Record Hall EC1N 7RJ Like-for-like 57,015 3,011,278 The Shaftesbury Centre W10 6BN Like-for-like 12,627 261,912 The Shepherds Building W14 0DA Like-for-like 141,805 5,222,800 Thurston Road SE13 7SH Redevelopment 7,133 123,033 Vox Studios SE11 5JH Like-for-like 106,944 4,214,705 Wenlock Studios N1 7EU Refurbishment 30,939 921,189 Westbourne Studios W10 5JJ Refurbishment 56,756 1,775,290 Willoughby Road RG12 8FB Acquisitions 54,157 594,947 66 Wilson Street EC2A 2BT Acquisitions 11,893 461,472 257 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information PROPERTY PORTFOLIO 2023 (UNAUDITED) CONTINUED Earnings per share (‘EPS’) is the proﬁt after taxation divided by the weighted average number of shares in issue during the period. Employee Share Ownership Trust (‘ESOT’) is the trust created by the Group to hold shares pending exercise of employee share options. EPRA EPS is a deﬁnition of earnings per share as set out by the European Public Real Estate Association (‘EPRA’). It is based on operating earnings where proﬁt before tax is adjusted to exclude the impact of any changes in property valuation, gains or losses on property disposals and fair value movements. EPRA Net Asset Value (‘EPRA NAV’) is a deﬁnition of net asset value as set out by EPRA. It is adjusted to include investment properties at fair value and to exclude certain items not expected to crystallise in a long- term investment property business model. EPRA Net Reinstatement Value (‘EPRA NRV’) represents the value required to rebuild an entity, assuming that no asset sales takes place. Assets and liabilities that are not expected to crystallise in normal circumstances, such as fair value movements on derivatives and deferred tax on property valuation movements, are excluded. EPRA Net Tangible Assets (‘EPRA NTA’) focuses on a company’s tangible assets and assumes that entities buy and sell assets, thereby crystallising certain levels of unavoidable deferred tax. EPRA Net Disposal Value (‘EPRA NDV’) represents the shareholders’ value under a disposal scenario, where deferred tax, ﬁnancial instruments and certain other adjustments are calculated to the full extent of their liability, net of any resulting tax. Like-for-like are those properties with stabilised occupancy, excluding recent acquisitions and buildings impacted by signiﬁcant refurbishment or redevelopment activity. Loan to Value (‘LTV’) is net debt divided by the current value of properties owned by the Group as valued by CBRE. LMA is the Loan Market Association. MSCI IPD MSC Inc is a company that produces independent benchmarks of property returns under the brand IPD. Net Asset Value per share (‘NAV’) is net assets divided by the number of shares at the period end. Net debt is the amount drawn on bank and other loan facilities, including overdrafts, less cash deposits. This excludes any foreign exchange movements. Net rents are rents excluding any contracted increases and after deduction of inclusive service charge revenue. Occupancy is the area of space let divided by the total net lettable area (excluding land used for open storage) expressed as a percentage. Property Income Distribution (‘PID’) a dividend generally subject to withholding tax that a UK REIT is required to pay from its tax-exempted property rental business and which is taxable for UK resident shareholders at their marginal tax rate. REIT is a Real Estate Investment Trust as set out in the UK Finance Act 2006 Sections 106 and 107. REITs pay no corporation tax on proﬁts derived from their property rental business. Equivalent yield is a weighted average of the initial yield and reversionary yield and represents the return a property will produce based upon the timing of the occupancy of the property and timing of the income receivable. This is approximated by the reversionary yield multiplied by the Group trend occupancy of 90%. Estimated Rental Value (‘ERV’) or market rental value is the Group’s external valuers’ opinion as to the open market rent which, on the date of valuation, could reasonably be expected to be obtained on a new letting or rent review. Exceptional items are signiﬁcant items of income or expense that by virtue of their size, incidence or nature are shown separately on the consolidated income statement to enable a full understanding of the Group’s ﬁnancial performance. Gearing is the Group’s net debt as a percentage of net assets. Green Finance Framework is aligned with ICMA’s Green Bond Principles (2018 edition) and