WORKSPACE
UNDERSTANDS
WORK SPACE
ANNUAL REPORT
AND ACCOUNTS 2015
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HIGHLIGHTS
Investor
Dividend per share growth
Total Shareholder Return
+13%
2015
2014
2013
2012
Property
Valuation
+30%
47%
12.04p
10.63p
9.67p
2015
2014
2013
2012
47%
51%
76%
Total return
37%
2015
2014
2013
2012
£1,423m
£1,078m
£830m
2015
2014
2013
2012
36.7%
34.7%
13.8%
Customer
Enquiries per month
Customer satisfaction
+15%
2015
2014
2013
2012
Financial
77%
1,222
1,063
1,037
2015
2014
2013
2012
77%
78%
82%
Adjusted trading profit
Profit before tax
+30%
+43%
£26.6m
£20.5m
£17.9m
2015
2014
2013
2012
£360.0m
£252.5m
£76.4m
2015
2014
2013
2012
EPRA
EPRA NAV per share
EPRA cost ratio
+42%
2015
2014
2013
2012
£7.03
£4.96
£3.48
34%
2015
2014
2013
2012
34%
33%
32%
CONTENTS
Overview
01 The right strategy
14 Chairman’s statement
Strategic report –
strategy and performance
Chief Executive Officer’s
18
Strategic Review
20 Right market and properties
22 Our business model
24 Our strategy
27 Principal business risks
34 Corporate Social Responsibility
44 Business review
53 Key property statistics
Our governance
56 Chairman’s Governance Statement
58 The Board and Executive Committee
62 The Board and Executive
Committee biographies
64 Corporate Governance Report
67 Executive Committee
67 Investment Committee
67 Risk Committee
73 Nominations Committee Report
75 Audit Committee Report
80 Directors’ Remuneration Report
100 Report of the Directors
104 Directors’ responsibilities
Financial statements
105
Independent Auditors’ report to the
members of Workspace Group PLC
109 Consolidated income statement
109 Consolidated statement of
comprehensive income
110 Consolidated balance sheet
111
Consolidated statement of changes
in equity
Consolidated statement of cash flows
112
113 Notes to the financial statements
141
Independent Auditors’ report to the
members of Workspace Group PLC
143 Parent Company balance sheet
Notes to the Parent Company
144
Financial Statements
Additional information
148 Five-year performance
149 Property portfolio 2015
151
152 Glossary of terms
153 Workspace Group online
Investor information
Also in this Report:
See how we use social media to engage with
our customers.
p.16-17
Discover the many different types of operational
activity we conduct each year in engaging with
our customers.
p.54-55
THE RIGHT STRATEGY
HOW IT WORKS
Right
market
London is growing
and changing
WORKSPACE
UNDERSTANDS
WORK SPACE
Right
properties
Creating
modern growth
environments
Right
brand
Increasing
recognition
and reputation
Right
people
Driving
performance
Right
customers
New and growing
companies
Home to new and
growing companies
across London.
Workspace Group PLC Annual Report and Accounts 2015
01
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 02
Workspace Group PLC Annual Report and Accounts 2015
Right
market
London is growing
and changing
Massive investment in infrastructure is
supporting the continued growth of the
London economy. This is evident in areas
such as Whitechapel, where we have a
cluster of properties.
A
d
d
i
t
i
o
n
a
l
i
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f
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r
m
a
t
i
o
n
1
4
8
-
1
5
3
Workspace Group PLC Annual Report and Accounts 2015
03
Strategy and performance 16-53Governance 54-104Financial statements 105-147Overview 01-15
04
Workspace Group PLC Annual Report and Accounts 2015
Right
properties
Creating
modern growth
environments
We constantly invest in our properties
across London to meet our customers’ needs.
Extensive refurbishment work, such as at
Westbourne Studios (pictured), gives our
customers access to a wide range of services
from on-site cafés, gyms and cycle racks to
meeting rooms and break-out areas – all
designed to help their businesses grow and
encourage engagement with each other.
This year, Pill Box in Bethnal Green was
named the ‘Best New Place to Work’ at
the London Planning Awards.
Workspace Group PLC Annual Report and Accounts 2015
05
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 06
Workspace Group PLC Annual Report and Accounts 2015
Right
customers
New and growing
companies
New and growing companies are driving
the London economy. Direct contact with
our customers improves our understanding
of how we can help them to grow their
businesses. One such customer, Ratesetter
(pictured), has been with us since May 2010
and we are pleased to have supported its
growth from a start-up to the UK’s leading
peer-to-peer lending platform.
Workspace Group PLC Annual Report and Accounts 2015
Workspace Group PLC Annual Report and Accounts 2015
07
07
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 08
Workspace Group PLC Annual Report and Accounts 2015
Right
people
Driving
performance
Everyone at Workspace is focused on our
customers, whether on-site in our business
centres, or in the lettings, marketing,
management, development or finance teams.
Our staff play an active role in supporting
their local communities as well, raising money
for our nominated charities through events
such as the Spinathon (pictured) and the
Arctic Challenge.
Workspace Group PLC Annual Report and Accounts 2015
09
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 10
Workspace Group PLC Annual Report and Accounts 2015
Right
brand
Increasing
recognition
and reputation
Our customers recognise our brand as
the go-to home for new and growing
companies. They look to us to provide
networking opportunities with other
fast-growing businesses, business grade
technology solutions and flexibility.
This year, we purchased a Tuk Tuk to
sell coffee in some of our business centres
while their cafés were being refurbished,
maintaining a high level of service for our
customers at all times.
Workspace Group PLC Annual Report and Accounts 2015
11
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 RIGHT STRATEGY
RIGHT STRATEGY
Bringing it all together –
another active year
‘ Best New
Place to
Work’
Pill Box, Bethnal Green, named
‘Best New Place to Work’ at
London Planning Awards.
8,000
£
Customer viewings.
Supported the launch of Informed
Funding in February 2015, a service
offering advice and information
on alternative sources of funding.
Customer events.300
12
Workspace Group PLC Annual Report and Accounts 2015
0.5mHits to our customer website.
Completed extensive refurbishment
of Metal Box Factory on Bankside.
Completed five acquisitions
in attractive locations.
5
‘ Specialist
Property
Company
of the Year’
Workspace named ‘Specialist
Property Company of the Year’
at Estates Gazette Awards.
‘ Best Real
Estate PLC’
Workspace named ‘Best Real Estate
PLC’ at UK Stock Market Awards.
15,000
Customer enquiries during the year.
35
Staff days spent volunteering
for our nominated charities:
XLP, FareShare and First
Love Foundation.
Inaugural NGC Forum held
in January 2015 at the House
of Commons.
75
Students gained valuable work
experience when they joined
customers’ businesses during
InspiresMe week.
Opened new business centres
in Islington (ScreenWorks) and
Wandsworth (The Light Bulb).
New ClubWorkspace opened,
bringing the total to 10.
+4
301
Deals with customers
expanding within the portfolio.
Workspace Group PLC Annual Report and Accounts 2015
13
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 CHAIRMAN’S STATEMENT
Our proven strategy
has delivered another
year of excellent
performance across
the business.
Related information:
Corporate Social
Responsibility p.34
Corporate governance
report p.64
14
Workspace Group PLC Annual Report and Accounts 2015
In a year of good performance across the property
sector, Workspace has again outperformed.
Workspace is benefiting from its focus on new
and growing companies in London and a long-term
strategy of redevelopment and refurbishment
combined with active portfolio management and
targeted acquisitions. This momentum is reflected
in our revenues and profits which have again grown
strongly. Group net rental income was £57.7 million,
an increase of 15%, profit before tax was £360.0 million,
an increase of 43%, and EPRA NAV per share was
£7.03, an increase of 42%.
Considering these strong results and the Company’s
future prospects, the Board is recommending an
increase in the final dividend by 15% to 8.15p to be
paid on 7 August 2015. This represents an increase
in the total dividend for the year of 13% to 12.04p.
During the year we acquired five properties, helping
us to expand our portfolio in our target areas such as
London’s Midtown, and we will continue to search for
and execute transactions that we believe will provide
strong, long-term shareholder returns. We also agreed
terms for the cancellation of the Glebe Proceeds Share
Agreement with the former lenders to the Glebe
portfolio which we acquired in 2009. This concludes
the integration of the portfolio that has delivered
substantial returns since its acquisition.
In November, we were grateful for the strong support
of investors in successfully completing a £96.5m share
placing. This will allow us to move more quickly to
extend our refurbishment pipeline and take advantage
of acquisition opportunities.
Throughout all of this, the Board continued to support
Jamie and the team in executing our strategic plans
with strong governance sitting at the heart of our
approach. During the year, Bernard Cragg retired as
Non-Executive Director and we welcomed the arrival
of Stephen Hubbard to the Board. Stephen is currently
Chairman of CBRE UK and we are already benefiting
from his wealth of experience.
We aim to support not only our customers but also
the wider communities around us and we remain alive
to our responsibilities. Nowhere is that more evident
than in our goal to reduce energy usage in all of our
buildings and it is pleasing to note that we have
reduced overall energy consumption by 9% over
the last two years.
All of the achievements we report this year are of
course a reflection of the hard work and dedication
of our employees and I would like to thank them
once again for their expertise and commitment
which is growing our business and further
strengthening our presence.
Looking forward, I believe we have the right strategy
to cement our position as the home to new and
growing companies across London, and deliver
superior value to shareholders.
Daniel Kitchen
Non-Executive Chairman
Daniel Kitchen,
Non-Executive
Chairman,
pictured in
the Atrium
at Metal Box
Factory.
Workspace Group PLC Annual Report and Accounts 2015
15
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 16
Workspace Group PLC Annual Report and Accounts 2015
Strategic report –
strategy and performance
In this section
18 Chief Executive Officer’s Strategic Review
22 Our business model
24 Our strategy
27 Principal business risks
34 Corporate Social Responsibility
44 Business review
53 Key property statistics
Using Twitter to communicate with customers
Each line represents one of the thousands of tweets
sent by centre managers at 10 of our key business
centres in 2014/15. Engaging with our customers is
critical and last year our social media activity was
supported by our events programme hosting 300
events for 10,000 customers.
Workspace Group PLC Annual Report and Accounts 2015
17
Strategy and performance 16-53Overview 01-15Governance 54-104Financial statements 105-147Additional information 148-153 CHIEF EXECUTIVE OFFICER’S STRATEGIC REVIEW
As the home to
new and growing
companies, our unique
offer is creating value
for shareholders.
Related information:
Our strategy p.24
Our business model p.22
Corporate Social
Responsibility p.34
We know that the new and growing companies
(‘NGCs’) that sit at the heart of London’s economic
success story look for more than just space on their
path for growth. As a result, our strategy of providing
a compelling combination of the right buildings in
the right locations and offering the right services,
is resonating strongly with customers.
The success of our approach, to be a home
for NGCs in London, and the acceleration of a
long-term programme of focused refurbishment
and redevelopment activity is reflected in the strong
performance we’ve delivered over the last year,
with rent roll up by 19% and the value of our
portfolio increasing by 30%.
London’s business community is evolving rapidly and
we are seeing increased demand from our core NGC
customer base for space and connectivity beyond
established locations. We are meeting this demand
and have grown our footprint through the acquisition
of new buildings and redevelopment of existing
properties and we continue to see huge potential
in other hotspots. We are creating a wider range
of options for our customers and this will help drive
our future growth.
Our customers are also changing the way they work,
seeking to create environments around them where
their business needs and their lifestyle aspirations
are fully merged. From full technological connectivity
in state of the art offices, to community cafés,
cycle stores and showers, we are providing what
these businesses need to be truly at home in their
surroundings. In addition, we provide opportunities
for our customers to engage and trade with each
other, enabling their businesses to grow faster
within the Workspace environment.
We are able to react to evolving trends and
requirements quickly thanks to the unique,
first-hand knowledge we gain through our direct,
daily interaction with customers. Across London,
our centre hosts spend time getting to know our
customers and ensure that they are surrounded by
the resources and services they need to be successful.
This ethos is shared throughout Workspace in all
of our highly experienced teams who work hard
to support both our buildings and our customers.
The growing profile of the Workspace brand plays
an essential role, too. As a business that is open,
friendly and directly engaged with customers
and one that is actively managing our portfolio
of buildings, we are increasingly being seen as
a highly differentiated landlord.
Our thriving NGC customers sit at the heart of the
London economy and by supporting them and being
alive to their changing needs in such a dynamic
market, Workspace is becoming their home.
Join Jamie Hopkins on a
guided tour of our portfolio at
investors.workspace.co.uk/about-us
Jamie Hopkins
Chief Executive Officer
18
Workspace Group PLC Annual Report and Accounts 2015
Jamie Hopkins,
Chief Executive Officer
Workspace Group PLC Annual Report and Accounts 2015
19
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 RIGHT MARKET AND PROPERTIES
Workspace property
Acquisitions
Redevelopments
Refurbishments
Crossrail
Northern Line Extension
ISLINGTON
KING’S
CROSS
SHOREDITCH
FARRINGDON
OLD
STREET
BETHNAL
GREEN
STRATFORD
PADDINGTON
WEST
END
EARLS COURT
VICTORIA
BATTERSEA
THE
CITY
LONDON
BRIDGE
WATERLOO
KENNINGTON
CANARY
WHARF
20
Workspace Group PLC Annual Report and Accounts 2015
WORKSPACE
UNDERSTANDS
WORK SPACE
PROPERTY PORTFOLIO 2015
Related information:
Property listing
p.149
ISLINGTON
% of value
ISLINGTON
KING’S
CROSS
SHOREDITCH
FARRINGDON
OLD
STREET
BETHNAL
GREEN
STRATFORD
KING’S
CROSS
SHOREDITCH
FARRINGDON
OLD
STREET
BETHNAL
GREEN
STRATFORD
PADDINGTON
WEST
END
THE
CITY
80%
WATERLOO
VICTORIA
LONDON
BRIDGE
CANARY
WHARF
EARLS COURT
KENNINGTON
BATTERSEA
CANARY
WHARF
Enquiries split
across London
ISLINGTON
PADDINGTON
KING’S
CROSS
SHOREDITCH
24%
FARRINGDON
BETHNAL
GREEN
OLD
STREET
WEST
END
THE
CITY
20%
EARLS COURT
VICTORIA
WATERLOO
LONDON
BRIDGE
34%
STRATFORD
CANARY
WHARF
KENNINGTON
BATTERSEA
22%
Workspace Group PLC Annual Report and Accounts 2015
21
PADDINGTON
WEST
END
EARLS COURT
VICTORIA
BATTERSEA
THE
CITY
LONDON
BRIDGE
WATERLOO
KENNINGTON
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 OUR BUSINESS MODEL
Driving
long-term
value within
our property
portfolio
Reposition
Understand
Right
market
Right
brand
WORKSPACE
UNDERSTANDS
WORK SPACE
Right
properties
Redevelop
Secure
Right
people
Right
customers
Refurbish
Retain
Driving
long-term
value from our
customer base
Creating value for all our stakeholders:
Customers
Direct contact ensures better
understanding of customer needs,
allowing us to create a home for
them to grow.
Investors
Sustainable operating income and
performance-led capital value
enhancement leads to dividend
growth and Total Shareholder Return.
Our people
Commitment to the constant
development of our people
to ensure that we attract,
motivate and retain talented
and ambitious individuals.
Partners
Our partners build direct relationships
with London’s new and growing
companies and, in turn, help us to
attract customers.
Communities
We play a strong and responsible role
in our local communities and they
benefit from our CSR strategy, which
supports initiatives on education,
employment and the environment.
22
Workspace Group PLC Annual Report and Accounts 2015
How we drive long-term value within our
property portfolio
How we drive long-term value from our
customer base
Reposition
Workspace is enhancing both core operational income
and capital values by repositioning its property assets
as home to new and growing companies. Owning
the right properties in the right locations allows us
to attract the right customers and provide the right
services to retain those customers and help them grow.
We have the balance sheet to support this strategy.
– In 2014/15, we acquired five properties in
attractive locations where we are seeing strong
demand from our customers.
– During the year, we also realised £44m from
the disposal of ten non-core properties.
Redevelop
As well as acquisitions, our strategy is to expand
the footprint of the business and bring new space
to London through redevelopment projects. We use
our expertise and knowledge to obtain mixed use
planning consent and agree terms with a residential
developer to undertake the redevelopment and
construction, including the provision of a new
business centre at no cost or risk to Workspace.
– This year, we opened two new business centres
in Islington (ScreenWorks) and Wandsworth
(The Light Bulb) at no cost to Workspace.
Refurbish
We also look to add value to our portfolio by
refurbishing existing buildings, allowing us to upgrade
the offices, communal areas and infrastructure,
including our digital platform, making our buildings
more attractive to our customers.
– We invested £18m of capital expenditure on
our refurbishment programme over the year
and £7m on smaller upgrade works.
net.workspace.co.uk
Featuring customer profiles and articles that
help generate enquiries.
Understand
Daily interaction with our customers through our on-site
staff, customer engagement programmes and regular
surveys ensure we build up the insights we need to
truly understand the requirements of our existing and
potential customers, anticipate the latest trends and
respond accordingly.
– We operate a system of real-time continuous
customer feedback, driven by our on-site business
centre managers.
– In addition, we conduct customer satisfaction surveys
twice a year and gather insights from research carried
out by third parties, such as Cambridge Economic
Associates, into the factors that help companies to
grow and the economic impact of our customer base.
– We hold highly successful quarterly business insight
dinners, which provide the opportunity for our
customers to network with Workspace management
and fellow customers.
Secure
Marketing direct to both our potential and existing
customers is vitally important. Rather than relying
on third parties, we are able to directly and clearly
communicate the benefits of Workspace as the home
for new and growing companies. These include the
range of space on offer, with live availability showing
on our website, the flexibility of leases, as well as a
whole host of other services from fast and secure
internet connectivity, ClubWorkspace and meeting
rooms to diverse events taking place in our business
centres every week.
– Our communications with potential and existing
customers reflect the nimble nature of new and
growing companies. Our blog, which features
customer profiles and relevant articles generated
20% of referral traffic to our website, which in total
contributed over 50% of all customer enquiries
during the year.
Retain
We look after our customers as their businesses grow by
providing the right environment to support that growth,
as well as high-quality space in extremely attractive
locations. Our on-site centre managers, technology
infrastructure and the flexible spaces we provide allow
our customers to focus on growing their businesses.
– Our partnership with Excell, a leading provider of
communications solutions, delivers business grade
digital services, built around super-fast, resilient
and secure internet connectivity – matching the
flexibility of the lease.
– We hosted 300 events last year, including the
launch of Informed Funding, the platform for
connecting growing businesses to finance.
These events connect our customers to business
experts and the latest business thinking, as well
as to fellow customers within our properties,
and help position Workspace as the home for
new and growing companies.
Workspace Group PLC Annual Report and Accounts 2015
23
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 OUR STRATEGY
Growth through
performance
Right
market
London is
growing
and changing
Right market
London is growing and changing
Maximising the value of our London-based
property portfolio and its wider opportunities
for repositioning and redevelopment.
Right
brand
Increasing
recognition
and
reputation
Right
properties
Creating
modern
growth
environments
WORKSPACE
UNDERSTANDS
WORK SPACE
Priorities in 2014/15
– Make planning applications for four
further schemes.
– Sell or appoint development partners
for newly consented schemes.
Right
people
Driving
performance
Right
customers
New and
growing
companies
This year we have aligned the
articulation of our strategy to
the strategic diagram above.
Related information:
Business review p.44
Corporate Social
Responsibility p.34
24
24
Workspace Group PLC Annual Report and Accounts 2015
Workspace Group PLC Annual Report and Accounts 2015
Performance in 2014/15
– Planning consent for mixed-use developments
obtained at Arches Business Centre, Enterprise
House, Hayes and Wandsworth Phase 2
(The Light Bulb).
– Deals agreed with development partners
on Poplar Business Park, Bow Enterprise
and Faircharm.
– Sale of 10 industrial properties supporting
the repositioning of the Workspace portfolio.
– Won Specialist Property Company of the Year
2014 at the Estates Gazette Awards and the UK
Stock Market Award for Best Real Estate PLC.
Priorities for 2015/16
– Make planning applications for six
further schemes.
– Appoint development partners for newly
consented schemes.
– Opening of Grand Union Studios.
Key risks
– Adverse planning decisions.
– Construction cost and programme overruns.
– Downturn in the London property market.
Market trends
London’s population continues to grow, resulting
in increasing demand for office rental space.
Right properties
Creating modern growth environments
Owning the right properties that are tailored to
our customers’ needs and intensively managing
these properties to drive occupancy and rents.
Right customers
New and growing companies
Understanding our customers and enhancing
our brand by responding to their needs.
Priorities in 2014/15
– Focus on driving pricing and rent roll.
– Continue our refurbishment projects including
Priorities in 2014/15
– Roll out of ClubWorkspace at four
further locations.
completion of Metal Box Factory.
– Progress with further potential
redevelopment/refurbishment projects.
– Continue with our targeted acquisitions programme.
Performance in 2014/15
– Total rent roll up 19% in the year.
– Metal Box Factory and The Light Bulb opened
during the year and are both letting up ahead
of expectations.
– Major refurbishments of Linton House,
Westminster Business Square and Cargo Works
are progressing well.
– Acquisition of five complementary properties
in strategic locations including 160 Fleet Street
and Edinburgh House.
– Like-for-like occupancy at 92.2% with continued
strong growth of like-for-like rent per sq. ft. up
16% in the year.
– Pill Box in Bethnal Green won ‘Best New Place
to Work’ at the London Planning Awards.
– Extend our telecoms and data product range.
Performance in 2014/15
– Club Workspace launched at ScreenWorks,
Pill Box, Parkhall and Metal Box Factory,
increasing the number of clubs to 10 locations.
– Our platform of digital infrastructure and
services is now available throughout 30 of our
major business centres. The platform offers
superior internet access and also a range of
cloud services.
– Joint venture with Generate Studio offering
office design services and provision of furniture.
– We have upgraded and expanded our meeting
room offer.
Priorities for 2015/16
– Complete the major refurbishments at
Cargo Works, Linton House and Westminster
Business Square.
– Continue with further refurbishment projects
including Barley Mow and Hatton Square
Business Centre.
– Continue with our targeted acquisitions programme.
– Continue to drive pricing and rent roll.
Priorities for 2015/16
– Continue to build provision of additional
services to customers and integration of
ClubWorkspace members.
– Extend our telecoms and data product range.
– Programme of hosted events at all our business
centres to support networking opportunities
amongst our customers.
Key risks
– Failure to meet customer space and
service expectations.
– External macroeconomic factors influence
the demand for our accommodation.
Key risks
– Failure to meet customer service expectations.
– Poor performance of our suppliers.
Market trends
More relevant properties in alignment with our
strategic priorities becoming available as churn
in the London property market increases.
Market trends
Through our increased customer interaction we
have identified that customers want more than
just space. These requirements are built into
new refurbishments and developments.
Workspace Group PLC Annual Report and Accounts 2015
Workspace Group PLC Annual Report and Accounts 2015
25
25
Strategy and performance 16-53Overview 01-15Governance 54-104Financial statements 105-147Additional information 148-153 OUR STRATEGY CONTINUED
Right people
Driving performance
Experienced teams with specialist skills creating
a responsible culture of risk management and
performance, with all employees focused on the
customer. Interests aligned across the Company,
as well as with investors.
Right brand
Increasing recognition and reputation
Focused on developing our brand to drive
performance across the business.
Priorities in 2014/15
– Provide employees with interesting and
rewarding roles.
– Increase number of training days and number
of employees undertaking training.
Priorities in 2014/15
– Develop and enhance our social media profile.
– Continue to ensure refurbishment and
redevelopment activity fits with our
CSR strategy.
– Overhaul training programme for customer-
– Continue to invest in carbon reduction initiatives
facing staff.
and encourage our customers to follow suit.
Performance in 2014/15
– Encouraged further study, supporting 10 staff to
pursue professional and vocational qualifications.
Performance in 2014/15
– Our social media activity generated 20%
of Workspace website referrals.
– Invested in technology and rolled out regular
external training for all customer-facing staff
in our properties, focused on social media,
networking and sales.
– 65% increase in training days completed by
our employees (631 days in total).
– 24% increase in number of employees
undertaking training (146 people trained).
– Regular presentations given by senior
management to all staff on business
performance and Company achievements.
– 27 long service awards presented to staff
for 5, 10, 15 and 20 years’ service.
– 15,000 enquiries during the year, an increase
of 15%.
– Launched the NGC Forum at the House of
Commons in January.
– Pill Box in Bethnal Green won ‘Best New
Place to Work’ at the London Planning Awards.
– Worked with customers to reduce carbon
emissions in our buildings and invested in
energy-reducing equipment.
Priorities for 2015/16
– Expand training and career development
opportunities for employees.
– Build on the internal communications platform
to ensure all staff are aligned in delivering
Company objectives.
– Roll out next stage of training for customer-facing
staff, to focus on people and stress management.
Priorities for 2015/16
– Cement Workspace’s position as the home
to new and growing companies.
– Develop our communications platform, including
social media and our website, to enhance brand
visibility and engagement with our customers.
– Launch the new Workspace website, integrating
the customer, investor and social sites and
enhancing the customer experience.
Key risks
– Ability to attract and retain talented and
committed individuals.
Key risks
– Failure to differentiate our brand.
– Lose contact with our customer base.
Market trends
People are increasingly looking for their
employers to provide professional development
opportunities, as well as taking an active interest
in the environmental impact their companies
make on the world around them.
Market trends
London’s economic growth is being driven by
our customer base of new and growing companies
who want to engage with relevant brands that
they trust.
26
Workspace Group PLC Annual Report and Accounts 2015
PRINCIPAL BUSINESS RISKS
Protecting
future returns
Risk management 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 is an integral part of all our activities
and is reflected in every decision we make. We focus
on key risks which could impact on the achievement of
our strategic goals and therefore on the performance
of our business. Risks are considered at every level
of the business including when approving decisions,
transactions and monitoring performance.
We have a structure in place to capture, document and
manage risk in line with our size and business model.
The close working relationship between the Executive
Directors, senior management and other team
members enhances the ability to efficiently capture,
communicate and action any risk issues identified.
Our Risk Committee co-ordinates risk management
activities throughout the Group and reports to the
Board and Audit Committee where appropriate.
The Risk Committee comprises the Chief Executive
Officer, the Operations Director and Company
Secretary, alongside certain senior managers and
representatives from across the Company. The Risk
Committee engages with staff throughout the
business and our small size helps to ensure a close
relationship between each business area. In addition,
frequent visits by head office staff to our business
centres help to ensure awareness and understanding
of any property-specific risks and issues.
Overall, we review risks in two strands:
1. Strategic risks
These are identified, assessed and managed by the
Executive Committee on behalf of the Main Board.
These risks are reviewed at Board level to ensure they
are valid and relate to the current strategic direction
and objectives of the Group. Details of our strategic
risks and the mitigating activities in place to reduce
these risks are set out on the following pages.
The Board is satisfied that we continue to operate
within our desired risk appetite.
2. Operational risks
These are identified, assessed and managed by the
Executive Committee. These risks cover all areas of
the business, such as Finance, Operations, Investment
and Development. Day-to-day operational risks are
closely reviewed and managed by the Executive
Committee and senior management, with information
being reported to the Board and Audit Committee
as appropriate.
Risk registers for all areas are maintained and risks
are assessed against a defined scoring mechanism
to ensure consistency. High-rated risks identified
in the registers are regularly reviewed by the Board,
Audit and Executive Committees.
Workspace Group PLC Annual Report and Accounts 2015
27
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15
PRINCIPAL BUSINESS RISKS CONTINUED
Risk
Mitigating activities and actions
Financing
Reduced availability and cost of bank financing
resulting in inability to meet business plans or
satisfy liabilities.
Market
Properties
We regularly review funding requirements for
business plans and ensure we have a wide range of
options available for alternative sources of funding.
We have a broad range of funding relationships in
place and regularly review our refinancing strategy.
We have also fixed or hedged 73% of our loan
facilities so that our interest payment profile is stable.
Risk management in action:
In November 2014 we successfully completed a Share
Placing raising proceeds of £96.5m to help extend and
accelerate our refurbishment and acquisition plans.
Change in year
This risk has reduced due to our additional fundraising
in the year, which enhanced our headroom on
facilities and provided cash to fund development
and acquisition opportunities.
Loan to value
19%
Headroom on
loan facilities
£140m
Property valuation
Value of our properties declining as a result of the
macroeconomic environment, external market or
internal management factors.
Market-related valuation risk is largely dependent on
external factors which we cannot influence. However,
we do the following to ensure we are aware of any
market changes, and are generating the maximum
value from our portfolio:
Market
Properties
ScreenWorks
Islington
– Monitor the investment market mood.
– Monitor market yields and pricing of property
transactions across the London market.
– Alternative use opportunities pursued across
the portfolio and progress made in achieving
planning consent for mixed-use development.
Change in year
Thanks to the action taken to strengthen our balance
sheet through the Share Placing and by ensuring that
all our borrowings are unsecured, we currently have
high levels of headroom on our facilities, protecting
us from any adverse changes in the market.
28
Workspace Group PLC Annual Report and Accounts 2015
Risk
Mitigating activities and actions
Customer
Demand by businesses for our space within our
properties declining as a result of social, economic
or competitive factors.
