Annual Report • Mar 31, 2011
Annual Report
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Annual Report and Accounts 2011
| 2011 Highlights |
|---|
| What we do |
| Our Customers and Market |
| Focused on London |
| Chairman's Statement |
| Chief Executive's Strategic Review |
| Our Strategy in Action |
| Business Review |
| Key Statistics |
| Managing our Risks |
| Sustainability |
| The Board & Executive Committee |
| Discover More of our Business |
| Communities |
| 36 | Report of the Directors | |
|---|---|---|
| 38 | Corporate Governance Report | |
| 44 | Directors' Remuneration Report | |
| 53 | Directors' Responsibilities |
| 54 | Independent Auditors' Report |
|---|---|
| to the Members of Workspace | |
| Group PLC | |
| 55 | Consolidated Income Statement |
| 55 | Consolidated Statement of |
| Comprehensive Income | |
| 56 | Consolidated Balance Sheet |
| 57 | Consolidated Statement |
| of Changes in Equity | |
| 58 | Consolidated Statement |
| of Cash Flows | |
| 59 | Notes to the Financial Statements |
| 82 | Independent Auditors' Report |
| to the Members of Workspace | |
| Group PLC (Parent Company) | |
| 83 | Parent Company Balance Sheet |
| 84 | Notes to the Parent Company |
| Financial Statements | |
| 86 | Five Years Performance |
| 86 | Key Performance Indicators |
| 87 | Investor Information | |
|---|---|---|
| 88 | Glossary of Terms |
IBC Property portfolio IBC Find out more about Workspace
This Report is also available online: www.workspacegroupplc.co.uk/investors2011
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
| Shareholder Information | 87 – 88 |
What we do Workspace owns and manages space across London. We let this space to growing businesses on fl exible terms and provide our customers with a range of additional services.
By helping our customers succeed, we boost employment and support the creativity that will drive the UK economy forward. This, in turn, drives more demand for what we do.
OFFICES AND STUDIOS TO LET
020 7247 7614
We deliver high-quality service, allowing our customers to focus on growing their businesses.
By actively managing our properties to improve rents and occupancy, we receive a sustainable income stream.
We rent space on fl exible terms. A typical lease is for two to three years, with a three-month break clause. This enables customers to expand or contract as they need and allows us to redevelop sites, as we look to maximise their value.
Our properties are often in areas of medium-term regeneration, with scope for intensifi cation or change of use.
We create communities within our buildings, by bringing customers together so they can trade and collaborate. We also create communities within our brand, by linking customers between buildings and with non-tenant customers. These communities boost our customers' businesses and help us drive occupancy and rents, by increasing demand for our properties.
Our buildings and customers are also rooted in their local communities. We build links with these communities through local organisations and public bodies. We often have a cluster of buildings in a particular area, making Workspace and our customers an important part of the locality.
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
| Shareholder Information | 87 – 88 |
Our service quality, the fl exibility of our offering and our marketing efforts have given us a strong and widely recognised brand.
We leverage this brand by understanding our customers' evolving needs and developing new services, on our own or with partners. Our core skills also allow us to create value by providing services to third parties.
Sustainability is part of our everyday approach. Workspace helps businesses to fl ourish, creating employment and boosting the economy in their local areas.
We also reuse old buildings, carefully manage our environmental footprint and work with our customers and partners to reduce their environmental impact.
A typical Workspace lease 3 break clause is three months
03
Our market is small and medium-sized enterprises (SMEs) in London. Our 4,000 customers are typically growing businesses, owned and led by entrepreneurs and employing around 30,000 people.
A typical Workspace customer has fewer than 20 staff and stays with us for four to six years. They refl ect the diversity of London's economy and many are in the creative industries, which are a key contributor to economic growth.
A typical customer:
stays with us 4-6 for 4-6 years
Many of our customers are run by serial or portfolio entrepreneurs and as growing businesses develop, they often split into new businesses, creating more demand for us.
Our market is also highly fragmented and not well served by traditional landlords. We have the scale to be effi cient, compete effectively and offer fl exibility to our customers. This scale is a barrier to entry, as competitors would fi nd it diffi cult to build a portfolio that matched ours.
The
ongoing
Industry sector % of customers (by number)
14%
15% Business and Professional
We understand growing businesses and have structured our offering to their needs, giving us a strong position in an attractive and dynamic market.
5%
19%
Manufacturing
Wholesale and Retail
Health and Social Work
4% Construction
19% Other Sectors
Information and Communication
Focused on London London is the prime driver of UK economic growth and a global hub for business and culture. With 160-180,000 SMEs, London has the UK's densest, most-diverse and most-active population of fast-growing businesses. This makes it the most attractive part of the SME market and gives us ample scope to expand.
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
| Shareholder Information | 87 – 88 |
This was a year of good progress for Workspace Group across a number of fronts. We delivered a strong operational performance, added value to the estate through active asset management, built on our brand strength, refi nanced much of our debt and created a new joint venture with BlackRock to add further growth potential. This success was refl ected in the reported growth in profi t and net asset value per share and lower gearing.
Workspace has great assets, comprehensive systems, outstanding customer relationships and a valuable brand. We have also shown that our business model positions us well, benefi ting us during upturns in the London market and proving resilient operationally when market conditions are diffi cult. Operational cash fl ow has been remarkably consistent, ensuring dividends have been maintained throughout the recent downturn.
I will be retiring as Chairman at the next Annual General Meeting, after more than eight years in the role. Strong governance is a guiding principle at Workspace and the recruitment of my successor was conducted by Bernard Cragg, our Senior Independent Director. I am delighted to be handing over a Group in robust shape to my very capable and experienced successor, Daniel Kitchen. Danny has had extensive experience in the property industry and is currently Non-Executive Chairman of Irish Nationwide Building Society and a Non-Executive Director of Minerva PLC, LXB Retail Properties PLC and Kingspan Group PLC. During the year the Board also welcomed Jamie Hopkins, who joined on 7 June 2010 as a Non-Executive Director, replacing Rupert Dickinson who retired at the conclusion of the last AGM.
The Group resumed its outperformance of the IPD universe in 2011, after two years of underperformance, and prior to this a long period of outperformance.
Harry Platt, our Chief Executive, will be 60 in September and has indicated that he would like to retire in 2012. Harry has been an excellent leader of Workspace for 15 years and will continue to be so until he hands over to his successor. I have personally enjoyed and admired his strong personal values and commitment to building Workspace. The Board will now manage an orderly transition of Chief Executive. Harry leads an executive team which has been strengthened over the last 4 years, giving the Board considerable confi dence in its ability to drive forward the future strategy. Our management team has both breadth and depth not just at Board and Executive Committee level but deep into operations and functions, and has the skills and collective spirit and enthusiasm to lead the Group forward to create further value for shareholders.
Workspace is a sustainable business, in the broadest sense of the word. We help new businesses succeed, creating employment and regenerating communities. The UK depends for its future on the small business sector to promote economic growth and we at Workspace have an important part to play in promoting that growth, while delivering good returns to our shareholders. London is undoubtedly one of the world's great cities and its economic prospects remain stronger than for most of the UK and indeed Europe. This is our market and our focus on London has been and will continue to be a distinguishing feature of your Group.
Given the Group's performance and prospects the Board is recommending a fi nal dividend of 0.55p (a total of 0.825p for the year) per share, an increase of 10% on the prior year. This resumes the progressive dividend policy that the Group previously delivered.
I want to take this opportunity to thank everyone at Workspace for their contribution to a successful year and to wish them, our customers and shareholders every success in the future.
Tony Hales CBE Non-Executive Chairman
Related subjects: Sustainability p.30 Corporate Governance p.38 Five Years Performance p.86
It has been a year of signifi cant progress on a number of fronts. We are now well positioned to take the Group forward to its next stage of growth.
Workspace delivered a strong performance in 2010/11. We achieved good growth through the year, with a continuing high level of enquiries, a resilient customer base of new and growing businesses and positive momentum in both occupancy and rental income. This, together with progress on our regeneration schemes, supported the growth in the valuation of our properties during the year, without the benefi t of any signifi cant shift in yield. We also have a strengthened balance sheet following the refi nancing of our debt facilities.
In last year's report, we set out four priorities. These were to:
We have made good progress against each of these priorities in the last year. Details of our performance are set out in the business review.
Workspace employs enthusiastic, committed and well-trained people, whose diversity refl ects that of London itself. Our management team, and our people as a group, have real strength and depth.
Our culture is centred on customer service and entrepreneurialism. Everyone who works for us is rewarded partly on trading performance and partly on the service quality we deliver. The majority of our people participate in the Save as You Earn Share Scheme. These factors align them to the needs of both customers and shareholders.
Our vision is to be the leading provider of fl exible space and services that enable growing businesses to succeed.
Becoming the leading provider is not about the absolute size of our business. It is based on:
Our aim is to create value by increasing earnings, dividends and asset values. With 4,000 customers, over 100 estates on 150 acres of freehold land in London and a clear brand and management strength, we have a solid platform for doing so.
The Government recognises the value of SMEs and sees them as vital to creating employment and driving further economic recovery. We also expect more business creation, for example as people leave the public sector.
Our strategy is actively managed and maintained by our Executive Committee and senior management. Executive Committee:
1. Harry Platt Chief Executive
2. Graham Clemett Group Finance Director Go to page 20 for a detailed review of operations in 2011.
3. Angus Boag Development Director Go to pages 16–19 to fi nd out how we have maximised alternative use in our portfolio during 2011.
4. Chris Pieroni Operations Director Go to page 14 to fi nd out how we have applied our strategy to The Leathermarket.
1
08
2 3 4
09
Review of Operations 01 – 35 Governance 36 – 53 Financial Statements 54 – 86 Shareholder Information 87 – 88
continued
Other trends are also benefi cial. Planning policies towards brownfi eld sites in London support intensifi cation and change of use. Our properties contribute to work-led regeneration, which fi ts the Government's localism agenda. And our sites are often in areas of change, which will benefi t from investment in London's infrastructure such as the East London line, Crossrail and the Olympics.
In addition, the UK economy is seeing structural changes as digital and creative businesses increase in importance. Our properties are highly attractive to these sectors and they are well-represented among our customers.
Workspace is therefore strongly positioned in the right part of the market – growing businesses in London. We will continue to enhance our performance by driving underlying occupancy to reach our 90% target and promoting the regeneration of our properties.
We have a four-part strategy for achieving our vision. This strategy has evolved but its fundamental focus remains the same as in previous years – to be an entrepreneurial, customer-centred property-based business.
Our strategy is to deliver superior returns to all our stakeholders by:
Workspace owns properties ranging from business centres to light industrial estates in areas of London that appeal to our customers. A full list of our properties is included at the back of this Report.
We actively manage our properties to increase occupancy and rents, for example by:
Building customer communities is also important to us. We do this within properties and between properties, to help our customers trade with each other and to grow their businesses. Our customers value these communities, which increase the attractiveness of our properties to them.
We measure our performance against a number of metrics, in particular:
Our performance in 2010/11 is set out in the business review under "Priority 1: to increase occupancy and rental income" on page 20 and "Financial performance" on pages 24 and 25.
Our priorities for the next fi nancial year are to:
We own almost 150 acres of freehold land in London. Our properties are often in areas of regeneration, which supports change in use or intensifi cation and gives us the opportunity to add value.
We look to maximise the value of our portfolio by:
We measure our performance by reviewing the progress of planning and development initiatives across the portfolio.
Our progress in 2010/11 is explained in the business review on page 22, under "Priority 3: to continue to work and churn the asset base to realise its full potential".
Our priorities for the next fi nancial year are to progress our existing initiatives and to continue to review our portfolio and drive up its value through innovative approaches to alternative use, redevelopment and repositioning. In particular, during the year we target signifi cant progress in regeneration initiatives at Highbury Grove, Highway Business Park, Bow Enterprise Park, Poplar Business Park and Tower Bridge Business Complex.
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
| Shareholder Information | 87 – 88 |
Responsible for: the acquisition and sale of investment properties and Property Manager for BlackRock Workspace Property Trust.
2. Mark Weatherald Asset Manager Responsible for: asset management across the North, West and East portfolio.
3. Claire Dracup
11
1 2 3
Head of Support Services Responsible for: HR, Health & Safety and Operations Support Teams to implement the Group's corporate policy and standards.
continued
Workspace is a customer-focused business, employing people who are committed to high-quality service. This, along with our marketing efforts, has given us a strong brand, which we can leverage through offering new services which help our existing customers and attract new ones.
We conduct quarterly exit surveys with our customers, which allow us to:
We measure our performance using the customer satisfaction surveys discussed above, and by monitoring the take up by our customers of our new initiatives and products.
Our performance in 2010/11 is set out in the business review under "Priority 4: to utilise and exploit our brand more fully" on page 24.
Our priorities for the next fi nancial year are to:
Sustainability is part of our everyday business. We develop properties which support work-led regeneration by allowing businesses to fl ourish, create employment and boost their local areas. Many of our properties are historic manufacturing buildings, with more people working in them now than ever in the past.
In addition, we carefully manage our environmental footprint and work with our customers and partners to reduce their environmental impact. We also place the safety and security of our customers at the heart of our service.
We measure our performance using a number of metrics, such as our carbon dioxide emissions and the proportion of waste diverted from landfi ll. Our performance in 2010/11 is set out in the sustainability section on pages 30 and 31.
Our priorities for the next fi nancial year are to continue to increase the profi le of our sustainability agenda, to further reduce our environmental impact and to maintain the safety and security of our customers.
Harry Platt Chief Executive 1
Workspace Group PLC Annual Report and Accounts 2011
1. John Robson Asset Manager Responsible for: asset management across the South and Central portfolio.
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
| Shareholder Information | 87 – 88 |
The case studies on the following pages are just three examples of how we put our strategy into action.
Each shows how, like our customers, we use our entrepreneurial skills to create value. And they explain some of the ways we create and strengthen communities, both within our buildings and in the areas around them.
The case studies also demonstrate how sustainability is central to what we do, and outline the way we manage key risks associated with each property.
Property background
The Leathermarket also shows how we understand our customers and enhance our brand by responding to their evolving needs, through:
– continuing to create new services, such as IT and broadband products for existing customers, and business lounges (called Club Workspace) for a wider customer group, and – developing both these services in partnership with
other companies.
We have worked sustainably by:
Our work at The Leathermarket has addressed the risk of:
Related subjects: Risk Management p.27 Sustainability p.30
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
| Shareholder Information | 87 – 88 |
Customer: Maverick
Type of business: Advertising and Design Workspace's fl exible offering enabled Maverick to grow its business by taking more
space at The Leathermarket.
Here are three stories from The Leathermarket business community in 2011.
Hear more stories from The Leathermarket community: workspacegroupplc.co.uk/ investors2011
Customer: Last Exit
Type of business: Digital Agency
Workspace has helped Last Exit to grow, by bringing creative businesses together so they can collaborate.
Club Workspace: Members of the Club Workspace marketing team
The Club Workspace business lounges will serve a new group of customers and create opportunities for Workspace.
Cu Light & Des
Cu Outstan Type o C
Outstanding independe promotion
Type o Light Providing li a wide rang private an
Property background
Our approach to redeveloping the site has addressed the risk of:
Related subjects: Risk Management p.27 Sustainability p.30
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
| Shareholder Information | 87 – 88 |
Here are two stories about our development at Wandsworth Business Village.
To fi nd out more go to workspacegroupplc.co.uk/ investors2011
Angus Boag: Workspace Group
Development Director The redevelopment of Wandsworth demonstrates Workspace's skill in identifying and extracting value from its portfolio.
Rebekah Paczek: Public affairs agency
Type of business: Consulting
Workspace's approach to community engagement refl ects its belief that it is an integral part of that community.
Property background
– Acquired in 2003 – One of a cluster of sites, with Westbourne Studios and Pall Mall Deposit close by
– Part of the site originally occupied by single-storey,
low-rental sheds, unsuitable for higher-value customers
Canalot Studios, W10 Another way we can maximise the value of a property is by obtaining planning consent, selling part of the site for alternative use and recycling some or all of the proceeds in creating new lettable space.
Related subjects: Risk Management p.27 Sustainability p.30
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
| Shareholder Information | 87 – 88 |
Barbara Acheampong: Workspace Group
Centre Manager: Upgrading and expanding the building will create a new and sophisticated working environment for Canalot's customers.
Here are three stories from the Canalot Studios business community in 2011.
Hear more stories from the Canalot Studios community: workspacegroupplc.co.uk/ investors2011
Customer: BOSS
Type of business: Back offi ce support solutions
Workspace has supported BOSS's growth, by introducing clients and suppliers they otherwise would not have met.
Customer: Green Row
Type of business: PR
Canalot's unique culture, supportive community and fl exible space makes it ideal for creative businesses.
Ty
The stud 'musical' a loaded
19
| Enquiries (average per month) |
960 |
|---|---|
| Lettings (average per month) |
88 |
| Underlying increase in value of property portfolio |
+4.7 % |
| Current portfolio value | £719 m |
| Cash rent roll | £48.9 m |
| Like-for-like occupancy | 86.2 % |
| Overall occupancy | 83.6 % |
Figure 1: Enquiries and lettings (average number per month) Enquiries Lettings Quarter to June 2010 Quarter to September 2010 Quarter to December 2010 Quarter to March 2011 87 88 97 79 917 1,045 908 970
We have four clear priorities:
There continues to be strong demand from small and growing businesses across London to lease space on fl exible terms; enquiries averaged 960 per month and lettings 88 per month over the last year. Good levels of enquiries and lettings have continued during the fi rst two months of the current fi nancial year.
| Quarter Ended | ||||
|---|---|---|---|---|
| Average number | March December September | June | ||
| per month | 2011 | 2010 | 2010 | 2010 |
| Enquiries | 1,045 | 917 | 970 | 908 |
| Lettings | 79 | 97 | 88 | 87 |
The overall occupancy across the portfolio at 31 March 2011 was 84.1% (March 2010: 81.9%) and cash rent roll was £52.0m (March 2010: £50.7m). The contracted rent roll was £2.3m higher than the cash rent roll, at £54.3m (March 2010: £53.9m).
The difference between the cash and contracted rent rolls relates to stepped rental increases (£1.7m), rent free periods (£0.5m) and rent discounts (£0.1m). £1.2m of contracted rent roll is due to be converted to cash rent roll in the six months ending September 2011.
For consistency in reporting these lead indicators, the overall rent roll and occupancy statistics at March 2011 include the properties which were sold to the BlackRock Workspace joint venture in February 2011. Excluding these properties, total occupancy at March 2011 was 83.6% and cash rent roll was £48.9m.
A more detailed analysis of performance by property category is set out in the following sections.
This category contains the majority of the property portfolio. It excludes properties purchased in the last 12 months and any properties that have been subject to major refurbishment in the last 24 months (the time it would normally take to reach our target occupancy level of 90%). The comparatives have been restated to exclude the properties we sold into the BlackRock Workspace joint venture in February 2011.
| Like-for-like | 2011 | 2010 | March December September 2010 |
June 2010 |
March 2010 |
|---|---|---|---|---|---|
| Occupancy Cash rent roll |
86.2% | 86.1% | 85.3% £40.1m £39.1m £39.1m £38.6m £38.6m |
84.0% | 83.6% |
| Average rent per sq. ft. |
£11.89 | £11.58 | £11.63 | £11.66 | £11.69 |
20
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
| Shareholder Information | 87 – 88 |
Kennington Park is the highest value property in our portfolio (£57m at March 2011).
During the coming year we are focusing on the refurbishment projects at Kennington Park, Great Guildford Street and Canalot Studios.
At Bow Enterprise Park E3, an industrial estate of 77,000 sq. ft., we received planning consent in February 2011 for 550 fl ats and 60,000 sq. ft. of commercial space.
Like-for-like occupancy improved through the year and was up 2.6% in total, to 86.2%. We have seen reduced levels of rent free incentives and discounts on new lettings and increased pricing at some of our more central locations. The combined effect of these improvements was a 3.9% (£1.5m) increase in the cash rent roll in the year.
Our target for like-for-like occupancy is 90%, a level that gives us greater opportunity to increase pricing. We are 3.8% away from this in overall terms, although 39 of the 80 properties at March 2011 were already at or exceeded this 90% occupancy target.
These are properties which we have either refurbished in the last 24 months, are currently refurbishing or have acquired in the last year. We target occupancy of 90% within two years of reopening a refurbished building.
| Occupancy | Cash rent roll | |||
|---|---|---|---|---|
| March | March | March | March | |
| Refurbishment | 2011 | 2010 | 2011 | 2010 |
| Kennington Park | 75% | 77% | £3.8m | £4.0m |
| Other | 76% | 74% | £3.2m | £2.9m |
Included in this category are the refurbishment projects at Kennington Park, Great Guildford Street and Canalot Studios. The other properties in this category comprise Q West, acquired in October 2009, and Barley Mow where the refurbishment was completed in November 2009.
Kennington Park is the highest value property in our portfolio (£57m at March 2011). This seven-acre site, close to Oval underground station, is being repositioned on a phased basis from a closed industrial site used mainly for storage to a thriving open location for a wide range of small and growing businesses. This long-term regeneration project is progressing well.
There are 11 separate buildings on the Kennington site and the fi rst redevelopment was of the Canterbury Court building (102,000 sq. ft.), which we completed in January 2008. We have now almost completed the refurbishment of the adjacent Chichester and Chester House buildings (24,000 sq. ft.), at a total cost of £3.7m, which will provide a broad range of studio-style units over two fl oors. Our head offi ce will also relocate to Chester House in July 2011 which will enable completion of the sale of our existing head offi ce building, Magenta House, for a student housing development.
In addition to the fi ve properties in this category we have planning consent for additional commercial space and refurbishment at a further seven of our properties that are currently in the like-forlike category. In due course as we proceed with these schemes they will be moved to the refurbishment category.
These are properties where occupancy has been affected by our redevelopment plans on the site (such as where landlord breaks are in place to achieve vacant possession) or where we are running down occupancy ahead of disposal.
| Other | March 2011 |
March 2010 |
|---|---|---|
| Occupancy | 75% | 76% |
| Cash rent roll | £1.8m | £2.2m |
continued
Included in this category are three properties valued at £41.3m at March 2011 where we are progressing with mixed use redevelopment schemes. In each case, we will receive a new purpose-built business centre as part of the proceeds of the sale of the residential component of the scheme. At Grand Union we have outline planning consent and at Bow Enterprise Park we recently received detailed planning consent. At Wandsworth Business Village, we received planning consent in 2010 and have started on the redevelopment in partnership with a residential developer, Mount Anvil, with completion targeted for mid-2014.
Also included in this category is the northern part of the Tower Bridge Business Complex valued at £14.7m at March 2011 where we have achieved a re-designation for residential use.
The valuation of our property portfolio increased by 4.7% over the last year, excluding the impact of capital expenditure and disposals. A summary of the movements in valuation through the year is set out below:
| £m | |
|---|---|
| Portfolio valuation at 31 March 2010 | 717 |
| Property disposals, including into BlackRock joint venture | (40) |
| Capital expenditure | 10 |
| Property valuation surplus: | |
| – quarter to June 2010 | 6 |
| – quarter to September 2010 | 9 |
| – quarter to December 2010 | 6 |
| – quarter to March 2011 | 14 |
| Less: Surplus on disposals | (3) |
| Portfolio valuation at 31 March 2011 | 719 |
A more detailed breakdown of the valuation at March 2011 by property category is set out below. Properties have added redevelopment value when we have obtained, or are well advanced with obtaining, planning approval for an intensifi cation of existing use or for alternative use.
| Valuation at March 2011 |
Existing Use Valuation* |
Yield* | Added value |
Valuation | Total ERV |
|---|---|---|---|---|---|
| Like-for-like properties Refurbishment |
£514m | 7.8% | £29m | £543m £48.1m | |
| properties Other properties |
£93m £32m |
7.5% 5.6% |
£12m £38m |
£106m £70m |
£9.0m £4.3m |
| Total | £639m | 7.7% | £79m | £719m £61.4m |
* The existing use valuation excludes added redevelopment value and the existing use yield is the cash rent roll return on the existing use valuation.
The movement in like-for-like income yield and estimated rental value (ERV) over the year are set out below:
| Like-for-like | 2011 | March September 2010 |
March 2010 |
|---|---|---|---|
| Existing use income yield | 7.8% | 7.8% | 7.9% |
| Estimated Rental Value (ERV) | £48.1m £48.5m | £48.8m |
There has been little movement in the like-for-like income yield on our portfolio through the year and only a marginal decline in rental values. In recent months we have seen evidence of new lettings being achieved at rental levels ahead of the March 2011 ERVs.
The total net initial yield on our whole portfolio, as calculated by our valuers CBRE, is 6.8% (March 2010: 7.1%) and the equivalent yield is 8.4% (March 2010: 8.8%). The reduction in net initial yield is a result of the increase in added redevelopment value with only a marginal reduction in the existing use income yield.
The capital value per sq. ft. is £137 (March 2010: £126), lower than the replacement value for the buildings alone (excluding the value of the land) with rents averaging £11.47 per sq. ft. (March 2010: £11.22).
A summary of the movements in added redevelopment value through the year is set out below:
| £m | |
|---|---|
| Added value at 31 March 2010 | 55 |
| Value added on new schemes in year | 12 |
| Increase in value of existing schemes | 12 |
| Added value at 31 March 2011 | 79 |
The redevelopment value added on new schemes in the year relates to the planning consents received for new commercial space at Kennington Park (£4.5m) and Exmouth House (£1.0m) and the re-designation of Tower Bridge to mixed use (£6.6m).
The increase in the added value of existing schemes is a result of the planning consent now received at Bow Enterprise Park (£4.4m), the conditional sale of the car park at Ewer Street for student housing (£2.7m), which completed in April 2011, and commencement of the mixed use redevelopment at Wandsworth Business Village (£5.3m).
During the year we completed £44m of disposals and contracted for a further £13m of conditional disposals, which should complete in 2011/12. The overall exit income yield on this £57m of disposals would be 5.9%. This compares to £55m of disposals made in the previous year at an exit yield of 6.3%. Disposals during the last year comprised £35m of properties sold into our joint venture with BlackRock and £9m of other disposals.
In February 2011, we established a joint venture with the BlackRock UK Property Fund. Workspace holds a 20.1% equity interest in the joint venture, which is called the BlackRock Workspace Property Trust (BWPT).
BWPT's objective is to invest up to £100m in high-yielding, multi-let offi ce and industrial properties in and around London, where there is potential for rental growth and added value from active asset management. Workspace is responsible for sourcing and recommending investment opportunities and will be the property manager for BWPT's assets. We will receive asset management and investment fees, together with a performance fee based on BWPT's relative performance against a comparator IPD index. The Trust was seeded with eight properties from Workspace, sold at the December 2010 valuation of £35.1m. We are currently reviewing a range of potential acquisitions.
We continually focus on opportunities to extract added value from our property portfolio. Particularly attractive is the disposal of low or non-income generating tracts of land, allowing us to reinvest the proceeds in our core business. A summary of completed and contracted disposals is set out below:
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
| Shareholder Information | 87 – 88 |
The value added on new schemes in the year relates to the planning consents received for new commercial space at Kennington Park (£4.5m) and Exmouth House (£1.0m) and the re-designation of Tower Bridge to mixed use (£6.6m).
