WORKSPACE
UNDERSTANDS
WORK SPACE
ANNUAL REPORT
AND ACCOUNTS 2014
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WORKSPACE PROVIDES
BUSINESS PREMISES
TAILORED TO THE NEEDS
OF NEW AND GROWING
COMPANIES ACROSS
LONDON.
INVESTOR
Dividend per share growth
+10%
Total Shareholder Return
76%
2014
2013
2012
2011
10.63p
9.67p
8.79p
7.99p
2014
2013
2012
2011
-7.6%
17.7%
76%
51%
PROPERTY
Valuation
+27%
2014
2013
2012
2011
Total return
35%
£1,078m
£830m
£760m
£719m
2014
2013
2012
2011
13.8%
13.4%
11.7%
34.7%
CUSTOMER
Enquiries per month
1,063
Customer satisfaction
78%
2014
2013
2012
2011
1,063
1,037
1,009
960
2014
2013
2012
2011
78%
82%
84%
84%
FINANCIAL
Adjusted underlying EPS
+14%
EPRA NAV per share
+43%
2014
2013
2012
2011
13.9p
12.2p
11.9p
11.7p
2014
2013
2012
2011
£4.96
£3.48
£3.08
£2.86
CONTENTS
STRATEGIC REPORT
Overview
IFC 2014 highlights
01 The right strategy
02 Pill Box
04 60 Gray’s Inn Road
06 Club Workspace
09 Chairman’s introduction
10 Chief Executive Officer’s
Strategic Review
12 Right market and properties
14 Our business model
Strategy
16 Our strategy
18 Principal business risks
Performance
22 Corporate Social Responsibility
26 Business review
36 Key property statistics
GOVERNANCE
38 Chairman’s overview
40 The Board & Executive Committee
42 Corporate governance report
55 Directors’ remuneration report
73 Report of the Directors
77 Directors’ responsibilities
FINANCIAL STATEMENTS
78 Independent Auditors’ report to the
members of Workspace Group PLC
81 Consolidated income statement
81 Consolidated statement of
comprehensive income
82 Consolidated balance sheet
83 Consolidated statement of
changes in equity
84 Consolidated statement of
cash flows
85 Notes to the financial statements
113 Independent Auditors’ report to the
members of Workspace Group PLC
115 Parent Company balance sheet
116 Notes to the Parent Company
financial statements
SHAREHOLDER INFORMATION
120 Five-year performance
120 Key Performance Indicators
121 Property portfolio 2014
123 Investor information
124 Glossary of terms
125 Workspace Group online
Workspace Group PLC Annual Report and Accounts 2014
01
THE RIGHT
STRATEGY
RIGHT
MARKET
London is growing
and changing.
RIGHT
BRAND
Increasing recognition
and reputation.
RIGHT
PROPERTIES
Creating modern
growth environments.
WORKSPACE
UNDERSTANDS
WORK SPACE
RIGHT
PEOPLE
Driving
performance.
RIGHT
CUSTOMERS
New and growing
companies.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 02 Workspace Group PLC Annual Report and Accounts 2014
RIGHT
PEOPLE
PILL BOX
A STUNNING NEW REFURBISHMENT IN BETHNAL GREEN
RIGHT
PEOPLE
RIGHT
BRAND
RIGHT
MARKET
Creating a new
hub for business
in Bethnal Green.
Workspace Group PLC Annual Report and Accounts 2014
03
RIGHT
PROPERTIES
Attractive space,
high quality digital
infrastructure and services
on flexible terms.
RIGHT
CUSTOMERS
Social networking
opportunities with
like-minded entrepreneurs
to develop and grow
their businesses.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 04 Workspace Group PLC Annual Report and Accounts 2014
Workspace Group PLC Annual Report and Accounts 2014
05
60 GRAY’S
INN ROAD
A RECENT ACQUISITION
RIGHT
CUSTOMERS
RIGHT
MARKET
RIGHT
PEOPLE
Our centre managers
focus on our customers.
RIGHT
BRAND
Our customers are
attracted by the low
energy usage in
our buildings.
RIGHT
PROPERTIES
Our buildings become our
customers’ address and part
of their brand.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 06 Workspace Group PLC Annual Report and Accounts 2014
RIGHT
MARKET
RIGHT
PEOPLE
Our Club Hosts
facilitate networking
between our members
enabling them
to grow faster.
RIGHT
BRAND
The ultimate in
operational flexibility.
A collaborative
co-working
environment.
RIGHT
CUSTOMERS
Tomorrow’s
economy.
RIGHT
PROPERTIES
Based within existing
Workspace properties.
Offering “super-fast”
digital infrastructure.
CLUB
WORKSPACE
INNOVATIVE CO-WORKING SPACE AT CHANCERY LANE
Workspace Group PLC Annual Report and Accounts 2014
07
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 08 Workspace Group PLC Annual Report and Accounts 2014
Workspace Group PLC Annual Report and Accounts 2014
09
CHAIRMAN’S INTRODUCTION
DRIVING
VALUE
Workspace has had another year of successful
growth, delivering a strong operational and financial
performance through our established strategy of driving
rent, occupancy and asset value across our London
portfolio. Not only are we benefiting from our focused
refurbishment and redevelopment programme but we
have continued to strengthen the direct relationships
we have with our customers by becoming an essential
partner, thus helping their businesses to grow faster.
We continue to be mindful of the role we play in the
communities in which our properties are based. Our
buildings are our biggest environmental impact and
we are committed to making the most of opportunities
to reduce energy use, benefiting the environment and
reducing energy costs. Our 2014 Corporate Social
Responsibility report outlines the progress we have
made against our 2013 targets and sets new targets
for the future.
Revenues and profits grew strongly during the year.
Group net rental income was £50.3m, an underlying
increase of 9.6%, trading profit after interest was
£20.5m, an increase of 14.5%, and EPRA NAV per
share was £4.96, an increase of 43% on 2013.
In a similar vein, we always try to ensure that when
refurbishing an existing property or progressing a
redevelopment we do so in a way that helps to act as a
catalyst in either boosting or regenerating the economy
of the local area. Our aim is always a positive legacy.
We are proposing a final dividend of 7.09 pence per
share (a total of 10.63 pence for the year) to be paid
on 1 August 2014, an increase of 10% on last year.
Workspace’s proven long-term value generation
is reflected in this progressive dividend stream.
During the year we successfully completed a
refinancing which gives us far greater operational
flexibility to execute our capital expenditure programme
to redevelop and refurbish existing assets and create
buildings that complement our strategy. We also
made selective acquisitions where we see the
opportunity to create added value by applying our
operating model, accelerated our mixed-use planning
applications and successfully disposed of a number
of non-core properties.
Jamie and the executive team work hard to grow the
business for our customers, investors and employees
and they have been ably supported by our strong
and diversified Board. Bernard Cragg retires from the
Board in July and we thank him for his guidance and
contribution to our growth over the last 11 years.
Of course none of the growth or initiatives we have
reported would be possible without the dedication
and expertise of all our employees and I would like
to thank them for another year of success.
We continue to execute a very consistent strategy
in support of clear objectives and this year’s results
show the benefit of that approach.
DANIEL KITCHEN
NON-EXECUTIVE CHAIRMAN
Related information:
Corporate Social Responsibility p.22
Corporate governance p.42
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77
10 Workspace Group PLC Annual Report and Accounts 2014
CHIEF EXECUTIVE OFFICER’S STRATEGIC REVIEW
THE RIGHT
STRATEGY
In many ways the story of the last twelve months is
straightforward. We have stuck to our strategy of
supporting London’s new and growing companies by
providing them with high-quality properties that are
in the right locations and that offer the services and
facilities that suit their needs. We have ensured that we
refurbish and redevelop our portfolio to create a modern
working environment in order to retain and attract
customers and to drive rents. By doing that consistently
and well we have grown our business, yet again
reporting an increase in our core rent roll of 8.5%
together with a 27% uplift to the capital value of
our portfolio taking its value to over £1bn. A very
successful year.
But ours is a property story with a difference.
Of course, at the core are our buildings. Spread across
the capital, many of them well-known landmarks, we
make sure that they provide our customers with the
quality, flexible space they need and we do this in
ways that minimise environmental impact. However, the
management of our buildings doesn’t end there because
we also put in place the technology and communication
channels on which our customers’ day-to-day business
and future growth depends. It is this twin approach that
sets us apart. Not only that, but we are able to manage
and evolve our properties in this way because we deal
directly with our customers – there are no intermediaries
– so we can tailor our space, management and services
using this direct dialogue and knowledge. Our brand is
very important to us.
Over the last few years, we have grown our relationships
and relevance with customers quickly and one thing that
has taught us is that their needs are constantly evolving.
We know that because we have a constant dialogue with
them: our on-site teams talk to them daily; we regularly
survey them on their needs and opinions; and of course
we have regular online communication with them. These
fast-growing businesses are thoughtful and nimble and
always alive to the possibilities of new technology and
increasingly-sophisticated processes. We intend to be
there supporting them as they evolve, ensuring our
buildings are providing exactly the right environment
for their success.
Nowhere is that more visible than in our Club Workspace
environments. Customers contact us directly to join
and take advantage of our co-working spaces and the
feedback our local teams receive as we begin each new
relationship helps to tailor our services and inform our
thinking about future improvements to buildings.
Having attracted these customers many stay with us
as they grow, moving into dedicated space often in the
same building. By the end of this year we will have eleven
of these co-working centres across our estate, housed
in space we have that is generally less easy to rent out –
a win win for us.
Our refurbishment and redevelopment pipeline remains
strong with great results achieved throughout the year.
For example, our Pill Box property in east London
underwent a full refurbishment and internal redesign,
creating modern and vibrant space as well as adding
a café, gym and bike store – things we know our
customers value. Further, a major redevelopment of
ScreenWorks in Islington will see us open a brand new
office building, creating an exciting destination for
our customer base in the heart of a thriving business
community.
On top of all of this we are actively looking to acquire
more of the right kind of properties and grow our
business. Opportunities where we can leverage and
apply our marketing and asset management skills to
drive rents and values. Within the last six months
we have successfully purchased three properties in
strategic locations across the capital and we continue
to search out more.
London is changing fast and I believe this pattern will
continue. Infrastructure investment such as Crossrail
and the Northern Line extension will further enhance
this change. New areas are emerging and establishing
across London, breaking down the traditional ‘core’
territories. Occupiers are generally more fleet of foot,
demand more flexibility and less commitment and
will locate their businesses where they want to be not
where they think they should be. Modern communication
channels have revolutionised the way businesses operate
with a significant amount now conducted online.
Workspace embraces this change and I believe we
are well positioned to benefit from this development
across the Capital.
Combining our knowledge of London and of every
customer, with the right buildings in the right locations,
and managing all of these elements directly with our
own people and the latest technology is the Workspace
blueprint for future growth.
JAMIE HOPKINS
CHIEF EXECUTIVE OFFICER
Workspace Group PLC Annual Report and Accounts 2014
11
Related information:
Our strategy p.16
Corporate Social
Responsibility p.22
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 12 Workspace Group PLC Annual Report and Accounts 2014
RIGHT MARKET AND PROPERTIES
KINGS
CROSS
SHOREDITCH
PADDINGTON
WEST
END
FARRINGDON
OLD
STREET
STRATFORD
THE
CITY
LONDON
BRIDGE
WATERLOO
CANARY
WHARF
EARLS COURT
VICTORIA
BATTERSEA
Workspace property
Acquisitions
Redevelopments
Refurbishments
Crossrail
Northern Line Extension
Workspace Group PLC Annual Report and Accounts 2014
13
% OF VALUE
KINGS
CROSS
50%
SHOREDITCH
PADDINGTON
WEST
END
FARRINGDON
OLD
STREET
STRATFORD
THE
CITY
LONDON
BRIDGE
WATERLOO
CANARY
WHARF
EARLS COURT
VICTORIA
BATTERSEA
KINGS
CROSS
SHOREDITCH
FARRINGDON
OLD
STREET
STRATFORD
CANARY
WHARF
ENQUIRIES SPLIT
ACROSS LONDON
PADDINGTON
KINGS
CROSS
20%
FARRINGDON
SHOREDITCH
OLD
STREET
WEST
END
THE
CITY
21%
VICTORIA
LONDON
BRIDGE
WATERLOO
34%
EARLS COURT
STRATFORD
CANARY
WHARF
BATTERSEA
25%
Related information:
Property listing p.121
PADDINGTON
WEST
END
THE
CITY
LONDON
BRIDGE
WATERLOO
EARLS COURT
VICTORIA
BATTERSEA
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 14 Workspace Group PLC Annual Report and Accounts 2014
OUR BUSINESS MODEL
DRIVING
VALUE
DRIVING
LONG-TERM
VALUE WITHIN
OUR PROPERTY
PORTFOLIO
REPOSITION
UNDERSTAND
RIGHT
MARKET
REDEVELOP
RIGHT
BRAND
RIGHT
PROPERTIES
WORKSPACE
UNDERSTANDS
WORK SPACE
SECURE
RIGHT
PEOPLE
RIGHT
CUSTOMERS
REFURBISH
RETAIN
DRIVING
LONG-TERM
VALUE FROM
OUR CUSTOMER
BASE
Related information:
Our strategy p.16
Principal business risks p.18
Workspace Group PLC Annual Report and Accounts 2014
15
12-13 GREVILLE STREET, EC1
Acquisition delivering a new business centre in Farringdon.
VESTRY STREET STUDIOS, N1
Acquisition capturing customer demand in Old Street.
THE LEATHERMARKET, SE1
Club Workspace near London Bridge.
SCREENWORKS, N5
New business centre opening in Islington.
BARLEY MOW CENTRE, W4
Business hub in Chiswick.
THE FILAMENTS, SW18
New business centre opening in Wandsworth.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 16 Workspace Group PLC Annual Report and Accounts 2014
OUR STRATEGY
DELIVERING
TO PLAN
STRATEGIC
PRIORITIES
PRIORITIES
IN 2013/14
PERFORMANCE
IN 2013/14
PRIORITIES
FOR 2014/15
KEY RISKS
CUSTOMERS
CSR
Understanding our customers and enhancing
Working sustainably as part of everyday business
our brand by responding to their needs.
for us, our customers and our partners.
Enhancing our brand (responding to
Sustainable working
customers’ needs)
– Continue the roll out and evolution of the
Club Workspace brand.
– To develop a CSR policy for engaging with and
encouraging school leavers and graduates into
entrepreneurship.
– Broaden the range of services offered under
– Demonstrate tangible savings in carbon emissions.
– Develop Charity Strategy.
our digital platform.
– Position Workspace as the preferred choice
for fast-growing businesses.
– Club Workspace launched at Chancery Lane in
– Refurbishment schemes continuing to achieve good
November 2013 and at Bethnal Green in March 2014.
BREEAM scores (Building Research Establishment
Revenue growth in year of 52%.
Environmental Assessment Method).
– Growth in partnered provision of telecoms and
– Continued liaison with customers in helping to
data services to customers, with the introduction
of Cloud products and services during the year.
reduce our carbon emissions and investment
in energy-reducing equipment during the year.
Telecoms and data revenue has increased by 53%
– Workspace Charity Committee and Charity
Strategy established during the year.
in the year.
– Work undertaken with partners to enhance our
social media profile and presence.
PROPERTIES
Owning the right properties that are
tailored to our customers’ needs and
intensively managing these properties
to drive occupancy and rents.
PORTFOLIO
Maximising the value of our London-
based property portfolio and its wider
opportunities for repositioning and
redevelopment.
Owning properties that are tailored
to our customers’ needs
– Complete three further refurbishment
schemes with a fourth due to complete
in 2014.
– Commence three refurbishment schemes.
– Progress further schemes through
design phase.
– Focus on driving pricing as occupancy
approaches 90%.
Repositioning and redevelopment
– Obtain planning consent for The Biscuit
Factory, Poplar Business Park and
The Faircharm.
– Make planning applications for
three further schemes.
– Appoint development partners
for The Biscuit Factory and
The Faircharm.
– Successful refurbishments completed
– Planning consent for mixed use
at Exmouth House, Westminster
Business Square (Phase 1) and Pill
Box. All schemes letting up ahead
of our expectations.
– Phase 2 at Leyton Industrial Village
recently completed and Metal Box
Factory nearing completion.
– Hatton Square Business Centre, Barley
Mow Centre and Enterprise House have
progressed through the planning stage.
– Like-for-like occupancy at 90.0% with
like-for-like rent per sq. ft. growth up
8.5% in the year.
– Focus on driving pricing and rent roll.
– Continue our refurbishment
projects including completion of
Metal Box Factory.
– Progress with further potential
redevelopment/refurbishment projects.
– Continue with our targeted acquisitions
programme.
developments obtained for The Biscuit
Factory, Poplar Business Centre,
The Faircharm, The Filaments (Phase 2)
and Lombard House car park.
– Deals agreed with development partners
on three schemes: Grosvenor (The
Biscuit Factory), L&Q (The Faircharm)
and Peabody (Bow Enterprise Park
Phase 2).
– Make planning applications for four
– Roll out of Club Workspace at four further locations.
– Deliver on objectives within the Charity Strategy.
further schemes.
– Sell or appoint development partners
for newly consented schemes.
– Extend our telecoms and data product range.
– Develop and enhance our social media profile.
– Continue to ensure refurbishment and
redevelopment activity fits with our CSR strategy.
– Continue to invest in carbon reduction initiatives
and encouraging our customers to follow suit.
– Failure to meet customer space
and service expectations.
– External macroeconomic factors
influence the demand for our
accommodation.
– Adverse planning decisions.
– Construction cost and programme
over runs.
– Downturn in the London
property market.
– Failure to meet customer service expectations.
– Failure to meet regulatory environmental
– The performance of our selected digital partners.
requirements.
– Introduction of new requirements causing
additional costs or inhibiting lettings.
Workspace Group PLC Annual Report and Accounts 2014
17
Related information:
Principal business risks p.18
Business review p.26
STRATEGIC
PRIORITIES
PRIORITIES
IN 2013/14
PERFORMANCE
IN 2013/14
PROPERTIES
PORTFOLIO
Owning the right properties that are
tailored to our customers’ needs and
Maximising the value of our London-
based property portfolio and its wider
intensively managing these properties
opportunities for repositioning and
to drive occupancy and rents.
redevelopment.
Owning properties that are tailored
Repositioning and redevelopment
to our customers’ needs
– Obtain planning consent for The Biscuit
– Complete three further refurbishment
Factory, Poplar Business Park and
schemes with a fourth due to complete
The Faircharm.
in 2014.
– Make planning applications for
– Commence three refurbishment schemes.
three further schemes.
– Progress further schemes through
– Appoint development partners
– Focus on driving pricing as occupancy
The Faircharm.
for The Biscuit Factory and
design phase.
approaches 90%.
– Successful refurbishments completed
– Planning consent for mixed use
at Exmouth House, Westminster
Business Square (Phase 1) and Pill
Box. All schemes letting up ahead
of our expectations.
– Phase 2 at Leyton Industrial Village
recently completed and Metal Box
Factory nearing completion.
developments obtained for The Biscuit
Factory, Poplar Business Centre,
The Faircharm, The Filaments (Phase 2)
and Lombard House car park.
– Deals agreed with development partners
on three schemes: Grosvenor (The
Biscuit Factory), L&Q (The Faircharm)
– Hatton Square Business Centre, Barley
and Peabody (Bow Enterprise Park
Mow Centre and Enterprise House have
Phase 2).
progressed through the planning stage.
– Like-for-like occupancy at 90.0% with
like-for-like rent per sq. ft. growth up
8.5% in the year.
CUSTOMERS
Understanding our customers and enhancing
our brand by responding to their needs.
CSR
Working sustainably as part of everyday business
for us, our customers and our partners.
Enhancing our brand (responding to
customers’ needs)
– Continue the roll out and evolution of the
Club Workspace brand.
– Broaden the range of services offered under
our digital platform.
– Position Workspace as the preferred choice
for fast-growing businesses.
Sustainable working
– To develop a CSR policy for engaging with and
encouraging school leavers and graduates into
entrepreneurship.
– Demonstrate tangible savings in carbon emissions.
– Develop Charity Strategy.
– Club Workspace launched at Chancery Lane in
November 2013 and at Bethnal Green in March 2014.
Revenue growth in year of 52%.
– Growth in partnered provision of telecoms and
data services to customers, with the introduction
of Cloud products and services during the year.
Telecoms and data revenue has increased by 53%
in the year.
– Work undertaken with partners to enhance our
social media profile and presence.
– Refurbishment schemes continuing to achieve good
BREEAM scores (Building Research Establishment
Environmental Assessment Method).
– Continued liaison with customers in helping to
reduce our carbon emissions and investment
in energy-reducing equipment during the year.
– Workspace Charity Committee and Charity
Strategy established during the year.
PRIORITIES
FOR 2014/15
– Focus on driving pricing and rent roll.
– Make planning applications for four
– Continue our refurbishment
further schemes.
projects including completion of
– Sell or appoint development partners
– Roll out of Club Workspace at four further locations.
– Extend our telecoms and data product range.
– Develop and enhance our social media profile.
– Deliver on objectives within the Charity Strategy.
– Continue to ensure refurbishment and
redevelopment activity fits with our CSR strategy.
– Continue to invest in carbon reduction initiatives
and encouraging our customers to follow suit.
Metal Box Factory.
– Progress with further potential
redevelopment/refurbishment projects.
– Continue with our targeted acquisitions
programme.
for newly consented schemes.
KEY RISKS
– Failure to meet customer space
– Adverse planning decisions.
and service expectations.
– External macroeconomic factors
influence the demand for our
accommodation.
– Construction cost and programme
over runs.
– Downturn in the London
property market.
– Failure to meet customer service expectations.
– The performance of our selected digital partners.
– Failure to meet regulatory environmental
requirements.
– Introduction of new requirements causing
additional costs or inhibiting lettings.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 18 Workspace Group PLC Annual Report and Accounts 2014
PRINCIPAL BUSINESS RISKS
FOCUSED RISK
MANAGEMENT
The process we use to identify risks, assess their impact
and monitor their likelihood is considered in two parts:
1. STRATEGIC RISKS:
These are identified, assessed and managed by the
Main Board and Audit Committee. They are reviewed at
Board level to ensure they are valid, and they represent
the key risks associated with the current strategic
direction of the Group.
2. OPERATIONAL RISKS:
These are identified, assessed and managed by
Executive Committee Directors. These cover all
areas of the business, such as Finance, Operations,
Investment, Development and Corporate Risks.
The segregation between strategic and operational
risks ensures that risks related to our strategy and major
decisions are considered at Main Board level and that
our level of risk appetite remains appropriate. Day-
to-day operational risks are more closely reviewed
and managed by the Executive team and senior
management, with information being reported to
the Board and Audit Committee as appropriate.
Risk registers are owned and maintained by the
Main Board for strategic risks and by the Executive
Committee for operational risks. The absolute and net
levels of risk (taking into account mitigating controls)
are assessed using our Risk Management Policy to try
to ensure consistency of rating risk exposure. High-rated
risks identified in the registers are regularly reviewed by
the Board, Audit and Executive Committees.
Details of our principal strategic risks and the mitigating
activities in place to reduce these risks are set out on
the following pages. The Board are satisfied that we
continue to operate within our risk appetite.
ORGANISATIONAL STRUCTURE
MAIN BOARD AND AUDIT COMMITTEE
EXECUTIVE COMMITTEE
CEO
CFO
DEVELOPMENT
DIRECTOR
OPERATIONS
DIRECTOR
RISK COMMITTEE
INTERNAL POLICY, PROCEDURE AND CONTROLS
REVIEW OF KEY PERFORMANCE INDICATORS
AND MANAGEMENT REPORTS
SUPPORTED BY MANAGEMENT AND STAFF
Risk management continues to be an integral part
of our activities and the day-to-day running of the
business. Risks are considered at every business level
and are assessed, discussed and taken into account
when deciding upon future strategy, approving
transactions and monitoring performance.
We have a Risk Committee in place to co-ordinate the
risk management activities throughout the Group and
also to assist with reporting to the Board and Audit
Committee. The Risk Committee comprises the Chief
Executive Officer, the Operations Director and Company
Secretary alongside some senior managers. It also
includes rolling representation from various areas across
the business to help ensure that lower level issues and
risks across all areas of the business are captured and
reported as appropriate.
Workspace Group PLC Annual Report and Accounts 2014
19
RISK
CHANGE
MITIGATING ACTIVITIES
RISK AREA:
FINANCING
Reduced availability and cost of
bank financing resulting in inability
to meet business plans or satisfy
liabilities.
REDUCED
STRATEGIC
LINK
Property
Portfolio
Funding requirements for business plans are reviewed
regularly and options for alternative sources of funding
monitored.
A broad range of funding relationships maintained
and refinancing strategy reviewed regularly.
Interest rate hedging policy in place to minimise
exposure to short-term rate fluctuations.
Examples of actions undertaken in 2013/14:
– Refinancing of all debt facilities to an unsecured basis.
– Reduced reliance on bank funding.
– Extended maturity profile to an average of
seven years.
RISK AREA:
PROPERTY VALUATION
Value of our properties declining
as a result of macroeconomic
environment, external market, or
internal management factors.
ACT Deal of the Year Award – Loans below £750m
Workspace won this award for achieving an unsecured
refinancing of their debt from a combination of bank debt
and capital markets funding.
NO CHANGE
Investment market mood monitoring.
STRATEGIC
LINK
Property
Portfolio
Market yields and pricing of property transactions
monitored closely across the London market.
Alternative use opportunities pursued across the
portfolio and planning consent progressed.
Examples of actions undertaken in 2013/14:
– Unsecured facilities give more flexibility to address
covenant requirements.
– Maximised value of The Biscuit Factory
(pictured below).
RISK AREA:
OCCUPANCY
Demand by businesses for our
accommodation declining as
a result of social, economic or
competitive factors.
NO CHANGE Weekly senior management monitoring of occupancy levels,
pricing demand levels and reasons for customers vacating.
STRATEGIC
LINK
Property
Customer
Extensive marketing using the Workspace brand.
Flexibility offered on deals by dedicated in-house
marketing and letting teams.
Increased social media marketing (pictured below).
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77
20 Workspace Group PLC Annual Report and Accounts 2014
PRINCIPAL BUSINESS RISKS
CONTINUED
RISK
CHANGE
MITIGATING ACTIVITIES
RISK AREA:
DEVELOPMENT
Impact to underlying income
and capital performance due to:
– Adverse planning rulings.
– Construction cost and
timing overrun.
– Lack of demand for
developments.
REDUCED
STRATEGIC
LINK
Property
Portfolio
Customer
CSR
Understanding of planning environment and use of
appropriate advisers.
Detailed standardised development analysis and
appraisal undertaken, sensitivity and risk scenarios
considered.
Board level discussion and approval prior to
project commitment.
Contract structuring to reduce/eliminate build risk.
Regular detailed monitoring of progress against plans
at Board level including post completion reviews.
ScreenWorks
Management level monitoring of ongoing developments, such
as ScreenWorks, to ensure delivery to schedule and budget.
We also monitor the letting performance of refurbishments
once completed on a weekly basis, looking at occupancy
levels, pricing of deals completed and the pipeline of deals.
RISK AREA:
LONDON
Changes in the political,
infrastructure and environmental
dynamics of London lead to
reduced demand for space
from businesses.
RISK AREA:
INVESTMENT
Underperformance due to
inappropriate strategy of:
– Timing of disposal decisions.
– Acquisitions timing.
– Non-achievement of
expected returns.
NO CHANGE Regular monitoring of the London economy, research
reports and the commissioning of research.
STRATEGIC
LINK
Portfolio
Customer
REDUCED
STRATEGIC
LINK
Property
Portfolio
Customer
CSR
Regular meetings with the GLA and London Boroughs.
Regular monitoring of asset performance and
positioning of portfolio.
Acquisition due diligence appraisal and business
plans analysis.
Regular monitoring of acquisition performance
against target returns.
Example of actions undertaken in 2013/14:
– Board level review and approval of targeted
non-core disposals undertaken during the year.
60 Gray’s Inn Road
Detailed review, due diligence and approval of the acquisition
of 60 Gray’s Inn Road to ensure it represents a good return
and is consistent with our strategy.
Workspace Group PLC Annual Report and Accounts 2014
21
RISK
CHANGE
MITIGATING ACTIVITIES
RISK AREA:
TRANSACTIONAL
Joint ventures or other ventures
with third parties do not deliver
the expected return.
RISK AREA:
REGULATORY
Failure to meet regulatory
requirements leading to fines
or penalties or the introduction
of new requirements that
inhibit activity.
RISK AREA:
BUSINESS INTERRUPTION
Major external events result
in Workspace being unable
to carry out its business for
a sustained period.
RISK AREA:
REPUTATIONAL
Failure to meet customer and
external stakeholder expectations.
NO CHANGE Due diligence on potential joint venture partners.
Requirements for business plans are reviewed regularly.
Regular review of performance of joint ventures.
STRATEGIC
LINK
Customer
NO CHANGE REIT conditions monitored and tested on a regular basis
and reported to the Board.
STRATEGIC
LINK
CSR
Close working relationship maintained with appropriate
authorities and all relevant issues openly disclosed.
Advisers engaged to support best practice operation.
The Risk Committee provides regular updates to the
Board on emerging risks and issues.
The Group employs a health and safety manager.
The Company’s policies include the Bribery Act, Health
and Safety, and whistleblowing.
NO CHANGE Monitoring security threat/target information.
Business continuity plans and procedures in place.
STRATEGIC
LINK
Property
CSR
REDUCED
Customer survey undertaken and results acted upon.
STRATEGIC
LINK
Customer
CSR
Training and mystery shopper initiatives undertaken.
Regular communication with stakeholders, Investor Day
presentations and Investor Roadshows.
Continual monitoring of social media channels.
Example of actions undertaken in 2013/14:
– Investor Day held in October 2013.
UK Stock Market Award – Best Real Estate PLC
On 27 March 2014, in recognition of the value the Company
creates for its shareholders, Workspace won the ‘Best Real
Estate PLC’ at the UK Stock Market Awards hosted by MSM
Media in association with KPMG.
1,000 companies to
inspire Britain
Jamie Hopkins pictured at
the launch at the London
Stock Exchange.
Crowdfunding
Industry Report
Sponsoring research into
alternative funding for small
and growing businesses.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77
22 Workspace Group PLC Annual Report and Accounts 2014
CORPORATE SOCIAL RESPONSIBILITY
AT THE HEART
OF THE BUSINESS
We are proud to once again be included in the
FTSE4Good Index which helps us assess our
achievements against a transparent and evolving
global corporate responsibility standard.
OUR APPROACH
PERFORMANCE HIGHLIGHTS 2013/14
TARGETS FOR 2014/15
CUSTOMERS (EXISTING)
Customer satisfaction and loyalty are key to the
sustainability of our business.
We help our customers to connect with local
communities by participating in our community
programmes and working with them to improve
the environmental performance of our centres.
– We achieved a score of 78% in our 2013/14 customer
experience survey.
– Several energy saving poster campaigns were
designed and circulated to centres during the year.
Posters identify the key areas of tenant energy
usage and how tenants can reduce consumption.
– Centre Managers encouraged responsible energy
usage through their tenant newsletters.
SUPPLIERS AND PARTNERS
We aim to build long-term relationships with our
suppliers by being a responsible purchaser of
goods and services.
We also work closely with our partners to integrate
sustainability into the design, construction and
redevelopment of Workspace centres.
– The Mayor’s Green Procurement Code is now
discontinued but we continue to work within
its guidelines.
– All new construction projects require measures
on materials, waste and consideration for the
local community.
– All new developments over 2,000m2 now registered
for the Considerate Constructors Scheme.
– Approved signatory of prompt payment code.
Gaining vital feedback on
areas for improvement
The Workspace brand has
evolved to ensure that we put
the customer at the heart of
everything we do. To help us
achieve this we survey our
customers’ experience of
Workspace annually and use
the feedback to help us
improve and respond to their
needs. All staff are appraised
so that their performance is
linked to a positive customer
experience in their centres.
– Undertake a workplace and wellbeing review,
based on a survey of selected customers in
Workspace buildings.
– Launch ‘Partnered Customers’ initiative at
flagship sites.
– Create a customer focused sustainability marketing
factsheet for selected assets.
– Create a customer engagement action plan which
identifies opportunities to engage with customers
and the information to be communicated.
– Demonstrate how Workspace’s property portfolio
contributes to tenant employee productivity.
– Continue to communicate energy saving ideas
to customers.
– Achieve a minimum Considerate Constructors score
of 35 for all relevant projects.
– Divert at least 75% (weight) of non-hazardous
demolition waste from landfill for all developments
and refurbishments.
– On all buildings, procure green electricity tariffs to
cover 90% of our total energy consumption.
Registering all major
developments with the
Considerate Constructors
Scheme
A prime requirement on
Workspace construction
projects over 2,000m2 is that
principal contractors are fully
registered under the
Considerate Constructors
Scheme. As an example, the
mixed-use redevelopment of
our Highbury site including
our new ScreenWorks
business centre has been
demonstrating compliance
scores of ‘very good’ and
‘excellent’, supporting
sustainability target
agreements established
with our development
partners and suppliers.
Workspace Group PLC Annual Report and Accounts 2014
23
We have long understood the value that a focused
Corporate Social Responsibility (CSR) programme can
create for Workspace, delivering operational efficiencies
in the process and contributing to our reputation as a
responsible business. We believe our CSR activities
benefit financial performance by driving occupancy
rates, delivering cost savings and creating a more
attractive business environment for our customers.
SUMMARY 2013/14 HIGHLIGHTS
– We are particularly pleased that we have extended
our community investment strategy from E3 to E5.
– We achieved a score of 78% in our 2013/14 customer
experience survey.
– All new construction projects require measures
on materials, waste and consideration for the
local community.
– A Charitable Strategy has been put in place.
– We developed ongoing training and development
programmes to develop the right skills for our
expansion plans.
More detail on our CSR activities in 2013/14, including
our performance against EPRA sustainability indicators,
is available at www.workspace.co.uk.
JAMIE HOPKINS
CHIEF EXECUTIVE OFFICER
TARGETS FOR 2014/15
Jamie Hopkins introducing Workspace’s charity
event with Kids Company in November 2013.
Gaining vital feedback on
areas for improvement
The Workspace brand has
evolved to ensure that we put
the customer at the heart of
everything we do. To help us
achieve this we survey our
customers’ experience of
Workspace annually and use
the feedback to help us
improve and respond to their
needs. All staff are appraised
so that their performance is
linked to a positive customer
experience in their centres.
– Undertake a workplace and wellbeing review,
based on a survey of selected customers in
Workspace buildings.
– Launch ‘Partnered Customers’ initiative at
flagship sites.
– Create a customer focused sustainability marketing
factsheet for selected assets.
– Create a customer engagement action plan which
identifies opportunities to engage with customers
and the information to be communicated.
– Demonstrate how Workspace’s property portfolio
contributes to tenant employee productivity.
– Continue to communicate energy saving ideas
to customers.
– Achieve a minimum Considerate Constructors score
of 35 for all relevant projects.
– Divert at least 75% (weight) of non-hazardous
demolition waste from landfill for all developments
and refurbishments.
– On all buildings, procure green electricity tariffs to
cover 90% of our total energy consumption.
Registering all major
developments with the
Considerate Constructors
Scheme
A prime requirement on
Workspace construction
projects over 2,000m2 is that
principal contractors are fully
registered under the
Considerate Constructors
Scheme. As an example, the
mixed-use redevelopment of
our Highbury site including
our new ScreenWorks
business centre has been
demonstrating compliance
scores of ‘very good’ and
‘excellent’, supporting
sustainability target
agreements established
with our development
partners and suppliers.
OUR APPROACH
PERFORMANCE HIGHLIGHTS 2013/14
CUSTOMERS (EXISTING)
– We achieved a score of 78% in our 2013/14 customer
Customer satisfaction and loyalty are key to the
experience survey.
sustainability of our business.
We help our customers to connect with local
communities by participating in our community
programmes and working with them to improve
the environmental performance of our centres.
– Several energy saving poster campaigns were
designed and circulated to centres during the year.
Posters identify the key areas of tenant energy
usage and how tenants can reduce consumption.
– Centre Managers encouraged responsible energy
usage through their tenant newsletters.
SUPPLIERS AND PARTNERS
We aim to build long-term relationships with our
suppliers by being a responsible purchaser of
goods and services.
We also work closely with our partners to integrate
sustainability into the design, construction and
redevelopment of Workspace centres.
– The Mayor’s Green Procurement Code is now
discontinued but we continue to work within
its guidelines.
– All new construction projects require measures
on materials, waste and consideration for the
local community.
– All new developments over 2,000m2 now registered
for the Considerate Constructors Scheme.
– Approved signatory of prompt payment code.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77
24 Workspace Group PLC Annual Report and Accounts 2014
CORPORATE SOCIAL RESPONSIBILITY
CONTINUED
OUR APPROACH
PERFORMANCE HIGHLIGHTS 2013/14
TARGETS FOR 2014/15
COMMUNITIES
We aim to make the communities in which we
operate better places to live and do business in.
Our flagship E5 community investment strategy
supports education, employment, enjoyment,
entrepreneurial and environmental initiatives
in the communities that we reside.
– New strategy in place for all our social and
charitable support schemes.
– Moving from E3 to E5 community programme.
– Through staff engagement, we are partnering
with a number of charities including Kids Company,
FareShare and XLP.
– Newly formed Charity Committee appointed
to ensure consistency and transparency in all
charitable and community initiatives.
– We have provided assistance to a number of
charitable organisations in the UK in the form
of either reduced rent or free accommodation.
EMPLOYEES
We provide a safe and rewarding work environment
to ensure we attract and retain talented and
ambitious individuals.
Our commitment to diversity encourages innovation
and ensures our workforce reflects the diversity of
our customers and communities.
Gender split on PLC Board
Male: 6
Gender split of entire workforce
Female: 1
– 381 training days completed by 118 staff to help
develop the right skills for our expansion plans.
– Delivering presentations to employees to ensure
they understand the strategy of the business
and the part they play.
– New appraisal process to ensure that employees
understand how their objectives assist in driving
the business performance.
– Introduced a Share Incentive Plan.
– Continued to offer Sharesave Scheme to employees.
– Staff engagement at the core of our new strategy
for social and charitable support.
– Investors in People reaccreditation achieved for
Male: 54%
Female: 46%
the 10th year.
– We have judged that human rights are not a
material risk for the business due to existing
regulatory requirements in the UK.
– Total energy consumption down 4%, on course
to reach our target of reducing consumption by
8% between March 2013 and March 2015.
– Total greenhouse gas (GHG) emissions down
2.9% in the year.
– 51% of total waste was recycled with zero waste
sent direct to landfill.
– We recorded water consumption on 62 assets.
– We achieved BREEAM ‘very good’ on our Pill Box
development which completed this year.
– Efficient energy usage at our new head office
building, Chester House. In 2013/14 we used 176
kWhe/NLA/PA compared to the good practice
standard of 223 kWhe/NLA/PA (JLL Real Estate
Environmental Benchmark).
ENVIRONMENT
Our buildings are our biggest environmental impact
and we are committed to making the most of
opportunities to reduce carbon emissions and
energy use, benefiting the environment and
reducing operating costs.
We strive to reduce other environmental impacts
and costs such as waste.
Greenhouse gas emissions
Overall GHG emissions across the portfolio have decreased
by 2.9% this financial year. On a like-for-like basis energy
consumption, which accounts for approximately 98%
of our total carbon emissions, has decreased by 3.6%.
This can be mainly attributed to a portfolio-wide improvement
of building management systems, and a milder winter.
More information can be found in the Report of the Directors
on page 73.
Supporting London
For the month of March,
Workspace funded the cost
of four refrigerated FareShare
vans and 12 staff volunteered
for a total of 96 hours to help:
– Distribute 143,000 meals
to over 150 London-
based charities.