Market
Properties
Customers
People
Brand
Development
Impact on underlying income and capital
growth due to:
– Adverse planning rulings.
– Construction cost and timing overrun.
– Lack of demand for developments.
Market
Properties
Customers
Brand
Every week the Executive Committee meet with
Senior Management to monitor occupancy levels,
pricing, demand levels and reasons for customers
vacating. This ensures we react quickly to changes
in any of these indicators.
Our extensive marketing programme ensures that we
are in control of our own leads and pipeline of deals
to business centres. Our use of social media, backed
up by a busy events programme, has further helped
us to engage with customers, differentiating us as
providing not only space but also an opportunity to
network with other businesses based in our portfolio.
Change in year
Like-for-like occupancy
92.2%
(91.4% March 2014)
For every development scheme we work hard to gain
a thorough understanding of the planning environment
and ensure we seek counsel from appropriate advisers.
We undertake a detailed development analysis and
appraisal prior to commencing a development
scheme. Investment Committee approval and
sign-off is required for every project.
Every month, a detailed review of progress against
plans is presented to the Board, including post-project
completion reviews.
Change in year
London
Changes in the political, infrastructure and
environmental dynamics of London.
We regularly monitor the London economy and
commission research reports. We also hold regular
meetings with the GLA and the councils in the London
boroughs in which we operate to ensure we’re aware
of any changes coming through ahead of time.
Change in year
Market
Customers
Workspace Group PLC Annual Report and Accounts 2015
29
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 4
14
27
55
56
23
1
22
PRINCIPAL BUSINESS RISKS CONTINUED
58
17
49
83
Risk
Mitigating activities and actions
Investment
Underperformance due to:
– Poor timing of disposals.
– Poor timing of acquisitions.
– Failure to achieve expected returns.
7
Regular monitoring of asset performance and
positioning of our portfolio.
44
Thorough due diligence and detailed appraisals
undertaken on all acquisitions prior to purchase.
29
ISLINGTON
Close monitoring of acquisition performance against
target returns.
71
Market
Properties
Customers
Brand
KING’S
CROSS
160 Fleet Street
New acquisition
68
76
80
Risk management in action:
Detailed review undertaken and due consideration
given to the decision to dispose of a portfolio of 10
properties in October 2014. These disposals were in
line with our strategy of repositioning our portfolio
and brand to meet our strategic goals.
43
50
SHOREDITCH
We have acquired five properties in the year, helping
to deliver against our strategic objectives. Each of
the acquisitions was reviewed and analysed in detail
prior to exchange so that any potential risks were
taken into account.
21
51
72
11
18
84
FARRINGDON
39
160
Fleet
Street
THE
CITY
BETHNAL
GREEN
Change in year
OLD
STREET
60
STRATFORD
9
87
24
Although the level of investment activity has increased
in the last year, we have maintained the level of risk as
we ensure that each acquisition or disposal is aligned
to our strategic goals and that appropriate approval
and due diligence is undertaken for each transaction.
10
47
61
CANARY
WHARF
31
12
69
54
85
PADDINGTON
28
19
36
32
59
WEST
END
2
33
34
64
30
13
78
16
6
EARLS COURT
VICTORIA
70
52
45
WATERLOO
LONDON
BRIDGE
5
77
38
46
73
74
Reputational
Joint ventures or other partnerships with third
parties do not deliver the expected return.
KENNINGTON
86
25
53
79
67
37
41
BATTERSEA
Customers
Brand
82
30
88
Workspace Group PLC Annual Report and Accounts 2015
57
35
Due diligence is undertaken on all potential new
business ventures.
Business plans for any JV partners are reviewed
regularly, as are the performance and progress of
the joint ventures.
75
Risk management in action:
We have a number of joint venture or investment
activities underway, including with office interior
design company, Generate Studio, for which we
assess and consider risks and rewards at inception.
We monitor the performance of each at Executive
level on a monthly basis to ensure they continue
to deliver against their plans and budgets.
81
Change in year
Risk
Mitigating activities and actions
Regulatory
Failure to meet regulatory requirements leading
to fines or penalties or the introduction of new
requirements that inhibit activity.
People
Brand
Data Protection workshop
REIT conditions are monitored and tested on
a regular basis and reported to the Board.
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’s Health and Safety Manager meets
regularly with the CEO.
Risk management in action:
We aim to engage and inform staff on key risk
areas and emerging issues. During 2014/15, Trading
Standards came into the business to present on
recognising fraudulent behaviour and we held
workshops on Data Protection. In addition, we held
staff training on our obligations regarding share
trading and market sensitive information
Change in year
Workspace Group PLC Annual Report and Accounts 2015
31
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 PRINCIPAL BUSINESS RISKS CONTINUED
Cyber security risk workshop
Risk
Mitigating activities and actions
Business interruption
Major external events result in Workspace
being unable to carry out its business for
a sustained period.
Properties
People
Brand
Monitoring security threat/target information.
Business continuity plans and procedures are in
place and are regularly tested and updated.
IT controls and safeguards are in place across all
our systems, including a data centre back-up.
Risk management in action:
During the year we focused on the potential
impact of cyber security risk on the Group.
A workshop was held to brainstorm areas where
we may be most at risk. We have now developed
a cyber security risk action plan and are taking
steps to ensure all required controls and
mitigations are in place.
Change in year
32
Workspace Group PLC Annual Report and Accounts 2015
Risk
Mitigating activities and actions
Brand
Failure to meet customer and external
stakeholder expectations.
Customers
People
Brand
To ensure we understand our customers and
their ever evolving requirements we undertake
twice-yearly customer surveys and have a system of
real-time feedback in place. We have also recently
developed a customer engagement plan to ensure
we are interacting with our customers in a variety
of ways, including the use of social media.
We maintain regular communication with all
stakeholders, key shareholders and hold Investor
Day presentations and roadshows.
Risk management in action:
The use of social media channels, such as Twitter,
to engage with our customers and our market
has proved to be very successful and helped to
create business communities within our centres.
We undertake detailed monitoring of the use
of these social media channels in case of any
adverse information.
Change in year
Customer engagement
Engaging our customers
using social media.
Workspace Group PLC Annual Report and Accounts 2015
33
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 Why CSR is important to us
Our business is built around our customers. We
provide flexible, innovative workspace for new and
growing companies and we pride ourselves in our
unique offering. This extends far beyond the space,
location and value for money that we provide,
but also resides in the CSR strategy that we have
embedded throughout our business. It differentiates
us in the marketplace, makes us a ‘location of choice’
for our customers, creates stronger communities in
the areas in which we operate and ensures that we
manage our operations as efficiently as possible.
Summary highlights
With customers at the centre of our business,
supporting them in driving their own success is
fundamental to our culture. This year alone, we
hosted 300 business networking and educational
events for our customers, with over 10,000 people
attending. We also supported the launch of Informed
Funding, which provides independent advice to
our customers on financing their business growth.
These programmes have delivered huge benefits to
our customers and we are committed to expanding
these, as well as a number of other exciting projects,
in the coming years.
While customers are at the centre of our business,
the sites that we operate form the heart of the
communities in which they sit. We believe that
supporting those communities in education,
employment, entrepreneurship, environment and
enjoyment (through our E5 strategy) is fundamental
to being a strong community partner. Building on
these principles, this year we linked our own business
with those of our customers to provide 75 work
placements for local students as part of InspiresMe
week. This is just one of a number of exciting
community projects that we have delivered in the
year and more of our achievements are highlighted
below, as well as on our website.
Moving forwards, we are committed to continuing
to innovate and drive further positive change, both
within our own business and in partnership with our
suppliers, customers and local communities.
Jamie Hopkins
Chief Executive Officer
CORPORATE SOCIAL RESPONSIBILITY
At the heart of
our business
Jamie Hopkins, Chief Executive Officer,
on site at Pill Box.
CSR components
Customers
Environment
WORKSPACE
UNDERSTANDS ITS
RESPONSIBILITIES
Suppliers
and
partners
Employees
Communities
34
Workspace Group PLC Annual Report and Accounts 2015
Awards and accreditations
GRESB – Global Real Estate
Sustainability Benchmark
We received the title of Global Sector Leader
(Diversified – Office/Industrial property type)
and gained a Green Star for the 2014 Global
Real Estate Sustainability Benchmark (GRESB)
Survey. Compared to the global average we
outperformed by 20 points and were in the
top quartile of all submissions.
The GRESB allows us and our investors to
measure our sustainability performance within
the real estate sector.
FTSE4Good
We were once again included in the FTSE4Good
Index, which helps us assess our achievements
against a transparent and evolving global
corporate responsibility standard.
EPRA – European Public Real
Estate Association
We were awarded a Gold in the European Public
Real Estate Association (EPRA) Sustainability
Awards for 2014. We were only one of 16
companies judged to have the highest compliance
with the EPRA Sustainability best practices
recommendations.
The EPRA ensures we are adhering to sustainability
reporting best practice.
Business in The Community
We retained our CommunityMark from one of
the Prince’s charities Business in The Community
(BiTC). This recognises businesses that have an
integrated and strategic approach to community
investment and are making a measurable difference
to communities through their programmes.
CDP – Carbon Disclosure Project
In 2014, we increased our Carbon Disclosure Project
score from 70 to 86 points and improved our rating
from a D to a B. The average disclosure score for a
FTSE 350 company in 2014 was 77 and the average
performance band was a C.
The CDP shows our investors what we are doing
internally to manage our carbon emissions and
protect ourselves from climate change risk.
Investors in People
We continued to hold our Investors in People
accreditation for the 12th year in a row.
Workspace Group PLC Annual Report and Accounts 2015
35
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15
CORPORATE SOCIAL RESPONSIBILITY CONTINUED
Customers
The relationships we build with our customers
are essential to achieving the high levels of customer
satisfaction and loyalty which are key to the success
of our business. We foster those relationships by
going beyond what might normally be expected
of a landlord; we help our customers to connect
with local communities by participating in our
community programmes, to grow their businesses
by connecting with other customers, and to improve
the environmental performance of our centres
by sharing best practice advice with them.
O UTER LONDON
INNER
LONDON
Method of travel by commuters into London
Today the majority of our properties are near to major
transport hubs and we are installing cycle racks in many
of our properties. All of this helps make us the natural
home to London’s new and growing companies.
Underground/Rail/DLR
Bus/Tram
Car/Motorcycle
Cycle
Walk
Workspace
business centres
36
Workspace Group PLC Annual Report and Accounts 2015
1,000
Customers surveyed over last
three years.
50
Engaged with 50 customers
for the pilot survey of our
Healthy Buildings study.
Performance highlights
– Achieved a score of 77% in our 2014/15 customer
experience survey. This was marginally down
on the previous year due to significant price
increases. However, we maintained a high score
on the components of the survey related to quality
of service.
– Worked with our customers to provide work
placements in their businesses for 75 students
as part of InspiresMe week in conjunction with
the GLA and BiTC.
– Workspace surveyed 1,000 customers over the
last three years to ascertain the key pillars of
sustainable success for London-based new and
growing companies. This research was used at the
NGC Forum, a parliamentary reception bringing
together key stakeholder groups and influencers
from the political, NGC and financial spectrum.
– Supported the launch of Informed Funding,
which aims to put businesses in touch with
finance providers that best match their needs,
and provided Workspace customers with premium
access to the service, making it easier for them to
find the right finance solution to help them grow.
– Launched Workspace Business Insight Dinners to
bring together senior Directors from our customer
base and industry experts to discuss relevant
challenges facing growing businesses.
– In conjunction with the GLA, we promoted
National Apprenticeship Week to all centres.
– We launched the pilot survey of our Healthy
Buildings study which builds on the 2014 WGBC
‘Health, Productivity and Wellbeing in Offices’
report. We have so far engaged with 50 customers
with a view to rolling the full survey out to 450
customers at three centres.
Case study – NGC Forum
On Tuesday, 13 January 2015, in the Churchill Room
at the House of Commons, Workspace hosted the
inaugural NGC Forum, to focus on how new and
growing companies are powering the London
economy. Our sponsor for the event, Mary McLeod,
then the Small Business Ambassador for London,
made it clear that ‘NGCs are so essential to what
we’re trying to do as UK plc’. The panel focused
on the threefold challenge faced by NGCs, namely
the availability of finance, premises and skills, with
Professor Peter Tyler from Cambridge Economics
Associates, who also attended the Forum,
commenting that 48% of NGCs reported access
to finance as a growth constraint.
Targets for 2015/16
– Build on customer networking and growth
opportunities such as Informed Funding,
NGC Forum and Business Insight Dinners.
– Increase participation of businesses in InspiresMe
week to provide work placements for 100 students.
– Continue to engage with our customers in relation
to sustainability and CSR issues.
– Demonstrate how Workspace’s property portfolio
contributes to tenant employee productivity.
– Issue Green Leases to our new customers on at
least 12 sites.
Workspace Group PLC Annual Report and Accounts 2015
37
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 CORPORATE SOCIAL RESPONSIBILITY CONTINUED
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.
Performance highlights
– Approved signatory of prompt payment code.
– Procured over 90% of our total electricity
consumption from renewable tariffs.
– The Light Bulb and Grand Union Studios
contractors have been awarded ‘Performance
Beyond Compliance’ certification for Considerate
Constructors Scheme.
– The Light Bulb and ScreenWorks schemes
achieved BREEAM Very Good certification.
Case study – Working with our partners
to reduce environmental impact
A requirement on all Workspace construction projects
over 2,000m2 is that principal contractors divert at
least 75% of the weight of non-hazardous demolition
waste and 90% of construction waste from landfill.
In the past year we have had three schemes exceed
this requirement, with ScreenWorks in Islington,
The Light Bulb in Wandsworth, and Grand Union
Studios in Kensal Rise, all achieving more than 99%
non-hazardous waste and materials landfill diversion.
We also require Considerate Constructors Scheme (CCS)
registration on all major development and refurbishment
sites, targeting a score of at least 34/50. We achieved
a score of 41/50 at The Light Bulb scheme (excellent-
exceptional) and 43/50 at Grand Union Studios
(exceptional), with both schemes receiving ‘Performance
Beyond Compliance’ certification from CCS.
We also aim for BREEAM certification, with the
ScreenWorks and The Light Bulb schemes achieving
BREEAM Very Good. We have three schemes in
development also targeting BREEAM, with Grand Union
Studios and Barley Mow designed to Very Good, and
Hatton Square Business Centre designed to Excellent.
99%
Average non-hazardous
construction and waste
materials diversion away
from landfill achieved at
ScreenWorks, The Light Bulb
and Grand Union Studios.
100%
FSC timber procured
at Grand Union Studios.
The Light Bulb achieved more than 99%
non-hazardous waste and materials landfill
diversion.
Targets for 2015/16
– Achieve a Considerate Constructors score
of at least 40/50 for all relevant projects.
– Continue to divert at least 90% (weight)
of non-hazardous demolition waste and 75%
of construction waste from landfill for all
developments and refurbishments.
– Suppliers to demonstrate that a minimum
of 80% of timber is procured from certified
sustainable source (FSC) equivalent.
– Refresh and recirculate ‘The Signpost’,
our supplier engagement document.
38
Workspace Group PLC Annual Report and Accounts 2015
Employees
We provide a safe and rewarding work environment
to ensure we attract, develop, motivate and retain
talented and ambitious individuals. Our commitment
to diversity encourages innovation and ensures our
workforce reflects the diversity of the customers
and communities in and around our centres.
27
Long service awards
presented to staff.
65%
Increase in training days
completed by employees.
Working to tackle hidden
hunger through the provision
of emergency donations of
food (enough for a minimum
of three days) and support
to those facing real crisis.
XLP is about creating positive
futures for young people
growing up on deprived
inner city estates.
Food supply organisation for
the vulnerable and needy.
Performance highlights
– 65% increase in training days completed by
our employees (631 training days completed).
– 24% increase in number of employees
undertaking training (146 people trained).
– Held Director-led presentations at a number of
our centres in 2014. These presentations ensure
all employees are aware of the performance of
the business, the strategy and the role they play
in driving performance.
– 27 long service awards presented to staff for 5,
10, 15 and 20 years’ service, with 20 awards for
10+ years’ service.
– Employees spent a total of 35 days volunteering
for our nominated charities: XLP, FareShare and
First Love Foundation.
Funding for further studies
We are committed to developing the skills of our
staff and will fund courses for employees who wish to
gain professional qualifications and undertake studies
that will enhance their careers. A new process was
introduced to ensure that any qualifications or studies
employees want to undertake are in line with the
strategy of the business. Employees must put a
business case together covering rationale, fees,
how the course will enhance their skills and how
the Company will benefit.
Case study – Investing in our people
Tim Balsom, Senior Building Surveyor, recently
completed his MBA in Real Estate and Construction
Management. The course was undertaken in two
and a half years and was fully funded by Workspace.
The course has enabled Tim to expand on his
knowledge of property and construction, improved
his construction management skills, allowing him
to manage larger design teams, and helped him
to better understand how the Company chooses
its development projects. Following the course,
redevelopment will now become part of his role.
The Company supported Tim financially but also
gave him the necessary time off to complete his
studies and provided additional support in the form
of colleagues sharing their expert knowledge. Tim’s
completion of the course benefits Workspace as well,
as he will be able to make a greater contribution to the
continued expansion of the development programme,
which is a major driver of asset value and income.
Targets for 2015/16
– Introduce a digital platform showing all
staff benefits and total reward statements.
– Continue to facilitate and encourage
further training and development.
– Increase staff participation in E5 strategy and
deliver at least 40 days of staff volunteering.
Workspace Group PLC Annual Report and Accounts 2015
39
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15
CORPORATE SOCIAL RESPONSIBILITY CONTINUED
Communities
We aim to make the communities in which we
operate better places to live and do business
in. We continue to enhance our understanding
of the impact that our centres have both socially
and economically and our flagship E5 community
investment strategy supports education,
employment, enjoyment, entrepreneurial and
environmental initiatives in the communities
in which we operate.
35
Days of staff volunteering.
75
In collaboration with BiTC
and the GLA, we provided
75 students with work
placements at our business
and our customers’ businesses
as part of InspiresMe week.
40
Workspace Group PLC Annual Report and Accounts 2015
Performance highlights
– Our charity committee donated £99,583 in
space and cash as part of our E5 community
strategy and supported a total of 35 days of
staff volunteering.
– In collaboration with BiTC and the GLA, we
provided 75 students with work placements at
our business and our customers’ businesses as
part of InspiresMe week.
– Continued our successful partnership with
St Gabriel’s School, Kennington, for the second
year, to prepare them to embark on their careers
and become entrepreneurs of the future.
– Volunteering at Food Banks and as part of the
Tesco food drive collection became an integral
part of our employee volunteering opportunities.
– Provided support for XLP, a charity which works
with underprivileged young people from inner
London, in the form of fundraising, volunteering
days, provision of preferred places on InspiresMe
week work placements and mentoring during
their summer camp.
Case study – Arctic Challenge (pictured)
One of the many highlights of our E5 strategy saw
four of our adventurous staff embark on a gruelling
Arctic Challenge to raise money for KidsCo. KidsCo
provide practical, emotional and educational support
to vulnerable inner-city children, and cover many of
the London boroughs in which our business operates.
The extreme weekend in Norway saw our staff
compete against other teams in dog-sledding, cross-
country skiing and fishing. Much fun (and many blisters)
were had, all while fundraising for a great charity.
Targets for 2015/16
– Expand delivery of our E5 strategy in
collaboration with our community partners
to provide more staff volunteering days,
space donation and financial support to our
nominated charities and community initiatives.
– Support at least 40 staff volunteering days
throughout the year.
– Expand InspiresMe week to facilitate a
total of 100 students working with our
customer base.
Workspace’s Lucia, Tim, Alphie and Dale
embark on the gruelling Arctic Challenge.
Workspace Group PLC Annual Report and Accounts 2015
41
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 CORPORATE SOCIAL RESPONSIBILITY CONTINUED
Performance highlights
– Completed an updated portfolio risk review
which identified that only 3% of our total gross
lettable area has F or G rated Energy Performance
Certificates, compared to 18% of the total
Landmark EPC database which are F or G rated.
– Achieved a 9% reduction in absolute energy
consumption between March 2013 and March 2015.
– Implemented several energy reduction measures
including: voltage optimisation at four key
business centres, boiler optimisation at 22
centres, and LED retrofit at three centres.
– Introduced water efficiency initiatives at four sites.
– Achieved a recycling rate of 57%, driven by the
waste audits undertaken at 12 business centres
which aimed to engage customers on recycling.
– Commissioned a portfolio viability analysis
to install photovoltaics at our sites, identifying
10 suitable buildings.
– Improved our Carbon Disclosure Project (CDP)
submission considerably this year, achieving a
rating of B and a score of 86.
Case study – Reducing environmental
impact of our properties
This year Clerkenwell Workshops was identified as
a target site to focus on reducing its environmental
impact. Gas and electricity consumption were a key
area of focus; by installing AMR smart metering for
both we were able to identify areas of wastage
throughout the year. We also installed several retrofit
measures including boiler and voltage optimisation.
Through these measures, we achieved a total energy
reduction of 13% compared to the previous year.
We also improved recycling levels from 56% to 61%,
well above our portfolio target. In addition, measures
such as site engagement with our customers and the
provision of information, newsletters and posters, have
made environmental impact a key area of focus for
them. Our action plan will continue into next year with
the roll-out of LED lighting, Green Leases and energy
dashboards to further reduce the building’s impact.
Targets for 2015/16
– Set energy reduction targets and action plan for
our 10 buildings that consume the most energy.
– Reduce landlord controlled (communal) energy
consumption by 10% by April 2017.
– Reduce overall carbon intensity by 20% by 2020.
– Reduce portfolio like-for-like water intensity to
0.50m3 by April 2017.
– Achieve 62% average recycling rate across
all existing assets where we manage waste
by March 2016.
Environment
We believe that continually improving our
environmental performance creates value for our
business. Not only is it essential if we are to meet
the changing expectations of our customers, but
as a property company we play an important role
in supporting the achievement of UK environmental
targets and fulfilling our role as a responsible business.
B-86
CDP (Carbon Disclosure
Project) scores were
considerably higher this year.
9%
Energy reduction when
adjusted for occupancy.
57%
Average recycling rate
achieved across our portfolio.
137
Our voltage optimisation
project, designed to reduce
electricity consumption
through voltage reduction,
helped to reduce four business
centres’ combined CO2
emissions by 137 tonnes.
42
Workspace Group PLC Annual Report and Accounts 2015
Environment
100% renewable
electricity purchased
for site. Recycling
rate of 80%
achieved.
Customer
Won ‘Best New
Place to Work’ at
the London
Planning
Awards.
Communities
Supported the
local borough,
providing
volunteers to
Tower Hamlets
food bank.
Suppliers
and partners
Achieved a
Considerate
Constructors
Scheme score
of 34/40.
Employees
On-site staff worked
with customers
to offer three work
placements to local
students as part of
InspiresMe week.
Bringing
it all together
at Pill Box
Background
Pill Box is surrounded by railway arches and popular
East End bars and pubs. The building embraces its
historical features which include lab tile floors, blue
engineering brick columns and a stunning water
tower, now a two-storey office. Each studio retains
a patch of the authentic brickwork combined with
a pure-white colour scheme.
Workspace Group PLC Annual Report and Accounts 2015
43
Strategy and performance 16-53Overview 01-15Governance 54-104Financial statements 105-147Additional information 148-153 BUSINESS REVIEW
Like-for-like portfolio
The like-for-like portfolio comprises properties which
have not been impacted over the last 24 months
by either major refurbishment or redevelopment
activity. They represent the majority (67%) of the
Group’s rent roll.
Like-for-like rent roll growth has been strong with
rent roll up 17.7% (£7.0m) to £46.5m in the year.
The majority of the increase has come from pricing
with like-for-like rent per sq. ft. up 15.8% to £18.37.
See table 1.
Like-for-like properties
91.4
91.5
90.6
92.6
92.2
£15.87
£16.54
£16.99
£17.76
£18.37
A breakdown of the like-for-like growth by property
type is set out below:
Rent roll
March
2015
March
2014
Rent per sq. ft.
March
2015
March
2014
£41.3m £34.9m £21.98
Business
centres
Industrial
estates
£8.01
Total/Average £46.5m £39.5m £18.37
£5.2m £4.6m
£18.87
£7.19
£15.87
Mar
2014
June
2014
Sep
2014
Dec
2014
Mar
2015
Rent per sq. ft.
Occupancy
The business centres, which now represent 89%
of the like-for-like rent roll, have seen the strongest
pricing increases in the year with rent per sq. ft. up
16.5% to £21.98. This compares to a 11.4% increase
in rent per sq. ft. at the industrial estates to £8.01.
31 Dec
2014
42
92.6%
31 Mar
2015
42
92.2%
30 Sept
31 Mar
2014
2014
42
42
91.4%
90.6%
£46.5m £44.7m £42.1m £41.3m £39.5m
£15.87
£16.99
30 June
2014
42
91.5%
£16.54
£17.76
£18.37
Table 1:
Like-for-like properties
Number of properties
Occupancy
Rent roll
Rent per sq. ft.
Metal Box Factory
Bankside
44
Workspace Group PLC Annual Report and Accounts 2015
ISLINGTON
KING’S
CROSS
ScreenWorks,
N5
Opened
June 2014
SHOREDITCH
PADDINGTON
WEST
END
FARRINGDON
OLD
STREET
BETHNAL
GREEN
Pill Box, E2
Opened
February 2014
STRATFORD
THE
CITY
LONDON
BRIDGE
WATERLOO
Metal Box
Factory, SE1
Opened
January 2015
KENNINGTON
CANARY
WHARF
EARLS COURT
VICTORIA
The Light
Bulb, SW18
Opened
March 2015
BATTERSEA
Completed projects
Completed projects comprise properties with new
and upgraded space that have been delivered from
our refurbishment and redevelopment programmes.
Highlights during the year include:
– The successful letting-up of the new business
centres in Bethnal Green (Pill Box – opened
February 2014) and Islington (ScreenWorks –
opened June 2014). Both reached 90%
occupancy levels within nine months at pricing
levels well ahead of initial expectations.
– Completion in January 2015 of the extensive
refurbishment and addition of two floors at the
Metal Box Factory on Bankside. We have seen
very strong demand for the new space at this
thriving location, with occupancy reaching
84% by the end of March 2015.
– We opened The Light Bulb in March 2015, a new
business centre in Wandsworth Town Centre.
By the end of April 2015 the centre was already
25% occupied with a further 13% under offer.
Completed projects
Refurbishments
Redevelopments
Total
Rent roll at
31 March
Rent roll at
31 March
No. of
projects
5
2
2015
£6.1m
£2.1m
7
£8.2m
2014
£2.7m
–
£2.7m
The rent roll of completed projects has increased
by £5.5m over the year to 31 March 2015. If all the
buildings were 90% let at latest estimated rental
values the rent would be £11.3m, £3.1m higher
than the March 2015 rent roll.
Projects underway
We have a pipeline of properties that are at varying
stages of refurbishment and redevelopment. This
ranges from those at the planning stage, to those
where we are vacating customers, through to
properties where new space is under construction.
Projects underway
Refurbishments
Redevelopments
No. of
projects
8
6
Rent roll at
31 March
Rent roll at
31 March
2015
£7.5m
£0.3m
2014
£8.2m
£1.9m
Total
14
£7.8m
£10.1m
During refurbishment projects there will usually be
some reduction in the rent roll in those areas affected
by the works; although on some larger projects we
may need to completely vacate the property. The
reduction in rent roll in the year of £0.7m includes the
vacation of all customers at Hatton Square Business
Centre ahead of the commencement of this major
refurbishment project. Based on latest estimated
rental values and assuming 90% occupancy the rent
roll of the eight refurbishments when they have been
completed would be £16.9m, £9.4m higher than the
rent at 31 March 2015.
Redevelopment projects require complete vacant
possession ahead of sale. During the year, the biggest
reduction in rent roll was £1.1m at the Biscuit Factory
where we are progressively vacating the part of the
site that we have contracted to sell to Grosvenor for a
residential redevelopment. Based on latest estimated
rental values and assuming 90% occupancy, the rent
roll of the new business space being returned to us at
these redevelopments would be £3.1m, £2.8m higher
than the rent at 31 March 2015.
Workspace Group PLC Annual Report and Accounts 2015
45
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 BUSINESS REVIEW CONTINUED
Total portfolio
Overall occupancy was 88.7% at 31 March 2015
(31 March 2014: 85.8%). Our total rent roll has
increased over the year by 19.0% to £69.4m
(31 March 2014: £58.3m) as detailed below.
Rent roll at 31 March 2014
Like-for-like portfolio
Completed projects
Projects underway
Acquisitions in the year
Disposals in the year
Rent roll at 31 March 2015
£m
58.3
7.0
5.5
(2.3)
3.0
(2.1)
69.4
Enquiries and lettings
Enquiries are an important indicator of the strength
of customer demand and have been consistently
high at an average of 1,222 per month, compared
to 1,063 per month in the prior year. We have seen
a similarly high level of completed lettings which
averaged 109 per month (2014: 85 per month).
Continued strong levels of enquiries and lettings
are being seen in the first quarter of the current
financial year.