At Exmouth House, we received planning consent in September 2010 for an additional 8,000 sq. ft. of commercial space on a new fl oor.
| Property | Status | Timing | Price | Use |
|---|---|---|---|---|
| Langdale House | Sold Jul 2010 £4.3m | Commercial | ||
| Unit 5, 2 Cullen Way | Sold Jan 2011 £0.3m | Commercial | ||
| Surrey House | Sold Jan 2011 £4.7m | Hotel | ||
| Ewer Street Car Park | Sold April 2011 £3.9m | Student | ||
| Housing | ||||
| Magenta House | Contracted Aug 2011 £4.0m | Student | ||
| – subject | Housing | |||
| to vacant | ||||
| possession | ||||
| Alscot Road | Contracted | H1 2011 £1.7m | Residential | |
| – subject | ||||
| to vacant | ||||
| possession | ||||
| Greenheath | Contracted | H1 2011 £3.4m | Residential | |
| Car Park | – subject | |||
| to planning |
In addition, we are working on a wide range of work-led regeneration opportunities with local authorities across London:
continued
Launching our fi rst two Club Workspace business lounges, at Clerkenwell Workshops and The Leathermarket.
At Poplar E14, an industrial estate of 75,000 sq. ft., we submitted a planning application for 345 fl ats and 62,000 sq. ft. of commercial space, with a determination expected shortly.
Our brand strength across London's small business community is underpinned by a high satisfaction rating from our customers. In our recently completed annual customer survey, 88% of our customers said they would recommend Workspace to other businesses. Our 4,000 customers employ some 30,000 people and each business has relationships with up to 10 others, so our reputation and brand are critical assets.
We are working hard to strengthen and extend the reach of our brand. Recent activity includes:
| Trading | ||
|---|---|---|
| £m | 2011 | 2010 |
| Net rental income | 45.9 | 44.4 |
| Staff and other administrative costs | (8.6) | (8.0) |
| Share-based incentive costs | (1.1) | (1.1) |
| Net interest cost | (22.1) | (24.5) |
| Trading profi t after interest | 14.1 | 10.8 |
| Property valuation gain | 30.8 | 1.8 |
| Workspace Glebe joint venture adjustments | – | 14.2 |
| Other items | 7.9 | (0.8) |
| Profi t for the year before tax | 52.8 | 26.0 |
Profi t before tax has increased signifi cantly to £52.8m from £26.0m last year. The largest element of this improvement is the increase in the property valuation.
Trading profi t after interest is up 31% (£3.3m) in the year to £14.1m. The main components of this increase were:
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
| Shareholder Information | 87 – 88 |
– Interest costs fell by £2.4m during the year, with the average interest cost running at 5.3% compared to 6.7% last year. We have 74% of our borrowings fi xed at an average rate of 3.8%, with the remainder of our debt at 1 or 3 months' LIBOR, which are currently at historic lows. Our interest rate hedging has been structured with the intention of being able to maintain a stable interest rate over the medium term at 5.5% to 6.0% even as short-term LIBOR rates recover to their longer term levels.
Other items include the increase in the mark to market value of our hedging instruments (£5.3m) and the profi t on the property disposals made in the year (£2.8m).
| £m | 2011 | 2010 |
|---|---|---|
| Operating cash fl ow | 37.9 | 36.3 |
| Net interest paid | (21.8) | (25.2) |
| Net cash from operations | 16.1 | 11.1 |
| Dividends to shareholders | (8.2) | (8.1) |
| Share placing proceeds (net of costs) | – | 18.8 |
| Rights Issue costs (proceeds in 2009) | – | (4.3) |
| Capital expenditure | (9.4) | (5.9) |
| Property acquisitions | – | (4.0) |
| Property disposal proceeds | 43.9 | 57.1 |
| Investment in BlackRock Workspace joint venture | (7.4) | – |
| Corporation tax | (2.1) | – |
| Hedging amendments | (6.5) | (8.6) |
| Loan facility arrangements fees and costs | (3.8) | – |
| Loan facility restricted cash | (5.0) | – |
| Other | (1.0) | (1.8) |
| 16.6 | 54.3 | |
| Acquisition of Glebe joint venture (including debt) | – | (83.0) |
| Decrease/(increase) in net borrowings | 16.6 | (28.7) |
The Group continues to generate a strong operating cash fl ow in line with trading profi ts. Bad debts continue to be maintained at very low levels and amounted to £0.2m in the year (2010: £0.3m).
As previously highlighted, we have increased the level of refurbishment activity during the year with £2.8m of capital expenditure at Kennington Park on the refurbishment of the Chichester and Chester House buildings. The level of expenditure will increase further during the next year as we progress on the refurbishment projects at Canalot Studios and Great Guildford Street.
Corporation tax of £2.1m paid in the year was the REIT entry charge for the former Glebe joint venture properties which we purchased in December 2009.
A number of interest rate hedging contracts were amended or cancelled during the year, as a result of the reduction in the level of debt and the Bayern Club refi nancing. The Bayern Club refi nancing also has an adverse working capital impact due to a rolling three month delay on the release of surplus rental income until the interest payment has been made each quarter. The Bayern Club facility is provided by Bayern LB, Deutsche Pfandbriefbank, Santander and Nationwide.
| £m | 2011 | 2010 |
|---|---|---|
| Investment properties | 713 | 713 |
| Investment in BlackRock Workspace joint venture | 7 | – |
| Net borrowings | (367) | (383) |
| Interest-rate swaps | (11) | (23) |
| Other net liabilities | (8) | (20) |
| Net assets | 334 | 287 |
| EPRA NAV per share | 29.5p | 26.7p |
| Loan to value (LTV) | 50% | 53% |
We have three banking facilities, details of which are set out below:
| Facility | Drawn at | |||
|---|---|---|---|---|
| amount March 2011 | Margin over | |||
| £m | £m | Term | LIBOR | |
| RBS* | ||||
| Term/revolving | 125 | 95 | June 2015 | 2.50%/ |
| facilities | 2.75% | |||
| Overdraft | 4 | 4 | On demand | 2.25% |
| Bayern Club | ||||
| Term facility | 200 | 200 | June 2015 | 2.25% |
| Lloyds BoS | ||||
| Term facility | 68 | 68 | December | 1.25% |
| 2014 | ||||
| Total | 397 | 367 |
* A new RBS facility to June 2015 was signed in June 2011.
We test the covenants on each of our facilities every quarter. We continue to have in excess of 20% headroom on all our valuation and interest related covenants.
Refl ecting improved trading performance during the year, the Board proposes a fi nal dividend of 0.55p per share. Combined with the interim dividend, this would take the total dividend for the year to 0.825p per share, an increase of 10% on prior year. The fi nal dividend will be paid as a Property Income Distribution (PID) to all shareholders on the shareholder register as at 15 July 2011.
We are proposing at the forthcoming AGM a resolution for a 1 for 10 share consolidation. Based on the current issued share capital of the Company this would reduce the number of shares in issue from 1.15 billion to 115 million.
| Quarter ending 2011 |
Quarter ending 31 March 31 December 30 September 2010 |
Quarter ending 2010 |
Quarter ending 30 June 2010 |
Quarter ending 31 March 2010 |
|
|---|---|---|---|---|---|
| Workspace Group Portfolio | |||||
| Number of estates | 94 | 104 | 104 | 105 | 105 |
| Lettable fl oorspace (million sq. ft.)† | 5.1 | 5.4 | 5.5 | 5.5 | 5.5 |
| Number of lettable units | 4,856 | 5,175 | 5,175 | 5,205 | 5,156 |
| ERV | £61.4m | £65.1m | £65.6m | £66.1m | £66.4m |
| Reversionary yield* | 8.5% | 8.8% | 9.0% | 9.1% | 9.3% |
| Cash rent roll of occupied units | £48.9m | £51.0m | £51.0m | £51.2m | £50.7m |
| Average rent per sq. ft. | £11.47 | £11.10 | £11.19 | £11.26 | £11.22 |
| Overall occupancy | 83.6% | 84.4% | 83.2% | 82.7% | 81.9% |
| Like-for-like lettable fl oor space (million sq. ft.) | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 |
| Like-for-like cash rent roll | £40.1m | £39.1m | £39.1m | £38.6m | £38.6m |
| Like-for-like average rent per sq. ft. | £11.89 | £11.58 | £11.63 | £11.66 | £11.69 |
| Like-for-like occupancy | 86.2% | 86.1% | 85.3% | 84.0% | 83.6% |
| BlackRock Workspace Property Trust | |||||
| Property valuation (£m) | £35m | – | – | – | – |
| Number of estates | 8 | – | – | – | – |
| Number of lettable units | 281 | – | – | – | – |
| ERV | £3.4m | – | – | – | – |
| Lettable fl oorspace (million sq. ft.)† | 0.3 | – | – | – | – |
| Cash rent roll of occupied units | £3.1m | – | – | – | – |
| Average rent per sq. ft. | £10.57 | – | – | – | – |
| Overall occupancy | 92.1% | – | – | – | – |
| Financial performance | |||||
| Property valuation (£m) | 719 | 741 | 732 | 725 | 717 |
| Net assets (£m) | 334 | – | 300 | – | 287 |
| EPRA NAV per share (p) | 29.5 | – | 27.6 | – | 26.7 |
| Net rental income interest cover (cumulative) | 2.07x | – | 2.04x | – | 1.81x |
| Trading interest cover (cumulative) | 1.63x | – | 1.59x | – | 1.44x |
| Gearing (%) on EPRA net assets | 106% | – | 123% | – | 125% |
| Loan to value (%) | 50% | – | 54% | – | 53% |
| Available borrowing facilities (£m) | 30 | – | 21 | – | 36 |
† Excludes storage space
* Based on ERV divided by valuation
During the year we have taken steps to refi ne and enhance our risk management process to ensure it is integrated with our management and day-to-day activities and also to focus the Board on our key strategic risks.
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
| Shareholder Information | 87 – 88 |
The Executive Committee have responsibility for managing and reviewing our operational risks. Risks and mitigating actions are evaluated monthly. The highest rated risks in each operational area are summarised below. These graphs are used internally to monitor the inherent risk rating of each risk, the residual risk rating after the impact of controls and mitigating activities, and how this compares to our appetite for risk.
continued
The key strategic risks are monitored by the Board and are defi ned as those which could prevent us from achieving our business goals. Our current strategic risks and key mitigating actions are as follows:
| Risk category | Risk | Mitigating activities | Residual Risk |
|---|---|---|---|
| Finance Risk | Lack of funding resulting in inability to meet business plans, satisfy liabilities or breach of covenants. |
– Funding requirements for business plans are reviewed regularly. – Regular dialogue with main lenders. – Options for alternative sources of funding monitored. – Financial ratios and covenant headroom monitored and regularly reported to the Board. – Working capital forecasts stress tested and regularly reported to the Board. |
|
| Valuation Risk | Value of our properties declining as a result of external market or internal management factors. |
– Independent valuations conducted quarterly by CB Richard Ellis. – Alternative use opportunities pursued across the portfolio and planning consent progressed. – Market yields and pricing of property transactions monitored closely across the London market. – Headroom on Loan to Value banking covenants is maintained and reviewed. |
|
| Occupancy Risk | Demand by SMEs for our accommodation declining as a result of social, economic or competitive factors. |
– Weekly monitoring of occupancy levels and update of pricing at each estate. – Quarterly customer satisfaction surveys. – Weekly monitoring of reasons for customers vacating and exit interviews conducted. – On-site staff maintain regular contact with customers and local monitoring of competitors offering space. – Extensive marketing using the 'Workspace' brand. – Flexibility offered on deals by dedicated in-house marketing and letting teams. – External research conducted on the SME sector to understand trends in demand. |
|
| Development Risk |
Plans being inhibited as a result of regulations. Risk of cost overrun. |
– Regular monitoring of Government announcements and active involvement in industry responses. – Alignment of our regeneration proposals with the London Plan and local strategic plans. – Timing of actual developments can be deferred with properties retained for existing rental use. |
Key High risk Medium risk Low risk
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
| Shareholder Information | 87 – 88 |
| Risk category | Risk | Mitigating activities | Residual Risk |
|---|---|---|---|
| Property Investment |
Acquisitions do not generate the expected valuations or rent roll resulting in losses. |
– Thorough due diligence conducted ahead of any property acquisitions. – Regular monitoring of acquisition performance against target returns. |
|
| Transactional Risk |
Joint ventures or other ventures with third parties do not deliver the expected return. |
– Potential joint ventures reviewed and monitored before agreed. – Regular review of performance of joint ventures throughout term. |
|
| Regulatory Risk |
Failure to meet regulatory requirements leading to fi nes or tax penalties or the introduction of new requirements that inhibit activity. |
– REIT conditions monitored and tested on a regular basis and reported to the Board. – Close working relationship maintained with HMRC and all relevant issues openly disclosed. |
|
| Business Interruption Risk |
Major events mean that Workspace is unable to carry out its business for a sustained period. |
– Business Continuity plans in place and tested. – Back-up systems at remote locations and remote working capabilities. |
|
| London | Changes in the political, infrastructure and environmental dynamics of London lead to reduced demand from SMEs. |
– Regular monitoring of the London economy, research reports and the commissioning of research. – Regular meetings with the Greater London Authority. |
|
| Reputational Risk |
Failure to meet customer and external stakeholder expectations. |
– Customer surveys undertaken and results acted upon. – Training and mystery shopper initiatives undertaken. – Regular communication with stakeholders. |
|
| Energy Risk | Reductions in energy usage are not achieved resulting in excessive costs under the carbon reduction commitment. |
– Initiatives to encourage tenants to reduce energy consumption. – Installation of energy meters to review and monitor energy consumption and ongoing upgrading of lighting and heating. – Full compliance with CRC regulations. |
Sustainability highlights
Waste diverted through recycling programmes 4,513tonnes
Customer satisfaction level achieved in
Number of installations of security equipment installed in 2010/11 28
Sustainability is part of our everyday approach. We improve sustainability in its broadest sense, by helping businesses to fl ourish, create employment and boost the economy in their local areas. This, in turn, creates opportunities and growth for us. We embarked on our sustainability journey a decade ago, well before most companies and we have found that understanding our environmental impact and managing it effectively is of great importance to our customers.
We believe that the whole lifecycle of a building is important in judging its sustainability. By reusing old premises we save all of the signifi cant carbon emissions involved in new construction which offsets the fact that older buildings are generally less energy effi cient in operation than brand-new properties. We also choose sites convenient for public transport and many customers cycle or walk, reducing the carbon footprint of travel to and from the offi ce.
While our recycled buildings are inherently sustainable, we can do more to minimise the environmental impact of our business, by implementing green management procedures, engaging with our 4,000 customers and working with them to reduce energy usage and waste from their operations. By doing so, we help both our customers and Workspace realise the benefi ts of sustainability.
Details of our performance against our targets can be found online: www.workspacegroup.co.uk/sustainability
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
| Shareholder Information | 87 – 88 |
Our sustainability governance structure drives the implementation of our initiatives, empowers our people and helps develop key decisions about future initiatives.
| Responsibility | |
|---|---|
| Harry Platt | Oversight of our sustainability |
| Chief Executive | programme. |
| Sustainability Committee | Discussing the implementation |
| The Committee is made up | of our strategy and identifying |
| of our target owners and is | opportunities. |
| chaired by Angus Boag, | Reporting to the Board on our |
| Development Director. | progress. |
| Target owners Targets are allocated to individuals at the beginning of each year. |
Implementing our sustainability targets. |
Waste management. Our centre managers have continued to engage with our customers to increase recycling rates. We avoided over £216,000 in landfi ll costs in 2010/11 across our portfolio, by diverting 4,513 tonnes of waste through recycling programmes and converting our waste to energy.
Customer satisfaction. Customer satisfaction and loyalty are key to the sustainability of our income stream and we targeted a customer experience score of 80% on our annual survey. We once again outperformed this benchmark by achieving an 84% approval rating with our customers in 2010/11.
We fully achieved eight of our ten targets for 2010/11 and partially achieved one. This high level of achievement refl ects a focus on core business essentials in our target setting process. Details of our performance against these targets can be found on our sustainability website, www.workspacegroup.co.uk/sustainability/
Achievement of the target to reduce energy use could not be evaluated at the time of this Report, as suppliers provide fi nal energy statements for the year in July. We will publish a full evaluation on our sustainability website by 15 August 2011, along with our 2010/11 total carbon emissions.
Building on our success in 2010/11, we will continue to focus on how sustainability can enhance our business performance in 2011/12. Our Sustainability Committee, supported by our strategic advisors Upstream Sustainability Services, identifi ed 16 potential initiatives, rooted in our core customer-facing business for this fi nancial year. These include:
We will carefully review the business value, sustainability impact and resources required for each initiative to ensure we deliver value to all of our stakeholders. Success in delivering these initiatives forms part of the annual performance and remuneration assessment for each initiative leader.
31
Chairman of the Nominations Committee and a member of the Remuneration Committee.
Tony Hales was appointed to the Board in November 2002 and was appointed as Non-Executive Chairman in December 2002. He was previously Chief Executive of Allied Domecq PLC and a Non-Executive Director of HSBC Bank PLC, Hyder PLC, Aston Villa PLC and Reliance Security Group PLC.
He is currently Chairman of British Waterways and Senior Independent Director of International Personal Finance PLC. He retired as Chairman of NAAFI Ltd in October 2008, and now chairs NAAFI Pension Fund Trustees.
Harry Platt was appointed to the Board as Director and General Manager in April 1991, became Managing Director in April 1992 and Chief Executive in October 1999. He was Chief Executive of Harlow District Council between 1983 and 1989 and before that Assistant Chief Executive at the London Borough of Greenwich. Prior to joining the Group he was Operations Director of Dixons Commercial Properties Limited.
Graham Clemett joined the Board as Finance Director in July 2007. Previously he was Finance Director, UK Corporate Banking at RBS Group PLC where he worked for a period of fi ve years. Prior to that, Graham spent eight years at Reuters Group PLC, latterly as Group Financial Controller.
Chairman of the Audit Committee and a member of the Remuneration and Nominations Committees.
Bernard Cragg was appointed to the Board in June 2003. He was previously Chairman of Datamonitor PLC and i-mate PLC, and a non-executive director of Bristol & West PLC. He was formerly Group Finance Director and Chief Financial Offi cer of Carlton Communications PLC and a non-executive director of Arcadia PLC.
He is a non-executive director of Astro Overseas Limited and Astro Malaysia Holdings SDN BHD and the Senior Independent Director of Mothercare PLC and Progressive Digital Media PLC.
A member of the Remuneration, Audit and Nominations Committees.
Jamie Hopkins was appointed to the Board in June 2010. He was previously Chief Executive and a Non-Executive Director of Mapeley PLC.
He is currently a Director of Chester Properties.
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
| Shareholder Information | 87 – 88 |
Chairman of the Remuneration Committee and a member of the Audit and Nominations Committees.
John Bywater was appointed to the Board in June 2004. He was previously an Executive Director of Hammerson PLC and retired in March 2007.
He is Managing Director of Caddick Developments Ltd, a Non-Executive Director of British Waterways and Realis Estates, a private property company; a Non-Executive of Low Carbon Workspace Limited and a Trustee of Opera North.
Daniel Kitchen was appointed to the Board on 6 June 2011 and subject to election by shareholders at the AGM, to be appointed as Chairman. He was previously Deputy Chief Executive at Heron International plc and prior to that was Finance Director at Green Property for eight years.
Current external appointments: He is currently Non-Executive Chairman of Irish Nationwide Building Society and a Non-Executive Director of Minerva PLC, LXB Retail Properties PLC and Kingspan Group PLC.
The Executive Committee comprises the Executive Directors; Harry Platt and Graham Clemett, together with Angus Boag and Chris Pieroni.
Angus Boag joined the Group in June 2007 as Development Director responsible for identifying and implementing improvement and regeneration opportunities within the Group's property portfolio. He is also responsible for investment management, valuations and leads on social environmental and ethical issues. Prior to joining the Group he was at Manhattan Loft Corporation for 12 years joining as Development Director and then being appointed as Managing Director in 2001.
Chris Pieroni joined the Group as Operations Director in October 2007. Prior to this date, he worked at KPMG specialising in real estate and infrastructure fi nance. He began his professional career teaching economics at Cambridge University. He joined Colliers Erdman Lewis in 1993, later becoming Chief Operating Offi cer. Chris was a Non-Executive Director of the Group from 2000 until his retirement from the Board in August 2006.
| 36 | Report of the Directors |
|---|---|
| 38 | Corporate Governance Report |
| 44 | Directors' Remuneration Report |
| 53 | Directors' Responsibilities |
| 54 | Independent Auditors' Report |
|---|---|
| to the Members of Workspace | |
| Group PLC |
| 58 | Consolidated Statement |
|---|---|
| of Cash Flows | |
| 59 | Notes to the Financial Statements |
| 82 | Independent Auditors' Report to |
| the Members of Workspace Group | |
| PLC (Parent Company) | |
| 83 | Parent Company Balance Sheet |
| 84 | Notes to the Parent Company |
| 87 | Investor Information | |
|---|---|---|
| 88 | Glossary of Terms |
IBC Property portfolio IBC Find out more about Workspace
The Directors present their report on the affairs of the Group together with the audited fi nancial statements for the year ended 31 March 2011. The Business Review and all other sections of the annual report, to which cross reference is made are incorporated into the Directors' Report by reference.
The Group is engaged in property investment in the form of letting of business accommodation to small and medium sized enterprises located in and around London. At 31 March 2011 the Company had 11 active subsidiaries, six of which are property investment companies owning properties in Greater London. The other fi ve companies are Workspace Management Limited which acts as manager for all the Group's property investment companies and the BlackRock Workspace Property Trust; LI Property Services Limited which procures insurance on behalf of the Group; Anyspacedirect.co.uk Limited which operates a web-based service for businesses in search of commercial space to rent in the UK. Workspace Holdings Limited and Workspace Glebe Limited are intermediate holding companies. A full list of the Company's trading subsidiaries appears on page 81.
Signifi cant events which occurred during the year are detailed in the Chairman's Statement on page 7, the Group Chief Executive's Review on pages 8 to 12 and the Business Review on pages 20 to 25.
The Business Review requires a detailed review of the business of the Group, the development and performance of the Company during the year and at the year end and of its strategy and prospects, including an analysis using key performance indicators.
This information, together with a description of the principal risks and uncertainties facing the Company, details of the Company's health and safety policies and its environmental and corporate responsibility activities can be found on pages 1 to 35.
The Company and the Group are committed to high standards of corporate governance, details of which are given in the Corporate Governance Report on pages 38 to 43 and in the Remuneration Report on pages 44 to 52.
The Group's profi t after tax for the year attributable to shareholders amounted to £53.5m (2010: £24.2m).
The interim dividend of 0.275p (2010: 0.25p) was paid in February 2011 and the Board is proposing to recommend the payment of the fi nal dividend of 0.55p (2010: 0.50p) per share to be paid on 5 August 2011 to shareholders whose names are on the Register of Members at the close of business on 15 July 2011. This makes a total dividend of 0.825p (2010: 0.75p) for the year.
The Group's activities, strategy and performance are explained in the Chief Executive's Review on pages 8 to 12 and the Business Review on pages 20 to 25.
Further detail on the fi nancial performance and fi nancial position of the Group is provided in the fi nancial statements on pages 55 to 81.
The Directors, having made appropriate enquiries, have a reasonable expectation that the Group and the Company have adequate resources and suffi cient headroom on the Group's bank loan facilities to continue in operational existence for the foreseeable future. For this reason, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the Group's accounts.
The Group's fi xed assets include investment properties of £713.4m (2010: £713.2m) and owner occupied property of £3.9m (2010: £2.7m). The Group's investment properties have been independently valued by CB Richard Ellis, Chartered Surveyors, at 31 March 2011 at open market value.
With the exception of Mr Hopkins and Mr Kitchen who were appointed as Directors on 7 June 2010 and 6 June 2011 respectively, the Directors of the Company, who all held offi ce throughout the year, are shown on pages 32 and 33.
As permitted under the Companies Act 2006 and the Company's Articles of Association, the Company has executed a Deed Poll under which it will indemnify its Directors, subject to certain limitations and as permitted by law, for liabilities incurred in connection with their appointment as a Director and in certain circumstances fund a Director's expenditure on defending criminal or civil proceedings brought against the Director in connection with his position as a Director of the Company or of any Group Company.
No Director had, during the year, any benefi cial interest in any contract signifi cant to the Company's business, other than a contract of employment.
Details of the Directors' shareholdings and options over shares are provided on pages 50 to 52.
The Company has procedures in place for managing confl icts of interest. Should a Director become aware that they, or their connected parties, have an interest in an existing or proposed transaction with Workspace Group PLC, they are required to notify the Board in writing or at the next Board Meeting.
The Group values highly the commitment of its employees and has maintained its practice of communicating business developments to them in a variety of formats. The Company has a monthly newsletter and Group intranet, which contains stories of interest and success around the Group. Furthermore, the Group has implemented a series of Director-led staff briefi ngs designed to keep employees well informed of the performance and objectives of the Group. These briefi ngs are held quarterly and serve as an informal forum for employees to ask questions about the Company. These have been particularly useful over the last year to keep staff appraised on the relocation of the Head Offi ce to Kennington. A staff forum has also been established to improve communication and consultation with employees.
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
| Shareholder Information | 87 – 88 |
Employees are appraised regularly. The appraisal process has been designed to link closely with the business planning process and provides employees with a clear set of business and personal objectives.
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 (SAYE).
The Group is committed to an active Equal Opportunities Policy from recruitment and selection, through training and development, performance reviews and promotion. All decisions relating to employment practices are objective, free from bias and based solely upon work criteria and individual merit. The Company is responsive to the needs of its employees, customers and the community at large. We are an organisation which uses everyone's talents and abilities, where diversity is valued.
The Group remains supportive of the employment and advancement of disabled persons and ensures its promotion and recruitment practices are fair and objective.
Full details of share options and awards under the terms of the Company's share incentive plans can be found on pages 47 to 52.
As at 31 March 2011, the Company's issued share capital comprised of a single class of 1,152,731,338 ordinary shares of 10p each. Details of the Company's issued share capital are set out on page 75.
The Board intends to propose a 1 for 10 consolidation of the Company's ordinary shares. The purpose of the share consolidation is to reduce the total number of shares now in issue following the rights issue undertaken in 2009 and to increase the likely price of the Company's shares to a fi gure more appropriate for a listed company of its size and nature in the UK market. Based on the current issued share capital of the Company, there would be approximately 115m ordinary shares in issue, following the share consolidation, reduced from approximately 1.15bn at present. The share consolidation is subject to approval by shareholders at the Annual General Meeting to be held on 28 July 2011.