Continue to deliver the E5 strategy:
– Increasing the provision of business space to certain
charities nominated in 2014/15.
– Record, report and reward all CSR/charity initiatives
taking place across the Company.
– In collaboration with BiTC and the GLA, deliver
‘InspiresMe’ work placements for local youths.
– Our employees will continue to give their time and
– Feed 7,250 vulnerable people
energy to support charitable events.
– Evaluate the socio-economic impact of a completed
Workspace development by March 2015.
each day across London.
– Save 52 tonnes of food
from going to waste.
– Prevent 26 tonnes of
harmful CO2 emissions.
Introducing a new
appraisal process
A new simpler process was
introduced to help foster
open and honest dialogue
between manager and team
member. Regular appraisals
provide an opportunity to
review performance and set
objectives as well as reward
high-performance employees
in the form of a higher bonus.
Team managers’ and
members’ objectives are now
aligned and it is understood
how collectively they help
drive business performance.
Achieving BREEAM
accreditation
A key Workspace
sustainability target is to
achieve BREEAM Very Good
status as a minimum on
redevelopment and major
refurbishment schemes
over 2,000m2.
Pill Box, our latest completed
refit project, has attained this
with an overall design stage
score of 60.3% covering
categories including energy
management, transport,
construction materials,
waste, land use and ecology.
– Continue training and development.
– Increase Director-led staff briefings in all
business locations.
– Updating our equal opportunities policy.
– Encourage staff to participate in E5 strategy.
Continue to deliver the E5 strategy:
– Support at least 160 hours of staff volunteering
events throughout the year.
– Actively encourage staff to take part in events,
sporting challenges and adventures to fundraise
for our nominated charities.
– Achieve an average recycling rate of 57% across
all assets where Workspace manages waste.
– Develop and implement a customer waste engagement
strategy which will include the conduct of recycling
audits and providing feedback to customers.
– Monitor 2014/15 water consumption and investigate
water efficiency opportunities with a view to setting
a 2015/16 reduction target in April 2015.
– Set energy reduction targets for our ten buildings that
consume the most energy (the ten buildings represent
50% of total energy consumption across the portfolio)
to assist the achievement of the portfolio reduction
target which finishes in March 2015.
– Undertake a portfolio risk review looking at Energy
Performance Certificate (‘EPC’) ratings and
opportunities to improve them.
– Review the opportunities across the portfolio for
renewable energy initiatives and create an action
plan for implementation by March 2016.
– Achieve an 8% reduction in energy between
March 2013 and March 2015.
– Create an action plan to improve scores in
external industry benchmarks following a review
of 2013/14 performance.
OUR APPROACH
PERFORMANCE HIGHLIGHTS 2013/14
TARGETS FOR 2014/15
Workspace Group PLC Annual Report and Accounts 2014
25
– New strategy in place for all our social and
charitable support schemes.
– Moving from E3 to E5 community programme.
– Through staff engagement, we are partnering
with a number of charities including Kids Company,
FareShare and XLP.
– Newly formed Charity Committee appointed
to ensure consistency and transparency in all
charitable and community initiatives.
– We have provided assistance to a number of
charitable organisations in the UK in the form
of either reduced rent or free accommodation.
– 381 training days completed by 118 staff to help
develop the right skills for our expansion plans.
– Delivering presentations to employees to ensure
they understand the strategy of the business
and the part they play.
– New appraisal process to ensure that employees
understand how their objectives assist in driving
the business performance.
– Introduced a Share Incentive Plan.
– Continued to offer Sharesave Scheme to employees.
– Staff engagement at the core of our new strategy
for social and charitable support.
– Investors in People reaccreditation achieved for
the 10th year.
– We have judged that human rights are not a
material risk for the business due to existing
regulatory requirements in the UK.
– Total energy consumption down 4%, on course
to reach our target of reducing consumption by
8% between March 2013 and March 2015.
– Total greenhouse gas (GHG) emissions down
– 51% of total waste was recycled with zero waste
2.9% in the year.
sent direct to landfill.
– We recorded water consumption on 62 assets.
– We achieved BREEAM ‘very good’ on our Pill Box
development which completed this year.
– Efficient energy usage at our new head office
building, Chester House. In 2013/14 we used 176
kWhe/NLA/PA compared to the good practice
standard of 223 kWhe/NLA/PA (JLL Real Estate
Environmental Benchmark).
COMMUNITIES
We aim to make the communities in which we
operate better places to live and do business in.
Our flagship E5 community investment strategy
supports education, employment, enjoyment,
entrepreneurial and environmental initiatives
in the communities that we reside.
EMPLOYEES
We provide a safe and rewarding work environment
to ensure we attract and retain talented and
ambitious individuals.
Our commitment to diversity encourages innovation
and ensures our workforce reflects the diversity of
our customers and communities.
ENVIRONMENT
Our buildings are our biggest environmental impact
and we are committed to making the most of
opportunities to reduce carbon emissions and
energy use, benefiting the environment and
reducing operating costs.
We strive to reduce other environmental impacts
and costs such as waste.
Greenhouse gas emissions
Overall GHG emissions across the portfolio have decreased
by 2.9% this financial year. On a like-for-like basis energy
consumption, which accounts for approximately 98%
of our total carbon emissions, has decreased by 3.6%.
This can be mainly attributed to a portfolio-wide improvement
of building management systems, and a milder winter.
More information can be found in the Report of the Directors
on page 73.
Supporting London
For the month of March,
Workspace funded the cost
of four refrigerated FareShare
vans and 12 staff volunteered
for a total of 96 hours to help:
– Distribute 143,000 meals
to over 150 London-
based charities.
Continue to deliver the E5 strategy:
– Increasing the provision of business space to certain
charities nominated in 2014/15.
– Record, report and reward all CSR/charity initiatives
taking place across the Company.
– In collaboration with BiTC and the GLA, deliver
‘InspiresMe’ work placements for local youths.
– Our employees will continue to give their time and
– Feed 7,250 vulnerable people
energy to support charitable events.
each day across London.
– Save 52 tonnes of food
from going to waste.
– Prevent 26 tonnes of
harmful CO2 emissions.
Introducing a new
appraisal process
A new simpler process was
introduced to help foster
open and honest dialogue
between manager and team
member. Regular appraisals
provide an opportunity to
review performance and set
objectives as well as reward
high-performance employees
in the form of a higher bonus.
Team managers’ and
members’ objectives are now
aligned and it is understood
how collectively they help
drive business performance.
Achieving BREEAM
accreditation
A key Workspace
sustainability target is to
achieve BREEAM Very Good
status as a minimum on
redevelopment and major
refurbishment schemes
over 2,000m2.
Pill Box, our latest completed
refit project, has attained this
with an overall design stage
score of 60.3% covering
categories including energy
management, transport,
construction materials,
waste, land use and ecology.
– Evaluate the socio-economic impact of a completed
Workspace development by March 2015.
– Continue training and development.
– Increase Director-led staff briefings in all
business locations.
– Updating our equal opportunities policy.
– Encourage staff to participate in E5 strategy.
Continue to deliver the E5 strategy:
– Support at least 160 hours of staff volunteering
events throughout the year.
– Actively encourage staff to take part in events,
sporting challenges and adventures to fundraise
for our nominated charities.
– Achieve an average recycling rate of 57% across
all assets where Workspace manages waste.
– Develop and implement a customer waste engagement
strategy which will include the conduct of recycling
audits and providing feedback to customers.
– Monitor 2014/15 water consumption and investigate
water efficiency opportunities with a view to setting
a 2015/16 reduction target in April 2015.
– Set energy reduction targets for our ten buildings that
consume the most energy (the ten buildings represent
50% of total energy consumption across the portfolio)
to assist the achievement of the portfolio reduction
target which finishes in March 2015.
– Undertake a portfolio risk review looking at Energy
Performance Certificate (‘EPC’) ratings and
opportunities to improve them.
– Review the opportunities across the portfolio for
renewable energy initiatives and create an action
plan for implementation by March 2016.
– Achieve an 8% reduction in energy between
March 2013 and March 2015.
– Create an action plan to improve scores in
external industry benchmarks following a review
of 2013/14 performance.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77
26 Workspace Group PLC Annual Report and Accounts 2014
BUSINESS REVIEW
PERFORMANCE
OCCUPANCY AND RENT PER SQ. FT.
LIKE-FOR-LIKE PORTFOLIO
90.8
90.2
89.8
£14.21
£14.44
£14.08
90.6
90.0
£14.72
£15.28
Mar
2013
June
2013
Sep
2013
Dec
2013
Mar
2014
Rent per sq. ft.
Occupancy
The like-for-like property portfolio, which
excludes properties impacted by refurbishment or
redevelopment, has seen good growth over the year
reflecting the strength of demand from both existing
and new customers for space at our properties.
Like-for-like occupancy is stable at around 90% with
good growth in rental pricing from both renewals and
new lettings. Rent per sq. ft. is up 8.5% since March
2013 to £15.28. This increase in pricing has delivered
a similar strong growth in like-for-like rent roll of 8.5%
(£3.7m) to £47.4m over the year. See table 1.
The majority of the rent roll in the like-for-like portfolio
comes from our office properties where demand has
been particularly strong with rent roll growing by 10% to
£37.7m (with rent per sq. ft. up 9.6%) compared to 3%
growth in rent at our industrials (rent per sq. ft. up 3.9%).
Table 1:
Like-for-like properties
Number of properties
Occupancy
Rent roll
Rent per sq. ft.
March 2014
Number
Occupancy
Rent roll
Rent per sq. ft.
Offices
Industrials
38
89.2%
£37.7m
£19.24
25
91.2%
£9.7m
£8.50
In the next phase of our refurbishment and
redevelopment activity in the current financial year, six
properties with rent roll of £7.6m will be transferred out
of the like-for-like category. This comprises five planned
refurbishments at Hatton Square Business Centre,
Barley Mow Centre, Enterprise House, Linton House
and Bounds Green Industrial Estate and one mixed-use
redevelopment at Poplar Business Park. Prior year
like-for-like comparatives will be restated in due course.
CLERKENWELL WORKSHOPS, EC1
16% rent roll growth in year
Mar
2014
Dec
2013
Sep
2013
June
2013
Mar
2013
63
90.6%
63
63
63
89.8%
90.8%
90.0%
£47.4m £46.2m £45.4m £44.7m £43.7m
£14.08
£14.44
£15.28
63
90.2%
£14.72
£14.21
Workspace Group PLC Annual Report and Accounts 2014
27
COMPLETED PROJECTS
We have completed seven refurbishments over
the last 18 months at a total cost of £27m providing
some 120,000 sq. ft. of upgraded space and
90,000 sq. ft. of new space. This has delivered
a £2.6m uplift in rent roll in the year to £5.9m
at March 2014 as detailed in table 2.
The most recent project completed was the 50,000
sq. ft. refurbishment of Pill Box, E2. This was an
18 month project which completed in February 2014
at a total cost of £8.7m. Letting progress to date at
Pill Box has been well ahead of our expectations
in terms of both demand and pricing. Occupancy
reached 32% by the end of April 2014 at an average
rent per sq. ft. of £26 compared to our initial
expectation of £22.
Assuming all these completed schemes were at
90% occupancy (although some are already higher)
the rent roll at current estimated rents would be
£7.2m, a further uplift of £1.3m on the rent roll at
March 2014.
Table 2:
Canalot Studios (Completed September 2012)
Chester House, Kennington Park (Completed April 2013)
Leyton Industrial Village Phase 1 (Completed April 2013)
Whitechapel Technology Centre (Completed April 2013)
Exmouth House (Completed September 2013)
Westminster Business Square Phase 1 (Completed September 2013)
Pill Box (Completed February 2014)
Total
Rent
uplift
in year
March
2014
occupancy
£0.5m
84.7%
£0.4m 100.0%
83.0%
£0.3m
84.0%
£0.2m
90.0%
£0.8m
97.4%
£0.1m
25.8%
£0.3m
£2.6m
80.8%
LEYTON INDUSTRIAL VILLAGE, E10
Occupancy of 83.0%
CANALOT STUDIOS, W10
Occupancy of 84.7%
KINGS
CROSS
SHOREDITCH
FARRINGDON
OLD
STREET
PILL BOX, E2
Occupancy of 25.8%
STRATFORD
PADDINGTON
EXMOUTH HOUSE, EC1
Occupancy of 90.0%
WEST
END
THE
CITY
WHITECHAPEL TECHNOLOGY CENTRE, E1
Occupancy of 84.0%
LONDON
BRIDGE
WATERLOO
CANARY
WHARF
EARLS COURT
VICTORIA
WESTMINSTER BUSINESS SQUARE, SE11
Occupancy of 97.4%
BATTERSEA
CHESTER HOUSE, SW9
Occupancy of 100.0%
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 28 Workspace Group PLC Annual Report and Accounts 2014
BUSINESS REVIEW
CONTINUED
TOTAL PORTFOLIO
Overall occupancy was 85.8% at March 2014 (March
2013: 87.0%). Total rent roll has increased over the year
by £5.6m (10.6%) to £58.3m (March 2013: £52.7m) as
detailed below:
Rent roll at 31 March 2013
Like-for-like portfolio
Completed projects
Refurbishments and redevelopments
Acquisition
Disposals
Rent roll at 31 March 2014
£m
52.7
3.7
2.6
(0.7)
1.1
(1.1)
58.3
Rent roll growth from the like-for-like portfolio and
completed projects of £6.3m in total was offset
by a loss of rent of £0.7m from refurbishment and
redevelopment projects. The majority of the rent
reduction was at The Biscuit Factory (part) and The
Faircharm where we are running down occupancy to
achieve vacant possession ahead of redevelopment.
The acquisition of Verulam House (‘60 Gray’s Inn
Road’) in November 2013 has added £1.1m to the rent
roll; offset by a similar loss of rent of £1.1m from four
non-core disposals completed in the year.
Total contracted rent roll, which includes stepped rents
and rent free periods, was £1.9m more than the cash
rent roll at £60.2m. Of this uplift in rent 63% (£1.2m) is
expected to convert to cash rent roll over the next year.
PILL BOX, E2
ENQUIRIES AND LETTINGS
Our enquiries are an important indicator of the health
of demand in London from new and growing companies
looking for business space. Enquiry levels over the year
have been consistently high at around 1,000 per month
(excluding the seasonal dip in December) reflecting the
robust strength of customer demand.
Lettings are running at an average of 85 per month
(2013: 84 per month). Lettings in the final quarter of the
year increased to an average of 103 per month, which
included 37 deals at Pill Box following its opening in
February 2014. Continued high levels of enquiries and
lettings are being seen in the first quarter of the current
financial year.
Average number
per month
Enquiries
Lettings
March
2014
1,292
103
Quarter Ended
Dec
2013
917
80
Sept
2013
1,010
84
June
2013
1,033
74
PROFIT PERFORMANCE
Adjusted Trading Profit after Interest for the year is
£20.5m, up 14.5% compared to the prior year. This
excludes the exceptional finance costs of £1.9m
associated with the refinancing of debt facilities
completed in July 2013.
£m
Net rental income – underlying
Net rental income – disposals
Joint venture income
31 March
2014
31 March
2013
50.0
0.3
1.1
45.6
1.5
1.1
Administrative expenses –
underlying
Administrative expenses –
share related incentives
Net finance costs (excluding
exceptional finance costs)
Adjusted Trading Profit
after Interest
(9.9)
(9.2)
(2.5)
(1.8)
(18.5)
(19.3)
20.5
17.9
Total rent roll
Trading profit
£58.3m
+14.5%
Workspace Group PLC Annual Report and Accounts 2014
29
TRADING PROFIT AFTER INTEREST
Profit before tax has increased by 230% (£176.1m) in the
year to £252.5m.
3.3
17.9
1.6
(0.8)
0.3
(1.2)
(1.4)
0.8
20.5
£m
Adjusted Trading Profit
after Interest
Exceptional finance costs
Change in fair value of
investment properties
Other Items
March
2013
Like-
for-like
Income
Com-
pleted
projects
Refurb/
redevel-
opment
Acquis-
itions
Disposals
Admin
Expenses
Interest
Costs
March
2014
Profit before tax
Underlying net rental income, excluding disposals was
up £4.4m (9.6%) for the year at £50.0m. This reflects
income growth of £3.3m (9%) at like-for-like properties
and growth of £1.6m from completed refurbishments.
This growth is partly offset by a reduction of £0.8m in
income from properties undergoing refurbishment and
redevelopment. The acquisition of 60 Gray’s Inn Road
in November 2013 has contributed £0.3m to underlying
net rental income in the year.
The reduction in net rental income from disposals of
£1.2m relates to four non-core property disposals made
during the current year and the five disposals made in
the prior year.
Joint venture (JV) income represents our 20.1% share of
net rental income from the properties in the BlackRock
Workspace JV. The portfolio comprised of 14 properties
with a rent roll of £6.4m at March 2014.
Underlying administrative expenses have increased by
£0.7m (8%) in the year due to an increase in head office
headcount by six to support the growth of the business
and salary increases averaging 3%.
Share related incentive costs have increased by £0.7m
(39%) due to higher than expected vesting levels as a
result of the strong share price performance.
Net finance costs, excluding exceptional costs, have
reduced by £0.8m year on year. The average level
of debt (excluding cash) over the year was £332m
(2013: £338m) and average interest cost excluding
amortisation costs was 5.3% (2013: 5.0%). The running
cost of debt at April 2014 was 5.1%.
31 March
2014
31 March
2013
20.5
(1.9)
17.9
–
221.9
12.0
252.5
59.0
(0.5)
76.4
13.9p
7.9p
12.2p
12.2p
Adjusted underlying
earnings per share
EPRA earnings per share
The exceptional finance costs of £1.9m relate to the
write off of unamortised costs on bank facilities that
have now been refinanced.
The change in fair value of investment properties
of £221.9m reflects the movement in the total CBRE
valuation in the year of £228.4m, but excludes the
movement in overage of £4.2m (reported within
other income), the movement in cash received on
part disposals of £1.5m and the revaluation gain
from the disposal of Pensbury of £0.8m in the second
half of the year (both of which are reported within
profit/(loss) on disposal of investment properties).
Other items include a £4.2m increase in the valuation
of expected overage at our redevelopments, a £2.2m
increase in the fair value of our derivative financial
instruments, profit on sale of investment properties of
£1.6m and our share of the increase in valuation and
property disposal profits relating to the BlackRock
Workspace JV of £4.0m.
Adjusted underlying diluted earnings per share, based
on the Adjusted Trading Profit after Interest is up 14%
to 13.9 pence (2013: 12.2 pence). EPRA earnings per
share of 7.9 pence is a reduction of 35% from the prior
year. This is due to the inclusion in the EPRA defined
EPS calculation of the Glebe proceeds share liability
of £11.0m and the increase in expected overage on
redevelopments of £4.2m.
DIVIDEND
The Board has proposed a final dividend of 7.09 pence
per share, (2013: 6.45 pence) which will be paid on
1 August 2014 to shareholders on the register at 11 July
2014. This dividend will be paid as a normal dividend
(non-PID). The total dividend for the year is 10.63 pence,
a 10% increase on the prior year (2013: 9.67 pence),
which is covered 1.3 times by underlying earnings
per share.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 30 Workspace Group PLC Annual Report and Accounts 2014
BUSINESS REVIEW
CONTINUED
PROPERTY VALUATION
At 31 March 2014 the wholly owned portfolio
was independently valued by CBRE at £1,078m, an
underlying increase of 27% (£228m) in the year, with
an increase of 14% (£132m) in the second half of the
year. The main movements in the valuation and
metrics over the year are set out below:
Valuation at 31 March 2013
Revaluation surpluses:
6 Months to September 2013
6 Months to March 2014
Capital expenditure
Acquisitions
Property Disposals
Capital Receipts
£m
830
96
132
32
19
(12)
(19)
Valuation at 31 March 2014
1,078
The £130m (23%) increase in value of the like-for-like
properties came from an uplift in rental pricing
(representing around 40% of the uplift) and a
tightening in valuation yields (representing around
60% of the uplift). Looking at these in turn:
– We have achieved strong growth in rent roll and
pricing levels, particularly at our office properties,
with rent per sq. ft. up 8.5% to £15.25 and estimated
rental value (ERV) per sq. ft. up 12.3% to £16.13.
– Net initial yield has tightened from 7.3% to 6.4%
in the year (with the equivalent yield moving from
8.1% to 7.2%) reflecting the strength of demand
and the investment we have made in upgrading the
quality of our properties (£9m capital expenditure
in the year). The capital value per sq. ft. of the
like-for-like portfolio is £205 (March 2013: £164).
The most significant uplifts in value of like-for-like
properties are detailed below, with the top eight
properties representing 55% of the total uplift:
PROPERTY VALUATION
132
1,078
Like-for-Like
Uplift in
Year
Rent Roll
Growth
March
2014 Net
Initial
Yield
830
(31)
32
19
96
March
2013
Disposals/
Receipts
Capital
expenditure
Acquisitions
H1
Revaluation
Surplus
H2
Revaluation
Surplus
March
2014
Total Portfolio
Net Initial Yield
Equivalent Yield
Capital Value per sq. ft.
31 March
2014
31 March
2013
6.2%
7.3%
£240
6.9%
8.1%
£177
Set out below is a summary of the valuation by
property type:
At March 2014
Like-for-like*
Redevelopments
Refurbishments
Acquisitions/Other
Total
No. of
properties
Revaluation
surplus
Valuation
62
9
8
4
83
£130m £692m
£73m £206m
£154m
£25m
£26m
£0m
£228m £1,078m
*
Excludes Poplar Business Park which has been transferred
to the redevelopment category.
Map reference
1. Enterprise House, SE1
2. Southbank House, SE1
3. Kennington Park, SW9
4. Clerkenwell Workshops, EC1
5. The Leathermarket, SE1
6. Barley Mow Centre, W4
7. Uplands Business Park, E17
8. Westbourne Studios, W10
40%
40%
35%
34%
26%
22%
22%
20%
11%
9%
4%
16%
9%
22%
4%
2%
5.4%
6.1%
6.2%
6.3%
6.5%
7.1%
7.0%
6.6%
The uplift in the value of our redevelopment properties
of £73m reflects the good progress we have made
in securing residential planning consents and the
strength of demand from residential developers for the
consented schemes. £51m (70%) of the uplift in the year
is from schemes that have been contracted for sale to
residential developers, these properties representing
£149m (72%) of the total redevelopment valuation.
The most notable uplifts in value are set out below:
Redevelopment
Map reference
9. The Biscuit Factory (part), SE16
10. Bow Enterprise Park, E3
11. Poplar Business Park, E14
12. The Faircharm, SE8
13. The Filaments, SW18
Other (4 properties)
Uplift in
Year
March 2014
Valuation
£31m
£12m
£11m
£7m
£5m
£7m
£58m
£24m
£32m
£16m
£24m
£52m
£73m £206m
Workspace Group PLC Annual Report and Accounts 2014
31
7
KINGS
CROSS
SHOREDITCH
8
PADDINGTON
WEST
END
15
4
FARRINGDON
OLD
STREET
16
THE
CITY
1
WATERLOO
14
LONDON
BRIDGE
5
STRATFORD
10
11
CANARY
WHARF
6
EARLS COURT
VICTORIA
2
9
3/17
12
BATTERSEA
13
Refurbishment properties saw an underlying uplift in
value of £25m with capital expenditure of £20m incurred
in the year. We are benefiting from the substantial investment
we are making in repositioning and expanding the amount
of space at these properties in locations where there is
increasingly strong demand. This demand has been reflected
in higher expected rents and tighter valuation yields. Of
the total valuation of refurbishments £101m (66%) relates
to the value of the seven completed schemes. A summary
of the most significant uplifts is set out below:
Workspace property
Redevelopments
Refurbishments
Crossrail
Northern Line Extension
Refurbishment
Map reference
14. Metal Box Factory, SE1
15. Exmouth House, EC1
16. Pill Box, E2
17. Chester House,
Kennington Park, SW9
Other (4 Properties)
Uplift in
Year
March 2014
Valuation
£7m
£7m
£5m
£5m
£1m
£25m
£37m
£27m
£16m
£16m
£58m
£154m
Related information:
Property listing p.121
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 32 Workspace Group PLC Annual Report and Accounts 2014
BUSINESS REVIEW
CONTINUED
ACQUISITIONS
In November 2013 we acquired 60 Gray’s Inn Road,
WC1 for £18.1m at a net initial yield of 4.3% off an
average rent of £26 per sq. ft. This prominent office
building offers 42,000 sq. ft. of net lettable space and
complements our existing cluster of buildings in the
Holborn/Clerkenwell area.
to book value at 31 March 2013, at a net initial yield of
7.6%. The non-core properties represent generally good
quality but small properties, primarily industrial estates,
where the opportunity for Workspace to add premium
operational or brand value is limited. The total value of
non-core properties at March 2014 was £53m (March
2013: £56m).
In April 2014 we acquired 12-13 Greville Street, EC1N for
£2.3m. This building is adjacent to our existing property
at 14 Greville Street and we are now progressing with
a planning application for a new business centre on
the combined site which will benefit greatly from the
opening of the new Crossrail station at Farringdon.
In May 2014 we completed on the purchase of Vestry
Street Studios, N1 for £12.6m at a net initial yield of 4.1%
off an average rent of £23 per sq. ft. This Shoreditch
warehouse of 23,000 sq. ft. complements our cluster
of buildings in the Old Street/Shoreditch area.
DISPOSALS
During the year we realised £12.4m from the disposal of
four non-core properties at a profit of £1.6m compared
METAL BOX FACTORY, SE1
Table 1:
Completing 2014/15
Metal Box Factory, SE1
Leyton Industrial Village (Phase 2), E10
Bounds Green Industrial Estate, N11
Enterprise House, SE1
Completing post 2014/15
Hatton Square Business Centre, EC1
Barley Mow Centre, W4
Linton House, SE1
Westminster Business Square (Phase 2), SE11
REFURBISHMENT ACTIVITY
We have invested £20m of capital expenditure on our
refurbishment programme over the year. Four projects
have been completed at Exmouth House, Pill Box,
and the first phases at Leyton Industrial Village and
Westminster Business Square. The level of capital
expenditure is expected to increase in 2014/15 as
we progress with the next phase of our pipeline,
as detailed in table 1.
The total estimated cost for current projects is £74m,
of which £13m had been incurred to the end of March
2014. A total of 200,000 sq. ft. of new space and
173,000 sq. ft. of upgraded space will be delivered from
these projects. Once these schemes are completed and
have reached 90% occupancy the rent roll would be
£14.8m at current estimated rents, an uplift of £6.7m
on the rent roll at March 2014.
REDEVELOPMENT ACTIVITY
Many of our properties are in areas across London
where there is strong demand for mixed use
redevelopment. These schemes generally require
demolition of an existing building to deliver new
residential and commercial space. Our model is to use
our expertise and knowledge to obtain a mixed use
planning consent at one of our properties and then
agree terms with a residential developer to undertake
the redevelopment and construction at no cost or risk
to Workspace. We receive back a combination of cash,
new commercial space and overage in return for the
sale of the residential component to the developer.
Project
cost
New Space
(sq. ft.)
Upgraded
Space
(sq. ft.)
Expected
Completion
£16m 20,000
£2m 21,000
£2m 15,000
–
£3m
82,000 Sept 2014
– May 2014
– Dec 2014
Jan 2015
61,000
£21m 64,000
£7m 20,000
£8m 16,000
£15m 44,000
– Oct 2016
Feb 2016
–
30,000 Oct 2015
– Dec 2015
£74m 200,000 173,000
Workspace Group PLC Annual Report and Accounts 2014
33
It has been a busy and successful year, highlights
include:
– Obtaining four mixed use planning consents at The
Biscuit Factory (May 2013), The Faircharm Phase 1
(May 2013), Poplar Business Park (September 2013),
and The Filaments Phase 2 (April 2014) for a total of
1,417 residential units.
– Agreeing the sale of five redevelopment schemes at
Bow Enterprise Park Phase 1 (April 2013), The Biscuit
Factory – part (October 2013), Lombard House car
park (December 2013), Bow Enterprise Park Phase 2
(April 2014) and The Faircharm Phase 1 (May 2014)
for a total of £84m in cash and the return of 112,000
sq. ft. of new business space (plus overage).
An overall summary of the redevelopment programme
is set out in table 2. It excludes a number of properties
where we are in active discussions with the relevant
local authorities for potential mixed use redevelopment
but do not yet have planning consent.
In total we will receive £95m of cash from the
redevelopment schemes that we have contracted
for sale. The timing of cash receipts is in many cases
dependent on when we obtain vacant possession or is
paid on a staged basis. £17m was received during the
last year, £42m is expected to be received in the current
financial year and the balance over the following two
financial years.
We will also receive 286,000 sq. ft. of new space on
the contracted for sale schemes where we would expect
to achieve rent roll of £5.4m, assuming 90% occupancy
and current estimated rents. We expect to receive
114,000 sq. ft. of this space in the current financial year
and the balance during 2015 to 2016. Current rent roll at
these properties at March 2014 prior to redevelopment
is £1.8m which will fall to £nil during redevelopment.
In a number of the sales we have overage clauses that
entitle Workspace to additional payments if private
residential sales exceed certain pre-agreed price levels.
As at March 2014 the expected cash proceeds from
overage was valued by CBRE at £5.8m.
CASH FLOW
The Group generates strong operating cash flow in
line with trading profit. We continue to see good levels
of cash collection with bad debts remaining low at
£0.3m (March 2013: £0.4m).
A summary of the movements in cash flow is set
out below:
Net cash from operations
Dividends paid
Capital expenditure
Property Acquisitions
Property disposals/capital receipts
Investment in joint ventures
Settlement and re-couponing of financial
derivatives
Release of secured bank facility accounts
Refinancing costs
Net movement in year
Net debt at 31 March 2013
Net debt at 31 March 2014
£m
26
(14)
(30)
(19)
29
2
(9)
7
(3)
(11)
(327)
(338)
KEY PERFORMANCE INDICATORS (KPIs)
The financial and non-financial KPIs that are used to
monitor the business are referenced throughout this
business review. These are summarised in the table
on page 120.
Table 2:
Contracted for sale
The Filaments (Phase 1), SW18
ScreenWorks, N5
Bow Enterprise Park (Phase 1), E3
Grand Union Centre, W10
Bow Enterprise Park (Phase 2), E3
The Biscuit Factory (part), SE16
The Faircharm, SE8
Lombard House car park, CR0
Pipeline (with planning)
Poplar Business Park, E14
The Filaments (Phase 2), SW18
Bow Enterprise Park (Phase 3), E3
Developer
Residential
Units
Cash
New
Space
Expected
Delivery
Overage
Workspace receive
Mount Anvil
Taylor Wimpey
Peabody
Taylor Wimpey
Peabody
Grosvenor
L&Q
Hexagon
209
72
267
145
160
800
148
22
–
53,000 Nov 2014
£5m 61,000 May 2014
£11m 10,000 Dec 2015
£6m 60,000 Feb 2016
£11m
3,000 Dec 2016
£51m 47,000 Oct 2016
£10m 52,000 Jun 2016
–
£1m
–
1,823
£95m 286,000
–
–
–
392
77
130
599
–
–
–
–
70,000
18,000
38,000
126,000
–
–
–
✓
✓
✓
✓
–
✓
–
–
–
–
–
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 34 Workspace Group PLC Annual Report and Accounts 2014
BUSINESS REVIEW
CONTINUED
FINANCING
During the year we successfully completed the
refinancing of all our debt facilities to ensure diversity
and flexibility of funding arrangements. The refinancing
has achieved the following:
– A diversification of our sources of funding, moving
away from a reliance on the bank debt market
which now only represents some 20% of our
drawn debt facilities.
– All facilities are now provided on an unsecured
basis, giving us significant flexibility in effectively
managing the property portfolio and allowing us to
react quickly to asset management opportunities.
– An extended maturity profile, the weighted average
maturity is just under seven years.
The Private Placement notes comprise $100m dollar
(£64.5m) ten year notes, £84m of sterling ten year
notes and £9m of seven year sterling floating rate notes.
The US dollar notes have been fully hedged against
sterling for ten years. The overall interest rate on the
£148.5m ten year fixed rate notes is 5.6%. The UK
Fund has provided a ten year floating rate facility which
amortises by 50% (£22.5m) at the end of year nine.
A seven year Retail Bond (listed on ORB) was issued
in October 2012 and carries a coupon of 6.0%. The five
year bank facilities are provided by three UK clearing
banks (RBS, HSBC and Santander) at a floating rate
over LIBOR. The bank term facilities of £50m and UK
Fund Facility of £45m are hedged at a rate of 1.9% for
five years to June 2018.
– Stability of our interest rate cost over the medium
term, some 75% of our facilities are fixed or hedged
for four years reducing to 35% at nine years.
At 31 March 2014 overall loan to value was 31% giving
us good headroom on all of bank, placement notes
and bond covenants.
At 31 March 2014 the Group had £410m of committed
facilities with an average period to maturity of 6.8 years
and the earliest maturity in June 2018. Details are set
out below:
Facility
Maturity
Private Placement notes £148.5m
Private Placement notes
£9m
UK Fund
Retail Bond
Bank debt
June 2023
June 2020
£45m June 2022/2023
October 2019
June 2018
£57.5m
£150m
Total
£410m
Undrawn facilities
(including cash)
£72m
NET ASSETS
Net assets increased in the year from £500m to
£726m with the main contributor being the £228m
increase in the value of our investment portfolio.
EPRA net asset value per share at 31 March 2014 was
£4.96 (2013: £3.48), an increase of 43% in the year.
The main movements in net asset value per share
are set out below:
EPRA NAV per share
At 31 March 2013
Property valuation surplus
Trading Profit after Interest
Dividends paid in year
Glebe proceeds share liability
Other
At 31 March 2014
£
3.48
1.50
0.14
(0.10)
(0.07)
0.01
4.96
£171m
FACILITIES BY TYPE
1. Bank Debt (37%)
2. Retail Bond (14%)
3. UK Funds (11%)
4. Private Placement
(38%)
DEBT MATURITY PROFILE
4.
£150m
1.
3.
2.
£58m
£22m
£9m
2014
2015
2016
2017
2018
2019
2020
2021
2022 2023
Workspace Group PLC Annual Report and Accounts 2014
35
GLEBE PROCEEDS SHARE AGREEMENT
Workspace entered into a proceeds share
agreement as part of acquiring full control of the
former Glebe joint venture (JV) in December 2009.
The proceeds share agreement provides for the
former lenders to the Glebe JV to share in net
proceeds from disposals of properties within the
JV once Workspace has received back its priority
return which at March 2014 stands at £92m. For
net cash proceeds up to £170m the former lender’s
share is 50%, from £170m to £200m it is 30% and
nil thereafter. The maximum payable under this
agreement is therefore £48m. All disposals are
at the option of Workspace.
The valuation of the Glebe portfolio has increased
by £53m over the year to £217m at 31 March 2014.
The majority of the increase has come from the
uplift in valuation of The Biscuit Factory, SE16 where
we obtained a residential planning consent in
May 2013 on the northern part of the site.
The portfolio comprises a mix of properties, some
have residential redevelopment potential which we
will sell and others, primarily business centres, which
we have no current intentions to sell. The valuation
at 31 March 2014 of the properties that have consent
for residential redevelopment or where planning
for redevelopment is well advanced and where we
consider it probable that they will be sold for cash
in due course is £107m. Total estimated proceeds,
including the cash already received from residential
disposals of £14m, are £121m (March 2013: £83m).
The significant increase in estimated proceeds from
disposals gives rise to a potential payment under
the proceeds share agreement. Net proceeds after
deducting allowable sales costs are now estimated
at £114m (March 2013: £79m). The excess of net
proceeds over the priority return to Workspace of
£92m is shared between Workspace and the former
lenders to the JV in accordance with the proceeds
share agreement. We have accordingly recognised
a liability of £11m (March 2013: £nil) representing
50% of the surplus in excess of £92m.
If we were to sell all the properties in the Glebe
portfolio, including the business centre assets that
we have no current intention to sell, the payment
under the proceeds share agreement would reach
the maximum payable under the agreement of
£48m (March 2013: £32m) compared to the amount
we have recognised of £11m. The increase of £37m
would reduce the EPRA NAV per share reported
at March 2014 by 25 pence to £4.71 (March 2013:
22 pence to £3.26).
BLACKROCK WORKSPACE PROPERTY TRUST
(BLACKROCK JV)
We have a 20.1% interest in the BlackRock JV for
which we also act as property manager receiving
management and performance fees. It has
continued to perform well during the year with
rent roll growth of £0.3m (5%) (excluding disposals)
to £6.4m in the year and occupancy at 87.7%. The
property valuation has increased by 17% (excluding
capital expenditure and disposals) to £104.0m at
31 March 2014.
During the year Cam Road, Stratford was sold in
April 2013 for £7.6m at an uplift of £0.6m on the
March 2013 valuation and in October 2013 the JV
sold Rudolf Place, SW8 for £4.9m, £1.6m higher
than the March 2013 valuation. We also gained
planning consent for a mixed use development at
Toplin House, SW9 for an eleven unit residential
development and a 3,000 sq. ft. roof extension
to the main building.
In May 2014 Windmill Place, UB2 was sold for
£2.5m, an uplift of £0.7m to March 2014 valuation.
THE BISCUIT FACTORY, SE16
6 LLOYDS AVENUE, EC3N
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 36 Workspace Group PLC Annual Report and Accounts 2014
BUSINESS REVIEW
CONTINUED
KEY PROPERTY STATISTICS
Quarter
ending
31 March
2014
Quarter
ending
31 December
2013
Quarter
ending
30 September
2013
Quarter
ending
30 June
2013
Quarter
ending
31 March
2013
–
83
4.6
4,543
–
£56.7m
£14.11
87.1%
3.5
£46.2m
£14.72
90.6%
£98m
14
0.5
£8.3m
£6.4m
£14.57
89.1%
£921m
83
4.6
4,539
£68.9m
£54.1m
£13.58
86.8%
3.5
£45.4m
£14.44
90.8%
£96m
15
0.5
£8.3m
£6.5m
£14.48
88.5%
–
84
4.6
4,543
–
£53.1m
£13.26
86.9%
3.5
£44.7m
£14.21
90.2%
£92m
15
0.5
£8.4m
£6.3m
£13.96
88.0%
£830m
86
4.7
4,626
£67.4m
£52.7m
£12.98
87.0%
3.5
£43.7m
£14.08
89.8%
£96m
16
0.5
£8.4m
£7.0m
£14.20
90.4%
12.2p
£3.48
6.9%
32%
£1,078m
83
4.5
4,653
£75.4m
£58.3m
£15.12
85.8%
3.5
£47.4m
£15.28
90.0%
£104m
14
0.5
£8.5m
£6.4m
£14.66
87.7%
7.9p
£4.96
6.2%
33%
Workspace Group Portfolio
Property valuation
Number of estates
Lettable floorspace (million sq. ft.)†
Number of lettable units
ERV
Cash rent roll of occupied units
Average rent per sq. ft.
Overall occupancy
Like-for-like lettable floor space (million sq. ft.)
Like-for-like cash rent roll
Like-for-like average rent per sq. ft.
Like-for-like occupancy
BlackRock Workspace Property Trust
Property valuation
Number of estates
Lettable floorspace (million sq. ft.)†
ERV
Cash rent roll of occupied units
Average rent per sq. ft.