Average number
per month
Enquiries
Lettings
31 March
2015
1,232
120
Quarter ended
31 Dec
2014
1,141
105
30 Sept
2014
1,294
108
30 June
2014
1,222
104
Pill Box
Bethnal Green
Profit performance
Adjusted trading profit after interest for the
year is £26.6m, up 30% compared to the prior
year. The prior year trading profit excludes the
exceptional finance costs of £1.9m associated
with the refinancing of the debt facilities which
was completed in July 2013.
£m
Net rental income – underlying
Net rental income – acquisitions
Net rental income – disposals
Joint venture income
31 March
2015
54.4
2.2
1.1
1.2
31 March
2014
47.7
0.3
2.3
1.1
Administrative expenses – underlying (10.5)
Administrative expenses –
share-related incentives
(3.3)
(9.9)
(2.5)
Net finance costs
Adjusted trading profit after interest
(18.5)
26.6
(18.5)
20.5
Total net rental income for the year was up 15%
(£7.4m) to £57.7m with underlying net rental income
up 14% (£6.7m) to £54.4m. This reflects income
growth of 18% (£5.7m) at like-for-like properties and
growth of £2.3m from completed refurbishments
offset by a reduction of income of £1.3m at
properties being refurbished or redeveloped.
The acquisitions in the current and prior year have
contributed £1.9m to net rental income growth with a
reduction in net rental income from disposals of £1.2m,
largely from the 10 industrial properties sold mid-year.
46
Workspace Group PLC Annual Report and Accounts 2015
£69.4m
Total rent roll
+30%
Trading profit
Trading profit after interest
£5.7m
£20.5m
£2.3m
£(1.3)m
£1.9m
£(1.2)m
£0.1m
£(1.4)m
£0.0m
£26.6m
March
2014
Like-for-like
income
Completed
projects
Projects
underway
Acquisitions Disposals
Joint
ventures
Admin
expenses
Interest
costs
March
2015
Joint venture income represents our share of
net rental income less associated administrative
expenses, primarily from the properties in the
BlackRock Workspace Property Trust in which
we have a 20.1% interest.
The change in fair value of investment properties
of £318.0m reflects the increase in the total CBRE
valuation in the year of £328.1m, adjusted for £10.1m
of overage income now classified as deferred
consideration within current receivables.
Underlying administrative expenses have increased
by 6% (£0.6m) in the year due to an increase of
four in average head-office headcount to 85 and
an overall salary and bonus increase averaging 5%.
Share-related incentive costs have increased by £0.8m
(32%) due to higher than expected vesting levels as
a result of the strong share price performance.
Other items for the year include profit on sale of
investment properties of £0.3m, the change in the
fair value of deferred consideration and overage
payments of £10.1m and our share of the increase
in valuation and property disposal profits relating
to the BlackRock Workspace JV of £7.2m, offset
by a £2.2m reduction in fair value of interest rate
derivative financial instruments.
Dividend
The Board has proposed a final dividend of 8.15
pence per share, an increase of 15% on the prior year
(2014: 7.09 pence), which will be paid on 7 August
2015 to shareholders on the register at 10 July 2015.
This dividend will be paid as a REIT Property Income
Distribution (PID). The total dividend for the year is
12.04 pence, a 13% increase overall on the prior year
(2014: 10.63 pence), which is covered 1.4 times by
adjusted underlying earnings per share.
Net finance costs, excluding exceptional costs,
have remained flat year on year. The average level
of debt (excluding cash) over the year was £328m
(2014: £332m) and average interest cost was 5.2%
(2014: 5.3%), this excludes the amortisation of fees
running at 0.2% p.a.
Profit before tax has increased by 43% (£107.5m)
in the year to £360.0m.
£m
Adjusted trading profit
after interest
Exceptional finance costs
Change in fair value of
investment properties
Other Items
Profit before tax
31 March
2015
31 March
2014
26.6
–
318.0
15.4
360.0
20.5
(1.9)
221.9
12.0
252.5
Adjusted underlying
earnings per share
17.2p
13.9p
Workspace Group PLC Annual Report and Accounts 2015
47
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 BUSINESS REVIEW CONTINUED
Property valuation
At 31 March 2015 the wholly owned portfolio
was independently valued by CBRE at £1,423m,
an underlying increase of 30% (£328m) in the full
year, with an increase of 14% (£171m) in the second
half of the year. The main movements in the
valuation are set out below:
Valuation at 31 March 2014
Revaluation surpluses:
– 6 months to 30 September 2014
– 6 months to 31 March 2015
Capital expenditure
Acquisitions
Property disposals
Capital receipts
£m
1,078
157
171
38
80
(44)
(57)
Valuation at 31 March 2015
1,423
Property valuation
1,078
(101)
80
38
171
1,423
157
March
2014
Disposals/
Receipts
Capital
expendi-
ture
Acquis-
itions
H1 Re-
valuation
Surplus
H2 Re-
valuation
Surplus
March
2015
The total Workspace property return for the year was
36.7% (March 2014: 34.7%). This compares to a total
property return of 17.1% (March 2014: 13.6%) for the
IPD Quarterly Universe.
Set out below is a summary of the revaluation surplus
and valuation at 31 March 2015 by property type:
£m
Like-for-like properties
Completed projects
Refurbishments
Redevelopments
Acquisitions
Disposals
Total
Revaluation
surplus
177
59
28
50
3
11
328
Valuation
768
179
177
197
102
–
1,423
The 30% (£177m) increase in value of the like-for-
like properties came from an uplift in rental pricing
(representing 59% of the uplift) and a tightening in
valuation yields (representing 41% of the uplift).
48
Workspace Group PLC Annual Report and Accounts 2015
Like-for-like properties
ERV per sq. ft.
Rent per sq. ft.
Equivalent Yield
Net Initial Yield
Capital Value per sq. ft.
31 March
2015
£20.24
£18.37
6.5%
5.4%
£280
31 March
2014
£17.24
£15.87
7.2%
6.3%
£213
The uplift of 49% (£59m) in value of completed
projects reflects the very strong pricing levels that
have been achieved at these properties, well ahead
of initial expectations when the buildings opened.
Completed projects
ERV per sq. ft.
Rent per sq. ft.
Capital Value per sq. ft.
31 March
2015
£24.24
£18.59
£344
We have also seen an uplift of 19% (£28m) in the
value of refurbishments underway. Expectations
for the pricing levels that can be achieved at these
properties have been raised in light of the pricing
levels achieved at the recently completed schemes.
The uplift of 34% (£50m) in the value of
redevelopment projects is a combination of the:
– Increase in residential land values reflected in both
schemes with planning that have been sold in the
year and those at the planning stage of £26m;
– Uplift in the value of business space being
returned to Workspace of £12m; and
– Increase in the estimated overage due
to Workspace of £12m.
The £11m revaluation surplus on disposals arises
from the uplift in value of these properties reported
in the first half of the financial year which were
subsequently sold in the second half of the year.
Acquisitions
We have continued to successfully identify and acquire
complementary properties in our target locations
across London where we can add value and leverage
our operational platform to deliver strong returns, with
five properties acquired during the last financial year.
– 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 plans for a new business centre
on the combined site which will benefit 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.
– In November 2014, we acquired 160 Fleet Street,
EC4 for £29.7m. This 54,000 sq. ft. property in
Midtown was acquired out of administration at
a capital value of £549 per sq. ft. and was only
48% let at a net initial yield of 3.7%.
160 Fleet Street
Midtown
– In January 2015, we acquired Edinburgh House,
SE11 for £25.3m. This prominent 68,000 sq. ft.
property in Kennington is fully let to the
Metropolitan Police Authority at a rent of £22
per sq. ft. and was acquired at a capital value
of £370 per sq. ft. and an initial yield of 5.2%.
– In January 2015, we also acquired Peer House,
WC1 for £6.1m. This property adjoins our existing
property at 60 Gray’s Inn Road, WC1 in Midtown
and is fully let off a low average rent of £21 per
sq. ft. It was acquired at a capital value of £605
and a net initial yield of 3.3%.
We continue to search for further acquisition
opportunities with two further properties acquired
since the year end. On 27 May 2015 we announced
that we had exchanged contracts for the purchase of
25 and 28 Easton Street, WC1 for £16.6m at a capital
value of £794 per sq. ft. On 3 June we announced
the exchange of contracts for the purchase of
Angel House, EC1 for £34.0m at a capital value
of £738 per sq. ft. These two properties are well
located in Clerkenwell and Islington respectively
and complement our existing cluster of buildings
in these vibrant areas of London.
Disposals
In October 2014 we completed the sale of a
portfolio of 10 non-core industrial estates for £44m,
an £11m premium to their book value at March 2014.
The properties generally represent good quality
but small industrial estates, where the opportunity
for Workspace to add premium operational or
brand value is limited. The valuation of the seven
remaining non-core properties at 31 March 2015
stands at £20m (March 2014: £53m).
Refurbishment activity
We continue to pursue opportunities to upgrade
and add additional space at our properties. We
are making good progress with three schemes
completing during the last financial year delivering
141,000 sq. ft. of new and upgraded space and
a further three delivering 162,000 sq. ft. of space
expected to complete this year.
A summary of the refurbishment programme is
set out in table 2 below.
We would expect the remaining capital expenditure
on these refurbishment projects to be relatively
evenly phased over the next three to four years.
Table 2:
Projects
Completed
Underway
Design stage
Total
Number
5
8
6
19
Capex spent
£32m
£17m
–
£49m
Capex to spend
–
£88m
£77m
£165m
Refurbished and new space
218,000 sq. ft.
372,000 sq. ft.
399,000 sq. ft.
989,000 sq. ft.
Workspace Group PLC Annual Report and Accounts 2015
49
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15
BUSINESS REVIEW CONTINUED
Cargo Works
Southbank
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.
It has been a busy and successful year for
redevelopment, and highlights include:
– Delivery of two new business centres in Islington
(ScreenWorks) and Wandsworth (The Light Bulb)
at no cost to Workspace.
– Planning consent in April 2014 for the second
phase of the redevelopment at The Light Bulb,
SW18 for 77 residential units and 18,000 sq. ft.
of commercial space.
– Sale of the second phase of the redevelopment
at Bow Enterprise Park, E3 of 160 residential
units to Peabody in April 2014 in return for £11m
in cash and 3,000 sq. ft. of new industrial space.
– Agreement in May 2014 of the contract for sale
of 148 residential units at The Faircharm, SE8 to
London & Quadrant in return for £10m in cash
and a new 52,000 sq. ft. business centre.
– Contract for sale with Telford Homes in
September 2014 for the first phase of
redevelopment at Poplar, E14 of 170 residential
units for £16m and 8,000 sq. ft. of new
industrial space.
– Planning consent in February 2015 at Arches
Business Centre, UB2 for 110 residential units.
A summary of the contracted redevelopments
where we have signed deals with residential
developers are set out in table 3 below.
– The timing of cash receipts is dependent on when
we obtain vacant possession or is often paid on
a staged basis. £55m in cash was received during
the last year, £28m is expected to be received in
the current financial year and the balance over
the following two financial years.
Table 3:
Contracted Projects
Completed
Underway
Total
Number
2
6
8
Residential units
281
1,690
1,971
Cash received
£5m
£74m
£79m
Cash to come
–
£31m
£31m
Overage to come
£13m
£5m
£18m
New business space
114,000 sq. ft.
180,000 sq. ft.
294,000 sq. ft.
50
Workspace Group PLC Annual Report and Accounts 2015
The Light Bulb
Wandsworth
– We will receive 180,000 sq. ft. of new space
on the contracted for sale schemes underway,
70,000 sq. ft. is expected to be delivered in the
current financial year and the balance during
the following two years.
– On 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 2015 the expected cash
proceeds from overage was valued by CBRE at
£18m of which £14m is expected to be received
in the current financial year.
In addition to the contracted redevelopments
detailed above, we have four properties with
planning consent for a total of 539 residential units
which will be marketed and sold in due course.
We are also progressing discussions with planners
on mixed-use planning schemes on a further six
properties for 1,067 residential units
Cash flow
The Group generates strong operating cash flow
in line with trading profit, with good levels of cash
collection and bad debts remaining low at £0.3m
(March 2014: £0.2m).
A summary of the movements in cash flow are set
out below:
Net cash from operations
Dividends paid
Capital expenditure
Property acquisitions
Property disposals
Capital receipts
Distributions from joint ventures
Net proceeds from share placement
Settlement of Glebe proceeds share
Net movement in year
£m
36
(17)
(37)
(80)
44
55
3
94
(30)
68
Debt at 31 March 2014 (net of cash)
Debt at 31 March 2015 (net of cash)
(338)
(270)
Workspace Group PLC Annual Report and Accounts 2015
51
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 BUSINESS REVIEW CONTINUED
Financing
At 31 March 2015 the Group had £410m of
committed facilities with an average period to
maturity of 5.8 years and the earliest maturity in
June 2018. Details are set out below:
Facility
Private placement notes £148.5m
£9m
Private placement notes
UK fund
Retail bond
Bank debt
Maturity
June 2023
June 2020
£45m June 2022/2023
£57.5m October 2019
June 2018
£150m
Total facilities
£410m
Undrawn facilities
(including cash)
£140m
The Private Placement notes comprise $100m dollar
(£64.5m) 10-year notes, £84m of sterling 10-year
notes and £9m of seven-year sterling floating rate
notes. The US dollar notes have been fully hedged
against sterling for 10 years. The overall interest rate
on the £148.5m 10-year fixed rate notes is 5.6%. The
UK Fund has provided a 10-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.
In November 2014, we successfully completed a
share placing issuing 14.6m new shares (representing
approximately 9.99% of the issued share capital
prior to the placing) at £6.60 per share raising gross
proceeds of £96.5m. The proceeds are being used
to extend and accelerate our refurbishment pipeline
and take advantage of acquisition opportunities.
At 31 March 2015, overall loan to value was 19% and
interest cover (based on net rental income) was
3.2 times, giving us good headroom on all of bank,
placement notes and bond covenants.
Net assets
Net assets increased in the year by £420m to
£1,146m, the most significant items being the £328m
increase in the value of our investment portfolio and
the share placing that raised a net £94m. EPRA net
asset value per share at 31 March 2015 was £7.03
(2014: £4.96), an increase of 42% in the year.
The main movements in net asset value per share
in the year are set out below:
At 31 March 2014
Property valuation surplus
Trading profit after interest
Dividends paid in year
Glebe proceeds share payment
Share placement
Other
At 31 March 2015
£
4.96
2.01
0.16
(0.10)
(0.12)
0.13
(0.01)
7.03
Glebe Proceeds Share Agreement (‘GPSA’)
In December 2014, we successfully agreed the
termination of the GPSA with the former lenders
to the Glebe joint venture in return for a cash
payment of £30m. The maximum that could have
been payable under the GPSA was £48m.
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 potentially performance fees.
The BlackRock JV has continued to perform well
during the year with underlying rent roll growth
of 16% (£1.0m) excluding disposals and occupancy
improving to 93.9%. The property valuation has
increased by 37% (excluding capital expenditure
and disposals) to £133m at 31 March 2015.
Two properties were sold during the financial
year for £13.2m, £6.1m ahead of the 31 March 2014
valuation. In April 2015, the BlackRock JV exchanged
for sale a further four properties for £32.1m, a 4%
premium to their 31 March 2015 valuation. The sale
of these properties is due to complete in June 2015.
Facilities by type
1. Bank Debt (37%)
2. Retail Bond (14%)
3. UK Fund (11%)
4. Private Placement (38%)
Debt maturity profile
4.
£171m
£150m
1.
3.
2.
£58m
£23m
£9m
2015
2016
2017
2018
2019
2020
2021
2022
2023
52
Workspace Group PLC Annual Report and Accounts 2015
Key property statistics
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
Quarter
ended
31 March
2015
Quarter
ended
31 December
2014
Quarter
ended
30 September
2014
Quarter
ended
30 June
2014
Quarter
ended
31 March
2014
–
£1,423m
73
75
4.0
4.2
4,511
4,525
–
£90.3m
£69.4m £64.4m
£17.97
88.9%
2.7
£44.7m
£17.76
92.6%
£18.79
88.7%
2.7
£46.5m
£18.37
92.2%
£1,230m
84
4.4
4,720
£79.7m
£61.3m
£16.29
86.0%
2.7
£42.1m
£16.99
90.6%
–
84
4.5
4,681
–
£1,078m
83
4.5
4,653
£75.4m
£61.0m £58.3m
£15.12
£15.73
85.8%
85.7%
2.7
2.7
£41.3m £39.5m
£15.87
£16.54
91.4%
91.5%
£133m
12
0.5
£8.9m
£7.1m
£16.13
93.9%
£126m
12
0.5
£8.6m
£6.7m
£16.17
88.9%
£117m
12
0.5
£8.4m
£6.2m
£14.40
92.2%
£111m
13
0.5
£8.4m
£6.2m
£14.84
89.1%
£104m
14
0.5
£8.5m
£6.4m
£14.66
87.7%
Note:
The like-for-like portfolio statistics reported for the year as set out above have been restated for the following:
–
Four refurbished properties have been transferred into this category as the refurbishments were completed more than
two years ago. These properties had a rent roll of £5.6m at 31 March 2015.
Twelve properties have been transferred out of the like-for-like category as we are now progressing with significant
refurbishment or redevelopment activity at these sites. These properties had a rent roll of £9.1m at March 2015.
Ten light industrial properties were sold in October 2014 with a rent roll of £2.1m.
–
–
The Strategic Report on pages 16 to 53 was approved by the Board of Directors on 2 June 2015 and
signed on its behalf by:
Jamie Hopkins
Chief Executive Officer
Graham Clemett
Chief Financial Officer
Workspace Group PLC Annual Report and Accounts 2015
53
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 Enquiries
Viewings
Deals
Renewals
Rent reviews
Leavers
Offer letters
54
Workspace Group PLC Annual Report and Accounts 2015
Our governance
In this section
56 Chairman’s Governance Statement
58 The Board and Executive Committee
62 The Board and Executive Committee biographies
64
Corporate Governance Report
67 Executive Committee
67 Investment Committee
67 Risk Committee
73 Nominations Committee Report
75 Audit Committee Report
80 Directors’ Remuneration Report
100 Report of the Directors
104 Directors’ responsibilities
Enquiries
Viewings
Deals
Renewals
Rent reviews
Leavers
Offer letters
Operational activity conducted
by our business in the year.
Workspace Group PLC Annual Report and Accounts 2015
55
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15
CHAIRMAN’S GOVERNANCE STATEMENT
Daniel Kitchen
Non-Executive Chairman
We believe that good
governance, based
on robust practices
and processes, is a
fundamental part of
being a responsible
business and delivering
for shareholders.
Related information:
Nominations Committee
Report p.73 to 74
Induction, training and
development p.70
56
Workspace Group PLC Annual Report and Accounts 2015
Dear Shareholder
On behalf of the Board I am pleased to present the
Company’s Corporate Governance Report for the
financial year ended 31 March 2015.
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, Board
effectiveness and in our relationship with our
shareholders.
This Corporate Governance Report is intended to
give an insight into how the Board operated during
the year under review. Throughout the year, the
Company complied with the UK Corporate
Governance Code. Full details of the Company’s
governance arrangements in compliance with the
Principles of the UK Corporate Governance Code
are included on page 62 to 103.
As you will have read in the Chief Executive’s
Report on page 18, it has been a strong year for the
business, which has achieved strong returns and is
well placed to deliver its strategic goals.
An effective Board
In order to ensure we uphold best practices and
operate effectively, the Board benefited during
the year from the insights gained from an external
evaluation of its performance. We appointed Sean
O’Hare of Boardroom Dialogue Ltd who facilitated
an external Board effectiveness review in March 2015
to consider the way in which we carry out our role
as Directors of Workspace and conduct ourselves
in the boardroom, as well as the Board’s structure
and processes. The review covered the Board, its
Committees, individual Directors and the Company
Secretary and included interviews with each of the
Corporate Governance structure
The Board
Audit
Committee
Page 75
Executive
Committee
Page 67
Nominations
Committee
Remuneration
Committee
Page 73
Page 80
Risk
Committee
Finance
External
Auditor
Investment
Committee
Senior
Management
External
Recruitment
Advisors
Directors, members of the Executive Committee and
the Company Secretary. The findings were reported
back to me and the output was reviewed at the
March 2015 Board Meeting.
I am pleased to report that the thorough exercise
conducted by Boardroom Dialogue Ltd, an
independent organisation which provides no other
services to the Group, concluded that the Board
operated in an efficient and effective manner.
As you would expect, the evaluation resulted in
certain specific recommendations for increased focus
on a small number of key areas and these will form
the basis of our action plan for 2015. Details of these
recommendations can be found on page 71 of the
Corporate Governance Report.
Board changes and succession planning
Since my last report to you, there have been a
number of changes to the Board and its Committees.
After the Annual General Meeting (AGM) in 2014,
Bernard Cragg retired from the Board and Chris
Girling assumed the role of Senior Independent
Non-Executive Director and Chairman of the Audit
Committee. Also in July 2014, we were delighted to
welcome Stephen Hubbard to the Board. His strong
and in-depth knowledge of the property industry
complements the skills of the Board.
Stephen is Chairman of CBRE UK and is a member
of their Management Board. The Valuation Advisory
Division of CBRE acts as the Group’s external valuer
and, recognising the effect that this may have on the
perception of his independence, the Board reviewed
Stephen’s position prior to his appointment in July
2014. Following this, the Board was and is completely
satisfied that he remains independent in judgement
and character. This will be assessed by the Board
each year prior to his reappointment at the AGM.
Stephen has no involvement, at any stage, in the
Group’s valuation exercise and takes no part in any
discussion concerning CBRE’s role and fees.
A report on the recruitment process is described
in the Nominations Committee Report on page 74.
Communication with shareholders and
other investors
Communication with all our shareholders is a
high priority for the Board. On publication of
the Company’s annual and half year results, the
Chief Executive Officer and Chief Financial Officer
present to institutional investors and analysts,
as well as holding one-to-one briefings.
In October 2014, Workspace hosted two events for
investors and analysts. The events showcased the
Group’s recent acquisitions, current refurbishments
and development activity and demonstrated how
Workspace plans to continue to drive value and
growth. Workspace also participated in EPRA’s Annual
Conference in September 2014 and took registered
guests on a tour of a selection of the Group’s assets.
Finally, Dr Maria Moloney, Chairman of the
Remuneration Committee, and I met with investors
during the year to discuss proposals on Executive
Director Remuneration for 2015.
I am pleased with the progress we have made this
year across the governance agenda. We have built a
committed Board that is working well in the interests of
all shareholders and each Director continues to contribute
effectively, demonstrating commitment to their role and
to the continued strong performance of the Company.
Daniel Kitchen
Non-Executive Chairman
2 June 2015
Workspace Group PLC Annual Report and Accounts 2015
57
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 THE BOARD AND EXECUTIVE COMMITTEE
This year we have photographed our
Executive team at the newly opened
Metal Box Factory at Bankside.
1. Daniel Kitchen
Non-Executive Chairman
2. Jamie Hopkins
Chief Executive Officer
58
Workspace Group PLC Annual Report and Accounts 2015
3. Graham Clemett
Chief Financial Officer
4. Maria Moloney
Non-Executive Director
5. Chris Girling
Senior Independent
Non-Executive Director
6. Damon Russell
Non-Executive Director
Workspace Group PLC Annual Report and Accounts 2015
59
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 THE BOARD AND EXECUTIVE COMMITTEE
CONTINUED
EXECUTIVE COMMITTEE
Our Executive Committee stay in
touch with the business through
regular site visits.
7. Stephen Hubbard
Non-Executive Director
8. Carmelina Carfora
Company Secretary
Chris Pieroni, Operations Director
and Angus Boag, Development
Director pictured with Mark
Baraks (Centre Manager) and
Rachel Kiddie (Assistant Centre
Manager) at Metal Box Factory.
Jamie Hopkins, Chief Executive
Officer and Graham Clemett,
Chief Financial Officer pictured
with customers Jason and David
from J3 Partners in the Games
Room at Metal Box Factory.
60
Workspace Group PLC Annual Report and Accounts 2015
EXECUTIVE COMMITTEE
Workspace Group PLC Annual Report and Accounts 2015
61
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 THE BOARD AND EXECUTIVE COMMITTEE BIOGRAPHIES
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 retired
as Non-Executive Chairman of Irish Nationwide
Building Society in July 2011 and as Non-Executive
Director of Kingspan Group PLC in May 2012.
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 Hospital in Dublin.
2. Jamie Hopkins
Chief Executive Officer
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 then 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.
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.
3. Graham Clemett
Chief Financial Officer
Background and relevant experience:
Graham Clemett 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. Maria Moloney
Non-Executive Director and Chairman of the
Remuneration Committee
Committee memberships:
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
Holdings, Independent Television Commission,
London and Broadcasting Authority of Ireland.
Current external appointments:
Maria, a lawyer, is currently on the Board and a
Trustee of the N. Ireland Cancer Centre in Belfast.
5. Chris Girling
Senior Independent Non-Executive Director and
Chairman of the Audit Committee
Committee memberships:
Member of the 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.
Current external appointments:
Chris is currently a Non-Executive Director and
Chairman of the Audit Committees of Keller PLC and
South East Water Limited and Chair of Trustees for
the Slaughter and May Pension Fund.
6. Damon Russell
Non-Executive Director
Committee memberships:
Member of the Remuneration, Audit and
Nominations Committees.
Background and relevant experience:
Damon was appointed to the Board in May 2013.
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. Telecom Express
was sold to AMV BBDO, part of the Omnicom Group,
in 1998. In 2004, Damon led a successful
management buyout.
Current external appointments:
Damon holds advisory roles for a number of smaller
companies in the digital media sector.
62
Workspace Group PLC Annual Report and Accounts 2015
7. Stephen Hubbard
Non-Executive Director
Committee memberships:
Member of the Remuneration, Audit and
Nominations Committees.
Background and relevant experience:
Stephen Hubbard was appointed to the Board in
July 2014. Stephen is currently Chairman of CBRE
UK. He joined Richard Ellis in 1976 and held the
position of head of EMEA and UK Capital Markets
from 1998 to 2012.
Current external appointments:
Stephen is Chairman of London Business Network
and a member of the advisory board for Redevco
which is a pan European property holding company.
8. 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.
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 appointments:
Chris was appointed as Chairman of the Business
Centre Association in May 2014.
Board tenure
Board gender diversity
51%
86%
80%
Male
Female
30%
19%
14%
20%
0-1 years
1-3 years
3+ years
Group Board
Non-Executive
Workspace Group PLC Annual Report and Accounts 2015
63
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 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.
Leadership
Corporate Governance
structure
Strategy
Succession
planning
Performance
THE
BOARD
Shareholder
communications
Compliance with the UK Corporate
Governance Code
The Board considers that it and the Company have,
throughout the year ended 31 March 2015, complied
with the provisions of the UK Corporate Governance
Code (September 2012), which is the version of the
Code which applies to the Company for its financial
year. 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 80 to 99 and pages 75 to 79.
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.
Executive Committee
– Address Group-wide issues and initiatives.
– Monitor the operating and financial results against plans and budgets.
– Make recommendations to the Board for its approval of any
business initiative with a value of more than £2m.
– Review the effectiveness of risk management and control procedures.
– Review and monitor progress of delivery against sustainability agenda.
– Ongoing review of Health and Safety.
Page 67
Investment Committee
– Approve any acquisition or disposal of investment properties.
– Review and approve capital expenditure, disposals and certain
property acquisitions within established levels of authority.
– Review and monitor integration plans for acquisitions.
– Approve and monitor development contracts.
– Approve and monitor asset management and property improvements
Page 67
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 auditors’ independence,
objectivity and effectiveness of the audit process.
– Establish and implement the policy on non-audit services
Page 75
Nominations Committee
– Assess what new skills, 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, talent management and
Risk
diversity services.
Page 73
Remuneration Committee
– Oversee all aspects of remuneration for Executive Directors.
– Recommend the Chairman’s remuneration.
– Consider remuneration policy and practices of the workforce.
Corporate
responsibility
Page 80
64
Workspace Group PLC Annual Report and Accounts 2015
An effective leadership structure
The Board
The Board is collectively responsible for the
performance and long-term success of the Company,
for its leadership, strategy, values, standards, control
and management. The Board will review and monitor
strategic plans and objectives, approve the acquisition
of investment properties, disposals, financing
arrangements and capital expenditure and of the
Group’s systems of internal control, governance and
risk management. Details of the Group strategy are
set out in the Strategic Report on pages 18 to 53.
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 monthly 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.
Senior Management
– Assist the Executive and Investment Committee in the running
– Attend regular meetings with the Executive and Investment
Committee to review performance and operational activity.
of day-to-day operations in line with Group strategy.
– Review and track major initiatives.
External Auditor
– Audit and express an opinion on the financial statements for
both the Group and subsidiaries in accordance with applicable
law and International Standards on Auditing (UK and Ireland).
Finance
– Produce the interim and annual financial reports and
– Review Dividend Policy.
– Review the compliance with the REIT regime and overall
associated announcements.
tax compliance.
– 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.
– Provide reports to the Audit Committee.
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 and aspects
associated with the LTIP and other share schemes.
– Advise on administration and the tax treatment of share
option schemes and deferred share awards.