As at 31 May 2011, the Company has been notifi ed, in accordance with the FSA Disclosure and Transparency Rules of the following interests in the voting rights of the Company:
| Number | Percentage | |
|---|---|---|
| Shareholder | of Shares | Held |
| Mr N Roditi* | 310,013,445 | 26.89% |
| F&C Asset Management Plc | 114,525,949 | 9.94% |
| BlackRock Inc | 88,822,780 | 7.71% |
| Columbia Wanger Asset Management | 87,878,100 | 7.62% |
| Legal & General Investment Management 63,667,496 | 5.52% | |
| Newton Investment Management Limited | 56,356,279 | 4.89% |
| Standard Life Investments | 37,861,878 | 3.28% |
* Mr Roditi's shareholding is held via a number of different trusts and legal entities.
The Group made no political contributions during the year (2010: £nil). Charitable contributions within the UK amounted to £85,604 (2010: £172,768) principally through rental concessions.
We are committed to health and safety best practice as an integral part of our business activities and our drive for high performance. The Group's policy is to provide and maintain safe and healthy working conditions, equipment and systems of work for all its employees and to provide such information, training and supervision as they need for this purpose.
Whilst all employees of the Group have a responsibility in relation to health and safety matters, certain staff have been designated 'workplace' responsibilities or other co-ordinating responsibilities throughout the Group, and ultimately, at Board level, the Chief Executive has overall responsibility.
The Group tries, wherever possible, to procure from within its own tenant base providing customers are competitive on price and quality. The Group's policy is that, unless agreed otherwise at the time of the transaction, its own payments to others for goods and services received are made on average within a month of the date of invoice.
During the year to 31 March 2011 the Group's average payment term from the date of invoice was 34 days (2010: 33 days). The Parent Company has made no trade purchases.
The fi nancial risk management objectives and policies of the Company are set out in note 17 to the fi nancial statements and in the Corporate Governance section of this report on pages 38 to 43.
The Directors who held offi ce at the date of approval of this Directors' Report confi rm that, so far as they are each aware there is no relevant information of which the Group's auditors are unaware; and each Director has taken all the steps that they ought to have taken as Directors to make themselves aware of any relevant audit information and to establish that the Group's auditors are aware of that information.
The auditors, PricewaterhouseCoopers LLP ('PwC'), have indicated their willingness to continue in offi ce and a resolution that they will be reappointed is included as ordinary business at the Annual General Meeting.
The 25th Annual General Meeting of the Company will be held at Chester House, Kennington Park, 1-3 Brixton Road, London SW9 6DE on Thursday 28 July 2011 at 11.00am. Accompanying this report is the Notice of the Annual General Meeting, which sets out the resolutions to be considered and approved at the meeting.
By order of the Board
Company Secretary 3 June 2011
The Board has a number of standing committees to which specifi c responsibilities have been delegated and for which written terms of reference have been agreed. These terms of reference are available for inspection on the Company's website.
| Remuneration Committee |
Audit Committee |
Nominations Committee |
City Committee |
Executive Committee |
|---|---|---|---|---|
| – All aspects of the remuneration of the Executive Directors – Recommending the Chairman's remuneration |
– Ensures the integrity of fi nancial reporting and audit processes – Maintenance of a sound internal control and risk management system |
– Recommends to the Board candidates for appointment as Executive and Non Executive Directors of the Company – Assess what new skills; knowledge and experience are required on the Board |
– Reviews the quarterly, interim and annual reports and associated announcements prior to their review by the Audit Committee and the Board |
– Address Group-wide issues and initiatives – Review and approve capital expenditure; disposals and certain acquisitions – Monitoring of the operating and fi nancial results against plans and budgets – Effectiveness of risk management and control procedures |
The Board is committed to maintaining high standards of corporate governance. Working with honesty and integrity are vital to building a sustainable business for all of our stakeholders.
Throughout the year ended 31 March 2011, the Company fully complied with the Code provisions set out in section 1 of the Combined Code on Corporate Governance issued by the Financial Reporting Council in June 2008. The application of the principles contained in the Combined Code is described below. Detailed reports on Directors' remuneration and the Audit Committee can be found on pages 44 to 52 and pages 39 and 40.
During the year ended 31 March 2011, the Board of Directors comprised:
| Tony Hales | Non-Executive Chairman | |
|---|---|---|
| Harry Platt | Chief Executive | |
| Graham Clemett | Finance Director | |
| Bernard Cragg | Senior Independent Non-Executive Director | |
| John Bywater | Independent Non-Executive Director | |
| Jamie Hopkins | Independent Non-Executive Director | |
| Rupert Dickinson | Independent Non-Executive Director | |
Notes
– Mr Hopkins was appointed on 7 June 2010.
– Mr Dickinson retired from the Board on 27 July 2010.
The Board is collectively responsible for the performance of the Company. The Board has carefully considered the guidance criteria on independence of Non-Executive Directors under the Combined Code. In the opinion of the Board, all the continuing Non-Executive Directors, namely Bernard Cragg, John Bywater and Jamie Hopkins bring independence of judgment and character to the Board and to the committees on which they sit. They are independent of management and are free from any business or other relationships which could interfere with the exercise of their judgment. Their considerable and diverse experience enables them to make a valuable contribution to the Company. The Board has nominated Bernard Cragg to act as the Senior Independent Director, thus providing an alternative contact at Board level, other than the Chairman, to whom shareholder matters can be addressed.
The Board has a formal schedule of matters reserved for its approval. It is responsible for the overall Group strategy, risk management and the review and approval of major investment proposals, signifi cant capital projects and disposals and acquisitions of more than £2m. The Board discusses and agrees strategic plans and reviews budgets, business plans and business performance. The Board has ultimate responsibility for the Group's overall management, its business and fi nancial strategy. Other day-to-day operational decisions are delegated by the Board to the Executive Committee.
The Board normally meets seven times per year and supplementary meetings are held as and when necessary.
In July 2010 the Board renewed the contract of John Bywater for a further three years having served six years.
Biographical details of the Directors at the date of this report are set out on pages 32 and 33 together with details of their membership of Board Committees.
| Review of Operations 01 – 35 |
|
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
| Shareholder Information | 87 – 88 |
The roles and responsibilities of the Chairman, Tony Hales, and the Chief Executive, Harry Platt, are separate and the division of responsibilities has been clearly established. The Chairman is responsible for leadership of the Board, ensuring its effectiveness and that it operates in the interests of shareholders. The Chairman facilitates the effective contribution of the Non-Executive Directors and ensures all Directors receive accurate, timely and clear information. The Chairman is not involved in an executive capacity in any of the Group's activities. He is also responsible for effective communication between the Board and shareholders.
The Chief Executive has direct charge of the Company on a day-to-day basis and is accountable to the Board for the fi nancial and operational performance of the Group and the determination of the strategy and achievement of its objectives.
Bernard Cragg, as the Senior Independent Director, is responsible for chairing the meeting of the Non-Executive Directors for the purpose of evaluating the Chairman's performance and to provide an alternative communication channel for shareholders if required.
The Board has a number of standing committees, namely the Remuneration, Audit, Nominations, City Committee and the Executive Committee, to which specifi c responsibilities have been delegated and for which written terms of reference have been agreed. These terms of reference are available for inspection on the Company's website. Board members receive minutes of meetings of all the Board's Committees and can request presentations or reports on areas of interest.
| Number of meetings during the year | Scheduled | Attended |
|---|---|---|
| 1. John Bywater (Chairman) | 8 | 8 |
| 2. Bernard Cragg | 8 | 7 |
| 3. Tony Hales | 8 | 8 |
| 4. Jamie Hopkins | 8 | 4 |
The Remuneration Committee consists of all of the Non-Executive Directors and is chaired by John Bywater. Under its terms of reference the Committee meets at least twice a year. During the year under review the Committee met eight times. It is responsible for all aspects of the remuneration of the Executive Directors. The Committee is also responsible for recommending the Chairman's remuneration to the Board in compliance with the Combined Code.
The Chief Executive is, other than in respect of his own position, invited to attend meetings.
Further details of the Remuneration Committee, remuneration policy and of the remuneration of each Director are set out in the Remuneration Report.
| Number of meetings during the year | Scheduled | Attended |
|---|---|---|
| 1. Bernard Cragg (Chairman) | 3 | 3 |
| 2. John Bywater | 3 | 3 |
| 3. Jamie Hopkins | 3 | 2 |
The Audit Committee comprises all the Non-Executive Directors, except the Chairman, and is chaired by Bernard Cragg. During the year under review the Committee met three times. It ensures the integrity of fi nancial reporting and audit processes and the maintenance of a sound internal control and risk management systems.
Bernard Cragg, the Chairman of the Audit Committee, is a Chartered Accountant and the Board is satisfi ed that he has the required and relevant fi nancial experience. The Audit Committee collectively has the skills and experience required to fully discharge its duties, and it has access to independent advice at the Group's expense.
The Chairman of the Company, the Chief Executive, the Group Finance Director, and other senior fi nance personnel and, when necessary, operational management together with senior representatives of the external auditors may attend meetings by invitation.
Meetings of the Audit Committee coincide with key dates in the fi nancial reporting and audit cycle. The Committee Chairman reports the outcome of meetings to the Board.
During the year, the Committee met in private sessions with PricewaterhouseCoopers LLP ('PwC') in the absence of management at least twice.
During the year the Committee was responsible for reviewing, and reporting to the Board, on a range of matters including:
continued
Due to its size and structure, the Group does not have an internal audit function, a matter which is kept under review by the Committee. However, the Company does undertake a programme of fi nancial, operational and health and safety audits at its estates. These are carried out by qualifi ed senior Head Offi ce personnel on a rotational basis. The Company's resource on managing areas of risk is also strengthened through the Committee's appointment of external advisors, PKF. PKF assist the Group and particularly the Risk Committee in identifying risks and ensuring that appropriate controls are in place to mitigate and manage those risks. PKF attend meetings of the Risk Committee, and they are invited to attend Audit Committee meetings to report to the Committee on specifi c areas of risk. They also report directly to the Chairman of the Audit Committee.
The Committee has a rolling agenda that ensures that the Committee receives appropriate information far enough in advance to enable it to fulfi l its responsibilities. This includes not only information from management but also detailed reports from the external auditor.
The Audit Committee recognises that the independence of the Group's external auditor is of paramount importance to shareholders and the Audit Committee terms of reference establish a process for monitoring and approving the nature and the level of related fees for non-audit services (e.g. accounting, tax or due diligence work) paid to the Group external auditors.
The Group uses the external auditor for relevant fi nancial work for a variety of reasons, including their knowledge of the Group, the audit-related nature of the work and the need to maintain confi dentiality.
At each meeting, the Committee will be advised of any signifi cant non-audit work awarded to the external auditor since the previous meeting and the related fees. At the annual May meeting, the Committee receive a report of fees, both audit and non-audit from PwC for the past fi nancial year. The Committee will consider in detail the nature and level of non-audit services provided by PwC and the related fees. The Committee may challenge and in some instances refuse proposals in respect of non-audit work to be performed by the external auditor.
In addition, the Committee will assess the threats of self review by the external auditors, self interest, advocacy and familiarity – these are set out below and considered in relation to PwC's services:
The Committee specifi cally will not allow the auditors to:
Prepare fi nancial statement disclosure items.
The Group will not use PwC in an advocacy role.
The Committee will prohibit the hiring of former employees of the external auditor associated with the Group's audit into management roles with signifi cant infl uence within the Group within two years following their association with the audit, unless the Chairman of the Audit Committee gives prior consent. Annually, the Committee will be advised of any new hires caught by this policy. In addition, PwC will rotate their audit partner every fi ve years.
The Committee will monitor on an ongoing basis the relationship with the external auditor to ensure its continuing independence, objectivity and effectiveness. By reference to the external auditor's litigation record, fi nancial assets, structure of the fi rm and the level of its professional indemnity insurance cover, the Committee will determine the external auditor's fi nancial stability and assesses the likelihood of its being able to meet any liabilities arising from the audit engagement.
Further details of the Audit Committee and its activities are set out in the Audit Committee Report.
Fees paid to PwC can be found in note 3 on page 64.
| Review of Operations 01 – 35 |
|
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
| Shareholder Information | 87 – 88 |
| Number of meetings during the year | Scheduled Attended |
|
|---|---|---|
| 1. Tony Hales (Chairman) | 3 | 3 |
| 2. John Bywater | 3 | 2 |
| 3. Bernard Cragg | 3 | 3 |
| 4. Jamie Hopkins | 3 | 1 |
The Nominations Committee comprises Tony Hales (Chairman) together with the three other Non-Executive Directors.
The Committee meets as required and recommends to the Board candidates for appointment as Executive and Non-Executive Directors of the Company. The Committee periodically assesses what new skills, knowledge and experience are required on the Board and if appropriate, recommends a candidate profi le which is then used to brief recruitment consultants appointed by the Committee to undertake the selection process. Initial meetings are held generally by the Chairman and the Chief Executive with prospective candidates and a shortlist of individuals is selected to meet with other Nominations Committee members and other Executive Directors. The Nominations Committee then meets and decides which candidate, if any, will be recommended to join the Board. This process was used for the appointment of Jamie Hopkins as Non-Executive Director, with Hanson Green acting as recruitment consultant.
This year the Committee also handled the process of succession for the Chairman. On this issue the Committee was chaired by Bernard Cragg, the Senior Independent Director and was assisted by recruitment consultant, Spencer Stuart. The Nominations Committee duly recommended to the Board that Daniel Kitchen be appointed as a Non-Executive Director and subject to election by shareholders at the AGM, to be appointed as Chairman of Workspace Group PLC to succeed Tony Hales on his retirement at the conclusion of the AGM.
The Board has succession plans in place for both the Board and the Executive Committee. As the Committee continues to evaluate the skills and abilities required, it will actively seek to bring more diversity onto the Board.
The City Committee comprises the Chairman, the Chief Executive, the Senior Independent Director and the Finance Director. The City Committee reviews the quarterly, interim and annual reports and associated announcements prior to their review by the Audit Committee and the Board.
The Executive Committee consists of the Executive Directors together with the Operations Director and Development Director. It is chaired by the Chief Executive. The Committee facilitates and assists the Chief Executive in managing the day-to-day activities of the Group and addressing Group-wide issues and initiatives. The Executive Committee is responsible for reviewing and approving capital expenditure; disposals and acquisitions at certain levels as determined by the Board; the monitoring of the operating and fi nancial results against plans and budgets; and to ensure the effectiveness of risk management and control procedures.
The Committee has met 11 times during the year ended 31 March 2011.
The Company also operates a Development Board and an Operations Board which comprise various members of the Executive Committee and the senior management team.
The responsibilities of the Executive Committee members include:
Strategic management; investor relations; health and safety; staff; equal opportunities; remuneration and training and development.
Finance; treasury; company secretarial; investor relations; and the Group's IT strategy.
Portfolio performance; asset management; lettings and marketing; rent reviews and renewals.
Planning consents; development of assets; valuations; acquisitions and disposals; sustainability and environmental strategy.
41
continued
The attendance of Directors at Board and principal Committee meetings during the year, together with the maximum number of routine meetings in the year, was as follows:
| Scheduled | Audit Remuneration Nominations | |||
|---|---|---|---|---|
| Board Committee | Committee | Committee | ||
| Meetings | Meetings | Meetings | Meetings | |
| Number of meetings | ||||
| held during the year | 8 | 3 | 8 | 3 |
| Chairman | ||||
| Tony Hales | 8 | – | 8 | 3 |
| Executive Directors | ||||
| Harry Platt | 8 | – | – | – |
| Graham Clemett | 8 | – | – | – |
| Non-Executive Directors | ||||
| Bernard Cragg | 8 | 3 | 7 | 3 |
| John Bywater | 8 | 3 | 8 | 2 |
| Jamie Hopkins1 | 5 | 2 | 4 | 1 |
| Rupert Dickinson2 | 3 | 1 | 3 | 0 |
Notes:
The Board also held an annual strategy meeting at which it considered the future strategy. In addition, other ad hoc meetings of the Board were held during the year as required to deal with various matters requiring Board consideration.
A tailored induction programme is provided for each new Director. Overall, the aim of the induction programme is to introduce new Directors to the Group's business and its governance arrangements. Such inductions typically include meetings with senior management, site visits and presentations of key business areas and other relevant documentation. In addition, Directors are encouraged to update their skills, knowledge and familiarity with the Group by attending external seminars and briefi ngs, through participation at meetings and through visits to estates, meetings with senior management and advisers. The Directors are regularly updated on new legislation and corporate governance issues as they arise. Directors are given access to independent professional advice at the Group's expense, if they deem it necessary, in order for them to carry out their responsibilities. This is in addition to the access that every Director has to the Company Secretary. The Company has continued to secure appropriate insurance cover for its Directors and its Offi cers.
During the year the Chairman held four meetings with the Non-Executive Directors, without the Executive Directors present. In addition, the Board has carried out a formal evaluation of its own performance. The process comprised the Company Secretary issuing a detailed questionnaire covering the Board and its Committees to Board members. The questionnaire covered issues such as effectiveness of meetings, how well strategy is tested and developed, board composition and succession planning and risk management controls. The responses to the questionnaire were collated independently by the Company Secretary, who then prepared reports for each of the chairmen of the Board and relevant Committees. The responses were discussed at the Board and the relevant committees taking follow up actions where
considered necessary. The review includes the assessment of individual Directors' performance, which in the case of the Executive Directors is undertaken as part of the wider performance appraisal process applied to staff across the Company. The evaluation undertaken during the year, although identifying areas for review, concluded that the Board and its committees were operating effectively.
During the year, the Non-Executive Directors, led by Bernard Cragg in his capacity as the Senior Independent Director, met to review the performance of the Chairman, taking into account the views of the Executive Directors. Following the review, Bernard Cragg met with the Chairman to discuss his performance.
During 2011/12 the Board intends to engage an external party to undertake formal evaluation of its performance.
The Articles of Association of the Company require that Directors should submit themselves for election at the fi rst opportunity after their appointment and thereafter for re-election at least every three years. However, the Company is adopting the requirements of the UK Corporate Governance Code (June 2010) (formerly the UK Combined Code) in relation to Directors' appointments and in particular the annual re-election of all Directors. Therefore in accordance with provision B.7.1 of the UK Corporate Governance Code all the Directors, except for Mr Hales, will retire at the AGM and being eligible, offer themselves up for re-election.
As previously announced, Tony Hales will be retiring as a Director at the forthcoming Annual General Meeting and will not be seeking re-election.
Mr Kitchen was appointed as a Non-Executive Director with effect from 6 June 2011. He will subsequently be appointed as Non-Executive Chairman at the conclusion of the Annual General Meeting.
Mr Kitchen therefore stands for election at the forthcoming AGM. He is currently Non-Executive Chairman of Irish Nationwide Building Society and a Non-Executive Director of Minerva PLC, Director of LXB Retail Properties PLC and Kingspan Group PLC.
Mr Platt and Mr Clemett have service contracts and details can be found on page 49.
None of the Non-Executive Directors have service contracts.
The appointment of Mr Hales may be terminated by either he or the Company giving twelve months notice in writing.
The appointment of Mr Bywater, Mr Cragg and Mr Kitchen may be terminated by any one of them or the Company giving six months' notice in writing.
Mr Jamie Hopkins was appointed as a Non-Executive Director during the year and his appointment may be terminated by either the Company or by Mr Hopkins giving three months notice in writing.
Biographies for the Directors can be found on pages 32 and 33.
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
| Shareholder Information | 87 – 88 |
In its fi nancial reporting to shareholders and other interested parties, by means of Annual and Half-Yearly Financial Reports, Interim Management Statements and other periodic statements, the Board aims to present a balanced and understandable assessment of the Group's position and prospects.
The Board has ultimate responsibility for the Group's system of internal control and for reviewing its effectiveness. The Board has reviewed the Group's system of controls including fi nancial, operational, compliance and risk management on a regular basis throughout the year. However any such system can only provide reasonable and not absolute assurance against any material misstatement or loss.
The Group has established a risk management framework and procedures necessary to enable the Directors to report on internal controls in compliance with the Code. The risk management procedures involve the analysis, evaluation and management of the key risks to the Group.
The other key elements of the Group's system of internal control include:
The Risk Committee reviews and identifi es risks facing the Group and ensures that appropriate controls are in place to review each issue raised. Each identifi ed risk is assigned a 'Risk Owner'. PKF are appointed by the Risk Committee to undertake specifi c projects to review particular areas of the business.
– a programme of site audit visits, covering a signifi cant proportion of the sites each year. Although the Group does not have a dedicated internal audit function an operational, fi nance and health and safety audit are carried out at the estates by qualifi ed Head Offi ce personnel. The results of the audits are reported to and reviewed by the Risk and Audit Committees and appropriate action taken as required.
The Group has 'whistleblowing procedures' under which staff may report any suspicion of fraud, fi nancial irregularity or other malpractice. There is also a process in place for staff to report operational risks and issues to the Risk Committee.
The Group has continued to develop its risk management and has reappraised its risks in the light of the changes in the external environment during the last year.
The Group has also considered the requirements of the Bribery Act 2010 and taken steps to ensure that it has adequate procedures as set out by the Act.
The Group continues to strengthen its risk management processes to ensure these are embedded as part of the Group's culture. The Turnbull Guidance sets out best practice on internal control to assist companies in applying the Codes principles with regards to internal control. The Board, with advice from the Audit Committee has completed its review of the effectiveness of internal control with no signifi cant failings or weaknesses identifi ed.
Further information on the Group's risks is detailed on pages 27 to 29.
Share capital structures are included in the Directors' Report on page 37.
Going Concern disclosures are included in the Directors' Report on page 36.
A copy of the Annual report and Accounts is sent to all shareholders. It is also available on the Company's website, which additionally contains up to date information on the Group's activities and published fi nancial results and presentations.
Executive Directors have frequent discussions with institutional shareholders on a range of issues throughout the year affecting the Group's performance, which include meetings following the announcements of the annual and interim results. Meetings are also held with analysts and the fi nancial press. It is also the Company's practice, following the preliminary results that these meetings are followed up by a telephone conversation between the Chairman and the relevant shareholders. The Company's stockbrokers also discuss the outcome of meetings with shareholders and report their fi ndings to the Board. Other ad hoc meetings, presentations and site visits are arranged for shareholders throughout the year.
The Company's Annual General Meeting is used as an opportunity to communicate with private investors. Shareholders attending the Annual General Meeting are invited to ask questions and to meet with the Directors informally after the meeting.
During the year ended 31 March 2011, the Directors consider that the Company complied with the provisions set out in section 1 of the Combined Code.
The Board is committed to maintaining a high standard of corporate governance within the Group. The Board believes that good governance is assisted by transparent detailed reporting and that strong and sustainable long-term economic performance is aided by compliance with best practice in corporate social responsibility. The Group publishes a range of material both on its website and in hard copy, for details see the inside back cover. This information is complementary to this statement of compliance with the Combined Code, which the Group is required to publish.
By order of the Board
Company Secretary 3 June 2011
This Remuneration Report has been prepared on behalf of the Board by the Remuneration Committee (the 'Committee'). The Committee adopts the principles of good governance as set out in the Combined Code on Corporate Governance 2008 ('Combined Code') and complies with 'the UKLA Listing Rules and relevant requirements of Schedule 421 to the Companies Act 2006.
The following report of the Committee provides an explanation of the Committee's work and of the remuneration arrangements for Directors. It is divided into the following sections:
Service Agreements of Executive Directors;
The Chairman and Non-Executive Directors;
The Committee is sensitive to the need to set Directors' remuneration having regard to pay and conditions in the Group as a whole and believes that the approach it has taken is fair and reasonable in light of current market practice, and is in the best interests of shareholders. Our key principles are set out below.
The Committee strives to ensure that shareholders' interests are served by ensuring that a signifi cant part of the Executive Directors' remuneration is variable and is therefore determined by the Group's success. This is achieved through bonus deferral, encouraging voluntary investment in Workspace shares, setting stretching performance targets applicable for the LTIP and monitoring compliance with executive shareholding requirements.
| Element | Purpose | Delivery | Summary details |
|---|---|---|---|
| Base Salary | To refl ect market value of the role, an individual's performance and contribution. |
Payable in cash. Pensionable. |
Reviewed annually, with any increases normally effective from 1 April. Following a review by the Remuneration Committee, the salaries for Executive Directors were increased by 2% with effect from 1 April 2011, in line with the rest of the Company. |
| Annual Bonus Scheme |
To encourage and reward the achievement of Group fi nancial and corporate targets and strategic business objectives. Part of the bonus may be deferred. |
The maximum annual cash bonus that could be earned by Executive Committee members is 120% of salary. Non Pensionable. The Remuneration Committee retains the fl exibility to vary the mix of cash and deferred bonus from year to year. For 2010/11, the Remuneration Committee has set a minimum deferral requirement of 25% of bonus earned. |
The performance targets are aligned to four distinct elements: Trading profi t before tax (50%); Capital return from the portfolio versus a defi ned comparator index compiled by IPD (30%); Customer satisfaction which is based on survey results (10%); and achievement of personal objectives (factor in the range of 0.67 to 1.33). The Committee retains the discretion to mandate deferral of a percentage of bonus earned (which will vest after two years, subject to continued employment) or allow executives to make an equivalent investment in the LTIP. |
| Long Term Incentive Plan ('LTIP') |
To align the interests of participants with those of shareholders and incentivise and reward long-term sectoral outperformance. |
Annual award of nominal priced options which vest after three years, subject to performance conditions. Non pensionable |
Discretionary award whereby executives receive (i) annual awards of performance shares of up to 100% of salary (200% in exceptional circumstances) and (ii) matching share awards of up to 2 for 1 on investments of up to 50% of net salary. Vesting of awards is subject to satisfaction of challenging targets relating to growth in Net Asset Value (1/3 of awards) and Total Shareholder Return (2/3 of awards). |
| Other Benefi ts | To provide market competitive benefi ts. | Benefi ts in kind or cash allowance. | Benefi ts include a car allowance, private health insurance, death in service cover and a pension contribution. Executives may also join the SAYE share scheme. |
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
| Shareholder Information | 87 – 88 |
All executives and senior managers have business and personal objectives which are set at the beginning of the fi nancial year and are aligned to the strategy.
During this year's review, the Committee reaffi rmed that a minimum deferral or investment each year into Workspace shares is appropriate and set a minimum deferral requirement of 25% of the bonus earned. The preferred mechanism for meeting this requirement is for participants to invest in the LTIP as this enhances the long-term performance focus. However, the Committee retains the discretion to mandate deferral of 25% of the bonus earned (which will vest after 2 years, subject to continued employment) or allow executives to make an equivalent investment in the LTIP. Consideration has also been given to the proposed Government changes to pension tax relief, and the Company has introduced the fl exibility to continue with the DC contributions or pay cash allowances in lieu of pension when it is more tax effi cient to do so. Such changes are at no additional cost to the Company.
The Committee believes the remuneration policy reinforces effective risk management by aligning Executive Directors' interests with the long-term interests of shareholders through bonus deferral and investment in Workspace shares, regular awards of performance shares vesting on long-term TSR and NAV growth, with TSR underpinned by Remuneration Committee discretion and the use of executive share ownership guidelines.