Overall occupancy
EPRA Performance Measures
EPRA Earnings per share
EPRA Net Asset Value per share
EPRA Net Initial Yield
EPRA Cost Ratio
† Excludes storage space
The strategic report on pages 1 to 36
was approved by the Board of Directors on
3 June 2014 and signed on its behalf by:
JAMIE HOPKINS
CHIEF EXECUTIVE OFFICER
GRAHAM CLEMETT
CHIEF FINANCIAL OFFICER
Workspace Group PLC Annual Report and Accounts 2014
37
GOVERNANCE
IN THIS SECTION:
38 Chairman’s overview
40 The Board & Executive Committee
42 Corporate governance report
55 Directors’ remuneration report
73 Report of the Directors
77 Directors’ responsibilities
KINGS
CROSS
SHOREDITCH
PADDINGTON
WEST
END
FARRINGDON
OLD
STREET
STRATFORD
THE
CITY
LONDON
BRIDGE
WATERLOO
CANARY
WHARF
EARLS COURT
VICTORIA
BATTERSEA
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 38 Workspace Group PLC Annual Report and Accounts 2014
CHAIRMAN’S OVERVIEW
We have a strong
commitment to conducting
business responsibly and
maintaining high standards
of corporate governance.
The Board of Workspace is committed to conducting
business responsibly and maintaining a high standard
of corporate governance in terms of leadership,
remuneration matters, accountability, and in our
relationship with our shareholders, all as identified
by the UK Corporate Governance Code.
We believe that good governance, based on robust
practices and processes, is a fundamental part of
being a responsible business.
DANIEL KITCHEN
CHAIRMAN
BOARD APPOINTMENTS AND SUCCESSION
In order to implement our strategy successfully, the
Board monitors and reviews succession planning and
development requirements for key executives and
senior managers across the Company. In addition,
we keep the composition, diversity and the size of the
Board under regular review to ensure that we have the
right balance of skills and experience and that it remains
relevant to the business both today and in the future.
We have strengthened our Board over the last two years
by welcoming three Non-Executive Directors bringing
with them a broad range of business experience across
a number of diverse sectors.
As I explained last year, Bernard Cragg will retire from
the Board at our AGM on 16 July 2014, having served
as a Director since June 2003. I am pleased to confirm
that Chris Girling has agreed to take on the roles of
both Chairman of the Audit Committee and Senior
Independent Director. Bernard has made a significant
contribution to the Board’s activities over the years;
we thank him and wish him well for the future.
In accordance with the UK Corporate Governance
Code, all of the Directors have submitted themselves for
re-election at the Annual General Meeting. This practice
will continue at the Annual General Meeting in 2014.
Workspace Group PLC Annual Report and Accounts 2014
39
CORPORATE GOVERNANCE STRUCTURE
I n v e stment
C o mmittee
E
age m e nt
enior
S
n
a
M
c
t i v e
u
t e e
m m i t
e 4 4
g
p a
E x e
C o
R
e
c
E
x
r
t
u
e
i
r
t
n
m
a
e
l
n
t
The Board
C
o
m
m
p
a
g
e
i
t
N
o
m
i
n
a
t
i
t
o
5
e
n
0
e
s
R
e
m
C
o
m
uneration
mittee
page 55
x
t
A
u
e
r
d
n
i
t
a
o
l
r
e
c
n
a
n
Fi
t
i
d
u
A
e
e
t
t
i
m
m
o
C
1
5
e
g
a
p
A
dvisors
k
R i s
C o m m itt e e
CHANGES TO CORPORATE REPORTING
The Board continues to monitor developments
in corporate governance and company reporting
regulations. The new Strategic Report on pages 1
to 36 includes, amongst other matters, the Group’s
strategy, progress and performance for the year.
Disclosures in the Governance Report also includes
expanded disclosures on the work of the Audit
Committee on pages 51 to 54.
The Remuneration Committee has continued its review
of Executive Remuneration under the new Chairmanship
of Maria Moloney to ensure that the arrangements are
aligned with shareholders whilst motivating a successful
team. Changes to remuneration reporting in particular
are significant and these are fully covered in the
Directors’ Remuneration Report on pages 55 to 72
which sets out in detail the Company’s approach to
this important area.
BOARD AND COMMITTEE PERFORMANCE
During the year we conducted a review of our
effectiveness as a Board. This year, I conducted the
Board performance evaluation with support from
the Company Secretary. The process covered Board,
Committee and personal performance and the output
was reviewed by the Board. The process confirmed
that the Board and its Committees continued to
work effectively.
COMMUNICATION WITH SHAREHOLDERS
Communication with shareholders is given a high priority
by the Board. When the Company announces its annual
and half year results, the Chief Executive Officer and Chief
Financial Officer make presentations to institutional
investors and analysts and hold one-to-one briefings with
key shareholders. In addition, I am available to meet with
shareholders if they wish to raise any matters separately.
DANIEL KITCHEN
CHAIRMAN
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77
40 Workspace Group PLC Annual Report and Accounts 2014
THE BOARD & EXECUTIVE COMMITTEE
THE BOARD
1. DANIEL KITCHEN
Non-Executive Chairman
COMMITTEE MEMBERSHIPS:
Chairman of the Nominations Committee and a member of
the Remuneration Committee.
BACKGROUND AND RELEVANT EXPERIENCE:
Daniel Kitchen was appointed to the Board on 6 June 2011 and
subsequently took on the role as Chairman in July 2011. He was
previously Deputy Chief Executive at Heron International plc
and prior to that was Finance Director at Green Property for
eight years. He resigned as Chairman of Key Capital Real Estate
Limited in 2014, as a Non-Executive Director of Kingspan Group
PLC in May 2012 and as Non-Executive Chairman of Irish
Nationwide Building Society in July 2011.
CURRENT EXTERNAL APPOINTMENTS:
He is currently Chairman of Hibernia REIT plc, a Non-Executive
Director of LXB Retail Properties PLC, Irish Takeover Panel
Limited and Governor of St Patrick’s Hospital in Dublin.
2. JAMIE HOPKINS
Chief Executive Officer
3. GRAHAM CLEMETT
Chief Financial Officer
BACKGROUND AND RELEVANT EXPERIENCE:
Graham Clemett, a Chartered Accountant, joined the Board as
Finance Director in July 2007. Previously he was Finance Director
for UK Corporate Banking at RBS Group PLC where he worked
for a period of five years. Prior to that, Graham spent eight years
at Reuters Group PLC, latterly as Group Financial Controller.
4. DAMON RUSSELL
Non-Executive Director
COMMITTEE MEMBERSHIPS:
A member of the Remuneration, Audit and
Nominations Committees.
BACKGROUND AND RELEVANT EXPERIENCE:
Damon is currently Chairman of New Telecom Express Group,
an interactive media service provider, and has more than 20
years’ experience in the industry. He co-founded the company
in 1989 and has been responsible for key client relationships
and the business’ sales strategy since its inception. Telecom
Express was sold to AMV BBDO, part of the Omnicom Group,
in 1998. In 2004, Damon led a successful management buyout.
He also holds advisory roles for a number of smaller companies
in the digital media sector.
BACKGROUND AND RELEVANT EXPERIENCE:
Jamie Hopkins was appointed to the Board as a Non-Executive
Director in June 2010 then subsequently took on the role as
Chief Executive Officer on 1 April 2012. He was previously Chief
Executive and a Non-Executive Director of Mapeley PLC and
a Director of Chester Properties. Prior to that, Jamie was a
Director of Delancey Estates and Savills.
5. BERNARD CRAGG
Senior Independent Non-Executive Director
COMMITTEE MEMBERSHIPS:
Chairman of the Audit Committee and a member of the
Remuneration and Nominations Committees.
CURRENT EXTERNAL APPOINTMENTS:
Jamie is a Member of the Corporate Board of Great Ormond
Street Hospital Children’s Charity and a Member of the
London Enterprise Panel’s Small and Medium Enterprise
Working Group.
BACKGROUND AND RELEVANT EXPERIENCE:
Bernard Cragg, a Chartered Accountant, 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 Officer of Carlton Communications
PLC and a Non-Executive Director of Arcadia Group PLC.
CURRENT EXTERNAL APPOINTMENTS:
He is a Non-Executive Director of Astro Overseas Limited and
Astro Malaysia Holdings SDN BHD and the Senior Independent
Director of Progressive Digital Media PLC. He is also Deputy
Chairman and Senior Independent Non-Executive Director of
Alternative Networks PLC.
Workspace Group PLC Annual Report and Accounts 2014
41
6. MARIA MOLONEY
Non-Executive Director
COMMITTEE MEMBERSHIPS:
Chairman of the Remuneration Committee, member of the
Audit and Nominations Committees.
BACKGROUND AND RELEVANT EXPERIENCE:
Maria Moloney was appointed to the Board in May 2012.
She was previously on the Board of the Belfast Harbour
Commissioners, the Industrial Development Board for
Northern Ireland, the Northern Ireland Transport Holding
Company and Independent Television Commission, London.
CURRENT EXTERNAL APPOINTMENTS:
Maria, a lawyer, is currently a Non-Executive Director of the
Broadcasting Authority of Ireland in Dublin and a Trustee
of the Northern Ireland Cancer Centre in Belfast.
7. CARMELINA CARFORA
Company Secretary
BACKGROUND AND RELEVANT EXPERIENCE:
Carmelina Carfora was appointed Company Secretary
in March 2010. She was previously Group Company Secretary
of Electrocomponents Plc. She has also worked in the
construction industry and for a consultancy firm offering
company secretarial services.
8. CHRIS GIRLING
Non-Executive Director
COMMITTEE MEMBERSHIPS:
Member of the Audit, Remuneration and Nominations
Committees.
BACKGROUND AND RELEVANT EXPERIENCE:
Chris Girling, a Chartered Accountant, was appointed to the
Board in February 2013. He was previously Group Finance
Director of Carillion PLC. He retired as a Non-Executive Director
of Elementis PLC in July 2013.
CURRENT EXTERNAL APPOINTMENTS:
Chris is currently a Non-Executive Director and Chairman
of the Audit Committee of Keller Group PLC and a
Non-Executive Director of Arco Limited.
EXECUTIVE COMMITTEE
9. ANGUS BOAG
Development Director
BACKGROUND AND RELEVANT EXPERIENCE:
Angus Boag joined the Group in June 2007 as Development
Director. He has extensive experience in property and
construction management and was a principal consultant
at PA Consulting Group. 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.
10. CHRIS PIERONI
Operations Director
BACKGROUND AND RELEVANT EXPERIENCE:
Chris Pieroni joined the Group as Operations Director in
October 2007. Chris is responsible for asset management,
marketing, professional services, brand and business
development. Prior to joining Workspace, he worked at KPMG
specialising in real estate and infrastructure finance. He began
his professional career teaching economics at Cambridge
University. Chris was a Non-Executive Director of the Group
from 2000 until his retirement from the Board in August 2006.
CURRENT EXTERNAL APPOINTMENT:
Chris was appointed as Chairman of the Business Centre
Association in May 2014.
BOARD COMPOSITION
1. DANIEL KITCHEN
Chairman
Executive Directors
2. JAMIE HOPKINS
Chief Executive Officer
3. GRAHAM CLEMETT
Chief Financial Officer
Non-Executive Directors
4. DAMON
RUSSELL
5. BERNARD
CRAGG
6. MARIA
MOLONEY
8. CHRIS
GIRLING
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 42 Workspace Group PLC Annual Report and Accounts 2014
CORPORATE GOVERNANCE REPORT
CORPORATE GOVERNANCE PRINCIPLES AND
COMPLIANCE STATEMENT
The Board is committed to maintaining high standards
of corporate governance and we support and apply
the principles of good governance advocated by the
UK Corporate Governance Code (the Code). The Board
works with honesty and integrity which it considers
is vital to building a sustainable business for all of
our stakeholders.
The Board believes that implementing a robust
governance and corporate social responsibility
framework in which appropriate management structures,
processes and safeguards are adopted and are
transparently communicated to shareholders is essential
in aiding sustainable long-term economic performance.
COMPLIANCE WITH THE UK CORPORATE
GOVERNANCE CODE
It is the Board’s view that the Group has been fully
compliant with the Code throughout the year ended
31 March 2014. The application of the principles contained
in the Code is described below. Detailed reports on
Directors’ remuneration and the Audit Committee can
be found on pages 55 to 72 and pages 51 to 54.
CORPORATE GOVERNANCE STRUCTURE
The Board is responsible to shareholders for the strategic
direction of the Group and the stewardship of its activities.
The Board has a number of standing committees to
which specific responsibilities have been delegated and
for which written terms of reference have been agreed.
LEADERSHIP
CORPORATE GOVERNANCE
STRUCTURE
THE BOARD
STRATEGY
SUCCESSION PLANNING
PERFORMANCE
SHAREHOLDER COMMUNICATIONS
RISK
Approve the business
strategy and business
objectives in order to
create long-term value
for shareholders.
Approve changes to the
size and structure of the
Board, and ensure the
necessary resources are
available to fulfil the
strategic objectives.
Review and monitor
performance
against strategy,
budgets and
business objectives.
Engagement with shareholders is through
meetings, presentations and roadshows.
The corporate website,
www.workspace.co.uk also allows visitors
access to Company information such as
annual reports, results and presentations.
Review and monitor
risk factors which
may adversely
impact the business
at large.
EXECUTIVE COMMITTEE
NOMINATIONS COMMITTEE
– Address Group-wide issues
– Assess what new skills;
and initiatives.
– Review and approve capital
expenditure, disposals and certain
property acquisitions within
established levels of authority.
– Monitor the operating and
financial results against plans
and budgets.
– Review the effectiveness of risk
management and control procedures.
knowledge and experience
are required on the Board.
– Recommend to the Board
candidates for appointment
as Executive and Non-
Executive Directors (‘NEDs’)
of the Group.
– Consider succession policies
and talent management.
REMUNERATION
COMMITTEE
– Oversee all aspects
of remuneration for
Executive Directors.
– Recommend
the Chairman’s
remuneration.
– Consider remuneration
policy and practices of
the workforce.
AUDIT COMMITTEE
– Ensure the integrity of financial
reporting and audit processes.
– Ensure maintenance of a
sound internal control and
risk management system.
– Review and monitor the external
auditor’s independence,
objectivity and effectiveness
of the audit process.
– Establish and implement the
policy on non-audit services.
SENIOR
MANAGEMENT
– Assist the
Executive
Committee in
the running of
day-to-day
operations in
line with Group
strategy.
– Review and
track major
initiatives.
– Attend regular
meetings with
the Executive
Committee
to review
performance
and operational
activity.
INVESTMENT
COMMITTEE
– Approve any
acquisition or disposal
of investment property
assets.
– Review and monitor
integration plans for
acquisitions.
– Approve and monitor
development
contracts.
– Approve and monitor
asset management
and property
improvements.
– Make recommendations
to the Board for its
approval of any
business initiative with a
value of more than £2m.
EXTERNAL
RECRUITMENT
– Advise and
assist the
Committee
in the search
for appropriate
candidates.
– Advise and
assist the
Nominations
Committee in
increasing the
effectiveness of
the Board and
ensure that
diversity
continues to be
a major factor
in profiling
candidates.
ADVISORS
– Advise on all
aspects of
executive
remuneration,
best practice
and aspects
associated
with the LTIP.
– Advise on
administration
and the tax
treatment of
share option
schemes and
deferred share
awards.
EXTERNAL
AUDITOR
– Audit and
express an
opinion on
the financial
statements
in accordance
with applicable
law and
International
Standards on
Auditing (UK
and Ireland).
FINANCE
– Produce the
interim and
annual financial
reports and
associated
announcements.
– Establish and
monitor financial
processes of
control and cash
management.
RISK
COMMITTEE
– Review and
identify risks
facing the
Group.
– Ensure that
appropriate
controls are
in place to
review each
issue raised.
– Provides
reports to
the Audit
Committee.
Workspace Group PLC Annual Report and Accounts 2014
43
AN EFFECTIVE LEADERSHIP STRUCTURE
ROLE OF THE BOARD
The Board is collectively responsible for the
performance and long-term success of the Company,
for its leadership, strategy, control and management.
The Board will review and monitor strategic plans and
objectives, approval of acquisition of investment
properties, disposals, financing arrangements and
capital expenditure and of the Group’s systems of
internal control, governance and risk management.
Other day-to-day operational decisions are delegated by
the Board to the Executive Committee, subject to formal
delegated authority limits; however certain matters have
been reserved for consideration by the Board.
The Chairman promotes open discussion among the
Board members and encourages the Non-Executive
Directors to constructively challenge strategic and
other business related debate in order to ensure that
the decisions adopted by the Board have been
vigorously tested.
To assist the Board in effectively discharging its duties,
Directors receive relevant supporting information,
which includes but is not limited to the Group’s financial
results, performance reports and risk assessment
reports. Equally, the Board routinely considers safety,
environmental, ethical and reputational issues in order
to ensure that they are fully reflected in the risk
management process.
The governance framework implemented by the Group
ensures that open communication channels exist
between the Board, its principal committees and
within the organisation. Copies of committee minutes
are distributed to all Directors and Committee Chairmen
report back to the Board.
BOARD ACTIVITIES
The full schedule of matters reserved for the
Board can be found on the Company website at
www.workspace.co.uk. At least once a year the Board
reviews the nature and scale of matters reserved for its
decision and these include: Dividend Policy, Company
Strategy, Board and Committee composition, significant
funding decisions and corporate transactions.
Board activities in 2013/14
During the year under review, the Board considered
the following:
–
Reviewed progress of the strategy and business
objectives;
– Monitored trading performance of the business;
– Considered the Group’s property valuation;
–
Finance matters including budgets, business plans
and significant refinancing opportunities. In June
2013, the Company announced the refinancing of
its bank debt facilities. All facilities (£410m) are now
provided on an unsecured basis with over 60% of
funding from non-bank sources;
–
–
–
–
–
–
–
Annual and interim results, interim management
statements and dividends;
Approval of redevelopment activity and
major developments;
Significant investment decisions including property
acquisitions during the year of £18.1m. In addition,
we realised £12.4m from the disposal of four
non-core properties;
Undertaking a review of its own performance
and that of its committees, the independence
of the Non-Executive Directors and reviewing
the governance framework in place;
Review of risk and the Group’s health and
safety arrangements;
Approval of Board appointments and retirements
and ensuring adequate succession planning is in
place; and
In September 2013, the Board held its annual
Strategy Day which included, amongst other
matters, a review of the business plan objectives,
a discussion on the economic outlook and
consideration given to other growth opportunities.
BOARD AND COMMITTEE MEETINGS ATTENDANCE
The Board has regular scheduled meetings and met
10 times during the past financial year. Supplementary
meetings are also held as and when necessary.
The Directors are expected to attend all meetings of the
Board, and of those Committees on which they serve
and the Annual General Meeting (AGM), and to devote
sufficient time to the Company’s affairs to enable them
to fulfil their duties as Directors. Details of Directors’
attendance at each of the Board and Committee
meetings during the year ended 31 March 2014 are
set out in the table below.
Name
Board
(10 meetings)
Audit
(3 meetings)
Remuneration
(7 meetings)
Nominations
(2 meetings)
10/10
Chairman
Daniel Kitchen
Executive Directors
10/10
Jamie Hopkins
Graham Clemett
10/10
Non-Executive Directors
10/10
Bernard Cragg
John Bywater1
4/10
10/10
Maria Moloney
10/10
Chris Girling
Damon Russell2
6/10
–
–
–
3/3
1/3
3/3
3/3
2/3
7/7
2/2
–
–
7/7
5/7
7/7
7/7
3/7
–
–
2/2
1/2
2/2
2/2
1/2
Notes:
1.
2. Damon Russell was appointed to the Board with effect from
John Bywater retired from the Board on 25 July 2013.
29 May 2013, consequently, Mr Russell attended his first Board
Meeting on 25 July 2013.
Where Directors are unable to attend meetings, their
comments, as appropriate, are provided to the Board
or Committee Chairman prior to the meeting.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 44 Workspace Group PLC Annual Report and Accounts 2014
CORPORATE GOVERNANCE REPORT
CONTINUED
THE EXECUTIVE COMMITTEE
The Executive Committee consists of the Executive
Directors together with the Operations Director
and Development Director. It is chaired by the Chief
Executive Officer. The purpose of the Committee is
to facilitate and assist the Chief Executive Officer 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 at certain levels
as determined by the Board; the monitoring of the
operating and financial results against plans and
budgets; and to ensure the effectiveness of risk
management and control procedures. The Executive
Committee has its own terms of reference.
The Committee has met 17 times during the year
ended 31 March 2014.
The responsibilities of the Executive Committee
members include:
Jamie Hopkins, Chief Executive Officer
Strategic management; investor relations; day-to-
day operations; acquisitions and disposals; health and
safety; staff; equal opportunities; remuneration; and
training and development.
Graham Clemett, Chief Financial Officer
Finance; treasury; company secretarial; investor
relations; and the Group’s IT strategy.
EFFECTIVENESS
BOARD COMPOSITION
The effectiveness of the Board and its Committees is
vital to the success of the Company. The Board considers
there to be an appropriate balance between Executive
and Non-Executive Directors required to lead the
business and safeguard the interest of shareholders.
The Board’s current composition of a Non-Executive
Chairman, two Executive Directors and four Non-
Executive Directors meets the requirement of the code
for at least half the Board, excluding the Chairman, to
be independent Non-Executive Directors. In the Board’s
view, all of the current Non-Executive Directors are
independent and this is explained in more detail on
page 45.
The Non-Executive Chairman was considered by the
Board to be independent upon his appointment.
Mr Damon Russell was appointed as a Non-Executive
Director on 29 May 2013. The biographies of all
members of the Board are set out on pages 40 and 41.
The Nominations Committee regularly reviews the
composition of the Board to ensure that we have an
appropriate and diverse mix of skills, experience,
independence and knowledge of the Group.
The following table illustrates the balance of Non-
Executive Directors to Executive Directors, excluding
the Chairman, on the Board during the past year.
Chris Pieroni, Operations Director
Portfolio performance; asset management; lettings
and marketing; rent reviews; and renewals.
BALANCE OF NON-EXECUTIVE AND
EXECUTIVE DIRECTORS
Angus Boag, Development Director
Planning consents; development of assets; valuations;
disposals; sustainability; and environmental strategy.
THE INVESTMENT COMMITTEE
The Investment Committee consists of the
Executive Directors, the Operations Director and the
Development Director. It is also attended by the Head
of Asset Management, Head of Investment and Head
of Business Development. The Investment Committee
is chaired by the Chief Executive Officer. The purpose
of the Committee is to review and approve disposals
and acquisitions of investment property assets;
approve and monitor asset management property
improvements and make recommendations to the
Board for its approval of any property initiative
with a value of more than £2m.
31 March
2014
31 March
2013
0
10
20
30 40 50 60 70
%
80 90
100
Non-Executive Directors
Executive Directors
COMMITMENT
The Board is satisfied that each of the Non-Executive
Directors is able to devote sufficient time to the
Company’s business. Non-Executive Directors are
advised on appointment of the time required to fulfil
the role and asked to confirm that they can make the
required commitment. Letters of appointment for the
Non-Executive Directors are available for inspection at
the AGM.
Executive Directors are encouraged to take a non-
executive position in other companies and organisations.
The appointment to such positions is subject to the
approval of the Board which considers, in particular,
the time commitment required.
Workspace Group PLC Annual Report and Accounts 2014
45
BACKGROUND AND EXPERIENCE OF THE BOARD
The Board currently has seven Directors that bring
considerable and diverse experience which enables
them to make a valuable contribution to the Group.
Their experience, gained from varied commercial
backgrounds, enables them to bring specific insights
and make valuable contributions to the Company.
The Board is actively considering diversity and believes
this to be an important factor when considering
appointments to the Board. As part of the recruitment
process, the composition of the Board will be kept
under review to ensure the best balance of skills and
experience is maintained. Further details on our
diversity policy can be found on page 48.
ROLES OF THE CHAIRMAN, CHIEF EXECUTIVE
OFFICER AND SENIOR INDEPENDENT DIRECTOR
The roles and responsibilities of the Non-Executive
Chairman, Chief Executive Officer and Senior
Independent Director are separate and the division
of responsibilities has been clearly established.
The Chairman is primarily responsible for leadership of the
Board, ensuring its effectiveness and setting its agenda.
The Chairman facilitates the effective contribution of
the Non-Executive Directors and ensures all Directors
receive accurate, timely and clear information. He is also
responsible for effective communication between the
Board and shareholders. The Chairman is not involved
in an executive capacity in any of the Group’s activities.
During the year the Chairman held a number of
meetings with the Non-Executive Directors, without
the Executive Directors being present. The discussions
largely revolved around succession planning.
The Chief Executive Officer has direct charge of the
Group on a day-to-day basis and is accountable to the
Board for the financial and operational performance of
the Group and the determination of the strategy and
achievement of its objectives.
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.
INDEPENDENCE OF NON-EXECUTIVE DIRECTORS
The Board has considered the independence of all of
the Non-Executive Directors, and in particular that of
Bernard Cragg given that his tenure will have reached
a threshold at which his independence could be called
into question by some shareholders under the criteria
set by the UK Corporate Governance Code.
The Board concluded that each of the Non-Executive
Directors is considered to be independent of the
executive management and free from any business
or other relationship which could materially interfere
with the exercise of their independent judgement. All
Non-Executive Directors act in a robustly independent
manner and bring constructive challenge to Board
discussions and independent decision-making to
their Board and Committee duties.
The Board believes that no long-standing relationship
which may be deemed to compromise independence
has been formed with any of the Executive Directors
or senior executives at Workspace. Furthermore, the
longest-standing professional relationship between
Bernard Cragg and any existing Executive Directors
is no more than seven years.
The Board is committed to actively refresh its
membership and that of its committees in line with its
succession planning process which has been evident
during the last 12 months with the appointment of
Damon Russell as a Non-Executive Director in May 2013.
As explained last year, Bernard Cragg will retire as a
Board Director at the Annual General Meeting in 2014.
Chris Girling will succeed Bernard Cragg as Chairman
of the Audit Committee at the conclusion of the Annual
General Meeting on 16 July 2014 given his background,
knowledge and in-depth experience within finance
which are essential in order to perform the role of Chair
of the Audit Committee. At the same time, Chris will
also assume the role of Senior Independent Director.
We continue to review and monitor Board and Board
Committee composition against our skills and
experience requirements.
The tenure of independent Non-Executive Directors
as at 31 March 2014 is set out in the chart below.
TENURE OF INDEPENDENT NON-EXECUTIVE
DIRECTORS AS AT 31 MARCH 2014
Years
12
10
8
6
4
2
0
Bernard
Cragg
Maria
Moloney
Chris
Girling
Damon
Russell
Bernard Cragg will not stand for re-election at the
2014 AGM.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 46 Workspace Group PLC Annual Report and Accounts 2014
CORPORATE GOVERNANCE REPORT
CONTINUED
INDUCTION, TRAINING AND DEVELOPMENT
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 briefings, through participation
at meetings and through visits to estates, meetings with
senior management and advisers. We recognise that
our Directors have a diverse range of experience, and
so we encourage them to attend external seminars
and briefings that will assist them individually.
The Directors are kept informed of changes in relevant
legislation, regulations and corporate governance
matters, with the assistance of the Company’s legal
advisors and external auditor, where appropriate.
Directors have access to independent professional
advice at the Company’s expense where they judge
this to be necessary to discharge their responsibilities
as Directors. This is in addition to the access that every
Director has to the advice and services of the Company
Secretary, who is responsible to the Board for ensuring
that Board procedures are complied with.
COMPANY SECRETARY
Carmelina Carfora is the Company Secretary to the
Board of Workspace. Her biography can be found on
page 41. Carmelina is responsible for ensuring good
information flows within the Board and its committees
and between senior management and Non-Executive
Directors. She is also responsible for advising the
Board, on corporate governance matters and
ensures that Board procedures are followed.
BOARD PERFORMANCE EVALUATION
The Board recognises the benefit of annual
evaluation, enabling it to improve its effectiveness
and focus and that of its Committees and Directors.
For 2011/12, the annual evaluation of the Board and
Committee performance was facilitated externally
through an independent external consultancy.
This year’s questionnaires were sent to Board
members covering the Board, its Directors
and Committees.
The questionnaires covered such issues as detailed
in the diagram below:
BOARD AND COMMITTEE EVALUATION
B o a r d a n d committee evaluation
Risk Management
Controls and Corporate
Governance
Succession
Planning
Induction
and
Training
Issues covered
Ongoing
Development
of Strategy
Board and committe e e v a l u a
n
t i o
The responses to the questionnaires were collated
independently by the Company Secretary who
prepared reports for the Company Chairman and
the Chairman of each Committee. These reports
were discussed at the relevant Committee meetings
and the Board discussed the results at its meeting
in April 2014.
The results of this year’s evaluation were constructive
and positive. The themes noted for further action are
detailed below together with the progress achieved
during the year for those actions identified as part
of the Board evaluation conducted in 2012/13.
Workspace Group PLC Annual Report and Accounts 2014
47
2012/13 BOARD EVALUATION
2013/14 BOARD EVALUATION
Actions
Progress during the year under review
Actions
Continued focus
on testing and
development
of strategy.
Ongoing review of
Board composition,
succession planning
and implementation.
Board updates on
both potential and
impending legal and
regulatory changes
across areas of the
Group’s operations.
–
–
–
–
–
Annual Board strategy
day was held.
Actions from the strategy
day were formally recorded
in a plan which is monitored
and updated by the Board.
Continue to develop
succession planning.
One new Non-Executive Director,
Damon Russell, was appointed
to the Board during the year
under review.
Conscious of changing
legislation, dedicated updates
and presentations to continue
during the course of the year.
During the year, Directors
received updates at the Board
and Committee meetings on
external corporate governance
and other regulatory changes
likely to impact the Company.
In particular, the Directors
considered changes to the
remuneration reporting
requirements and corporate
reporting changes.
Updates were also provided
by the Company Secretary on
impending regulatory changes.
With the assistance of the
Company Secretary, specific
needs and interests of Directors
to be considered as part of the
Board Development Programme.
Further site visits will be arranged
for Directors during the course of
the year.
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 Group.
The Directors concluded that following the Board
effectiveness evaluation for the year under review, the
Board and its Committees operate effectively and that
each Director continues to contribute effectively and
demonstrates commitment to the role.
CHAIRMAN’S EVALUATION
The Senior Independent Director chairs an annual
meeting of Executive and Non-Executive Directors
without the Chairman present to appraise the
Chairman’s performance and to address any other
matters which the Directors might wish to raise.
The outcome of these discussions is conveyed by
the Senior Independent Director to the Chairman.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 48 Workspace Group PLC Annual Report and Accounts 2014
CORPORATE GOVERNANCE REPORT
CONTINUED
RE-ELECTION OF DIRECTORS
The Articles of Association of the Group require that
Directors should submit themselves for election at the
first opportunity after their appointment and thereafter
for re-election at least every three years. However, at the
2011 Annual General Meeting the Group had adopted
the requirements of the UK Corporate Governance
Code (June 2010) 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 will retire
at the Annual General Meeting, and being eligible, offer
themselves up for re-election.
The Board considers that all of the Directors have the
necessary skills and experience needed to effectively
lead the business. In addition, the Non-Executive
Directors are considered to bring independent
objectivity in order to safeguard and promote the
interest of shareholders.
The Board has considered the outcome of the Board
effectiveness review as well as the performance of
each individual Director, including how they operate
as a collective in fulfilling their duties on the Board or
as members of the Board’s Committees. The Board
has accepted the recommendations provided by the
Nominations Committee and is of the opinion that the
Directors seeking re-election at the Annual General
Meeting have continued to give effective counsel and
commitment to the Company and accordingly should
be reappointed by the Group’s shareholders at the
upcoming Annual General Meeting.
Mr Hopkins and Mr Clemett have service contracts
and details can be found on page 61.
None of the Non-Executive Directors have
service contracts.
Daniel Kitchen’s first term of appointment as Non-
Executive Chairman is due to expire on 6 June 2014.
Following a review of his performance, the Nominations
Committee recommended that his appointment
should be extended for a further three-year term.
This recommendation was agreed by the Board. The
appointment of Daniel Kitchen may be terminated by
either him or the Company giving six months’ notice
in writing.
The appointment of Bernard Cragg may be terminated
by either the Company or by him giving six months’
notice in writing.
The appointment of Chris Girling, Maria Moloney
and Damon Russell may be terminated by either the
Company or any one of them giving three months’
notice in writing.
Biographies for the Directors can be found on pages
40 and 41.
DIVERSITY
Workspace employs enthusiastic, committed and
well-trained people, whose diversity reflects that
of London itself. The Board is fully 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. Workspace has a good record of
promoting and appointing women to senior positions.
The employee gender profile is fairly evenly split with
a total of 46% female and 54% male employees.
The Board recognises the benefits of diversity of skills,
knowledge and independence, as well as gender
diversity. During the year, the Board formally discussed
and reviewed its policy regarding diversity, including
gender, on the Board and within the Group as a whole.
As a result the Board requested that going forward;
diversity becomes a formal area for consideration in
Board effectiveness reviews and in its succession
planning. Consequently, diversity will form part of
considerations afforded to the search and selection
process for Directors and staff.
The Board does not consider it appropriate at this time
to set targets on gender diversity as all appointments
will be made on merit. Gender and wider diversity,
however, will continue to be taken into account when
evaluating the skills and experience desired to fill each
Board vacancy.
Workspace Group PLC Annual Report and Accounts 2014
49
TAKEOVER DIRECTIVE
Share capital structures are included in the Directors’
Report on page 75.
GOING CONCERN
Going Concern disclosures are included in the Directors’
Report on page 74.
RELATIONS WITH SHAREHOLDERS
Communication with shareholders is given a high priority
and the Company undertakes regular dialogue with major
shareholders and fund managers.
In October 2013, an investor and analyst event was
held which highlighted Workspace’s targeted in-house
marketing approach and how active asset management
and real time market information enables the Company
to deliver superior performance and shareholder value.
Executive Directors are the Company’s principal
representatives with investors, analysts, fund managers,
press and other interested parties. Discussions with
institutional shareholders are held 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.
Other ad hoc meetings, presentations and site visits
are arranged for shareholders throughout the year
in the UK, Europe and the United States.
The Board receives reports of meetings with
institutional shareholders together with regular market
reports and brokers’ reports which enable the Directors
to understand the views of shareholders.
The Annual Report and Accounts is sent to all
shareholders who wish to receive a copy. It is also
available in the investor section of the Company’s
website www.workspace.co.uk, which additionally
contains up-to-date information on the Group’s
activities and published financial results
and presentations.
ANNUAL GENERAL MEETING
The Annual General Meeting provides the Board with
an opportunity to communicate with, and answer
questions from, private and institutional shareholders
and the whole Board is available after the meeting,
in particular, for shareholders to meet new Directors.
Details of the resolutions to be proposed at the Annual
General Meeting on 16 July 2014 can be found in the
Notice of Annual General Meeting which is available
at www.workspace.co.uk. and is despatched to
shareholders who have requested a hard copy
of the documentation from the Company.
The Chairmen of the Audit, Remuneration and
Nominations Committees normally attend the Annual
General Meeting and are available to answer any
questions. All Directors normally attend the meeting.
A copy of the Annual Report and Accounts is sent
to shareholders and is also available on the Group’s
website, which additionally contains up-to-date
information on the Group’s activities and published
financial information.
BOARD COMMITTEES
The Board has a number of standing committees,
namely the Remuneration, Audit, and Nominations
Committees, to which specific responsibilities have been
delegated and for which written terms of reference
have been agreed.
The terms of reference for the Nominations, Audit and
Remuneration Committees are available for inspection
on the Company’s website at www.workspace.co.uk.
Each of these Committees is comprised of Independent
Non-Executive Directors of the Company who are
appointed by the Board. Board members receive
minutes of meetings of all the Board’s Committees and
can request presentations or reports on areas of interest.
The Company Secretary is secretary to each Committee.
The activity of each Committee is described on pages
50 to 72.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 50 Workspace Group PLC Annual Report and Accounts 2014
CORPORATE GOVERNANCE REPORT
CONTINUED
NOMINATIONS COMMITTEE REPORT
DANIEL KITCHEN
Chairman of the Nominations Committee
Members of the Committee
– Bernard Cragg
– Maria Moloney
– Chris Girling
– Damon Russell
For full biographies see pages 40 to 41.
We continue to look
for the right capabilities
and competencies for
the future.
During the year the Nominations Committee continued
to consider Board composition and succession planning.
It is planned that Bernard Cragg will retire from the
Board at the conclusion of the 2014 Annual General
Meeting. I am very pleased to confirm that Chris Girling
has agreed to take on the roles of Chairman of the Audit
Committee and Senior Independent Director following
the Annual General Meeting.
The Nominations Committee will continue to review
its skills, experience, independence and knowledge
of Board members and this will be reflected in the
Committee’s recommendations to the Board on
any future appointments.
DANIEL KITCHEN
CHAIRMAN OF THE NOMINATIONS COMMITTEE
3 June 2014
The Nominations Committee has responsibility for
making recommendations to the Board on Board and
Committee composition, for developing succession
plans for both Executive and Non-Executive Directors,
and for making recommendations to the Board on
Board appointments.
The Committee periodically assesses what new skills,
knowledge and experience are required on the Board
and, if necessary, the balance of independence. If
appropriate, a candidate profile is recommended which
is then used to brief recruitment consultants appointed
by the Committee to undertake the selection process.
Initial meetings are generally held by the Company
Chairman with prospective candidates, and a shortlist
of individuals is then selected by the Chairman, with
assistance from the recruitment consultants, to meet
with other Nominations Committee members and
the Executive Directors. The Nominations Committee
then meets and decides which candidate, if any, will
be recommended to join the Board.
Diversity has been addressed on page 48.
During the year, the Nominations Committee was
chaired by the Company Chairman, Daniel Kitchen and
comprised all of the Non-Executive Directors as listed
above. The Nominations Committee met twice during
the year and attendance at these meetings is shown
in the table on page 43.
Daniel Kitchen does not Chair the Committee when it
is considering matters relating to his position. In these
circumstances, the Senior Independent Director acts
as Chairman of the Committee.
The full terms of reference of the Nominations
Committee are available for inspection on the
Company’s website at www.workspace.co.uk.
–
–
Matters considered by the Committee during the year
Discussed Board composition and determined
–
the ongoing skills and experience required on
the Board;
Prepared candidate specifications for potential
Non-Executive Director candidates;
External search agents, Spencer Stuart,
were engaged to assist in finding a new
Non-Executive Director;
The Committee met with a number of candidates;
Recommended to the Board the appointment
of Damon Russell as Non-Executive Director;
Conducted the performance review of the Chairman;
Recommended to the Board that the Chairman’s
appointment be extended for a further three-year
term from 6 June 2014.
–
–
–
–
Workspace Group PLC Annual Report and Accounts 2014
51
AUDIT COMMITTEE REPORT
BERNARD CRAGG BSC ACA
Chairman of the Audit Committee and
Senior Independent Non-Executive Director
Members of the Committee
– Maria Moloney
– Chris Girling
– Damon Russell
For full biographies see pages 40 to 41.
This is my final report as Chairman of the Audit
Committee as I will step down as a Non-Executive
Director following the Annual General Meeting in July
2014. Chris Girling, a fellow Non-Executive Director and
a current member of the Committee will succeed me as
Chairman. Chris has served as Group Finance Director
of Carillion PLC and is currently Chairman of the Audit
Committee of Keller PLC and so has the required
experience to fulfil the role.
During the year under review the Audit Committee
considered a number of topics, the most significant of
which are described below. A description of the work
and information about the other significant issues that
the Committee considered during the year can be
found on page 52.
BERNARD CRAGG
CHAIRMAN OF THE AUDIT COMMITTEE
3 June 2014
The Audit Committee ensures the integrity of financial
reporting and audit processes and the maintenance of
a sound internal control and risk management system,
details of which are described on pages 53 and 54.
The Committee’s main role and responsibilities are set
out in its terms of reference and are available on the
Company’s website at www.workspace.co.uk.
The Audit Committee comprises all the Non-Executive
Directors, except the Chairman, and is chaired by
Bernard Cragg. During the year, Damon Russell joined
the Committee. The Group audit partner from the
external auditor attends the Audit Committee Meeting
at least twice a year.