Workspace Group PLC Annual Report and Accounts 2015
65
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 CORPORATE GOVERNANCE REPORT CONTINUED
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 and committee meetings attendance
The Board has regular scheduled meetings and
met nine 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
2015 are set out in the table below.
Scheduled meetings and attendance
Board activities in 2014/15
During the year under review, the Board considered
the following:
Reviewed progress of the strategy and
business objectives:
– In September 2014, 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; and
– Review of risk and the Group’s health and
safety arrangements.
Monitored trading performance of the business
and considered other finance matters:
– Finance matters including budgets, business
plans and significant refinancing opportunities;
– In November 2014, the Company announced
the successful completion of a Cash-Box Placing,
raising gross proceeds of approximately £96.5m;
– In December 2014, the Company agreed terms with
the former lenders of the Glebe Joint Venture for the
termination of the Glebe Proceeds Share Agreement
in return for a cash payment of £30m; and
– Annual and interim results, interim management
statements and dividends.
Considered the Group’s property valuation and
investment decisions:
– Approval of redevelopment activity and
major developments;
– Significant investment decisions including five
property acquisitions during the year of £80m; and
– We realised £44m from the disposal of 10
non-core Industrial Estates.
Reviewed succession planning and Board
performance:
– The Board engaged an external party to
undertake a review of its own performance
and that of the Committees and the Directors; and
– Approval of Board appointments, retirements
and ensuring adequate succession planning is
in place.
66
Workspace Group PLC Annual Report and Accounts 2015
9 meetings
4 meetings
8 meetings
5 meetings
Board
Daniel Kitchen
Jamie Hopkins
Graham Clemett
Damon Russell
Bernard Cragg1
Maria Moloney
Chris Girling
Stephen Hubbard2
Audit Committee
Chris Girling
Damon Russell
Bernard Cragg1
Maria Moloney
Stephen Hubbard2
Remuneration Committee
Maria Moloney
Daniel Kitchen
Damon Russell
Bernard Cragg1
Chris Girling
Stephen Hubbard2
Nominations Committee
Daniel Kitchen
Damon Russell
Bernard Cragg1
Maria Moloney3
Chris Girling
Stephen Hubbard2
Notes:
1.
2.
3.
Bernard Cragg retired from the Board on 16 July 2014.
Stephen Hubbard was appointed to the Board with effect
from 16 July 2014; consequently, Mr Hubbard attended his
first Board Meeting on 16 July 2014.
Maria Moloney did not attend one meeting of the
Nominations Committee given that the meeting was to
review and approve her reappointment.
Where Directors are unable to attend meetings, they
are still provided with papers in advance of the meeting
and their comments, as appropriate, are provided to the
Board or Committee Chairman prior to the meeting.
Board Committees
The Board has a number of standing Committees,
namely the Remuneration, Audit, and Nominations
Committees to enable the Board to operate effectively
and ensure a strong governance framework.
Each Committee has written terms of reference which
were reviewed by each of the Committees and the
Board during the year. 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 73 to 99.
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 18 times during the year
ended 31 March 2015.
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; tax; company secretarial;
investor relations; and the Group’s IT strategy.
Chris Pieroni, Operations Director
Portfolio performance; asset management;
lettings and marketing; rent reviews; and renewals.
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 and meets
every two weeks. 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.
The Company Secretary is secretary to each of the
Executive and Investment Committees.
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.
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 69 and in the Chairman’s
Governance Statement on pages 56 and 57.
The Non-Executive Chairman was considered by the
Board to be independent upon his appointment and
continues to be independent for the reasons stated
on page 69.
During the year, Mr Stephen Hubbard was appointed
as a Non-Executive Director at the conclusion of
the Annual General Meeting on 16 July 2014. The
biographies of all members of the Board are set out
on pages 62 and 63. The Nominations Committee
regularly reviews the composition of the Board to
ensure that it has an appropriate and diverse mix of
skills, experience, independence and knowledge of
the Group. Each Director brings a particular range of
skills and expertise to the deliberations of the Board.
Workspace Group PLC Annual Report and Accounts 2015
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Business experience and skills 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, includes technology, property
development, marketing and finance, which enables
them to support the executive team in delivering
the Company’s strategy.
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 72.
The following table illustrates the business
experience and skills held by each Director.
The mix and diverse range of skills create a highly
effective Board, with the Directors’ individual and
complementary qualities encouraging a high level
of debate on strategic matters.
Daniel Kitchen
Non-Executive Chairman
Leadership
Strategy and Finance
Shareholder Relations
Chris Girling
Non-Executive Senior
Independent Director
Chairman of Audit Committee
Strategy
Finance
Infrastructure and
Development Projects
Jamie Hopkins
Chief Executive Officer
Strategic Leadership
Property
Investor Relations
Damon Russell
Non-Executive Director
Digital and media technology
Key client relationships
Business strategy
THE BOARD
Graham Clemett
Chief Financial Officer
Finance
Capital Markets
Investor Relations
Stephen Hubbard
Non-Executive Director
Property
Regeneration and
Development Projects
Investment and
transactions
Maria Moloney
Non-Executive Director
Chairman of Remuneration
Committee
Marketing
Law
Business Development
Related information:
Board and Executive
biographies p.62 to 63
68
Workspace Group PLC Annual Report and Accounts 2015
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.
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 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. During the year, the
independence of Stephen Hubbard, being a new
Non-Executive Director, was specifically considered.
The Board considers the Chairman, Daniel Kitchen,
to be independent as he is independent in character
and judgement. He is also considered to be a valuable
member of the Board taking into account his
extensive experience.
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.
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
Stephen Hubbard as a Non-Executive Director on
16 July 2014.
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 2015 is set out in the chart below.
Length of tenure of independent
Non-Executive Directors as at 31 March 2015
3 years
2.4 years
1.7 years
0.8 years
Maria
Moloney
Chris
Girling
Damon
Russell
Stephen
Hubbard
Workspace Group PLC Annual Report and Accounts 2015
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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. On appointment, Stephen Hubbard
participated in the Board induction programme.
Introducing new Directors to the Group’s
business and governance arrangements
1. Meet Senior Management.
2. Go on site visits.
3. Attend presentations of key
business areas and other
relevant documentation.
4. Learn about the business.
Through the Board development programme, the
Directors are kept informed of changes in relevant
legislation, regulations and corporate governance
matters, with the assistance of the Company’s legal
advisers 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 Group PLC. Her biography
can be found on page 63. Through the Chairman,
Carmelina is responsible for advising the Board
on matters of corporate governance and ensuring
that Board procedures are complied with. She
also ensures good information flows within the Board
and its Committees and between senior management
and Non-Executive Directors.
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Workspace Group PLC Annual Report and Accounts 2015
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. The Board’s
progress against the matters identified from the
2014 Board effectiveness review is shown below.
2013/14 Board evaluation
Continue to develop succession planning.
Progress during 2014/15:
One new Non-Executive Director, Stephen
Hubbard, was appointed to the Board during
the year. Stephen has extensive property
experience which complements the existing
skills of the Board.
Conscious of changing legislation, dedicated
updates and presentations to continue
during the course of the year.
Progress during 2014/15:
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.
The Company’s legal advisers and external
auditor also attended a Board Meeting during
the year to provide an update on legal and
regulatory developments.
Updates were also provided by the Company
Secretary during the course of the year.
With the assistance of the Company
Secretary, specific needs and interests of
Directors to be considered as part of the
Board Development Programme.
Progress during 2014/15:
The Company Secretary considered details
of updates and development programmes
received from advisers and other parties during
the year and forwarded events of specific
interest to Directors.
Further site visits will be arranged for
Directors during the course of the year.
Progress during 2014/15:
Directors have independently visited sites
during the year. When appropriate, Board
Meetings will also be held at sites within
the portfolio.
In accordance with our policy to undertake the
Board evaluation process externally every three years,
for the year under review our Board evaluation was
undertaken by Sean O’Hare of Boardroom Dialogue
Ltd, who was selected after conducting a competitive
tendering process. Boardroom Dialogue Ltd provides
no other services to the Company. The process
covered the Board and its Committees. The scope
and focus of the review was agreed in advance with
the Chairman. One-to-one interviews were conducted
with each member of the Board, members of the
Executive Committee and the Company Secretary
to ascertain their views on the subjects detailed in
the diagram below:
Board and Committee evaluation
Topics
covered
Performance
and remit of
Committees
Ongoing
development
of strategy
Induction
and training
Succession
planning
The results of the evaluation were presented at the
March 2015 Board Meeting. The Board effectiveness
review concluded that the Board is working well
and that each Director continues to contribute
effectively and demonstrate commitment to their
roles. Specific recommendations from the externally
facilitated Board effectiveness review are set
out below:
Refine the structure of the strategy day held by
the Board and how strategic discussions may
be facilitated.
Continue the focus on succession planning,
with greater visibility of the succession plans
for senior management.
Review the current induction process with the
introduction of customer engagement and
Non-Executive Directors to be advised of
customer events during the year to which
they may attend.
Increased interaction between the Board and
senior management.
The recommendations are included in the action
plan for 2015/16 and will be reviewed regularly
by the Board.
Chairman’s evaluation
The Senior Independent Director normally 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.
However, during the year under review, the
Chairman’s performance was appraised as part of
the external Board evaluation. The review concluded
that the Chairman is highly respected and is valued
for his industry knowledge. Furthermore, he was
complimented by all for his leadership and for his
inclusive style during Board meetings.
Related information:
Nominations Committee
Report p.73 to 74
Induction, training and
development p.70
Workspace Group PLC Annual Report and Accounts 2015
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Election and re-election of Directors
All Directors will stand for election or re-election at
the AGM on 15 July 2015. Following the external Board
evaluation review, the Chairman considers that each
Director continues to operate as an effective member
of the Board and has the skills, knowledge and
experience that enable them to discharge their duties
effectively in fulfilling their duties on the Board and as
members of the Board Committees. Consequently, the
Board has accepted the recommendations provided
by the Nominations Committee and is of the opinion
that the Directors seeking election and re-election at
the Annual General Meeting have continued to give
effective counsel and commitment to the Company
and accordingly should be appointed or 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 96. None of the
Non-Executive Directors have service contracts.
Maria Moloney’s first term of appointment as Non-
Executive Director expired on 22 May 2015. Following
a review of her performance, the Nominations
Committee recommended that her appointment
should be extended for a further three-year term.
This recommendation was agreed by the Board.
Mr Hubbard was appointed as a Non-Executive Director
from the conclusion of the Annual General Meeting on
16 July 2014. Mr Hubbard therefore stands for election
at the forthcoming Annual General Meeting.
The appointment of Chris Girling, Maria Moloney,
Damon Russell and Stephen Hubbard 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
62 and 63.
Diversity
Policy on diversity
Workspace employs enthusiastic, committed and
well-trained people. 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 50% female and 50% male employees.
The Board recognises the benefits of diversity of
skills, knowledge and independence, as well as gender,
ethnicity and sexual orientation 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.
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Workspace Group PLC Annual Report and Accounts 2015
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.
Takeover directive
Share capital structures are included in the Directors’
Report on page 102.
Going concern
Going Concern disclosures are included in the
Directors’ Report on page 101.
Relations with shareholders
A high priority is given to communication with
shareholders and the Company maintains regular
dialogue with major shareholders and fund managers.
In October 2014, Workspace hosted two events for
investors and analysts. The events showcased the
Group’s recent acquisitions, current refurbishments
and development activity and how Workspace plans
to continue to drive value and growth. Workspace
also participated in EPRA’s Annual Conference in
September 2014 and took registered guests on a
tour of a selection of the Group’s assets.
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, analysts and media 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 the new Director.
Details of the resolutions to be proposed at the Annual
General Meeting on 15 July 2015 can be found in the
Notice of Annual General Meeting which is available
at www.workspace.co.uk and will be 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.
Nominations
Committee
Report
Daniel Kitchen
Chairman of the Nominations Committee
Members of the Committee
– Stephen Hubbard
– Maria Moloney
– Chris Girling
– Damon Russell
For full biographies see pages 62 and 63.
We continue to monitor
the composition of the
Board so that future
succession planning is
managed effectively.
Nominations Committee scheduled meetings
and attendance
5 meetings
Daniel Kitchen
Damon Russell
Bernard Cragg1
Maria Moloney2
Chris Girling
Stephen Hubbard3
Notes:
1.
2.
3.
Bernard Cragg retired from the Board on 16 July 2014.
Maria Moloney did not attend one meeting of the
Nominations Committee given that the meeting was to
review and approve her reappointment.
Stephen Hubbard was appointed to the Board with effect
from 16 July 2014; consequently, Mr Hubbard attended his
first Board Meeting on 16 July 2014.
Dear Shareholder
I would like to welcome you to the report of the
Nominations Committee.
Each year the Nominations Committee undertakes
a review of succession planning to ensure that
the membership and composition of the Board,
including the mix and balance of skills, continue
to be appropriate. This year, the Committee’s main
focus has been the recruitment, appointment
and induction of our new Non-Executive Director,
Stephen Hubbard who joined the Board on 16 July
2014. The appointment process is described in more
detail on page 74. We are already benefiting from
the wealth of experience that he brings in property
as well as his sound judgement on all Board matters.
Again, in line with our action plan from last year,
we have and will continue to focus on ensuring that
succession is a key agenda item. We have spent time
looking at succession planning for the Executive
Director team as well as the Board over the medium
to long term.
Daniel Kitchen
Chairman of the Nominations Committee
2 June 2015
Workspace Group PLC Annual Report and Accounts 2015
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Non-Executive Director appointment
In making recommendations to the Board on
Non-Executive Director appointments, the
Nominations Committee will consider the expected
time commitment of the proposed Non-Executive
Director and other commitments they already have
to ensure that they have sufficient time available to
devote to the Company.
Following the ongoing review of succession
planning by the Nominations Committee and
the skills, knowledge and experience required
of Board members, the Committee agreed that
a new Non-Executive Director should be recruited
with specific property expertise.
Spencer Stuart was appointed to assist with the
recruitment process and a broad brief was provided
to ensure that the long list of candidates reflected
the experience and skills required to complement the
Board. The Chairman met with a number of candidates
and reviewed the respective skills, experience and fit
of each with the Board’s candidate profile. Members
of the Committee then met with the shortlisted
candidates. The preferred candidate, Mr Stephen
Hubbard, also met with the Executive Directors.
Following these meetings, a recommendation was
made to the Board that, based on his significant
property experience, Stephen Hubbard be appointed
to the Board with effect from 16 July 2014. The basis
of Stephen Hubbard’s induction was also agreed
and included property tours, meetings with the
senior management team as well as appropriate
background reading.
The full terms of reference of the Nominations
Committee are available for inspection on the
Company’s website at www.workspace.co.uk.
The Nominations Committee and advisers
The Nominations Committee has responsibility for
making recommendations on Board and Committee
composition, appointments and for developing
succession plans for the Board.
The members of the Nominations Committee as at
31 March 2015 and at the date of this report are listed
above. The Nominations Committee met five times
during the year, and attendance at these meetings
is shown on page 66.
During the year, Spencer Stuart was appointed
as external recruitment consultants to conduct
the search for a new Non-Executive Director,
which culminated in the appointment of Mr Stephen
Hubbard on 16 July 2014. Spencer Stuart has no
other connection with the Company.
Matters considered by the Committee
during the year
– Reviewed the performance of the Company
Chairman and recommended to the Board that
Mr Daniel Kitchen’s appointment as Company
Chairman is extended for a further three-year
term from 6 June 2014. This meeting was
chaired by Mr Bernard Cragg who was Senior
Independent Director at that time. Mr Cragg
retired from the Board in July 2014.
– Discussed Board composition and determined
the ongoing skills and experience required
on the Board;
– External search agents, Spencer Stuart,
were engaged to assist in finding a new
Non-Executive Director;
– Prepared candidate specifications for potential
Non-Executive Director candidates with
Spencer Stuart;
– The Committee met with a number of candidates
to assess their appropriateness;
– Recommendation to the Board that
Stephen Hubbard be appointed as Non-
Executive Director;
– Review of succession plans for the Executive
Directors and key senior managers with the
Chief Executive Officer; and
– Recommended to the Board that Dr Maria
Moloney’s appointment as Non-Executive
Director and Chair of the Remuneration
Committee be extended for a further three-
year term from 22 May 2015.
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Workspace Group PLC Annual Report and Accounts 2015
Audit
Committee
Report
Chris Girling
Chairman of the Audit Committee and
Senior Independent Non-Executive Director
Members of the Committee
– Maria Moloney
– Damon Russell
– Stephen Hubbard
For full biographies see pages 62 and 63.
Audit Committee scheduled meetings
and attendance
Chris Girling
Damon Russell
Bernard Cragg1
Maria Moloney
Stephen Hubbard2
Notes:
1.
2.
Bernard Cragg retired from the Board on 16 July 2014.
Stephen Hubbard was appointed to the Board with effect
from 16 July 2014; consequently, Mr Hubbard attended his
first Board Meeting on 16 July 2014.
Dear Shareholder
On behalf of the Audit Committee, I am pleased
to present its report for the year ended 31 March
2015. Although this is my first report as Chairman
of the Committee, I have been a member of the
Committee since my appointment on 7 February
2013. I succeeded Bernard Cragg who stepped
down after last year’s Annual General Meeting
after more than 10 years’ service. I would like to
thank Bernard for his considerable contribution
to the work of the Committee.
4 meetings
This Report of the Audit Committee details the key
activities of the Committee during the year under
review, alongside its principal responsibilities. The
Audit Committee, reporting to the Board, oversees the
financial reporting process, monitors the effectiveness
of internal control, risk management and the statutory
audit and monitors the independence of the statutory
auditors and the provision of non-audit services.
A new audit partner has been appointed this year
following the completion of the five-year rotation
period by the previous partner.
The Audit Committee met four times during the
year. Attendance at these meetings is shown in the
table opposite. By invitation, there were a number
of attendees at each of the Committee’s meetings.
Regular attendees included the Chairman of the
Company, the Chief Executive Officer, the Chief
Financial Officer, Head of Finance and external
auditors. The Committee also met privately
during the year with the external auditors.
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 main activities and information on the other
significant issues that the Committee considered
during the year can be found on pages 76 and 77.
Chris Girling
Chairman of the Audit Committee
2 June 2015
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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 78 and 79.
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 Chris Girling. During the year, Stephen
Hubbard joined the Committee. The Group audit
partner from the external auditors attends the
Audit Committee Meeting at least twice a year.
The Board is satisfied that Chris Girling has
the required level of relevant financial and accounting
experience required by the provisions of the Code,
having previously held chief financial officer positions
in public companies. Chris, who is a Chartered
Accountant is currently a Non-Executive Director
and Chairman of the Audit Committees of Keller
PLC and South East Water Limited.
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 twice
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 four 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 four 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;
– determining and recommending to the Board
that the Annual Report taken as a whole was
fair, balanced and understandable;
– review of a Cyber Risk Assessment developed
by members of the Risk Committee following
a workshop held in December 2014;
– reviewed accounting for the Glebe Proceeds
Share Agreement and terms of buyout
completed in December 2014;
– corporate reporting updates and approach to
the 2015 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 and ensures independent
investigation of any such matter;
– the performance of the external auditor, the
external audit process, the audit and non-audit
fee and independence and taking into
consideration relevant professional and
regulatory developments including mandatory
auditor tendering;
– the need and use for an internal audit function
and specific reviews carried out by head
office staff;
– the review of fraud risk; and
– the terms of reference of the Audit Committee.
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Workspace Group PLC Annual Report and Accounts 2015
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.
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.
Settlement of the
Glebe Proceeds
Share Agreement
During the year, the Group has accounted for the Glebe Proceeds Share
Agreement (‘Proceeds Share’) as an equity instrument under IAS 32 representing
a non-controlling interest (NCI) in the assets of Workspace Glebe Limited.
The agreement was terminated in December 2014 and the NCI was extinguished.
The Group was previously in discussions with the Financial Reporting Council (FRC)
regarding the accounting for the Glebe Proceeds Share Agreement. As a result of
these discussions, the Directors revised the application of the accounting policy
so that a liability was only recorded when the Group had an unconditional legal
obligation to make a distribution to the non-controlling interests. As such the
amount of £11m calculated as attributable to the former lenders at 31 March 2014
was reclassified during the year and reported as a non-controlling interest rather
than as a liability. The discussions with the FRC were concluded following the
adjustments and disclosures made in the Interim Statement.
In December 2014 an agreement was reached with the former lenders to
terminate the Proceeds Share Agreement for a cash settlement of £30m. As at
the date of settlement, the non-controlling interest recognised in relation to the
Proceeds Share had a carrying value of £20m. As a result of this settlement, the
Group extinguished non-controlling interests of £20m and recorded a decrease
in equity attributable to owners of the parent of £10m.
The Audit Committee considered the accounting treatment of the Proceeds Share
Agreement at both the 30 September 2014 and 31 March 2015 and believes that
the Group’s accounting for, and disclosures of, the Proceeds Share are appropriate.
Compliance with
the REIT regime
As a Real Estate Investment Trust (REIT) Workspace must comply with specific
rules so as to benefit from a tax exempt status. These rules are complex and
the tax exempt status has a significant impact on the Group’s business and
financial statements. Management monitor REIT compliance on an ongoing basis.
The Group is in ongoing discussions with HMRC regarding the application of
certain criteria. The Audit Committee has kept the position under review and
does not consider that these discussions have any immediate financial impact
and no further action is required until the discussions are concluded.
Workspace Group PLC Annual Report and Accounts 2015
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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.
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
PwC has been Workspace’s auditor since 1988 following
the last competitive tender that the Group held. A new
PwC audit partner has been appointed to the role this
year. However, it is currently expected that we will
look to rotate PwC inside the timeframe required
under both the EU and UK Competition and Markets
Authority transitional rules on mandatory firm rotation
and tendering. Thereafter a policy of putting the
external audit contract out to tender at least every
10 years will be adopted.
A resolution to reappoint PwC for the 2016 audit
will 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 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, familiarity and management. 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:
– 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. Sonia Copeland
has taken over as lead partner for the year ended
31 March 2015, replacing Bowker Andrews who
completed his five years in the role as lead partner.
– The Audit Committee will monitor on an ongoing
basis the relationship with the external auditors to
ensure their continuing independence, objectivity
and effectiveness by reviewing their tenure, quality
and fees.
5. Management threat – this occurs when
the audit firm performs non-audit services
and management make judgements based
on that work.
– The Group will not use PwC for any services which
would be considered management responsibility.
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Workspace Group PLC Annual Report and Accounts 2015
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, including the impact of cyber security, in 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 27 to 33.
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.
Audit fees
Fees paid to PwC can be found in note 2 on page 118.
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 2015 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 2015 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 104.
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.
Workspace Group PLC Annual Report and Accounts 2015
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Directors’
Remuneration
Report
Maria Moloney
Chairman of the Remuneration Committee
Members of the Committee
– Stephen Hubbard
– Chris Girling
– Daniel Kitchen
– Damon Russell
For full biographies see pages 62 to 63.
The key objectives
for the Remuneration
Committee are to ensure
that the remuneration
arrangements strongly
underpin the overall
Group strategy and
to allow us to attract
and retain critical talent
to continue to drive
a performance culture
which brings long-term
outstanding corporate
results and market-
leading returns to
our shareholders.
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Workspace Group PLC Annual Report and Accounts 2015
Remuneration Committee scheduled meetings
and attendance
8 meetings
Maria Moloney
Daniel Kitchen
Damon Russell
Bernard Cragg1
Chris Girling
Stephen Hubbard2
Notes:
1.
2.
Bernard Cragg retired from the Board on 16 July 2014.
Stephen Hubbard was appointed to the Board with effect
from 16 July 2014; consequently, Mr Hubbard attended his
first Board Meeting on 16 July 2014.
Dear Shareholder
Annual statement
Our first remuneration report presented in line
with the new reporting regulations received over
99% support at the 2014 AGM. This year we are not
proposing any changes to that policy.
Our aim is to ensure that our shareholders are
presented, through this communication, with a clear
and comprehensive report on the implementation
of that policy, to provide the best balance between
better disclosure and less complicated presentation
of information and very importantly, to provide
reassurance that the work of the Committee is taken
very seriously in the interests of the Company and
its shareholders alike.
A very successful year
As you will have read earlier in the Annual Report,
this has been another successful year for the
Company. In assessing performance against strategic
and personal objectives this year, Workspace has
again outperformed. This is reflected in our revenues
and profits which have again grown strongly.
Such statements do not imply complacency but
it is gratifying that over several years, the Company
has delivered attractive returns for shareholders
with continued strong operational and
financial performance.
Actual performance of strategic and
financial measures
The following table shows a number of the
Company’s KPIs and how their satisfaction
is targeted by the incentive arrangements:
LTIP
Annual Bonus
2015
47%
2014
76%
Total Shareholder Return
Total Shareholder Return
+30%
+15%
Trading profit after
interest (adjusted)
Up 30% to £26.6m
Trading profit after
interest (adjusted)
Up 14.5% to £20.5m
+42%
+43%
Net Asset Value per share
Net Asset Value per share
Up 42% to £7.03
Up 43% to £4.96
+37%
Capital Return of
37% vs 17% for IPD
quarterly Universe
+35%
Capital Return of
35% vs 14% for IPD
quarterly Universe
+13%
+10%
Dividend per share
Dividend per share
for full year
Up 13% to 12.04p
for full year
Up 10% to 10.63p
Outperformance and reward
The results speak for themselves and are testament
to a highly motivated corporate culture and a highly
achieving corporate team.
As a Remuneration Committee, we constantly seek to
challenge ourselves to ensure that our remuneration
policy continues to be fit for purpose to underpin our
wider corporate strategy.
We are very aware that the retention, motivation
and attraction of a high performing leadership team,
focused on the delivery of business priorities and
continued strong shareholder returns is critical to
our continued success.
Furthermore, in the context of the London property
market, our reward packages must be competitive
relative to our peers as we enter the next phase of
the Company’s development.
One challenge we have faced over the last few years,
particularly in light of the success of the Company
and the increase in the scale and complexity of the
business, is that our Executive salaries and fair value
of total remuneration are no longer competitive.
Addressing this challenge has not been approached
lightly. We have expended considerable time and
effort to ensure that we fully understand our
remuneration structure and how it is aligned with
the business strategy as well as how it compares
to the market.
As part of our constant drive to be rigorously
up to date with and close to any changes in the
remuneration landscape as well as to encourage
a two-way discussion with our investors on
remuneration matters, which we particularly
value, the Chairman of the Company and I had the
benefit of consulting with major shareholders who
collectively hold over 65% of the Company’s issued
share capital.
Salary adjustments
In light of the above, and following our consultation
with major shareholders, the Remuneration
Committee considered it appropriate to make use of
the flexibility approved within our policy to move the
salaries of our Executive Directors closer to median,
from 1 April 2015 by:
77%
78%
– increasing the CEO’s salary from £419,020 to
£450,000 (c.7% increase); and
Customer satisfaction
Customer satisfaction
– increasing the CFO’s salary from £261,890 to
£275,000 (5% increase)
In addition, the underlying property valuation is up 30%
(£328m) in the year to £1,423m.
Three year TSR of c.278% places Workspace top of its
comparator group by a considerable margin.
The final dividend per share increased by 15% to 8.15 pence
(2014: 7.09 pence).
The Committee also increased the pension contribution
for the CEO from 15% to 16.5% which is consistent with
that of the CFO.
It was very gratifying for the Committee to not only
have the support of the majority of the shareholders
consulted but also to see their recognition of both the
strength of the returns to shareholders over recent
years and the contribution of the management team
in achieving this success.
Workspace Group PLC Annual Report and Accounts 2015
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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
a summary of 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 2015/16. The
sections subject to audit are highlighted accordingly.
1. Summary of the policy
Introduction
This section provides a summary of the relevant
elements of the remuneration policy for Executive
and Non-Executive Directors which shareholders
approved at our 2014 AGM on 16 July 2014, and took
effect from that date. This policy will continue to
apply until our 2017 AGM unless a revised policy
receives shareholder approval and becomes
applicable prior to this date.
We have summarised below how the policy was
operated in 2014/15 and how it is intended to be
operated in 2015/16.
Objectives of the policy
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 wider Company
It is important to note that, as a Committee, we are
very conscious of the need to take a strong interest in
the remuneration of all employees below Board level
to ensure that the remuneration arrangements across
the business are consistent and foster the strong
performance culture that drives our business.
Highlights of other elements of remuneration
Bonus
Reflecting the outstanding results outlined above and
also strong individual performance, each Executive
Director was awarded an annual bonus equivalent to
116.6% of salary. See page 89.
LTIP
The LTIP awards granted in 2012 are due to vest in
June 2015 (November 2015 for the CEO). The three-
year performance period of the 2012 LTIP awards
ended on 31 March 2015.
Over the three years from 1 April 2012 to 31 March 2015,
the Company’s TSR and NAV performance conditions
were met in full. After considering the underlying
performance of the Company, the Committee
confirmed that overall Workspace’s performance
warranted 100% vesting of the 2012 LTIP awards.
Further details can be found on page 92.