During 2011/12, the Committee will continue to monitor the remuneration policy's alignment with business priorities and objectives, whilst ensuring that our remuneration framework continues to motivate, reward and retain our senior management in order to deliver the business strategy.
Directors' remuneration details are explained in the table below which is then followed by the remuneration policy framework.
| Normally received or awarded | Alignment with strategy | 2011 | Harry Platt 2010 |
2011 | Graham Clemett 2010 |
|---|---|---|---|---|---|
| Paid on a four weekly basis throughout the year. |
Salaries are set below median. | £330.8k | £330.8k | £217.3k | £217.3k |
| Provides a sound basis on which to attract and retain executives of a high calibre. |
|||||
| Normally paid in June following the reporting fi nancial year end. |
Provides a direct link between operational performance and reward. |
£339.4k | £165.3k | £232.3k | £156.4k |
| Ensures that Directors' and shareholders' interests are closely aligned. |
25%2 deferral requirement |
40%1 of bonus deferred |
25%2 deferral requirement |
40%1 of bonus deferred |
|
| Normally awarded in June following the reporting fi nancial year end. |
NAV return and TSR measured against an industry specifi c comparator group rewards |
Performance Award | Performance Award | ||
| sectoral outperformance. | 90% | 90% | 90% | 90% | |
| Growth in the absolute TSR underpinned by relative TSR provides alignment with shareholders' interests. |
Matching Award | Matching Award | |||
| Performance criteria aligned with the strategy. | 90% | 90% | 90% | 90% | |
| Received during the year. | Provides a sound basis on which to attract and retain executives of a high calibre. |
£23.9k | £77.6k | £17.5k | £52.9k |
Notes:
For the fi nancial year ended 31 March 2010, the Remuneration Committee decided to defer 40% of the bonus. Mr Platt invested the deferred element of the bonus earned in Company shares and Mr Clemett made an equivalent investment in the LTIP.
For the fi nancial year ended 31 March 2011, the Remuneration Committee set a minimum deferral requirement of 25% of bonus earned.
Following the review by the Remuneration Committee of Executive salaries, it was agreed that the salaries for both Mr Platt and Mr Clemett be increased by 2% to £337.4k and £221.6k respectively with effect from 1 April 2011.
continued
It is intended that the remuneration policy framework as set out below, which has applied throughout the reporting year, will continue to apply for FY 2012. Consequently, our remuneration policy remains focused on the following key elements described in detail below:
The Company's remuneration policy reinforces the Company's goals, providing effective incentives for exceptional Company and individual performance.
Remuneration packages are designed to attract, retain and motivate Executive Directors of the highest calibre who have the experience, skills and talents to manage and develop the business successfully.
A signifi cant part of the Executive Directors' remuneration is variable and is determined by the Group's success. Below-median basic salaries plus above-median incentives provide opportunity for competitive performance-linked total reward for superior performance.
The Committee strives to ensure that shareholders' interests are served by creating an appropriate balance between performancerelated and non-performance-related pay. A considerable part of the reward package is linked to share price performance, is delivered in shares that have to be retained until minimum shareholding requirements have been met and requires executives to invest their own funds in Company shares. Executives are encouraged to build up a shareholding equal to at least one times basic salary.
The chart below shows the 2011 pay mix for Executives on a fair-value basis. The fair value of performance shares and matching shares incorporates an estimate of the probability that the performance conditions are achieved, takes into account that dividends are accrued and includes a discount for the risk of forfeiture.
Executive Director pay mix (% of total remuneration by fair value)
The Committee reviews base salaries annually with any changes normally taking effect from 1 April. Individual pay levels are determined by reference to the external economic environment, individual performance, experience and rates of salary for similar jobs in companies of a similar sector and size. Consideration is also given to salary increases across the Company.
The annual salaries of the Executives were reviewed on 1 April 2011. Taking into consideration the current economic environment and pay rises made to the majority of employees, the Committee considered it appropriate that an increase of 2% be made to the executive salaries. Salaries were last increased in April 2008. The next salary review date for Executives will be 1 April 2012.
All Executive Directors are provided with a Company mobile phone, a car allowance, private health insurance, death in service cover and an employer's contribution equal to 16.5% of basic salary to a defi ned contribution (money purchase) scheme. No further employer pension contributions will be made to Mr Platt, but he will receive, instead a cash allowance in lieu of pension at no additional cost to the Company.
The members of the Remuneration Committee In the reporting year the Committee consisted of the following Non-Executive Directors:
| John Bywater (Chairman) |
|---|
| Bernard Cragg |
| Tony Hales |
| Jamie Hopkins (from June 2010) |
| Rupert Dickinson (retired July 2010) |
The Remuneration Committee's responsibilities are set out in its terms of reference, which are available in the Investor section of the Company's website www.workspacegroup.co.uk. These responsibilities include:
The Committee met eight times during the year under review. Attendance by individual Committee members at meetings is detailed in the Corporate Governance Report on page 39.
At the invitation of the Chairman, the Chief Executive and Finance Director have attended parts of meetings to advise on specifi c questions raised by the Committee and on matters relating to the performance and remuneration of senior managers. The Company Chairman, Chief Executive and Finance Director are excluded from discussions regarding their own remuneration. The Company Secretary attends each meeting as Secretary to the Committee.
46
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
| Shareholder Information | 87 – 88 |
For the year under review, the Committee continued to retain the services of Kepler Associates and PricewaterhouseCoopers LLP as independent external advisers. Kepler Associates provided advice on executive remuneration matters and aspects associated with the LTIP and provides no other services to the Company. The advice PwC provides on remuneration is limited to administrative matters and the tax treatment of share option schemes and deferred share awards. The Company continually assesses ongoing advice provided by its advisers on remuneration matters.
The Group operates an annual bonus scheme which provides for a capped variable (performance related) bonus. During the year the maximum bonus potential for the Executive was set at 120% of basic annual salary.
During the year, the Committee reviewed the scheme and concluded that a minimum deferral or investment each year into Workspace shares remains appropriate. For 2010/11 the Committee set a minimum deferral requirement of 25% of the bonus earned.
The preferred mechanism for meeting this requirement is participant investment in the LTIP. However, the Committee will retain the discretion to mandate deferral of 25% of bonus earned (which will vest after two years, subject to continued employment) or allow executives to make an equivalent investment in the LTIP. For 2010/11 the Committee will allow Executives to make an equivalent investment in the LTIP.
The targets applicable for the year ended 31 March 2011 and the performance against them are detailed below:
| Bonus Target | Maximum bonus potential expressed as a percentage of annual basic salary |
Percentage of bonus earned |
|
|---|---|---|---|
| Harry Platt |
Graham Clemett |
||
| Trading profi t before tax |
50% | 50% | 50% |
| Capital return from the portfolio versus a defi ned comparator |
|||
| index compiled by IPD Customer satisfaction |
30% | 25.5% | 25.5% |
| (based on survey results) | 10% | 10% | 10% |
| Personal objectives | Corporate performance bonus may be adjusted by a factor in the range of 0.67 to 1.33 (with factors greater than 1.1 refl ecting superior performance) |
1.2 | 1.25 |
| Maximum bonus | |||
| potential | 120% | 102.6% | 106.9% |
The Plan provides for annual awards of performance shares of up to 100% of salary (200% in exceptional circumstances) and matching share awards of up to 2 for 1 on investments in Workspace of up to 50% of (net) salary. The maximum matching share award that may be granted to the Executive Directors is 100% of their annual basic salary, subject to the Director using his own funds to purchase invested shares, up to the maximum of 50% of net annual basic salary. The Company then awards matching shares in respect of an amount equivalent to two times the grossed up (for income tax and National Insurance) amount invested by the participant in Invested Shares.
Vesting of performance shares and matching shares is based 1/3, 1/3, 1/3 on three-year relative NAV, relative TSR and absolute TSR. In addition, for any shares to vest on TSR, the Committee must satisfy itself that the recorded TSR is a genuine refl ection of the underlying business performance of Workspace, and for awards granted in 2010, for any shares to vest on absolute TSR, the Company's TSR must exceed the median TSR of the Comparator group by over +1.5% p.a. over the performance period.
The TSR and NAV performance conditions have been selected to ensure a balanced portfolio of measures which are well aligned with shareholder interests. The Committee believes a blend of relative and absolute performance is most appropriate for Workspace and that use of absolute TSR underpinned by relative TSR provides transparency for executives and shareholder alignment (as this element will only vest if there is outperformance of sector peers).
In the event of a change of control, LTIP awards would normally be pro-rated for time and performance, in line with best practice.
Following its review and consultation with the Company's major shareholders and corporate governance bodies including the ABI and RREV, the Committee decided to set a performance zone of 25p to 30p for the Company's share price at 31 March 2012 (with three-month averaging) plus dividends from 1 April 2009 to aid transparency and simplicity, replacing the previous absolute TSR performance zone of 8% p.a. to 15% p.a. From 8 June 2009 closing price of 15p this would represent a total shareholder return of 66% to 100% over three years.
The Company offered participants the opportunity to restructure their 2009 LTIP awards so that they acquired shares jointly held with the Company's Employee Share Ownership Trust ('ESOT'). With the effect that the growth in value of the shares creates a capital gain (taxed currently at 18%, with no National Insurance). Individuals were required to pay a small income tax and National Insurance charge as part of their upfront acquisition. If the awards vest, the participants keep their part-interest in the shares and the ESOT also transfers its part-interest to the participant at that stage, so that they receive the full value of the shares as intended under the terms of the Plan. This restructuring generates ongoing savings for the Company and participants.
For the 2009 awards Messrs Platt and Clemett accepted the joint ownership awards as part of their total awards, each taking half of their awards as joint ownership awards, with the remainder in the original conditional shares structure.
continued
The Committee reviewed the performance conditions in advance of grant of the 2010 awards. The review reaffi rmed that a TSR outperformance of +7.5% per annum of the current comparator group remains approximately equivalent to upper quartile. The Committee determined to raise the default absolute TSR performance zone approved by shareholders in 2008 (of 8% p.a. to 15% p.a.). For 2010 awards the absolute TSR performance zone is 11% p.a. to 20% p.a. over the period to 31 March 2013 (with three months averaging).
In addition, the Committee introduced a requirement that for any shares to vest on absolute TSR, the Company's TSR must exceed the median TSR of its comparator group by +1.5% per annum over the performance period.
Participation in the Plan extends to members of the Executive Committee and the Group's senior managers. During the year awards were made over a total of 11,112,334 ordinary shares in the Company. The maximum value of annual awards of performance shares could be up to 100% of salary (200% in
exceptional circumstances) and matching shares of up to a maximum value of 100% of salary if the participant invests 50% of net salary in ordinary shares.
Full details of the awards made to the Executive Directors under the Plan are shown on page 51.
The Committee intends to make the following awards to Executive Directors following the release of the Company's preliminary results announcement on 6 June 2011 with similar performance conditions as for 2010 LTIP awards.
| Director | Performance award |
Maximum potential Matching Award* |
|---|---|---|
| Chief Executive | 90% | 90% |
| Finance Director | 90% | 90% |
* The maximum Matching Award to be made to the Executive Directors will be in respect of 90% of their annual basic salary. However, the Director must use his own funds to purchase invested shares, up to a maximum of 45% of net annual basic salary. The Company will then award Matching Shares in respect of an amount equivalent to two times the grossed up (for income tax and National Insurance) amount invested by the participant in Invested Shares.
| One-third | One-third | One-third | |||||
|---|---|---|---|---|---|---|---|
| Performance condition: | Growth in Net Asset Value relative to companies in the FTSE 350 real estate index |
TSR (share price growth plus re-invested dividends) relative to companies in the FTSE 350 real estate index |
Absolute TSR*1 | ||||
| Level of performance | Company's rank |
% of award vesting |
Company's performance |
% of award vesting |
Company's performance |
% of award vesting |
|
| Awards made in June 2008 Threshold Maximum |
51st percentile 75th percentile |
20% 100% |
Median Median + 7.5% p.a. |
20% 100% |
8% p.a. 15% p.a. |
20% 100% |
|
| Awards made in June 2009 Threshold Maximum |
51st percentile 75th percentile |
20% 100% |
Median Median + 7.5% p.a. |
20% 100% |
25 pence 30 pence |
20% 100% |
|
| Awards made in June 2010*2 Threshold Maximum |
51st percentile 75th percentile |
20% 100% |
Median Median + 7.5% p.a. |
20% 100% |
11% p.a. 20% p.a. |
20% 100% |
Notes
*1. There will be a pro-rata vesting of awards between the 'threshold' and 'maximum' performance levels.
*2. For the 2010 LTIP award, for any shares to vest on absolute TSR, the Company's TSR must exceed the median TSR of the comparator group by +1.5% p.a. over the performance period.
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
| Shareholder Information | 87 – 88 |
In order for the shares in the Invested Award to vest, the Company must satisfy the performance condition linked to the Company's TSR performance against the FTSE 350 Real Estate Index, its comparator group, during the three-year performance period.
For full vesting of the Matching Award the performance of the Company needs to be above that of the Company at the bottom of the top quartile. For partial vesting of the matching award the Company's performance needs to be at or above the 40th percentile of the ranking. Awards made in 2007 did not satisfy the performance conditions and the awards lapsed. Details are shown on page 52.
No awards were made during the year under the Co-Investment Plan and no further awards will be made.
Details of outstanding grants made to the Executive Directors under the Executive Share Option Scheme and the performance targets that have to be satisfi ed for the options to become exercisable are shown on pages 51 and 52. No grants of options were made during the year under the Executive Share Option Scheme and no further grants will be made.
Executive Directors can participate in the Savings Related Share Option Scheme. Performance conditions have not been imposed, as they are not permissible under UK HM Revenue and Customs rules for this type of scheme.
All current Executive Directors have service agreements that are on a 12-month rolling basis. These agreements provide for 12 months' notice by the Company. The agreements provide for 12 months' notice by all the Executive Directors with the exception of Mr Platt whose agreement provides for 12 months' notice which shall be reduced to 3 months if notice is served by him during the period for 30 December 2011 to 27 April 2012 (inclusive).
Termination payments are limited to the Directors' normal compensation, including basic salary, annual incentives and benefi ts for the unexpired portion of the notice period subject to performance and Committee discretion. The Committee will aim to minimise the level of payments to that Director, however, having regard to all circumstances, including the Company's contractual obligations to the Director, the reason for the departure, and the Company's policy to apply mitigation in the case of severance.
The Company entered into a service agreement with Graham Clemett on 31 July 2007 and an updated service agreement was entered into with Mr Platt on 25 May 2010 and amended on 12 May 2011. In the event of termination of either Director, the Company reserves the right to make phased payments which are paid in monthly instalments and subject to mitigation.
The Company intends to review its practice for service contracts in relation to new hires in light of developments in best practice.
Letters of appointment are provided to the Chairman and Non-Executive Directors. Dates of the Non-Executive Directors' letters of appointment and the unexpired period of their appointments (where appropriate after extension by re-election) are set out below:
Fees for Non-Executive Directors are reviewed annually and determined by the Board in the light of market practice and surveys by Kepler Associates and with reference to the time commitment and responsibilities associated with the roles. Generally, the time commitment of the Chairman is expected to be 50 days a year and for other Non-Executives approximately 15 to 20 days a year. Non-Executive Directors do not participate in decisions about their own remuneration.
The current fees were reviewed, but not increased, in April 2011 and are currently at an annual base fee of £40,000 with additional annual fees of £5,000 for the role of Chairman of the Audit or Remuneration Committees. Non-Executive Directors receive no other pay or benefi ts (other than the reimbursement of expenses incurred in respect of their duties as Directors of the Company). The Chairman's annual fee, which has not been subject to any increase since November 2005, is £100,000.
The fee payable to Mr Kitchen will be £125,000.
Executive Directors are permitted to take up one Non-Executive position on the boards of other companies, subject to the prior approval of the Board. Any fee earned in relation to outside appointments is retained by the Executive Director. No such fees were paid during the fi nancial year.
| Name | Date of letter | Unexpired term as at June 2011 |
Date of appointment/ last reappointment at AGM |
Notice period |
|---|---|---|---|---|
| A J Hales | December 2008 | 6 months | 2009 | 12 months |
| B Cragg | June 2009 | 12 months | 2008 | 6 months |
| J Bywater | July 2010 | 26 months | 2009 | 6 months |
| J Hopkins | June 2010 | 24 months | 2010 | 3 months |
continued
Figure 1 above compares the total shareholder return performance (TSR) of the Group with benchmark indices. Given the differing benchmarks used for such performance measurement your Board has decided to undertake this comparison against all of the FTSE 250, FTSE All Share, FTSE Small Cap and FTSE 350 Real Estate indices. In the opinion of the Directors, these indices are the most appropriate against which the total shareholder return of Workspace Group PLC should be measured.
Figure 2 above compares the TSR performance of the Group against benchmark indices over the last two years.
| Fees 2011 £000 |
Base salary 2011 £000 |
Performance bonus 2011 £000 |
Other benefi ts 2011 £000 |
Total 2011 £000 |
Pension scheme emoluments contributions 2011 £000 |
Total 2010 £000 |
Pension scheme emoluments contributions 2010 £000 |
|
|---|---|---|---|---|---|---|---|---|
| Executive Directors H Platt1 (Chief Executive) |
– | 330.8 | 339.4 | 23.9 | 694.1 | 54.6 | 519.1 | 54.6 |
| G Clemett (Finance Director) |
– | 217.3 | 232.3 | 17.5 | 467.1 | 35.9 | 390.7 | 35.9 |
| – | 548.1 | 571.7 | 41.4 | 1,161.2 | 90.5 | 909.8 | 90.5 | |
| Non-Executive Directors | ||||||||
| A J Hales (Chairman) |
100.0 | – | – | – | 100.0 | – | 100.0 | – |
| B Cragg2 | 45.0 | – | – | – | 45.0 | – | 45.0 | – |
| J Bywater2 | 45.0 | – | – | – | 45.0 | – | 45.0 | – |
| J Hopkins3 | 32.8 | – | – | – | 32.8 | – | – | – |
| R Dickinson4 | 12.9 | – | – | – | 12.9 | – | 40.0 | – |
| 235.7 | – | – | – | 235.7 | – | 230.0 | – | |
| 235.7 | 548.1 | 571.7 | 41.4 | 1,396.9 | 90.5 | 1,139.8 | 90.5 | |
Notes:
No further employer pension contributions will be made to Mr Platt, but he will receive, instead a cash allowance of £55,600 per annum in lieu of pension at no additional cost to the Company.
Messrs Cragg and Bywater received a fee of £5,000 for acting as chairman of the Audit and Remuneration Committee respectively.
Mr Hopkins was appointed as a Director on 7 June 2010.
Mr Dickinson retired as a Director on 27 July 2010. 5. For 2010/2011 the Committee has set a minimum deferral requirement of 25% of the bonus earned. Equivalent to £84,850 and £58,073 for Messrs Platt and Clemett respectively.
The benefi cial interests of the Directors in the shares of the Company are set out below:
| Director | 31 March 2011 31 March 2010 |
|---|---|
| A J Hales 7,805,555 |
7,135,263 |
| H Platt 4,027,919 |
3,846,478 |
| G Clemett 795,715 |
652,864 |
| J Bywater 31,190 |
30,463 |
| B Cragg 646,316 |
646,316 |
| R Dickinson See note 1 |
73,200 |
| J Hopkins 39,110 |
Nil |
Interest in shares for Mr Dickinson as at the date of his retirement on 27 July 2010 was 73,200.
Mr Hopkins acquired 39,110 shares on 4 March 2011.
Directors' interests in Incentive Plans and Share Options are disclosed on pages 51 and 52.
There have been no changes in the interests in the period between 31 March 2011 and 3 June 2011.
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
| Shareholder Information | 87 – 88 |
Details of current awards outstanding to the Executive Directors are as follows:
| Interests in shares as at 1 April 2010 (post Rights-Issue adjustment) |
Lapsed during the year | Interests in shares as at 31 March 2011 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Date awarded | Performance | Invested | Matching | Performance | Matching | Performance | Invested | Matching | |
| H Platt | 13/06/2008 | 535,454 | 57,502 | 259,392 | – | – | 535,454 | 57,502 | 259,392 |
| 12/06/2009 | 2,067,188 | 609,819 | 2,067,183 | – | – | 2,067,188 | 609,819 | 2,067,183 | |
| 06/07/2010 | – | – | – | – | – | 1,446,429 | 354,375 | 1,446,429 | |
| G Clemett | 13/06/2008 | 351,789 | 37,778 | 170,418 | – | – | 351,789 | 37,778 | 170,418 |
| 12/06/2009 | 1,697,656 | 400,644 | 1,358,115 | – | – | 1,697,656 | 400,644 | 1,358,115 | |
| 06/07/2010 | – | – | – | – | – | 950,292 | 232,821 | 950,292 |
Notes:
Awards will vest subject to the satisfaction of performance conditions detailed on page 48 above over the three-year performance period.
Performance Awards were made to the Executive Directors:
In June 2008 in respect of 200% of their annual salary based on a share price at date of award of £1.644. In June 2009 in respect of 100% and 125% of annual salary for Harry Platt and Graham Clemett respectively based on a share price at date of award of 16 pence.
In July 2010 in respect of 90% of annual salary based on a share price at date of award of 20.58 pence.
of net salary. The reference share price for determining this cap was 16 pence being the average share price for the three days preceding the date of grant of Matching Awards. 4. Matching Awards were granted to participants who purchased Invested Shares or who used shares acquired during and since the Rights Issue as Invested Shares. The number of shares comprised in a matching award for Harry Platt and Graham Clemett, who pledged the maximum number of shares as Invested Shares, was calculated
by dividing the participant's gross salary by 16 pence. In 2010, Executive Directors invested an amount equal to 45% of their net annual basic salary in invested shares. Matching awards were granted to participants who purchased invested shares.
Participants are entitled to dividends payable on the Invested Shares. The Invested Shares which are benefi cially owned by participants are included in the table detailing Ordinary Shares held by Directors on page 50 of this Report.
2009 awards were initially granted as conditional award of shares. On 8 December 2009 the Executive Directors elected to convert part of the awards into a combination of interest in shares benefi cially held, and linked options over the same total value.
The three year performance period of 2008 LTIP awards ended on 31 March 2011. The Remuneration Committee concluded that the performance conditions had not been satisfi ed and that the awards should therefore not vest.
Outstanding Options for the Directors of the Company as at 31 March 2011, granted pursuant to the Company's 2000 Share Option Scheme:
| Director | At 01/04/2010 |
Granted during the year |
Lapsed during the year |
At 31/03/2011 |
Exercise price4 |
Normal exercise date From |
To | Exercise terms (see table following) |
|---|---|---|---|---|---|---|---|---|
| H Platt | 232,8791 | – | – | 232,879 | £0.8202 24.07.2004 24.07.2011 | A | ||
| 545,6031 | – | – | 545,603 | £0.8939 29.07.2005 29.07.2012 | B | |||
| 363,2821 | – | – | 363,282 | £0.8510 30.06.2006 30.06.2013 | C | |||
| 183,6421 | – | – | 183,642 | £1.3583 30.06.2007 30.06.2014 | C | |||
| 109,2872 | – | – | 109,287 | £1.8373 17.06.2008 17.06.2015 | E | |||
| 95,9462 | – | (95,946) | – | £3.2824 15.06.2010 15.06.2017 | E | |||
| 76,2603 | – | – | 76,260 | £0.1190 01.09.2012 01.03.2013 | D | |||
| G Clemett | 146,9132 | – | (146,913) | – | £3.0378 25.06.2010 25.06.2017 | E | ||
| 76,2603 | – | – | 76,260 | £0.1190 01.09.2012 01.03.2013 | D | |||
| Total5 | 1,830,072 | – | (242,859) 1,587,213 |
Notes:
Options which have fully satisfi ed their performance criteria and vested.
Options granted in 2005 did not satisfy the performance condition in full and 25% of options lapsed. Options granted in 2006 did not meet performance criteria and lapsed in full.
Options obtained under the Rules of the Group's SAYE Scheme. All other options have been granted under the Rules of the Company's Executive Share Option Schemes.
The exercise price has been adjusted for the effect of the rights issue in March 2009. 5. The exercise price of all options that are currently exercisable is greater than the mid-market closing share price of Workspace ordinary shares on 31 March 2010 and no profi t would therefore arise upon exercise of any of these options.
| Basis of grant | Terms for exercise |
|---|---|
| A. 1 times total earnings | EPS growth of RPI plus 3% p.a. compound |
| B. 2 times total earnings | 1 times earnings at EPS growth of RPI plus 5% p.a. compound plus 1 times earnings at EPS |
| growth of RPI plus 12% p.a. compound (pro rata) | |
| C. 1 times salary | EPS growth of RPI plus 5% p.a. compound |
| D. Per Inland Revenue Rules | SAYE options with no terms for exercise |
| E. 2 times salary for Mr Clemett NAV growth over three years in top quartile of listed real estate companies with market cap | |
| 1 times salary for Mr Platt | exceeding £300m. |
continued
Where the performance test is not fulfi lled or is only partly achieved, no retesting in future periods is allowed.
There have been no changes in Directors' interests over options in the period between the balance sheet date and 3 June 2011.
Details of outstanding awards to the current Executive Directors under the Co-Investment Plan are shown below:
| Date | Interests in shares as at 1 April 2010 |
Market value of shares at date |
Matching shares lapsed during |
Interests in shares as at 31 March 2011 |
Vesting dates of outstanding Matching |
|||
|---|---|---|---|---|---|---|---|---|
| H Platt1,2,3 | awarded 12/06/2007 |
Invested 11,826 |
Matching 26,673 |
of award £4.013 |
the year (26,673) |
Invested 11,826 |
Matching | shares – 12/06/2010 |
| G Clemett1,2,3 | 26/06/2007 | 22,173 | 50,012 | £4.045 | (50,012) | 22,173 | – 26/06/2010 |
Notes:
Participants are entitled to dividends payable on the Invested Shares, which are held in Trust. They may also instruct the Trustee how they wish to vote on their shares. The Invested Shares which are benefi cially owned by participants are included in the table detailing Ordinary Shares held by Directors on page 50 of this Report.
No Awards were made during the year. 3. Awards made on 12 June 2007 and 26 June 2007 lapsed as they did not meet the performance conditions. The invested shares are benefi cially owned by the participants.
In implementing its remuneration strategy, the Board established in 1999 an Employee Share Ownership Trust (ESOT). The trust is used to purchase shares in the Company to meet its obligations under share plans. The ESOT has purchased:
| Year of purchase | Share price Pence |
Number of shares purchased |
|---|---|---|
| 1999 2002 2004 2005 2006 2007 2007 |
50.7 (average) 103.0 180.8 238.2 345.0 402.2 (average) 382.0 |
2,000,000 5,067,700 169,210 170,567 164,788 70,655 500,000 |
| 2008 2010 2010 |
168.0 21.4 23.3 |
697,168 3,329,083 673,049 12,842,220 |
In addition 1,854,176 new ordinary shares were allotted by the Company to the ESOT in December 2009 at nominal value in order that the ESOT had suffi cient shares to satisfy awards made to participants under the Company's Joint Ownership Plan.