The Board is satisfied that both Bernard Cragg and Chris
Girling have the required level of relevant and financial
and accounting experience required by the provisions of
the Code, having previously held chief financial officer
positions in public companies. Currently both Bernard
and Chris, who are Chartered Accountants, also hold
various positions with public companies.
The Audit Committee collectively has the skills and
experience required to fully discharge its duties,
and it has access to independent advice at the
Company’s expense.
During the year, the Committee met in private sessions
with its external auditors, PricewaterhouseCoopers LLP
(‘PwC’), in the absence of management.
COMMITTEE MEETINGS
Meetings of the Audit Committee coincide with key
dates in the financial reporting and audit cycle. The
Committee Chairman reports the outcome of meetings
to the Board. During the year under review the
Committee met three times.
The Committee has a rolling agenda that ensures it
gives thorough consideration to matters of particular
importance to the Company, and additional matters are
considered when appropriate. The Committee receives
appropriate information far enough in advance to enable
it to fulfil its responsibilities. This includes not only
information from management but also detailed
reports from the external auditor.
The Chairman of the Company, the Chief Executive
Officer, the Chief Financial Officer and other members
of the senior management team together with senior
representatives of the external auditor are invited to
attend all or part of meetings as appropriate.
MAIN ACTIVITIES DURING THE YEAR
The agendas for the three scheduled meetings of
the Committee during the year under review were
organised around the Company’s reporting schedule.
The Committee considered amongst other matters:
– the interim and annual financial statements
and matters raised by management and the
external auditors;
– the appropriateness of the Group’s accounting
policies and practices;
– the full and half year valuations and the external
valuation process;
– the review of the Group’s system of internal controls
and risk management; health and safety update;
– representation letters to the external auditors;
– the strategic risks for the Group and emerging risks;
– Corporate reporting updates and approach to the
2014 Annual Report;
– the Group’s compliance with REIT legislation;
– the Company’s approach to compliance with
legislation and regulations, including arrangements
for staff to raise concerns in confidence;
– the performance relationship with the external
auditor, the external audit process, the audit and
non-audit fee and independence;
– the need and use for an internal audit function;
– the review of fraud risk; and
– the terms of reference of the Audit Committee.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 52 Workspace Group PLC Annual Report and Accounts 2014
CORPORATE GOVERNANCE REPORT
CONTINUED
SIGNIFICANT ISSUES CONSIDERED BY THE COMMITTEE
The Audit Committee pays particular attention to matters it considers to be important by virtue of their impact
on the Group’s results, or the level of complexity, judgement or estimation involved in their application on the
consolidated financial statements. The main areas of focus during the year are set out below:
Matter considered
Action taken by the Committee
Valuation of the investment
property portfolio
The valuation of the investment
property portfolio is inherently
subjective, requiring significant
judgement. The outcome is
significant for the Group in
terms of its investment
decisions, results
and remuneration.
Accounting for the Glebe
proceeds share agreement
The valuation is conducted externally by independent valuers. The valuers
presented the year-end valuation to the Audit Committee. The Audit
Committee reviewed the methodology and outcomes of the valuation,
challenging the key assumptions and judgements. The valuers proposed
significant increases in the values, particularly in relation to properties
where developments have progressed and active management has
increased current rents. These values were discussed in detail by the Audit
Committee in consideration of the current market outlook and the stage of
progress on significant developments. The objectivity and independence
of the valuers is monitored by the Audit Committee. PwC also met with
the valuers and presented their views on the valuation to the Committee.
Based on the above, the Committee was satisfied that the methodology,
assumptions and judgements used by the valuers were appropriate and
that the valuations were suitable for inclusion in the financial statements.
The Group has decided to change its policy for the Glebe proceeds share
agreement (‘proceeds share’). This is now accounted for as an equity
instrument under IAS 32 representing a non-controlling interest (NCI) in
the assets of Workspace Glebe Limited; previously it was accounted for
as a contingent liability under IAS 37. IFRS does not deal explicitly with
agreements of this nature, and, consequently, this is a judgemental area.
Therefore, in determining an appropriate policy, the Group analysed the
key features of the proceeds share in the context of relevant accounting
pronouncements weighing the importance of each feature in faithfully
representing the overall commercial effect and economic substance. Details
of the proceeds share and implications of the change in policy can be found
in note 20 to the financial statements and in the accounting policies.
In measuring the amount attributable to NCI, the Group takes into
account the likelihood that a property will be sold and that a payment
may be made. On this basis, the Group attributes amounts to NCI when
it considers there is a legal or constructive obligation to sell the relevant
properties. No amounts are attributed to NCI in relation to properties
that the Group has no intention of selling.
The Group is in discussions with the Financial Reporting Council (FRC)
regarding the accounting for the Glebe Proceeds share agreement and
has yet to agree with the FRC how this non-controlling interest should
be measured.
The Audit Committee has considered the accounting treatment of the
proceeds share agreement including the questions raised by the FRC.
It believes that the Group’s measurement of the amount attributable to
NCI best reflects the commercial objectives and economic substance of
the proceeds share. In particular that no amounts should be attributed
to NCI for proceeds that are highly unlikely to arise.
The maximum amount that would be payable if all the properties were sold
would be £48m (31 March 2013: £32m). This would increase the attributed
amounts at 31 March 2014 by £37m (31 March 2013: £32m) with a net
impact of reducing EPRA NAV per share by 25p (31 March 2013: 22p).
In addition, the Audit Committee has considered a number of other judgements which have been made by
management, none of which had a material impact on the Group results.
Workspace Group PLC Annual Report and Accounts 2014
53
INTERNAL AUDIT
Due to its size and structure, the Group does not have
an internal audit function, a matter which is kept under
review by the Audit Committee. However, management
instructs the undertaking of a programme of financial,
operational and health and safety internal audits at its
estates. These are carried out by qualified senior Head
Office personnel on a rotational basis. All findings are
reported to the Risk Committee with any significant
findings reported to the Audit Committee.
AUDIT TENDERING
The comply-or-explain provision in the UK Corporate
Governance Code applies to the Company for the
first time this year. However, in the light of the recent
agreement of the European proposals in this area and
the UK Competition Commission’s final report, the FRC
has indicated that it will consult on withdrawing the
provision during 2016.
The relevant European Directive will become
applicable in the UK in June 2016, subject to an
implementation exercise by the UK regulators. PwC
has been Workspace’s auditor since 1988, which means
that the EU’s transitional rules would prevent their
reappointment from six years after June 2014. The
UK Competition Commission had previously proposed
mandatory audit tenders at least every ten years
with different transitional rules, but has delayed
its implementation programme to consider fully the
implications of the EU Directive on its proposals.
The current PwC audit partner has completed five years
in the role and will be replaced by a new partner for
next year’s audit. Subject to the outcome of the annual
assessment of audit quality and auditor independence
continuing to be satisfactory, it is currently expected
that we would look to rotate PwC within the next five
years when the current regulatory uncertainty is
resolved. A resolution to reappoint them for the 2015
audit will therefore be proposed at the AGM.
NON-AUDIT SERVICES
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 process requires prior approval by
the Audit Committee Chairman for non-audit work with
a cost exceeding £50,000.
The Group uses the external auditor for relevant
financial work for a variety of reasons, including their
knowledge of the Group, the audit-related nature of
the work and the need to maintain confidentiality.
At each meeting, the Audit Committee will be advised of
any significant non-audit work awarded to the external
auditor since the previous meeting and the related fees.
At the annual May meeting, the Audit Committee
receive a report of fees, both audit and non-audit from
PwC for the past financial year. The Committee has
considered 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 Audit 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:
1. A self-review threat – this is where, in providing
a service, the PwC audit team could potentially
evaluate the results of a previous PwC service.
The Audit Committee specifically will not allow the
auditors to:
– Do anything that is a management responsibility
(e.g. such as setting performance targets or
determining employees’ actual compensation).
– Provide accounting or book-keeping services.
– Prepare financial statement disclosure items.
2. A self-interest threat – where a financial or other
interest (of an individual or PwC) will inappropriately
influence an individual’s judgement or behaviour.
The Audit Committee will specifically perform
the following:
– If the external auditor is to be considered for the
provision of non-audit services, their scope of work
and fees must be approved in advance by the Chief
Financial Officer and the Committee Secretary and,
in the case of fees in excess of £50,000 for a single
project, by the Audit Committee (or if approval is
required before the next meeting, by the Audit
Committee Chairman). For larger assignments in
excess of £100,000 this would involve a competitive
tender process unless there are compelling
commercial or timescale reasons to use the external
auditor or another specific accountancy firm.
– It does not accept significant contingent fee
arrangements with the external auditors.
3. An advocacy threat – this is where PwC or PwC
personnel promote an audit client’s position to
the extent where PwC’s objectivity as auditor
is compromised.
– The Group will not use PwC in an advocacy role.
4. A familiarity threat – this is where, because of a
too long or too close a relationship, the external
auditor’s independence is affected.
– The Audit Committee will prohibit the hiring of former
employees of the external auditor associated with the
Group’s audit into management roles with significant
influence within the Group within two years following
their association with the audit, unless the Chairman
of the Audit Committee gives prior consent. Annually,
the Audit Committee will be advised of any new hires
caught by this policy. However, there have been no
instances of this occurring. In addition, PwC will
rotate their lead audit partner every five years.
– The Audit Committee will monitor on an ongoing
basis the relationship with the external auditor to
ensure its continuing independence, objectivity
and effectiveness.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 54 Workspace Group PLC Annual Report and Accounts 2014
CORPORATE GOVERNANCE REPORT
CONTINUED
AUDIT FEES
Fees paid to PwC can be found in note 2 on page 90.
FINANCIAL REPORTING
The Audit Committee considers all financial information
published in the annual and half year financial
statements and considers accounting policies adopted
by the Group, presentation and disclosure of the
financial information.
The Directors are responsible for preparing the Annual
Report. At the request of the Board, the Committee
considered whether the 2014 Annual Report was fair,
balanced and understandable and whether it provided
the necessary information for shareholders to assess
Workspace’s performance, business model and strategy.
It was satisfied that, taken as a whole, the 2014 Annual
Report is fair, balanced and understandable and
included the necessary information. It confirmed this to
the Board, whose statement in this regard is set out in
the Directors’ Responsibility Statement on page 77.
INTERNAL CONTROL AND RISK MANAGEMENT
The Board has ultimate responsibility for the Group’s risk
management framework and system of internal control
and the ongoing review of their effectiveness. The Board
has reviewed the Group’s system of controls including
financial, 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 Company has established processes and procedures
necessary to enable the Directors to report on internal
controls in compliance with the Code. These processes
and 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:
– a comprehensive system of financial reporting;
– an organisational and management Board structure
with clearly defined levels of authority and division
of responsibilities;
– a Risk Committee, which is chaired by the Chief
Executive Officer and is attended by representatives
from senior management and operational staff.
The Risk Committee formally reports to the Audit
Committee twice a year; and
– a programme of site audit visits, covering a significant
proportion of the sites each year. Although the Group
does not have a dedicated internal audit function, an
operational, finance and health and safety audit are
carried out at the estates by qualified Head Office
personnel. The results of the audits are reported to
and reviewed by the Risk and Audit Committees
and appropriate action taken as required.
The Risk Committee reviews and identifies risks facing
the Group and ensures that appropriate controls are in
place to review each issue raised. Each identified risk
is assigned a ‘Risk Owner’. The Risk Committee have
also devised an annual plan of work where a review
is undertaken of particular areas of the business.
Depending on the nature of the project, a third-party
consultant may be appointed to assist in the review.
The Group has continued to develop its risk
management framework 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 Code’s principles with regards to internal
control. The Board, with advice from the Audit
Committee continues to review the effectiveness
of internal control with no significant failings or
weaknesses identified.
Further information on the Group’s risks is detailed on
pages 18 to 21.
WHISTLEBLOWING
The Group has a ‘whistleblowing procedure’ by which
employees may report suspicion of fraud, financial
irregularity or other malpractice. There is also a process
in place for staff to report operational risks and issues
to the Risk Committee.
CODE OF CONDUCT
The Group has a Code of Conduct which explains how
employees are expected to fulfil their responsibilities
by acting in the best interests of the Group. This includes
compliance with laws and regulations; acting fairly
in dealing with customers, suppliers and other
stakeholders; treating people with respect and
operating within a control framework.
RISK COMMITTEE
The Committee is chaired by the Chief Executive Officer
and comprises the Operations Director, Company
Secretary and Head of Finance. Meetings of the
Committee are attended by employees from across
the business. The role of the Risk Committee is to:
– Promote the application of the risk
management framework;
– Agree an annual internal control review programme;
– Consider the results of reviews and implementation
of recommendations.
DIRECTORS’ REMUNERATION REPORT
MARIA MOLONEY
Chairman of the Remuneration Committee
Members of the Committee
– Bernard Cragg
– Chris Girling
– Damon Russell
For full biographies see pages 40 to 41.
The Company’s long-term
strategy is to attract,
motivate and retain high-
performing leaders and
to ensure that they are
focused on the delivery of
business priorities within a
framework closely aligned
with shareholder interests.
Workspace Group PLC Annual Report and Accounts 2014
55
CHAIRMAN’S STATEMENT
On behalf of the Board, I am pleased to introduce our
2014 Remuneration Report, for which we are seeking
your support at our AGM in July 2014.
This is my first report to shareholders as Chairman of
the Committee, having taken over from John Bywater in
July 2013. I would like to take this opportunity to thank
John for his considerable contribution to the Committee
and also to welcome Damon Russell to the Committee.
In common with many Remuneration Committees, we
recognise that executive remuneration continues to be
an area of focus for shareholders and the wider public
and we are supportive of the Government’s drive to
increase the simplification and transparency of executive
remuneration reporting and to provide shareholders with
greater understanding and influence over future policy.
We present the report in line with the requirements
of the Large and Medium-sized Companies and Groups
(Accounts and Reports) (Amendment) Regulations
2013, to complement the considerable number of
changes which we introduced in the 2013 report to
comply with BIS requirements.
In 2013, we undertook a consultation with major
shareholders on modifications to long-term incentive
arrangements aimed at:
– enhanced performance measurement;
– extended time horizons for long-term incentives
through the introduction of a holding period with
claw-back provisions on vested LTIP awards; and
– increased shareholding guidelines for Executive
Directors with a minimum time horizon to
achieve them.
At the July 2013 AGM, 99% of the votes cast were in
favour of the Remuneration Report.
The Committee believes that the structure of
remuneration, which is unchanged for the year
commencing 1 April 2014:
– is transparent and well aligned with
shareholder interests;
– reinforces the Company’s strategy; and
– is helping to deliver strong results for shareholders.
We continue to monitor its impact carefully.
The Company’s long-term strategy is to attract,
motivate and retain high-performing leaders and
to ensure that they are focused on the delivery
of business priorities within a framework closely
aligned with shareholder interests.
Consequently, the key objective for the Remuneration
Committee, as in previous years, is to ensure that the
executive team are appropriately incentivised and that
the remuneration arrangements are fully aligned with
the Company’s strategy to provide sustainable long-
term returns to shareholders.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 56 Workspace Group PLC Annual Report and Accounts 2014
DIRECTORS’ REMUNERATION REPORT
CONTINUED
Workspace has continued to deliver attractive returns for
shareholders as shown by the progress against strategic
and financial measures summarised in the table below:
Against this background the Committee:
– Redesigned the Directors’ Remuneration Report in
line with the new regulations.
ACTUAL PERFORMANCE OF STRATEGIC AND
FINANCIAL MEASURES
2014
2013
76%
Total Shareholder Return
51.1%
Total Shareholder Return
+15%
Trading Profit after interest
(adjusted)
Up 14.5% to £20.5m
+12%
Trading Profit after interest
(adjusted)
Up 12% to £17.9m
+43%
Net Asset Value per share
Up 43% to £4.96
+13%
Net Asset Value per share
Up 13% to £3.48
Capital Return of
35% vs 14% for IPD quarterly
Universe
Capital Return of
14% vs 3% for IPD quarterly
Universe
+10%
Dividend per share for full year
Up 10% to 10.63p
+10%
Dividend per share for full year
Up 10% to 9.67p
2.
78%
Customer Satisfaction
82%
Customer Satisfaction
Overall, we believe that our remuneration strategy
provides appropriate incentives to foster a strong
performance culture, positioning pay competitively,
whilst doing the right thing for our shareholders.
We aim to ensure that the remuneration arrangements
throughout the business incentivise a clear focus on
both short and long-term financial performance as
well as the key strategic objectives, whilst driving and
developing a successful business.
– Conducted a review of Executive Director salaries
and agreed increases of 2.5% with effect from 1 April
2014. The average increase provided to employees
was 3.2%.
– Reviewed and agreed bonus outcomes for 2013/14.
The Group outcome was rated around Stretch
performance and bonuses were 117.3% of salary.
– Reviewed and increased the Chairman’s fee to
£135,000 with effect from 1 April 2014.
Details of the decisions are set out in the report below
structured as:
1.
The Directors’ Remuneration Policy Report (pages
57 to 62) which sets out the components of pay,
how they are linked to business strategy, and the
framework for assessing performance for the
Executive Directors. We propose that the policy will
apply from the 2014 AGM (16 July 2014) subject to
obtaining shareholder approval at the AGM; and
The Directors’ Annual Report on Remuneration.
This section sets out details of how our remuneration
policy was implemented for the year ended
31 March 2014 and how we intend for the policy
to apply for the year ended 31 March 2015.
Mindful of the increasing length of Remuneration
Reports, we have aimed to be concise without
compromising on transparency. I hope it is clear and
easy to understand and we welcome any feedback
or comments.
The Committee believes that its remuneration policy has
been successful in incentivising management to deliver
value for shareholders and therefore hopes to receive
your support at the AGM.
I would like to thank my fellow Committee members for
their support on these critical issues of the business.
The Committee also monitors the remuneration of
employees below Board level when determining
remuneration for Executive Directors.
DR MARIA V MOLONEY
CHAIRMAN OF THE REMUNERATION COMMITTEE
3 June 2014
Linking pay to Company performance is fundamental
to the remit of the Committee and we believe that we
provide a strong and independent direction on policy.
Our aim is to ensure that superior awards are only
paid for exceptional performance with a substantial
proportion of remuneration payable in the form of
performance-related pay. Incentives for Directors will
only pay out when stretching performance targets
have been achieved.
It is the policy of the Remuneration Committee to
consult with shareholders prior to making any significant
changes to the Remuneration Policy.
COMPLIANCE STATEMENT
This Remuneration Report has been prepared on behalf
of the Board by the Remuneration Committee (‘the
Committee’) in accordance with the Large and Medium-
sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013. The Committee adopts
the principles of good governance as set out in the
UK Corporate Governance Code and complies with
the UKLA Listing Code. The first part of this report,
which is not subject to audit, sets out the Company’s
remuneration policy. The second part, the Annual Report
on Remuneration, provides information on how the policy
was implemented during the year and how Workspace
intends to implement the policy in 2014/15, and the
sections subject to audit are highlighted accordingly.
Workspace Group PLC Annual Report and Accounts 2014
57
1. POLICY REPORT
This section provides Workspace’s remuneration policy
for Executive and Non-Executive Directors which is
intended to apply from 16 July 2014, the date of the 2014
AGM, subject to shareholder approval at the 2014 AGM.
Workspace’s remuneration policy is designed to
reinforce the Company’s goals, and to provide effective
incentives for exceptional Company and individual
performance. The Committee regularly reviews the
remuneration structure in place at Workspace to ensure
it remains aligned with our business strategy, reinforces
our success, and aligns reward with the creation of
shareholder value.
Remuneration packages are designed to attract, retain
and motivate directors of the highest calibre who have
the experience, skills and talent to manage and develop
the business successfully. A significant part of executive
remuneration is variable and is determined by the
Group’s success and directly links reward with Group
and individual performance. The Committee strives to
ensure that shareholders’ interests are served by
creating an appropriate balance between fixed and
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.
The policy aims to incorporate a level of flexibility and
discretion which allows the Committee, in accordance
with its reviews, to manage and determine Directors’
remuneration over the life of the policy. Once approved,
this policy will continue to apply until a revised policy
receives shareholder approval and becomes applicable.
WORKSPACE’S REMUNERATION POLICY FOR EXECUTIVE DIRECTORS
Purpose and link
to strategy
Operation
Base salary
To reflect market
value of the
role and an
individual’s
experience,
performance
and contribution.
Reviewed on an annual basis, with any increases
normally taking effect from 1 April.
The Committee reviews base salaries with reference to:
– the individual’s role, performance and experience;
− business performance and the external economic
environment;
− salary levels for similar roles at relevant comparators;
and
− salary increases across the Group.
Payable in cash.
Performance
metrics
Both Company
and individual
performance are
considerations
in setting
Executive
Director base
salaries.
Opportunity
Base salary increases are applied in line
with the outcome of the review. There is
no prescribed maximum.
Salary increases for Executive Directors
will not normally exceed those of the wider
workforce on an annualised basis over the
term of this policy.
Increases may be above this level if there
is an increase in the scale, scope, market
comparability or responsibilities of the role.
Where increases are awarded in excess of the
wider employee population, the Committee
will provide an explanation in the relevant
year’s Annual Report on Remuneration.
Latest salaries are set out on page 65.
Pension
To provide
cost-effective
retirement
benefits.
Benefits
To provide
market
competitive
benefits.
Executives participate in a defined contribution pension
scheme or may receive a cash allowance in lieu of
pension contribution.
Up to 16.5% of salary.
This may be exceeded in exceptional
circumstances (e.g. recruitment).
Not
performance
related.
Benefits typically include car allowance, private health
insurance, and death in service cover. Where
appropriate, other benefits may be offered including,
but not limited to, allowances for relocation.
Executives are also eligible to participate in all-
employee share plans, currently SAYE and Share
Incentive Plan, on the same basis as other employees.
Benefits may vary by role and individual
circumstance and are reviewed periodically.
Not
performance
related.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 58 Workspace Group PLC Annual Report and Accounts 2014
DIRECTORS’ REMUNERATION REPORT
CONTINUED
Purpose and link
to strategy
Annual Bonus
To reinforce and
reward delivery
of annual
strategic
business
priorities, based
on a scorecard
of KPIs relating
to both Group
and individual
performance.
Bonus deferral
and LTIP
investment
provide further
alignment with
shareholder
interests.
Operation
Opportunity
Performance metrics
KPIs and weightings are reviewed prior to
the start of the year to ensure they remain
appropriate and reinforce the business
strategy. Stretching targets are set.
The maximum bonus
potential for Executive
Directors is 120% of
salary p.a.
At the end of the year the Committee
determines the extent to which these
targets were achieved.
The Committee may vary the mix of cash
and deferred bonus shares from year to
year. The minimum deferral requirement
is normally 25% of bonus earned. The
Committee retains the discretion to
mandate deferral of a percentage of
bonus earned (which will normally vest
after two years) or allow Executives
to make an equivalent investment in
the LTIP.
Dividends may accrue on deferred
bonus shares and be paid on those
shares which vest.
Awards under the bonus are non-
pensionable.
For Threshold
performance, the
bonus opportunity is
typically up to 20%
of maximum.
In the event there is
no bonus for Group
performance, the
Committee has
discretion to award
a bonus of up to
20% of salary for
exceptional individual
performance.
Performance is assessed against Group and individual
performance. Group performance represents the
majority of the total bonus opportunity.
KPIs selected and their respective weightings may
vary from year to year to reflect the Company’s
strategic priorities.
The Group performance measures for 2014 annual
bonuses were:
– Trading profit before tax;
− Capital return from the portfolio versus a defined
comparator index compiled by IPD; and
− Customer satisfaction.
The Committee has the flexibility to select alternative
or additional Group performance measures over the
life of the policy to ensure that the annual bonus is
aligned to the Company’s strategic priorities. Any
changes will be disclosed and explained in the Annual
Report on Remuneration.
In exceptional circumstances, the Committee has the
ability to exercise discretion to override the formulaic
bonus outcome within the limits of the plan where
it believes the outcome is not truly reflective of
performance and to ensure fairness to both
shareholders and participants.
Further details of performance measures, weightings
and targets for the financial year under review are
provided in the Annual Report on Remuneration on
page 66.
LTIP
To reinforce
delivery of
sustained
long-term
sector out-
performance;
and to align the
interests of
participants
with those of
shareholders.
The Committee may grant annual awards
of performance shares and matching
shares (subject to participant investment).
Awards1 may be in the form of nominal
priced options, conditional shares or
jointly held shares2, which normally
vest after three years, subject to
performance conditions.
The performance period is normally
three years and runs from the start of
the financial year in which the awards
are granted.
From 2013 LTIP awards, inclusive, 100%
of net vested shares are subject to a
further holding period during which
clawback provisions apply. The holding
period is normally at least one year.
LTIP awards subject to the holding period
may be reduced in circumstances where
the Company becomes aware of a
material misstatement of the Company’s
financial accounts for any financial year
during the performance period or a
participant’s gross misconduct.
The award levels and performance
conditions are reviewed in advance of
grant by the Remuneration Committee
to ensure they remain appropriate.
Dividends may accrue on LTIP awards
and be paid on those shares which vest.
Non-pensionable.
Plan provides for
annual awards of:
Awards usually vest after three years, subject to
Company performance and continued employment.
Performance measures and weightings are
reviewed in advance of grant to ensure they
remain appropriate.
Performance measures for 2014 LTIP awards are
relative Net Asset Value (NAV) growth (1/3), relative
TSR (1/3) and absolute TSR (1/3).
Over the life of this policy, NAV growth and TSR will
be retained as performance measures.
The Committee has the flexibility to vary the
weightings and the balance between relative and
absolute performance.
The Committee would consult major shareholders
before making any significant changes.
For LTIP awards to vest on TSR, the Remuneration
Committee must be satisfied that the Company’s
recorded TSR outcome is a genuine reflection of the
underlying business performance of the Company
over the performance period. Where absolute TSR
is used, it is subject to a relative TSR underpin.
Further details of performance measures, weightings
and targets for awards made during the financial year
under review are provided in the Annual Report on
Remuneration on pages 67 to 68.
− 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 shares
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. The
Company 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.
Threshold performance
typically warrants
20% vesting.
Notes:
1.
LTIP: Awards will be satisfied by either newly issued shares or shares purchased in the market and any use of newly issued shares will
be subject to dilution limits contained in the Scheme rules.
2. Jointly held LTIP awards: The Company may offer participants the opportunity to structure their LTIP awards so that they acquire shares
jointly with the Company’s Employee Share Ownership Trust (‘ESOT’), with the effect that the growth in value of the shares creates a
capital gain. Individuals are required to pay appropriate income tax and National Insurance 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 structure is intended to provide
savings for the Company and participants.
Workspace Group PLC Annual Report and Accounts 2014
59
NOTES TO THE POLICY TABLE
RATIONALE FOR PERFORMANCE MEASURES
Annual bonus KPIs are reviewed annually to ensure
these reinforce the Company’s strategic business
priorities for the year. For the LTIP, the Committee has
selected TSR and NAV to provide a balanced portfolio
of measures which are well aligned with shareholder
interests. The comparator group for relative TSR and
relative NAV for recent cycles has been the FTSE 350
Real Estate Companies. The Committee has discretion
to review the comparator group if any of the constituent
companies are affected by corporate events such as
mergers and acquisitions. Ahead of each performance
cycle, the Committee also reviews and may change the
comparator group to ensure it remains appropriate.
Performance targets applying to the annual bonus
and LTIP are reviewed annually, based on a number
of internal and external reference points (e.g. internal
forecasts, external expectations, etc).
Performance targets are set to be stretching but
achievable, with regard to the particular strategic
priorities and economic environment in a given
performance period.
The Committee has discretion to adjust the performance
conditions during the performance period in exceptional
circumstances, provided the new conditions are no
tougher or easier to achieve than the original conditions.
SHAREHOLDING GUIDELINES
To encourage long-term share ownership and support
alignment with shareholders, Executive Directors are
encouraged to build and hold Workspace shares
equivalent to 150% of salary in normal circumstances
within five years of appointment.
EXISTING AWARDS
Executive Directors are eligible to receive payment for
awards made prior to the approval and implementation
of the remuneration policy detailed in this report.
REMUNERATION POLICY FOR OTHER EMPLOYEES
The Group’s wider people policies are reported
separately on page 74. Following probationary periods,
all staff in the Company are eligible to participate in the
Company’s bonus scheme, SAYE, SIP, pension scheme,
life assurance arrangements and medical insurance
benefits. All members of the Executive Committee
and some senior staff are eligible to participate in the
Company’s LTIP. Some senior executives are also required
to adhere to the Company’s shareholding guidelines.
REMUNERATION POLICY FOR THE CHAIRMAN AND NON-EXECUTIVE DIRECTORS
The Board determines the remuneration policy and level of fees for the Non-Executive Directors within the limits
set out in the Articles of Association. The Remuneration Committee recommends the remuneration policy and level
of fees for the Chairman of the Board. The current policy is:
Purpose and link
to strategy
Fees
To reflect the
time commitment in
performing the duties
and responsibilities
of the role.
Operation
Annual fee for the Chairman.
Annual base fee for the Non-Executive Directors. Additional fees
are paid to Non-Executive Directors for additional responsibilities
such as chairing a Board Committee.
Fees are reviewed from time to time, taking into account time
commitment, responsibilities and fees paid by companies of a
similar size and complexity.
Payable in cash.
Opportunity
Performance metrics
Fee increases are
applied in line with
the outcome of
the review.
Not applicable.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 60 Workspace Group PLC Annual Report and Accounts 2014
DIRECTORS’ REMUNERATION REPORT
CONTINUED
PAY SCENARIO CHARTS
The graphs below provide estimates of the potential
future reward opportunity for each of the two current
Executive Directors, and the potential split between
the different elements of remuneration under three
different performance scenarios: ‘Minimum’, ‘On Target’
and ‘Maximum’.
CEO
Maximum
27%
27%
On-target
54%
Minimum
46%
28%
£1,840k
18%
£918k
£499k
0
200 400 600 800 1,000 1,200 1,400 1,600
1,800
£000s
CFO
Fixed
Annual bonus
LTIP
Maximum
28%
27%
On-target
55%
Minimum
45%
27%
£1,162k
18%
£586k
Fixed
Pension
Other
benefits
£324k
Annual Bonus
0
200 400 600 800 1,000 1,200 1,400 1,600
1,800
Fixed
Annual bonus
LTIP
£000s
Potential reward opportunities illustrated above are
based on Workspace’s remuneration policy, applied
to the latest known base salaries and incentive
opportunities.
For the annual bonus, the amounts illustrated are
those potentially receivable in respect of performance
for 2014/15.
For the LTIP, the award opportunities are based on
those LTIP awards which are expected to be granted
in 2014. It should be noted that LTIP awards granted in
a year do not normally vest until the third anniversary
of the date of grant and, for awards granted in 2014,
a holding period applies to net vested shares of 1 year.
The projected value of LTIP amounts excludes the
impact of share price movement.
In illustrating potential reward opportunities the
following assumptions have been made:
Component
Base salary Latest known salary
‘Minimum’
‘On-target’
‘Maximum’
Contribution rate applied to latest
known salary
Benefits as provided in the single
figure table on page 64
No bonus
payable
Target
bonus
(50% of
max)
Maximum
bonus
LTIP
No LTIP
vesting
Assumes full take-up
of investment
opportunity, and
Threshold
vesting
(20% of max)
Maximum
vesting
APPROACH TO RECRUITMENT REMUNERATION
In the cases of hiring or appointing a new Executive Director from outside the Company, the Committee may make
use of all existing components of remuneration, as follows:
Component
Base salary
Pension
Benefits
Annual bonus
Approach
The base salaries of new appointees will be determined by reference to the
individual’s role and responsibilities, experience and skills, relevant market data,
internal relativities and their current basic salary.
New appointees will be eligible to participate in the Group’s defined contribution
pension plan or receive a cash alternative.
New appointees will be eligible to receive benefits in line with the policy.
The structure described in the policy table will normally apply to new appointees
with the relevant maximum being pro-rated to reflect the proportion of the
year served.
LTIP
New appointees will be eligible for awards under the LTIP which will normally
be on the same terms as other executives, as described in the policy table.
Maximum annual grant value
Not applicable.
Up to 120% of salary p.a.
Performance shares of up
to 200% of salary (100%
normal maximum).
Matching share awards1 of
up to 100% of salary.
Note:
1. Subject to similar investment requirement as for other executives.
Workspace Group PLC Annual Report and Accounts 2014
61
In determining the appropriate remuneration structure
and levels for a new Executive Director, the Committee
will take into consideration all relevant factors (including
quantum, nature of remuneration and the jurisdiction
from which the candidate was recruited) to ensure that
the pay arrangements are in the best interests of
Workspace and its shareholders.
Different performance measures may be set initially for
the annual bonus and LTIP award, taking into account
the responsibilities of the individual, and the point in the
financial year that they joined, and subject to the rules
of the plan. The rationale will be clearly explained.
The Committee may make an award in respect of a
new appointment to ‘buy out’ incentive arrangements
forfeited on leaving a previous employer, i.e. over and
above the approach outlined in the table above, and
may exercise the discretion available under Listing Rule
9.4.2 R1 if necessary to do so. In doing so, the Committee
will seek to do no more than match the fair value of
the awards forfeited, taking account of performance
conditions attached to these awards, the likelihood of
those conditions being met and the proportion of the
vesting period remaining.
The approach in cases of appointing a new Executive
Director by way of internal promotion will be consistent
with the policy for external appointees detailed above.
Where an individual has contractual commitments made
prior to their promotion to Executive Director level, the
Company will continue to honour these arrangements.
In the case of appointing a new Non-Executive Director,
the Committee will follow the policy as set out in the
table on page 59. A base fee and any additional fees
payable for additional services (such as chairing a
Board Committee) will be in line with the prevailing
fee schedule.
SERVICE CONTRACTS
The Executive Directors are employed under contracts of employment with Workspace Group PLC. The principal
terms of the Executive Directors’ service contracts are as follows:
Executive Director
Position
Effective date of contract
From Company
From Director
Jamie Hopkins
Graham Clemett
Chief Executive Officer
Chief Financial Officer
3 February 2012
31 July 2007
12 months
12 months
12 months
12 months
Notice period
The Chairman and Non-Executive Directors have letters of appointment. Dates of the Directors’ letters of
appointment and the unexpired period of their appointments (where appropriate after extension by re-election)
are set out below:
Name
Daniel Kitchen
Bernard Cragg
Maria Moloney
Chris Girling
Damon Russell
Date of original appointment
(date of reappointment)
6 June 20112
1 June 2003
(1 June 2012)
22 May 2012
7 February 2013
29 May 2013
The Directors are subject to annual re-election at the AGM.
Unexpired
term as at
31 March 2014
3 months
4 months
14 months
22 months
26 months
Date of
appointment/last
reappointment at AGM
2013
2013
2013
2013
2013
Notice period
6 months
6 months
3 months
3 months
3 months
Non-Executive Directors’ letters of appointment and Executive Directors’ contracts are available to view at the
Company’s registered office.
Notes:
1.
Listing Rule 9.4.2 R allows UK-listed companies to grant long-term share-based awards in exceptional circumstances, without
prior shareholder approval. The Committee has limited exceptional circumstances to the recruitment of an individual to buy out
outstanding awards.
2. On 30 April 2014 and on the recommendation of the Nominations Committee, the Board agreed to renew Mr Kitchen’s letter of
appointment, extending his tenure for a further three-year term from 6 June 2014.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77
62 Workspace Group PLC Annual Report and Accounts 2014
DIRECTORS’ REMUNERATION REPORT
CONTINUED
EXIT PAYMENT POLICY
Payments in lieu of notice are limited to the Director’s basic salary for the unexpired portion of the notice period.
The Committee will aim to minimise the level of payments to that Director, having regard to all circumstances,
including the Company’s contractual obligations to the Director, the reason for departure, and the Company’s
policy on mitigation. In the event of termination of any Director, the Company reserves the right to make phased
payments which are paid in monthly instalments and subject to mitigation.
Where a Director may be entitled to pursue a claim against the Company in respect of his/her statutory
employment rights or any other claim arising from the employment or its termination, the Committee will be
entitled to negotiate settlement terms with the Director that the Committee considers to be reasonable in the
circumstances and is in the best interests of the Company, and to enter into a settlement agreement with the
Director. The Committee has discretion to pay a Director’s legal fees in relation to any settlement agreement.
In the event that a participant ceases to be an employee of Workspace, treatment of outstanding awards under
the Group’s incentive plans will be determined based on the relevant plan rules.
Incentive Plan
Treatment of awards
LTIP
– Under the LTIP, unvested LTIP shares (Performance and Matching) normally lapse unless the individual is
considered a ‘good leaver’1, in which case awards are normally tested for performance over the full
performance period and pro-rated for time based on the proportion of the vesting period served, with
Committee discretion to treat otherwise. Vested LTIP awards which are subject to an additional holding period
will typically be retained and released at the end of the holding period, although the Committee has the
discretion to allow earlier release.
– In the event of a change of control, LTIP awards would normally be pro-rated for time and performance to the
effective date of change of control, in line with best practice.
Deferred Bonus Plan
– Under the deferred bonus plan, unvested deferred bonus shares will normally lapse on leaving unless the
individual is considered a ‘good leaver’1, in which case awards normally continue and are released at the usual
time, although the Committee has the discretion to allow earlier release.
Annual Bonus Plan
– Under the annual bonus plan, leavers during the plan year normally lose any entitlement to bonus unless the
individual is considered a ‘good leaver’1. Good leavers are eligible for an award to the extent that performance
conditions have been satisfied and pro-rated for the proportion of the financial year served, with Committee
discretion to treat otherwise.
1.
A good leaver is defined as an employee who ceases to hold Employment during the plan year by reason of: injury, ill-health or
disability proved to the satisfaction of the Committee; redundancy; retirement with the agreement of the Group Company by which he
is employed; the Participant’s Employing Company ceasing to be a Group Company; the business or part of the business to which the
Participant’s Employment relates being transferred to a person who is not a Group Company; or any other reason which the Committee
in its absolute discretion so permits.
EXTERNAL APPOINTMENTS
It is the Board’s policy to allow Executive Directors
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.
CONSIDERATION OF CONDITIONS ELSEWHERE
IN THE COMPANY
In making remuneration decisions, the Committee
considers the pay and employment conditions
elsewhere in the Group. In particular, the Committee
considers the range of base pay increases across the
Company as a factor in determining the base salary
increases for Executives.
The Remuneration Committee does not specifically
consult with employees over the effectiveness and
appropriateness of the remuneration policy and
framework, although as members of the Board,
the Committee members receive updates from the
Executives on their discussions and consultations with
employees. The Committee also monitors information
with regard to bonus payments and share awards
made to the management of the Group.
CONSIDERATION OF SHAREHOLDER VIEWS
The Committee is committed to ongoing dialogue with
shareholders and welcomes feedback on Directors’
remuneration. It is the Remuneration Committee’s policy
to consult with major shareholders prior to making any
significant changes to its remuneration policy and the
Committee also considers AGM feedback when
reviewing remuneration policy and considering its
implementation. The Committee also considers
guidance from investors more generally.
As foreshadowed in last year’s Remuneration Report,
following consultation with shareholders in early 2013,
the Committee implemented some modifications for
LTIP awards from 2013 onwards aimed at providing
improved performance measurement, extended time
horizons and increased alignment with shareholder
interests. We were pleased to receive strong support
from shareholders on the 2013 Remuneration Report
with a 99.3% vote in favour. No further changes have
been made to the policy for 2014.
Workspace Group PLC Annual Report and Accounts 2014
63
2. THE DIRECTORS’ ANNUAL
REPORT ON REMUNERATION
The following section provides details of how the
remuneration policy was implemented during the year
and how the Committee intends to implement policy
in 2014/15. Disclosure also details outstanding awards
to Directors.