Looking to the future
This has been a busy year but, equally, we are very
aware of the tasks ahead. For example, in light of
recent changes to the UK Corporate Governance
Code, the Committee intends to review the new
provisions during the next financial year. In relation
to holding periods, for LTIP awards granted from 2013
onwards, net vested LTIP shares are required to be
held for a one year holding period before the shares
can be sold. Clawback provisions also apply during
the holding period, details of which can be found on
page 85.
Finally, I would like to thank my fellow Committee
members for their hard work and support, including
Bernard Cragg who retired from the Committee
in July 2014. We welcome Stephen Hubbard who
has joined us. The Committee has been completely
renewed over the last few years. It is entirely
committed to ensuring that we are totally on top
of changes within the remuneration landscape in
all we do, whether it be developments in corporate
governance, legislation, shareholder consultation
or shareholder views.
We seek to provide a strong and independent
direction on remuneration policy and implementation
with clear disclosure and transparency.
We remain committed to hearing and taking an
active interest in your views as shareholders and
we hope to receive your support at the AGM.
Dr Maria V Moloney
Chairman of the Remuneration Committee
2 June 2015
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Workspace Group PLC Annual Report and Accounts 2015
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.
During the year, the Committee consulted with major
shareholders holding over 65% of the Company’s
issued share capital regarding executive remuneration
proposals for 2015 and the Committee is pleased to
report there was good support for the proposals and
a very gratifying understanding of both the strength
of the returns to shareholders over recent years and
the contribution of the management team to achieve
such levels.
Summary table
Purpose and link
to strategy
Operation
Opportunity
Operation in the Year
ended 31 March 2015
2014/15
Operation in the Year
ended 31 March 2016
2015/16
Jamie Hopkins (CEO)
£419,020.
Graham Clemett (CFO)
£261,890.
Jamie Hopkins (CEO)
£450,000
(7% increase).
Graham Clemett (CFO)
£275,000
(5% increase).
For further
information please
see the Directors’
Annual Report on
Remuneration on
page 89.
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. It is payable in cash.
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.
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
Remuneration Report.
Pension
To provide
cost-effective
retirement
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).
Jamie Hopkins (CEO)
15% of salary.
Graham Clemett (CFO)
16.5% of salary.
Both Executive
Directors 16.5%
of salary.
For further
information please
see the Directors’
Annual Report on
Remuneration on
page 89.
Benefits
To provide market
competitive
benefits.
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.
Benefits may vary
by role and individual
circumstance and are
reviewed periodically.
Company mobile phone,
a car allowance, private
health insurance and
death in service cover.
No change.
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Purpose and link
to strategy
Operation
Opportunity
Operation in the Year
ended 31 March 2015
2014/15
Operation in the Year
ended 31 March 2016
2015/16
The maximum bonus
potential for Executive
Directors is 120% of
salary p.a.
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.
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.
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.
At the end of the year the
Committee determines the
extent to which these
targets were achieved.
Bonus deferral
and LTIP
investment
provide further
alignment with
shareholder
interests.
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.
No change to type of
performance condition
or maximum bonus
potential for the
Executive Directors.
The Committee is
of the opinion that
given the commercial
sensitivity arising in
relation to the detailed
financial targets used
for the annual bonus,
disclosing precise
targets for the Annual
Bonus plan in advance
would not be in
shareholder interests.
Actual targets,
performance achieved
and awards made will
be published at the end
of the performance
periods so shareholders
can fully assess the
basis for any pay-outs
under the annual bonus.
Performance conditions
and weightings (‘WT’):
Corporate
Wt.
Measure
50% Trading profit
before tax
(% growth on
prior year)
30% Capital Return
from portfolio
versus a
defined
comparator
Benchmark
compiled by IPD
10%
Customer
satisfaction
Personal
Wt.
Measure
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)
Annual bonus
(% of salary) 120%
Maximum
opportunity for:
Jamie Hopkins (CEO)
Up to 120% of salary
Graham Clemett (CFO)
Up to 120% of salary
For further information
on the performance
targets, their level of
satisfaction and the
corresponding bonus
earned please see
the Directors’ Annual
Report on Remuneration
on pages 89 and 90.
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Workspace Group PLC Annual Report and Accounts 2015
Purpose and link
to strategy
Operation
Opportunity
Operation in the Year
ended 31 March 2015
2014/15
Operation in the Year
ended 31 March 2016
2015/16
No change to
maximum LTIP
opportunities or
the performance
conditions.
The Committee
reviewed the LTIP
comparator group and
decided to exclude
Agencies from the
FTSE 350 Real Estate
comparator group
as these operate a
different business
model.
Please see pages
91 and 92 of the
Directors’ Annual
Report on
Remuneration for
further details of
the proposed 2015
LTIP operation.
Plan provides for annual
awards of:
− performance shares of
up to 100% of salary
(200% in exceptional
circumstances); and
− matching share
awards of up to 2 for 1
on investments in
Workspace 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.
Grant sizes for:
Jamie Hopkins (CEO)
– Performance Awards
(100% of salary)
– Matching Awards
(82% of salary)
Graham Clemett (CFO)
– Performance Awards
(100% of salary)
– Matching Awards
(100% of salary)
Performance conditions
for performance shares
and matching shares
are:
– 1/3rd Growth in Net
Asset Value relative to
comparators;
– 1/3rd TSR (share price
growth plus reinvested
dividends) relative to
comparators;
– 1/3rd Absolute TSR.
For any shares to vest
on Absolute TSR, the
Company’s TSR must
exceed the median
TSR for the comparator
group over the
performance period.
For full details of
the 2014 LTIP awards
please see page 91
of the Directors’
Annual Report on
Remuneration.
LTIP
To reinforce
delivery of
sustained
long-term sector
out-performance;
and to align the
interests of
participants
with those of
shareholders.
Shareholding
guidelines
To encourage
long-term share
ownership and
support
alignment with
shareholders.
The Committee may
grant annual awards of
performance shares and
matching shares (subject
to participant investment).
Awards may be in the form
of nominal priced options
or conditional shares,
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.
Executive Directors are
encouraged to build and
hold Workspace shares
equivalent to 150% of salary
in normal circumstances
within five years of
appointment.
150% of salary.
Current shareholding as
a percentage of salary
(based on a share price
of 854.5 pence at
31 March 2015).
CEO 303% of salary.
CFO 239% of salary.
Therefore both
Executive Directors
have met their
shareholding guidelines.
For full details please
see pages 93 and 96
of the Directors’ Annual
Report on Remuneration.
No change.
No change.
Save As You Earn
(SAYE)
In line with HMRC rules from
time to time.
Share Incentive
Plan (SIP)
To encourage
wide employee
share ownership.
Executive Directors are
eligible to participate in
these Plans on the same
basis as other employees
of the Company.
Workspace Group PLC Annual Report and Accounts 2015
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In designing the remuneration policy, the Committee has
considered the requirements of schedule A of the UK
Corporate Governance Code (the ‘Code’) and will review
the revisions to the Code in the next financial year.
External appointments
It is the Board’s policy to allow Executive Directors
to take up one Non-Executive position on the Board
of another company, subject to the prior approval
of the Board. Any fee earned in relation to outside
appointments is retained by the Executive Director.
Currently the Executive Directors do not hold
any appointments.
Remuneration policy scenarios for 2015/16
compared to single figure of total
remuneration for 2014/15
The following charts illustrate the application of
the remuneration policy for 2015/16 under different
performance scenarios for the Executive Directors
of the Company compared to the single figure of
total remuneration for 2014/15 which includes the
vesting of the 2012 LTIP.
Chief Executive Officer
Share price gain
Long-Term Incentive Plan (‘LTIP’)
Annual Variable Element
Fixed Elements
Single figure of total
remuneration for 2014/15
£3.2m
Application of remuneration policy for 2015/16
under different performance scenarios
£2.0m
£1.0m
18%
27%
55%
£0.5m
100%
45%
27%
28%
51%
19%
15%
15%
Minimum
On-target
Maximum
Actual
Chief Financial Officer
Share price gain
Long-Term Incentive Plan (‘LTIP’)
Annual Variable Element
Fixed Elements
Single figure of total
remuneration for 2014/15
£2.2m
Application of remuneration policy for 2015/16
under different performance scenarios
£1.2m
45%
27%
28%
£0.3m
100%
£0.6m
18%
27%
55%
52%
20%
14%
14%
Minimum
On-target
Maximum
Actual
86
Workspace Group PLC Annual Report and Accounts 2015
The policy scenarios are based on 2015/16 salary,
bonus, pension and LTIP opportunities, and benefits
are as per the single figure table. It should be noted
that LTIP awards granted do not normally vest until
the third anniversary of the date of grant and a holding
period applies to net vested shares of one year for
those awards granted from 2013. The projected value of
the LTIP excludes the impact of share price movement.
For the policy scenarios the following assumptions
have been made:
‘On-target’
‘Minimum’
Component
Base salary 2015/16 salary
Pension
Other
benefits
2015/16 contribution rate
Benefits as provided in the single
figure table on page 88
‘Maximum’
Fixed
Annual Bonus
(Annual Variable
Element)
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
Shareholding of Executive Directors
The following chart shows the interests in shares
held by the Executive Directors as at 31 March 2015.
Full details are provided on page 93 of the Directors’
Annual Report on Remuneration:
Shareholding of Executive Directors
Jamie Hopkins
(% of salary)
Shares owned or
vested outright
Share awards
not yet vested
Graham Clemett
(% of salary)
Shares owned or
vested outright
Share awards
not yet vested
303%
638%
239%
732%
Shareholding guideline:
150% of salary
Notes:
Value of shares was calculated with reference to share price
on 31 March 2015 of £8.545. For further details of outstanding
shares see page 94.
The value of share awards not yet vested represents the
maximum award available assuming 100% vesting and is
calculated on a net of tax basis assuming a tax rate of 47%.
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
Operation
Opportunity
Operation in the Year
ended 31 March 2015
2014/15
Operation in the Year
ended 31 March 2016
2015/16
Fees
To reflect the
time commitment
in performing
the duties and
responsibilities
of the role.
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.
Fee increases are
applied in line with the
outcome of the review
No change.
Chairman’s Fee
£135,000
NED Base Fee
£45,000
Chair of Audit
Committee Fee
£10,000
Chair of Remuneration
Committee Fee
£10,000
Wider approach to remuneration throughout the Company
The Group’s wider people policies are reported separately on pages 101 and 102. 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. During the year, we
extended LTIP participation to a wider group of employees. Some senior executives are also required to
adhere to the Company’s shareholding guidelines.
In making remuneration decisions for the Executive Directors, the Committee considers the pay and
employment conditions elsewhere in the Group. To assist in this 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.
In addition, the following table demonstrates how key objectives are reflected consistently in plans operating
at all levels within the Company.
Plan
Purpose
Eligibility
Objectives
Financial
performance
Strategic and
operational
goals
Share
ownership
Long-term
value creation
(encouraged
through equity
retention)
SAYE
and
SIP
To broaden share
ownership and share in
corporate success over
the medium term.
Annual
bonus
Incentivise and reward
short-term
performance
LTIP
Incentivise and reward
long-term performance
All employees
All employees
Executive
Directors and
management
Workspace Group PLC Annual Report and Accounts 2015
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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 the policy in 2015/16. Disclosure also details outstanding awards
to Directors.
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 2015 and the prior year:
Salary
Benefits1
Annual bonus2
LTIP3
Other – SAYE, SIP4
Pension5
Total
Jamie Hopkins
2014/15
£000
419.0
17.5
488.6
2,259.0
n/a
62.9
3,247.0
2013/14
£000
408.8
17.3
479.5
n/a
n/a
61.3
966.9
Graham Clemett
2014/15
£000
261.9
19.1
305.4
1,618.0
2.2
43.2
2,249.8
2013/14
£000
255.5
18.7
299.7
897.7
n/a
42.2
1,513.8
Notes:
1.
Benefits: Taxable value of benefits received in the year by Executive Directors includes Company mobile phone, a car
allowance, private health insurance and death in service cover.
Annual bonus: This is the total bonus earned in respect of performance during the relevant year. For 2014/15 (and 2013/14),
the Committee set a minimum deferral requirement of 25% of the bonus earned. For 2014/15, this deferral was equivalent to
£122,144 for Mr Hopkins and £76,343 for Mr Clement. For 2013/14, this was equivalent to £119,880 for Mr Hopkins and £74,925
for Mr Clement. Further details of annual bonus awards for 2014/15 can be found in the Annual Report on Remuneration on
pages 89 and 90.
LTIP: The 2014/15 figure includes the estimated value of 2012 LTIP shares that vested on performance to 31 March 2015; 100%
of the 2012 LTIP awards vested on performance. The share price is the trailing three-month average share price to 31 March 2015
of 816.4 pence. This will be reported in the 2015/16 Remuneration Report based on the share price on date of vesting. Further
details of the 2012 LTIP awards vesting can be found in the Annual Report on Remuneration on page 92. The 2013/14 figure
for Mr Clemett includes the value of 2011 LTIP shares at vesting. As described in last year’s Remuneration Report, the value has
been updated based on the share price on the date of vesting (3 August 2014) of 607.5 pence. The value of LTIP awards vesting
is higher than the value shown in the pay scenario charts on page 86 due to the impact of share price appreciation between
grant and vesting.
Mr Clemett was awarded 1,960 SAYE options on 25 July 2014, and the value is the embedded value at grant, based on an
exercise price of £4.59 set at 80% of the market value of a share at the invitation date.
Company’s contribution to defined contribution plan or cash allowance in lieu of pension contribution. No further breakdown
is required.
2.
3.
4.
5.
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 2015 and the prior year:
Daniel Kitchen
Bernard Cragg1
Maria Moloney
Chris Girling
Damon Russell
Non-Executive
Director
Base fee
Additional fees
2013/14
2014/15
£000
£000
135.0 125.0
–
–
Total
135.0 125.0
2014/15
£000
13.3
3.0
16.3
2013/14
£000
40.0
5.0
45.0
2014/15
£000
45.0
10.0
55.0
2013/14
£000
40.0
3.3
43.3
2014/15
£000
44.9
7.5
52.4
2013/14
£000
40.0
–
40.0
2014/15
£000
45.0
–
45.0
2013/14
£000
33.8
–
33.8
Stephen Hubbard2
2013/14
2014/15
£000
£000
–
32.1
–
–
32.1
–
Notes:
1.
2
Bernard Cragg retired as a Director on 16 July 2014.
Stephen Hubbard was appointed as a Director on 16 July 2014.
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Workspace Group PLC Annual Report and Accounts 2015
Base salary and pension
In line with the remuneration policy, the Committee reviews base salaries annually with any changes normally
taking effect from 1 April. As foreshadowed in the Chairman’s statement, during the year the Committee
conducted a detailed review of the base salaries of the CEO and the CFO taking into account a wide range of
factors including the external economic environment, Company and individual performance, experience, rates
of salary for similar jobs in companies of a similar sector and size and overall impact on total remuneration.
Following its review and consultation with major shareholders and shareholder bodies, the Committee increased
the CEO’s salary from £419,020 to £450,000 (a c.7% increase) and the CFO’s salary from £261,890 to £275,000
(a 5% increase) from 1 April 2015. The next salary review date for Executive Directors will be 1 April 2016.
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. Following its review and consultation with shareholders the Committee
increased the CEO’s pension contribution from 15% to 16.5% of salary from 1 April 2015, consistent with that
for the CFO.
Since April 2014, no further pension contributions have been made to Mr Clemett, but he receives instead
an equivalent cash allowance of 16.5% per annum in lieu of pension. For Mr Hopkins, the Company will make
pension contributions up to the Annual Allowance and provide a cash allowance above this, up to 16.5% of salary.
The average salary increase across the Group for the year commencing 1 April 2015 is 5%. Additionally all
employees participate in annual bonuses and during the year LTIP awards were granted to a wider group of
employees to further reinforce the strong performance culture.
Annual bonus scheme (audited)
The Group operates an annual bonus scheme which provides for a capped variable performance-related bonus.
For 2014/15, 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 2014/15 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 2014/15 the Committee allowed Executive Directors to make an equivalent investment in the LTIP.
The performance measures, targets and outcomes for 2014/15 Executive Director annual bonuses are shown
below. 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.
The performance measures, targets and outcomes for 2014/15
Measure
Corporate
Personal
Annual bonus
(% of salary)
Weighting Measure
50%
30%
Trading profit before tax
(% growth on prior year)
Capital Return from
portfolio versus a defined
comparator Benchmark
compiled by IPD
Customer satisfaction
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)
120%
Threshold1
5%
Stretch1
10%
Actual
performance
30%
Jamie
Hopkins
50%
Graham
Clemett
50%
Performance achieved
(% of bonus earned)
Benchmark Benchmark
+2%
Benchmark
+16.3%
30%
30%
70%
80%
Subject to
Committee assessment
77%
See
commentary
below
7.7%
1.33
7.7%
1.33
116.6% 116.6%
Workspace Group PLC Annual Report and Accounts 2015
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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 21%;
– Trading profit after interest up 30% to £26.6m;
– Outperformed IPD quarterly Universe by 19.6% and
outperformed the comparator Benchmark by 16.3%;
– Property Valuation up 30% to £1,423m;
– Total Dividend up 13% to 12.04p per share;
– Net Asset Value up 42% to £7.03 per share;
– Total Shareholder Return for the year of 47%;
– Successful completion of Cash Box Placing raising
gross proceeds of approximately £96.5m.
Operational
– Deliver marketing plan
– Deliver new and refurbished buildings
– Increase brand awareness and
customer service
– Strong customer demand and pricing increases;
– All delivered on time with strong lettings momentum;
– Roll out of new centre staff operating model;
– Accelerate change of use planning
– Four mixed-use consents achieved and five schemes sold.
applications
Investment
– Complementary acquisitions
– Non-core disposals
– Grow alternative income streams
– Five acquisitions completed in strategic London
locations for £80m;
– Disposal of a portfolio of 10 non-core industrial
estates for gross proceeds of £44m;
– Initiatives including ClubWorkspace, technology
offering and design services continue to develop.
Following consideration of the above, the Committee awarded Jamie Hopkins and Graham Clemett a
gross bonus of £488,577 and £305,375 respectively. 25% of earned bonuses will be invested in the LTIP.
2015/16 annual bonus framework
The framework for 2015/16 is unchanged from 2014/15. 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.
90
Workspace Group PLC Annual Report and Accounts 2015
LTIP awards (audited)
LTIP awards are granted as performance shares of up to 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 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 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. For the 2012, 2013 and 2014 LTIP cycles, 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. For LTIP awards granted in 2013 onwards, 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 of a participant’s gross misconduct.
A summary of performance measures, weightings and targets for 2014 LTIP awards granted during the year
is provided below:
Performance
condition
One-third
Growth in Net Asset Value
relative to comparators1
Level of
performance
Threshold
Maximum
Company’s
percentile rank
51st percentile
75th percentile
% of award
vesting3
20%
100%
One-third
TSR (share price growth plus
reinvested dividends) relative
to comparators1
Company’s
percentile rank
51st percentile
75th percentile
% of award
vesting3
20%
100%
One-third
Absolute TSR2
Company’s
performance
8% p.a.
17% p.a.
% of award
vesting3
20%
100%
Notes:
1. The comparator group for the 2014 LTIP cycle is the constituents of the FTSE 350 Real Estate Index.
2.
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.
3. There is straight-line vesting between the ‘Threshold’ and ‘Maximum’ performance levels.
The following awards were granted during the year under the 2014 LTIP.
Date of grant
26 June 2014
26 June 2014
Market price at
date of award2
£5.7033
£5.7033
CEO
CFO
Number of
shares
73,469
45,918
£
419,020
261,890
% of salary
100%
100%
Performance share award
Face value
Matching share award1
Number of
shares
60,378
45,918
Face value
£
344,350
261,890
% of salary
82%
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 £5.7033, the average mid-market closing price over the three dealing
days 17, 18 and 19 June 2014.
2015 LTIP awards
The Committee intends to grant 2015 LTIP awards following the release of the Company’s preliminary results
announcement. During the year, the Committee reviewed the LTIP comparator group and decided to exclude
Agencies from the FTSE 350 Real Estate comparator group as these operate a different business model.
The performance conditions are otherwise unchanged from those for the 2014 LTIP awards. The anticipated
maximum opportunity for awards is detailed below.
Director
CEO
CFO
Performance Award
100% of salary
100% of salary
Maximum potential Matching Award1
100% of salary
100% of salary
Notes:
1. Subject to committing invested shares equivalent to 50% of salary.
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Recap of performance conditions for existing LTIP awards
Performance
condition
One-third
Growth in Net Asset Value
relative to comparators1
Level of
performance
Company’s
percentile rank
% of award
vesting
One-third
TSR (share price growth plus
reinvested dividends) relative
to comparators1
Company’s
percentile rank
% of award
vesting
One-third
Absolute TSR2
Company’s
performance
% of award
vesting
Awards made in 2013 and 20143
Threshold
Maximum
51st percentile
75th percentile
Awards made in 20123,4
Threshold
Maximum
51st percentile
75th percentile
20%
100%
20%
100%
51st percentile
75th percentile
20%
100%
8% p.a.
17% p.a.
Median
Median + 7.5% p.a.
20%
100%
11% p.a.
20% p.a.
20%
100%
20%
100%
Notes:
1. The comparator group for the 2012, 2013 and 2014 LTIP cycles is the constituents of the FTSE 350 Real Estate Index.
2.
For any shares to vest on absolute TSR for the 2013 and 2014 LTIP awards, the Company’s TSR must exceed the median TSR
of the comparator group over the performance period. For the 2012 LTIP awards, 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.
3. There is straight-line vesting between the ‘Threshold’ and ‘Maximum’ performance levels.
4.
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 2014/15 (audited)
The three-year performance period of 2012 LTIP awards ended on 31 March 2015.
Over the three years from 1 April 2012 to 31 March 2015, Workspace’s three-year NAV growth of 32.1% p.a.
placed it 1st (100th percentile) against its comparator group (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 23.8% p.a. which warranted 100% of this
element vesting (equivalent to 33.3% of LTIP shares awarded). Workspace’s three-year absolute TSR of
55.8% p.a. warranted 100% of the absolute TSR element vesting (equivalent to 33.3% of LTIP shares awarded).
As described in prior years’ Remuneration Reports, the 2012 matching share award for the CEO was subject
to the achievement of an absolute TSR underpin of 4% p.a. Over the three years from 1 April 2012 to 31 March
2015, Workspace’s three-year absolute TSR of 55.8% p.a. warranted 100% of this award vesting.
The Committee considered this together with the underlying business performance of Workspace and
concluded that 100% of the 2012 LTIP shares awarded to the Executive Directors would vest. These awards
are due to vest on 18 June 2015 for the CFO and 19 November 2015 for the CEO.
The table below summarises the LTIP interests held by the CEO and CFO and the estimated value at vesting:
CEO
CFO
Interests held1
276,642
198,168
Vesting %
100%
100%
Number of shares vesting
276,642
198,168
Date vesting
19 November 2015
18 June 2015
Value2
£2,258,505
£1,617,843
Notes:
1.
For the CEO, LTIP interests held comprises 164,117 performance shares and 112,525 matching shares. Similarly, for the CFO,
it comprises 99,084 performance shares and 99,084 matching shares.
2. The value is calculated as the number of shares vesting multiplied by the average three-month share price to 31 March 2015
of 816.4 pence. These awards will be reported in the 2016 Remuneration Report based on the share price on date of vesting.
92
Workspace Group PLC Annual Report and Accounts 2015
Save As You Earn (SAYE)
On 25 July 2014, 1,960 options were granted to
the CFO to buy shares in the Company at an option
exercise price of £4.59 based on 80% of the market
value of a share at the invitation date. The contract
maturity date is 1 September 2017. SAYE awards are
offered on consistent terms to all employees.
Payments for loss of office (audited)
There were no payments for loss of office during
the year, or in 2014.
Payments to past Directors (audited)
There were no payments to past Directors during
the year.
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.
The Company purchased shares on the market to
satisfy the grant of 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.
No awards were granted, exercised or lapsed by the
Executive Directors under the SIP during the year.
Share-based awards and dilution
The Company’s share schemes are funded through
a combination of shares purchased in the market
and new-issue shares, as appropriate. The Company
monitors the number of shares issued under these
schemes and their impact on dilution limits. The
Company’s usage of shares compared to the relevant
dilution limits set by the Investment Association (‘IA’)
in respect of all shares plans (10% in any rolling 10-year
period) and executive share plans (5% in any rolling
10-year period) as at 31 March 2014 is detailed below.
As of 31 March 2015, around 5.3m (3.3%) and 4.9m
(3%) 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
3.32%
Executive share plans
Actual
Limit
3.03%
10%
5%
As reported in the 2014 Directors’ Remuneration
Report, Harry Platt retained an interest in the 2011
LTIP grant after pro-rating for time. The vesting of
these shares was subject to the same performance
conditions as for other Executives. Based on
performance to 31 March 2014, 100% of the shares
vested (corresponding to 74,970 shares). The value
given in the 2014 Report was based on a three-month
average share price to 31 March 2014 of 565.2 pence.
The actual value at vesting was £455,443 based
on the closing share price on the date of vesting
(3 August 2014) of 607.5 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 exceed these requirements;
the shareholding of the CEO is equivalent to 303%
of salary and the CFO is equivalent to 239% of salary
based on a share price of 854.5 pence at 31 March 2015.
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 2015 and 2 June 2015.
Chairman
Daniel Kitchen1
Executive Directors
Jamie Hopkins
Graham Clemett
Non-Executive Directors
Bernard Cragg2
Maria Moloney
Chris Girling
Damon Russell
Stephen Hubbard3
31 March
2015
31 March
2014
37,500
37,500
148,756
73,159
137,757
106,657
66,590
Nil
Nil
Nil
Nil
66,590
Nil
Nil
Nil
Nil
Notes:
1.
2.
Daniel Kitchen acquired 1,000 6% sterling Bonds on
2 October 2012 at a price of £100 per Bond.
The interest in shares for Mr Cragg is at the date of his
retirement on 16 July 2014.
3. Mr Hubbard was appointed as a Director on 16 July 2014.
Workspace Group PLC Annual Report and Accounts 2015
93
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15
CORPORATE GOVERNANCE REPORT CONTINUED
The table below shows the Executive Directors’ interests in shares.
Executive Director
Graham Clemett
Jamie Hopkins
Type
Shares
Nil cost options
Market value options1
Shares
Nil-cost options
Market value options1
Owned or
vested outright
73,159
Nil
Nil
148,756
Nil
Nil
Unvested and
subject to deferral2
198,460
Nil
6,623
276,934
Nil
4,663
Subject to
performance3
218,018
Nil
Nil
308,871
Nil
Nil
Total
489,637
Nil
6,623
734,561
Nil
4,663
Notes:
1.
Market value options include SAYE options outstanding and not yet matured as at 31 March 2015. The exercise price of these
was set at 80% of the market value of a share at the invitation date.
For Mr Clemett, the interest in shares of 198,460 consists of 198,168 LTIP awards granted in 2012 which are no longer subject
to performance but are due to vest on 18 June 2015 and 292 SIP shares granted in March 2013. Similarly, for Mr Hopkins, the
interest in shares of 276,934 consists of 276,642 LTIP awards granted in 2012 which are no longer subject to performance but
are due to vest on 19 November 2015 and 292 SIP shares granted in March 2013.
The interest in shares of 218,018 for Mr Clemett, and the interest in shares of 308,871 for Mr Hopkins consist of the total LTIP
awards made in 2013 and 2014, details of which can be found on page 96 of this Report.
2.
3.
Six-year TSR performance review and CEO single figure
The chart below compares the Total Shareholder Return performance (TSR) of the Group with benchmark
indices over the last six 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 are the most appropriate
published indices against which the Total Shareholder Return of Workspace Group PLC should be measured.
)
£
(
9
0
0
2
h
c
r
a
M
1
3
n
o
d
e
t
s
e
v
n
i
0
0
1
£
f
o
e
u
a
V
l
900
800
700
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
31 Mar
2015
Workspace Group
FTSE 350 Real Estate
FTSE 250
FTSE SmallCap Index
FTSE All-Share Index
94
Workspace Group PLC Annual Report and Accounts 2015
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
£000
2011
£000
2012
£000
2013
£000
2014
£000
2015
£000
573.7
748.7
27.4
1,359.6
960.3
–
966.9
–
3,247.0
–
–
–
–
41.7%
165.3
85.5%
339.4
75%
303.7
100%
480.0
–
–
97.8%
479.5
–
–
97.2%
488.6
–
–
–
–
0%
–
–
–
0%
–
–
–
66.5%
642.9
–
–
–
–
–
–
–
–
100%
2,259.0
–
–
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 207, 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
CEO
2015
2014
£419.0k £408.8k
£17.3k
£17.5k
£488.6k
£479.5k
£925.1k £905.6k
All other
employees
% change
3.9%
5.9%
11.0%
5.7%
% change
2.5%
1.2%
1.9%
2.2%
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 ended 31 March 2014 and
ended 31 March 2015.
Employee remuneration
12.2%
£16.5m
£14.7m
Distribution to shareholders
25.2%
£19.4m
£15.5m
2014
2015
2014
2015
Workspace Group PLC Annual Report and Accounts 2015
95
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 CORPORATE GOVERNANCE REPORT CONTINUED
Supplementary information on Directors’ remuneration
Long-term equity incentive plan 2008
Details of current awards outstanding to the Executive Directors are detailed below.