Of these shares 4,946,075 have been transferred on exercise of options and vesting through the Co-Investment Plan and the balance has been allocated to meet future exercises. The market value of the ESOT holding at 31 March 2011 was £2.7m compared with a book cost of £8.0m.
The ESOT also holds 1,680,102 shares as bare trustee on behalf of participants following purchases by them under the terms of the Group's Co-Investment Plan and Long Term Incentive Plan.
The Group's wider people policies are reported separately on pages 36 and 37. Following probationary periods, all staff in the Company are eligible to participate in the Company's bonus scheme, SAYE, pension scheme, life assurance arrangements, and medical insurance benefi ts; and some senior staff have share option awards. Some senior staff are also eligible to participate in the Company's long-term equity incentive plan together with all members of the Executive Committee.
The closing mid-market price of Workspace Group PLC ordinary shares at 31 March 2011 was 27 pence. During the year, the price of the Company's shares varied between 19.3 pence and 27.5 pence.
By Order of the Board John Bywater Chairman of the Remuneration Committee 3 June 2011
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
| Shareholder Information | 87 – 88 |
The Directors are responsible for preparing the Annual Report, the Directors' Remuneration Report and the fi nancial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare fi nancial statements for each fi nancial year. Under that law the Directors have prepared the Group fi nancial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, and the Parent Company fi nancial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law, the Directors must not approve the fi nancial statements unless they are satisfi ed that they give a true and fair view of the state of affairs of the Group and the Company and of the profi t or loss of the Group for that period.
In preparing those fi nancial statements, the Directors are required to:
The Directors are responsible for keeping adequate accounting records that are suffi cient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the fi nancial position of the Company and the Group and to enable them to ensure that the fi nancial statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the Group fi nancial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of fi nancial statements may differ from legislation in other jurisdictions.
Each of the current Directors, whose names and functions are listed on pages 32 and 33 and 38 to 41 of the Annual Report, confi rms that, to the best of their knowledge:
We have audited the Group fi nancial statements of Workspace Group PLC for the year ended 31 March 2011 which comprise the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Statement of Changes in Equity, Consolidated Statement of Cash Flows and the related notes. The fi nancial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
As explained more fully in the Statement of Directors' Responsibilities set out on page 53, the Directors are responsible for the preparation of the Group fi nancial statements and for being satisfi ed that they give a true and fair view. Our responsibility is to audit and express an opinion on the Group fi nancial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the Company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
An audit involves obtaining evidence about the amounts and disclosures in the fi nancial statements suffi cient to give reasonable assurance that the fi nancial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group's circumstances and have been consistently applied and adequately disclosed; the reasonableness of signifi cant accounting estimates made by the Directors; and the overall presentation of the fi nancial statements. In addition, we read all the fi nancial and non-fi nancial information in the Annual Report and Accounts to identify material inconsistencies with the audited fi nancial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
In our opinion the Group fi nancial statements:
– the information given in the Directors' Report for the fi nancial year for which the Group fi nancial statements are prepared is
consistent with the Group fi nancial statements; and – the information given in the Corporate Governance Statement set out on pages 38 to 43 with respect to internal control and risk management systems and about share capital structures is consistent with the fi nancial statements.
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
Under the Listing Rules we are required to review:
We have reported separately on the Parent Company fi nancial statements of the Parent Company fi nancial statements of Workspace Group PLC for the year ended 31 March 2011 and on the information in the Directors' Remuneration Report that is described as having been audited.
for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London
3 June 2011
For the year ended 31 March
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
| Shareholder Information | 87 – 88 |
| Notes | 2011 £m |
2010 £m |
|
|---|---|---|---|
| Revenue | 1 | 68.8 | 66.5 |
| Direct costs | 1 | (22.9) | (22.1) |
| Net rental income | 1 | 45.9 | 44.4 |
| Administrative expenses | 3 | (9.7) | (9.1) |
| Trading profi t | 36.2 | 35.3 | |
| Other income | 2a | 0.1 | 0.3 |
| Other expenses | 2a | – | (1.2) |
| Profi t on disposal of investment properties | 2b | 2.8 | 5.8 |
| Change in fair value of investment properties | 10 | 30.8 | 1.8 |
| Operating profi t | 3 | 69.9 | 42.0 |
| Finance income | 4 | 0.1 | 0.1 |
| Finance costs | 4 | (22.2) | (24.6) |
| Change in fair value of derivative financial instruments | 4 | 5.3 | (0.6) |
| (Losses)/gains from share in joint ventures | 24 | (0.3) | 6.7 |
| Negative goodwill on business combination | 24 | – | 2.4 |
| Profi t before tax | 6 | 52.8 | 26.0 |
| Taxation | 0.7 | (1.8) | |
| Profi t for the year after tax and attributable to equity shareholders | 53.5 | 24.2 | |
| Basic earnings per share (pence) | 8 | 4.7p | 2.3p |
| Diluted earnings per share (pence) | 8 | 4.6p | 2.2p |
| EPRA earnings per share (pence) | 8 | 1.3p | 0.7p |
| Notes | 2011 £m |
2010 £m |
|
|---|---|---|---|
| Profi t for the fi nancial year Revaluation of owner occupied property |
12 | 53.5 1.2 |
24.2 0.7 |
| Total comprehensive income attributable to equity shareholders | 54.7 | 24.9 |
The notes on pages 59 to 81 form part of these fi nancial statements.
As at 31 March
| Notes | 2011 £m |
2010 £m |
|
|---|---|---|---|
| Non-current assets | |||
| Investment properties | 10 | 713.4 | 713.2 |
| Intangible assets | 11 | 0.4 | 0.4 |
| Property, plant and equipment | 12 | 4.6 | 3.4 |
| Investment in joint venture | 24 | 6.7 | – |
| Trade and other receivables | 13 | 4.9 | 4.9 |
| 730.0 | 721.9 | ||
| Current assets | |||
| Trade and other receivables | 13 | 8.3 | 4.5 |
| Cash and cash equivalents | 14 | 2.3 | 2.1 |
| 10.6 | 6.6 | ||
| Current liabilities Bank overdraft |
16a | (3.2) | (2.3) |
| Derivative financial instruments | 16d & e | (10.9) | (22.6) |
| Trade and other payables | 15 | (28.0) | (28.5) |
| Current tax liabilities | – | (2.8) | |
| (42.1) | (56.2) | ||
| Net current liabilities | (31.5) | (49.6) | |
| Non-current liabilities | |||
| Borrowings | 16a | (363.8) | (384.1) |
| Other non-current liabilities | 20 | (0.9) | (0.9) |
| (364.7) | (385.0) | ||
| Net assets | 333.8 | 287.3 | |
| Shareholders' equity | |||
| Ordinary shares | 21a | 115.3 | 114.9 |
| Share premium | 25.0 | 24.7 | |
| Investment in own shares | 23 | (8.0) | (7.2) |
| Other reserves | 22 | 15.0 | 13.0 |
| Retained earnings | 186.5 | 141.9 | |
| Total shareholders' equity | 333.8 | 287.3 | |
| EPRA net asset value per share | 9 | 29.5p | 26.7p |
The fi nancial statements were approved and authorised for issue by the Board of Directors on 3 June 2011 and were signed on its behalf by:
Directors
The notes on pages 59 to 81 form part of these fi nancial statements.
| Shareholder Information | 87 – 88 |
|---|---|
| Financial Statements | 54 – 86 |
| Governance | 36 – 53 |
| Review of Operations | 01 – 35 |
| Attributable to owners of the Parent | ||||||
|---|---|---|---|---|---|---|
| Share capital £m |
Share £m |
Investment premium in own shares £m |
Other reserves £m |
Retained earnings £m |
Total £m |
|
| Balance at 1 April 2009 | 104.6 | 24.6 | (5.7) | 2.6 | 125.8 | 251.9 |
| Profi t for the year Revaluation of owner occupied property |
– – |
– – |
– – |
– 0.7 |
24.2 – |
24.2 0.7 |
| Total comprehensive income | – | – | – | 0.7 | 24.2 | 24.9 |
| Transactions with owners: Share issues ESOT shares net purchase Transfer of shares Dividends paid Share based payments Balance at 31 March 2010 |
10.3 – – – – 114.9 |
0.1 – – – – 24.7 |
– (0.2) (1.3) – – (7.2) |
8.7 – – – 1.0 13.0 |
– – – (8.1) – 141.9 |
19.1 (0.2) (1.3) (8.1) 1.0 287.3 |
| Profi t for the year Revaluation of owner occupied property |
– – |
– – |
– – |
– 1.2 |
53.5 – |
53.5 1.2 |
| Total comprehensive income | – | – | – | 1.2 | 53.5 | 54.7 |
| Transactions with owners: Share issues ESOT shares net purchase Dividends paid Share based payments |
0.4 – – – |
0.3 – – – |
– (0.8) – – |
– – – 0.8 |
– – (8.9) – |
0.7 (0.8) (8.9) 0.8 |
| Balance at 31 March 2011 | 115.3 | 25.0 | (8.0) | 15.0 | 186.5 | 333.8 |
For the year ended 31 March
| Notes | 2011 £m |
2010 £m |
|
|---|---|---|---|
| Cash fl ows from operating activities | |||
| Cash generated from operations | 18 | 37.9 | 36.3 |
| Interest received | 0.1 | 0.1 | |
| Interest paid | (21.9) | (25.3) | |
| Tax paid | (2.1) | – | |
| Net cash infl ow from operating activities | 14.0 | 11.1 | |
| Cash fl ows from investing activities | |||
| Purchase of investment properties | – | (4.0) | |
| Capital expenditure on investment properties | (9.4) | (5.9) | |
| Net proceeds from disposal of investment properties | 43.9 | 57.1 | |
| Purchase of intangible assets | (0.2) | (0.2) | |
| Purchase of property, plant and equipment | (0.4) | (0.1) | |
| Investment in and loan to joint ventures | (7.4) | (0.8) | |
| Movement in short-term funding balances with joint venture | 0.6 | 2.0 | |
| Net cash infl ow from investing activities | 27.1 | 48.1 | |
| Cash fl ows from fi nancing activities | |||
| Net proceeds from issue of ordinary share capital | – | 16.3 | |
| Finance costs for new/amended borrowing facilities | (3.8) | (1.8) | |
| Former joint venture restructuring costs and priority fee | – | (2.1) | |
| Settlement and re-couponing of derivative fi nancial instruments | (6.5) | (8.6) | |
| Repayment of bank borrowings | (17.3) | (58.2) | |
| Movement on bank facility rental income accounts | (5.0) | – | |
| ESOT shares net purchase | (0.8) | (0.2) | |
| Finance lease principal payments Dividends paid |
7 | (0.2) (8.2) |
(0.4) (8.1) |
| Net cash outfl ow from financing activities | (41.8) | (63.1) | |
| Net decrease in cash and cash equivalents | (0.7) | (3.9) | |
| Cash and cash equivalents at start of year | 18 | (0.2) | 3.7 |
| Cash and cash equivalents at end of year | 18 | (0.9) | (0.2) |
The notes on pages 59 to 81 form part of these fi nancial statements.
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
| Shareholder Information | 87 – 88 |
Workspace Group PLC ('the Company') and its subsidiaries (together 'the Group') are engaged in property investment in the form of letting of business accommodation to small and medium sized enterprises in 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 2041612.
These fi nancial statements are presented in sterling, which is the Company's functional and the Group's presentational currency and have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRIC interpretations as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
The fi nancial statements have been prepared under the historical cost convention as modifi ed by the revaluation of investment properties, owner occupied property, derivative fi nancial instruments and share based payments.
The preparation of fi nancial statements in conformity with generally accepted accounting principles requires the use of estimates and judgements that 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 differ from those estimates.
The Group's signifi cant accounting policies are stated below. Not all of these accounting policies require management to make subjective or complex judgements. The following is intended to provide an understanding of the policies that management consider critical because of the level of judgement or estimation involved in their application and their impact on the consolidated fi nancial statements.
The Group uses the valuation performed by its independent valuers as the fair value of its investment properties. The valuation is based upon assumptions including estimated rental values, future rental income, anticipated maintenance costs, future development costs and the appropriate discount rate. The valuers also make reference to market evidence of transaction prices for similar properties.
The Group is required to judge when there is suffi cient objective evidence to require the impairment of individual trade receivables. It does this on the basis of the age of the relevant receivables, external evidence of the credit status of the debtor entity and the status of any disputed amounts.
On 1 January 2007 the Group converted to a Group REIT. In order to achieve and retain Group REIT status, several entrance tests had to be met and certain ongoing criteria must be maintained. The main criteria are as follows:
The Directors intend that the Group should continue as a Group REIT for the foreseeable future, with the result that deferred tax is no longer recognised on temporary differences relating to the property rental business and relevant property rental income is treated as exempt from taxation.
The signifi cant accounting policies adopted in the preparation of these consolidated fi nancial statements are set out below. These policies have been consistently applied to all years presented unless stated otherwise:
The consolidated fi nancial statements include the fi nancial statements of the Company and all its subsidiary undertakings up to 31 March 2011. Subsidiaries are entities over which the Group has the power to govern the fi nancial and operating policies. The fi nancial statements of subsidiaries are included in the consolidated fi nancial statements from the date that control commences to the date control ceases.
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.
Joint ventures are those entities over which the Group, either directly or indirectly, is in a position to jointly control the fi nancial and operating policies of the entity. Joint ventures are accounted for under the equity method whereby the consolidated fi nancial statements include the Group's investment in and contribution from the joint venture.
The Group's forecasts and projections, taking into account reasonably possible changes in trading performance, show that the Group should be able to continue to operate within the level of its current fi nancing. All loan covenants are being comfortably met and the Group has suffi cient liquidity for day to day activities and progressing business plans.
After making enquiries, the Directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its consolidated fi nancial statements.
Investment properties are those properties owned or leased under a fi nance lease by the Group that are held to earn rental income or for capital appreciation or both and are not occupied by the Company or subsidiaries of the Group.
continued
Land or buildings held under operating leases are classifi ed and accounted for as investment properties where the rest of the defi nition of investment property is met. The operating lease is accounted for as if it were a fi nance lease.
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 a professional external valuer at each reporting date. Changes in fair value of investment property at the reporting date are recorded in the income statement.
Properties are treated as acquired at the point the Group assumes the signifi cant risks and rewards of ownership and are treated as disposed when these are transferred outside of the Group's control.
Existing investment property which undergoes redevelopment for continued future use as investment property remains in investment property. Property that is being constructed or developed for future use as investment property, but has not previously been classifi ed as such, is classifi ed as property, plant and equipment and initially recognised at cost until construction or development is complete, at which time it is reclassifi ed as investment property at fair value.
Subsequent expenditure is charged to the asset's carrying amount only when it is probable that future economic benefi ts associated with the expenditure will fl ow to the Group, and the cost of each item can be reliably measured. Certain internal staff costs directly attributable to capital/redevelopment projects are capitalised. All other repairs and maintenance costs are charged to the income statement during the period in which they are incurred.
In the case of existing investment properties undergoing redevelopment, capitalised interest on the redevelopment expenditure is added to the asset's carrying amount. Borrowing costs capitalised are calculated by reference to the actual interest rate payable on borrowings, or if fi nanced out of general borrowings by reference to the average rate payable on funding the assets employed by the Group and applied to the direct expenditure on the property undergoing redevelopment. Interest capitalised is from the date of commencement of the re-development activity until the date when substantially all the activities necessary to prepare the asset for its intended use are complete.
Investment properties are recognised as non-current 'assets held for sale' when it is considered highly probable that sale completion will take place.
Land and buildings within property, plant and equipment relate to the owner occupied building of Magenta House. The Group have adopted the revaluation model to show this asset category at fair value less subsequent depreciation for buildings. They were revalued at 31 March 2011 by CB Richard Ellis as detailed in note 12 to the fi nancial statements.
This class of asset will continue to be revalued on a regular basis.
Depreciation rates are as follows:
| Land | not depreciated |
|---|---|
| Buildings | 50 years |
Equipment and fi xtures (including motor vehicles) are stated at historical purchase cost less accumulated depreciation. Historical cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its 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 benefi ts associated with the expenditure will fl ow to the Group and the cost of each item can be reliably measured. All other repairs and maintenance costs are charged to the 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 asset's estimated useful lives which range from 4-10 years.
The assets' residual values and useful lives are reviewed and adjusted, if appropriate, at least at each fi nancial 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.
Acquired computer software licenses and external costs of implementing or developing computer software programmes and websites are capitalised. These costs are amortised over their estimated useful lives of 5 years on a straight line basis. Intangibles are stated at historical cost.
Costs associated with maintaining computer software programmes are recognised as an expense as they fall due.
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
Operating leases – properties leased out under operating leases are included in investment property in the balance sheet. Rental income from operating leases is recognised in the income statement on a straight line basis over the lease term. When the Group provides incentives to its customers the incentives are recognised over the lease term on a straight line basis.
Trade and other receivables are recognised initially at fair value and subsequently measured at cost less provision for impairment where it is established there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivable. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash fl ows. The provision is recorded in the income statement.
Other receivables include bank facility rental income accounts from which interest to lenders is paid.
Trade and other payables are stated at cost.
Cash and cash equivalents include cash in hand, restricted cash in the form of tenants deposits, deposits held on call with banks and other short term highly liquid investments with original maturities of three months or less. Bank overdrafts are included within cash and cash equivalents for the purpose of the cash fl ow statement.
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost, any difference between the initial amount (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings, using the effective interest method, except for interest capitalised on redevelopments.
Borrowings are classifi ed as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.
The Group enters into derivative transactions such as interest rate collars and swaps in order to manage its interest rate risk. Financial derivatives are recorded at fair value calculated by valuation techniques based on market prices, estimated future cash fl ows and forward interest rates. Movements in fair value are recognised in the Income Statement within total fi nance costs. Amounts payable or receivable under such arrangements are included within interest payable or receivable, recognised on an accruals basis.
Ordinary shares are classifi ed 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.
The Group operates an Employee Share Ownership Trust (ESOT). When the Group funds the ESOT in order to purchase Company shares, the loan is deducted from shareholders' equity as investment in own shares.
Revenue comprises rental income, service charges and other sums receivable from the Group's investment properties. Other sums comprise insurance charges, supplies of utilities, premia associated with surrender of tenancies, commissions, fees and other sundry income.
Rental income from operating leases is recognised in the income statement on a straight line basis over the lease term. When the Group provides lease incentives to its tenants the incentives are recognised over the lease term, on a straight line basis.
Service charges and other sums receivable from tenants are recognised by reference to the stage of completion of the relevant service or transactions at the reporting date.
Rental income from property let out under a fi nance lease is accounted for by allocating each lease payment between receivable and fi nance income so as to achieve a constant rate on the fi nance balance outstanding. The interest element of the fi nance income is credited to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the receivable for each period. Contingent rents, being those lease payments that are not fi xed at the inception of the lease, for example increases arising on rent reviews, are recorded as income in the periods in which they are earned.
Income for the sale of assets is recognised when the signifi cant risks and returns have been transferred to the buyer. In the case of sales of properties this is generally taken on completion. Where any aspect of consideration is conditional then the revenue associated with that conditional item is valued and included as deferred consideration.
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 Board of the Company. The Group considers that it has only one operating segment being a single portfolio of commercial property providing business accommodation for rent in London. Discrete fi nancial information is provided to the chief operating decision maker on a property by property basis, including rental income and direct costs and valuation gains or losses.
Direct costs comprise service charge and other costs directly recoverable from tenants and non recoverable costs directly attributable to investment properties and other revenue streams.
61
continued
Minimum lease payments payable under head leases categorised as fi nance leases are allocated between liability and fi nance charges so as to achieve a constant rate on the fi nance balance outstanding. The interest element of the fi nance cost is charged to the income statement. Contingent rents, being those lease payments that are not fi xed at the inception of the lease, for example increases arising on rent reviews, are recorded as an expense in the income statement in the period in which they are incurred.
The Group operates a number of share schemes under which the Group receives services from employees as consideration for equity instruments (options) of the Group.
Incentives in the form of shares are provided to employees under share option schemes. The fair value of the employee services received in exchange for the grant of options is recognised as an expense over the vesting period.
Fair value is measured by the use of Black-Scholes, Monte-Carlo and Binomial option pricing models. The expected life used in the models has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
The Company has established an ESOT to satisfy part of its obligations under employee share plans and other share based payment arrangements. The Company provides funding to the ESOT to purchase these shares and the cost is deducted from equity.
The Group operates a defi ned contribution pension scheme. Contributions are charged to the income statement on an accruals basis.
Income tax on the profi t for the year comprises current and deferred tax.
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 have been substantively enacted by the balance sheet date.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated fi nancial statements. Deferred income tax is determined using tax rates that have been substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax is realised or the deferred tax liability settled. Deferred tax is provided in full on the difference between the original cost of investment properties and their carrying amounts at the reporting date without taking into account deductions and allowances, which would apply if the assets concerned were disposed of. Since conversion to a REIT deferred tax is not required to be provided on the investment properties held within the REIT.
No provision is made for temporary differences arising on the initial recognition of assets or liabilities that affect neither accounting nor taxable profi t or relating to investments in subsidiaries where it is probable that the temporary differences will not reverse in the foreseeable future.
Final dividend distributions to the Company's shareholders are recognised as a liability in the Group's fi nancial statements in the period in which the dividends are approved, while interim dividends are recognised when paid.
a) The following new standards, amendments and interpretations are mandatory for the fi rst time for the Group's 31 March 2011 year end:
| Standard or interpretation Content | |
|---|---|
| IFRS 3 (revised) | Business Combinations |
| IAS 27 (revised) | Consolidated and separate fi nancial statements |
| IAS 32 | Classifi cation of rights issues |
| Amendment: IFRS 1 | Additional exemptions for fi rst-time adopters |
| Amendment: IFRS 2 | Group cash-settled share-based payment transactions |
| IFRS 1 | First-time adoption of International Financial |
| Reporting Standards | |
| IAS 39 | Financial instruments: Recognition and measurement |
| – Eligible hedged items. | |
| IFRIC 17 | Distribution of non-cash assets to owners |
| IFRIC 18 | Transfers of assets from customers |
| Amendments | Annual improvements – 2009 |
IFRS 3 (revised) Business Combinations was adopted last year and was relevant to the acquisition of the former Workspace Glebe joint venture. The other standards or interpretations are either not relevant or have no signifi cant impact on the Group's fi nancial statements.
b) Standards, amendments and interpretations that are not yet effective and not expected to have a signifi cant impact on the Group's fi nancial statements:
| Standard or interpretation Content | |
|---|---|
| IFRS 9 | Financial instruments |
| Amendment: IFRS 7 | Disclosures – Transfers of fi nancial assets |
| Amendment: IAS 24 | Related party disclosures |
| Amendment: IFRIC 14 | Prepayments of a minimum funding requirement |
| IFRIC 19 | Extinguishing fi nancial liabilities with equity |
| instruments | |
| Amendment: IFRS 1 | First time adoption on fi nancial instrument disclosures |
| IFRIC 15 | Arrangements for construction of real estates |
For the year ended 31 March
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
| Shareholder Information | 87 – 88 |
| 2011 | 2010 (restated) | |||||
|---|---|---|---|---|---|---|
| Revenue £m |
Direct costs £m |
Net rental income £m |
Revenue £m |
Direct costs £m |
Net rental income £m |
|
| Rental income Service charges1 Empty rates and other non recoverables1 Services, fees, commissions and sundry income |
52.0 13.8 0.5 2.5 |
(0.2) (17.2) (4.1) (1.4) |
51.8 (3.4) (3.6) 1.1 |
49.8 13.6 0.6 2.5 |
(0.2) (16.5) (4.0) (1.4) |
49.6 (2.9) (3.4) 1.1 |
| 68.8 | (22.9) | 45.9 | 66.5 | (22.1) | 44.4 |
2010 represented to combine other non recoverables and empty rates.
Discrete fi nancial information is provided to the Executive Committee on a property by property basis, including rental income and direct costs and valuation gains or losses. All of the properties within the portfolio are geographically close to each other and have similar economic features and risks and all information provided to the Executive Committee is aggregated and reviewed in total as one portfolio. As a result management have determined that the Group operates a single operating segment providing business accommodation for rent in London, which is continuing.
As noted above, the Executive Committee assesses the performance of the operating segment using measures of rental income and direct costs and valuation gains or losses. All fi nancial information provided to the Executive Committee is prepared on a basis consistent with these fi nancial statements and, as the Group has only one operating segment, the measures used in assessing the business have been reconciled to profi t before tax in the Consolidated Income Statement and net assets in the Consolidated Balance Sheet.
| 2011 £m |
2010 £m |
|
|---|---|---|
| Right of light and other damages compensation | 0.1 | 0.3 |
| Other income | 0.1 | 0.3 |
| Legal fees relating to construction contract litigation | – | (1.2) |
| Other expenses | – | (1.2) |
| 0.1 | (0.9) |
| 2011 £m |
2010 £m |
|
|---|---|---|
| Gross proceeds from sale of investment properties Book value at time of sale plus sale costs |
44.3 (41.1) |
62.4 (61.7) |
| 3.2 | 0.7 | |
| Movement in provision for joint venture tax indemnity Unrealised profi t on sale of properties to joint venture |
– (0.4) |
5.1 – |
| Pre-tax profit on sale | 2.8 | 5.8 |
The following items have been charged in arriving at operating profi t:
| 2011 £m |
2010 £m |
|
|---|---|---|
| Depreciation | 0.5 | 0.9 |
| Staff costs (including share based costs) | 9.9 | 9.6 |
| Repairs and maintenance expenditure on investment properties | 3.6 | 2.9 |
| Trade receivables impairment | 0.2 | 0.3 |
| Amortisation of intangibles | 0.2 | 0.1 |
| Operating lease rentals payable | 0.1 | 0.1 |
| Audit fees payable to the Group's auditors 1 | 0.2 | 0.2 |
Services provided by the Group's Auditors – PricewaterhouseCoopers LLP:
For the year ended 31 March continued
| 2011 | 2010 | |
|---|---|---|
| Analysis of audit and non-audit services: | £000 | £000 |
| Audit services: | ||
| Audit of Group and Company fi nancial statements | 123 | 121 |
| Audit of subsidiary fi nancial statements | 28 | 25 |
| Non-audit services: | ||
| Group interim review | 32 | 32 |
| Taxation and legal services | 123 | 117 |
| Other services | 4 | 2 |
| 310 | 297 | |
| 2011 | 2010 | |
| Total administrative expenses are analysed below: | £m | £m |
| Staff costs | 5.4 | 5.2 |
| Cash settled share based costs | 0.3 | 0.1 |
| Equity settled share based costs | 0.8 | 1.0 |
| Other | 3.2 | 2.8 |
| 9.7 | 9.1 |
| 5. Employees and Directors | ||
|---|---|---|
| Staff costs for the Group during the year were: | 2011 £m |
2010 £m |
| Wages and salaries Social security costs Defi ned contribution pension plan costs (see note 29) Cash settled share based costs Equity settled share based costs |
7.5 0.8 0.5 0.3 0.8 |
7.4 0.7 0.4 0.1 1.0 |
| 9.9 | 9.6 | |
| The monthly average number of people (including Executive Directors) employed during the year was: | 2011 Number |
2010 Number |
| Executive Directors Head office staff Estates and property management staff |
2 67 102 |
2 68 109 |
| 171 | 179 |
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
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: | 2011 £m |
2010 £m |
|---|---|---|
| Salaries and short-term employee benefi ts | 2.3 | 2.2 |
| Pensions and other post-employment benefi ts | 0.2 | 0.2 |
| Termination benefi ts | – | 0.5 |
| Share-based payments | 0.5 | 0.5 |
| 3.0 | 3.4 |
The remuneration of the Executive Directors is determined by the Remuneration Committee of the Board. A table of the Directors' emoluments and details of Directors' benefi cial interests in the shares of the Company and in options to acquire shares in the Company are given in the Directors' Remuneration Report on pages 44 and 52. These form part of the fi nancial statements.
| 6. Taxation | ||
|---|---|---|
| Analysis of charge in period: | 2011 £m |
2010 £m |
| Current tax Deferred tax |
(0.7) – |
1.9 (0.1) |
| Total taxation (credit)/charge | (0.7) | 1.8 |
| The charge in the period is analysed as follows: | 2011 £m |
2010 £m |
| Current tax: | ||
| UK corporation tax | – | – |
| REIT conversion charge | – | 1.9 |
| REIT penalty tax charge provision* | – | (1.2) |
| Adjustments to tax in respect of previous periods | (0.7) | 1.1 |
| Total taxation (credit)/charge | (0.7) | 1.8 |
* A potential REIT penalty charge was waived in 2010 in light of changes introduced by the Finance Act 2009.