REMUNERATION COMMITTEE MEMBERSHIP IN 2013/14
The Committee met formally on seven occasions
during the year under review. The Committee also met
informally on several occasions. John Bywater chaired
the Committee until his retirement on 25 July 2013,
when Maria Moloney became Chairman. Attendance
by individual Committee members at meetings is
detailed below.
Committee member
Daniel Kitchen
Bernard Cragg
Maria Moloney
Chris Girling
Damon Russell1
John Bywater2
Member
throughout
2013/14
Number
of meetings
attended
Yes
Yes
Yes
Yes
No
No
7
7
7
7
3
5
Notes:
1. Damon Russell was appointed as a Director on 29 May 2013.
2. John Bywater retired as a Director on 25 July 2013.
During the year, the Committee sought internal
support from the CEO and CFO whose attendance
at Committee meetings was by invitation from the
Chairman, to advise on specific questions raised by the
Committee and on matters relating to the performance
and remuneration of senior managers. The Company
Secretary attended each meeting as Secretary to the
Committee. No Director was present for any discussions
that related directly to their own remuneration.
AGENDA DURING 2014
During the course of the year, the Remuneration
Committee was engaged with a number of
matters, including:
– Approval of the Directors’ Remuneration Report for
2013/14 and review of the outcome of AGM voting
for the report;
– Annual review of all Executive Directors’
remuneration arrangements. Salaries and total
remuneration were benchmarked against a
comparator group of other UK-listed property
companies and companies of similar market
capitalisation;
– Review of annual bonus outcomes for 2013/14 and
approval of the performance conditions for 2014/15
annual bonuses;
– Review of share plan performance measures;
– Review and approval of awards under the LTIP,
taking into account the total value of all awards
under this Plan;
– Review of the Chairman’s fees;
– Review of macro-economic conditions, regulatory
developments and legislative changes;
– Review of developments in Corporate Governance,
guidance from institutional shareholders and their
representative bodies and the Large and Medium-
sized (Accounts and Reports) (Amendments)
Regulations 2013;
– Review of Committee Performance in 2013/14; and
– The tender of Remuneration Advisor services
undertaken in October 2013.
ADVISERS
In undertaking its responsibilities, the Committee seeks
independent external advice as necessary. To this end,
for the year under review, having conducted a review
of services provided by Remuneration Advisers, the
Committee continued to retain the services of Kepler
Associates as the principal external advisers to the
Committee. The Committee evaluates the support
provided by its advisers annually and is comfortable
that Kepler Associates provides independent
remuneration advice to the Committee and do not
have any connections with Workspace that may impair
their independence. Kepler Associates is a founding
member and signatory of the Code of Conduct for
Remuneration Consultants, details of which can be
found at www.remunerationconsultantsgroup.com.
During the year, Kepler Associates provided independent
advice on a wide range of remuneration matters
including current market practice, benchmarking of
executive pay and incentive design and independent
monitoring of TSR. They have also provided guidance
on the new Directors’ remuneration reporting
regulations. Kepler Associates does not provide
any other services to the Company.
Grant Thornton was engaged by the Company
Secretary to advise the Committee and the Company
generally on the administration of the Company’s share
plans. Slaughter and May LLP was also engaged by the
Company Secretary to provide legal advice to the
Committee and employment law advice concerning
senior executives of the Company.
The Committee continually assesses ongoing advice
provided by its advisers on all remuneration matters.
The fees paid to advisers in respect of support to the
Committee during the year under review are shown in
the table below:
Kepler
Associates1
Grant
Thornton
Slaughter
and May LLP
Remuneration
Committee
support
£55,600
£52,256
£4,000
Note:
1. Fees paid are on the basis of time and materials.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 64 Workspace Group PLC Annual Report and Accounts 2014
DIRECTORS’ REMUNERATION REPORT
CONTINUED
SUMMARY OF SHAREHOLDER VOTING AT THE 2013 AGM
The table below shows the results of the advisory vote on the 2012/13 Remuneration Report at the 2013 AGM on
25 July 2013. It is the Remuneration Committee’s policy to consult with major shareholders prior to any major
changes to its Executive Director remuneration structure.
For (including discretionary)
Against
Total votes cast (excluding withheld votes)
Votes withheld1
Total votes cast (including withheld votes)
Total number
of votes
92,214,653
684,139
92,898,792
2,381
92,901,173
% of votes
cast
99.26%
0.74%
99.99%
0.01%
100%
Note:
1. A withheld vote is not a vote in law and is not counted in the calculation of the proportion of votes cast for and against a resolution.
SINGLE FIGURE OF EXECUTIVE DIRECTOR TOTAL REMUNERATION (AUDITED)
The table below sets out a single figure for the total remuneration received by each Executive Director for the year
ended 31 March 2014 and the prior year:
Salary
Benefits1
Annual bonus2
LTIP3
Other – SAYE, SIP4
Pension
Total
Jamie Hopkins
Graham Clemett
2014
£000
408.8
17.3
479.5
n/a
n/a
61.3
966.9
2013
£000
400.0
17.1
480.0
n/a
3.2
60.0
960.3
2014
£000
255.5
18.7
299.7
835.2
n/a
42.2
1,451.3
2013
£000
250.0
18.1
300.0
984.6
3.2
41.2
1,597.1
Notes:
1.
Benefits: Taxable value of benefits received in the year by Executives includes Company mobile phone, a car allowance, private health
insurance and death in service cover.
2. Annual bonus: This is the total bonus earned in respect of performance during the relevant year. For 2014 (and 2013), the Committee set
a minimum deferral requirement of 25% of the bonus earned. For 2014, this deferral was equivalent to £119,880 for Jamie Hopkins and
£74,925 for Graham Clement. For 2013, this was equivalent to £120,000 for Jamie Hopkins and £75,000 for Graham Clemett. Further
details of annual bonus awards for 2014 can be found in the Annual Report on Remuneration on pages 65 and 66.
3. LTIP: The 2014 figure for Mr Clemett, includes the value of 2011 LTIP shares that vested on performance to 31 March 2014. 100% of the
2011 LTIP award vested. The share price is the trailing three-month average share price to 31 March 2014 of 565.2 pence. This will be
reported in the 2015 Remuneration Report based on the share price on date of vesting. The value of LTIP awards vesting is higher
than the value shown in the pay scenario charts on page 60 due to the impact of share price appreciation between grant and vesting.
Further details of the 2011 LTIP awards vesting can be found in the Annual Report on Remuneration on page 68.
The 2013 figure for Mr Clemett includes, the value of 2010 LTIP awards at vesting which has been calculated using the mid-market
closing share price at vesting on 12 November 2013 of £5.08. These awards vested in November 2013 as the Company had remained
in an extended closed period. 98.9% of the 2010 LTIP grant vested on performance to 31 March 2013.
4. Each Executive Director was awarded 4,663 SAYE options on 30 July 2012 and 292 SIP shares on 26 March 2013. The value of the SAYE
options is the embedded value at grant, based on an exercise price set at 80% of the market value of a share at the invitation date of
£2.41 and SIP shares are valued using a share price on date of award of £3.42.
EXTERNAL APPOINTMENTS
The Board’s policy on external appointments is detailed on pages 60 and 61. No such positions were taken and
so no such fees were paid during the financial year.
Workspace Group PLC Annual Report and Accounts 2014
65
SINGLE FIGURE OF NON-EXECUTIVE DIRECTOR REMUNERATION AND NON-EXECUTIVE DIRECTOR
FEES (AUDITED)
The table below sets out a single figure for the total remuneration received by each Non-Executive Director for the
year ended 31 March 2014 and the prior year:
Daniel Kitchen
Bernard Cragg
Maria Moloney
Chris Girling
Damon Russell1
John Bywater2
Non-Executive
Director
Base fee
Additional fees
2014
£000
125.0
–
2013
£000
125.0
–
Total
125.0 125.0
2014
£000
40.0
5.0
45.0
2013
£000
40.0
5.0
45.0
2014
£000
40.0
3.3
43.3
2013
£000
34.6
–
34.6
2014
£000
40.0
–
40.0
2013
£000
5.8
–
5.8
2014
£000
33.8
–
33.8
2013
£000
–
–
–
2014
£000
13.3
1.7
15.0
2013
£000
40.0
5.0
45.0
Notes:
1. Damon Russell was appointed to the Board on 29 May 2013.
2. John Bywater retired as a Director on 25 July 2013.
Remuneration comprises an annual fee for acting as
Chairman or Non-Executive Director of the Company.
Additional fees are paid to Non-Executive Directors
in respect of service as Chairman of the Audit and
Remuneration Committee. The Chairman and
Non-Executive Directors are not eligible for bonuses,
retirement benefits or to participate in any share
scheme operated by the Company.
During the year the Committee reviewed the Chairman’s
fee in light of the time commitment and fees payable at
comparator companies and increased this to £135,000
effective from 1 April 2014 (2013: £125,000).
With effect from 1 April 2014 the Non-Executive
Directors receive a base fee of £45,000 (2013: £40,000)
with an additional fee for the Audit and Remuneration
Committee Chairs of £10,000 (2013: £5,000).
The fees for Non-Executive Directors were previously
increased in 2008.
BASE SALARY AND PENSION
In line with Policy, the Committee reviews base salaries
annually with any changes normally taking effect from
1 April. In April 2014, the Committee reviewed the base
salary of the CEO and the CFO and considered a range
of factors including the external economic environment,
individual performance, experience and rates of salary for
similar jobs in companies of a similar sector and size, and
salary increases across the Company. Following its review,
the Committee increased Executive salaries by 2.5%. The
average salary increase across the Group was 3.2%. As
of 1 April 2014, the CEO will therefore receive a salary of
£419,000 and the CFO will receive a salary of £261,900.
The next salary review date for Executives will be
1 April 2015.
For the year under review, the CEO and CFO received
an employer’s pension contribution equal to 15% and
16.5% of basic salary respectively, which is made to a
defined contribution (money purchase) scheme.
From April 2014, no further pension contributions will
be made to Mr Clemett, but he will receive instead an
equivalent cash allowance of 16.5% per annum in lieu
of pension.
ANNUAL BONUS SCHEME (AUDITED)
The Group operates an annual bonus scheme
which provides for a capped variable performance-
related bonus.
For 2013/14, the maximum bonus potential for the
Executive Directors was set at 120% of basic annual
salary. The Committee sets a minimum deferral or
investment each year into Workspace shares; for
2013/14 the Committee set a minimum deferral
requirement of 25% of the bonus earned.
The preferred mechanism for meeting this deferral
requirement is participant investment in the LTIP.
However, the Committee retains 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 2013/14 the Committee allowed Executives
to make an equivalent investment in the LTIP.
The performance measures, targets and outcomes for
2013/14 Executive Director annual bonuses are shown
overleaf. Against each measure the bonus starts to be
paid on the achievement of a threshold performance,
increasing on a straight line basis until stretch
performance is achieved, at which point the full
bonus potential for that measure is earned.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 66 Workspace Group PLC Annual Report and Accounts 2014
DIRECTORS’ REMUNERATION REPORT
CONTINUED
THE PERFORMANCE MEASURES, TARGETS AND OUTCOMES FOR 2013/14
Measure
Weighting Measure
Threshold1
Stretch1
Performance achieved
(% of bonus earned)
Actual
performance
Jamie
Hopkins
Graham
Clemett
Trading profit before tax
(% growth on prior year)
Capital Return from portfolio
versus a defined comparator
Benchmark compiled by IPD Benchmark
70%
Customer satisfaction
6%
30%
10%
Corporate performance bonus may be
adjusted by a factor in the range of
0.67 to 1.33 (with factors greater than
1.0 reflecting superior performance)
Corporate
50%
Personal
Annual bonus
(% of salary)
120%
12%
14.5%
50%
50%
Benchmark
+2%
80%
Benchmark
+18.3%
78%
30%
8.2%
30%
8.2%
Subject to Committee
assessment
See
commentary
below
1.33
1.33
117.3%
117.3%
Note:
1. Bonus is payable on a straight line basis, from 0% at Threshold to 100% at Stretch.
The Committee also assessed performance against strategic and personal objectives and was pleased to
note that during the year the Company outperformed on every measure. The Committee noted the following
achievements in particular:
Objective
Result
Financial and Corporate
– Deliver Budget;
– Broaden Portfolio Profile;
– Diversify funding.
Budget exceeded by 7%;
Trading profit after interest up 14.5% to £20.5m;
Outperformed IPD quarterly Universe by 21% and outperformed the
comparator Benchmark by 18.3%;
Property Valuation up 27% to £1,078m;
Dividend up 10% to 10.63p per share;
Net Asset Value up 43% to £4.96 per share;
Total Shareholder Return for the year of 76%;
Fully unsecured, diversified lending pool and extended maturity profile.
Operational
– Deliver marketing plan;
– Deliver new and refurbished
buildings;
Strong customer demand and pricing increases;
All delivered on time with strong lettings momentum;
– Increase brand awareness
Roll out of new centre staff operating model;
and customer service;
– Accelerate change of use
planning applications.
Investment
– Complementary acquisitions;
– Non-core disposals;
– Grow alternative income
streams.
Four mixed-use consents achieved and five schemes sold.
Three acquisitions completed in strategic London locations for £33m;
Four properties sold for £12m;
Initiatives including Club Workspace, technology offering and design
services continue to develop.
Following consideration of the above, the Committee awarded Jamie Hopkins and Graham Clemett a bonus
of £479,522 and £299,701 respectively. 25% of earned bonuses will be invested in the LTIP.
Workspace Group PLC Annual Report and Accounts 2014
67
2014/15 ANNUAL BONUS FRAMEWORK
The framework for 2014/15 is unchanged from 2013/14. The Committee intends to disclose incentive targets
retrospectively at the time that bonuses are paid provided that they are not considered to be commercially
sensitive at that time.
LTIP AWARDS (AUDITED)
LTIP awards are granted as performance shares of 100% of salary 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 was 100% of their annual basic salary. The Company 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 growth,
relative TSR and absolute TSR. Relative performance is measured against the constituents of the FTSE 350 Real
Estate Index. In addition, for any shares to vest on TSR, the Committee must satisfy itself that the recorded TSR is
a genuine reflection of the underlying business performance of Workspace. Net vested LTIP shares are required to
be held for a one-year holding period before the shares can be sold. Clawback provisions apply during the holding
period in the event of a material misstatement of the Company’s financial statements for any financial year during
the Performance Period or a participant’s gross misconduct.
A summary of performance measures, weightings and targets for awards granted during the year is provided below:
Performance
condition
One-third
Growth in Net Asset Value
relative to companies in the
FTSE 350 Real Estate Index
Level of
performance
Threshold
Maximum
Company’s
% of award
vesting2
percentile rank
20%
51st percentile
75th percentile 100%
One-third
TSR (share price growth plus
reinvested dividends) relative
to companies in the FTSE 350
Real Estate Index
Company’s
% of award
vesting2
percentile rank
20%
51st percentile
75th percentile 100%
One-third
Absolute TSR1
Company’s
performance
8% p.a.
17% p.a.
% of award
vesting2
20%
100%
Notes:
1.
For any shares to vest on absolute TSR, the Company’s TSR must exceed the median TSR of the comparator group over the
performance period.
2. There is straight-line vesting between the ‘Threshold’ and ‘Maximum’ performance levels.
The following awards were granted during the year under the LTIP.
CEO
CFO
Date of grant
26 June 2013
26 June 2013
Market price
at date of
award2
£4.0497
£4.0497
Performance share award
Face value
Number of
shares
£
% of salary
Matching share award1
Number of
shares
Face value
£
% of salary
100,945 £408,800
63,091 £255,500
100%
100%
74,079 £300,000
63,091 £255,500
73%
100%
Notes:
1. Matching share awards of up to 100% of salary. Actual awards to the Executive Directors reflected their investments.
2. The share price for calculating the levels of awards was £4.0497, the average mid-market closing price over the three dealing days
to 14 June 2013.
2014 LTIP AWARDS
The Committee intends to grant 2014 LTIP awards following the release of the Company’s preliminary results
announcement with performance conditions unchanged from those for the 2013 LTIP awards, and the anticipated
maximum opportunity for awards is detailed below.
Director
CEO
CFO
Performance Award
100% of salary
100% of salary
Maximum potential
Matching Award
100% of salary
100% of salary
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77
68 Workspace Group PLC Annual Report and Accounts 2014
DIRECTORS’ REMUNERATION REPORT
CONTINUED
RECAP OF PERFORMANCE CONDITIONS FOR EXISTING LTIP AWARDS
Performance
condition
One-third
Growth in Net Asset Value
relative to companies in the
FTSE 350 Real Estate Index
Level of
performance
Company’s
percentile rank
% of award
vesting
One-third
TSR (share price growth plus
reinvested dividends) relative
to companies in the FTSE 350
Real Estate Index
Company’s
percentile rank
% of award
vesting
One-third
Absolute TSR1
Company’s
performance
% of award
vesting
Awards made in 2011, 20121,2,3
Threshold
Maximum
51st percentile
20%
75th percentile 100%
Median
Median +
7.5% p.a.
20%
100%
11% p.a.
20% p.a.
20%
100%
Notes:
1.
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.
2. There is straight-line vesting between the ‘Threshold’ and ‘Maximum’ performance levels.
3. As described in prior years’ remuneration reports, the 2012 Matching Share award for the CEO may vest subject to the achievement
of an absolute TSR underpin of 4% p.a.
LTIP VESTING OUTCOME IN 2013/14 (AUDITED)
The three-year performance period of 2011 LTIP awards ended on 31 March 2014.
Over the three years from 1 April 2011 to 31 March 2014, Workspace’s three-year NAV growth of 21.7% p.a. was 100th
percentile against the FTSE 350 Real Estate which warranted 100% of this element vesting (equivalent to 33.3% of
LTIP shares awarded). Workspace’s three-year TSR outperformed the median TSR of the FTSE 350 Real Estate by
17.2% p.a. which warranted 100% of this element vesting (equivalent to 33.3% of LTIP shares awarded). Workspace’s
three-year absolute TSR of 36.7% p.a. warranted 100% of the absolute TSR element vesting (equivalent to 33.3% of
LTIP shares awarded).
The Committee considered this together with the underlying business performance of Workspace, and concluded
that 100% of the 2011 LTIP shares awarded to Executives would vest. These awards are due to vest on 3 August 2014.
CEO
CFO
Interests held1
Vesting %
Number of shares vesting
Date vesting
NIL
147,764
N/A
100%
NIL
147,764
N/A
3 August 2014
Value2
N/A
£835,162
Notes:
1. Comprises 73,882 performance award shares and 73,882 matching award shares for the CFO.
2. The value is calculated as the number of shares vesting multiplied by the average three-month share price to 31 March 2014
of 565.2 pence. These awards will be reported in the 2015 Remuneration Report based on the share price on date of vesting.
SHARE INCENTIVE PLAN (SIP)
The Company implemented a SIP in 2013 and, in March 2013, the Company granted one-off share awards under the
SIP (although the SIP rules are flexible enough to accommodate subsequent offers) of up to £1,000 of free shares
per employee.
51,800 ordinary shares were purchased by the Company on the market to grant the free shares and these are held
in a UK resident trust. The free shares are to be held in the Trust for a minimum period of three years before they
can be withdrawn by the employees.
JOINTLY HELD LTIP AWARDS
In 2009 the Company offered participants the opportunity to restructure their 2009 LTIP awards and future
awards so that they acquired shares jointly with the Company’s Employee Share Ownership Trust (‘ESOT’), with
the effect that the growth in value of the shares creates a capital gain. Individuals were required to pay appropriate
income tax and National Insurance 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 has generated
ongoing savings for the Company and participants.
For the 2009 and 2010 awards Graham Clemett accepted the joint ownership awards as part of his total awards,
taking half of his awards as joint ownership awards, with the remainder in the original conditional shares structure.
For the 2011, 2012 and 2013 awards the Executive Directors did not participate in joint ownership awards. It is also
intended that the Executive Directors will not participate in joint ownership awards for the 2014 LTIP awards.
Workspace Group PLC Annual Report and Accounts 2014
69
SHARE-BASED AWARDS AND DILUTION
The Company’s share schemes are funded through
a combination of shares purchased in the market and
new-issue shares, as appropriate. The Company monitors
the number of shares issued under these schemes and
their impact on dilution limits. The Company’s usage of
shares compared to the relevant dilution limits set by
the Association of British Insurers (ABI) in respect of
all shares plans (10% in any rolling ten-year period)
and executive share plans (5% in any rolling ten-year
period) as at 31 March 2014 is detailed below.
As of 31 March 2014, around 5.1m (3.5%) and 4.4m
(3.0%) shares have been, or may be, issued to settle
awards made in the previous 10 years in connection
with all share schemes and executive share schemes
respectively. Awards that are made but then lapse
or are forfeited are excluded from the calculations.
ALL SHARE PLANS
Actual
Limit
0
1
2
3
4
EXECUTIVE SHARE PLANS
Actual
Limit
0
1
2
3
4
5
%
5
%
6
7
8
9
10
6
7
8
9
10
PAYMENTS FOR LOSS OF OFFICE (AUDITED)
There were no payments for loss of office during the year.
PAYMENTS TO PAST DIRECTORS (AUDITED)
Harry Platt retired from office as Chief Executive on
31 March 2012. As disclosed in last year’s Remuneration
Report, he retained an interest in the 2011 LTIP grant
after pro-rating for time of 37,485 performance shares
and 37,485 matching shares. The vesting of these
shares was subject to the same performance conditions
as for other Executives which are set out on page 68.
Based on performance to 31 March 2014, 100% of these
shares will vest (corresponding to 74,970 shares in
August 2014. The value is estimated at £423,730 based
on the trailing three-month average share price on
31 March 2014 of 565.2 pence.
SHARE OWNERSHIP AND SHARE
INTERESTS (AUDITED)
The Committee has adopted guidelines for Executive
Directors and other senior Executives to encourage
substantial long-term share ownership. In 2013, the
Remuneration Committee agreed that shareholding
guidelines would be increased to 150% of salary to be
achieved within five years of appointment from 1 April
2013. The CEO and CFO meet these requirements.
The table below shows the interests of the Directors
and connected persons in shares. There have been
no changes in the interests in the period between
31 March 2014 and 3 June 2014.
Chairman
Daniel Kitchen1
Executive Directors
Jamie Hopkins
Graham Clemett
Non-Executive Directors
John Bywater
Bernard Cragg
Maria Moloney
Chris Girling
Damon Russell
31 March
2014
31 March
2013
37,500
37,500
137,757
106,657
117,706
120,823
3,8992
66,590
Nil
Nil
Nil
3,899
66,590
Nil
Nil
Nil
Notes:
1.
Daniel Kitchen acquired 1,000 6% sterling Bonds
on 2 October 2012 at a price of £100 per Bond.
2. The interest in shares for Mr Bywater is at the date
of his retirement on 25 July 2013.
The table below shows the Executive Directors’ interests
in shares.
Executive Director
Graham Clemett
Jamie Hopkins
Type
Owned or
vested outright
Unvested and
subject to deferral2
Subject to
performance3
Shares
Nil cost options
Market value options1
Shares
Nil-cost options
Market value options1
106,657
Nil
Nil
137,757
Nil
Nil
148,056
Nil
4,663
292
Nil
4,663
324,350
Nil
Nil
451,666
Nil
Nil
Total
579,063
Nil
4,663
589,715
Nil
4,663
Notes:
1.
Market value options include SAYE options outstanding and not yet matured as at 31 March 2014. The exercise price of these was set
at 80% of the market value of a share at the invitation date.
2. For Graham Clemett, the interest in shares of 148,056 consists of 147,764 LTIP awards granted in 2011 which are no longer subject to
performance but are due to vest on 3 August 2014 and 292 SIP shares granted in March 2013. Similarly, for Mr Hopkins, the interest in
shares of 292 consists of the SIP shares granted in March 2013.
3. The interest in shares of 324,350 for Graham Clemett, and the interest in shares of 451,666 for Jamie Hopkins consist of the total LTIP
awards made in 2012 and 2013, details of which can be found on page 71 of this Report.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 70 Workspace Group PLC Annual Report and Accounts 2014
DIRECTORS’ REMUNERATION REPORT
CONTINUED
FIVE-YEAR TSR PERFORMANCE REVIEW AND CEO SINGLE FIGURE
The below figure compares the total shareholder return performance (TSR) of the Group with benchmark indices
over the last five years. 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.
FTSE All-Share Index
FTSE SmallCap Index
FTSE 350 Real Estate
FTSE 250
Workspace Group
n
o
d
e
t
s
e
v
n
i
0
0
1
£
f
o
e
u
a
V
l
)
£
(
9
0
0
2
h
c
r
a
M
1
3
600
500
400
300
200
100
0
31 Mar
2009
31 Mar
2010
31 Mar
2011
31 Mar
2012
31 Mar
2013
31 Mar
2014
CEO SINGLE FIGURE OF TOTAL REMUNERATION
CEO single figure of total remuneration (£000)
Jamie Hopkins1
Harry Platt2
Annual bonus pay-out
Jamie Hopkins (% of maximum opportunity)
£000
Harry Platt (% of maximum opportunity)
£000
LTIP vesting
Jamie Hopkins (% of maximum opportunity)
£000
Harry Platt (% of maximum opportunity)
£000
2010
£000s
2011
£000s
2012
£000s
2013
£000s
2014
£000s
573.7
748.7
27.4
1,359.6
–
–
–
41.7%
165.3
85.5%
339.4
75%
303.7
–
–
0%
–
–
–
0%
–
–
–
66.5%
642.9
960.3
–
100%
480.0
–
–
–
–
–
–
966.9
–
97.8%
479.5
–
–
–
–
–
–
Notes:
1. Mr Hopkins was appointed as an Executive Director on 12 March 2012.
2. Mr Platt retired as an Executive Director of the Company on 31 March 2012.
PERCENTAGE CHANGE IN CEO REMUNERATION
The table below shows the percentage change in CEO remuneration, comprising salary, taxable benefits and
annual bonus, and comparable data for the average of employees within the Company. The comparator group
is based on all employees (excluding the CEO), normalised for joiners and leavers during the year. The average
number of people employed by the Group during the year was 182, the majority of whom are involved in
property management. All employees are eligible for consideration of an annual bonus.
Executive Director
Salary
Taxable benefits
Annual variable
Total
2014
£408.8k
£17.3k
£479.5k
£905.6k
CEO
2013
% change
£400.0k
£17.1k
£480.0k
£897.1k
2.2%
1.2%
-0.1%
0.9%
All other
employees
% change
3.3%
3.3%
6.1%
3.8%
Workspace Group PLC Annual Report and Accounts 2014
71
RELATIVE IMPORTANCE OF SPEND ON PAY
The chart below shows the Company’s actual expenditure on shareholder distributions (including dividends and
share buybacks) and total employee pay expenditure for the financial years ending 31 March 2013 and ending
31 March 2014.
EMPLOYEE REMUNERATION
+16.8%
DISTRIBUTION TO SHAREHOLDERS
+9.9%
£11.9m
£13.9m
£14.1m
£15.5m
2013
2014
2013
2014
SUPPLEMENTARY INFORMATION ON DIRECTORS’ REMUNERATION
LONG-TERM EQUITY INCENTIVE PLAN 2008
Details of current awards outstanding to the Executive Directors are as follows:
At 1 April 2013
Lapsed during the year
Vested during the year
At 31 March 2014
Performance
Invested Matching Performance Matching Performance
Invested Matching Performance
Invested Matching
Jamie
Hopkins
19/11/2012
26/06/2013
Graham
Clemett
06/07/2010
03/08/2011
18/06/2012
26/06/2013
Harry
Platt
06/07/2010
03/08/2011
164,117
–
112,525
–
112,525
–
–
–
–
–
–
–
–
–
–
–
164,117
100,945
112,525
19,631
112,525
74,079
98,057
73,882
99,084
–
23,282
17,732
23,780
–
98,057
73,882
99,084
–
(1,143)
–
–
–
(1,144)
–
–
–
(96,914)
–
–
–
(23,282)
–
–
–
(96,913)
–
–
–
–
73,882
99,084
63,091
–
17,732
23,780
16,719
–
73,882
99,084
63,091
99,502
37,485
35,438
26,989
99,502
37,485
(1,161)
–
(1,162)
–
(98,341)
–
(35,438)
–
(98,340)
–
–
37,485
–
26,989
–
37,485
Notes:
1.
Awards will vest subject to the satisfaction of performance conditions detailed on pages 67 and 68 over the three-year performance period.
2. Performance Awards made to the Executive Directors: Awards in July 2010 were in respect of 90% of annual salary based on a share
price at date of award of 20.58 pence; awards in July 2011 were in respect of 90% of annual salary based on a share price at date of
award of 27 pence; In June 2012 in respect of 90% of annual salary for Mr Clemett based on a share price at date of award of £2.2708
and in November 2012 in respect of 125% of gross salary for Mr Hopkins based on a share price of £3.0466. In June 2013, awards were
in respect of 100% of salary based on a share price at date of award of £4.0497.
3. Matching Awards were granted to participants who purchased Invested Shares or who used shares acquired during and since the
Rights Issue as Invested Shares. In 2010, and 2011, Executive Directors received matching share awards of 90% of salary (subject to
investing an amount equal to 45% of their net annual basic salary in Invested Shares). In 2012, Mr Clemett received a matching share
award of 90% of salary; Mr Hopkins received a Matching Share Award of 112,525 (subject to overall cap of 1x salary at grant) in
November 2012 based on a share price of £3.0466 which may vest subject to the achievement of an absolute TSR underpin of
4% p.a. In 2013, matching shares were up to 100% of salary for Mr Clemett and 73% of salary for Mr Hopkins.
4. Participants are entitled to dividends payable on the Invested Shares. The Invested Shares which are beneficially owned by participants
are included in the table detailing Ordinary Shares held by Directors on page 69 of this Report.
5. For the 2010 awards, the Executive Directors elected to convert part of the awards into a combination of interest in shares beneficially
held, and linked options over the same total value.
6. The LTIP awards granted in July 2010 vested in November 2013 as the Company had been in an extended closed period.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77
72 Workspace Group PLC Annual Report and Accounts 2014
DIRECTORS’ REMUNERATION REPORT
CONTINUED
SHARE OPTIONS
The following table shows, for the Directors who served during the year, the interests in outstanding awards under
the HMRC-approved Savings Related Share Option Plan and SIP Awards.
Director
At 01/04/2013
Granted
during
the year
Lapsed
during
the year
Exercised
in year
At 31/03/2014
Exercise price
From
To
Normal exercise date
Jamie
Hopkins
Graham
Clemett
4,663
292
4,663
292
–
–
–
–
–
–
–
–
–
–
–
–
4,663
292
4,663
292
22.03.2016
£1.93 01.09.2015 01.03.2016
–
£1.93 01.09.2015 01.03.2016
–
22.03.2016
There have been no changes in Directors’ interests over options in the period between the balance sheet date and
3 June 2014.
NIL COST OPTIONS
The table below summarises the change in Director interests in nil cost options during the year.
Pursuant to the Workspace Long Term Equity Incentive Plan 2008, share awards (conditional on three separate
performance conditions for a period of three years from grant) were made to the Directors on 12 June 2009.
Prior to the vesting date, 12 June 2012, these were converted to nil cost options to ease administration.
As part of the bonus arrangements, share awards (conditional on continuous employment for a period of two
years from grant) were made to Mr Clemett on 12 June 2009. Prior to the vesting date, 12 June 2011, these were
converted into nil cost options.
Director
Graham
Clemett
Total
At 01/04/2013
209,7891
17,0801
226,869
Granted
during
the year
Lapsed
during
the year
–
–
–
–
–
–
Exercised
in year
(209,789)
(17,080)
(226,869)
At 31/03/2014
Exercise price
From
To
–
–
–
12.06.2012
12.06.2011
12.06.2017
12.06.2019
1.
Mr Clemett exercised 17,080 nil cost options on 26 June 2013 at a price of £3.945 and 209,789 nil cost options on 27 June 2013 at
a price of £3.885787.
Normal exercise date
REPORT OF THE DIRECTORS
CARMELINA CARFORA
Company Secretary
The Directors present their report on the affairs of the
Group together with the audited financial statements
for the year ended 31 March 2014.
PRINCIPAL ACTIVITY AND BUSINESS REVIEW
The Group is engaged in property investment in the
form of letting of business space to new and growing
companies located in London. At 31 March 2014 the
Company had eleven active subsidiaries, six of which
are property investment companies owning properties
in Greater London. The other five companies include:
Workspace Management Limited which acts as
manager for all the Group’s property investment
companies and the BlackRock Workspace Property
Trust; Workspace 16 (Jersey) Limited which invests
in the BlackRock Workspace Property Trust and LI
Property Services Limited which procures insurance
on behalf of the Group. Workspace Holdings Limited
and Workspace Glebe Limited are intermediate
holding companies. A full list of the Company’s
trading subsidiaries appears on page 111.
Significant events which occurred during the year
are detailed in the Chairman’s introduction on page 9,
the Chief Executive Officer’s strategic review on page
10 and the Business Review on pages 26 to 36.
Workspace Group PLC Annual Report and Accounts 2014
73
BUSINESS REVIEW AND FUTURE DEVELOPMENTS
The Group’s 2014 Strategic Report, on pages 1 to 36
includes a review of the business of the Group during
the financial year and at the year-end together with
a description of its strategy and prospects and 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 in the following sections of
the Annual Report:
Chairman’s introduction
Chief Executive Officer’s strategic review
Business model
Strategy
Principal business risks
Corporate social responsibility
Business Review
Page 09
Page 10
Page 14
Page 16
Page 18
Page 22
Page 26
DIRECTORS
With the exception of Mr Russell who was appointed
as a Director on 29 May 2013 and John Bywater who
retired as a Director on 25 July 2013, the Directors
of the Company all held office throughout the year.
The current Directors and their biographies can be
found on pages 40 and 41. Details of the Directors’
shareholdings and options over shares are provided
on pages 69 to 72.
All the Directors will retire at the Annual General
Meeting and, being eligible, will offer themselves
up for re-election.
DIRECTORS’ INDEMNITIES AND INSURANCE
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.
The indemnity provision was in force during the year
and at the date of approval of the Directors’ Report.
The Company maintains Directors’ and Officers’
liability insurance which is reviewed annually.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 74 Workspace Group PLC Annual Report and Accounts 2014
REPORT OF THE DIRECTORS
CONTINUED
DIRECTORS’ CONFLICT OF INTEREST
No Director had, during the year, any beneficial interest
in any contract significant to the Company’s business,
other than a contract of employment.
The Company has procedures in place for managing
conflicts of interest. Should a Director become aware
that they, or their connected parties, have an interest
in an existing or proposed transaction with Workspace
Group PLC, they are required to notify the Board in
writing or at the next Board Meeting.
CORPORATE GOVERNANCE
The Company and the Group are committed to high
standards of corporate governance, details of which
are given in the Chairman’s overview and Corporate
Governance Report on pages 38 to 54 and in the
Directors’ Remuneration Report on pages 55 to 72.
PROFIT AND DIVIDENDS
The Group’s profit after tax for the year attributable
to shareholders amounted to £241.4m (2013: £76.4m).
The interim dividend of 3.54 pence (2013: 3.22 pence)
was paid in February 2014 and the Board is proposing
to recommend the payment of a final dividend of
7.09 pence (2013: 6.45 pence) per share to be paid
on 1 August 2014 to shareholders whose names are
on the Register of Members at the close of business
on 11 July 2014. This makes a total dividend of
10.63 pence (2013: 9.67 pence) for the year.
GOING CONCERN
The Group’s activities, strategy and performance are
explained in the Strategic Report on pages 1 to 36.
Further detail on the financial performance and financial
position of the Group is provided in the financial
statements on pages 81 to 112.
The Directors, having made appropriate enquiries,
have a reasonable expectation that the Group and
the Company have adequate resources and sufficient
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.
EMPLOYEES
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 Group’s employees are kept
informed of its activities and performance through a
series of Director-led staff briefings at key points during
the year and the circulation of corporate announcements
and other relevant information to staff which are
supplemented by updates on the intranet. These
briefings also serve as an informal forum for
employees to ask questions about the Company.
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 Company 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 Company remains supportive of the employment
and advancement of disabled persons and ensures
its promotion and recruitment practices are fair
and objective.
The Company encourages the continuous development
and training of its employees and the provisions of equal
opportunities for the training and career development
of all employees.
The Group provides retirement benefits for the
majority of its employees. Details of the Group pension
arrangements are set out in note 28 on page 111.
Workspace Group PLC Annual Report and Accounts 2014
75
SHARE CAPITAL AND CONTROL
Full details of share options and awards under the terms
of the Company’s share incentive plans can be found on
pages 106 to 110.
HEALTH AND SAFETY
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, customers and anyone
affected by our business 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
Officer has overall responsibility.
FINANCIAL RISK MANAGEMENT
The financial risk management objectives and policies
of the Company are set out in note 17 to the financial
statements and in the Corporate Governance section
of this report on pages 38 to 54.
DISCLOSURE OF INFORMATION TO AUDITORS
The Directors who held office at the date of approval of
this Report of the Directors confirm that, so far as they
are each aware there is no relevant information of which
the Company’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 Company’s
auditors are aware of that information.
INDEPENDENT AUDITORS
The auditors, PricewaterhouseCoopers LLP (‘PwC’),
have indicated their willingness to continue in office
and a resolution that they will be reappointed will
be included as ordinary business at the Annual
General Meeting.
Other relevant requirements from the takeover directive
are included elsewhere in the Report of the Directors,
the Corporate Governance Report, the Directors’
Remuneration Report and the notes to the Group and
Company financial statements. There are no agreements
in place between the Group and its employees or
Directors for compensation for loss of office or
employment that occur because of a takeover bid.
As at 31 March 2014, the Company’s issued share capital
comprised of a single class of 145,616,695 ordinary
shares of £1.00 each. Details of the Company’s issued
share capital are set out on page 105.
SUBSTANTIAL SHAREHOLDINGS IN THE COMPANY
As at 31 March 2014 the following interests in voting
rights over the issued share capital of the Company
had been notified.
Shareholder
Mr S N Roditi
BlackRock Inc
Standard Life Investments
NBIM
Old Mutual Global Investors
Invesco Perpetual
Legal & General Investment
Management
F&C Asset Management plc
Number
of shares
Percentage
held
39,203,258
15,496,402
11,199,830
5,875,352
5,393,255
5,351,794
5,237,165
5,016,561
26.92%
10.64%
7.69%
4.03%
3.70%
3.68%
3.60%
3.45%
As at 21 May 2014 the following interests in voting
rights over the issued share capital of the Company
had been notified.
Shareholder
Number
of shares
Percentage
held
Mr S N Roditi
BlackRock Inc
Standard Life Investments
NBIM
Old Mutual Global Investors
Invesco Perpetual
Legal & General Investment
Management
F&C Asset Management plc
Aberdeen Asset Management
Principal Global Investors
39,203,258
14,515,673
11,737,829
5,835,604
7,056,400
4,855,903
5,245,078
4,568,783
4,823,746
4,584,477
26.92%
9.97%
8.06%
4.01%
4.85%
3.33%
3.60%
3.14%
3.31%
3.15%
*
Mr Roditi’s shareholding is held via a number of different trusts
and legal entities.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 76 Workspace Group PLC Annual Report and Accounts 2014
REPORT OF THE DIRECTORS
CONTINUED
GREENHOUSE GAS (GHG) EMISSIONS REPORTING
METHODOLOGY
This year we have followed the 2013 UK Government
environmental reporting guidance to account for all
emissions related to our activities.
Greenhouse gas emissions are reported using the
parameters listed below.
Scope 1 Emissions –
Direct Emissions
Scope 2 Emissions –
Indirect Emissions
On-site Fuel Combustion:
any gas or oil used on
our sites, typically for
heating purposes.