At 1 April 2014
Lapsed during the year
Vested during the year
At 31 March 2015
Performance Invested Matching Performance Matching Performance Invested Matching Performance Invested Matching
Jamie
Hopkins
19/11/2012
26/06/2013
26/06/2014
Graham
Clemett
03/08/2011
18/06/2012
26/06/2013
26/06/2014
Harry
Platt
03/08/2011
164,117
112,525
112,525
100,945
19,631
74,079
–
–
–
73,882
17,732
73,882
99,084
23,780 99,084
63,091
16,719
63,091
–
–
–
37,485 26,989
37,485
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
164,117
112,525
112,525
100,945
19,631
74,079
73,469
16,000 60,378
(73,882)
(17,732) (73,882)
–
–
–
–
–
–
–
–
–
–
–
–
99,084
23,780 99,084
63,091
45,918
16,719
12,168
63,091
45,918
(37,485) (26,989) (37,485)
–
–
–
Notes:
1.
Awards will vest subject to the satisfaction of performance conditions detailed on pages 90 to 92 over the three-year
performance period.
Performance Awards made to the Executive Directors: 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 and in June
2014, awards were in respect of 100% of salary based on a share price at date of award of £5.7033.
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 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 vesting based on the achievement of an absolute TSR underpin of
4% p.a. In 2013, matching shares granted were up to 100% of salary for Mr Clemett and 73% of salary for Mr Hopkins and in 2014,
matching shares granted were up to 100% of salary for Mr Clemett and 82% of salary for Mr Hopkins.
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 93 of this Report.
2.
3.
4.
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
Jamie
Hopkins
Graham
Clemett
At 01/04/2014
4,6631
2922
4,6631
–
2922
Granted
during the
year
–
–
–
1,9601
–
Lapsed
during the
year
–
–
–
–
–
Exercised in
year At 31/03/2015
4,663
292
4,663
1,960
292
–
–
–
–
–
Exercise
price
£1.93
£1.93
£4.59
Normal exercise date
From
01.09.2015
22.03.2016
01.09.2015
01.09.2017
22.03.2016
To
01.03.2016
–
01.03.2016
01.03.2018
–
There have been no changes in Directors’ interests over options in the period between the balance sheet date
and 2 June 2015.
1. SAYE scheme.
2. SIP scheme.
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
Jamie Hopkins
Graham Clemett
Position
Chief Executive Officer
Chief Financial Officer
Effective date of contract
3 February 2012
31 July 2007
From Company
12 months
12 months
From Director
12 months
12 months
Notice period
96
Workspace Group PLC Annual Report and Accounts 2015
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
Maria Moloney
Chris Girling
Damon Russell
Stephen Hubbard
Date of original appointment
(date of reappointment)
6 June 2011 (6 June 2014)
22 May 2012 (22 May 2015)1
7 February 2013
29 May 2013
16 July 2014
Unexpired
term as at
31 March 2015
27 months
2 months
11 months
14 months
28 months
Date of
appointment/last
reappointment at AGM
2014
2014
2014
2014
2014
Notice period
6 months
3 months
3 months
3 months
3 months
Notes
1.
On 22 April 2015 and on the recommendation of the Nominations Committee, The Board agreed to renew Dr Moloney’s letter
of appointment, extending her tenure for a further three-year term from 22 May 2015.
The Directors are subject to annual re-election at the AGM.
Non-Executive Directors’ letters of appointment and Executive Directors’ contracts are available to view at
the Company’s registered office.
Remuneration Committee membership in 2014/15
The Committee met formally on eight occasions during the year under review. Attendance by individual
Committee members at meetings is detailed below.
Committee member
Maria Moloney
Bernard Cragg1
Daniel Kitchen
Chris Girling
Damon Russell
Stephen Hubbard2
Member throughout 2014/15
Yes
No
Yes
Yes
Yes
No
Notes:
1. Bernard Cragg retired as a Director on 16 July 2014.
2. Stephen Hubbard was appointed as a Director on 16 July 2014.
Number of meetings attended
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.
Advisers
In undertaking its responsibilities, the Committee seeks independent external advice as necessary. To this end,
for the year under review 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 does
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 and corporate governance guidance,
benchmarking of executive pay and incentive design, and independent monitoring of TSR. 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.
Workspace Group PLC Annual Report and Accounts 2015
97
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15
CORPORATE GOVERNANCE REPORT CONTINUED
The fees paid to advisers in respect of support to the Committee during the year under review are shown in
the table below:
Remuneration Committee support
Kepler Associates1
£80,020
Grant Thornton
£17,500
Slaughter and May LLP
£1,750
Note:
1. Fees paid are on the basis of time and materials.
Key activities of the Remuneration Committee during the year
Meeting date
Key activities
April 2014
May 2014
Review of:
– Effectiveness of the Committee through the Board evaluation process.
– Review of Committee Terms of Reference.
– Proposed salary increases across the Group.
– Draft 2014 Directors’ Remuneration Report and key decisions taken in light of the
new reporting requirements.
– Executive remuneration with reference to total remuneration benchmarking.
Approval of:
– Chairman fees with effect from 1 April 2014.
Review of:
– Executive Director and senior manager corporate bonus plan targets.
– Vesting of 2011 LTIP Awards.
– Grant of 2014 Performance and Matching Share Awards, considering
performance measures and targets and impact on dilution.
– Draft Directors’ Remuneration Report.
Approval of:
– Executive Director annual bonus awards for 2013/14 performance.
June 2014
Approval of:
– LTIP vesting outcome.
November 2014
Review of:
– Trends in Executive remuneration and developments in corporate governance.
January 2015
Review of:
– Approach to Executive Director remuneration and benchmarking.
– LTIP comparator group.
– Terms of Reference of the Committee.
February 2015
Review of:
– Executive Director remuneration arrangements for 2015.
– Approach to shareholder consultation.
– Draft Directors’ Remuneration Report for 2015.
98
Workspace Group PLC Annual Report and Accounts 2015
Summary of shareholder voting at the 2014 AGM
The table below shows the results of the advisory vote on the 2013/14 Remuneration Report at the 2014 AGM
on 16 July 2014. It is the Remuneration Committee’s policy to consult with major shareholders prior to any major
changes to its Executive Director remuneration structure. The Committee views this level of shareholder
support as a strong endorsement of the Company’s policy and its implementation.
For (including discretionary)
Against
Total votes cast (excluding withheld votes)
Votes withheld1
Total votes cast (including withheld votes)
Total number
of votes
86,708,943
649,528
87,358,471
43,394
87,401,865
Approve Annual Report On Remuneration
% of
Total number
% of
votes cast
99.26%
0.74%
100%
of votes
86,731,134
627,337
87,358,471
43,394
87,401,865
votes cast
99.28%
0.72%
100%
Approve Policy Report
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.
The Directors’ Remuneration Report has been approved by the Board of Workspace Group PLC.
By Order of the Board
Dr Maria V Moloney
Chairman of the Remuneration Committee
2 June 2015
Workspace Group PLC Annual Report and Accounts 2015
99
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 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 2015.
Principal activities 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 2015
the Company had 12 active subsidiaries, six of which
are property investment companies owning properties
in Greater London. The other six 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, LI Property
Services Limited which procures insurance on behalf
of the Group and Anyspacedirect.co.uk Limited.
Workspace Holdings Limited and Workspace Glebe
Limited are intermediate holding companies. The
Group currently has three joint ventures, BlackRock
Workspace Property Trust, Enterprise House
Investments LLP and Generate Studio Limited.
A full list of the Company’s trading subsidiaries
appears on page 139.
Significant events which occurred during the year are
detailed in the Chairman’s introduction on page 14,
the Chief Executive Officer’s Strategic Review on
page 18 and the Business Review on pages 44 to 53.
Business review and future developments
The Group’s 2015 Strategic Report, on pages 18 to 53
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.
100
Workspace Group PLC Annual Report and Accounts 2015
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:
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 56 to 79 and in the
Directors’ Remuneration Report on pages 80 to 99.
Chairman’s introduction
Chief Executive Officer’s Strategic Review
Business model
Our Strategy
Principal business risks
Corporate Social Responsibility
Business Review
Page 14
Page 18
Page 22
Page 24
Page 27
Page 34
Page 44
Directors
With the exception of Mr Hubbard who was appointed
as a Director at the conclusion of the AGM on 16 July
2014 and Bernard Cragg who retired as a Director on
16 July 2014, the Directors of the Company all held
office throughout the year. The current Directors and
their biographies can be found on pages 62 to 63.
Details of the Directors’ shareholdings and options
over shares are provided on pages 93 and 96.
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.
Profit and dividends
The Group’s profit after tax for the year attributable to
shareholders amounted to £350.9m (2014: £241.4m).
The interim dividend of 3.89 pence (2014: 3.54 pence)
was paid in February 2015 and the Board is proposing
to recommend the payment of a final dividend of
8.15 pence (2014: 7.09 pence) per share to be paid
on 7 August 2015 to shareholders whose names are
on the Register of Members at the close of business
on 10 July 2015. This makes a total dividend of
12.04 pence (2014: 10.63 pence) for the year.
Going concern
The Group’s activities, strategy and performance are
explained in the Strategic Report on pages 18 to 53.
Further detail on the financial performance and
financial position of the Group is provided in the
financial statements on pages 109 to 140.
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 12 months
from the date of this report. 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.
Directors’ conflicts 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.
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.
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 verbally at the next Board Meeting.
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).
Workspace Group PLC Annual Report and Accounts 2015
101
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15
REPORT OF THE DIRECTORS CONTINUED
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
provision 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 140.
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 136 to 138.
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 2015, the Company’s issued share
capital comprised a single class of 161,107,649
ordinary shares of £1.00 each. Details of the
Company’s issued share capital are set out on page
135. In November 2014 the Company successfully
completed a Share Placing issuing up to 14,627,492
Ordinary Shares which raised net proceeds £96.5m.
Substantial shareholdings in the company
As at 31 March 2015 the following interests in voting
rights over the issued share capital of the Company
had been notified.
Number of
shares
Shareholder
The London & Amsterdam
43,505,488
Trust Company Limited*
13,402,300
BlackRock Inc.
11,512,054
Old Mutual PLC
8,305,135
Standard Life PLC
7,057,246
Invesco Ltd
5,727,410
Aberdeen Group
Principal Financial Group
5,630,684
Legal & General Group PLC 5,396,486
Percentage
held
27.00%
8.32%
7.15%
5.16%
4.38%
3.56%
3.49%
3.35%
102
Workspace Group PLC Annual Report and Accounts 2015
As at 21 May 2015 the following interests in voting
rights over the issued share capital of the Company
had been notified.
Shareholder
The London & Amsterdam
Trust Company Limited*
BlackRock Inc
Old Mutual PLC
Standard Life PLC
Invesco Ltd
Aberdeen Group
Principal Financial Group
Legal & General Group PLC
Number of
shares
Percentage
held
43,505,488
13,463,478
11,518,255
7,665,942
7,258,572
5,715,943
5,502,293
5,380,061
27.00%
8.36%
7.15%
4.76%
4.51%
3.55%
3.42%
3.34%
*
Full name of shareholders include Rovida Holdings Limited,
RR Investment Company Ltd, Mingulay Holdings Ltd, SN Roditi,
Mrs P Roditi and The Belvedere Realty Investment Company.
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 64 to 79.
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.
Greenhouse gas (GHG) emissions
As indicated in our 2013/14 report we will continue
to quantify and report any emissions resulting from
our business activities. These are calculated from the
following sources:
Scope 2 Emissions
– Indirect Emissions
Purchased Electricity:
Electricity purchased for
our Assets. This includes
tenant electricity
consumption where
we procure energy
on their behalf.
Scope 1 Emissions
– Direct Emissions
On-site Fuel
Combustion:
Gas or oil purchased
for our Assets.
Fugitive Emissions:
Refrigerant leaks from
owned air-conditioning
(RAC) equipment.
Company Vehicles:
Fuel combustion and
refrigerant leakage.
Overall GHG emissions across the portfolio have
increased by 5.2% from last year. This is mainly due
to an 11% increase in the emissions factor for grid-
purchased electricity.
However, it must be noted that total energy consumption
which accounts for a large proportion of our total carbon
emissions has decreased this year by 9% compared to
our baseline year. We will continue to focus on energy
efficiency measures within our buildings and engage
with our customers to ensure that our overall carbon
intensity ratio is reduced.
Independent verification of our data has been provided
by Carbon Credentials Limited.
Disclosure required under the Listing Rules
For the purpose of LR9.8.4C R, the information required
to be disclosed by LR 9.8.4R can be found in the Annual
Report in following locations:
Carbon emissions by source (tCO2e)
Section Topic
1
Interest capitalised
2012/13 2013/14 2014/15 % Change
Source of Emissions
Scope 1
(Direct Emissions)
Workspace
Gas
Fugitive Emissions
Vehicle Emissions
Joint Venture
Gas
Heating Oil
Fugitive Emissions
3,959 3,535
216
2
169
2
3,194
247
4
60
31
0
64
28
2
51
20
2
Scope 2
(Indirect Emissions)
Workspace
Purchased Electricity 10,510 10,956 12,037
Joint Venture
Purchased Electricity
312
334
368
15,043 15,137 15,923
Total
Net Lettable Area
tCO2e/m2
Occupied space
Area tCO2e/m2
(9.6)
14.7
103.8
(20.3)
(26.1)
(8.9)
9.5
10.2
5.1
2
4
5
6
7
8
9
10
11
12
13
14
Publication of unaudited
financial information
Details of long-term
incentive schemes
Waiver of emoluments
by a Director
Waiver of future
emoluments by a Director
Non pre-emptive issues
of equity for cash
Item (7) in relation to major
subsidiary undertakings
Parent participation in a
placing by a listed subsidiary
Contracts of significance
Provision of services by
a controlling shareholder
Shareholder waivers
of dividends
Shareholder waivers
of future dividends
Agreements with
controlling shareholders
Location in the Annual Report
Financial Statements,
page 122, note 10
Not applicable
Remuneration Report
page 91 to 92 and 96
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
0.030 0.031 0.035
11.6
0.035 0.036 0.040
10.4
All the information cross-referenced above is hereby
incorporated by reference into this Directors’ Report.
Notes:
Previous data has been recalculated to account for
discrepancies with JV electricity data and additional gas/
electricity meter read information unavailable at the time.
Data was still within the 5% materiality threshold.
Previous data has been recalculated to account for changes
and additions.
Emissions from vacant units have been omitted from
data collection as they are considered to be immaterial.
Calculations based upon a 5% materiality threshold.
Joint Venture Emissions are calculated as a proportion based
on our equity share.
Defra Environmental Reporting Guidelines and the
financial control approach applied.
2015 Annual General Meeting
The 29th Annual General Meeting of the Company will
be held at Chester House, Kennington Park, 1-3 Brixton
Road, London SW9 6DE on Wednesday 15 July 2015
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
2 June 2015
Workspace Group PLC Annual Report and Accounts 2015
103
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 DIRECTORS’ RESPONSIBILITIES
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual
Report and Accounts, including the Group and the
Parent Company financial statements in accordance
with applicable law and regulations.
The Directors are responsible for the maintenance
and integrity of the Company’s corporate website
(investors.workspace.co.uk). Legislation in the United
Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in
other jurisdictions.
The Directors consider that the Annual Report
and Accounts taken as a whole is fair, balanced
and understandable and provides the information
necessary for shareholders to assess the Company’s
performance, business model and strategy.
Each of the Directors, whose names and functions
are detailed on pages 62 and 63 of the Annual Report,
confirm 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 contained in pages 16 to 53
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 2 June 2015 by:
Jamie Hopkins
Chief Executive Officer
Graham Clemett
Chief Financial Officer
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 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 Parent 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 Parent 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.
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Workspace Group PLC Annual Report and Accounts 2015
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF WORKSPACE GROUP PLC
Report on the Group financial statements
Our opinion
In our opinion, Workspace Group PLC’s Group financial
statements (the “financial statements”):
– give a true and fair view of the state of the Group’s
affairs as at 31 March 2015 and of its 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.
What we have audited
Workspace Group PLC’s financial statements comprise:
– the Consolidated Balance Sheet as at 31 March 2015;
– the Consolidated Income Statement and Consolidated
Statement of Comprehensive Income for the year
then ended;
– the Consolidated Statement of Cash Flows for the
year then ended;
– the Consolidated Statement of Changes in Equity
for the year then ended; and
– the notes to the financial statements, which include a
summary of significant accounting policies and other
explanatory information.
Certain required disclosures 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.
The financial reporting framework that has been
applied in the preparation of the financial statements
is applicable law and IFRSs as adopted by the
European Union.
Our audit approach
Overview
Materiality
Audit
scope
Areas
of focus
– Overall Group materiality: £13.4m,
which represents 1% of total assets.
– Specific materiality of £2.0m used
for certain income statement
line items, being a percentage of
the profit before tax excluding
changes in fair value of investment
properties and net finance costs.
– The Group team carried out an
audit of the complete financial
information of all the components
within the Group, the consolidation
and of the Group’s share of the
profit and net assets of the
joint ventures.
– Valuation of investment properties
due to materiality and the level of
judgement involved.
– Accounting for the Glebe Proceeds
Share Agreement (PSA) due to
its technical complexity and the
judgements involved.
– Compliance with REIT regime due
to the impact of the tax exempt
status on the Group’s business
and the financial statements.
– Investments in joint ventures due
to the application of IFRS 11 for the
first time in the current year.
The scope of our audit and our areas of focus
We conducted our audit in accordance with
International Standards on Auditing (UK and Ireland)
(“ISAs (UK & Ireland)”).
We designed our audit by determining materiality
and assessing the risks of material misstatement in the
financial statements. In particular, we looked at where
the directors made subjective judgements, for example
in respect of significant accounting estimates that
involved making assumptions and considering future
events that are inherently uncertain. As in all of our
audits we also addressed the risk of management
override of internal controls, including evaluating
whether there was evidence of bias by the directors
that represented a risk of material misstatement
due to fraud.
The risks of material misstatement that had the
greatest effect on our audit, including the allocation
of our resources and effort, are identified as “areas of
focus” in the table below. We have also set out how
we tailored our audit to address these specific areas in
order to provide an opinion on the financial statements
as a whole, and any comments we make on the results
of our procedures should be read in this context. This
is not a complete list of all risks identified by our audit.
Workspace Group PLC Annual Report and Accounts 2015
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CONTINUED
Area of focus
Valuation of investment properties
Refer to page 77 (Audit Committee Report), pages 122 to 124
(Notes to the financial statements – Note 10) and page 113
(Significant judgements, key assumptions and estimates).
We focused on this area due to the magnitude of the investment
property balance and because the assumptions used in
determining the fair value of the investment properties involve
significant judgements and estimates.
The Group’s investment properties were valued at £1,408.9m as
at 31 March 2015 and the revaluation gain of £318.0m is included
within ‘Change in fair value of investment properties’ in the
Consolidated Income Statement.
The property valuations are carried out by third party valuers
in accordance with the RICS Valuation – Professional Standards
and Workspace’s Group accounting policies which incorporate
the requirements of International Accounting Standard 40,
Investment property.
The Group’s property portfolio consists of office and industrial
properties located in London and includes:
– Properties held at investment value: These are existing
properties that are currently let and generate rental income.
They are valued using the income capitalisation method
as explained in note 10.
– Properties held at development value: These are properties
currently being refurbished, under development or identified
for future development. They have a different risk and
investment profile to the properties held at investment value
and are valued using the residual value method as explained
in note 10.
The most significant judgements affecting all the valuations
include yields and estimated rental value (“ERV”) growth (as
described in note 10 of the financial statements). For properties
held at development value, other assumptions including costs to
complete, property specific factors and the likelihood of achieving
planning consent are also factored into the valuation. Where
available, the valuations take into account evidence of market
transactions for properties and locations comparable to those
of the Group.
Accounting for the Glebe Proceeds Share Agreement (PSA)
Refer to page 77 (Audit Committee Report), pages 133 to 134
(Notes to the financial statements – Notes 19 and 20) and page 113
(Significant judgements, key assumptions and estimates).
On 22 December 2014, Workspace terminated the Glebe PSA
following a payment of £30m to the joint venture’s former lenders,
resulting in the non-controlling interest (NCI) being extinguished.
At the point of settlement, Workspace had profit attributable to
the NCI of £20m in accordance with the accounting policies on
pages 116.
We focused on the Glebe PSA because the accounting
treatment of the NCI up to the date of settlement was complex
and judgemental, and because we needed to check that the
termination itself was accounted for appropriately, including
whether adequate disclosure had been made in the Annual
Report. In the prior year, the accounting treatment had been
the subject of scrutiny by the Financial Reporting Council (FRC)
(refer to page 134). During the current year, their enquiries were
concluded on the basis of the adjustments and disclosures
made in the Interim Statement.
Compliance with the REIT regime
Refer to page 77 (Audit Committee Report) and page 113
(Significant judgements, key assumptions and estimates).
How our audit addressed the area of focus
In order to assess the accuracy of the valuation of the property portfolio
as at 31 March 2015 and to identify those properties which needed further
investigation, we undertook an analysis of each property valuation and
compared the yield adopted and movement in capital value over the year
with expected market benchmarks. We evaluated the underlying valuation
methodology and assumptions used by the valuer and met with the Group’s
Development Director to understand property specific factors.
The external valuer used by the Group is CB Richard Ellis (CBRE). We
assessed the competence, capabilities and objectivity of CBRE and verified
its qualifications. We also discussed the scope of its work and reviewed the
terms of its engagements. We found no unusual terms or fee arrangements
that might affect its objectivity.
We met with CBRE to discuss and challenge the valuation process, key
assumptions and the rationale behind the more significant movements since
1 April 2014. Where relevant, we were able to corroborate the explanations
for yields and ERV movements with comparable property transactions and
market benchmarks.
We found that yield rates and ERVs were predominantly consistent with
comparable benchmarking information for the locations of the assets and
assumptions appropriately reflected available comparable market transactions.
Where assumptions did not fall within our expected range, we assessed whether
additional evidence presented in arriving at the final valuation was appropriate,
and, whether this was robustly challenged by the external independent valuers.
We were satisfied that variances were predominantly due to property specific
factors such as new lettings at higher rents, increased average rents or capital
improvements to the properties.
In addition, we were able to obtain evidence to support the valuation from
the results of the following procedures which did not identify any material
misstatements. We:
– checked the accuracy of the underlying lease and occupancy data used
by CBRE in their valuation of the portfolio by tracing the data back to the
Workspace accounting records and signed leases on a sample basis;
– for the properties held at development value, evaluated the underlying
assumptions around the gross development value, construction costs and
property specific factors within the development appraisals by comparing
them to available market information and underlying project plans;
– agreed the acquisitions and disposals in the year to the underlying
agreements, cash payments and receipts and title deeds;
– agreed a sample of capital expenditure items to invoices and cash to check
that they had been correctly capitalised; and
– visited selected properties within the portfolio over the course of the year.
CBRE also valued the share of proceeds of any future sale of the residential
developments from a number of historical property disposals (“overages”).
Based on the timing and likelihood of receipt, these are classified within
investment properties or receivables.
We agreed the arrangements to the signed sales contracts; verified the
assumptions underpinning the valuation to supporting documentation; and
agreed the classification of the amounts within investment properties or
receivables based on the timing and likelihood of receipt.
In the current year, we tested the application of the accounting policy up to
the termination date by confirming that properties where there was a legal or
constructive obligation to sell had been identified in determining the amount
attributable to NCI. We also checked that the amounts had been included at an
appropriate fair value by reference to the CBRE valuation or other corroborative
evidence and checked that the amount recognised as NCI up to the date of
termination had been calculated in accordance with the accounting policy.
We obtained and read the termination agreement and, having agreed the cash
settlement to bank statements, we were satisfied that the settlement had been
appropriately accounted for by reference to applicable accounting standards.
Additionally, we checked, and were satisfied with, the disclosures in relation
to the recognition of NCI up to the date of termination and of the subsequent
termination of the agreement.
We confirmed our understanding of management’s approach to ensuring
compliance with the REIT regime requirements.
Workspace converted to a Real Estate Investment Trust (REIT) in
2007. The UK REIT regime grants companies tax exempt status
provided they meet the specific requirements within the regime.
We obtained management’s calculations and supporting documentation,
checking the accuracy by verifying the inputs, calculation and application
of the rules.
We focused on this because the rules are complex and the tax
exempt status has a significant impact on the Group’s business
and the financial statements.
We note that the Group is currently in discussions with HMRC regarding
the application of the REIT criteria to certain aspects of the Group’s business.
We discussed this with management and their tax advisors and, based on the
evidence we obtained, we are satisfied that the Group’s view of the matter
(which is set out in the Audit Committee Report) is reasonable.
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Workspace Group PLC Annual Report and Accounts 2015
How our audit addressed the area of focus
We obtained and read the documentation and contracts governing the structure
of the joint arrangements, the relevant Board minutes and other supporting
documents. This provided sufficient evidence to confirm that Workspace has
shared control over the key strategic and operational decisions, meaning that
it was appropriate for the joint arrangements to be equity accounted for as
joint ventures.
We are also satisfied that sufficient and appropriate disclosures in accordance
with IFRS 11 are included in the financial statements.
Area of focus
Investments in joint ventures
Refer to pages 125 to 126 (Notes to the financial statements –
Note 12(a)) and page 115 (Significant accounting policies).
We focused on this area because 31 March 2015 is the first year
that IFRS 11 ‘Joint Arrangements’ is applicable for the Consolidated
Financial Statements. IFRS 11 requires that joint arrangements are
classified as either joint operations or joint ventures. In the case of
joint operations, the parties have rights and obligations relating
to the assets and liabilities relating to the arrangement and
should account for their own rights and obligations. In the case
of joint ventures, the parties have rights to the net assets of the
arrangement and should equity account. There was particular
judgement to be applied in the case of BlackRock Workspace
Property Trust JV (BWPT), where Workspace owns 20.1% of
the arrangement.
Management concluded that, based on their day to day operation
and the contractual arrangements in place, all the Group’s
arrangements, including BWPT, are joint ventures and should
be equity accounted in the Consolidated Financial Statements.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on
the financial statements as a whole, taking into account the geographic structure of the Group, the accounting
processes and controls, and the industry in which the Group operates.
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 financial statements, all entities were identified as requiring
an audit of their complete financial information, either due to their size or their risk characteristics and all the audit
work was performed by the Group audit team.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and 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 financial statements as a whole as follows:
Overall Group materiality
£13.4m (2014: £11.2m)
How we determined it
1% of total assets
Rationale for benchmark applied
Specific materiality
How we determined it
Rationale for benchmark applied
The key driver of the business and determinant of the Group’s value is direct property
investments. Due to this, the key area of focus in the audit is the valuation of investment
properties. On this basis, consistent with last year, we set an overall Group materiality
based on total assets.
£2.0m (2014: £1.9m)
As a percentage of profit before tax excluding changes in fair value of investment properties
and net finance costs.
A number of key performance indicators of the Group are driven by income statement items
and we therefore applied, consistent with last year, a lower specific materiality to audit 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 £0.2m (2014: £0.2m) as well as misstatements below that amount that, in our view, warranted reporting
for qualitative reasons.
Going concern
Under the Listing Rules we are required to review the Report of the Directors, set out on page 100 to 104, in relation
to going concern. We have nothing to report having performed our review.
As noted in the Report of the Directors, the Directors have concluded that it is appropriate to prepare the 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.
Workspace Group PLC Annual Report and Accounts 2015
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CONTINUED
Other required reporting
Consistency of other information
Companies Act 2006 opinion
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.
ISAs (UK & Ireland) reporting
Under ISAs (UK & Ireland) we are required to report to you if,
in our opinion:
– information in the Annual Report and
Accounts 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 Group acquired in
the course of performing our audit; or
− otherwise misleading.
– the statement given by the Directors on
page 104, in accordance with provision
C.1.1 of the UK Corporate Governance Code
(“the Code”), that they consider the Annual
Report and Accounts 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 is materially inconsistent
with our knowledge of the Group acquired
in the course of performing our audit.
We have no
exceptions to
report arising
from this
responsibility.
We have no
exceptions to
report arising
from this
responsibility.
– the section of the Annual Report and
Accounts on page 76, as required by
provision C.3.8 of the Code, 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.
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.
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.
Corporate governance statement
Under the Listing Rules we are required to review the
part of the Corporate Governance Statement relating to
the Parent Company’s compliance with 10 provisions of
the UK Corporate Governance Code. We have nothing
to report having performed our review.
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 104, the Directors are
responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair view.
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Workspace Group PLC Annual Report and Accounts 2015
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.
What an audit of financial statements involves
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.
We primarily focus 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.
We test and examine information, using sampling and
other auditing techniques, to the extent we consider
necessary to provide a reasonable basis for us to draw
conclusions. We obtain audit evidence through testing
the effectiveness of controls, substantive procedures
or a combination of both.
In addition, we read all the financial and non-financial
information in the Annual Report and Accounts 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.
Other matter
We have reported separately on the Parent Company
financial statements of Workspace Group PLC for the
year ended 31 March 2015 and on the information in
the Directors’ Remuneration Report that is described
as having been audited.