LMA’s Green Loan Principles (2021 edition) and addresses UN SDGs 7, 11, 12 and 13. The framework allows Workspace to issue a variety of GDIs and sets out the principles for the use and management of proceeds from GDIs. ICMA is the International Capital Market Association. Initial yield is the net rents generated by a property or by the portfolio as a whole expressed as a percentage of its valuation. Interest cover is the number of times net interest payable is covered by net rental income. Rent roll is the annualised net rent of occupied units for a property or portfolio of properties at a reporting date. Reversionary yield is the anticipated yield, which the initial yield will rise to once the rent reaches the estimated rental value. It is calculated by dividing the ERV by the valuation. SONIA is the Sterling Overnight Interbank Average Rate, an important interest benchmark administrated by the Bank of England. Total Accounting Return is the growth in absolute EPRA net asset per share plus dividends paid in the year as a percentage of the opening EPRA net asset value per share. Total Property Return (‘TPR’) is a percentage measure calculated by MSCI IPD and deﬁned in the MSCI Global Methodology for Real Estate Investment as the percentage of value change plus net income accrued relative to the capital employed. Total Shareholder Return (‘TSR’) is the growth in ordinary share price as quoted on the London Stock Exchange plus dividends per share received for the year, expressed as a percentage of the share price at the beginning of the year. Trading proﬁt after interest is net rental income, less administrative expenses and ﬁnance costs (excluding exceptional ﬁnance costs). UN SDGs is UN Sustainable Development Goals which are addressed in the Green Finance Framework. 258 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information GLOSSARY OF TERMS Registrar All general enquiries concerning ordinary shares in Workspace Group PLC should be addressed to: Computershare Investor Services PLC The Pavilions Bridgwater Road Bristol BS13 8AE Telephone: +44 (0)370 707 1413 Alternatively, shareholders can contact Computershare online via their free Investor Centre facility. Shareholders have the ability to set up or amend bank details for direct credit of dividend payments, amend address details, view payment history and access information on the Company’s share price. For more information or to register, please visit www.investorcentre.co.uk Website The Company has an investor website which holds, amongst other information, a copy of the latest Annual Report and Accounts, a list of properties held by the Group and copies of all press announcements. The site can be found at www.workspace.co.uk/investors Registered oce and headquarters Canterbury Court Kennington Park 1–3 Brixton Road London SW9 6DE Registered number: 2041612 Telephone: +44 (0)20 7138 3300 Facsimile: +44 (0)20 7247 0157 Web: www.workspace.co.uk Email: [email protected] Company Secretary Carmelina Carfora The Company’s advisers include: Independent auditors KPMG LLP 15 Canada Square London E14 5GL Solicitors Slaughter and May 1 Bunhill Row London EC1Y 8YY Clearing bankers NatWest 250 Bishopsgate London EC2M 4AA Joint stockbrokers JP Morgan 25 Bank Street London E14 5JP Stifel Nicolaus Europe Limited 150 Cheapside London EC2V 6ET FSC® certiﬁed paper Printed to the EMAS standard and its Environmental Management System certiﬁed to ISO 14001. This publication has been manufactured using 100% oshore wind electricity sourced from UK wind. 100% of the inks used are HP Indigo ElectroInk which complies with RoHS legislation and meets the chemical requirements of the Nordic Ecolabel (Nordic Swan) for printing companies, 95% of press chemicals are recycled for further use and, on average 99% of any waste associated with this production will be recycled and the remaining 1% used to generate energy. This document is printed on paper made of material from well-managed, FSC®-certiﬁed forests and other controlled sources. Designed and produced by Gather www.gather.london INVESTOR INFORMATION Workspace Group PLC Annual Report and Accounts 2023 Workspace Group PLC Canterbury Court Kennington Park 1–3 Brixton Road London SW9 6DE Telephone: +44 (0)20 7138 3300 Web: www.workspace.co.uk Email: [email protected] If you require information regarding business space in London, call +44 (0)20 7369 2390 or visit: www.workspace.co.uk

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