The tax on the Group's profi t for the period differs from the standard applicable corporation tax rate in the UK (28%). The differences are explained below:
| 2011 £m |
2010 £m |
|
|---|---|---|
| Profi t on ordinary activities before taxation Adjust losses/(gains) in joint ventures |
52.8 0.3 |
26.0 (6.7) |
| 53.1 | 19.3 | |
| Tax at standard rate of corporation tax in the UK of 28% (2010: 28%) Effects of: |
14.9 | 5.4 |
| REIT exempt income | (4.5) | (2.2) |
| REIT penalty tax charge | – | (1.2) |
| REIT conversion charge | – | 1.9 |
| Changes in fair value not subject to tax as a REIT Share scheme adjustments |
(11.1) 0.2 |
(1.5) 0.3 |
| Provision for tax indemnity | – | (1.4) |
| Negative goodwill on business combination | – | (0.7) |
| Adjustments to tax in respect of previous periods Losses carried forward |
(0.7) 0.5 |
1.1 0.1 |
| Total taxation per income statement | (0.7) | 1.8 |
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. A REIT conversion charge of £1.9m was provided for in 2010 on the values of the former Workspace Glebe joint venture properties brought into the REIT in December 2009. This was paid in the current year. The Group's 'residual' business (subject to tax) is small and consists mainly of ancillary services and commissions.
The Group currently has £6.0m (2010: £5.9m) of revenue tax losses carried forward calculated at a corporation tax rate of 26% (2010: 28%) which is the rate substantively enacted at the Balance Sheet date following the March 2011 UK Budget Statement. These have not been recognised as an asset as they are unlikely to be utilised in the foreseeable future. Further reductions in the main rate of corporation tax to 23% by 1 April 2014 are expected to be enacted. If this rate had been applied to tax losses at the Balance Sheet date it would have reduced losses by £0.7m.
For the year ended 31 March continued
| Ordinary dividends paid | Payment date |
Per share |
2011 £m |
2010 £m |
|---|---|---|---|---|
| For the year ended 31 March 2009 Final dividend |
August 2009 | 0.50p | – | 5.2 |
| For the year ended 31 March 2010 Interim dividend Final dividend |
February 2010 August 2010 |
0.25p 0.50p |
– 5.7 |
2.9 – |
| For the year ended 31 March 2011 Interim dividend |
February 2011 | 0.28p | 3.2 | – |
| Dividends for the year | 8.9 | 8.1 | ||
| Less dividends settled in shares | (0.7) | – | ||
| Dividends – cash paid | 8.2 | 8.1 |
In addition the Directors are proposing a fi nal dividend in respect of the fi nancial year ended 31 March 2011 of 0.55p per ordinary share which will absorb an estimated £6.3m of revenue reserves. If approved by the shareholders at the AGM, it will be paid on 5 August 2011 to shareholders who are on the register of members on 15 July 2011. The dividend will be paid as a Property Income Distribution (PID).
The calculation of earnings per share is based on the weighted average number of shares in issue during the year excluding shares held in the Company's Employee Share Ownership Trust.
Diluted earnings per share is calculated by adjusting the weighted average number of shares to assume conversion from share option schemes.
| Earnings used for calculation of earnings per share: | 2011 £m |
2010 (restated) £m |
|---|---|---|
| Profi t used for basic and diluted earnings Change in fair value of investment property Profi t on disposal of investment properties Movement in fair value of derivative fi nancial instruments Group's share of EPRA adjustments of joint venture Negative goodwill on business combination |
53.5 (30.8) (2.8) (5.3) 0.3 – |
24.2 (1.8) (5.8) 0.6 (6.7) (2.4) |
| EPRA adjusted earnings | 14.9 | 8.1 |
| (Deduct)/add non-recurring items (including tax) | (0.8) | 2.7 |
| Adjusted underlying earnings (before tax) | 14.1 | 10.8 |
Earnings have been adjusted and calculated on a diluted basis to derive an earnings per share measure as defi ned by the European Public Real Estate Association (EPRA).
Underlying earnings consists of the EPRA earnings measure, with additional Company adjustments for non-recurring items and taxation.
Prior year EPRA adjusted earnings have been restated to exclude impact of negative goodwill and gain from share in joint venture.
| Weighted average number of shares used for calculation of earnings per share: | 2011 Number |
2010 Number |
|
|---|---|---|---|
| Weighted average number of shares (excluding shares held in the ESOT) Dilution due to share option schemes |
1,143,192,516 25,272,506 |
1,073,361,020 11,540,185 |
|
| Shares for diluted earnings per share | 1,168,465,022 | 1,084,901,205 | |
| In pence: | 2011 | 2010 | |
| Basic earnings per share Diluted earnings per share EPRA earnings per share Underlying earnings per share |
4.7p 4.6p 1.3p 1.2p |
2.3p 2.2p 0.7p 1.0p |
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
The calculation of net assets per share is based on the number of shares in issue at the year end excluding shares held in the Company's Employee Share Ownership Trust.
Diluted net assets per share is calculated by adjusting the number of shares to assume conversion from share option schemes.
| Net assets used for calculation of net assets per share: | 2011 £m |
2010 £m |
|
|---|---|---|---|
| Net assets at end of year (basic) Derivative financial instruments at fair value |
333.8 10.9 |
287.3 22.6 |
|
| EPRA net assets | 344.7 | 309.9 | |
| EPRA net assets per share (pence) | 29.5p | 26.7p | |
| Number of shares used for calculating net assets per share: | 2011 Number |
2010 Number |
|
| Shares in issue at year-end Less ESOT shares at year-end |
1,152,731,338 (9,750,321) |
1,149,459,056 (5,748,189) |
|
| Number of shares for calculating basic net assets per share Dilution due to share option schemes |
1,142,981,017 26,959,784 |
1,143,710,867 14,968,151 |
Net assets have been adjusted and calculated on a diluted basis to derive a net asset per share measure as defi ned by the European Public Real Estate Association (EPRA).
Number of shares for calculating diluted adjusted net assets per share 1,169,940,801 1,158,679,018
| 10. Investment properties | ||
|---|---|---|
| 2011 £m |
2010 £m |
|
| Balance at 1 April | 713.2 | 664.1 |
| Property acquisitions | – | 5.1 |
| Capital expenditure | 10.0 | 6.4 |
| Additions from business combination with former joint venture | – | 96.7 |
| Capitalised interest on refurbishments | 0.2 | 0.1 |
| Disposals during the year | (40.7) | (60.6) |
| Depreciation on finance leases | (0.1) | (0.4) |
| Change in fair value of investment properties | 30.8 | 1.8 |
| Balance at 31 March | 713.4 | 713.2 |
Capitalised interest is included at a rate of capitalisation of 5.5% (2010: 6.7%). The total amount of capitalised interest included in investment properties is £3.2m (2010: £3.0m).
Investment property includes buildings under fi nance leases of which the carrying amount is £3.5m (2010: £3.5m). Investment property fi nance lease commitment details are show in note 16(f).
The Group has determined that all tenant leases are operating leases within the meaning of IAS17. The majority of the Group's tenant leases are granted with a rolling three month tenant break clause. The future minimum non-cancellable rental receipts under operating leases granted to tenants are as follows:
| 2011 £m |
2010 (restated) £m |
|
|---|---|---|
| Within one year Between two and five years Beyond five years |
20.3 0.7 0.7 |
20.4 0.3 0.2 |
| 21.7 | 20.9 |
The Group's investment properties were revalued at 31 March 2011 by the external valuer, CB Richard Ellis, a fi rm of independent qualifi ed valuers. The valuations were undertaken in accordance with the Royal Institution of Chartered Surveyors Valuation Standards, sixth edition on the basis of market value assuming that the property would be sold subject to any existing leases. Market value is defi ned as the estimated amount for which a property should exchange on the date of valuation between a willing buyer and willing seller in an arm's length transaction after proper marketing wherein the parties had both acted knowledgably, prudently and without compulsion.
For the year ended 31 March continued
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:
| 2011 £m |
2010 £m |
|
|---|---|---|
| Total per CB Richard Ellis valuation report | 718.7 | 717.4 |
| Deferred consideration on sale of property (note 13) | (4.9) | (4.9) |
| Owner occupied property (note 12) | (3.9) | (2.7) |
| Head leases treated as fi nance leases under IAS 17 | 3.5 | 3.5 |
| Short leases valued as head leases | – | (0.1) |
| Total investment properties per balance sheet | 713.4 | 713.2 |
| Computer software | £m |
|---|---|
| Cost | |
| Balance at 1 April 2009 | 0.8 |
| Additions during the year | 0.2 |
| Balance at 31 March 2010 | 1.0 |
| Additions during the year | 0.2 |
| Balance at 31 March 2011 | 1.2 |
| Accumulated amortisation Balance at 1 April 2009 Charge for the year |
0.5 0.1 |
| Balance at 31 March 2010 | 0.6 |
| Charge for the year Balance at 31 March 2011 |
0.2 0.8 |
| Net book value at 31 March 2011 | 0.4 |
| Net book value at 31 March 2010 | 0.4 |
None of the Group's intangible assets have been internally generated. All are regarded as having a fi nite life and are amortised accordingly.
| Owner occupied land £m |
Owner occupied buildings £m |
Equipment and fi xtures £m |
Total £m |
|
|---|---|---|---|---|
| Cost or valuation | ||||
| Balance at 1 April 2009 | 0.5 | 1.6 | 4.3 | 6.4 |
| Additions during the year | – | 0.1 | 0.1 | 0.2 |
| Disposals during the year | – | – | (0.1) | (0.1) |
| Gain/(loss) on revaluation | 0.9 | (0.4) | – | 0.5 |
| Balance at 31 March 2010 | 1.4 | 1.3 | 4.3 | 7.0 |
| Additions during the year | – | – | 0.4 | 0.4 |
| Disposal during the year | – | – | (0.2) | (0.2) |
| Gain/(loss) on revaluation | 1.5 | (0.3) | – | 1.2 |
| Balance at 31 March 2011 | 2.9 | 1.0 | 4.5 | 8.4 |
| Accumulated depreciation Balance at 1 April 2009 Charge for the year Gain on revaluation |
– – – |
0.1 0.1 (0.2) |
3.2 0.4 – |
3.3 0.5 (0.2) |
| Balance at 31 March 2010 | – | – | 3.6 | 3.6 |
| Charge for the year | – | – | 0.4 | 0.4 |
| Disposals during the year | – | – | (0.2) | (0.2) |
| Balance at 31 March 2011 | – | – | 3.8 | 3.8 |
| Net book amount at 31 March 2010 | 1.4 | 1.3 | 0.7 | 3.4 |
| Net book amount at 31 March 2011 | 2.9 | 1.0 | 0.7 | 4.6 |
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
As permitted by IAS 16 'Property, plant & equipment' the Group's owner occupied property (land and buildings) is included at valuation. The property was valued at 31 March 2011 by CB Richard Ellis, a fi rm of independent qualifi ed valuers who value the whole of the Group's Investment property portfolio based on market information (see note 10). The carrying value of the land and buildings under the historic cost model would have been £2.0m. The net revaluation gain of £1.2m (2010: £0.7m) has been recognised in the statement of comprehensive income and taken to other reserves (note 22).
| Non-current trade and other receivables | 2011 £m |
2010 £m |
|---|---|---|
| Deferred consideration on sale of investment property | 4.9 | 4.9 |
| 4.9 | 4.9 |
The non-current receivable relates to deferred consideration arising on the sale of the Thurston Road site in February 2010. The value of this receivable has been fair valued by CB Richard Ellis on the basis of market value as at 31 March 2011, using appropriate discount rates, and will be revalued on a regular basis.
| Current trade and other receivables | 2011 £m |
2010 £m |
|---|---|---|
| Trade receivables | 2.4 | 3.3 |
| Less provision for impairment of receivables | (0.5) | (0.5) |
| Trade receivables – net (see note 17(b)) | 1.9 | 2.8 |
| Prepayments and accrued income | 1.4 | 1.7 |
| Bank facility rental income accounts | 5.0 | – |
| 8.3 | 4.5 |
There is no material 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.
Movements on the provision for impairment of trade receivables are shown below:
| 2011 | 2010 | |
|---|---|---|
| £m | £m | |
| Balance at 1 April | 0.5 | 0.3 |
| Provision for receivables impairment | 0.2 | 0.3 |
| Receivables written off during the year | (0.2) | (0.1) |
| Balance at 31 March | 0.5 | 0.5 |
As at 31 March 2011, the ageing of trade receivables past due but not impaired was as follows:
| Total | Impairment | Unimpaired | Total | Impairment | Unimpaired | |
|---|---|---|---|---|---|---|
| 2011 | 2011 | 2011 | 2010 | 2010 | 2010 | |
| £m | £m | £m | £m | £m | £m | |
| Up to 3 months past due | 1.6 | (0.1) | 1.5 | 2.5 | – | 2.5 |
| 3 to 6 months past due | 0.2 | (0.1) | 0.1 | 0.2 | (0.1) | 0.1 |
| Over 6 months past due | 0.6 | (0.3) | 0.3 | 0.6 | (0.4) | 0.2 |
| 2.4 | (0.5) | 1.9 | 3.3 | (0.5) | 2.8 |
The trade receivables balance is deemed to be all past due as rental payments are due on demand. Trade receivables that are not impaired are expected to be fully recovered as there is no recent history of default or indications that debtors will not meet their obligations. Impaired receivables are provided against based on expected recoverability.
| 2011 £m |
2010 £m |
|
|---|---|---|
| Cash at bank and in hand Restricted cash – tenants' deposit deeds |
0.2 2.1 |
– 2.1 |
| 2.3 | 2.1 |
Tenants' deposit deeds represent returnable cash security deposits received from tenants and are ring-fenced under the terms of the individual lease contracts.
Bank overdrafts are included within cash and cash equivalents for the purpose of the cash fl ow statement (see note 18).
For the year ended 31 March continued
| 2011 £m |
2010 £m |
|
|---|---|---|
| Trade payables | 1.9 | 2.0 |
| Taxation and social security payable | 1.4 | 1.8 |
| Tenants' deposit deeds (see note 14) | 2.1 | 2.1 |
| Tenants' deposits | 7.6 | 7.6 |
| Accrued expenses and deferred income | 11.2 | 11.3 |
| Amounts due to related parties | 0.6 | – |
| Deferred income-rent and service charges | 3.2 | 3.7 |
| 28.0 | 28.5 |
There is no material difference between the above amounts and their fair values due to the short term nature of the payables.
| al Balances | |
|---|---|
| ------------- | -- |
| a) Balances | ||
|---|---|---|
| 2011 £m |
2010 £m |
|
| Current | ||
| Bank loans and overdrafts due within one year or on demand (secured) | 3.2 | 2.3 |
| 3.2 | 2.3 | |
| Non-current | ||
| Bank loans (secured) | ||
| Finance lease obligations (part secured) | 360.3 | 380.6 |
| 3.5 | 3.5 | |
| 363.8 | 384.1 | |
| 367.0 | 386.4 |
The secured loans and overdraft facility are secured on investment properties with balance sheet values totalling £692.4m (2010: £670.6m).
| b) Maturity | ||
|---|---|---|
| 2011 £m |
2010 £m |
|
| Secured (excluding fi nance leases) | ||
| Repayable in less than one year | 3.2 | 2.3 |
| Repayable between one year and two years | 95.5 | – |
| Repayable between two years and three years | – | 312.8 |
| Repayable between three years and four years | 68.0 | – |
| Repayable between four years and fi ve years | 200.0 | 68.0 |
| 366.7 | 383.1 | |
| Less cost of raising fi nance | (3.2) | (0.2) |
| 363.5 | 382.9 | |
| Finance leases (part secured) | ||
| Repayable in fi ve years or more | 3.5 | 3.5 |
| 367.0 | 386.4 | |
| Principal £m |
Interest rate |
Interest payable |
Repayable | |
|---|---|---|---|---|
| Current Bank overdraft due within one year or on demand |
3.2 | Base +2.25% | Variable | On demand |
| Non-current Loan – Bayern LB Loan – Royal Bank of Scotland (RBS) Loan – Bank of Scotland (BoS) |
200.0 95.5 68.0 |
LIBOR +2.25% LIBOR +2.75% LIBOR +1.25% |
Quarterly Monthly Quarterly |
June 2015 November 2012 December 2014 |
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
The following interest rate derivatives are held:
| Amount hedged £m |
Rate payable (or cap strike rate) % |
Rate Receivable % |
Term/expiry | |
|---|---|---|---|---|
| Interest rate cap | 100.0 | 5.43% | – | to October 2012 |
| Interest rate cap | 15.5 | 5.00% | – | to October 2012 |
| Interest rate swap | 100.0 | 4.00% | 3 month LIBOR | to October 2012 |
| Interest rate swap | 80.0 | 4.00% | 1 month LIBOR | to October 2012 |
| Interest rate swap | 50.0 | 5.16% | 3 month LIBOR | to June 2013 |
| Interest rate swap* | 40.0 | 1.50% | 3 month LIBOR | to October 2012 |
| Interest rate swap* | 140.0 | 3.23% | 3 month LIBOR | October 2012 to |
| June 2015 |
* These swaps comprise three derivatives with different providers but with identical rates, payment dates and end dates.
The above instruments are treated as fi nancial instruments at fair value with changes in value dealt with in the income statement during each reporting period.
| 2011 Book Value £m |
2011 Fair Value £m |
2010 Book Value £m |
2010 Fair Value £m |
|
|---|---|---|---|---|
| Financial liabilities not at fair value through profi t or loss Bank overdraft Bank loans Finance lease obligations |
3.2 360.3 3.5 |
3.2 360.3 3.5 |
2.3 380.6 3.5 |
2.3 380.6 3.5 |
| Financial liabilities at fair value through profi t or loss Derivative fi nancial instruments: Liabilities Assets |
367.0 10.9 – |
367.0 10.9 – |
386.4 22.6 – |
386.4 22.6 – |
| 10.9 | 10.9 | 22.6 | 22.6 |
The total change in fair value of derivative fi nancial instruments recorded in the income statement was a gain of £5.3m (2010: £0.6m loss). This is net of £6.5m (2010: £8.6m) paid in the year to settle/re-coupon some instruments.
The table below analyses fi nancial instruments carried at fair value, by valuation method. The different levels have been defi ned in accordance with IFRS 7 as below:
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.
The fair values of all the Group's fi nancial derivatives has been determined by reference to market prices and discounted expected cash fl ows at prevailing interest rates and as such are a Level 2 valuation.
| Level 1 £m |
Level 2 £m |
Level 3 £m |
Total £m |
|
|---|---|---|---|---|
| Financial liabilities at fair value through profi t or loss Derivative fi nancial instruments: |
||||
| Liabilities | – | 10.9 | – | 10.9 |
| Assets | – | – | – | – |
The total fair value calculated equates to 1.0p per share (31 March 2010: 2.0p).
For the year ended 31 March continued
f) Finance leases Finance lease liabilities are in respect of leased investment property.
| Minimum lease payments under fi nance leases fall due as follows: | 2011 £m |
2010 £m |
|---|---|---|
| Within one year Between two and five years Beyond five years |
0.3 0.8 21.7 |
0.4 0.8 21.9 |
| Future fi nance charges on finance leases | 22.8 (19.3) |
23.1 (19.6) |
| Present value of finance lease liabilities | 3.5 | 3.5 |
The Group has identifi ed exposure to the following fi nancial risks: Market risk Credit risk Liquidity risk Capital risk
The policies for managing each of these risks and the principal effects of these policies on the results for the year are summarised below:
Market risk is the risk that changes in market conditions such as interest rates and equity prices will affect the Group's income or valuations.
The Group's exposure to market risk is restricted to that of interest rate changes on its borrowings. Borrowings at variable rates expose the Group to cash fl ow interest rate risk. Borrowings at fi xed rates expose the Group to fair value interest rate risk.
The Group fi nances its operations through a mixture of retained profi ts and borrowings. The Group borrows at both fi xed and fl oating rates of interest and then uses interest rate swaps and caps to generate the desired interest and risk profi le.
The Group's policy is to fi x at least 50% of its borrowings. At 31 March 2011 74% (2010: 72%) of Group borrowings were fi xed through the use of interest rate swaps.
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 suffi ciently safeguarded against.
Based upon year end variable rate loan balances, a reasonably possible interest rate movement of +/-0.5% would have increased or decreased net interest payable and equity by £0.5m (2010: £0.5m).
The Group's main fi nancial assets are cash and cash equivalents, deposits with banks and fi nancial institutions and trade and other receivables.
Credit risk is the risk of fi nancial loss if a tenant or a counterparty to a fi nancial instrument fails to meet its contractual obligations. The Group's exposure to this risk principally relates to the receivables from tenants and cash and cash equivalent balances held with counterparties.
The Group's exposure to credit risk in relation to receivables from tenants is infl uenced mainly by the characteristics of individual tenants occupying its rental properties. The Group has some 4,000 tenants in approximately 100 properties. The largest 10 single tenants generate only 6% of net rent roll. As such, the credit risk attributable to individual tenants is low.
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
The Group's credit risk in relation to tenants is further managed by performing credit checks and analysis on new customers and requesting that tenants provide a deposit equivalent to three months rent on inception of lease as security against default. The Group also monitors aged debt balances and any potential bad debts every week, the information being reported to Board level every month for monitoring as part of the performance monitoring process. The Group's debtor recovery is consistently high and as such is deemed a low risk area.
Cash and cash equivalents and fi nancial derivatives are held with major UK clearing banks or building societies in order to minimise any risk exposure in this area.
The carrying amount of fi nancial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:
| 2011 £m |
2010 £m |
|
|---|---|---|
| Cash and cash equivalents (note 14) Trade receivables – current (note 13) Other receivables - non current (note 13) |
2.3 2.4 4.9 |
2.1 3.3 4.9 |
| 9.6 | 10.3 |
Liquidity risk is the risk that the Group will not be able to meet its fi nancial obligations as they fall due.
The Group's approach to managing liquidity is to ensure it will always have suffi cient funds to meet obligations as they fall due. This is performed via a variety of methods including daily cash fl ow review and forecasting, monthly monitoring of the maturity profi le of debt and the regular revision of borrowing facilities in relation to the Group's requirements and strategy.
To ensure it can effectively manage its liquidity risk; the Group has an overdraft facility of £4m available on demand and ensures suffi cient headroom on total borrowings. At 31 March 2011 headroom excluding overdraft was £35m (31 March 2010: £36m).
Cash fl ow is monitored formally on a monthly basis as part of internal performance monitoring with regular daily monitoring and forecasting undertaken to manage day to day cash fl ows and any balances which are ring-fenced by lenders. 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.
The following is an analysis of the contractual undiscounted cash fl ows payable under fi nancial liabilities and derivative assets and liabilities existing at the balance sheet date. Interest payments are based upon the loan balances and applicable interest rates payable on these at each year end.
| Carrying 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 fl ows £m |
|
|---|---|---|---|---|---|---|
| Financial Liabilities | ||||||
| Bank overdraft | 3.2 | 3.2 | – | – | – | 3.2 |
| Secured bank loans (note 16b) | 363.5 | – | 95.5 | – | 268.0 | 363.5 |
| Interest payable on secured bank loans | – | 10.8 | 9.6 | 7.4 | 8.0 | 35.8 |
| Derivative fi nancial instruments | 10.9 | 8.3 | 7.3 | 3.9 | 3.8 | 23.3 |
| Finance lease liabilities | 3.5 | 0.3 | 0.4 | 0.4 | 21.7 | 22.8 |
| Trade and other payables | 24.8 | 24.8 | – | – | – | 24.8 |
| Bank priority fee | 0.9 | – | – | – | 0.9 | 0.9 |
| 406.8 | 47.4 | 112.8 | 11.7 | 302.4 | 474.3 |
For the year ended 31 March continued
31 March 2010
| Carrying 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 fl ows £m |
|
|---|---|---|---|---|---|---|
| Financial Liabilities | ||||||
| Bank overdraft | 2.3 | 2.3 | – | – | – | 2.3 |
| Secured bank loans (note 16b) | 380.8 | – | – | 312.8 | 68.0 | 380.8 |
| Interest payable on secured bank loans | – | 10.2 | 10.2 | 7.3 | 0.2 | 27.9 |
| Derivative fi nancial instruments | 22.6 | 11.7 | 11.7 | 7.4 | 0.4 | 31.2 |
| Finance lease liabilities | 3.5 | 0.4 | 0.4 | 0.4 | 21.9 | 23.1 |
| Trade and other payables | 24.8 | 24.8 | – | – | – | 24.8 |
| Bank priority fee | 0.9 | – | – | – | 0.9 | 0.9 |
| 434.9 | 49.4 | 22.3 | 327.9 | 91.4 | 491.0 |
Prior year numbers have been restated to include bank priority fee and exclude deferred income.
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern, to provide returns to shareholders, maintain a good capital structure and reduce the cost of capital.
Capital risk management remained a key area for the Group throughout the fi nancial year. During the year the Group refi nanced its debt with Bayern LB to extend the facility to fi ve years. The Group also entered into a joint venture with the BlackRock UK Property Fund using net proceeds from the deal to reduce borrowings and further enhance capital structure.
Actions taken in the last few years in relation to borrowings and capital raising have enabled the Group to have suffi cient headroom on fi nancing and to ensure it is comfortably within all applicable loan to value covenants applied on borrowings which range between 75% to 85%.