Sonia Copeland
(Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
2 June 2015
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 MARCH 2015
Revenue
Direct costs
Net rental income
Administrative expenses
Trading profit excluding share of joint ventures
Profit 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
Notes
1
1
1
2
3(a)
3(b)
10
2
4
4
4
4
12(a)
6
20
2015
£m
83.6
(25.9)
57.7
(13.8)
43.9
0.3
10.1
318.0
372.3
2014
£m
73.6
(23.3)
50.3
(12.4)
37.9
1.6
4.2
221.9
265.6
0.1
0.1
(18.6)
–
(18.6)
(2.2)
8.4
360.0
(0.1)
359.9
350.9
9.0
359.9
(18.6)
(1.9)
(20.5)
2.2
5.1
252.5
(0.1)
252.4
241.4
11.0
252.4
Basic earnings per share (pence)
Diluted earnings per share (pence)
8
8
231.4p
227.4p
166.8p
163.3p
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2015
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 113 to 140 form part of these financial statements.
Notes
16(f)
20
2015
£m
359.9
2014
£m
252.4
(0.3)
359.6
(2.9)
249.5
350.6
9.0
359.6
238.5
11.0
249.5
Workspace Group PLC Annual Report and Accounts 2015
109
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 CONSOLIDATED BALANCE SHEET
AS AT 31 MARCH 2015
Non-current assets
Investment properties
Intangible assets
Property, plant and equipment
Investment in joint ventures
Other investments
Trade and other receivables
Derivative financial instruments
Current assets
Trade and other receivables
Cash and cash equivalents
Corporation tax asset
Assets held for sale
Total assets
Current liabilities
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
EPRA net asset value per share
Notes
2015
£m
2014
£m
10 1,408.9
0.4
2.0
28.6
1.0
8.7
0.3
1,449.9
11
12(a)
12(b)
13
16(f)
1,068.3
0.4
2.0
23.1
–
11.2
–
1,105.0
13
14
10
15
16(a)
16(e) & (f)
19
18.9
42.6
–
0.3
61.8
1,511.7
7.1
3.7
0.3
–
11.1
1,116.1
(45.4)
(45.4)
(36.0)
(36.0)
(317.4)
(2.6)
–
(320.0)
(365.4)
(335.8)
(7.2)
(11.0)
(354.0)
(390.0)
1,146.3
726.1
21
21
23
22
20
161.1
136.8
(8.8)
15.7
841.5
1,146.3
–
1,146.3
145.6
58.2
(8.9)
14.0
517.2
726.1
–
726.1
9
£7.03
£4.96
The notes on pages 113 to 140 form part of these financial statements.
The financial statements on pages 109 to 140 were approved and authorised for issue by the Board of Directors
on 2 June 2015 and signed on its behalf by:
J Hopkins
G Clemett
Directors
110
Workspace Group PLC Annual Report and Accounts 2015
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2015
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
Profit for the year
Change in fair value of derivatives
Total comprehensive income
Transactions with owners:
Share issues
Dividends paid
Reclassification
Acquisition of non-controlling
interests
Share based payments
Balance at 31 March 2015
Notes
22
21
7
19 & 20
24
22
21
7
20
20
24
Attributable to owners of the Parent
Share
capital
£m
144.9
–
Share
premium
£m
58.8
–
Investment
in own
shares
£m
(8.9)
–
Other
reserves
£m
15.3
–
Retained
earnings
£m
290.3
241.4
Total
Share-
holders’
Equity
£m
500.4
241.4
Non-
controlling
interests
£m
–
11.0
Total
Equity
£m
500.4
252.4
–
–
–
–
–
–
(2.9)
(2.9)
–
241.4
(2.9)
238.5
–
11.0
(2.9)
249.5
0.7
–
–
–
145.6
–
–
–
15.5
–
–
–
–
161.1
(0.6)
–
–
–
58.2
–
–
–
78.6
–
–
–
–
136.8
–
–
–
–
(8.9)
–
–
–
0.1
–
–
–
–
–
1.6
14.0
–
(14.5)
–
–
517.2
350.9
–
(0.3)
–
(0.3) 350.9
0.1
(14.5)
–
1.6
726.1
350.9
(0.3)
350.6
–
–
–
–
(16.6)
–
94.2
(16.6)
–
–
–
(11.0)
–
–
9.0
–
9.0
–
–
11.0
0.1
(14.5)
(11.0)
1.6
726.1
359.9
(0.3)
359.6
94.2
(16.6)
11.0
–
–
(8.8)
–
2.0
15.7
(10.0)
–
(10.0)
2.0
841.5 1,146.3
(20.0)
(30.0)
2.0
–
– 1,146.3
The notes on pages 113 to 140 form part of these financial statements.
Workspace Group PLC Annual Report and Accounts 2015
111
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2015
Cash flows from operating activities
Cash generated from operations
Interest received
Interest paid
Tax refunded
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
Capital distributions from joint ventures
Purchase of investments
Movement in 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
Fees paid on share issue
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
Inflow on bank facility rental income accounts
Acquisition of non-controlling interests
Dividends paid
Net cash inflow/(outflow) from financing activities
Notes
18
12(a)
12(a)
21
16(b)
20
7
2015
£m
2014
£m
54.3
0.1
(18.5)
0.2
36.1
(79.7)
(35.8)
99.4
(0.3)
(0.7)
2.0
(1.0)
0.2
1.1
(14.8)
96.7
(2.6)
–
–
(30.0)
–
–
–
(30.0)
(16.5)
17.6
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)
Net increase/(decrease) in cash and cash equivalents
38.9
(8.1)
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
18
18
3.7
42.6
11.8
3.7
The notes on pages 113 to 140 form part of these financial statements.
112
Workspace Group PLC Annual Report and Accounts 2015
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2015
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 IFRS IC
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.
Joint ventures
IFRS 11 requires that joint arrangements are classified as
either joint operations or joint ventures. In the case of joint
ventures the parties have rights to the net assets and
should be accounted for under the equity method. The
Group applied judgement in the case of the BlackRock
Workspace Property Trust where it owns 20.1% of the
arrangement. Management have concluded that based
on their day-to-day operation and the contractual
arrangements in place then this arrangement should
be accounted for as a joint venture.
Glebe proceeds share agreement
In the year to 31 March 2014 there was a change in
accounting policy for the Glebe Proceeds Share
Agreement. Previously, the Group considered the
Proceeds Share Agreement to be 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. At 31 March 2014,
the Group changed its accounting policy so that the
Glebe Proceeds Share Agreement was accounted for
as an equity instrument under IAS 32 representing a
non-controlling interest.
The Group 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 took into account the likelihood that a property
will be sold and that a payment may be made. On this
basis, the Group attributed amounts to NCI when it
was considered probable that it would sell the relevant
properties. At this point, the NCI had a demonstrable
interest in their portion of the fair value gains to be
realised in relation to these properties.
In December 2014 an agreement was reached with the
former lenders to terminate the Glebe Proceeds Share
Agreement for a cash settlement of £30m. As a result
of this settlement, the Group derecognised the NCI of
£20m and recorded a decrease in equity attributable
to owners of the parent of £10m.
Further details on the methodology, judgements involved
and calculation of recognising the attributable amount is
given in note 20 and the accounting policy for non-
controlling interests.
Compliance with the Real Estate Investment
Trust (REIT) taxation regime
The Group is a REIT and is thereby exempt from tax
on both rental profits and chargeable gains from its UK
property rental business. In order to retain REIT status,
certain ongoing criteria must be maintained. The main
criteria are as follows:
– at the start of each accounting period, the assets
of the tax exempt business must be at least 75%
of the total value of the Group’s assets;
– at least 75% of the Group’s total profits must
arise from the tax exempt business; and
– at least 90% of the tax exempt business must
be distributed.
The Directors intend that the Group should continue as a
REIT for the foreseeable future, with the result that deferred
tax is no longer recognised on temporary differences
relating to the property rental business which is within
the REIT structure.
Workspace Group PLC Annual Report and Accounts 2015
113
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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 2015. Subsidiaries
are all entities (including structured entities) over which
the Group has control. The Group controls an entity
when the Group is exposed to, or has rights to, variable
returns from its involvement with the entity and has the
ability to affect those returns through its power over the
entity. Subsidiaries are fully consolidated from the date
on which control is transferred to the Group. They are
deconsolidated from the date that 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.
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
114
Workspace Group PLC Annual Report and Accounts 2015
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. This is assumed when a sale
has exchanged by the balance sheet date and completed
before the date of signing the financial statements.
Income from the sale of assets is recognised when the
significant risks and returns have been transferred to the
buyer. In the case of sales of properties this is generally
taken on completion of the contract. In the case of a part
disposal agreement, the part of the asset being disposed
will be derecognised from investment property when
completion is reached or when a finance lease
agreement is signed (i.e. when the risks and rewards of
this part of the site transfer to the developer). Profit or
loss on disposal is taken as the consideration receivable
(net of costs) less the latest valuation (net book value)
and 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 Consolidated
Income Statement in accordance with IAS 40.
Overage is only recognised once an agreement has
been signed with a residential developer. Overage
represents a financial asset and is designated as a
financial asset at fair value through profit or loss upon
initial recognition. The carrying value of overage is
assessed at each period end and changes in fair value
are taken to other operating income/expense.
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.
Trade and other payables
Trade and other payables are initially recognised at
fair value and subsequently held at amortised cost.
Property, plant and equipment
Equipment and fixtures
Equipment and fixtures 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.
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.
Subsequent expenditure is charged to the asset’s
carrying amount or recognised as a separate asset
only when it is probable that future economic benefits
associated with the expenditure will flow to the Group
and the cost of each item can be reliably measured.
All other repairs and maintenance costs are charged
to the Consolidated Income Statement during the
period in which they are incurred.
Depreciation is provided using the straight line method
to allocate the cost less estimated residual value over
the assets’ estimated useful lives which range from
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 Group’s investment is initially
accounted for at cost and adjusted thereafter to
recognise the Group’s share of the gains or losses
in the joint venture. These are adjusted for any gains
or losses arising from transactions between the
Group and the joint venture.
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 other comprehensive income 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.
Other investments
Investment in unlisted shares are accounted for at
cost where the fair value cannot be reliably measured.
Subsequently they are reviewed for impairment by
management on an annual basis.
Impairments and reversals are recognised through
the Consolidated Income Statement.
For financial derivatives (where hedge accounting is
not applied) movements in fair value are recognised in
the Consolidated Income Statement. 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.
Trade and other receivables
Trade and other receivables are recognised initially at
fair value and subsequently measured at amortised 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 Consolidated Income Statement.
Deferred consideration on the disposal of investment
properties is included within trade and other receivables.
It is fair valued on recognition and at each year end with
any movement taken to other operating income/expense.
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.
Workspace Group PLC Annual Report and Accounts 2015
115
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 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 Consolidated Income Statement.
the treatment under this new accounting policy best
reflects the commercial objectives and economic
substance of the contractual arrangement.
Transactions with NCI that do not result in loss of
control (such as settlement of the Glebe Proceeds Share
Agreement) are accounted for as equity transactions
(i.e. as transactions with the owners in their capacity
as owners). The difference between fair value of
consideration paid and the carrying amount of the
NCI acquired is recorded in equity.
Further details can be found in note 20.
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.
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.
Non-controlling interests
The Group recognises any non-controlling interest in the
acquiree at the non-controlling interest’s proportionate
share of the acquiree’s identifiable net assets.
A non-controlling interest was recognised for the
Glebe Proceeds Share Agreement (see note 20). Total
comprehensive income and loss were attributed to
non-controlling interest in line with the terms of the
relevant contract. For the Glebe Proceeds Share
Agreement, amounts were attributed to the non-
controlling interest when it was considered probable
that the Group would sell the relevant properties. At this
point, the non-controlling interest had a demonstrable
interest in their portion of the fair value gains to be
realised in relation to these properties.
Distributions of the 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). At 31 March 2014, we considered there
to be a contractual obligation once a redevelopment
contract had been exchanged with a third party.
During the year, the Group revised the application of this
policy such that a liability is only recognised when the
Group has an unconditional legal obligation to make a
distribution to the NCI that is no longer at its discretion,
in accordance with the requirements of IAS 32 ‘Financial
Instruments: Presentation’. This is usually on completion
of the redevelopment contract. This resulted in a
reclassification from non-current liabilities to the
NCI during the year.
The Group analysed key features of the Glebe Proceeds
Share Agreement in the context of relevant accounting
pronouncements, weighing the importance of each
feature in faithfully representing the overall commercial
effect and economic substance. The Group believes that
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.
If 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.
Exceptional items
Exceptional items are those items that in the Directors’
view are required to be separately disclosed by virtue
of their size or incidence to enable a full understanding
of the Group’s financial performance.
Share based payments
The Group operates a number of share schemes under
which the Group receives services from employees as
consideration for equity instruments of the Group.
116
Workspace Group PLC Annual Report and Accounts 2015
IFRS II resulted in additional disclosures on joint ventures.
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
Amendment: IFRS 9
IFRS 15
Amendment: IAS 1
Amendment: IFRS 11
Amendment: IAS 27
Amendment: IFRS 10
and IAS 28
Amendment: IAS 16
and IAS 38
Annual improvements
2012
Financial instruments:
classification and measurement
Financial instruments: regarding
general hedge accounting
Revenue from contracts with
customers
Presentation of financial
statements on the disclosure
initiative
Joint venture arrangements
on acquisition of an interest
in a joint operation
Separate financial statements
on the equity method
Consolidated financial
statements and investments in
associates and joint ventures
Property, plant and equipment
and intangible assets, on
depreciation and amortisation
Changes to IFRS 2/IFRS 3/
IFRS 8/IFRS 13/IAS 16/IAS 37/
IAS 39
Annual improvements
2013
Changes to IFRS 1/IFRS 3/
IFRS 13/IAS 40
Annual improvements
2014
Changes to IFRS 5/IFRS 7/
IAS 19/IAS 34
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.
Pensions
The Group operates a defined contribution pension
scheme. Contributions are charged to the income
statement on an accruals basis.
Taxation
Current income tax is tax payable on the taxable income
for the year and any prior year adjustment, and is
calculated using tax rates that have been substantively
enacted by the balance sheet date.
Deferred tax is provided in full on temporary differences
between the tax base of an asset or liability and its
carrying amount in the balance sheet. Deferred tax
is determined using tax rates that have been enacted
or substantively enacted by the balance sheet date.
Deferred tax assets are recognised when it is probable
that taxable profits will be available against which the
deferred tax asset can be utilised.
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 2015 the Group adopted
the following accounting standards and guidance:
Standard or interpretation
Content
IFRS 10
IFRS 11
IFRS 12
Consolidated financial statements
Joint arrangements
Disclosures of interest in
other entities
Amendment:
IFRS 10, 11 and 12
On transition guidance
Amendment:
IFRS 10, 12 and IAS 27
Consolidation and investment
entities
IAS 27 (revised)
Separate financial statements
IAS 28 (revised)
Associates and joint ventures
Amendment:
IAS 32
Amendment:
IAS 36
Amendment:
IAS 39
Financial instruments:
presentation, on offsetting
financial assets and liabilities
Impairment of assets
Financial instruments: recognition
and measurement, on novation of
derivatives and hedge accounting
Workspace Group PLC Annual Report and Accounts 2015
117
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 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
2015
Direct
costs
£m
(2.3)
(17.8)
(2.8)
(3.0)
(25.9)
Net rental
income
£m
61.5
(2.5)
(2.8)
1.5
57.7
Revenue
£m
55.3
14.2
–
4.1
73.6
2014
Direct
costs
£m
(1.5)
(16.3)
(2.2)
(3.3)
(23.3)
Net rental
income
£m
53.8
(2.1)
(2.2)
0.8
50.3
Revenue
£m
63.8
15.3
–
4.5
83.6
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.
The segmental information has been reclassified to reflect the underlying nature of the balances. Comparatives
have been reclassified accordingly.
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 based on the underlying nature of the 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
Tax advisory, tax compliance and legal services
Total administrative expenses are analysed below:
Staff costs
Cash settled share based costs
Equity settled share based costs
Other
3(a). Profit on disposal of investment properties
Proceeds from sale of investment properties (net of sale costs)
Book value at time of sale (note 10)
Pre-tax profit on sale
118
Workspace Group PLC Annual Report and Accounts 2015
2015
£m
0.7
15.3
3.5
0.3
0.2
0.1
0.2
2014
£m
0.6
13.9
3.3
0.2
0.2
0.1
0.2
2015
£000
2014
£000
143
31
174
138
20
158
2015
£m
6.8
1.3
2.0
3.7
13.8
136
30
166
34
108
142
2014
£m
6.6
0.9
1.6
3.3
12.4
2015
£m
99.0
(98.7)
0.3
2014
£m
30.6
(29.0)
1.6
£1.5m (2014: £2.9m) of the proceeds for the year were in the form of deferred consideration, of which £1.5m is
outstanding at 31 March 2015 (31 March 2014: £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
2015
£m
10.1
2014
£m
4.2
The value of deferred consideration (cash and overage) from the sale of investment properties has been re-valued
by CBRE Limited at 31 March 2015 and 31 March 2014. The amounts receivable are included in the Consolidated
Balance Sheet under non-current and 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 (losses)/gains on financing activities
Cash flow hedge – transfer from equity
Finance costs – underlying
Issue costs written off on re-financing (exceptional)
Total finance costs
Change in fair value of financial instruments through the income statement
Net finance costs
2015
£m
0.1
0.1
(3.6)
(14.7)
(0.8)
(0.3)
0.8
(7.2)
7.2
(18.6)
–
(18.6)
(2.2)
(20.7)
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)
Exceptional finance costs for the year ended 31 March 2014 of £1.9m related to the write off of unamortised issue
costs on bank facilities that were refinanced in the year.
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 above are gross of costs capitalised of £1.2m (2014: £0.8m).
The monthly average number of people employed during the year was:
Head office staff (including Directors)
Estates and property management staff
2015
£m
11.2
1.3
0.7
1.3
2.0
16.5
2014
£m
10.4
1.2
0.6
0.9
1.6
14.7
2015
Number
85
114
199
2014
Number
81
106
187
The emoluments and pension benefits of the Directors is determined by the Remuneration Committee of the
Board and are set out in detail in the Directors’ Remuneration Report on pages 80 to 99. These form part of the
financial statements.
Workspace Group PLC Annual Report and Accounts 2015
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Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 NOTES TO THE FINANCIAL STATEMENTS CONTINUED
6. Taxation
Current tax:
UK corporation tax
Adjustments to tax in respect of previous periods
Total taxation charge
2015
£m
–
0.1
0.1
2014
£m
–
0.1
0.1
The tax on the Group’s profit for the year differs from the standard applicable corporation tax rate in the UK of 21%
(2014: 23%). 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 21% (2014: 23%)
Effects of:
REIT exempt income
Changes in fair value not subject to tax as a REIT
Share scheme adjustments
Other income
Adjustments to tax in respect of previous periods
Losses carried forward previously unrecognised
Total taxation charge
2015
£m
360.0
(8.4)
351.6
73.8
(5.8)
(66.3)
(0.7)
0.2
0.1
(1.2)
0.1
2014
£m
252.5
(5.1)
247.4
56.9
(4.8)
(51.6)
(1.1)
(0.9)
0.1
1.5
0.1
The Group is a Real Estate Investment Trust (REIT). The Group’s UK property rental business (both income and
capital gains) is exempt from tax. The Group’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 unrecognised tax losses carried forward of £3.6m (2014: £5.3m) calculated at a
corporation tax rate of 20% (2014: 21%) which is the rate substantively enacted at the Balance Sheet date.
The analysis of deferred tax assets and liabilities is as follows:
Deferred tax assets:
– Deferred tax to be recovered within 12 months
Deferred tax liabilities
– Deferred tax liabilities to be recovered within 12 months
Deferred tax (net)
2015
£m
2.3
(2.3)
–
The movement in deferred income taxes and liabilities during the year, without taking into consideration the
offsetting of balances within the same tax jurisdiction, is as follows:
Deferred tax liabilities
At 1 April 2014
Charged to income statement
At 31 March 2015
Deferred tax assets
At 1 April 2014
Credited to income statement
At 31 March 2015
120
Workspace Group PLC Annual Report and Accounts 2015
Other income
(overage receipts)
£m
–
2.3
2.3
Tax losses
£m
–
(2.3)
(2.3)
2014
£m
–
–
–
Total
£m
–
2.3
2.3
Total
£m
–
(2.3)
(2.3)
7. Dividends
Ordinary dividends paid
For the year ended 31 March 2013:
Final dividend
For the year ended 31 March 2014:
Interim dividend
Final dividend
For the year ended 31 March 2015:
Interim dividend
Dividends for the year
Timing difference on payment of withholding tax
Dividends cash paid
Payment
date
Per
share
August 2013
6.45p
February 2014
August 2014
3.54p
7.09p
February 2015
3.89p
2015
£m
–
–
10.3
6.3
16.6
(0.1)
16.5
2014
£m
9.3
5.2
–
–
14.5
(0.1)
14.4
In addition the Directors are proposing a final dividend in respect of the financial year ended 31 March 2015 of
8.15 pence per ordinary share which will absorb an estimated £13.1m of revenue reserves and cash. If approved by
the shareholders at the AGM, it will be paid on 7 August 2015 to shareholders who are on the register of members
on 10 July 2015. The dividend will be paid as a REIT Property Income Distribution (PID) net of withholding tax
where appropriate.
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
Adjustments for non-controlling interests share of 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-trading items:
Group’s share of joint ventures other expenses
Other income
Exceptional finance costs
Non-controlling interests (less adjustment above)
Taxation
Adjusted underlying earnings
2015
£m
350.9
(318.0)
3.7
(0.3)
2.2
(9.3)
29.2
2.1
(10.1)
–
5.3
0.1
26.6
2014
£m
241.4
(221.9)
11.0
(1.6)
(2.2)
(4.0)
22.7
–
(4.2)
1.9
–
0.1
20.5
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-trading items.
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
2015
Number
151,635,965
2,649,360
154,285,325
2015
231.4p
227.4p
18.9p
17.2p
2014
Number
144,705,947
3,122,782
147,828,729
2014
166.8p
163.3p
15.4p
13.9p
1. EPRA earnings per share and adjusted underlying earnings per share are calculated on a diluted basis.
Workspace Group PLC Annual Report and Accounts 2015
121
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15
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
2015
£m
1,146.3
2.3
1,148.6
2015
Number
161,107,649
(114,354)
160,993,295
2,462,487
163,455,782
2014
£m
726.1
7.2
733.3
2014
Number
145,616,695
(157,846)
145,458,849
2,526,414
147,985,263
2015
£7.03
2014
£4.96
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
Acquisition of finance leases
Capital expenditure
Capitalised interest on refurbishments (note 4)
Disposals during the year
Change in fair value of investment properties
Balance at 31 March
Less: classified as held for sale
Total investment properties
2015
£m
1,068.3
80.0
3.6
37.2
0.8
(98.7)
318.0
1,409.2
(0.3)
1,408.9
2014
£m
825.9
19.0
–
29.7
0.8
(29.0)
221.9
1,068.3
–
1,068.3
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 5.2% (2014: 5.1%). The total amount of capitalised
interest included in investment properties is £5.8m (2014: £5.0m).
The change in fair value of investment properties is recognised in the Consolidated Income Statement.
Details of acquisitions and disposals during the year are provided on page 49.
Investment property includes buildings under finance leases of which the carrying amount is £7.1m (2014: £3.5m).
Investment property finance lease commitment details are shown in note 16(h).
Valuation
The Group’s investment properties are held at fair value and were revalued at 31 March 2015 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. All the properties are revalued at period end regardless of the
date of acquisition. 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, most of 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 Committee 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.
122
Workspace Group PLC Annual Report and Accounts 2015
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
Assets held for sale
Head leases treated as finance leases under IAS 17
Total investment properties per balance sheet
2015
£m
1,423.4
(21.3)
(0.3)
7.1
1,408.9
2014
£m
1,078.0
(13.2)
–
3.5
1,068.3
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 the investment properties are
classified as Level 3, due to the fact that one or more significant inputs to the valuation are not based on observable
market data. If the degree of subjectivity or nature of the measurement inputs changes then there could be a transfer
between Levels 2 and 3 of classification. No changes requiring a transfer have occurred during the current or
previous year.
The following table summarises the valuation techniques and inputs used in the determination of the
property valuation.
Workspace Group PLC Annual Report and Accounts 2015
123
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
10. Investment properties continued
Key unobservable inputs:
Valuation
£m
768
Valuation
technique
1
ERVs – per sq. ft.
Equivalent yields
Range
£5–£81
Weighted
average
£20
Range
5.0%–9.0%
Weighted
average
6.5%
179
177
176
102
7
1,409
1
2
2
1
n/a
£8–£51
£19–£55
£9–£30
£30–£53
£24
£34
£20
£41
6.1%–6.7%
5.5%–7.3%
6.0%–10.0%
5.4%–6.5%
6.0%
6.1%
6.7%
6.2%
Property category
Like-for-like
Completed projects
(refurbishments)
Refurbishments
Redevelopments
Other
Head leases
Total
1 = Income capitalisation method.
2 = Residual value method.
Sensitivity analysis:
A +/- 10% movement in ERVs or a +/- 25 basis points movement in yields would result in the following increase/
decrease in the valuation.
+/- 10% in ERVs
+77/-77
+18/-18
+23/-23
+9/-9
+10/-10
+/- 25 bps in yields
-29/+31
-7/+8
-9/+10
-4/+4
-4/+4
Equipment
and fixtures
£m
6.3
0.9
7.2
0.7
7.9
4.6
0.6
5.2
0.7
5.9
2.0
2.0
Total
£m
6.3
0.9
7.2
0.7
7.9
4.6
0.6
5.2
0.7
5.9
2.0
2.0
£m
Like-for-like
Completed projects (refurbishments)
Refurbishments
Redevelopments
Other
11. Property, plant and equipment
Cost or valuation
Balance at 31 March 2013
Additions during the year
Balance at 31 March 2014
Additions during the year
Balance at 31 March 2015
Accumulated depreciation
Balance at 31 March 2013
Charge for the year
Balance at 31 March 2014
Charge for the year
Balance at 31 March 2015
Net book amount at 31 March 2015
Net book amount at 31 March 2014
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Workspace Group PLC Annual Report and Accounts 2015
12(a). Joint ventures
The Group’s investment in joint ventures represents:
Balance at 1 April
Capital distributions
Loans to joint ventures
Share of gains
Income distributions received
Balance at 31 March
The Group has the following joint ventures:
2015
£m
23.1
(2.0)
0.2
8.4
(1.1)
28.6
2014
£m
20.7
(1.6)
–
5.1
(1.1)
23.1
BlackRock Workspace Property Trust
Enterprise House Investments LLP
Generate Studio Limited
Partner
BlackRock UK Property Fund
Polar Properties Limited
Whitebox Creative Limited
Established Ownership
20.1%
50%
50%
February 2011
April 2012
February 2014
Measurement
Method
Equity
Equity
Equity
BlackRock Workspace Property Trust is a Jersey property unit trust established in February 2011 whose aim was
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 has no funding commitments relating to its joint ventures.
The summarised balance sheets and income statements of the joint ventures are shown below:
Balance sheets of joint ventures
Investment properties
Cash and cash equivalents
Other current assets
Current liabilities
Net assets
Income statements of joint ventures
Revenue
Direct costs
Net rental income
Administrative expenses
Other expenses
Profit on disposal of investment properties
Change in fair value of investment properties
Profit before tax
Taxation
Profit after tax
2015
£m
139.7
8.0
1.5
(14.5)
134.7
2015
£m
9.8
(3.0)
6.8
(1.9)
(10.2)
5.7
36.6
37.0
–
37.0
2014
£m
108.0
6.7
0.7
(3.8)
111.6
2014
£m
8.7
(2.8)
5.9
(1.2)
–
1.4
17.9
24.0
–
24.0
The information above has been adjusted where necessary for differences in accounting policies between the
Group and the joint ventures.
Workspace Group PLC Annual Report and Accounts 2015
125
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 NOTES TO THE FINANCIAL STATEMENTS CONTINUED
12(a). Joint ventures continued
The reconciliation of the summarised financial information presented above to the carrying amount of the Group’s
interest in the joint ventures is shown below:
Summarised financial information
Opening net assets 1 April
Profit for the period
Capital distributions
Income distributions
Loans to joint ventures
Closing net assets 31 March
Group’s interest
Unrealised surplus on sale of properties to joint ventures
Carrying amount
12(b). Other investments
During the year the Group purchased 10% of the share capital of Mailstorage Ltd for £1.0m.
13. Trade and other receivables
Non-current trade and other receivables
Deferred consideration on sale of investment property:
Balance at 1 April
Additions (cash receivable)
Less: classified as current
Change in fair value (see note 3(b))
Balance at 31 March
2015
£m
111.6
37.0
(10.0)
(4.3)
0.4
134.7
29.1
(0.5)
28.6
2014
£m
100.5
24.0
(8.2)
(4.7)
–
111.6
23.6
(0.5)
23.1
2015
£m
2014
£m
11.2
1.5
(14.1)
10.1
8.7
6.1
0.9
–
4.2
11.2
The non-current receivables relate 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 is held at fair value through
profit and loss – £7.2m (2014: £10.2m). It has been fair valued by CBRE Limited on the basis of residual value, using
appropriate discount rates, and will be revalued on a regular basis. This is a Level 3 valuation of a financial asset, as
defined by IFRS 13. The methodology and significant assumptions used in the valuation are consistent with those
disclosed in note 10. The change in fair value recorded in the Consolidated Income Statement was a profit of £10.1m
(31 March 2014: £4.2m) (see note 3(b)).