Fugitive Emissions:
refrigerant leaks from
owned air-conditioning
(RAC) equipment.
Company Vehicles:
fuel combustion and
refrigerant leakage.
Purchased Electricity:
both landlord and tenant
emissions where we
procure electricity and
make an onward sale to
our customers who use
the electricity in the course
of their business activities.
Emissions from vacant
units have been omitted
from data collection as
they are considered to
be immaterial.
Our reported emissions data is provided in tonnes
of carbon dioxide equivalent (tCO2e). This has been
consolidated using the financial control approach and
includes both the BlackRock and Enterprise House joint
ventures; we have reported joint venture emissions as
a proportion of our equity share.
The chosen methodology for reporting uses ISO
14064-1:2006 guidelines for quantification and
reporting of emissions. Calculations are based upon
a 5% materiality threshold.
Breakdown of carbon emissions by source (tCO2e)
Source of Emissions
2013/14 Difference
2012/13
Scope 1 (Direct Emissions)
Workspace
Gas
Fugitive Emissions
Vehicle Emissions
Joint Venture
Gas
Heating Oil
Fugitive Emissions
3,947.0 3,456.0
215.5
2.0
169.1
2.2
60.3
30.9
1.3
63.8
28.8
2.0
Scope 2 (Indirect Emissions)
Workspace
Purchased Electricity 11,104.9 11,102.5
Joint Venture
Purchased Electricity
212.3
212.6
-491.0
46.4
-0.2
3.5
-2.1
0.7
-2.4
0.3
Total
15,528.0 15,083.2 -444.8
Overall GHG emissions across the portfolio have
decreased by 2.9% this financial year. On a like-for-
like basis energy consumption, which accounts for
approximately 98% of our total carbon emissions
has decreased by 3.6%.
This can be mainly attributed to a portfolio-wide
improvement of building management systems,
and a milder winter.
Several key energy-saving initiatives and the ongoing
refurbishment of older inefficient buildings will continue
to make an impact in reducing energy consumption.
In order to be in line with other property companies,
we have opted to express the amount of greenhouse
gas emissions for each square metre of occupied floor
space and gross internal area. This is identified as an
intensity ratio in the table below:
EMISSIONS DATA
Below compares our emissions data for 2013/14 to our
2012/13 baseline data.
Intensity Ratio
Comparison of total emissions (tCO2e)
Total emissions
2012/13
2013/14
15,528.0 15,083.2
Occupied space kgCO2e/m2
GIA kgCO2e/m2
2012/13
2013/14
1.05
1.09
1.03
0.87
Carbon Credentials Ltd has provided assurance on the
accuracy, completeness and consistency of the GHG
emissions data.
2014 ANNUAL GENERAL MEETING
The 28th Annual General Meeting of the Company will be held at Chester House, Kennington Park, 1-3 Brixton
Road, London SW9 6DE on Wednesday 16 July 2014 at 11.00am. The Notice of the Meeting, together with an
explanation of the business to be dealt with at the Meeting, is included as a separate document and is also
available on the Company’s website.
By order of the Board
CARMELINA CARFORA
COMPANY SECRETARY
3 June 2014
Workspace Group PLC Annual Report and Accounts 2014
77
DIRECTORS’ RESPONSIBILITIES
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Annual
Report, the Directors’ Remuneration Report and the
Group and the Parent Company financial statements
in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors have prepared the Group financial statements
in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union,
and the Parent Company financial statements in
accordance with applicable law and United Kingdom
Generally Accepted Accounting Standards (United
Kingdom Accounting Standards and applicable law).
Under company law, the Directors must not approve
the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of
the Company and the Group and of the profit or loss
of the Group for that period.
In preparing those financial statements, the Directors
are required to:
– select suitable accounting policies and then apply
them consistently;
– make judgements and estimates that are reasonable
and prudent;
– state whether IFRSs as adopted by the European
Union and applicable UK Accounting Standards have
been followed, subject to any material departures
disclosed and explained in the Group and Parent
Company financial statements respectively; and
– prepare financial statements on the going concern
basis unless it is inappropriate to presume that the
Group will continue in business.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Company’s transactions and disclose with
reasonable accuracy at any time the financial position
of the Company and the Group and to enable them to
ensure that the financial statements and the Directors’
Remuneration Report comply with the Companies Act
2006 and, as regards the Group financial 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 financial statements may differ from
legislation in other jurisdictions.
Having taken all matters considered by the Board
and brought to the attention of the Board during
the year into account, the Directors consider that the
Annual Report and Accounts taken as a whole are
fair, balanced and understandable and provide the
information necessary for shareholders to assess the
Company’s performance, business model and strategy.
Each of the current Directors, whose names and
functions are detailed on pages 40 to 54 of the Annual
Report, confirms that, to the best of their knowledge:
– the Group financial statements, which have been
prepared in accordance with IFRSs as adopted by the
EU, give a true and fair view of the assets, liabilities,
financial position and profit of the Group; and
– the Strategic Report on pages 1 to 36 includes a fair
review of the development and performance of the
business and the position of the Group, together with
a description of the principal risks and uncertainties
that it faces.
Signed on behalf of the Board on 3 June 2014 by:
JAMIE HOPKINS
CHIEF EXECUTIVE OFFICER
GRAHAM CLEMETT
CHIEF FINANCIAL OFFICER
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 78 Workspace Group PLC Annual Report and Accounts 2014
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF WORKSPACE GROUP PLC
REPORT ON THE GROUP FINANCIAL STATEMENTS
OUR OPINION
In our opinion the Group financial statements:
– give a true and fair view of the state of the Group’s
affairs as at 31 March 2014 and of the Group’s profit
and cash flows for the year then ended;
– have been properly prepared in accordance with
International Financial Reporting Standards (IFRSs)
as adopted by the European Union; and
– have been prepared in accordance with the
requirements of the Companies Act 2006 and
Article 4 of the IAS Regulation.
This opinion is to be read in the context of what we say
in the remainder of this report.
WHAT WE HAVE AUDITED
The Group financial statements, which are prepared by
Workspace Group PLC, comprise:
– the Consolidated Balance Sheet as at 31 March 2014;
– the Consolidated Income Statement and the
Consolidated Statement of Comprehensive Income
for the year then ended;
– the Consolidated Statement of Changes in Equity and
Statement of Cash Flows for the year then ended; and
– the notes to the Group financial statements, which
include a summary of significant accounting policies
and other explanatory information.
The financial reporting framework that has been applied
in their preparation comprises applicable law and IFRSs
as adopted by the European Union.
Certain disclosures required by the financial reporting
framework have been presented elsewhere in the
Annual Report, rather than in the notes to the financial
statements. These are cross-referenced from the
financial statements and are identified as audited.
WHAT AN AUDIT OF FINANCIAL STATEMENTS INVOLVES
We conducted our audit in accordance with International
Standards on Auditing (UK and Ireland) (‘ISAs (UK &
Ireland)’). An audit involves obtaining evidence about
the amounts and disclosures in the financial statements
sufficient to give reasonable assurance that the financial
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 significant accounting
estimates made by the directors; and
– the overall presentation of the financial statements.
In addition, we read all the financial and non-financial
information in the Annual Report to identify material
inconsistencies with the audited Group financial
statements and to identify any information that is
apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the
course of performing the audit. If we become aware of
any apparent material misstatements or inconsistencies
we consider the implications for our report.
OVERVIEW OF OUR AUDIT APPROACH
MATERIALITY
We set certain thresholds for materiality. These helped
us to determine the nature, timing and extent of our
audit procedures and to evaluate the effect of
misstatements, both individually and on the financial
statements as a whole.
Based on our professional judgement, we determined
materiality for the Group financial statements as a whole
to be £11.2 million. This represents 1% of total assets,
which we consider an appropriate benchmark for
an investment property company. We set a specific
materiality level of £1.9 million for the audit of net rental
income, finance costs, administrative expenses and the
related working capital balances.
We agreed with the Audit Committee that we would
report to them misstatements identified during our audit
above £0.2 million as well as misstatements below that
amount that, in our view, warranted reporting for
qualitative reasons.
OVERVIEW OF THE SCOPE OF OUR AUDIT
Workspace Group PLC provides commercial property to
let throughout London. The Group financial statements
are a consolidation of the eight trading entities, two
investment holding companies, one service company,
the Parent Company entity and the Group’s three
joint ventures.
Except for the joint ventures, where we focused our
work on the share of profits and net assets (including
investment properties) that are recognised in the Group
accounts, all entities were identified as requiring an audit
of their complete financial information, either due to
their size or their risk characteristics.
In establishing the overall approach to the group audit, we
determined the type of work that we needed to perform
to be able to conclude whether sufficient appropriate
audit evidence had been obtained as a basis for our
opinion on the Group financial statements as a whole.
AREAS OF PARTICULAR AUDIT FOCUS
In preparing the financial statements, the directors
made a number of subjective judgements, for example in
respect of significant accounting estimates that involved
making assumptions and considering future events that
are inherently uncertain. We primarily focused our work
in these areas by assessing the directors’ judgements
against available evidence, forming our own judgements,
and evaluating the disclosures in the financial statements.
In our audit, we tested and examined information, using
sampling and other auditing techniques, to the extent
we considered necessary to provide a reasonable basis
for us to draw conclusions. We obtained audit evidence
through testing the effectiveness of controls, substantive
procedures or a combination of both.
Workspace Group PLC Annual Report and Accounts 2014
79
How the scope of our audit addressed
the area of focus
As the foundation of the evidence we
obtained regarding the revenue recognised
during the year, we evaluated the relevant
IT systems and tested the internal controls
over the accuracy and timing of revenue
recognised in the financial statements.
We tested a sample of revenue transactions
back to original lease agreements and cash
received to assess the existence of revenue.
We also tested journal entries posted
to revenue accounts to identify and
investigate unusual or irregular items.
Area of focus
Fraud in revenue
recognition
ISAs (UK & Ireland)
presume there is a risk
of fraud in revenue
recognition because
of the pressure
management may feel
to achieve the planned
results. We focused
on the existence of the
recognition of rental
income and service
charge revenue, because
these revenue streams
are high in quantity and
low in value. Therefore
they are systematic
and homogenous.
Manipulation would
be most likely to occur
through creating
fictitious revenue
journals.
Risk of management
override of internal
controls
ISAs (UK & Ireland)
require that we
consider this.
We assessed the overall control
environment of the Group, including the
arrangements for staff to ‘whistle-blow’
inappropriate actions, and interviewed
senior management. We examined the
significant accounting estimates and
judgements relevant to the financial
statements for evidence of bias by the
directors that may represent a risk of
material misstatement due to fraud.
We also tested journal entries.
GOING CONCERN
Under the Listing Rules we are required to review the
directors’ statement, set out on page 74, in relation
to going concern. We have nothing to report having
performed our review.
As noted in the Statement of Directors’ Responsibilities,
the directors have concluded that it is appropriate to
prepare the Group’s financial statements using the going
concern basis of accounting. The going concern basis
presumes that the Group has adequate resources to
remain in operation, and that the directors intend it to
do so, for at least one year from the date the financial
statements were signed. As part of our audit we have
concluded that the directors’ use of the going concern
basis is appropriate.
However, because not all future events or conditions can
be predicted, these statements are not a guarantee as to
the Group’s ability to continue as a going concern.
We considered the following areas to be those that
required particular focus in the current year. This is not
a complete list of all risks or areas of focus identified by
our audit. We discussed these areas of focus with the
Audit Committee. Their report on those matters that
they considered to be significant issues in relation to
the financial statements is set out on pages 51 to 54.
Area of focus
How the scope of our audit addressed
the area of focus
Potential misstatement
of property valuations
We focused on this
area because of the
magnitude of the
investment property
balance and because
the assumptions used
in determining the fair
values of investment
properties involve
significant judgement
and complexities.
Accounting for Glebe
proceeds sharing
agreement
We focused on this
area because this is
the first year in which
attributable profits
have been recognised
under the agreement
and the accounting
policy has changed in
the year. The directors
and the Audit
Committee considered
alternative accounting
treatments for the
attributable profits.
The directors needed
to exercise judgement
in the selection of the
accounting policy used
to determine the profit
attributable to the
non-controlling interest
recognised under
the agreement.
We assessed the competence, capabilities
and objectivity of management’s third
party valuers and the scope of their work
through discussions with the valuers,
verifying their qualifications and reviewing
the terms of their engagement.
We assessed the control environment of
the Group, including controls within the
entity over the valuer’s work.
We tested the data inputs of the
investment property valuation including
rental income, acquisitions and capital
expenditure by agreeing them back to
supporting documentation to assess the
reliability, completeness and accuracy of
the underlying data in the valuation model.
We held discussions with management’s
third party valuers to understand and
assess the assumptions underlying the
valuation calculations and the rationale
behind all significant movements over
the year.
We tested the valuation performed
by the external valuers by checking the
reasonableness of the assumptions used
in the calculations, including tenure and
tenancy of the properties, prevailing
market yields and comparable market
transactions. We also compared the
valuations to our independently formed
market expectations and challenged any
differences identified. We focused, in
particular, on the development properties
whose valuations are, by nature, more
judgemental.
We assessed the accounting treatment
of the Glebe proceeds sharing agreement
by reference to the appropriate
accounting standards. In particular, we:
read the contract and considered its legal,
commercial and economic substance; met
with the directors and the Audit
Committee to understand their basis for
selecting the accounting treatment; and
formed an independent view, considering
alternative accounting treatments and
compared that to the Audit Committee’s.
We tested the application of the
accounting policy by: agreeing the
methodology used in calculating the split
of proceeds to the signed agreement
with HBOS; agreeing the inputs to the
calculation to supporting documentation,
including the signed agreements with
HBOS; and testing that the proceeds
sharing agreement has been applied to
all properties that the Group had a legal
or constructive obligation at the year
end to sell.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 80 Workspace Group PLC Annual Report and Accounts 2014
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF WORKSPACE GROUP PLC
CONTINUED
OPINIONS ON OTHER MATTERS PRESCRIBED BY
THE COMPANIES ACT 2006
In our opinion:
– the information given in the Strategic Report and
the Report of the Directors for the financial year for
which the Group financial statements are prepared is
consistent with the Group financial statements; and
– the information given in the Corporate Governance
Report set out on pages 42 to 54 in the Annual
Report with respect to internal control and risk
management systems and about share capital
structures is consistent with the financial statements.
OTHER INFORMATION IN THE ANNUAL REPORT
Under ISAs (UK & Ireland), we are required to report to
you if, in our opinion, information in the Annual Report is:
– materially inconsistent with the information in the
audited Group financial statements; or
– apparently materially incorrect based on, or materially
inconsistent with, our knowledge of the Group
acquired in the course of performing our audit; or
– is otherwise misleading.
We have no exceptions to report arising from
this responsibility.
OTHER MATTERS ON WHICH WE ARE REQUIRED
TO REPORT BY EXCEPTION
ADEQUACY OF INFORMATION AND
EXPLANATIONS RECEIVED
Under the Companies Act 2006 we are required to
report to you if, in our opinion we have not received
all the information and explanations we require for
our audit. We have no exceptions to report arising
from this responsibility.
RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS
AND THE AUDIT
OUR RESPONSIBILITIES AND THOSE OF THE
DIRECTORS
As explained more fully in the Statement of Directors’
Responsibilities set out on page 77, the directors are
responsible for the preparation of the Group financial
statements and for being satisfied that they give a
true and fair view.
Our responsibility is to audit and express an opinion
on the Group financial statements in accordance with
applicable law and ISAs (UK & 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.
OTHER MATTER
We have reported separately on the parent company
financial statements of Workspace Group PLC for the
year ended 31 March 2014 and on the information in the
Directors’ Remuneration Report that is described as
having been audited.
BOWKER ANDREWS (SENIOR STATUTORY AUDITOR)
FOR AND ON BEHALF OF
PRICEWATERHOUSECOOPERS LLP
CHARTERED ACCOUNTANTS AND
STATUTORY AUDITORS
London
3 June 2014
DIRECTORS’ REMUNERATION
Under the Companies Act 2006 we are required to
report to you if, in our opinion, certain disclosures of
directors’ remuneration specified by law have not been
made. We have no exceptions to report arising from
this responsibility.
CORPORATE GOVERNANCE STATEMENT
Under the Companies Act 2006, we are required to
report to you if, in our opinion a corporate governance
statement has not been prepared by the Parent
Company. We have no exceptions to report arising
from this responsibility.
Under the Listing Rules we are required to review the
part of the Corporate Governance Report relating to the
Parent Company’s compliance with nine provisions of
the UK Corporate Governance Code (‘the Code’). We
have nothing to report having performed our review.
On page 77 of the Annual Report, as required by
the Code Provision C.1.1, the directors state that they
consider the Annual Report taken as a whole to be
fair, balanced and understandable and provides the
information necessary for members to assess the
Group’s performance, business model and strategy.
On page 52, as required by C.3.8 of the Code, the
Audit Committee has set out the significant issues
that it considered in relation to the financial statements,
and how they were addressed. Under ISAs (UK
& Ireland) we are required to report to you if, in
our opinion:
– the statement given by the directors is materially
inconsistent with our knowledge of the Group
acquired in the course of performing our audit; or
– the section of the Annual Report describing the
work of the Audit Committee does not appropriately
address matters communicated by us to the
Audit Committee
We have no exceptions to report arising from
this responsibility.
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 MARCH
Revenue
Direct costs
Net rental income
Administrative expenses
Trading profit excluding share of joint ventures
Profit/(loss) on disposal of investment properties
Other income
Change in fair value of investment properties
Operating profit
Finance income
Finance costs
Exceptional finance costs
Total finance costs
Change in fair value of derivative financial instruments
Gains from share in joint ventures
Profit before tax
Taxation
Profit for the year after tax
Attributable to:
– Owners of the parent
– Non-controlling interests
Workspace Group PLC Annual Report and Accounts 2014
81
Notes
1
1
1
2
3(a)
3(b)
10
2
4
4
4
4
12
6
20
2014
£m
73.6
(23.3)
50.3
(12.4)
37.9
1.6
4.2
221.9
265.6
2013
£m
69.5
(22.4)
47.1
(11.0)
36.1
(2.2)
–
59.0
92.9
0.1
0.2
(18.6)
(1.9)
(20.5)
2.2
5.1
252.5
(0.1)
252.4
241.4
11.0
252.4
(19.5)
–
(19.5)
1.1
1.7
76.4
–
76.4
76.4
–
76.4
Basic earnings per share (pence)
Diluted earnings per share (pence)
8
8
166.8p
163.3p
53.3p
52.1p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH
Profit for the financial year
Items that may be classified subsequently to profit or loss:
Change in fair value of derivative financial instruments (cash flow hedge)
Total comprehensive income for the year
Attributable to:
– Owners of the parent
– Non-controlling interests
The notes on pages 85 to 112 form part of these financial statements.
Notes
16(f)
20
2014
£m
252.4
(2.9)
249.5
238.5
11.0
249.5
2013
£m
76.4
–
76.4
76.4
–
76.4
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 82 Workspace Group PLC Annual Report and Accounts 2014
CONSOLIDATED BALANCE SHEET
AS AT 31 MARCH
Non-current assets
Investment properties
Intangible assets
Property, plant and equipment
Investment in joint ventures
Trade and other receivables
Current assets
Trade and other receivables
Cash and cash equivalents
Corporation tax asset
Total assets
Current liabilities
Derivative financial instruments
Trade and other payables
Non-current liabilities
Borrowings
Derivative financial instruments
Other non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Share capital
Share premium
Investment in own shares
Other reserves
Retained earnings
Total shareholders’ equity
Non-controlling interests
Total equity
Notes
2014
£m
2013
£m
10
11
12
13
13
14
1,068.3
0.4
2.0
23.1
11.2
1,105.0
7.1
3.7
0.3
11.1
825.9
0.5
1.7
20.7
6.1
854.9
13.0
11.8
0.8
25.6
1,116.1
880.5
16(e) & (f)
15
–
(36.0)
(36.0)
(11.1)
(31.3)
(42.4)
16(a)
16(e) & (f)
19
21
23
22
19 & 20
(335.8)
(7.2)
(11.0)
(354.0)
(390.0)
(337.7)
–
–
(337.7)
(380.1)
726.1
500.4
145.6
58.2
(8.9)
14.0
517.2
726.1
–
726.1
144.9
58.8
(8.9)
15.3
290.3
500.4
–
500.4
EPRA net asset value per share
9
£4.96
£3.48
The notes on pages 85 to 112 form part of these financial statements.
The financial statements on pages 81 to 112 were approved and authorised for issue by the Board of Directors
on 3 June 2014 and signed on its behalf by:
J HOPKINS
G CLEMETT
DIRECTORS
Workspace Group PLC Annual Report and Accounts 2014
83
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to owners of the Parent
Share
capital
£m
Share
premium
£m
Investment
in own
shares
£m
Other
reserves
£m
Retained
earnings
£m
Non-
controlling
interests
£m
Total
£m
Notes
144.1
59.2
(8.7)
13.9
226.9
435.4
Balance at 1 April 2012
Profit for the year
Total comprehensive income
Transactions with owners:
Share issues
Own shares purchase
Dividends paid
Share based payments
Balance at 31 March 2013
Profit for the year
Change in fair value of derivatives
Total comprehensive income
Transactions with owners:
Share issues
Dividends paid
Distributions
Share based payments
Balance at 31 March 2014
21
23
7
24
22
21
7
19 & 20
24
–
–
0.8
–
–
–
144.9
–
–
–
0.7
–
–
–
145.6
–
–
(0.4)
–
–
–
58.8
–
–
–
(0.6)
–
–
–
58.2
–
–
–
(0.2)
–
–
(8.9)
–
–
–
–
–
–
–
The notes on pages 85 to 112 form part of these financial statements.
–
–
–
–
–
1.4
76.4
76.4
76.4
76.4
–
–
(13.0)
–
0.4
(0.2)
(13.0)
1.4
15.3
290.3
500.4
–
(2.9)
(2.9)
241.4
–
241.4
241.4
(2.9)
238.5
Total
£m
435.4
76.4
76.4
0.4
(0.2)
(13.0)
1.4
500.4
252.4
(2.9)
249.5
–
–
–
–
–
–
–
–
11.0
–
11.0
–
–
–
1.6
–
(14.5)
–
–
0.1
(14.5)
–
1.6
–
–
(11.0)
–
0.1
(14.5)
(11.0)
1.6
(8.9)
14.0
517.2
726.1
–
726.1
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 84 Workspace Group PLC Annual Report and Accounts 2014
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH
Cash flows from operating activities
Cash generated from operations
Interest received
Interest paid
Tax refunded/(paid)
Net cash inflow from operating activities
Cash flows from investing activities
Purchase of investment properties
Capital expenditure on investment properties
Proceeds from disposal of investment properties (net of sale costs)
Purchase of intangible assets
Purchase of property, plant and equipment
Net investment in joint ventures
Movement in short-term funding balances with joint ventures
Distributions received from joint ventures
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from issue of ordinary share capital
Finance costs for new/amended borrowing facilities
Settlement and re-couponing of derivative financial instruments
Repayment of bank borrowings
Drawdown of bank borrowings
Drawdown of other borrowings
Payment of priority fee
Inflow/(outflow) on bank facility rental income accounts
Own shares purchase
Dividends paid
Net cash outflow from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
The notes on pages 85 to 112 form part of these financial statements.
Notes
18
12
12
7
18
18
2014
£m
2013
£m
43.0
0.1
(17.4)
0.4
26.1
(19.2)
(28.9)
29.1
(0.1)
(0.9)
1.6
(0.5)
1.1
(17.8)
0.1
(3.5)
(8.5)
(280.0)
80.0
202.5
–
7.4
–
(14.4)
(16.4)
38.6
0.3
(16.6)
(0.2)
22.1
–
(27.3)
16.7
(0.3)
(1.0)
(7.7)
–
0.9
(18.7)
0.4
(1.1)
(2.1)
(68.0)
10.0
57.5
(0.9)
(0.7)
(0.2)
(13.0)
(18.1)
(8.1)
(14.7)
11.8
3.7
26.5
11.8
Workspace Group PLC Annual Report and Accounts 2014
85
NOTES TO THE FINANCIAL STATEMENTS
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 new and growing enterprises
across London.
The Company is a public limited company which is
listed on the London Stock Exchange and is
incorporated and domiciled in the UK.
The registered number of the Company is 2041612.
BASIS OF PREPARATION
These financial statements are presented in Sterling,
which is the Company’s functional currency and the
Group’s presentation currency and have been prepared
on a going concern basis, 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 financial statements have been prepared under the
historical cost convention as modified by the revaluation
of investment properties and financial assets and
liabilities (including derivative financial instruments)
at fair value through profit or loss or equity.
SIGNIFICANT JUDGEMENTS, KEY ASSUMPTIONS
AND ESTIMATES
The preparation of financial 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 significant 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 significant judgements within
the accounting policies that management consider
critical because of the assumptions or estimation
involved in their application and their impact on
the consolidated financial statements.
INVESTMENT PROPERTY VALUATION
The Group uses the valuation performed by its
independent valuers as the fair value of its investment
properties. The valuation is based upon the key
assumptions of estimated rental values and market
based yields. With regard to redevelopments and
refurbishments, future development costs and an
appropriate discount rate are also used. In determining
fair value the valuers make reference to market evidence
and recent transaction prices for similar properties.
Details of the valuation methodology and key
assumptions are given in note 10. Management
consider the significant assumptions to the valuation
of investment properties to be estimated rental values
and market based yields. Sensitivities on these
assumptions are provided in note 10.
GLEBE PROCEEDS SHARE AGREEMENT
The Group has exercised judgement in considering the
amounts attributable to non-controlling interest (‘NCI’)
in relation to the Glebe Proceeds Share Agreement. In
measuring the amount attributable to the NCI the Group
takes into account the likelihood that a property will be
sold and that a payment may be made. On this basis,
the Group attributes amounts to NCI when it considers
there is a legal or constructive obligation to sell the
relevant properties. At this point, the NCI has a
demonstrable interest in their portion of the fair value
gains to be realised in relation to these properties.
Further details on the methodology, judgements
involved and calculation of recognising the attributable
amount is given in note 20 and the accounting policy.
SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies adopted in the
preparation of these consolidated financial statements
are set out below. These policies have been consistently
applied to all years presented unless stated otherwise:
BASIS OF CONSOLIDATION
The consolidated financial statements include the
financial statements of the Company and all its
subsidiary undertakings up to 31 March 2014.
Subsidiaries are entities over which the Group has the
power to govern the financial and operating policies.
The financial statements of subsidiaries are included
in the consolidated financial 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.
INVESTMENT PROPERTIES
Investment properties are those properties owned or
leased by the Group that are held either to earn rental
income or for capital appreciation, or both, and are not
occupied by the Company or subsidiaries of the Group.
Investment property is measured initially at cost,
including related transaction costs. After initial recognition
investment property is held at fair value based on a
valuation by an independent professional external valuer
at each reporting date. The valuation methods and key
assumptions applied are explained in note 10. Changes in
fair value of investment property at each reporting date
are recorded in the income statement.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 86 Workspace Group PLC Annual Report and Accounts 2014
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
Assets acquired under finance leases are capitalised
at the lease’s commencement at the lower of the
fair value of the leased property and the net present
value of the minimum lease payments. The investment
properties acquired under finance leases are
subsequently carried at fair value. The corresponding
rental obligations, net of finance charges, are included
in current and non current borrowings. Each lease
payment is allocated between liability and finance
charges so as to achieve a constant rate on the
finance balance outstanding. The interest element
of the finance cost is charged to the income statement.
Properties are treated as acquired at the point the
Group assumes the significant risks and rewards of
ownership and are treated as disposed when these
are transferred outside of the Group’s control. Existing
investment properties which undergo redevelopment
and refurbishment for continued future use remain in
investment property where the purpose of holding the
property continues to meet the definition of investment
property as defined above.
Subsequent expenditure is charged to the asset’s
carrying amount only when it is probable that future
economic benefits associated with the expenditure
will flow to the Group, and the cost of each item can be
reliably measured. Certain internal 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.
Capitalised interest on refurbishment/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
financed out of general borrowings by reference to the
average rate payable on funding the assets employed
by the Group and applied to the direct expenditure on
the property undergoing redevelopment. Interest is
capitalised from the date of commencement of the
redevelopment 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 ‘assets held
for sale’ when it is considered highly probable that sale
completion will take place.
Income from the sale of assets is recognised when the
significant risks and returns have been transferred to the
buyer. In the case of sales of properties this is generally
taken on completion. In the case of a part disposal
agreement, the part of the asset being disposed will
be derecognised from investment property when
completion is reached or when a finance lease agreement
is signed (i.e. when the risks and rewards of this part of
the site transfer to the developer). Any profit or loss on
disposal is taken to other operating income/expense.
Consideration can take the form of cash, new commercial
buildings and a right to future overage (generally being a
share in the proceeds of any future sale of the residential
development to be constructed by the developer).
Revenue is recognised when all relevant criteria in IAS 18
are met, specifically when the inflow of economic benefit
is probable and when the amount can be measured
reliably. Consideration (including overage) is measured
at the fair value of the consideration received/receivable.
Commercial property to be received is fair valued using
the residual method described in note 10 and is included
in investment property. Changes in fair value are
recognised through the income statement in
accordance with IAS 40.
Overage is only recognised once an agreement has
been signed with a residential developer. Where any
aspect of consideration is conditional, the revenue
associated with that conditional item is fair valued
and included as deferred consideration. The carrying
value of overage is assessed at each period end and
changes in fair value are taken to other operating
income/expense. Cash consideration is recognised as
a receivable and classified as current or non-current
depending on the agreed payment terms.
INTANGIBLE ASSETS
Intangible assets are stated at historical cost,
less accumulated amortisation. Acquired computer
software licences and external costs of implementing
or developing computer software programs and
websites are capitalised. These costs are amortised
over their estimated useful lives of five years on a
straight line basis.
Costs associated with maintaining computer software
programs are recognised as an expense as they
fall due.
PROPERTY, PLANT AND EQUIPMENT
EQUIPMENT AND FIXTURES
Equipment and fixtures (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 benefits
associated with the expenditure will flow to the Group
and the cost of each item can be reliably measured.
All other repairs and maintenance costs are charged
to the income statement during the period in which
they are incurred.
Workspace Group PLC Annual Report and Accounts 2014
87
Depreciation is provided using the straight line method
to allocate the cost less estimated residual value over
the assets’ estimated useful lives which range from
4-10 years.
The assets’ residual values and useful lives are
reviewed and adjusted, if appropriate, at least at
each financial year end. An asset’s carrying amount is
written down immediately to its recoverable amount
if its carrying amount is greater than its estimated
recoverable amount.
JOINT VENTURES
Joint ventures are those entities over which the Group,
either directly or indirectly, is in a position to jointly
control the financial and operating policies of the
entity. Joint ventures are accounted for under the
equity method whereby the consolidated financial
statements include the Group’s investment in and
contribution from the joint venture.
TRADE AND OTHER RECEIVABLES
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 flows.
The provision is recorded in the income statement.
Deferred consideration on the disposal of investment
properties is included within trade and other receivables.
It is fair valued on recognition and at each year
end with any movement taken to other operating
income/expense.
Other receivables include bank facility rental income
accounts from which interest to lenders is paid.
TRADE AND OTHER PAYABLES
Trade and other payables are initially recognised at
fair value and subsequently held at amortised cost.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash in hand,
restricted cash in the form of tenants’ deposits and
deposits held on call with banks. Bank overdrafts are
included in current liabilities but within cash and cash
equivalents for the purpose of the cash flow statement.
BORROWINGS
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently
stated at amortised cost, with any difference between
the initial amount (net of transaction costs) and the
redemption value being recognised in the income
statement over the period of the borrowings, using the
effective interest method, except for interest capitalised
on redevelopments.
Transaction costs are amortised over the effective life
of the amounts borrowed.
FOREIGN CURRENCY TRANSLATION
Foreign currency transactions are translated into
Sterling using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses
resulting from the settlement of such transactions and
from the translation at year-end rates of monetary
assets and liabilities denominated in foreign currencies
are recognised in the income statement, except when
deferred in equity as qualifying cash flow hedges.
DERIVATIVE FINANCIAL INSTRUMENTS AND
HEDGE ACCOUNTING
The Group enters into derivative transactions in order
to manage its exposure to foreign currency fluctuations
and interest rate risks. Financial derivatives are recorded
at fair value calculated by valuation techniques based
on market prices, estimated future cash flows and
forward interest rates.
For financial derivatives (where hedge accounting is not
applied) movements in fair value are recognised in the
Income Statement. Amounts payable or receivable
under such arrangements are included within interest
payable or receivable, recognised on an accruals basis.
In line with IFRS 13, fair values of financial derivatives
are measured at the estimated amount that the Group
would receive or pay to terminate the agreement at
the balance sheet date, taking into account the current
interest expectations and current credit value
adjustment of the counterparties.
The Group applies hedge accounting for certain
derivatives that are designated and effective as hedges
of future cash flows (cash flow hedges). The Group
documents at the inception of the transaction the
relationship between hedging instruments and hedged
items, as well as its risk management objectives and
strategy for undertaking various hedging transactions.
The Group also documents its assessment, both at
hedge inception and on an ongoing basis, of whether
the derivatives that are used in hedging transactions are
highly effective in offsetting changes in fair values or
cash flows of hedged items. The fair values of various
derivative instruments used for hedging purposes are
disclosed in note 16. Movements on the hedging reserve
in other comprehensive income are shown in note 22.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77
88 Workspace Group PLC Annual Report and Accounts 2014
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
For cash flow hedges, the effective portion of changes
in the fair value of derivatives that are designated and
qualify as cash flow hedges is recognised in other
comprehensive income. The gain or loss relating to the
ineffective portion is recognised immediately in the
income statement within other gains/(losses). Amounts
accumulated in equity are reclassified to profit or loss
in the periods when the hedged item affects profit or
loss (for example, to offset the currency movement on
borrowings that are hedged at each period end). The
gain or loss relating to the effective portion of swaps
hedging the currency of borrowings is recognised in
the Income Statement.
SHARE CAPITAL
Ordinary shares are classified as equity. Incremental
costs directly attributable to the issue of new shares
are shown in equity as a deduction, net of tax, from
the proceeds.
INVESTMENT IN OWN SHARES
The Group operates an Employee Share Ownership
Trust (ESOT) and a trust for the Share Incentive Plan
(SIP). When the Group funds these trusts in order to
purchase Company shares, the loan is deducted from
shareholders’ equity as investment in own shares.
NON-CONTROLLING INTERESTS
The Group recognises any non-controlling interest (‘NCI’)
in the acquiree on an acquisition-by-acquisition basis,
either at fair value or at the non-controlling interest’s
proportionate share of the acquiree’s identifiable net
assets. Transactions with non-controlling interests that
do not result in loss of control are accounted for as
equity transactions – that is, as transactions with the
owners in their capacity as owners. The difference
between fair value of any consideration paid and the
relevant share acquired of the carrying value of net
assets of the subsidiary is recorded in equity. Gains
or losses on disposals to non-controlling interests
are also recorded in equity.
Where the Group enters into a contract that meets the
definition of equity under IAS 32 and also represents an
interest in a subsidiary’s net assets that is not attributable
to the parent, such a contract is accounted for as
non-controlling interest. A non-controlling interest is
recognised for the Glebe proceeds share agreement (see
note 20). Profit or loss and comprehensive income and
loss are attributed to non-controlling interest in line with
the terms of the relevant contract. In measuring the
amount attributable to the non-controlling interest, the
Group takes into account the likelihood that a property
will be sold and that a payment may be made. On this
basis, the Group attributes amounts to NCI when it
considers there is a legal or constructive obligation to sell
the relevant properties. At this point, the non-controlling
interest has a demonstrable interest in their portion of
the fair value gains to be realised in relation to these
properties. Amounts payable under the agreement are
recognised as liabilities when a contractual obligation is
established, with the corresponding entry being against
the balance of non-controlling interest (that is, through
equity). See note 20 for further details.
OPERATING SEGMENTS
Operating segments are reported in a manner
consistent with the internal reporting provided to the
chief operating decision maker. The chief operating
decision maker is the person or group that allocates
resources to and assesses the performance of the
operating segments of an entity. The Group has
determined that its chief operating decision maker is
the Executive Committee of the Company. 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
financial 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.
REVENUE RECOGNITION
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.
All the Group’s properties are leased out under
operating leases and 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. Rent
received in advance is deferred in the balance sheet
and recognised in the period to which it relates to.
When the Group provides incentives to its customers
the incentives are recognised over the lease term on
a straight line basis.
Service charges and other sums receivable from
tenants are recognised on an accruals basis by reference
to the stage of completion of the relevant service or
transactions at the reporting date. These services
generally relate to a 12 month period.
DIRECT COSTS
Direct costs comprise service charge and other costs
directly recoverable from tenants and non recoverable
costs directly attributable to investment properties and
other revenue streams.
SHARE BASED PAYMENTS
The Group operates a number of share schemes under
which the Group receives services from employees as
consideration for equity instruments of the Group.
The fair value of the employee services received in
exchange for the grant of share awards and options
is recognised as an expense over the vesting period.
Fair value is measured by the use of Black-Scholes
and Binomial option pricing 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.
Workspace Group PLC Annual Report and Accounts 2014
89
The other standards or guidance had no material
impact on the Group’s financial statements or resulted
in changes to presentation and disclosure only.
b)
The following accounting standards and guidance
are not yet effective or not yet endorsed by the
EU, and are either not expected to have a
significant impact on the Group’s financial
statements or will result in changes to presentation
and disclosure only. They have not been adopted
early by the Group:
Standard or interpretation
Content
IFRS 9
IFRS 10
IFRS 11
IFRS 12
Financial instruments:
classification and
measurement
Consolidated financial
statements
Joint arrangements
Disclosures of interest
in other entities
Amendment: IFRS 10, 11
and 12
On transition
guidance
IAS 27 (revised)
IAS 28 (revised)
Amendment: IAS 32
Separate financial
statements
Associates and joint
ventures
Financial instruments:
presentation, on offsetting
financial assets and liabilities
Amendment: IAS 36
Impairment of assets
Amendment: IAS 39
Amendment: IFRS 9
Financial instruments:
recognition and
measurement, on
novation of derivatives
and hedge accounting
Financial instruments:
regarding general hedge
accounting
Annual improvements 2012 Changes to IFRS 2/IFRS 3/
IFRS 8/IFRS 13/IAS 16/
IFRS 9/IAS 37/IAS 38/
IAS 39
Annual improvements 2013 Changes to IFRS 1/IFRS 3/
IFRS 13/IAS 40
PENSIONS
The Group operates a defined contribution pension
scheme. Contributions are charged to the income
statement on an accruals basis.
INCOME 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.
DIVIDEND DISTRIBUTIONS
Final dividend distributions to the Company’s
shareholders are recognised as a liability in the Group’s
financial statements in the period in which the dividends
are approved, while interim dividends are recognised
when paid.
NEW ACCOUNTING STANDARDS, AMENDMENTS
AND GUIDANCE
a)
During the year to 31 March 2014 the Group adopted
the following accounting standards and guidance:
Standard or interpretation
Content
Amendment: IAS 1
Financial statement
presentation regarding
other comprehensive
income
Amendment: IAS 34
Interim financial reporting
Amendment: IAS 12
IFRS 13
Amendment: IFRS 7
Income taxes on
deferred tax
Fair value measurement
Financial instruments:
disclosures, on offsetting
financial assets and
liabilities.
Annual improvements 2011 Changes to IFRS 1/IAS
1/IAS 16/IAS 32/IAS 34
IFRS 13 ‘Fair Value Measurement’ – This standard
provides a precise definition of fair value and a single
source of fair value measurement and disclosure
requirements for use across IFRSs. The guidance
includes enhanced disclosure requirements which
are similar to those in IFRS 7, ‘Financial Instruments:
Disclosures’, but apply to all assets and liabilities
measured at fair value, not just financial ones. These
disclosures are included in the financial statements.