Reconciliation of profi t for the period to cash generated from operations:
| 2011 | 2010 | |
|---|---|---|
| £m | £m | |
| Profi t for the period | 53.5 | 24.2 |
| Tax | (0.7) | 1.8 |
| Depreciation | 0.5 | 0.8 |
| Amortisation of intangibles | 0.2 | 0.1 |
| Profi t on disposal of investment properties | (2.8) | (5.8) |
| Net gain from change in fair value of investment property | (30.8) | (1.8) |
| Equity settled share based payments | 0.8 | 1.0 |
| Change in fair value of fi nancial instruments | (5.3) | 0.6 |
| Interest income | (0.1) | (0.1) |
| Interest expense | 22.2 | 24.6 |
| Share in joint ventures | 0.3 | (6.7) |
| Negative goodwill on business combination | – | (2.4) |
| Changes in working capital: | ||
| Decrease in trade and other receivables | 1.3 | 1.2 |
| (Decrease) in trade and other payables | (1.2) | (1.2) |
| Cash generated from operations | 37.9 | 36.3 |
| Shareholder Information | 87 – 88 |
|---|---|
| Financial Statements | 54 – 86 |
| Governance | 36 – 53 |
| Review of Operations | 01 – 35 |
For the purposes of the cash fl ow statement, cash and cash equivalents comprise the following:
| 2011 £m |
2010 £m |
|
|---|---|---|
| Cash at bank and in hand Restricted cash – tenants' deposit deeds Bank overdrafts |
0.2 2.1 (3.2) |
– 2.1 (2.3) |
| (0.9) | (0.2) |
| Cash at bank and in hand – 0.2 – 0.2 Restricted cash – tenants' deposit deeds 2.1 – – 2.1 Bank overdrafts (2.3) (0.9) – (3.2) (0.2) (0.7) – (0.9) Bank loans (380.8) 17.3 – (363.5) Less cost of raising finance 0.2 3.8 (0.8) 3.2 Finance lease obligations (3.5) 0.2 (0.2) (3.5) (384.1) 21.3 (1.0) (363.8) Total (384.3) 20.6 (1.0) (364.7) |
At 1 April 2010 £m |
Cash fl ow £m |
Non-cash items £m |
At 31 March 2011 £m |
|---|---|---|---|---|
| 20. Other non-current liabilities | ||
|---|---|---|
| 2011 £m |
2010 £m |
|
| Bank priority fee | 0.9 | 0.9 |
| 0.9 | 0.9 |
This fee is payable to Bank of Scotland before the end of the term of the associated loan in December 2014.
| 2011 | 2010 | |
|---|---|---|
| Number | Number | |
| Issued: Fully paid ordinary shares of 10p each | 1,152,731,338 | 1,149,459,056 |
| 2011 | 2010 | |
| £m | £m | |
| Issued: Fully paid ordinary shares of 10p each | 115.3 | 114.9 |
| 2011 | 2010 | |
| Movements in share capital were as follows: | Number | Number |
| Number of shares at 1 April | 1,149,459,056 | 1,046,116,842 |
| Issue of shares | 3,272,282 | 103,327,509 |
| Save as You Earn share options exercised | – | 14,705 |
| Number of shares at 31 March | 1,152,731,338 | 1,149,459,056 |
The share issue during the year arose from the take up from the scrip dividend in August 2010.
For the year ended 31 March continued
i) Long Term Equity Incentive Plan (LTIP) The LTIP scheme is a performance award scheme whereby shares are issued against three Group performance measures which are
Under the 2010 LTIP scheme 11,112,334 performance and matching shares were awarded in June 2010 to Directors and senior management (2009 LTIP scheme: 17,900,696). The Directors' shares under these schemes are analysed in detail in the Directors' Remuneration Report on page 51.
A binomial model was used to determine the fair value of the LTIP grant for the Absolute TSR and Relative TSR elements of the LTIP scheme.
Assumptions used in the model were as follows:
| 2011 | 2010 | |
|---|---|---|
| Share price at grant | 21p | 16p |
| Exercise price (pence) | Nil | Nil |
| Average expected life (years) | 3 | 3 |
| Risk free rate | 1% | 2% |
| Expected dividend yield | 4% | 5% |
| Average share price volatility | 59% | 51% |
| Fair value per option – Absolute TSR element | 12p | 7p |
| Fair value per option – Relative TSR element | 13p | 8p |
The relative NAV is a non-market based condition and the intrinsic value is therefore the share price at date of grant of 21p. At each balance sheet date, the Directors 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 was that up to 50% of the relative NAV element will vest.
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. The average expected term to exercise used in the models has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural conditions and historical experience.
The risk free rate has been determined from market yield curves for government gilts with outstanding terms equal to the average expected term to exercise for each relevant grant. The expected dividend yield was determined by calculating the present value of expected future dividend payments to expiry.
The Group operates a Save as You Earn (SAYE) share option scheme and an Executive Share Option Scheme (ESOS) for which there have been no grants since 2008. Grants under ESOS are normally exercisable between three and ten years from the date of grant and normally granted at the market price ruling at the date of grant.
Grants of ESOS options made in 2006, 2007 and 2008 did not meet the required performance conditions and have lapsed.
Grants under the SAYE scheme are normally exercisable after three or fi ve 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.
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
Details of the movements for the SAYE and equity-settled ESOS schemes during the year were as follows:
| ESOS | SAYE | |||
|---|---|---|---|---|
| Options outstanding | Weighted Number exercise price |
Weighted Number exercise price |
||
| At 1 April 2009 Options granted Options exercised Options lapsed |
5,658,989 – – (626,820) |
145p – – 145p |
283,605 4,405,690 (14,705) (331,519) |
97p 12p 12p 81p |
| At 31 March 2010 | 5,032,169 | 145p | 4,343,071 | 12p |
| Options granted Options lapsed |
– (2,064,822) |
– 178p |
347,851 (385,986) |
17p 14p |
| At 31 March 2011 | 2,967,347 | 108p | 4,304,936 | 12p |
Of the outstanding ESOS options at 31 March 2011 2,967,347 (2010: 4,209,912) were exercisable immediately. None of the SAYE options outstanding were available to exercise.
At 31 March 2011 in total there were 7,272,283 (2010: 9,375,240) SAYE and ESOS share options exercisable on the Company's ordinary share capital. Of these, 1,587,213 were Directors' share options and are disclosed in the Directors' Remuneration Report. 5,685,070 options are held by employees who are not Directors and these are analysed below:
| Total | 5,685,070 | ||||
|---|---|---|---|---|---|
| 20 July 2010 20 July 2010 |
SAYE SAYE |
17.1p 17.1p |
318,939 01.09.2013 01.03.2014 28,912 01.09.2015 01.03.2016 |
||
| 21 July 2009 | SAYE | 11.9p | 852,178 01.09.2014 01.03.2015 | ||
| 21 July 2009 | SAYE | 11.9p | 2,948,206 01.09.2012 01.03.2013 | ||
| 22 July 2008 | SAYE | 91.7p | 4,370 01.09.2013 01.03.2014 | ||
| Exercisable between | |||||
| 1 September 2005 | ESOS | 19.99p | 80,044 01.09.2008 01.09.2015 | ||
| 17 June 2005 | ESOS | 18.37p | 226,810 17.06.2008 17.06.2015 | ||
| 30 June 2004 | ESOS | 13.58p | 270,140 30.06.2007 30.06.2014 | ||
| 30 June 2003 | ESOS | 85.10p | 456,444 30.06.2006 30.06.2013 | ||
| 29 July 2002 | ESOS | 89.39p | 499,027 29.07.2005 29.07.2012 | ||
| Non-Director options Date of grant |
Scheme | Exercise price (Pence) |
Ordinary shares Number |
Exercisable between |
The exercise of all options, other than those obtained under the Group's Save As You Earn scheme, is dependent upon the Group achieving specifi ed performance targets as disclosed in the Directors' Remuneration Report on page 51.
The fair value of the SAYE share options granted during the year have been calculated using the Black-Scholes model. Inputs to the model are summarised as follows:
| 2011 SAYE 3 year |
2011 SAYE 5 year |
2010 SAYE 3 year |
2010 SAYE 5 year |
|
|---|---|---|---|---|
| Weighted average share price at grant | 21p | 21p | 15p | 15p |
| Exercise price | 17p | 17p | 12p | 12p |
| Expected volatility | 59% | 54% | 51% | 42% |
| Average expected life (years) | 3 | 5 | 3 | 5 |
| Risk free rate | 1% | 2% | 2% | 2% |
| Expected dividend yield | 4% | 4% | 5% | 5% |
| 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.
For the year ended 31 March continued
Fair values per share of these options were:
| 2011 | 2011 | 2010 | 2010 | |
|---|---|---|---|---|
| Grant date | Fair value of award |
Grant date | Fair value of award |
|
| SAYE – 3 year SAYE – 5 year |
20 July 2010 20 July 2010 |
8p 21 July 2009 8p 21 July 2009 |
6p 5p |
The Group operated a Co-Investment Plan for Directors, the exercise of which depended on the achievement of certain market related performance conditions. No grants were made during the year on this scheme as it has been replaced by the Long Term Equity Incentive Plan (LTIP).
The scheme and performance criteria are fully explained in the Directors' Remuneration Report on page 49.
National Insurance payments due on the exercise of non-approved ESOS options and shares from the LTIP and the Co-Investment Plan 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 Black-Scholes model. 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.
Inputs to the model for the grants during the year are summarised as follows:
| 2011 | 2010 | |
|---|---|---|
| Share price at 31 March | 27p | 24p |
| Exercise price | – | – |
| Expected volatility | 59% | 51% |
| Term of option remaining (years) | 2.2 | 2.2 |
| Risk free rate | 1% | 2% |
| Expected dividend yield | 4% | 5% |
| Possibility of ceasing employment | 10% | 10% |
| Fair value of cash based payment per share | 24p | 22p |
The Group recognised a total charge in relation to share based payments as follows:
| 2011 £m |
2010 £m |
|
|---|---|---|
| Equity settled share based payments Cash settled share based payments |
0.8 0.3 |
1.0 0.1 |
| 1.1 | 1.1 |
The total liability at the end of the period in respect of cash-settled share based schemes was £0.4m (2010: £0.1m).
| occupied property £m |
Owner Equity settled share based payments £m |
Merger reserve £m |
Total £m |
|
|---|---|---|---|---|
| Balance at 1 April 2009 Arising on share issue Revaluation gain Share based payments |
– – 0.7 – |
2.6 – – 1.0 |
– 8.7 – – |
2.6 8.7 0.7 1.0 |
| Balance at 31 March 2010 | 0.7 | 3.6 | 8.7 | 13.0 |
| Revaluation gain Share based payments |
1.2 – |
– 0.8 |
– – |
1.2 0.8 |
| Balance at 31 March 2011 | 1.9 | 4.4 | 8.7 | 15.0 |
The revaluation gain on owner occupied property relates to the accounting policy to include owner occupied land and buildings at valuation rather than historic cost.
The merger reserve was created in the prior year following the raising of £18.8m of equity through a cashbox share placing structure.
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
The Company has established an Employee Share Ownership Trust (ESOT) to purchase shares in the market for distribution at a later date in accordance with the terms of the 1993 and 2000 Executive Share Option Schemes, Co-Investment Plan and Long Term Equity Incentive Plan. The shares are held by an independent trustee and the rights to dividends on the shares have been waived except where the shares are benefi cially owned by participants. During the year the Trust purchased 4,002,132 shares for a cash consideration of £0.8m. At 31 March 2011 the number of shares held by the Trust totalled 9,750,321 (2010: 5,748,189). At 31 March 2011 the market value of these shares was £2.7m (2010: £1.4m) compared to a nominal value of £1.0m (2010: £0.6m).
| 2011 £m |
2010 £m |
|
|---|---|---|
| Balance at 1 April Acquisition of ordinary shares Transfer of shares |
7.2 0.8 – |
5.7 0.2 1.3 |
| Balance at 31 March | 8.0 | 7.2 |
On 23 February 2011 the Company entered into an arrangement with the BlackRock UK Property Fund by creating a Jersey property unit trust. The Group holds a 20.1% interest in the trust (BlackRock Workspace Property Trust) whose aim is to build a £100m fund of offi ce and industrial property in and around London. The Company is property manager with signifi cant delegated powers including responsibility for asset management and recommending acquisitions and disposals. Transactions between the Group and the joint venture are on an arm's length basis. This joint venture has been equity accounted for in the Group's consolidated fi nancial statements.
The Group's 20.1% share of the joint venture assets and liabilities at 31 March 2011 is shown below:
| 31 March 2011 £m |
|
|---|---|
| Investment properties Current assets |
7.1 0.3 |
| Total assets | 7.4 |
| Current liabilities | (0.3) |
| Total liabilities | (0.3) |
| Net assets | 7.1 |
| Unrealised surplus on sale of properties to joint venture | (0.4) |
| Investment in joint venture | 6.7 |
The Group's 20.1% share of the joint venture income and expenses for the period 23 February 2011 to 31 March 2010 is shown below:
| Period ended 31 March 2011 £m |
|
|---|---|
| Revenue | 0.1 |
| Direct costs | – |
| Net rental income | 0.1 |
| Administrative expenses | – |
| Change in fair value of investment properties | (0.3) |
| Set up costs | (0.1) |
| Loss before tax | (0.3) |
| Taxation | – |
| Loss after tax | (0.3) |
For the period to 11 December 2009, Workspace Group PLC held 50% of the ordinary share capital of Workspace Glebe Limited. Its interest in this joint venture was equity accounted for in the Group's consolidated fi nancial statements.
On 11 December 2009 Workspace Group PLC acquired the remaining 50% of the share capital of Workspace Glebe Limited from Glebe Two Limited, the former joint venture partner. From this date Workspace Glebe Limited became a wholly owned subsidiary of Workspace Group PLC.
For the year ended 31 March continued
The Group's 50% share of the joint venture income and expenses for the period 1 April 2009 to 11 December 2009 is shown below:
| Period ended 11 December 2009 £m |
|
|---|---|
| Revenue | 3.0 |
| Direct costs | (1.1) |
| Net rental income | 1.9 |
| Administrative expenses | – |
| Change in fair value of investment properties | (16.2) |
| Finance costs – interest payable | (2.6) |
| Change in fair value of derivative financial instruments | 0.8 |
| Loss before tax | (16.1) |
| Taxation | – |
| Loss after tax | (16.1) |
This loss and subsequent adjustments arising upon the business combination are shown below:
| Total credited to income statement | 9.1 |
|---|---|
| Share in former joint venture profit after tax | 6.7 |
| Loss after tax Revaluation of share in joint venture Release of interest shortfall guarantee provision |
(16.1) 18.4 4.4 |
| Negative goodwill on business combination | 2.4 |
| Consideration for acquisition of joint venture Net assets acquired on business combination Acquisition related costs |
– 3.1 (0.7) |
| Year ended 31 March 2010 £m |
Transactions between the Group and its joint ventures are set out below. These are related party transactions as defi ned in IAS 24:
| 2011 £m |
2010 £m |
|
|---|---|---|
| Transactions year ended 31 March: Net investment into joint ventures Recharges to joint ventures Recharges from joint ventures |
7.4 – – |
– 0.4 (0.1) |
| Balances with joint ventures at 31 March: Amounts payable to joint venture |
(0.6) | – |
At the year end the estimated amounts of contractual commitments for future capital expenditure not provided for were:
| 2011 £m |
2010 £m |
|
|---|---|---|
| Under contract: | ||
| Property, plant and equipment | 0.4 | – |
| Purchases, construction or re-development of investment property | 2.0 | 0.4 |
| Repairs, maintenance or enhancement of investment property | 1.5 | 1.1 |
| 3.9 | 1.5 | |
| Authorised by Directors but not contracted: | ||
| Property, plant and equipment | 0.2 | 0.1 |
| Intangible assets | 0.1 | – |
| Purchases, construction or re-development of investment property | 8.2 | 5.6 |
| Repairs, maintenance or enhancement of investment property | 2.8 | 4.4 |
| 11.3 | 10.1 | |
| 15.2 | 11.6 |
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
Upon restructuring of the former joint venture Workspace Group PLC entered into a proceeds sharing agreement with Workspace Glebe Limited's lenders allowing the banks to share in any property disposal proceeds remaining after the repayment of the £68m debt and priority fee, and repayment to Workspace for the initial consideration of £15m, together with any capital expenditure incurred to the date of disposal to the extent not funded by cash fl ows of Workspace Glebe itself. All disposals are at the option of the Group. This gives rise to a contingent liability based upon the deemed value liable under this proceeds sharing arrangement.
At 31 March 2011 the proceeds sharing contingent liability assuming all properties were sold was calculated at £15.8m (2010: £8.4m). This is based on 31 March 2011 valuation of the former joint venture portfolio of £117m (2010: £101m).
The impact of this on EPRA NAV per share if the entire Glebe portfolio were sold would be a decrease of 1.3p (2010: 0.7p). This liability will be reviewed at each six monthly valuation using the same basis to generate a contingent liability under this proceeds sharing arrangement.
Except where indicated otherwise, the Company (incorporated in the UK) wholly owns the following active subsidiary undertakings incorporated in the UK and registered in England and Wales, all of which are consolidated in the Group's fi nancial statements:
| Name | Nature of business | Share capital (ordinary shares) |
|---|---|---|
| Workspace 11 Ltd | Property Investment | 88,861,629 shares of £1 |
| *Workspace 12 Ltd | Property Investment | 1004 shares of 0.1 pence |
| Workspace 13 Ltd | Property Investment | 138,769,653 shares of £1 |
| *Workspace 14 Ltd | Property Investment | 145,568,460 shares of £1 |
| Workspace 15 Ltd | Property Investment | 37,772,814 shares of £1 |
| †Workspace 16 (Jersey) Ltd | Investor in joint venture | 751 shares of £1 |
| Workspace Glebe Ltd | Property Investment | 2,000,004 shares of £1 |
| *Glebe Three Ltd | Property Investment | 1,000,000 shares of £1 |
| Workspace Holdings Ltd | Holding Company | 2 shares of £1 |
| LI Property Services Ltd | Insurance Agents | 100 shares of £1 |
| Workspace Management Ltd | Property Management | 1 share of £1 |
| Anyspacedirect.co.uk Ltd | Website Service | 1 share of £1 |
* The share capital of these subsidiaries is held by other Group companies.
† Company registered in Jersey.
A full list of subsidiary undertakings at 31 March 2011 will be appended to the Company's next annual return.
The Group operates a defi ned 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 the year totals £0.5m (2010: £0.5m) representing contributions payable by the Group to the fund and is charged through operating profi t.
The Group's commitment with regard to pension contributions range from 6% to 16.5% of an employee's salary and employee contributions range from 3% to 20%. The pension scheme is open to every employee after three months' qualifying service. The number of employees in the scheme at the year end was 98 (2010: 103).
The following future minimum lease payments are due under non-cancellable operating leases:
| 2011 | 2010 | |
|---|---|---|
| Motor vehicles and offi ce equipment: | £m | £m |
| Due within one year | 0.1 | 0.1 |
| Due between two and five years | 0.1 | – |
| 0.2 | 0.1 |
In April 2011 the Group completed the sale of Ewer Street car park (part of Great Guildford Street Business Centre) for £3.9m.
In June 2011 the Group signed a new £125m loan facility with RBS repayable in June 2015.
We have audited the Parent Company fi nancial statements of Workspace Group PLC for the year ended 31 March 2011 which comprise the Parent Company Balance Sheet and the related notes. The fi nancial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
As explained more fully in the Statement of Directors' Responsibilities set out on page 53, the Directors are responsible for the preparation of the Parent Company fi nancial statements and for being satisfi ed that they give a true and fair view. Our responsibility is to audit and express an opinion on the Parent Company fi nancial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the Company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
An audit involves obtaining evidence about the amounts and disclosures in the fi nancial statements suffi cient to give reasonable assurance that the fi nancial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Parent Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of signifi cant accounting estimates made by the Directors; and the overall presentation of the fi nancial statements. In addition, we read all the fi nancial and non-fi nancial information in the Group annual report to identify material inconsistencies with the audited fi nancial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implication for our report.
In our opinion the Parent Company fi nancial statements:
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
We have reported separately on the Group fi nancial statements of Workspace Group PLC for the year ended 31 March 2011.
for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London 3 June 2011
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
| Notes | 2011 £m |
2010 (restated) £m |
|
|---|---|---|---|
| Fixed assets | |||
| Investments in subsidiary undertakings | C | 260.4 | 252.1 |
| Current assets | 260.4 | 252.1 | |
| Debtors Creditors: amounts falling due within one year |
D E |
125.6 (102.2) |
94.8 (56.0) |
| Net current assets | 23.4 | 38.8 | |
| Total assets less current liabilities | 283.8 | 290.9 | |
| Net assets | 283.8 | 290.9 | |
| Capital and reserves Called up share capital Share premium account Investment in own shares Merger reserve Share based payment reserve Profit and loss account |
F F F F F F |
115.3 25.0 (8.0) 8.7 4.4 138.4 |
114.9 24.7 (7.2) 8.7 3.6 146.2 |
| Total shareholders' funds | 283.8 | 290.9 |
The fi nancial statements were approved by the Board of Directors on 3 June 2011 and were signed on its behalf by:
H Platt G Clemett Directors
The notes on pages 84 and 85 form part of these fi nancial statements.
Workspace Group PLC Registered number 2041612
Although the Group consolidated fi nancial statements are prepared under IFRS, the Workspace Group PLC Company fi nancial statements are prepared under UK GAAP. The principal accounting policies of the Company which have been applied consistently throughout the year are set out below:
The fi nancial statements are prepared on a going concern basis under the historical cost convention and in accordance with the Companies Act 2006 and applicable accounting standards in the UK. FRS 29 Financial Instruments – Disclosure (the UK GAAP equivalent of IFRS 7 Financial Instruments – Disclosure) has been adopted by the Company, but the disclosure requirements are met in note 17 of the Group fi nancial statements.
The Company has taken advantage of the convention not to produce a cash fl ow statement as one is prepared for the Group fi nancial statements.
Interests in subsidiary undertakings are carried in the Company's balance sheet at cost less impairment. Impairment in subsidiaries is taken to the profi t and loss account.
Corporation tax payable is provided on taxable profi ts at the current rate.
Deferred tax assets and liabilities arise from differences between the recognition of gains and losses in the fi nancial statements and their recognition in a tax computation.
In accordance with FRS 19 deferred tax has been recognised in respect of all timing differences which have originated, but not reversed, by the balance sheet date, except that deferred tax has not been recognised on any potential capital gain where a binding sale commitment is not in place.
The Company has not discounted deferred tax assets and liabilities.
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 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 refl ected in a subsidiary undertaking, Workspace Management Limited. The Company recognises this as an investment in subsidiary undertakings with a corresponding increase to equity.
As permitted by the exemption in Section 408 of the Companies Act 2006, the profi t and loss account of the Company is not presented as part of these fi nancial statements. The profi t attributable to shareholders, before dividend payments, dealt with in the fi nancial statements of the Company was £1.1m (2010: £25.9m).
Auditors' remuneration of £10,000 (2010: £10,000) has been borne by a subsidiary undertaking.
Proposed dividends are disclosed in note 7 to the consolidated fi nancial statements.
| Cost | £m |
|---|---|
| Balance at 1 April 2010 Additions in the year |
299.2 8.3 |
| Balance at 31 March 2011 | 307.5 |
| Impairment | £m |
|---|---|
| Balance at 31 March 2010 and 2011 | 47.1 |
| Net book value at 31 March 2011 | 260.4 |
| Net book value at 31 March 2010 | 252.1 |
During the year the Company acquired 751 shares in Workspace 16 (Jersey) Ltd, a company registered in Jersey.
The Directors believe that the carrying value of the investments is supported by their underlying net assets.
Refer to note 28 to the consolidated fi nancial statements for the list of subsidiary undertakings.
| 2011 £m |
2010 £m |
|
|---|---|---|
| Amounts owed by subsidiary undertakings | 125.6 | 94.8 |
| 125.6 | 94.8 |
Amounts owed by subsidiary undertakings are unsecured and repayable on demand. Interest is charged to subsidiary undertakings.
| Review of Operations | 01 – 35 |
|---|---|
| Governance | 36 – 53 |
| Financial Statements | 54 – 86 |
| 2011 £m |
2010 £m |
|
|---|---|---|
| Amounts owed to subsidiary undertakings Other taxation and social security payable Corporation tax payable |
101.8 0.4 – |
54.4 0.4 1.2 |
| 102.2 | 56.0 |
Amounts owed to subsidiary undertakings are unsecured and repayable on demand. Interest is paid to subsidiary undertakings.
Movements and notes applicable to share capital, share premium account, investment in own shares, merger reserve and share based payment reserve are shown in notes 21, 22 and 23 of the consolidated fi nancial statements.
Prior year numbers have been restated to include share based payments in equity and investment in subsidiary undertakings.
| Profi t and loss account: | £m |
|---|---|
| Balance at 1 April 2010 | 146.2 |
| Profi t for the year | 1.1 |
| Dividends paid | (8.9) |
| Balance at 31 March 2011 | 138.4 |
| 2011 £m |
2010 £m |
|
|---|---|---|
| Profi t for the fi nancial year Dividends paid |
1.1 (8.9) |
25.9 (8.1) |
| Merger reserve arising on share issue Issue of shares Investment in own shares Share based payments |
– 0.7 (0.8) 0.8 |
8.7 10.4 (1.5) 1.0 |
| Net movement in shareholders' funds | (7.1) | 36.4 |
| Opening shareholders' funds | 290.9 | 254.5 |
| Closing shareholders' funds | 283.8 | 290.9 |
The Company has taken advantage of the exemption under FRS 8 Related Party Disclosures not to disclose related party transactions with wholly owned subsidiary undertakings.