Amendment: IAS 1 – This amendment changes the
disclosure of items presented in other comprehensive
income (OCI) in the statement of comprehensive
income. IAS 1 will still permit profit or loss and OCI
to be presented in either a single statement or in two
consecutive statements. The amendment requires
entities to separate items presented in OCI into two
groups, based on whether or not they may be recycled
to profit or loss in the future. This has no significant
impact to the Group.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77
90 Workspace Group PLC Annual Report and Accounts 2014
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
1. ANALYSIS OF NET RENTAL INCOME AND SEGMENTAL INFORMATION
Rental income
Service charges
Empty rates and other non recoverables
Services, fees, commissions and sundry income
2014
Direct
costs
£m
(0.3)
(16.3)
(3.8)
(2.9)
(23.3)
Net rental
income
£m
Revenue
£m
55.0
(2.1)
(3.4)
0.8
50.3
51.4
14.1
0.4
3.6
69.5
2013
Direct
costs
£m
(0.2)
(16.0)
(3.4)
(2.8)
(22.4)
Net rental
income
£m
51.2
(1.9)
(3.0)
0.8
47.1
Revenue
£m
55.3
14.2
0.4
3.7
73.6
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.
2. OPERATING PROFIT
The following items have been charged in arriving at operating profit:
Depreciation1
Staff costs (including share based costs)1 (see note 5)
Repairs and maintenance expenditure on investment properties
Trade receivables impairment (see note 13)
Amortisation of intangibles
Operating lease rentals payable
Audit fees payable to the Company’s auditors
1. Charged to direct costs and administrative expenses.
Auditors’ remuneration:
Services provided by the Company’s auditors and its associates
Audit fees:
Audit of parent company and consolidated financial statements
Audit of subsidiary financial statements
Fees for other services:
Audit related assurance services
Corporate reporting work on Retail Bond issue
Tax advisory, tax compliance and legal services
Other services
Total administrative expenses are analysed below:
Staff costs
Cash settled share based costs
Equity settled share based costs
Other
2014
£m
0.6
13.9
3.3
0.2
0.2
0.1
0.2
2013
£m
0.4
11.9
3.3
0.3
0.1
0.1
0.2
2014
£000
2013
£000
136
30
166
34
–
69
39
142
2014
£m
6.6
0.9
1.6
3.3
12.4
129
29
158
33
30
78
31
172
2013
£m
6.0
0.4
1.4
3.2
11.0
Workspace Group PLC Annual Report and Accounts 2014
91
3(A). PROFIT/(LOSS) ON DISPOSAL OF INVESTMENT PROPERTIES
Proceeds from sale of investment properties (net of sale costs)
Book value at time of sale (note 10)
Unrealised profit on sale of properties to joint ventures
Pre-tax profit/(loss) on sale
2014
£m
30.6
(29.0)
1.6
–
1.6
2013
£m
19.6
(21.7)
(2.1)
(0.1)
(2.2)
£2.9m (2013: £6.2m) of the proceeds for the year were in the form of deferred consideration, of which £2.9m is
outstanding at 31 March 2014 (31 March 2013: £2.9m) and is included in the Consolidated Balance Sheet under
non-current and current trade and other receivables.
3(B). OTHER INCOME
Change in fair value of deferred consideration
2014
£m
4.2
2013
£m
–
The value of deferred consideration from the sale of investment properties has been re-valued by CBRE Limited
at 31 March 2014. The receivable is included in the Consolidated Balance Sheet under non-current trade and other
receivables (see note 13).
4. FINANCE INCOME AND COSTS
Interest income on bank deposits
Finance income
Interest payable on bank loans and overdrafts
Interest payable on other borrowings
Amortisation of issue costs of borrowings
Interest payable on finance leases
Interest capitalised on property refurbishments (note 10)
Foreign exchange gains on financing activities
Cash flow hedge – transfer from equity
Finance costs – underlying
Issue costs written off on re-financing
Total finance costs
Change in fair value of financial instruments through the income statement
Net finance costs
2014
£m
0.1
0.1
(6.3)
(11.8)
(1.1)
(0.2)
0.8
4.3
(4.3)
(18.6)
(1.9)
(20.5)
2.2
(18.2)
2013
£m
0.2
0.2
(16.3)
(1.6)
(2.0)
(0.2)
0.6
–
–
(19.5)
–
(19.5)
1.1
(18.2)
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 92 Workspace Group PLC Annual Report and Accounts 2014
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
5. EMPLOYEES AND DIRECTORS
Staff costs for the Group during the year were:
Wages and salaries
Social security costs
Other pension costs (see note 28)
Cash settled share based costs (see note 24)
Equity settled share based costs (see note 24)
The monthly average number of people (including Executive Directors) employed
during the year was:
Executive Directors
Head office staff
Estates and property management staff
2014
£m
9.7
1.1
0.6
0.9
1.6
13.9
2013
£m
8.6
1.0
0.5
0.4
1.4
11.9
2014
Number
2013
Number
2
74
106
182
2
68
100
170
The emoluments and pension benefits of the Executive Directors is determined by the Remuneration Committee
of the Board and are set out in detail in the Directors’ Remuneration Report on pages 55 to 72. These form part
of the financial statements.
6. TAXATION
Current tax:
UK corporation tax
Adjustments to tax in respect of previous periods
Total taxation charge
2014
£m
–
0.1
0.1
2013
£m
(0.2)
0.2
–
The tax on the Group’s profit for the period differs from the standard applicable corporation tax rate in the UK –
23% (2013: 24%). The differences are explained below:
Profit on ordinary activities before taxation
Adjust gains from share in joint ventures
Tax at standard rate of corporation tax in the UK of 23% (2013: 24%)
Effects of:
REIT exempt income
Changes in fair value not subject to tax as a REIT
Share scheme adjustments
Contaminated land relief
Other income
Adjustments to tax in respect of previous periods
Losses carried forward/(brought forward)
Total taxation charge
2014
£m
252.5
(5.1)
247.4
56.9
(4.8)
(51.6)
(1.1)
–
(0.9)
0.1
1.5
0.1
2013
£m
76.4
(1.7)
74.7
17.9
(2.8)
(14.4)
(0.1)
(0.3)
–
0.2
(0.5)
–
The Group is a Real Estate Investment Trust (REIT). The Group’s UK property rental business (both income and
capital gains) is exempt from tax. The Group’s other income is subject to corporation tax. The Group estimates
that as the majority of its future profits will be exempt from tax, it will have a very low tax charge.
The Group currently has £5.3m (2013: £4.2m) of tax losses carried forward calculated at a corporation tax rate of
21% (2013: 23%) which is the rate substantively enacted at the Balance Sheet date. These have not been recognised
as an asset as they are unlikely to be utilised in the foreseeable future. A further reduction in the main rate of
corporation tax to 20% by 1 April 2015 has been enacted. If the 20% rate had been applied to tax losses at the
Balance Sheet date it would have reduced losses by £0.3m.
Workspace Group PLC Annual Report and Accounts 2014
93
7. DIVIDENDS
Ordinary dividends paid
For the year ended 31 March 2012:
Final dividend
For the year ended 31 March 2013:
Interim dividend
Final dividend
For the year ended 31 March 2014:
Interim dividend
Dividends for the year
Timing difference on payment of withholding tax
Dividends cash paid
Payment
date
Per
share
2014
£m
2013
£m
August 2012
5.86p
–
8.4
February 2013
August 2013
3.22p
6.45p
–
9.3
February 2014
3.54p
5.2
14.5
(0.1)
14.4
4.6
–
–
13.0
–
13.0
In addition the Directors are proposing a final dividend in respect of the financial year ended 31 March 2014 of
7.09 pence per ordinary share which will absorb an estimated £10.3m of revenue reserves and cash. If approved by
the shareholders at the AGM, it will be paid on 1 August 2014 to shareholders who are on the register of members
on 11 July 2014. The dividend will be paid as a normal distribution (non-PiD).
8. EARNINGS PER SHARE
Earnings used for calculating earnings per share:
Basic and diluted earnings (attributable to owners of the parent)
Change in fair value of investment property
Profit/(loss) on disposal of investment properties
Movement in fair value of derivative financial instruments
Group’s share of EPRA adjustments of joint ventures
EPRA adjusted earnings
Adjustment for non-recurring items
Adjusted underlying earnings (before tax)
2014
£m
241.4
(221.9)
(1.6)
(2.2)
(4.0)
11.7
8.8
20.5
2013
£m
76.4
(59.0)
2.2
(1.1)
(0.6)
17.9
–
17.9
Earnings have been adjusted and calculated on a diluted basis to derive an earnings per share measure as defined
by the European Public Real Estate Association (EPRA) and an underlying earnings measure with additional
company adjustments for non-recurring items. The adjustments are for other income of £4.2m, exceptional
finance costs of £1.9m, tax of £0.1m and profit attributable to non-controlling interests of £11.0m.
Number of shares used for calculating earnings per share:
Weighted average number of shares (excluding own shares held in trust)
Dilution due to share option schemes
Weighted average number of shares for diluted earnings per share
In pence:
Basic earnings per share
Diluted earnings per share
EPRA earnings per share1
Adjusted underlying earnings per share1
2014
Number
144,705,947
3,122,782
147,828,729
2013
Number
143,404,929
3,351,045
146,755,974
2014
166.8p
163.3p
7.9p
13.9p
2013
53.3p
52.1p
12.2p
12.2p
1. EPRA earnings per share and Adjusted underlying earnings per share are calculated on a diluted basis.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77
94 Workspace Group PLC Annual Report and Accounts 2014
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
9. NET ASSETS PER SHARE
Net assets used for calculating net assets per share:
Net assets at end of year (basic)
Derivative financial instruments at fair value
EPRA net assets
Number of shares used for calculating net assets per share:
Shares in issue at year-end
Less own shares held in trust at year-end
Number of shares for calculating basic net assets per share
Dilution due to share option schemes
Number of shares for calculating diluted adjusted net assets per share
EPRA net assets per share
2014
£m
726.1
7.2
733.3
2014
Number
2013
£m
500.4
11.1
511.5
2013
Number
145,616,695
(157,846)
145,458,849
2,526,414
147,985,263
144,936,155
(1,270,602)
143,665,553
3,448,522
147,114,075
2014
£4.96
2013
£3.48
Net assets have been adjusted and calculated on a diluted basis to derive a net asset per share measure as defined
by the European Public Real Estate Association (EPRA).
10. INVESTMENT PROPERTIES
Balance at 1 April
Purchase of investment properties
Capital expenditure
Capitalised interest on refurbishments (note 4)
Disposals during the year
Change in fair value of investment properties
Balance at 31 March
2014
£m
825.9
19.0
29.7
0.8
(29.0)
221.9
1,068.3
2013
£m
759.3
–
28.7
0.6
(21.7)
59.0
825.9
Investment properties represent a single class of property being business accommodation for rent in London.
Capitalised interest is included at a rate of capitalisation of 5.1% (2013: 5.0%). The total amount of capitalised
interest included in investment properties is £5.0m (2013: £4.2m).
The change in fair value of investment properties is recognised in the income statement.
Investment property includes buildings under finance leases of which the carrying amount is £3.5m (2013: £3.5m).
Investment property finance lease commitment details are shown in note 16(g).
VALUATION
The Group’s investment properties are held at fair value and were revalued at 31 March 2014 by the external valuer,
CBRE Limited, a firm of independent qualified valuers in accordance with the Royal Institution of Chartered
Surveyors Valuation – Professional Standards 2014. This includes a physical inspection of all properties, at least
once a year. In line with IFRS 13, all investment properties are valued on the basis of their highest and best use.
For like-for-like properties their current use equates to the highest and best use. For properties undergoing
refurbishment or redevelopment these are currently being used for business accommodation in their current
state. However, the valuation is based on the current valuation at the balance sheet date including the impact
of the potential refurbishment and redevelopment as this represents the highest and best use.
The Executive management team and the Board both conduct a detailed review of each property valuation to
ensure appropriate assumptions have been applied. Meetings are held with the valuers to review and challenge the
valuations, ensuring they have considered all relevant information, and rigorous reviews are performed to ensure
valuations are sensible.
Workspace Group PLC Annual Report and Accounts 2014
95
The valuation of like-for-like properties (which are not subject to refurbishment or redevelopment) is based on
the income capitalisation method which applies market-based yields to the estimated rental values (ERVs) of
each of the properties. Yields are based on current market expectations depending on the location and use of the
property. ERVs are based on estimated rental potential considering current rental streams, market comparatives,
occupancy and timing of rent reviews. Whilst there is market evidence for these inputs and recent transaction
prices for similar properties, there is still a significant element of estimation and judgement. As a result of
adjustments made to market observable data, the significant inputs are deemed unobservable under IFRS 13.
When valuing properties being refurbished by Workspace, the residual value method is used. The completed value
of the refurbishment is determined as for like-for-like properties above. Capital expenditure required to complete
the building is then deducted and a discount factor is applied to reflect the time period to complete construction
and allowance made for construction and market risk to arrive at the residual value of the property.
The discount factor used is the property yield that is also applied to the estimated rental value to determine the
value of the completed building. Other risks such as unexpected time delays relating to planned capital expenditure
are assessed on a project-by-project basis, looking at market comparable data where possible and the complexity
of the proposed scheme.
Redevelopment properties are also valued using the residual value method. The completed proposed
redevelopment which would be undertaken by a residential developer is valued based on the market value
for similar sites and then adjusted for costs to complete, developer’s profit margin and a time discount factor.
Allowance is also made for planning and construction risk depending on the stage of the redevelopment. If a
contract is agreed for the sale/redevelopment of the site, the property is valued based on agreed consideration.
For all methods the valuers are provided with information on tenure, letting, town planning and the repair of the
buildings and sites.
An increase/decrease to ERVs (Estimated rental values) will increase/decrease valuations respectively, while an
increase/decrease to yields will decrease/increase valuations respectively. There are interrelationships between
these inputs as they are partially determined by market conditions.
An increase/decrease in costs to complete and the discount factor will decrease/increase valuations respectively.
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:
Total per CBRE valuation report
Deferred consideration on sale of property (note 13)
Head leases treated as finance leases under IAS 17
Total investment properties per balance sheet
2014
£m
1,078.0
(13.2)
3.5
1,068.3
2013
£m
829.9
(7.5)
3.5
825.9
The Group’s Investment properties are carried at fair value and under IFRS 13 are required to be analysed by level
depending on the valuation method adopted. The different valuation methods are as follows:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access
at the measurement date.
Level 2 – Use of a model with inputs (other than quoted prices included in Level 1) that are directly or indirectly
observable market data.
Level 3 – Use of a model with inputs that are not based on observable market data.
As noted in the Significant Judgements, Key Assumptions and Estimates section, property valuations are complex
and involve data which is not publicly available and involves a degree of judgement. All our investment properties
are classified as Level 3, due to the fact that one or more significant inputs to the valuation are not based on
observable market data. If the degree of subjectivity or nature of the measurement inputs changes then there could
be a transfer between Levels 2 and 3 of classification. No changes requiring a transfer have occurred during the year.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 96 Workspace Group PLC Annual Report and Accounts 2014
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
10. INVESTMENT PROPERTIES continued
The following table summarises the valuation techniques and inputs used in the determination of the property
valuation.
KEY UNOBSERVABLE INPUTS:
Property Category
Like-for-like
Refurbishments
Redevelopments
Other
Head leases
1 = income capitalisation method
2 = residual value method
SENSITIVITY ANALYSIS:
Valuation
£m
Valuation
technique
692
154
197
21
4
1,068
1
2
2
1
n/a
ERVs – per sq. ft.
Range
£3 – £65
£7 – £47
£5 – £27
£8 – £39
Weighted
average
£16
£25
£18
£33
Equivalent yields
Range
Weighted
average
6.0% – 12.7%
6.5% – 7.9%
6.1% – 9.9%
6.8% – 15.4%
7.2%
7.1%
7.5%
8.2%
A +/- 10% movement in ERVs or a +/- 25 basis points movement in yields would result in the following increase/
decrease in the valuation.
£m
Like-for-like
Refurbishments
Redevelopments
Other
11. PROPERTY, PLANT AND EQUIPMENT
Cost or valuation
Balance at 1 April 2012
Additions during the year
Balance at 31 March 2013
Additions during the year
Balance at 31 March 2014
Accumulated depreciation
Balance at 1 April 2012
Charge for the year
Balance at 31 March 2013
Charge for the year
Balance at 31 March 2014
Net book amount at 31 March 2014
Net book amount at 31 March 2013
+/- 10% in ERVs
+/- 25 bps in yields
+69 / -69
+18 / -18
+10 / -10
+3 / -3
-23 / +25
-6 / +6
-3 / +3
-1 / +1
Equipment
and fixtures
£m
5.3
1.0
6.3
0.9
7.2
4.2
0.4
4.6
0.6
5.2
2.0
1.7
Total
£m
5.3
1.0
6.3
0.9
7.2
4.2
0.4
4.6
0.6
5.2
2.0
1.7
Workspace Group PLC Annual Report and Accounts 2014
97
12. JOINT VENTURES
The Group’s investment in joint ventures represents:
Balance at 1 April
Net cash investment
Unrealised surplus on sale of properties to joint venture
Share of gains
Distributions received
Balance at 31 March
The Group has the following joint ventures:
2014
£m
20.7
(1.6)
–
5.1
(1.1)
23.1
2013
£m
12.3
7.7
(0.1)
1.7
(0.9)
20.7
BlackRock Workspace Property Trust
Enterprise House Investments LLP
Generate Studio Limited
BlackRock UK Property Fund
Polar Properties Limited
Whitebox Creative Limited
February 2011
April 2012
February 2014
20.1%
50%
50%
Partner
Established
Ownership
BlackRock Workspace Property Trust is a Jersey property unit trust established in February 2011 whose aim is
to build a fund of up to £100m of office and industrial property in and around London. The Group holds a 20.1%
interest however strategic decisions are taken with the agreement of both parties and no one party has control
on their own. The Group is also property manager with significant delegated powers including responsibility for
asset management and recommending acquisitions and disposals. As a result there is shared control and so the
joint venture has been equity accounted in the consolidated financial statements.
Enterprise House Investments LLP has been established to obtain mixed use planning consent and redevelop
Enterprise House, Hayes, UB3 for new residential and commercial space. The Group sold this property to the
joint venture in April 2012.
Generate Studio Limited is engaged in the design and project management of office fit outs and workplace
consultancy both for Group properties and third parties.
The Group’s share of the joint ventures’ assets and liabilities is shown below:
Investment properties
Current assets
Current liabilities
Net assets
Unrealised surplus on sale of properties to joint venture
Investment in joint venture
The Group’s share of the joint ventures’ revenues and expenses is shown below:
Revenue
Direct costs
Net rental income
Administrative expenses
Profit on disposal of investment properties
Change in fair value of investment properties
Profit before tax
Taxation
Profit after tax
2014
£m
22.9
1.5
(0.8)
23.6
(0.5)
23.1
2013
£m
20.8
1.2
(0.8)
21.2
(0.5)
20.7
Year
ended
31 March
2014
£m
Year
ended
31 March
2013
£m
1.9
(0.6)
1.3
(0.2)
0.3
3.7
5.1
–
5.1
1.7
(0.5)
1.2
(0.1)
–
0.6
1.7
–
1.7
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77
98 Workspace Group PLC Annual Report and Accounts 2014
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
13. TRADE AND OTHER RECEIVABLES
Non-current trade and other receivables
Deferred consideration on sale of investment property:
Balance at 1 April
Additions
Change in fair value
Balance at 31 March
2014
£m
2013
£m
6.1
0.9
4.2
11.2
4.6
1.5
–
6.1
The non-current receivable relates to deferred consideration (cash and overage) arising on the sale of investment
properties. The conditional value of the portion of the receivable that relates to overage has been fair valued by
CBRE Limited on the basis of residual value as at 31 March 2014, using appropriate discount rates, and will be
revalued on a regular basis. This is a Level 3 valuation of a financial asset, as defined by IFRS 13. The methodology
and significant assumptions used in the valuation are consistent with those disclosed in note 10. The change in fair
value recorded in the income statement was a profit of £4.2m (31 March 2013: £nil) (see note 3 (b)).
Current trade and other receivables
Trade receivables
Less provision for impairment of receivables
Trade receivables – net
Prepayments and accrued income
Bank facility rental income accounts
Amounts due from related parties (see note 25)
Deferred consideration on sale of investment property
2014
£m
2.3
(0.3)
2.0
2.8
–
0.3
2.0
7.1
2013
£m
2.5
(0.4)
2.1
2.1
7.4
–
1.4
13.0
Bank facility rental income accounts were held by the banks as security for interest payments under the terms
of our previous bank facilities. These have now been settled following the refinancing in July 2013.
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:
Balance at 1 April
Provision for receivables impairment
Receivables written off during the year
Balance at 31 March
As at 31 March 2014, the ageing of trade receivables past due but not impaired was as follows:
2014
£m
0.4
0.2
(0.3)
0.3
2013
£m
0.6
0.3
(0.5)
0.4
Up to 3 months past due
3 to 6 months past due
Over 6 months past due
Total 2014
£m
Impaired
2014
£m
Not
impaired
2014
£m
Total 2013
£m
Impaired
2013
£m
2.0
0.1
0.2
2.3
(0.1)
(0.1)
(0.1)
(0.3)
1.9
–
0.1
2.0
2.1
0.1
0.3
2.5
(0.1)
(0.1)
(0.2)
(0.4)
Not
impaired
2013
£m
2.0
–
0.1
2.1
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.
Workspace Group PLC Annual Report and Accounts 2014
99
14. CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Restricted cash – tenants’ deposit deeds
2014
£m
2.0
1.7
3.7
2013
£m
10.1
1.7
11.8
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 flow statement.
15. TRADE AND OTHER PAYABLES
Trade payables
Other tax and social security payable
Tenants’ deposit deeds (see note 14)
Tenants’ deposits
Accrued expenses
Amounts due to related parties (see note 25)
Deferred income – rent and service charges
2014
£m
4.4
2.5
1.7
10.1
14.3
0.3
2.7
36.0
2013
£m
2.1
1.5
1.7
8.7
14.0
0.5
2.8
31.3
There is no material difference between the above amounts and their fair values due to the short-term nature of
the payables.
16. BORROWINGS
(A) BALANCES
Non-current
Bank loans (unsecured)
6% Retail Bond (unsecured)
5.6% Senior US Dollar Notes 2023 (unsecured)
5.53% Senior Notes 2023 (unsecured)
Senior Floating Rate Notes 2020 (unsecured)
Other term loan (unsecured)
Bank loans (secured)
Finance lease obligations
2014
£m
78.3
56.6
60.4
83.7
9.0
44.3
–
3.5
335.8
2013
£m
–
56.4
–
–
–
–
277.8
3.5
337.7
On 1 July 2013 the Group refinanced £325m of secured bank debt provided by the RBS and Bayern Clubs.
This bank debt was replaced by £352.5m of unsecured debt provided by the issue of £157.5m private placement
notes, £45m provided by a UK Fund and £150m of new bank debt.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 100 Workspace Group PLC Annual Report and Accounts 2014
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
16. BORROWINGS continued
(B) NET DEBT
Borrowings per (a) above
Adjust for:
Finance leases
Cost of raising finance
Foreign exchange gains and hedge adjustment
Cash at bank and in hand (note 14)
Net Debt
2014
£m
335.8
(3.5)
3.8
3.9
340.0
(2.0)
338.0
2013
£m
337.7
(3.5)
3.3
–
337.5
(10.1)
327.4
At 31 March 2014 the Group had £70m (2013: £45m) of undrawn bank facilities and £2m of unrestricted cash
(2013: £10m).
(C) MATURITY
Repayable between two years and three years
Repayable between four years and five years
Repayable in five years or more
Cost of raising finance
Foreign exchange gains and hedge adjustment
Finance leases
Repayable in five years or more
(D) INTEREST RATE AND REPAYMENT PROFILE
2014
£m
–
80.0
260.0
340.0
(3.8)
(3.9)
332.3
2013
£m
280.0
–
57.5
337.5
(3.3)
–
334.2
3.5
335.8
3.5
337.7
Current
Bank overdraft due within one year
or on demand
Non-current
5.6% Senior US Dollar Notes
5.53% Senior Notes
Senior Floating Rate Notes
Other term loan
Term loan
Revolver loan
6% Retail Bond
Principal at
period end
£m
Interest
rate
Interest
payable
Repayable
–
Base +2.25%
Variable
On demand
{
64.5
84.0
9.0
22.5
22.5
50.0
30.0
57.5
5.6%
5.53%
LIBOR +3.5%
LIBOR +3.5%
LIBOR +3.5%
LIBOR +2.5%
LIBOR +2.3%
6%
Half Yearly
Half Yearly
Half Yearly
Quarterly
Quarterly
Quarterly
Monthly
Half Yearly
June 2023
June 2023
June 2020
May 2022
May 2023
June 2018
June 2018
October 2019
Workspace Group PLC Annual Report and Accounts 2014
101
(E) DERIVATIVE FINANCIAL INSTRUMENTS
The following derivative financial instruments are held:
Interest rate swap
Cash flow hedge – cross currency swap
£95m
$100m/£64.5m
1.87%
5.66%
Amount
hedged
Rate payable
(or cap strike rate)
(%)
Term/expiry
June 2018
June 2023
The interest rate swap is treated as financial instruments at fair value with changes in value dealt with in the
income statement during each reporting period.
The Group has entered into a cross currency swap to ensure the US Dollar liability streams generated from the
US Dollar Notes are fully hedged into sterling for the life of the transaction. Through entering into the cross
currency swap the Group has created a synthetic sterling fixed rate liability totalling £64.5m. This swap has
been designated as a cash flow hedge with changes in fair value dealt with in equity.
(F) FAIR VALUES OF FINANCIAL INSTRUMENTS
Financial liabilities not at fair value through profit or loss
Bank loans
6% Retail Bond
Private Placement Notes
Other term loan
Finance lease obligations
Financial liabilities at fair value through profit or loss
Derivative financial instruments:
Interest rate swaps
Financial liabilities at fair value through equity
Derivative financial instruments:
Cash flow hedge
2014
Book Value
£m
2014
Fair Value
£m
2013
Book Value
£m
2013
Fair Value
£m
78.3
56.6
153.1
44.3
3.5
78.3
60.5
153.1
44.3
3.5
335.8
339.7
0.5
0.5
6.7
7.2
6.7
7.2
277.8
56.4
–
–
3.5
337.7
11.1
–
11.1
277.8
59.0
–
–
3.5
340.3
11.1
–
11.1
The fair value of the Retail Bond has been established from the quoted market price at 31 March 2014 and is thus
a Level 1 valuation as defined by IFRS 13.
In accordance with IFRS 13 disclosure is required for financial instruments that are carried in the financial
statements at fair value. The fair values of all the Group’s financial derivatives have been determined by reference
to market prices and discounted expected cash flows at prevailing interest rates and are Level 2 valuations.
There have been no transfers between levels in the year.
The different levels of valuation hierarchy as defined by IFRS 13 are set out in note 10.
The amount of £11.1m outstanding in 2013 was due in 2015. However, this was classified as current as it was settled
on refinancing shortly after the year end.
The total change in fair value of derivative financial instruments recorded in the income statement was a
profit of £2.2m (2013: £1.1m). This is net of £8.5m (2013: £2.1m) paid in the year to settle some instruments
on refinancing debt.
The total change in fair value of derivative financial instruments recorded in other comprehensive income was
a loss of £2.9m (2013: £nil).
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 102 Workspace Group PLC Annual Report and Accounts 2014
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
16. BORROWINGS continued
(G) FINANCE LEASES
Finance lease liabilities are in respect of leased investment property.
Minimum lease payments under finance leases fall due as follows:
Within one year
Between two and five years
Beyond five years
Future finance charges on finance leases
Present value of finance lease liabilities
17. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICY
The Group has identified exposure to the following financial risks:
Market risk
Credit risk
Liquidity risk
Capital risk
2014
£m
0.2
1.0
21.0
22.2
(18.7)
3.5
2013
£m
0.2
0.9
21.5
22.6
(19.1)
3.5
The policies for managing each of these risks and the principal effects of these policies on the results for the year
are summarised below:
(A) MARKET RISK
Market risk is the risk that changes in market conditions will affect the Group’s interest rates. Borrowings at variable
rates expose the Group to cash flow interest rate risk. Borrowings at fixed rates expose the Group to fair value
interest rate risk.
The Group finances its operations through a mixture of retained profits and borrowings. The Group borrows at
both fixed and floating rates of interest and then uses interest rate and cross currency swaps and caps to generate
the desired interest and risk profile. The Group has entered into a cross currency swap to ensure the US Dollar
liability streams generated from the US Dollar private placement notes are fully hedged into sterling for the life
of the transaction. At 31 March 2014 89% (2013: 79%) of Group borrowings were fixed or fixed through the use
of interest rate and cross currency 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 sufficiently 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 £0.2m (2013: £0.4m).
(B) CREDIT RISK
The Group’s main financial assets are cash and cash equivalents, deposits with banks and financial institutions
and trade and other receivables.
Credit risk is the risk of financial loss if a tenant or a counterparty to a financial instrument fails to meet its
contractual obligations. The Group’s exposure to this risk principally relates to the receivables from tenants,
deferred consideration on the sale of investment property and cash and cash equivalent balances held with
counterparties.
The Group’s exposure to credit risk in relation to receivables from tenants is influenced mainly by the characteristics
of individual tenants occupying its rental properties. The Group has approximately 4,000 tenants over approximately
100 properties. The largest 10 single tenants generate around 6% of net rent roll. As such, the credit risk attributable
to individual tenants is low.
The Group’s credit risk in relation to tenants is further managed by requiring that tenants provide a deposit
equivalent to three month’s rent on inception of lease as security against default. Total tenant deposits held are
£11.8m (2013: £10.4m). The Group monitors aged debt balances and any potential bad debts every week, the
information being reported to the Executive Committee every month as part of the performance monitoring
process. The Group’s debtor recovery is consistently high and as such is deemed a low risk area.
Deferred consideration on the sale of investment property is contractual and valued regularly by the external
valuer based on current and future market factors.
Workspace Group PLC Annual Report and Accounts 2014
103
Cash and cash equivalents and financial derivatives are held with major UK high street banks or building societies
and strict counterparty limits are operated on deposits.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to
credit risk at the reporting date was:
Cash and cash equivalents (note 14)
Trade receivables – current (note 13)
Deferred consideration – current (note 13)
Deferred consideration – non current (note 13)
2014
£m
3.7
2.3
2.0
11.2
19.2
2013
£m
11.8
2.5
1.4
6.1
21.8
(C) LIQUIDITY RISK
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
The Group’s approach to managing liquidity is to ensure it will always have sufficient funds to meet obligations
as they fall due. This is performed via a variety of methods including daily cash flow review and forecasting,
monthly monitoring of the maturity profile of debt and the regular revision of borrowing facilities in relation
to the Group’s requirements and strategy.
To ensure it can effectively manage its liquidity risk, the Group has an overdraft facility of £4m and a revolving
loan facility of £100m. At 31 March 2014 headroom excluding overdraft was £70m (31 March 2013: £45m).
Cash flow 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 flows 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 flows payable under financial liabilities, derivative
financial instruments and trade and other payables existing at the balance sheet date. Contracted cash flows are
based upon the loan balances and applicable interest rates payable on these at each year end.
31 March 2014
Financial Liabilities
Bank loans
6% Retail Bond
Private placement notes
Other term loan
Derivative financial instruments
Finance lease liabilities
Trade and other payables
31 March 2013
Financial Liabilities
Bank loans
6% Retail Bond
Derivative financial instruments
Finance lease liabilities
Trade and other payables
Carrying
Amount
£m
80.0
57.5
157.5
45.0
7.2
3.5
30.8
381.5
Carrying
Amount
£m
280.0
57.5
11.1
3.5
27.0
379.1
Due
within
1 year
£m
Due
between
1 and 2
years
£m
Due
between
2 and 3
years
£m
Due 3
years and
beyond
£m
Total
contracted
cash flows
£m
2.3
3.5
8.7
1.8
1.5
0.2
30.8
48.8
Due
within
1 year
£m
7.9
3.5
5.0
0.2
27.0
43.6
2.3
3.5
8.7
1.8
1.5
0.2
–
2.3
3.5
8.7
1.8
1.5
0.2
–
80.8
66.1
200.1
55.0
2.7
21.6
–
18.0
18.0
426.3
87.7
76.6
226.2
60.4
7.2
22.2
30.8
511.1
Due
between
1 and 2
years
£m
Due
between
2 and 3
years
£m
Due 3
years and
beyond
£m
Total
contracted
cash flows
£m
7.9
3.5
5.0
0.4
–
16.8
281.6
3.5
1.1
0.5
–
286.7
–
69.5
–
21.5
–
91.0
297.4
80.0
11.1
22.6
27.0
438.1
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 104 Workspace Group PLC Annual Report and Accounts 2014
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
(D) CAPITAL RISK MANAGEMENT
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern,
and monitor an appropriate mix of debt and equity financing.
Equity comprises issued share capital, reserves and retained earnings as disclosed in the consolidated statement
of changes in equity. Debt comprises drawings against term loan facilities, revolving loan facilities from banks, the
Retail Bond, private placement notes less cash at bank and in hand.
The foreign currency risk on the US Dollar private placement notes is fully hedged through a cross currency swap.
At 31 March 2014 Group equity was £726.1m (2013: £500.4m), and Group net debt (debt less cash at bank and in
hand) was £338.0m (2013: £327.4m). Group gearing at 31 March 2014 was 46% (2013: 65%).
Following the refinancing in the year the Group’s borrowings are now all unsecured. The loan to value covenants
applicable to these borrowings range between 60% and 75% and compliance is being met comfortably.
18. NOTES TO CASH FLOW STATEMENT
Reconciliation of profit for the period to cash generated from operations:
Profit before tax
Depreciation
Amortisation of intangibles
Profit/(loss) on disposal of investment properties
Other income
Net gain from change in fair value of investment property
Equity settled share based payments
Change in fair value of financial instruments
Finance income
Finance expense
Gains from share in joint ventures
Changes in working capital:
(Increase) in trade and other receivables
Increase in trade and other payables
Cash generated from operations
For the purposes of the cash flow statement, cash and cash equivalents comprise the following:
Cash at bank and in hand
Restricted cash – tenants’ deposit deeds
19. OTHER NON-CURRENT LIABILITIES
Amount payable re proceeds share agreement
See note 20 for details of this payable.
2014
£m
252.5
0.6
0.2
(1.6)
(4.2)
(221.9)
1.6
(2.2)
(0.1)
20.5
(5.1)
(0.4)
3.1
43.0
2014
£m
2.0
1.7
3.7
2014
£m
11.0
2013
£m
76.4
0.4
0.1
2.2
–
(59.0)
1.4
(1.1)
(0.2)
19.5
(1.7)
(0.5)
1.1
38.6
2013
£m
10.1
1.7
11.8
2013
£m
–
Workspace Group PLC Annual Report and Accounts 2014
105
20. NON-CONTROLLING INTERESTS
In December 2009 Workspace acquired full control of its former Workspace Glebe joint venture. The purchase
was satisfied by a cash payment of £15m and a debt facility of £68m provided by the former lenders to the joint
venture, with further amounts potentially payable under a proceeds share agreement.
The proceeds share provides for the former lenders to Workspace Glebe to share in net cash proceeds from
disposals from the Glebe property portfolio once Workspace has received its priority return. The priority return
at 31 March 2014 is £92m. For proceeds up to £170m the lenders’ share is 50%, from £170m up to £200m it is
30% and nil thereafter. The maximum payable under this proceed share is £48m. All disposals are at the option
of Workspace and there are no time limits.
The total valuation of the Glebe portfolio at 31 March 2014 was £217m (31 March 2013: £164m). While a number
of the assets have residential redevelopment potential a substantial part of the portfolio is comprised of
investment properties that Workspace has no current plans to sell. The current value of the properties that
have redevelopment potential and management consider probable to be sold for cash is £107m. Total proceeds
including cash received to date from disposals of £14m would therefore be £121m (31 March 2013: £83m). It is
estimated that net proceeds after costs that would be realised is £114m. On this basis, the Group has a legal or
constructive obligation to pay the lenders £11m at 31 March 2014.
We have reviewed and changed our accounting policy for the Glebe proceeds share agreement. Previously, the
Group considered the proceeds share agreement as a contingent liability, with a provision under IAS 37 only being
recognised if the obligation under the agreement was triggered or it was otherwise considered probable that an
outflow of economic benefits would be required. The Group now accounts for the agreement as an equity
instrument in accordance with IAS 32 representing a non-controlling interest (NCI).
There is no impact of this change in policy on the prior year. The NCI had an initial fair value on acquisition of £nil
with no subsequent attributions of profit or distributions until the current year. The effect in the current year is to
recognise a NCI of £11m and a subsequent distribution to the NCI of £11m. This has resulted in a non-current liability
of £11m on the balance sheet (see note 19). Under the previous treatment, the Group would have recognised a
provision of £11m in the current year with a corresponding entry through other income and expenses. This change
in policy has no impact on EPRA NAV.
In the highly unlikely scenario that all properties in the Glebe portfolio were sold, the maximum amount payable
under the proceeds share agreement of £48m would be due to the lenders (31 March 2013: £32m). This would be
reflected in an increase in the amount attributable to NCI at 31 March 2014 of £37m (31 March 2013: £32m) with a
net impact of reducing EPRA NAV per share by 25 pence (31 March 2013: 22 pence).
21. SHARE CAPITAL
Issued: Fully paid ordinary shares of £1 each
Issued: Fully paid ordinary shares of £1 each
Movements in share capital were as follows:
Number of shares at 1 April
Issue of shares
Number of shares at 31 March
The shares issued during the year were to satisfy the exercise of share options.
Balance at 1 April
Issue of shares
Balance at 31 March
2014
Number
2013
Number
145,616,695
144,936,155
2014
£m
145.6
2014
Number
144,936,155
680,540
145,616,695
2014
£m
144.9
0.7
145.6
2013
£m
144.9
2013
Number
144,091,418
844,737
144,936,155
2013
£m
144.1
0.8
144.9
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 106 Workspace Group PLC Annual Report and Accounts 2014
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
22. OTHER RESERVES
Balance at 1 April 2012
Share based payments
Balance at 31 March 2013
Share based payments
Change in fair value of derivative financial instruments (cash flow hedge)
Balance at 31 March 2014
Equity
settled
share based
payments
£m
Merger
reserve
£m
Hedging
reserve
£m
5.2
1.4
6.6
1.6
–
8.2
8.7
–
8.7
–
–
8.7
–
–
–
–
(2.9)
(2.9)
Total
£m
13.9
1.4
15.3
1.6
(2.9)
14.0
The merger reserve was created in 2009 following the raising of equity through a cashbox share placing structure.
23. INVESTMENT IN OWN SHARES
The Company has 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 Executive Share Option Scheme 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 beneficially owned by participants. No shares were purchased for the Trust during
the year but 1,109,836 shares were transferred to employees on the exercise of share options. At 31 March 2014 the
number of shares held by the Trust totalled 108,966 (2013: 1,218,802). At 31 March 2014 the market value of these
shares was £0.6m (2013: £4.2m) compared to a nominal value of £0.1m (2013: £1.2m).
The Company has also established an employee Share Incentive Plan (SIP) which is governed by HMRC rules.
51,800 shares were purchased for the Plan in 2013 at a cost of £0.2m. These are being held in a separate trust.
Balance at 1 April
Acquisition of ordinary shares
Balance at 31 March
24. SHARE-BASED PAYMENTS
The Group operates a number of share schemes:
2014
£m
8.9
–
8.9
2013
£m
8.7
0.2
8.9
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 assessed over the three year vesting period. These are:
– Absolute TSR
– Relative TSR
– Relative NAV
The shares are issued at nil consideration provided the performance conditions are met.
Under the 2013 LTIP scheme 766,728 performance and matching shares were awarded in June 2013 to Directors
and senior management (2012 LTIP scheme: 1,163,416).
Workspace Group PLC Annual Report and Accounts 2014
107
Details of the movements for the LTIP scheme during the year were as follows:
At 1 April 2012
Granted
Exercised
Lapsed
At 31 March 2013
Granted
Exercised
Lapsed
At 31 March 2014
LTIP
Number
3,864,467
1,163,416
(515,866)
(875,177)
3,636,840
766,728
(1,681,747)
(65,932)
2,655,889
The weighted average share price at the date of exercise of shares exercised during the year was £4.53 (2013: £2.48).
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:
Share price at grant
Exercise price
Average expected life (years)
Risk free rate
Expected dividend yield
Average share price volatility
Fair value per option – Absolute TSR element
Fair value per option – Relative TSR element
2014
405p
Nil
3
0.3%
3%
31%
162p
148p
2013
(Nov 2012)
2013
(June 2012)
306p
Nil
3
0.5%
4%
41%
249p
172p
227p
Nil
3
0.5%
4%
41%
125p
128p
The relative NAV is a non-market based condition and the intrinsic value is therefore the share price at date of
grant of 405 pence. 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.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 108 Workspace Group PLC Annual Report and Accounts 2014
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
24. SHARE-BASED PAYMENTS continued
II) EMPLOYEE SHARE OPTION SCHEMES
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 were 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 under the SAYE scheme are normally exercisable after three or five years saving. In accordance with UK
practice, the majority of options under the SAYE schemes are granted at a price 20% below the market price
ruling at the date of grant.
Details of the movements for the ESOS and SAYE schemes during the year were as follows:
Options outstanding
At 1 April 2012
Options granted
Options exercised
Options lapsed
At 31 March 2013
Options granted
Options exercised
Options lapsed
At 31 March 2014
ESOS
SAYE
Number
191,171
–
–
(139,656)
Weighted
exercise
price
£11.05
–
–
£10.34
Number
483,601
193,992
(328,871)
(15,394)
51,515
£13.22
333,328
–
–
(18,950)
–
–
£8.25
66,147
(39,168)
(19,720)
Weighted
exercise
price
£1.26
£1.93
£1.15
£1.55
£1.74
£3.47
£1.63
£2.31
32,565
£16.12 340,587
£2.06
The exercise of all options, other than those obtained under the Group’s SAYE scheme, was dependent upon the
Group achieving specified performance targets.
The weighted average share price at the date of exercise for the SAYE options exercised during the year was
£4.50 (2013: £2.63).
66,147 SAYE share options were granted in the year (2013: 193,992 shares).
The fair value has been calculated using the Black-Scholes model. Inputs to the model are summarised as follows:
Weighted average share price at grant
Exercise price
Expected volatility
Average expected life (years)
Risk free rate
Expected dividend yield
Possibility of ceasing employment before vesting
2014
SAYE
3 year
440p
347p
31%
3
0.3%
3%
25%
2014
SAYE
5 year
440p
347p
31%
5
0.3%
3%
25%
2013
SAYE
3 year
230p
193p
41%
3
0.5%
4%
25%
2013
SAYE
5 year
230p
193p
41%
5
0.5%
4%
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.
Workspace Group PLC Annual Report and Accounts 2014
109
Fair values per share of these options were:
SAYE – 3 year
SAYE – 5 year
2014
Grant
date
31 July 2013
31 July 2013
2014
Fair value
of award
118p
124p
2013
Grant
date
30 July 2012
30 July 2012
2013
Fair value
of award
68p
74p
III) SHARE INCENTIVE PLAN (SIP)
On 22 March 2013 all staff were granted £1,000 worth of shares. These shares are held in trust under an HMRC
approved SIP. The shares can be exercised following three years of employment but must be held for a further
two years in order to qualify for tax advantages. There were no grants made in the year (2013: 51,800 shares).
2,920 shares were exercised in the year and 6,424 shares lapsed.
IV) YEAR END SUMMARY
At 31 March 2014 in total there were 3,071,497 (2013: 4,073,483) share awards/options exercisable on the
Company’s ordinary share capital. These are analysed below:
Date of grant
LTIP
04 August 2011
18 June 2012
19 November 2012
26 June 2013
ESOS
30 June 2004
17 June 2005
1 September 2005
SAYE
21 July 2009
20 July 2010
14 December 2011
30 July 2012
30 July 2012
31 July 2013
31 July 2013
SIP
22 March 2013
Exercise
Price
Ordinary
shares
Number
Vested
and
exercisable
–
762,587
– 865,229
276,642
–
751,431
–
–
–
–
–
Exercisable between
04.08.2014
18.06.2015
19.11.2015
26.06.2016
Exercisable between
–
–
–
–
£13.16
£17.81
£19.37
14,624
9,681
8,260
14,624
9,681
8,260
30.06.2007
17.06.2008
01.09.2008
30.06.2014
17.06.2015
01.09.2015
Exercisable between
£1.15
£1.66
£1.91
£1.93
£1.93
£3.47
£3.47
69,036
2,983
32,314
154,048
18,652
54,910
8,644
–
42,456
–
–
–
–
–
–
–
–
01.09.2014
01.09.2015
01.02.2015
01.09.2015
01.09.2017
01.09.2016
01.09.2018
01.03.2015
01.03.2016
01.08.2015
01.03.2016
01.03.2018
01.03.2017
01.03.2019
Exercisable between
22.03.2016
22.03.2018
Total
3,071,497
32,565
The weighted average exercise price for vested and exercisable shares at 31 March 2014 is: LTIP – £nil (2013: £nil),
ESOS – £16.12 (2013: £13.22).
The share awards/options outstanding at 31 March 2014 had a weighted average remaining contractual life of:
LTIP – 1.5 years (2013: 1.1 years), ESOS – nil years (2013: nil years), SAYE – 1.6 years (2013: 2.2 years), SIP – 2 years
(2013: 3 years).
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 110 Workspace Group PLC Annual Report and Accounts 2014
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
24. SHARE-BASED PAYMENTS continued
V) CASH SETTLED SHARE BASED PAYMENTS
National Insurance payments due on the exercise of non-approved ESOS options and shares from the LTIP are
considered cash settled share based payments.
The estimated fair value of the National Insurance cash settled share based payments have been calculated using
the 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.
VI) SHARE BASED PAYMENT CHARGES
The Group recognised a total charge in relation to share based payments as follows:
Equity settled share based payments
Cash settled share based payments
2014
£m
1.6
0.9
2.5
2013
£m
1.4
0.4
1.8
The total liability at the end of the period in respect of cash-settled share based schemes was £0.9m (2013: £0.9m).
25. RELATED PARTY TRANSACTIONS
Transactions year ended 31 March:
Net investment into joint ventures (note 12)
Sale of property to joint ventures
Fee income and recharges to joint ventures
Distributions received from joint ventures (note 12)
Balances with joint ventures at 31 March:
Amounts receivable from joint ventures (note 13)
Amounts payable to joint ventures (note 15)
2014
£m
(1.6)
–
0.9
1.1
2013
£m
7.7
3.2
0.9
0.9
0.3
(0.3)
–
(0.5)
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:
Short-term employee benefits
Post-employment benefits
Share-based payments
2014
£m
2.9
0.2
1.1
4.2
2013
£m
2.9
0.2
0.7
3.8
Workspace Group PLC Annual Report and Accounts 2014
111
26. CAPITAL COMMITMENTS
At the year end the estimated amounts of contractual commitments for future capital expenditure not provided
for were:
Funding of joint venture
Purchases, construction or redevelopment of investment property
2014
£m
3.3
8.9
2013
£m
1.7
18.2
27. PRINCIPAL SUBSIDIARY UNDERTAKINGS
Except where indicated otherwise, the Company (incorporated in the UK) wholly owns the following active
subsidiary undertakings incorporated and operating in the UK, all of which are consolidated in the Group’s
financial statements:
Name
Workspace 11 Limited
Workspace 12 Limited*
Workspace 13 Limited
Workspace 14 Limited*
Workspace 15 Limited
Workspace 16 (Jersey) Limited†
Workspace Glebe Limited
Glebe Three Limited*
Workspace Holdings Limited
LI Property Services Limited
Workspace Management Limited
Nature of business
Property Investment
Property Investment
Property Investment
Property Investment
Property Investment
Investor in joint venture
Holding Company
Property Investment
Holding Company
Insurance Agents
Property Management
* The share capital of these subsidiaries is held by other Group companies.
† Company registered in Jersey.
The Company has taken advantage of the exemption under section 410 of the Companies Act 2006 only to
disclose those subsidiary undertakings that principally affect the financial statements.
A full list of subsidiary undertakings at 31 March 2014 will be appended to the Company’s next annual return.
28. PENSION COMMITMENTS
The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from
those of the Group in an independently administered fund. The pension cost charge for this scheme in the year
was £0.6m (2013: £0.5m) representing contributions payable by the Group to the fund and is charged through
operating profit.
The Group’s commitment with regard to pension contributions ranges from 6% to 16.5% of an employee’s salary.
The pension scheme is open to every employee after three months’ qualifying service but from next year will be
subject to the new Government auto-enrolment rules. The number of employees in the scheme at the year end
was 102 (2013: 91).
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 112 Workspace Group PLC Annual Report and Accounts 2014
NOTES TO THE FINANCIAL STATEMENTS
CONTINUED
29. OPERATING LEASES
The following future minimum lease payments are due under non-cancellable operating leases:
Motor vehicles and office equipment:
Due within one year
Due between two and five years
Land and buildings:
Within one year
Between two and five years
Beyond five years
2014
£m
0.1
0.1
0.2
2014
£m
21.3
2.4
0.6
24.3
2013
£m
0.1
0.1
0.2
2013
£m
21.2
1.5
0.6
23.3
The Group has determined that all tenant leases are operating leases within the meaning of IAS 17. 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 above.
30. POST BALANCE SHEET EVENTS
Bow Enterprise Park, E3 – Contracts were exchanged in April 2014 with Peabody Enterprises for the second
phase of the redevelopment of this site with consideration comprising £11m in cash and 3,000 sq. ft. of new
commercial space.
12/13 Greville Street, London, EC1 – The purchase of this property for a consideration of £2.3m was completed
in April 2014.
The Filaments, SW18 – in April 2014 a mixed use planning permission was secured for the second phase of the
redevelopment of this estate. This scheme comprises 77 apartments and 18,000 sq. ft. of commercial space.
We would expect to receive back a combination of cash and new commercial space (at no cost or risk to the
Group) from the sale of the residential component to a residential developer.
The Faircharm, SE8 – contracts were exchanged in May 2014 with London & Quadrant Housing Association
for the redevelopment of this estate with consideration comprising £9.5m in cash and 52,000 sq. ft. of new
business space.
The Biscuit Factory (part), SE16 – £17.9m of cash was received in May 2014 for the sale of the first phase of the
redevelopment to Grosvenor Britain and Ireland.
Vestry Street Studios, N1 – The purchase of this property for a consideration of £12.6m was completed in
May 2014.
Workspace Group PLC Annual Report and Accounts 2014
113
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF WORKSPACE GROUP PLC
(PARENT COMPANY)
OUR OPINION
In our opinion the financial statements, defined below:
– give a true and fair view of the state of the Parent
Company’s affairs as at 31 March 2014;
– have been properly prepared in accordance with
United Kingdom Generally Accepted Accounting
Practice; and
– have been prepared in accordance with the
requirements of the Companies Act 2006.
This opinion is to be read in the context of what we say
in the remainder of this report.
WHAT WE HAVE AUDITED
The Parent Company financial statements (the “financial
statements”), which are prepared by Workspace Group
PLC, comprise:
– the Parent Company balance sheet as at
31 March 2014; and
– the notes to the financial statements, which include
a summary of significant accounting policies and
other explanatory information.
The financial reporting framework that has been
applied in their preparation is applicable law and United
Kingdom Accounting Standards (United Kingdom
Generally Accepted Accounting Practice).
In applying the financial reporting framework,
the directors have made a number of subjective
judgements, for example in respect of significant
accounting estimates. In making such estimates, they
have made assumptions and considered future events.
Certain disclosures required by the financial reporting
framework have been presented elsewhere in the
Annual Report and Accounts (the “Annual Report”),
rather than in the notes to the financial statements.
These are cross-referenced from the financial
statements and are identified as audited.
WHAT AN AUDIT OF FINANCIAL
STATEMENTS INVOLVES
We conducted our audit in accordance with
International Standards on Auditing (UK and Ireland)
(“ISAs (UK & Ireland)”). An audit involves obtaining
evidence about the amounts and disclosures in the
financial statements sufficient to give reasonable
assurance that the financial 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 significant accounting
estimates made by the directors; and
– the overall presentation of the financial statements.
In addition, we read all the financial and non-financial
information in the Annual Report to identify material
inconsistencies with the audited financial statements
and to identify any information that is apparently
materially incorrect based on, or materially inconsistent
with, the knowledge acquired by us in the course of
performing the audit. If we become aware of any
apparent material misstatements or inconsistencies we
consider the implications for our report.
OPINIONS ON OTHER MATTERS PRESCRIBED
BY THE COMPANIES ACT 2006
In our opinion:
– the information given in the Strategic Report and
the Report of the Directors for the financial year
for which the financial statements are prepared
is consistent with the financial statements; and
– the part of the Directors’ Remuneration Report to be
audited has been properly prepared in accordance
with the Companies Act 2006.
OTHER MATTERS ON WHICH WE ARE REQUIRED
TO REPORT BY EXCEPTION
ADEQUACY OF ACCOUNTING RECORDS AND
INFORMATION AND EXPLANATIONS RECEIVED
Under the Companies Act 2006 we are required to
report to you if, in our opinion:
– we have not received all the information and
explanations we require for our audit; or
– adequate accounting records have not been kept
by the Parent Company, or returns adequate for our
audit have not been received from branches not
visited by us; or
– the financial statements and the part of the Directors’
Remuneration Report to be audited are not in
agreement with the accounting records and returns.
We have no exceptions to report arising from this
responsibility.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 114 Workspace Group PLC Annual Report and Accounts 2014
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF WORKSPACE GROUP PLC
(PARENT COMPANY) CONTINUED
OTHER MATTER
We have reported separately on the group financial
statements of Workspace Group PLC for the year ended
31 March 2014.
BOWKER ANDREWS (SENIOR STATUTORY AUDITOR)
FOR AND ON BEHALF OF
PRICEWATERHOUSECOOPERS LLP CHARTERED
ACCOUNTANTS AND STATUTORY AUDITORS
London
3 June 2014
DIRECTORS’ REMUNERATION
Under the Companies Act 2006 we are required to
report to you if, in our opinion, certain disclosures
of directors’ remuneration specified by law are not
made. We have no exceptions to report arising from
this responsibility.
OTHER INFORMATION IN THE ANNUAL REPORT
Under ISAs (UK & Ireland) we are required to report to
you if, in our opinion, information in the Annual Report is:
– materially inconsistent with the information in the
audited financial statements; or
– apparently materially incorrect based on, or materially
inconsistent with, our knowledge of the Company
acquired in the course of performing our audit; or
– is otherwise misleading.
We have no exceptions to report arising from
this responsibility.
RESPONSIBILITIES FOR THE FINANCIAL
STATEMENTS AND THE AUDIT
OUR RESPONSIBILITIES AND THOSE OF
THE DIRECTORS
As explained more fully in the Statement of Directors’
Responsibilities set out on page 77, the directors are
responsible for the preparation of the financial
statements and for being satisfied that they give a true
and fair view.
Our responsibility is to audit and express an opinion on
the financial statements in accordance with applicable
law and ISAs (UK & 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.
Workspace Group PLC Annual Report and Accounts 2014
115
PARENT COMPANY BALANCE SHEET
AS AT 31 MARCH
Fixed assets
Investments
Current assets
Debtors
Cash at bank and in hand
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Creditors: amounts falling due after more than one year
Capital and reserves
Called up share capital
Share premium account
Investment in own shares
Other reserves
Profit and loss account
Total shareholders’ funds
Notes
2014
£m
2013
£m
C
D
E
289.6
289.6
495.0
0.2
495.2
(97.3)
397.9
687.5
F
(350.5)
337.0
G
G
G
G
G
H
145.6
58.2
(8.9)
14.0
128.1
337.0
268.5
268.5
207.1
1.2
208.3
(88.2)
120.1
388.6
(56.4)
332.2
144.9
58.8
(8.9)
15.3
122.1
332.2
The notes on pages 116 to 119 form part of these financial statements.
The financial statements on pages 115 to 119 were approved by the Board of Directors on 3 June 2014 and
signed on its behalf by:
J HOPKINS
G CLEMETT
DIRECTORS
Workspace Group PLC
Registered number 2041612
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 116 Workspace Group PLC Annual Report and Accounts 2014
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
The disclosure requirements of FRS 20 Share-based
payment are met in note 24 of the Group financial
statements.
(E) BORROWINGS
Details of borrowings are described in note F to the
Parent Company financial statements. Costs associated
with the raising of finance are capitalised, amortised
over the life of the instrument and charged as part of
interest costs.
(F) DERIVATIVE FINANCIAL INSTRUMENTS AND
HEDGE ACCOUNTING
The accounting policy for derivative financial
instruments and hedge accounting, under FRS 26
Financial Instruments – Recognition and Measurement,
are the same as those for the Group and are set out on
pages 87 and 88. Disclosure requirements are provided
in note 16 to the consolidated financial statements.
(G) FOREIGN CURRENCY TRANSLATION
The accounting policy for foreign currency translation
is the same as that for the Group and is set out on
page 87.
B. PROFIT FOR THE YEAR
As permitted by the exemption in Section 408 of the
Companies Act 2006, the profit and loss account of
the Company is not presented as part of these financial
statements. The profit attributable to shareholders,
before dividend payments, dealt with in the financial
statements of the Company was £20.5m (2013: £4.5m).
Auditors’ remuneration of £10,000 (2013: £10,000)
has been borne by a subsidiary undertaking.
Proposed dividends are disclosed in note 7 to the
consolidated financial statements.
A. ACCOUNTING POLICIES
Although the Group consolidated financial statements
are prepared under IFRS as adopted by the EU, the
Workspace Group PLC Company financial 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:
(A) BASIS OF ACCOUNTING
The financial 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
financial statements.
(B) CASH FLOW STATEMENT
The Company has taken advantage of the convention
not to produce a cash flow statement as one is prepared
for the Group financial statements.
(C) INVESTMENT IN SUBSIDIARY UNDERTAKINGS
Interests in subsidiary undertakings are carried in the
Company’s balance sheet at cost less impairment.
Impairment reviews are performed by the Directors
when there has been an indication of potential
impairment.
Impairment and reversal of impairment is taken to the
profit and loss account.
(D) SHARE BASED PAYMENT AND INVESTMENT IN
OWN SHARES
Incentives are provided to employees under share
option schemes. The Company has established an
Employee Share Ownership Trust (ESOT) to satisfy
part of its obligation to provide shares when Group
employees exercise their options. The Company
provides funding to the ESOT to purchase these shares.
The Company has also established an employee Share
Incentive Plan (SIP) which is governed by HMRC rules.
The Company itself has no employees. When the
Company grants share options to Group employees
as part of their remuneration, the expense of the
share options is reflected in a subsidiary undertaking,
Workspace Management Limited. The Company
recognises this as an investment in subsidiary
undertakings with a corresponding increase to equity.
Workspace Group PLC Annual Report and Accounts 2014
117
Investment
in subsidiary
undertakings
£m
Investment
in joint
ventures
£m
311.8
1.6
313.4
44.9
(19.5)
25.4
288.0
266.9
1.6
–
1.6
–
–
–
1.6
1.6
Total
£m
313.4
1.6
315.0
44.9
(19.5)
25.4
289.6
268.5
C. INVESTMENTS
Cost
Balance at 1 April 2013
Additions in the year
Balance at 31 March 2014
Impairment
Balance at 1 April 2013
Reversal of impairment loss
Balance at 31 March 2014
Net book value at 31 March 2014
Net book value at 31 March 2013
The Directors believe that the carrying value of the investments is supported by their underlying net assets. Due to
increasing property values some impairment losses from previous years have been reversed.
Refer to note 27 of the consolidated financial statements for the list of trading subsidiary undertakings.
The Company has a 50% interest in Enterprise House Investments LLP, a partnership incorporated in the UK and a
50% interest in Generate Studio Ltd, a company incorporated in the UK.
D. DEBTORS
Amounts owed by subsidiary undertakings
Corporation tax asset
2014
£m
494.7
0.3
495.0
2013
£m
206.3
0.8
207.1
Amounts owed by subsidiary undertakings are unsecured and repayable on demand. Interest is charged to
subsidiary undertakings.
E. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Amounts owed to subsidiary undertakings
Taxation and social security
Accruals and deferred income
2014
£m
91.8
0.5
5.0
97.3
2013
£m
86.2
0.4
1.6
88.2
Amounts owed to subsidiary undertakings are unsecured and repayable on demand. Interest is paid to
subsidiary undertakings.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 118 Workspace Group PLC Annual Report and Accounts 2014
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
CONTINUED
F. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Bank Loans
5.6% Senior US Dollar Notes 2023
5.53% Senior Notes 2023
Senior Floating Rate Notes 2020
Other term loan
6% Retail Bond
Total borrowings
Less cost of raising finance
Net borrowings
Derivative financial instruments
Other creditors1
Interest rate
Repayable
June 2018
LIBOR+2.3% to 2.5%
June 2023
5.6%
June 2023
5.53%
LIBOR+3.5%
June 2020
LIBOR+3.5% May 2022 and May 2023
October 2019
6%
2014
£m
80.0
60.6
84.0
9.0
45.0
57.5
336.1
(3.8)
332.3
7.2
11.0
350.5
1. Other creditors relate to amounts payable under the Glebe proceeds share agreement. See note 20 of the Group accounts for
further details.
All the above borrowings are unsecured.
Maturity analysis of borrowings:
Repayable between four and five years
Repayable in five years or more
The following derivative financial instruments are held:
Interest rate swap
Cash flow hedge – cross currency swap
£95m
$100m/£64.5m
1.87% June 2018
5.66% June 2023
Amount
hedged
Rate payable
(or cap strike rate)
(%)
Term/
expiry
2014
£m
80.0
256.1
336.1
2014
£m
0.5
6.7
7.2
2013
£m
–
–
–
–
–
57.5
57.5
(1.1)
56.4
–
–
56.4
2013
£m
–
57.5
57.5
2013
£m
–
–
–
G. CAPITAL AND RESERVES
Movements and notes applicable to share capital, share premium account, investment in own shares and share
based payment reserve are shown in notes 21 to 24 and in the consolidated statement of changes in equity of
the consolidated financial statements.
Other reserves:
Balance at 1 April 2012
Share based payments
Balance at 31 March 2013
Share based payments
Change in fair value of derivative financial instruments
Balance at 31 March 2014
Profit and loss account:
Balance at 1 April 2013
Profit for the year
Dividends paid
Balance at 31 March 2014
Equity settled
share based
payments
£m
Merger
Reserve
£m
Hedging
Reserve
£m
5.2
1.4
6.6
1.6
–
8.2
8.7
–
8.7
–
–
8.7
–
–
–
–
(2.9)
(2.9)
Total
£m
13.9
1.4
15.3
1.6
(2.9)
14.0
£m
122.1
20.5
(14.5)
128.1
Workspace Group PLC Annual Report and Accounts 2014
119
H. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS
Profit for the financial year
Dividends paid
Issue of shares (net of costs)
Investment in own shares
Share based payments
Change in fair value of derivative financial instruments
Net movement in shareholders’ funds
Opening shareholders’ funds
Closing shareholders’ funds
2014
£m
20.5
(14.5)
0.1
–
1.6
(2.9)
4.8
332.2
337.0
2013
£m
4.5
(13.0)
0.4
(0.2)
1.4
–
(6.9)
339.1
332.2
I. RELATED PARTY TRANSACTIONS
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 financial statements.
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 120 Workspace Group PLC Annual Report and Accounts 2014
FIVE-YEAR PERFORMANCE
2010 – 2014
Rents receivable
Service charges and other income
Revenue
Profit before interest including share of joint ventures
Net interest payable^
Trading profit after interest
Profit before taxation
Profit after taxation
Basic earnings per share*
Dividends per share*
Dividends (total)
Investment properties
Other assets less liabilities
Net borrowings
Net assets
Gearing
Gearing on EPRA net assets
Basic NAV per share*
EPRA NAV per share*
31 March
2014
£m
31 March
2013
£m
31 March
2012
£m
31 March
2011
£m
31 March
2010
£m
55.3
18.3
73.6
39.0
(18.5)
20.5
252.5
252.4
166.8p
10.63p
15.5
1,068.3
(8.4)
(333.8)
726.1
51.4
18.1
69.5
37.2
(19.3)
17.9
76.4
76.4
53.3p
9.67p
13.9
825.9
2.1
(327.6)
500.4
50.2
17.1
67.3
35.1
(19.1)
16.0
48.5
49.0
36.3p
8.79p
12.6
759.3
(11.1)
(312.8)
435.4
46%
46%
65%
64%
72%
70%
£4.99
£4.96
£3.48
£3.48
£3.05
£3.08
52.0
16.8
68.8
36.3
(22.1)
14.2
52.8
53.5
45.4p
7.99p
9.5
49.8
16.7
66.5
35.3
(24.5)
10.8
26.0
24.2
21.8p
7.27p
8.6
713.4
(12.8)
(366.8)
713.2
(39.5)
(386.4)
333.8
287.3
110%
106%
£2.83
£2.86
134%
125%
£2.43
£2.59
*
Earnings per share, dividends per share and net assets per share have been restated to reflect adjustment for the Rights Issue,
in July 2011 and share consolidation in August 2011.
^ Excludes exceptional items.
KEY PERFORMANCE INDICATORS
Workspace Group:
Number of estates1
Lettable floorspace (m sq. ft.)n 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)*
Lettings (number)*
BlackRock Workspace Property Trust (BWPT):
Number of estates
Lettable floorspace (m sq. ft.)n
Number of lettable units
Average unit size (sq. ft.)
Rent roll of occupied units
Average rent per sq. ft.
Overall occupancy
n Excludes storage space
1 Excluding BWPT which is shown separately
*
Including BWPT
31 March
2014
31 March
2013
31 March
2012
31 March
2011
31 March
2010
86
4.7
4,626
1,011
96
5.1
4,856
1,049
92
5.0
4,668
1,070
83
4.5
4,653
967
105
5.5
5,156
1,067
£58.3m £52.7m £50.2m £48.9m £50.7m
£11.22
£11.79
81.9%
85.3%
12,109
12,103
1,203
981
£12.98
87.0%
12,440
1,014
£11.47
83.6%
11,535
1,051
£15.12
85.8%
12,754
1,020
31 March
2014
14
0.5
410
1,300
£6.4m
£14.66
87.7%
31 March
2013
31 March
2012
31 March
2011
16
0.5
435
1,260
£7.0m
£14.20
90.4%
11
0.4
313
1,407
£4.7m
£11.82
89.8%
8
0.3
281
1,147
£3.1m
£10.57
92.1%
Workspace Group PLC Annual Report and Accounts 2014
121
PROPERTY PORTFOLIO 2014
Property name
Acton Business Centre
Archer Street Studios
Arches Business Centre
Artesian Close Industrial Estate
Artesian Land
Atlas Business Centre
Baden Place*
Barley Mow Centre
Barratt Way Industrial Estate
Belgravia Workshops
Bounds Green Industrial Estate
Bow Enterprise Park
Bow Office Exchange
Burford Road Business Centre*
Buzzard Creek Industrial Estate
Canalot Studios
Canterbury Industrial Estate
Chandelier Building*
Charles House*
Chiswick Studios
Chocolate Factory
City Road*
Clerkenwell Workshops
Clyde House
Cremer Business Centre
2 Cullen Way
10 Cullen Way
E1 Business Centre
Enterprise House, SE1
Enterprise House Hayes***
Europa Studios*
Exmouth House
Fairways Business Centre
Grand Union Centre
60 Gray's Inn Road**
12-13 Greville Street**
14 Greville Street
Hamilton Road Industrial Estate
Hatton Square Business Centre
Havelock Terrace
Highway Business Park
Holywell Centre
Horton Road Industrial Estate*
Kennington Park – Investment
Kennington Park – Refurbishment
Kingsmill Business Park*
Leroy House
Leyton Industrial Village
Linton House
Little London*
Littleton House
Postcode
NW10 6TD
W1D 7AZ
UB2 4AU
NW10 8JP
NW10 8JP
NW2 7HJ
SE1 1YW
W4 4PH
HA3 5TJ
N19 4NF
N11 2UL
E3 3QY
E3 3QP
E15 2ST
IG11 0EL
W10 5BN
SE15 1NP
NW10 6RB
UB2 4BD
W4 5PY
N22 6XJ
EC1V 1JN
EC1R 0AT
SL6 8BR
E2 8HD
NW10 6JZ
NW10 7JH
E1 1DU
SE1 9PG
UB3 1DD
NW10 6ND
EC1R 0JH
E10 7QT
W10 5AS
WC1X 8AQ
EC1N 8SB
EC1N 8SB
SE27 9SF
EC1N 7RJ
SW8 4AS
E1 9HR
EC2A 4PS
UB7 8JD
SW9 6DE
SW9 6DE
KT1 3AP
N1 3QP
E10 7QP
SE1 0LH
SE1 2BA
TW15 1UU
Category
Like for like
Like for like
Like for like
Like for like
Like for like
Like for like
–
Refurbishment
Like for like
Like for like
Refurbishment
Redevelopment
Like for like
–
Like for like
Refurbishment
Like for like
–
–
Like for like
Like for like
–
Like for like
Redevelopment
Like for like
Like for like
Like for like
Like for like
Refurbishment
–
–
Refurbishment
Like for like
Redevelopment
Acquisition
Acquisition
Like for like
Like for like
Refurbishment
Like for like
Like for like
Like for like
–
Like for like
Refurbishment
–
Like for like
Refurbishment
Refurbishment
–
Like for like
Lettable
floor area
sq. ft.
50,361
14,984
40,725
15,815
4,500
152,499
25,472
77,102
47,294
32,324
123,272
39,415
36,962
21,296
45,000
49,704
18,893
46,177
72,097
14,253
119,215
32,306
52,879
29,680
41,364
1,562
10,304
40,186
72,870
86,591
26,113
58,832
47,091
47,630
41,057
–
10,961
23,531
43,396
58,165
19,969
21,796
38,720
336,861
36,384
40,151
46,551
118,977
23,363
31,101
41,716
Net rent roll
of occupied
units
£000s
528
714
334
206
23
1,022
538
1,706
303
354
632
236
280
224
262
1,050
189
423
1,111
178
888
359
2,863
76
615
17
24
711
2,541
230
358
1,777
292
34
1,121
–
340
165
929
801
255
516
213
4,803
1,096
437
929
738
670
586
263
ERV
£000s
700
860
403
212
0
1,200
762
1,754
505
391
837
290
345
311
345
1,456
190
547
1,217
186
1,269
842
3,416
241
683
15
52
843
2,806
194
390
2,781
367
34
1,589
–
428
190
1,005
932
273
569
246
5,763
1,180
426
1,029
897
968
705
360
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 122 Workspace Group PLC Annual Report and Accounts 2014
PROPERTY PORTFOLIO 2014
CONTINUED
Property name
6 Lloyds Avenue*
Lombard House
Mahatma Ghandi Industrial Estate
Mallard Place
Maple Industrial Estate
Mare Street Studios
Marshgate Business Centre
Metal Box Factory
Michael Manley Industrial Estate
Morie Street Business Centre
Pall Mall Deposit
Park Royal Business Centre
Park Royal House
Parkhall Business Centre
Parma House
Pill Box
Poplar Business Park
Progress Way Business Park*
Q West
Quality Court
Quicksilver Place
Rainbow Industrial Estate
Redbridge Enterprise Centre
Riverside
ScreenWorks
Shaftesbury Centre
Southbank House
Spectrum House
Stratford Office Village
T Marchant Trading Estate
The Biscuit Factory – Investment
The Biscuit Factory – Redevelopment
The Faircharm
The Filaments
The Ivories
The Leathermarket
The Light Box
The Wenlock
Thurston Road
Toplin House*
Union Court*
Uplands Business Park
Vestry Street Studios**
Westbourne Studios
Westminster Business Square
Whitechapel Technology Centre
Windmill Place*† – Sold
Zennor Tradepark
*
**
***
†
BlackRock Joint Venture
Purchased after 31 March 2014
Enterprise House Hayes LLP Joint Venture
Exchanged for sale after 31 March 2014
Postcode
EC3N 3AX
CR0 3JP
SE24 0JF
N22 6TS
TW13 7AW
E8 3QE
E15 2NH
SE1 0HS
SW8 4TU
SW18 1SL
W10 6BL
NW10 7LQ
NW10 7JH
SE21 8EN
N22 6XF
E2 6GG
E14 9RL
CR0 4XD
TW8 0GP
WC2A 1HR
N22 6XH
SW20 0JK
IG1 1TY
SW18 4UQ
N5 2EF
W10 6BN
SE1 7SJ
NW5 1LP
E15 4BZ
SE16 3DH
SE16 4DG
SE16 4DG
SE8 3DX
SW18 4JQ
N1 2HY
SE1 3ER
W4 5PY
N1 7EU
SE13 7SH
SW9 8BB
SW4 6JP
E17 5QN
N1 7RE
W10 5JJ
SE11 5JH
E1 1DU
UB2 4NJ
SW12 0PS
Category
–
Like for like
Like for like
Like for like
Like for like
Like for like
Redevelopment
Refurbishment
Like for like
Like for like
Like for like
Like for like
Redevelopment
Like for like
Like for like
Refurbishment
Redevelopment
–
Like for like
Like for like
Like for like
Like for like
Like for like
Like for like
Redevelopment
Like for like
Like for like
Like for like
Like for like
Like for like
Like for like
Redevelopment
Redevelopment
Redevelopment
Like for like
Like for like
Like for like
Like for like
Redevelopment
–
–
Like for like
–
Like for like
Refurbishment
Refurbishment
–
Like for like
Lettable
floor area
sq. ft.
34,764
67,072
16,750
10,150
18,210
39,442
92,673
68,072
5,800
21,696
49,360
30,347
0
119,035
35,040
50,261
74,779
31,002
40,372
16,925
27,810
1,000
20,020
99,341
0
12,612
62,857
46,491
47,081
51,984
194,413
215,416
106,668
0
24,813
125,690
70,218
27,951
0
40,485
67,717
280,497
–
55,758
56,973
38,424
26,171
66,054
Net rent roll
of occupied
units
£000s
820
308
207
83
264
383
274
957
56
392
1,000
309
0
856
218
342
1,089
278
273
664
255
364
183
1,083
0
211
1,517
629
691
193
1,953
1,374
269
0
424
3,420
1,122
817
0
85
723
1,609
–
1,831
917
698
225
602
ERV
£000s
1,115
592
219
83
316
450
491
1,882
76
435
1,058
370
89
1,112
334
1,452
1,271
302
478
930
181
405
238
1,006
1,550
237
1,796
655
846
489
2,668
1,680
508
1,320
516
3,508
1,223
977
561
486
909
1,557
–
2,052
934
856
236
676
Workspace Group PLC Annual Report and Accounts 2014
123
INVESTOR INFORMATION
REGISTRAR
All general enquiries concerning ordinary shares
in Workspace Group PLC, should be addressed to:
COMPUTERSHARE INVESTOR SERVICES PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
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.investorcentre.co.uk
WEBSITE
The Company has a corporate website, which holds,
amongst other information, a copy of our latest annual
report and accounts, a list of properties held by the
Group and copies of all press announcements. The
site can be found at www.workspace.co.uk.
REGISTERED OFFICE AND HEADQUARTERS
CHESTER HOUSE
Kennington Park
1-3 Brixton Road
London SW9 6DE
Registered number: 2041612
Telephone:
Facsimile:
Web: www.workspace.co.uk
Email: investor.relations@workspace.co.uk
+44 (0) 20 7138 3300
+44 (0) 20 7247 0157
COMPANY SECRETARY
Carmelina Carfora
THE COMPANY’S ADVISERS INCLUDE:
INDEPENDENT AUDITORS
PRICEWATERHOUSECOOPERS LLP
Chartered Accountants and Statutory Auditors
1 Embankment Place
London WC2N 6RH
SOLICITORS
NORTON ROSE
3 More London Riverside
London SE1 2AQ
SLAUGHTER AND MAY
One Bunhill Row
London EC1Y 8YY
BANKERS
THE ROYAL BANK OF SCOTLAND
Corporate and Institutional Banking
280 Bishopsgate
London EC2M 4RB
FINANCIAL ADVISERS
N M ROTHSCHILD
New Court
St Swithins Lane
London EC4N 8AL
JOINT STOCKBROKERS
LIBERUM CAPITAL INVESTMENT BANKING
Ropemaker Place
Level 12
25 Ropemaker Street
London EC2Y 9LY
INVESTEC
2 Gresham Street
London EC2V 7QP
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 124 Workspace Group PLC Annual Report and Accounts 2014
GLOSSARY OF TERMS
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.
Loan to value is the current loan balance divided by
the current value of properties secured on the loan.
Market rental values (see ERV).
Cash rent roll is the current net rents receivable for
occupied units.
Earnings per share (EPS) is the profit after taxation
divided by the weighted average number of shares
in issue during the period.
Employee Share Ownership Trust (ESOT) is the trust
created by the Group to hold shares pending exercise
of employee share options.
EPRA NAV is a definition 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 flow hedges (financial
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 significant 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 financial 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 profit.
IPD is the Investment Property Databank Ltd, a
company that produces an independent benchmark
of property returns.
Net asset value per share (NAV) is net assets divided
by the number of shares at the period end.
Net bank debt is the amount drawn on bank facilities,
including overdrafts, less cash deposits.
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).
Profit/(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 profits 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 staffing of up to 20.
IPD Universe is the IPD quarterly universe property fund
benchmark of approximately 250 (£50bn) UK domestic
property funds.
Total Shareholder Return (TSR) is the return obtained
by a shareholder calculated by combining both share
price movements and dividend receipts.
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 or redevelopment
programme in the last 24 months.
Trading profit after interest is net rental income,
joint venture trading income and finance income,
less administrative expenses, less finance costs.
Unique web visits is the number of unduplicated
(counted only once) visitors to a website over the
course of a specified time period.
Workspace Group PLC Annual Report and Accounts 2014
125
WORKSPACE GROUP ONLINE
Workspace’s comprehensive website gives you fast,
direct access to a wide range of Company information.
To find out more go to www.workspace.co.uk
CUSTOMERS
Office
Light industrial
Studios
Workshops
Serviced offices
Co-working
Investors
INVESTORS
About us
Corporate information
Corporate social responsibility
RNS announcements
Share price and information
Publications archive
Bonds
CO-WORKING
Club locations
Join Club
Our events
Hold a meeting
About Club
Overview 01-15Strategy 16-21Performance 22-36Financial statements 78-119Shareholder information 120-125Governance 37-77 W
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WORKSPACE GROUP PLC
Chester House
Kennington Park
1-3 Brixton Road
London
SW9 6DE
Telephone: +44 (0)20 7138 3300
Web: www.workspace.co.uk
Email: investor.relations@workspace.co.uk
If you require information regarding
business space in London call
+44 (0)20 7369 2390 or visit
www.workspace.co.uk
This Report is printed on materials which
are FSC® certified from well-managed forests.
These materials contain ECF (Elemental
Chlorine Free) pulp and are 100% Recyclable.
Designed by Carnegie Orr
(a Workspace Group customer)
+44 (0)20 7610 6140.
www.carnegieorr.com