Related party transactions are the same for the Company as for the Group. For details refer to note 25 of the consolidated fi nancial statements.
| 31 March | 31 March | 31 March | 31 March | 31 March | |
|---|---|---|---|---|---|
| 2011 | 2010 | 2009 | 2008 | 2007 | |
| £m | £m | £m | £m | £m | |
| Rents receivable | 52.0 | 49.8 | 54.2 | 51.4 | 45.6 |
| Service charges and other income | 16.8 | 16.7 | 15.6 | 15.5 | 14.3 |
| Revenue | 68.8 | 66.5 | 69.8 | 66.9 | 59.9 |
| Trading profi t | 36.2 | 35.3 | 38.4 | 37.0 | 31.6 |
| Net interest payable^ | (22.1) | (24.5) | (28.4) | (28.1) | (23.2) |
| Trading profi t after interest | 14.1 | 10.8 | 10.0 | 8.9 | 8.4 |
| Profit/(loss) before taxation | 52.8 | 26.0 | (360.4) | (37.0) | 112.5 |
| Profit/(loss) after taxation | 53.5 | 24.2 | (360.4) | (34.7) | 193.4 |
| Earnings per share* | 4.7p | 2.3p | (134.6)p | (15.2)p | 86.5p |
| Dividends per share* | 0.83p | 0.75p | 1.15p | 3.43p | 3.11p |
| Dividends (total) | 9.5 | 8.6 | 7.8 | 7.8 | 7.0 |
| Investment properties | 713.4 | 713.2 | 664.1 | 994.3 | 1,001.6 |
| Less: net liabilities | (12.8) | (39.5) | (54.1) | (16.1) | (37.9) |
| Less: net borrowings | (366.8) | (386.4) | (358.1) | (441.4) | (381.1) |
| Net assets | 333.8 | 287.3 | 251.9 | 536.8 | 582.6 |
| Gearing | 110% | 134% | 142% | 82% | 65% |
| Gearing on EPRA net assets | 106% | 125% | 129% | 82% | 65% |
| Basic NAV per share* | £0.29 | £0.25 | £0.24 | £2.35 | £2.55 |
| EPRA NAV per share* | £0.30 | £0.27 | £0.27 | £2.33 | £2.52 |
* Earnings per share, dividends per share and net assets per share have been restated to refl ect adjustment for the Rights Issue in March 2009. ^ Excludes exceptional items.
| Workspace Group: | 2011 | 2010 | 2009 | 2008 | 2007 |
|---|---|---|---|---|---|
| Number of estates1 Lettable fl oorspace (m sq. ft.) ■1 Number of lettable units1 Average unit size (sq. ft.)1 Rent roll of occupied units1 Average rent per sq. ft.1 Overall occupancy1 Enquiries (number)* |
94 5.1 4,856 1,049 £48.9m £11.47 83.6% 11,535 |
105 5.5 5,156 1,067 £50.7m £11.22 81.9% 12,109 |
106 5.0 4,546 1,099 £50.8m £12.64 80.3% 10,515 |
106 5.2 4,611 1,118 £52.6m £11.88 85.8% 9,414 |
101 4.9 4,304 1,139 £47.2m £11.34 84.8% 7,913 |
| Lettings (number)* | 1,051 | 1,203 | 1,035 | 1,007 | 1,149 |
| BlackRock Workspace Property Trust (BWPT): | 31 March 2011 |
|
|---|---|---|
| Number of estates | 8 | |
| Lettable fl oorspace (m sq.ft.) ■ | 0.3 | |
| Number of lettable units | 281 | |
| Average unit size (sq.ft.) | 1,147 | |
| Rent roll of occupied units | £3.1m | |
| Average rent per sq.ft. | £10.57 | |
| Overall occupancy | 92.1% |
■ Excludes storage space
Excluding BWPT which is shown separately
* Including BWPT
| 54 – 86 |
|---|
| 36 – 53 |
| 01 – 35 |
The report and fi nancial statements, share price information, company presentations, Corporate Governance, contact details and other investor information on the Group are available at the investor website www.workspacegroupplc.co.uk
All general enquiries concerning ordinary shares in Workspace Group PLC, should be addressed to:
PO Box 82 The Pavilions Bridgwater Road Bristol BS99 7NH Telephone: +44 (0) 870 707 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-uk.computershare. com/investor
Magenta House 85 Whitechapel Road London E1 1DU
From early July 2011 our registered offi ce and headquarters will be:
Kennington Park 1-3 Brixton Road London, SW9 6DE.
Registered number: 2041612 Telephone: +44 (0) 207 247 7614 Fax: +44 (0) 207 247 0157 Email: [email protected]
Carmelina Carfora
PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors 1 Embankment Place London WC2N 6RH
Norton Rose 3 More London Riverside London SE1 2AQ
Slaughter and May One Bunhill Row London EC1Y 8YY
The Royal Bank of Scotland Corporate and Institutional Banking 280 Bishopsgate London EC2M 4RB
N M Rothschild New Court St Swithin's Lane London EC4P 4DU
Espirito Santo Investment Bank 10 Paternoster Square London EC4M 7AL
Investec 2 Gresham Street London EC2V 7QP
87
BWPT BlackRock Workspace Property Trust, a joint venture property fund with the BlackRock UK Property Fund in which the Group holds a 20.1% interest.
Cash rent roll is the current net rents receivable for occupied units.
Earnings per share (EPS) is the profi t 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 NAV is a defi nition of net asset value as set out by the European Public Real Estate Association. It represents net assets after excluding mark to market adjustments of effective cash fl ow hedges (fi nancial derivatives) and deferred tax relating to revaluation movements, capital allowances and derivatives.
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 signifi cant items of income or expense that by virtue of their size, incidence or nature are shown separately on the Income Statement to enable a full understanding of the Group's fi nancial performance.
Gearing is the Group's net debt as a percentage of net assets.
Gearing on adjusted net assets is the Group's net debt as a percentage of net assets excluding mark to market derivative adjustments.
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 operating profi t.
IPD is the Investment Property Databank Ltd, a company that produces an independent benchmark of property returns.
LIBOR is the British Bankers' Association London Interbank Offer Rate.
Like-for-like are those properties that have been held throughout a 12 month period and have not been subject to a refurbishment programme in the last 24 months.
Loan to value is the current loan balance divided by the current value of properties secured on the loan.
Market rental values (see ERV).
Net assets per share (NAV) are net assets divided by the number of shares in issue at the period end (excluding shares held in the ESOT).
Net rents are rents excluding any contracted increases and after deduction of inclusive service charge revenue.
Occupancy percentage is the area of space let divided by the total net lettable area (excluding land used for open storage).
Open market value is an opinion of the best price at which the sale of an interest in the property would complete unconditionally for cash consideration on the date of valuation (as determined by the Group's external valuers).
Profi t/(loss) before tax (PBT) is income less all expenditure other than taxation.
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 profi ts derived from their property rental business.
Rent per sq. ft. is the net rent divided by the occupied area.
Rent roll (see cash rent roll).
Reversion/reversionary income is the increase in rent estimated by the Group's external valuers, where the net rent is below the current estimated rental value. The increases to rent arise on rent reviews, letting of vacant space, expiry of rent free periods or rental increase steps.
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.
Small and medium-sized enterprises (SMEs) are those businesses with a turnover of less than £1m p.a. or staff of less than 50. Most Workspace customers are SME businesses with staffi ng of up to 20.
Total shareholder return (TSR) is the return obtained by a shareholder calculated by combining both share price movements and dividend receipts.
Trading profit after interest is net rental income, less administrative expenses, less net interest including amortisation of fi nancing costs.
London is the prime driver of UK economic growth and a global hub for business and culture.
With 160-180,000 SMEs, London has the UK's densest, most-diverse and most active population of fast growing businesses.
This makes it the most attractive part of the SME market and gives us ample scope to expand.
As London continues to grow, the pressure on land will promote the intensifi cation and change of use of our assets, further increasing their value.
Property portfolio characteristics
3
Key ■ Workspace properties ■ South properties ■ West properties
4
Workspace Group PLC Property portfolio 2011
Long Island House
Net Rent Roll of
| fl oor area | Lettable occupied units |
ERV | ||||||
|---|---|---|---|---|---|---|---|---|
| Property Name | Post Code Category | Property uses | Tenure* Acreage | sq. ft.† | £000s £000s | |||
| South | ||||||||
| ◆ Alscot Road Industrial Estate | SE1 3AW | Like for like | Industrial | f/h | 0.2 | 6,370 | 62 | 96 |
| ■ Avro & Hewlett Hse Havelock Terrace SW8 4AS | Like for like | Business Centre/Offi ces | f/h | 0.7 | 58,363 | 563 | 587 | |
| ◆ 55 Bendon Valley | SW18 4LZ Like for like | Business Centre/Offices | f/h | 0.4 | 19,371 | 177 | 178 | |
| ■ Bendon Valley Riverside | SW18 4UQ Like for like | Business Centre/Offi ces | f/h | 2.0 | 80,130 | 776 | 747 | |
| ◆ Canterbury Industrial Park | SE15 1NP Like for like | Industrial | f/h | 1.0 | 18,893 | 145 | 177 | |
| ■ Creekside (Faircharm Trading Estate) SE8 3DX | Like for like | Industrial | f/h | 2.3 | 106,088 | 450 | 627 | |
| ◆ Hamilton Rd | SE27 9SF Like for like | Industrial | f/h | 1.0 | 23,531 | 193 | 210 | |
| ◆ Homesdale Business Centre | BR1 2QZ | Like for like | Business Centre/Offi ces | f/h | 0.6 | 14,044 | 136 | 182 |
| ● Kennington Park | SW9 6DE | Refurbishment | Business Centre/Offices | f/h | 6.2 | 368,270 | 3,827 | 4,925 |
| ■ Lombard Business Centre | CR0 3JP | Like for like | Business Centre/Offi ces | f/h | 2.2 | 67,246 | 531 | 625 |
| ◆ Mahatma Ghandi | SE24 0JF | Like for like | Industrial | f/h | 0.9 | 16,750 | 93 | 173 |
| ◆ Michael Manley | SW8 4TU | Like for like | Industrial | f/h | 0.3 | 5,800 | 73 | 73 |
| ◆ Morie Street | SW18 1SL Like for like | Business Centre/Offices | f/h | 0.3 | 21,695 | 258 | 285 | |
| ■ Parkhall Road Trading Estate | SE21 8EN Like for like | Business Centre/Offi ces | f/h | 2.2 | 126,960 | 635 | 870 | |
| ◆ Pensbury Industrial Estate | SW8 4TL | Like for like | Industrial | f/h | 1.2 | 19,971 | 249 | 247 |
| ◆ Rainbow Industrial Estate | SW20 0JK Like for like | Storage | f/h | 4.7 | 1,000 | 295 | 386 | |
| ◆ Sundial Court | KT5 9RN | Like for like | Business Centre/Offices | f/h | 0.6 | 26,110 | 232 | 337 |
| ◆ T Marchant | SE16 3DH Like for like | Industrial | f/h | 2.1 | 51,721 | 334 | 294 | |
| ◆ Thurston Road Industrial Estate | SE13 7SH Held for redevelopment/sale Awaiting return of | commercial space | f/h | 0.0 | 0 | 0 | 561 | |
| ◆ Tower Bridge F Block | SE16 4DG Held for redevelopment/sale Industrial | f/h | 2.7 | 141,881 | 0 | 652 | ||
| ● Tower Bridge Business Complex | SE16 4DG Like for like/ Held for redevelopment/sale |
Business Centre/Offices | f/h | 9.9 | 416,898 | 2,468 | 2,996 | |
| ■ Wandsworth Business Village | SW18 4JQ Held for redevelopment/sale Business Centre/Offi ces | f/h | 2.1 | 0 | 0 | 0 | ||
| ◆ Zennor Road | SW12 0PS Like for like | Industrial | f/h | 1.9 | 66,054 | 317 | 510 | |
| 45.6 1,657,146 | 11,814 15,735 |
| West | ||||||||
|---|---|---|---|---|---|---|---|---|
| ◆ 2 Cullen Way | NW10 6JZ Like for like | Industrial | f/h | 0.1 | 1,562 | 17 | 15 | |
| ◆ 10 Cullen Way | NW10 7JF Like for like | Industrial | f/h | 0.2 | 10,304 | 34 | 59 | |
| ◆ 28-30 Park Royal Road | NW10 7LF Like for like | Business Centre/Offices | f/h | 0.7 | 28,175 | 171 | 258 | |
| ◆ 330 Ladbroke Grove | W10 5AS | Held for redevelopment/sale Business Centre/Offices | f/h | 0.0 | 2,000 | 34 | 34 | |
| ■ Acton Business Centre | NW10 6TD Like for like | Industrial | f/h | 2.0 | 50,361 | 459 | 589 | |
| ◆ Arches Business Centre | UB2 4AU | Like for like | Business Centre/Offices | f/h | 1.5 | 40,725 | 309 | 287 |
| ◆ Artesian Close Industrial Estate | NW10 8RW Like for like | Industrial | f/h | 1.2 | 15,814 | 193 | 213 | |
| ◆ Artesian Land | NW10 8JP Like for like | Industrial | f/h | 0.0 | 4,500 | 18 | 0 | |
| ◆ Barratt Way Industrial Estate - Harrow HA3 5TJ | Like for like | Industrial | f/h | 2.3 | 48,507 | 320 | 364 | |
| ■ Canalot Studios | W10 5BN Refurbishment | Business Centre/Offices | f/h | 0.7 | 32,550 | 541 | 700 | |
| ◆ Chiswick Studios | W4 5PY | Like for like | Business Centre/Offices | f/h | 0.5 | 14,244 | 153 | 190 |
| ◆ Enterprise, Hayes | UB3 1DD | Held for redevelopment/sale Business Centre/Offices | f/h | 1.0 | 89,433 | 151 | 381 | |
| ■ Grand Union Centre | W10 5AS | Held for redevelopment/sale Business Centre/Offices | f/h | 1.6 | 50,690 | 482 | 609 | |
| ◆ Ladbroke Hall | W10 6AZ | Like for like | Business Centre/Offices | f/h | 0.6 | 15,219 | 239 | 254 |
| ◆ Littleton House | TW15 1UU Like for like | Business Centre/Offices | f/h | 1.4 | 41,716 | 203 | 323 | |
| ◆ Long Island House | W3 0RG | Like for like | Business Centre/Offices | f/h | 0.2 | 29,973 | 179 | 295 |
| ◆ Maple Industrial Estate | TW13 7AW Like for like | Industrial | Long l/h | 1.2 | 18,210 | 219 | 207 | |
| ■ Pall Mall Deposit | W10 6BL | Like for like | Business Centre/Offices | f/h | 0.6 | 49,613 | 772 | 924 |
| ◆ Park Royal Business Centre | NW10 7LQ Like for like | Business Centre/Offices | f/h | 0.5 | 30,347 | 253 | 344 | |
| ◆ Park Royal House | NW10 7JH Like for like | Business Centre/Offices | f/h | 0.1 | 1,591 | 22 | 76 | |
| ◆ Q West | TW8 0GP | Refurbishment | Business Centre/Offices | Long l/h | 0.9 | 40,425 | 279 | 391 |
| ● The Barley Mow Centre | W4 4PH | Refurbishment | Business Centre/Offices | f/h | 0.9 | 73,813 | 1,182 | 1,446 |
| ■ The Light Box | W4 5PY | Like for like | Business Centre/Offices | f/h | 1.9 | 71,155 | 845 | 1,033 |
| ◆ The Shaftesbury Centre | W10 6BN Like for like | Business Centre/Offices | f/h | 0.1 | 12,600 | 192 | 235 | |
| ● Westbourne Studios | W10 5JJ | Like for like | Business Centre/Offices | Long l/h | 0.1 | 56,488 | 1,406 | 1,633 |
| ◆ Westwood Business Centre | NW10 6NB Like for like | Industrial | f/h | 2.7 | 47,406 | 311 | 472 | |
| 23.0 | 877,421 | 8,981 11,330 |
● denotes properties with value over £15m
■ denotes properties with value of between £5m and £15m
◆ denotes properties with value less than £5m
* f/h Freehold, l/h Leasehold † excludes storage space
Property details correct as at 31 March 2011
| Property Name | Post Code Category | Property uses | Tenure* Acreage | Lettable occupied fl oor area sq. ft.† |
Net Rent Roll of units £000s £000s |
ERV | |||
|---|---|---|---|---|---|---|---|---|---|
| Central | |||||||||
| ◆ 14 Greville St | EC1N 8SB Like for like | Business Centre/Offices | f/h | 0.1 | 10,961 | 254 | 516 | ||
| ◆ 57/59 Whitechapel Road | E1 1DU | Held for sale/development | Business Centre/Offices | f/h | 0.1 | 2,760 | 20 | 41 | |
| ■ Archer Street | W1D 7AZ | Like for like | Business Centre/Offices | f/h | 0.1 | 14,981 | 517 | 605 | |
| ■ Baldwins Gardens - Hatton Sq | EC1N 7RJ Like for like | Business Centre/Offices | f/h | 0.4 | 43,386 | 691 | 901 | ||
| ● Clerkenwell Workshops | EC1R 0AT Like for like | Business Centre/Offices | f/h | 0.4 | 50,461 | 1,828 | 2,225 | ||
| ■ E1 Business Centre (formerly Neil House) |
E1 6TD | Like for like | Business Centre/Offices | f/h | 0.3 | 41,108 | 463 | 689 | |
| ● Enterprise Estate, Upper Grnd, & Hatfield |
SE1 9PG | Like for like | Business Centre/Offices | f/h | 0.5 | 72,824 | 1,950 | 1,937 | |
| ■ Exmouth House | EC1R 0JH Like for like | Business Centre/Offices | Long l/h | 0.4 | 54,121 | 1,097 | 1,372 | ||
| ● Great Guildford Street | SE1 0HS | Refurbishment | Business Centre/Offices | f/h | 1.6 | 93,222 | 1,149 | 1,551 | |
| ◆ Holywell Centre | EC2A 4PS Like for like | Business Centre/Offices | f/h | 0.4 | 21,794 | 363 | 396 | ||
| ■ Linton House | SE1 0LH | Like for like | Business Centre/Offices | f/h | 0.2 | 34,179 | 661 | 680 | |
| ◆ Magenta House | E1 1DU | Like for like | Business Centre/Offices | f/h | 0.1 | 0 | 200 | 0 | |
| ■ Quality Court | WC2A 1HR Like for like | Business Centre/Offices | f/h | 0.1 | 17,333 | 761 | 820 | ||
| Clerkenwell Workshops | ● Southbank House | SE1 | Like for like | Business Centre/Offices | f/h | 0.5 | 62,318 | 1,279 | 1,731 |
| ● The Leathermarket | SE1 3ER | Like for like | Business Centre/Offices | f/h | 1.7 | 120,499 | 2,397 | 2,710 | |
| ■ Westminster Business Square | SE11 5JH Like for like | Business Centre/Offices | f/h | 1.3 | 62,884 | 857 | 907 | ||
| ■ Whitechapel Technology Centre | E1 1DU | Like for like | Business Centre/Offices | Mainly f/h | 0.9 | 35,409 | 573 | 816 | |
| 9.3 | 738,240 | 15,060 17,898 | |||||||
Key ■ Workspace properties
■ Central properties
6
Workspace Group PLC Property portfolio 2011
Cremer Business Centre
| Property Name | Post Code Category | Property uses | Tenure* Acreage | fl oor area sq. ft.† |
Net Rent Roll of Lettable occupied units £000s £000s |
ERV | ||
|---|---|---|---|---|---|---|---|---|
| North | ||||||||
| ■ Atlas Business Centre | NW2 7HJ Like for like | Industrial | f/h | 5.8 | 152,141 | 948 | 1,295 | |
| ◆ Belgravia Workshops | N19 4NF | Like for like | Business Centre/Offices | f/h | 0.5 | 32,324 | 304 | 335 |
| ■ Bounds Green Industrial Estate | N11 2UL | Like for like | Industrial | f/h | 6.5 | 123,417 | 640 | 831 |
| ● Highbury Grove/Aberdeen Centre | N5 2EA | Like for like | Business Centre/Offices | f/h | 1.9 | 55,367 | 588 | 590 |
| ■ Leroy House | N1 3QP | Like for like | Business Centre/Offices | f/h | 0.5 | 46,924 | 662 | 770 |
| ◆ Mallard Place | N22 6TS | Like for like | Industrial | Long l/h | 0.3 | 10,150 | 83 | 83 |
| ◆ Parma House | N22 6XF | Like for like | Business Centre/Offices | f/h | 0.4 | 35,033 | 256 | 397 |
| ◆ Quicksilver Place | N22 6XH | Like for like | Industrial | Long l/h | 0.8 | 27,810 | 135 | 167 |
| ■ Spectrum House | NW5 1LP Like for like | Business Centre/Offices | f/h | 0.7 | 46,487 | 523 | 547 | |
| ■ The Chocolate Factory | N22 6XJ | Like for like | Business Centre/Offices | Mainly f/h | 2.8 | 118,847 | 696 | 965 |
| ◆ The Ivories | N1 2HY | Like for like | Business Centre/Offices | f/h | 0.4 | 24,804 | 413 | 363 |
| ■ The Wenlock (formerly Wharf Road) | N1 7EU | Like for like | Business Centre/Offices | f/h | 0.7 | 27,946 | 550 | 564 |
| 21.4 | 701,250 | 5,798 6,907 |
| East | ||
|---|---|---|
| ■ 1-13 Stratford Office Village | E15 4EA | Like for like | Business Centre/Offices | f/h | 1.6 | 52,058 | 547 | 966 |
|---|---|---|---|---|---|---|---|---|
| ◆ Alpha Business Centre | E17 7NX | Held for sale/development Business Centre/Offices Short l/h |
0.8 | 22,168 | 123 | 347 | ||
| ● Bow Enterprise Park | E3 3QY | Held for sale/development | Industrial | f/h | 3.5 | 77,417 | 521 | 632 |
| ◆ Bow Exchange | E3 3QP | Like for like | Business Centre/Offices | f/h | 0.8 | 37,585 | 289 | 327 |
| ◆ Buzzard Creek Industrial Estate | IG11 0EL | Like for like | Industrial | Long l/h | 3.1 | 42,500 | 247 | 329 |
| ■ Cremer Business Centre | E2 8HD | Like for like | Business Centre/Offices | f/h | 0.3 | 41,364 | 438 | 503 |
| ◆ Fairways | E10 7QT | Like for like | Industrial | f/h | 1.9 | 47,091 | 306 | 359 |
| ◆ Greenheath Business Centre | E2 6JL | Held for redevelopment/sale |
Business Centre/ Offices |
Mainly f/h | 0.4 | 56,527 | 140 | 332 |
| ■ Highway Business Park | E1 9HR | Like for like | Industrial | f/h | 1.1 | 19,969 | 236 | 301 |
| ■ Leyton Business Centre | E10 7QP | Like for like | Industrial | f/h | 6.3 | 114,210 | 444 | 589 |
| ◆ Leyton Studios | E10 7QE | Like for like | Industrial | f/h | 0.5 | 18,962 | 118 | 121 |
| ◆ Mare Street Studios | E8 3QE | Like for like | Business Centre/Offices | Mainly f/h | 0.8 | 39,443 | 348 | 411 |
| ■ Marshgate Centre | E15 2NH | Like for like | Industrial | f/h | 2.8 | 92,674 | 272 | 511 |
| ● Poplar Business Park | E14 9RL | Like for like | Industrial | Mainly f/h | 4.2 | 74,760 | 1,218 | 1,299 |
| ◆ Redbridge Enterprise Centre | IG1 1TY | Like for like | Industrial | f/h | 1.5 | 20,064 | 203 | 227 |
| ● Uplands | E17 5QN | Like for like | Industrial | f/h | 12.0 | 280,497 | 1,362 | 1,641 |
| 41.4 1,037,289 | 6,812 8,896 |
7
● denotes properties with value over £15m
Property details correct as at [31 March 2011]
| Property Name | Post Code Category | Property uses | Tenure* | Acreage | fl oor area sq. ft.† |
Net Rent Roll of Lettable occupied units £000s |
ERV £000s |
|---|---|---|---|---|---|---|---|
| Outside London | |||||||
| ◆ Clyde House, Maidenhead | SL6 8BR Like for like |
Business Centre/Offices | Long l/h | 1.6 | 29,654 | 83 | 263 |
| ◆ Harlow Enterprise Centre, Harlow | CM20 2HS Like for like | Industrial | f/h | 1.8 | 51,851 | 304 | 351 |
| 3.4 | 81,505 | 387 | 614 |
| Property Name | Acreage | fl oor area sq. ft.† |
Net Rent Roll of Lettable occupied units £000s |
ERV £000s |
|---|---|---|---|---|
| Outside London | 3.4 | 81,505 | 387 | 614 |
| Central | 9.3 | 738,240 | 15,060 | 17,898 |
| North | 21.4 | 701,250 | 5,798 | 6,907 |
| South | 45.6 1,657,146 | 11,814 | 15,735 | |
| East | 41.4 1,037,289 | 6,812 | 8,896 | |
| West | 23.0 | 877,421 | 8,981 | 11,330 |
| Total as at 31 March 2011 | 144.1 5,092,851 | 48,852 | 61,380 |
| Property Name | Post Code | Property uses | Tenure* | Acreage | fl oor area sq. ft.† |
Net Rent Roll of Lettable occupied units £000s |
ERV £000s |
|---|---|---|---|---|---|---|---|
| ■ Charles House | UB2 4BD | Industrial | f/h | 2.0 | 75,577 | 780 | 889 |
| ◆ Europa Building | NW10 6ND | Business Centre/Offices | f/h | 0.6 | 26,477 | 356 | 397 |
| ◆ Horton Road | UB7 8JD | Industrial | f/h | 1.9 | 41,495 | 178 | 193 |
| ◆ Kingsmill Business Park | KT1 3AP | Business Centre/Offices | Long l/h | 1.5 | 40,151 | 356 | 389 |
| ◆ Progress Park | CR0 4XD | Industrial | f/h | 1.8 | 31,002 | 282 | 268 |
| ◆ Rudolph Place | SW8 1RP | Business Centre/Offices | f/h | 0.4 | 14,609 | 233 | 250 |
| ■ Union Court | SW4 6JP | Business Centre/Offices | f/h | 1.9 | 67,203 | 675 | 670 |
| ◆ Windmill Place | UB2 4NJ | Business Centre/Offices | f/h | 0.7 | 25,779 | 281 | 365 |
| 10.8 | 322,293 | 3,140 | 3,421 |
■ denotes properties with value of between £5m and £15m
◆ denotes properties with value less than £5m
* f/h Freehold, l/h Leasehold †
excludes storage space Property details correct as at 31 March 2011
Magenta House 85 Whitechapel Road London E1 1DU
From early July 2011 our registered offi ce and headquarters will be: Chester House, Kennington Park, 1-3 Brixton Road, London SW9 6DE.
Registered number: 2041612
Telephone: +44 (0) 20 7247 7614 Fax: +44 (0) 20 7247 0157 Web: www.workspacegroupplc.co.uk Email: [email protected]
If you require information regarding business space in London call 020 7369 2309 or visit www.workspacegroup.co.uk.
| Shareholder Information | 87 – 88 |
|---|---|
| Financial Statements | 54 – 86 |
| Governance | 36 – 53 |
| Review of Operations | 01 – 35 |
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This Report is printed on materials which are FSC® certifi ed from well-managed forests.
These materials contain ECF (Elemental Chlorine Free) pulp and are 100% Recyclable.
Designed by Carnegie Orr (a Workspace Group customer) 020 7610 6140.
www.workspacegroup.co.uk
www.workspacegroupplc.co.uk
– business lounges for early stage businesses www.clubworkspace.co.uk
Advice and information for start-up businesses www.inspiresme.co.uk
Property search website
– marketing of small business space www.anyspacedirect.co.uk
Workspace Group PLC Magenta House
85 Whitechapel Road London E1 1DU
From early July 2011 our registered offi ce and headquarters will be: Chester House, Kennington Park, 1-3 Brixton Road, London SW9 6DE.
Registered number: 2041612
Telephone: +44 (0) 20 7247 7614 Fax: +44 (0) 20 7247 0157 Web: www.workspacegroupplc.co.uk Email: [email protected]
If you require information regarding business space in London call 020 7369 2309 or visit www.workspacegroup.co.uk.
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