Current trade and other receivables
Trade receivables
Less provision for impairment of receivables
Trade receivables – net
Prepayments and accrued income
Amounts due from related parties (see note 25)
Deferred consideration on sale of investment property
2015
£m
2.8
(0.4)
2.4
2.4
–
14.1
18.9
2014
£m
2.3
(0.3)
2.0
2.8
0.3
2.0
7.1
Receivables at fair value:
Included within deferred consideration on sale of investment property is £13.1m (2014: £nil) of overage which is held
at fair value through profit and loss. The amount is receivable within the following 12 months and has therefore been
classified from non-current to current receivables.
Receivables at amortised cost:
The remaining receivables are held at amortised cost. There is no material difference between the above amounts
and their fair values due to the short-term nature of the receivables. 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.
126
Workspace Group PLC Annual Report and Accounts 2015
Movements on the provision for impairment of trade receivables are shown below:
Balance at 1 April
Increase in provision for impairment of trade receivables
Receivables written off during the year
Balance at 31 March
2015
£m
0.3
0.3
(0.2)
0.4
2014
£m
0.4
0.2
(0.3)
0.3
As at 31 March 2015, the ageing of trade receivables past due but not impaired was as follows:
Up to 3 months past due
3 to 6 months past due
Over 6 months past due
Total 2015
£m
2.4
0.2
0.2
2.8
Impaired
2015
£m
(0.1)
(0.1)
(0.2)
(0.4)
Not
impaired
2015
£m
2.3
0.1
–
2.4
Total 2014
£m
2.0
0.1
0.2
2.3
Impaired
2014
£m
(0.1)
(0.1)
(0.1)
(0.3)
Not
impaired
2014
£m
1.9
–
0.1
2.0
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.
14. Cash and cash equivalents
Cash at bank and in hand
Restricted cash – tenants’ deposit deeds
2015
£m
40.3
2.3
42.6
2014
£m
2.0
1.7
3.7
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
2015
£m
3.9
3.9
2.3
13.3
18.8
0.4
2.8
45.4
2014
£m
4.4
2.5
1.7
10.1
14.3
0.3
2.7
36.0
There is no material difference between the above amounts and their fair values due to the short-term nature of
the payables.
Workspace Group PLC Annual Report and Accounts 2015
127
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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)
Finance lease obligations
(b) Net Debt
Borrowings per (a) above
Adjust for:
Finance leases
Cost of raising finance
Foreign exchange differences
Cash at bank and in hand (note 14)
Net Debt
2015
£m
2014
£m
48.8
56.8
67.6
83.7
9.0
44.4
7.1
317.4
2015
£m
317.4
78.3
56.6
60.4
83.7
9.0
44.3
3.5
335.8
2014
£m
335.8
(7.1)
3.0
(3.3)
310.0
(40.3)
269.7
(3.5)
3.8
3.9
340.0
(2.0)
338.0
At 31 March 2015 the Group had £100m (2014: £70m) of undrawn bank facilities and £40.3m of unrestricted cash
(2014: £2m). £30m of bank borrowings were repaid during the year.
(c) Maturity
Repayable between three years and four years
Repayable between four years and five years
Repayable in five years or more
Cost of raising finance
Foreign exchange differences and hedge adjustment
Finance leases
Repayable in five years or more
2015
£m
50.0
57.5
202.5
310.0
(3.0)
3.3
310.3
2014
£m
–
80.0
260.0
340.0
(3.8)
(3.9)
332.3
7.1
317.4
3.5
335.8
128
Workspace Group PLC Annual Report and Accounts 2015
(d) Interest rate and repayment profile
Current
Bank overdraft due within one year
or on demand
Non-current
Private Placement Notes:
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
–
57.5
310.0
5.6%
5.53%
LIBOR +3.5%
LIBOR +3.5%
LIBOR +3.5%
LIBOR +2.5%
LIBOR +2.3%
6.0%
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
(e) Derivative financial instruments
The following derivative financial instruments are held:
Interest rate swap
Cash flow hedge – cross currency swap
Amount
£95m
$100m/£64.5m
Rate payable
(or cap strike rate)
(%)
1.87%
5.66%
Term/expiry
June 2018
June 2023
The interest rate swap is treated as a financial instrument at fair value with changes in value dealt with in the
Consolidated Income Statement during each reporting year.
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) Financial instruments and fair values
Financial liabilities held at amortised cost
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 (assets)/liabilities at fair value through equity
Derivative financial instruments:
Cash flow hedge – derivatives used for hedging
Financial assets at fair value through profit or loss
Deferred consideration (see note 13)
2015
Book Value
£m
2015
Fair Value
£m
2014
Book Value
£m
2014
Fair Value
£m
48.8
56.8
160.3
44.4
7.1
317.4
48.8
62.1
160.3
44.4
7.1
322.7
78.3
56.6
153.1
44.3
3.5
335.8
78.3
60.5
153.1
44.3
3.5
339.7
2.6
2.6
0.5
0.5
(0.3)
2.3
(0.3)
2.3
6.7
7.2
6.7
7.2
20.3
20.3
10.2
10.2
The fair value of the Retail Bond has been established from the quoted market price at 31 March 2015 and is thus
a Level 1 valuation as defined by IFRS 13.
Workspace Group PLC Annual Report and Accounts 2015
129
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 NOTES TO THE FINANCIAL STATEMENTS CONTINUED
16. Borrowings continued
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 total change in fair value of derivative financial instruments recorded in the income statement was a loss of
£2.2m (2014: profit of £2.2m).
The total change in fair value of derivative financial instruments recorded in other comprehensive income was
a loss of £0.3m (2014: £2.9m).
(g) Financial instruments by category
Assets
a) Derivatives used for hedging
Derivative financial instruments
b) Assets at value through profit or loss
Financial assets at fair value through profit or loss
c) Loans and receivables
Cash and cash equivalents
Trade and other receivables excluding prepayments1
Total
Liabilities
a) Liabilities at fair value through profit or loss
Derivative financial instruments
b) Derivatives used for hedging
Derivative financial instruments
c) Other financial liabilities at amortised cost
Borrowings (excluding finance leases)
Finance lease liabilities
Trade and other payables excluding non-finance liabilities2
Total
2015
£m
0.3
2014
£m
–
20.3
10.2
42.6
4.9
47.5
68.1
2015
£m
2.6
–
310.3
7.1
38.7
356.1
358.7
3.7
5.3
9.0
19.2
2014
£m
0.5
6.7
332.3
3.5
30.8
366.6
373.8
1.
Trade and other receivables exclude prepayments of £2.4m (2014: £2.8m) and non cash deferred consideration of £20.3m
(2014: £10.2m).
2. Trade and other payables exclude other tax and social security of £3.9m (2014: £2.5m) and deferred income of £2.8m (2014: £2.7m).
(h) 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
£3.6m of finance leases were acquired in the year (see note 10).
130
Workspace Group PLC Annual Report and Accounts 2015
2015
£m
0.5
1.8
49.3
51.6
(44.5)
7.1
2014
£m
0.2
1.0
21.0
22.2
(18.7)
3.5
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 management.
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 2015 97% (2014: 89%) 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 and decreased net interest payable
and equity respectively by £0.1m (2014: £0.2m).
(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 around 4,000 tenants over approximately
100 properties. The largest 10 single tenants generate less than 7% (2014: 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 months’ rent on inception of lease as security against default. Total tenant deposits held are
£15.6m (2014: £11.8m). 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. 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)
2015
£m
42.6
2.4
14.1
8.7
67.8
2014
£m
3.7
2.0
2.0
11.2
18.9
Workspace Group PLC Annual Report and Accounts 2015
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17. Financial risk management objectives and policy continued
(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 2015 headroom excluding overdraft and cash was £100m (31 March 2014: £70m).
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 2015
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 2014
Financial liabilities
Bank loans
6% Retail Bond
Private Placement Notes
Other term loan
Derivative financial instruments
Finance lease liabilities
Trade and other payables†
Carrying
Amount
£m
50.0
57.5
157.5
45.0
2.6
7.1
38.7
358.4
Carrying
Amount
£m
80.0
57.5
157.5
45.0
7.2
3.5
30.8
381.5
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
1.5
3.5
8.7
1.8
1.8
0.5
38.7
56.5
Due
within
1 year
£m
2.3
3.5
8.7
1.8
1.5
0.2
30.8
48.8
1.5
3.5
8.7
1.8
1.8
0.5
–
17.8
51.8
3.5
8.7
1.8
1.8
0.5
–
68.1
–
62.7
200.5
53.3
0.3
50.1
–
366.9
54.8
73.2
226.6
58.7
5.7
51.6
38.7
509.3
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
–
18.0
2.3
3.5
8.7
1.8
1.5
0.2
–
18.0
80.8
66.1
200.1
55.0
2.7
21.6
–
426.3
87.7
76.6
226.2
60.4
7.2
22.2
30.8
511.1
† Trade and other payables exclude other tax and social security of £3.9m (2014: £2.5m) and deferred income of £2.8m (2014: £2.7m).
132
Workspace Group PLC Annual Report and Accounts 2015
(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 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 2015 Group equity was £1,146.3m (2014: £726.1m), and Group net debt (debt less cash at bank and in
hand) was £269.7m (2014: £338.0m). Group gearing at 31 March 2015 was 24% (2014: 46%).
Following the refinancing in July 2013, 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 year to cash generated from operations:
Profit before tax
Depreciation
Amortisation of intangibles
Profit 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
This liability was reclassified during the year (see note 20).
2015
£m
360.0
0.7
0.2
(0.3)
(10.1)
(318.0)
2.0
2.2
(0.1)
18.6
(8.4)
(0.1)
7.6
54.3
2015
£m
40.3
2.3
42.6
2015
£m
–
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
Workspace Group PLC Annual Report and Accounts 2015
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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 the Glebe Proceeds Share Agreement (GPSA).
The GPSA provided for the former lenders to Workspace Glebe to share in net cash proceeds from disposals from the
Glebe property portfolio once Workspace received its priority return. The priority return was £92m. For proceeds up to
£170m the lenders’ share (after deducting Workspace’s priority return) was 50%, from £170m up to £200m it was 30%
and nil thereafter. The maximum payable under the GPSA was capped at £48m. All disposals were at the option of
Workspace and there are no time limits.
In measuring the amount attributable to NCI, the Group took into account the likelihood that a property would be
sold and that a payment may be made. On this basis, the Group attributed amounts to NCI when it considered it
probable that it would sell the relevant properties. No amounts were attributed to NCI in relation to properties that
the Group had no intention of selling.
In December 2014 an agreement was reached with the former lenders to terminate the GPSA for a cash settlement
of £30m.
The total valuation of the Glebe portfolio at the date of settlement was £222m (31 March 2014: £217m). While a number
of the assets had residential redevelopment potential a substantial part of the portfolio comprised of investment
properties that Workspace had no plans to sell. The value of the properties with redevelopment potential which
management considered probable to be sold for cash was £93m at the date of settlement (31 March 2014: £107m).
Total proceeds including cash received to date from disposals of £45m (31 March 2014: £14m) would therefore be
£138m (31 March 2014: £121m). It was estimated that net proceeds after costs that would be realised was £131m
(31 March 2014: £114m). As a result, the amount attributable to the former lenders (after deducting Workspace’s
priority return) increased by £9m to £20m at the date of settlement (31 March 2014: £11m). On settlement, the Group
derecognised non-controlling interests of £20m and recorded a decrease in equity attributable to owners of the
parent of £10m.
In the prior year, the Group was in discussions with the FRC Conduct Committee regarding the accounting for the
GPSA. An alternative view of the measurement basis for NCI would be to attribute the maximum amount that would
be payable if all of the properties were sold at their carrying value at the balance sheet date. The amounts that would
then be recognised as NCI would have been a maximum of £48m as noted above. Management did not believe this
approach to be appropriate. In managements view, the measurement basis adopted best reflects the commercial
objectives and economic substance of the GPSA, in particular that no amounts should be attributed to NCI for
proceeds that are highly unlikely to arise.
Distribution of amounts payable under the GPSA was recognised as a liability when it was considered that a contractual
obligation was established. At 31 March 2014, we considered there to be a contractual obligation once a redevelopment
contract had been exchanged with a third party. During the year, the Directors further considered the point at which a
contractual obligation to pay a distribution arises. At the point of exchange, there are often still a number of conditions to
be satisfied before completion of the contract. The Directors therefore revised the application of this policy such that a
liability was only recognised when the Group had an unconditional legal obligation to make a distribution to the NCI that
was no longer at its discretion, in accordance with the requirements of IAS 32 ‘Financial Instruments: Presentation’. This is
usually on completion of the redevelopment contract. Other amounts attributable to the GPSA were classified as NCI in
the balance sheet. Had this principle been applied at 31 March 2014 non-current liabilities would have been reported as
being £nil rather than £11m and NCI would have been reported as £11m rather than £nil. The Directors considered this
adjustment to be insufficiently material to warrant a prior year adjustment. The Group therefore reclassified the liability
to equity during the year. The reclassification has no impact on EPRA NAV or the income statement.
As noted above, during the year an agreement was reached with the former lenders to terminate the GPSA. At the
settlement date no amounts were recognised as a liability as there was no contractual obligation to pay a distribution
at that time.
Having adopted the accounting policies for the GPSA described above, the discussions with the FRC Conduct
Committee were concluded in November 2014.
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Workspace Group PLC Annual Report and Accounts 2015
21. Share capital and share premium
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
2015
Number
161,107,649
2014
Number
145,616,695
2015
£m
161.1
2015
Number
145,616,695
15,490,954
161,107,649
2014
£m
145.6
2014
Number
144,936,155
680,540
145,616,695
On 12 November 2014 the Group undertook a placement of 14,627,492 shares at 660p per share raising £94.0m
net of expenses.
The Group also issued 863,462 (2014: 680,540 shares) shares during the year to satisfy the exercise of share options.
Balance at 1 April
Issue of shares
Balance at 31 March
22. Other reserves
Balance at 31 March 2013
Share based payments
Change in fair value of derivative financial instruments
(cash flow hedge)
Balance at 31 March 2014
Share based payments
Change in fair value of derivative financial instruments
(cash flow hedge)
Balance at 31 March 2015
Share Capital
2015
£m
145.6
15.5
161.1
2014
£m
144.9
0.7
145.6
Share Premium
2015
£m
58.2
78.6
136.8
2014
£m
58.8
(0.6)
58.2
Equity
settled
share based
payments
£m
6.6
1.6
–
8.2
2.0
–
10.2
Merger
reserve
£m
8.7
–
Hedging
reserve
£m
–
–
–
8.7
–
–
8.7
(2.9)
(2.9)
–
(0.3)
(3.2)
Total
£m
15.3
1.6
(2.9)
14.0
2.0
(0.3)
15.7
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 33,740 shares were transferred to employees on the exercise of share options. At 31 March 2015 the number
of shares held by the Trust totalled 75,226 (2014: 108,966). At 31 March 2015 the market value of these shares was
£0.6m (2014: £0.6m) compared to a nominal value of £0.1m (2014: £0.1m).
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
Shares issued from the Trust
Balance at 31 March
2015
£m
8.9
(0.1)
8.8
2014
£m
8.9
–
8.9
Workspace Group PLC Annual Report and Accounts 2015
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Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 NOTES TO THE FINANCIAL STATEMENTS CONTINUED
24. Share-based payments
The Group operates a number of share schemes:
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 2014 LTIP scheme 597,967 performance and matching shares were awarded in June 2014 to Directors
and senior management (2013 LTIP scheme: 766,728).
Details of the movements for the LTIP scheme during the year were as follows:
At 31 March 2013
Granted
Exercised
Lapsed
At 31 March 2014
Granted
Exercised
Lapsed
At 31 March 2015
LTIP
Number
3,636,840
766,728
(1,681,747)
(65,932)
2,655,889
597,967
(762,587)
(1,656)
2,489,613
The closing share price at the date of exercise of shares exercised during the year was £6.00 (2014: £4.53).
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
2015
570p
Nil
3
1%
2%
29%
221p
211p
2014
405p
Nil
3
0.3%
3%
31%
162p
148p
The relative NAV is a non-market based condition and the intrinsic value is therefore the share price at date of
grant of 570 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.
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Workspace Group PLC Annual Report and Accounts 2015
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:
ESOS
SAYE
Options outstanding
At 31 March 2013
Options granted
Options exercised
Options lapsed
At 31 March 2014
Options granted
Options exercised
Options lapsed
At 31 March 2015
Weighted
exercise
price
Number
£13.22 333,328
66,147
–
(39,168)
–
£8.25
(19,720)
£16.12 340,587
–
126,060
– (100,879)
(11,262)
£13.16
Weighted
exercise
price
£1.74
£3.47
£1.63
£2.31
£2.06
£4.59
£1.39
£3.89
Number
51,515
–
–
(18,950)
32,565
–
–
(14,624)
17,941
£18.53 354,506
£3.09
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 closing share price at the date of exercise for the SAYE options exercised during the year was £7.30 (2014: £4.50).
126,060 SAYE share options were granted in the year (2014: 66,147 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
2015
SAYE
3 year
550p
459p
28%
3
1%
2%
25%
2015
SAYE
5 year
550p
459p
28%
5
1%
2%
25%
2014
SAYE
3 year
440p
347p
31%
3
0.3%
3%
25%
2014
SAYE
5 year
440p
347p
31%
5
0.3%
3%
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.
Fair values per share of these options were:
SAYE – 3 year
SAYE – 5 year
2015
Grant date
25 July 2014
25 July 2014
2015
Fair value of award
135p
151p
2014
Grant date
31 July 2013
31 July 2013
2014
Fair value of award
118p
124p
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 (2014: nil shares). 1,168
(2014: 2,920) were exercised in the year and 2,044 (2014: 6,424) shares lapsed.
Workspace Group PLC Annual Report and Accounts 2015
137
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 NOTES TO THE FINANCIAL STATEMENTS CONTINUED
24. Share-based payments continued
IV) Year end summary
At 31 March 2015 in total there were 2,901,188 (2014: 3,071,497) share awards/options exercisable on the Company’s
ordinary share capital. These are analysed below:
Date of grant
LTIP
18 June 2012
19 November 2012
26 June 2013
26 June 2014
ESOS
17 June 2005
1 September 2005
SAYE
20 July 2010
30 July 2012
30 July 2012
31 July 2013
31 July 2013
25 July 2014
25 July 2014
SIP
22 March 2013
Total
Exercise
Price
Ordinary
shares
Number
– 865,229
– 276,642
751,431
–
596,311
–
Vested
and
exercisable
–
–
–
–
Exercisable between
18.06.2015
19.11.2015
26.06.2016
26.06.2017
–
–
–
–
£17.81
£19.37
9,681
8,260
9,681
8,260
17.06.2008
01.09.2008
17.06.2015
01.09.2015
Exercisable between
Exercisable between
£1.66
£1.93
£1.93
£3.47
£3.47
£4.59
£4.59
2,983
151,997
18,652
53,873
8,644
111,430
6,927
–
39,128
–
–
–
–
–
–
–
–
2,901,188
17,941
01.09.2015
01.09.2015
01.09.2017
01.09.2016
01.09.2018
01.09.2017
01.09.2019
01.03.2016
01.03.2016
01.03.2018
01.03.2017
01.03.2019
01.03.2018
01.03.2020
Exercisable between
22.03.2016
22.03.2018
The weighted average exercise price for vested and exercisable shares at 31 March 2015 is: ESOS – £18.53 (2014: £16.12).
The share awards/options outstanding at 31 March 2015 had a weighted average remaining contractual life of: LTIP – 1.1
years (2014: 1.5 years), ESOS – nil years (2014: nil years), SAYE – 1.4 years (2014: 1.6 years), SIP – 1 year (2014: 2 years).
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
2015
£m
2.0
1.3
3.3
2014
£m
1.6
0.9
2.5
The total liability at the end of the year in respect of cash-settled share based schemes was £1.6m (2014: £0.9m).
138
Workspace Group PLC Annual Report and Accounts 2015
25. Related party transactions
Transactions year ended 31 March:
Capital distributions from joint ventures (note 12(a))
Loans to joint ventures (note 12(a))
Fee income and recharges to joint ventures
Fee income and recharges from joint ventures
Distributions received from joint ventures (note 12(a))
Fees paid to CBRE Limited
Balances with joint ventures at 31 March:
Amounts receivable from joint ventures (note 13)
Amounts payable to joint ventures (note 15)
2015
£m
2.0
(0.2)
0.9
(0.7)
1.1
(0.2)
2014
£m
1.6
–
0.9
–
1.1
(0.2)
–
(0.4)
0.3
(0.3)
The Group as property manager of the BlackRock Workspace joint venture is entitled to a performance fee at the
end of the five year initial term of the fund in March 2016. This is based on the Group’s performance as property
manager and on the basis that all the properties in the joint venture are sold. Under IAS18 recognition rules this
has not been recognised as income in the year.
Fees paid to CBRE Limited are in respect of the property valuations.
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
2015
£m
2.9
0.2
1.1
4.2
2014
£m
2.9
0.2
1.1
4.2
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
2015
£m
–
42.3
2014
£m
3.3
8.9
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
Anyspacedirect.co.uk 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
Property advertising
* The share capital of these subsidiaries is held by other Group companies.
† Company registered in Jersey.
Workspace Group PLC Annual Report and Accounts 2015
139
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 NOTES TO THE FINANCIAL STATEMENTS CONTINUED
27. Principal subsidiary undertakings continued
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 2015 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 £0.7m
(2014: £0.6m) 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 in accordance with the new Government auto-enrolment rules.
The number of employees in the scheme at the year end was 181 (2014: 102).
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
2015
£m
0.1
–
0.1
2015
£m
29.4
5.8
0.5
35.7
2014
£m
0.1
0.1
0.2
2014
£m
21.3
2.4
0.6
24.3
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
In April 2015 the BlackRock joint venture exchanged contracts for the sale of four properties for a cash
consideration of £32.1m, in line with their March 2015 valuations.
Clyde House, SL6 was sold for a cash consideration of £0.3m in May 2015, in line with its March 2015 valuation.
In May 2015 the Group exchanged contracts for the purchase of 25 & 28 Easton Street, WC1 for a cash consideration
of £16.6m.
In June 2015 the Group exchanged contracts for the purchase of Angel House, EC1 for a cash consideration
of £34.0m.
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Workspace Group PLC Annual Report and Accounts 2015
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF WORKSPACE GROUP PLC
(PARENT COMPANY)
Report on the Parent Company
financial statements
Our opinion
In our opinion, Workspace Group PLC’s Parent Company
financial statements (the “financial statements”):
– give a true and fair view of the state of the Parent
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
Company’s affairs as at 31 March 2015;
– 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.
What we have audited
Workspace Group PLC’s financial statements comprise:
– the Parent Company Balance Sheet as at 31 March
2015; and
– the notes to the financial statements, which include
a summary of significant accounting policies and
other explanatory information.
Certain required disclosures 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.
The financial reporting framework that has been
applied in the preparation of the financial statements
is applicable law and United Kingdom Accounting
Standards (United Kingdom Generally Accepted
Accounting Practice).
Other required reporting
Consistency of other information
Companies Act 2006 opinion
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.
ISAs (UK & Ireland) reporting
Under International Standards on Auditing (UK and
Ireland) (“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 Parent
Company acquired in the course of performing
our audit; or
– otherwise misleading.
We have no exceptions to report arising from
this responsibility.
– 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.
Directors’ remuneration
Directors’ Remuneration Report –
Companies Act 2006 opinion
In our opinion, the part of the Directors’ Remuneration
Report to be audited has been properly prepared in
accordance with the Companies Act 2006.
Other Companies Act 2006 reporting
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.
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 104, 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 Parent 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 2015
141
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF WORKSPACE GROUP PLC
(PARENT COMPANY) CONTINUED
What an audit of financial statements involves
We conducted our audit in accordance with 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.
We primarily focus 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.
We test and examine information, using sampling and
other auditing techniques, to the extent we consider
necessary to provide a reasonable basis for us to draw
conclusions. We obtain audit evidence through testing
the effectiveness of controls, substantive procedures
or a combination of both.
In addition, we read all the financial and non-financial
information in the Annual Report and Accounts 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.
Other matter
We have reported separately on the Group financial
statements of Workspace Group PLC for the year
ended 31 March 2015.
Sonia Copeland
(Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
2 June 2015
142
Workspace Group PLC Annual Report and Accounts 2015
PARENT COMPANY BALANCE SHEET
AS AT 31 MARCH 2015
Fixed assets
Investments
Current assets
Debtors
Cash at bank and in hand
Derivative financial instruments
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Creditors: amounts falling due after more than one year
Net assets
Capital and reserves
Called up share capital
Share premium account
Investment in own shares
Other reserves
Profit and loss account
Total shareholders’ funds
Notes
2015
£m
2014
£m
C
D
F
E
F
G
G
G
G
G
H
638.3
638.3
289.6
289.6
394.2
0.6
0.3
395.1
(119.7)
275.4
913.7
(312.9)
600.8
161.1
136.8
(8.8)
15.7
296.0
600.8
495.0
0.2
–
495.2
(97.3)
397.9
687.5
(350.5)
337.0
145.6
58.2
(8.9)
14.0
128.1
337.0
The notes on pages 144 to 147 form part of these financial statements.
The financial statements on pages 143 to 147 were approved by the Board of Directors on 2 June 2015 and signed on
its behalf by:
J Hopkins
G Clemett
Directors
Workspace Group PLC
Registered number 2041612
Workspace Group PLC Annual Report and Accounts 2015
143
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 NOTES TO THE PARENT COMPANY 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.
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 page 115. 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 115.
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 £184.5m (2014: £20.5m).
£185m dividends were received in the year from
subsidiary undertakings (2014: nil).
Auditors’ remuneration of £10,000 (2014: £10,000)
has been borne by a subsidiary undertaking.
Proposed dividends are disclosed in note 7 to the
consolidated financial statements.
(C) Investments
Investments are carried in the Company’s balance
sheet at cost less impairment. Impairment reviews are
performed by the Directors when there has been an
indication of potential impairment.
Impairment and reversal of impairment is taken to
the profit and loss account.
(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.
144
Workspace Group PLC Annual Report and Accounts 2015
C. Investments
Cost
Balance at 31 March 2014
Additions in the year
Acquisition of non-controlling interests
Balance at 31 March 2015
Impairment
Balance at 31 March 2014
Reversal of impairment loss
Balance at 31 March 2015
Net book value at 31 March 2015
Net book value at 31 March 2014
Investment
in subsidiary
undertakings
£m
Investment
in joint
ventures
£m
Other
Investments
£m
313.4
315.6
30.0
659.0
25.4
(1.9)
23.5
635.5
288.0
1.6
0.2
–
1.8
–
–
–
1.8
1.6
–
1.0
–
1.0
–
–
–
1.0
–
Total
£m
315.0
316.8
30.0
661.8
25.4
(1.9)
23.5
638.3
289.6
The Directors believe that the carrying value of the investments is supported by their underlying net assets.
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.
During the year, the Company purchased 10% of the share capital of Mailstorage Ltd, a company incorporated
in the UK, for £1.0m.
Acquisition of non-controlling interests represents the settlement of the Glebe Proceeds Share Agreement.
Other additions to investment in subsidiary undertakings includes £313.6m in respect of the acquisition of
Workspace 14 Limited from another Group undertaking.
D. Debtors
Amounts owed by Group undertakings
Corporation tax asset
2015
£m
394.0
0.2
394.2
2014
£m
494.7
0.3
495.0
Amounts owed by Group undertakings are unsecured and repayable on demand. Interest is charged to Group
undertakings.
E. Creditors: amounts falling due within one year
Amounts owed to Group undertakings
Taxation and social security
Accruals and deferred income
2015
£m
114.1
0.6
5.0
119.7
2014
£m
91.8
0.5
5.0
97.3
Amounts owed to Group undertakings are unsecured and repayable on demand. Interest is paid to Group
undertakings.
Workspace Group PLC Annual Report and Accounts 2015
145
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED
F. Creditors: amounts falling due after more than one year
Interest rate
LIBOR+2.3% to 2.5%
5.6%
5.53%
LIBOR+3.5%
LIBOR+3.5%
6.0%
Repayable
June 2018
June 2023
June 2023
June 2020
May 2022 and
May 2023
October 2019
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
2015
£m
50.0
67.8
84.0
9.0
45.0
57.5
313.3
(3.0)
310.3
2.6
–
312.9
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 financial
statements for further details.
All the above borrowings are unsecured.
Maturity analysis of borrowings:
Repayable between three and four years
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 swap2
Amount
£95m
$100m/£64.5m
Rate payable
(or cap strike rate)
(%)
Term/
expiry
1.87% June 2018
5.66% June 2023
2. The cash flow hedge this year has been valued as an asset of £0.3m.
2015
£m
50.0
57.5
205.8
313.3
2015
£m
2.6
–
2.6
2014
£m
–
80.0
256.1
336.1
2014
£m
0.5
6.7
7.2
146
Workspace Group PLC Annual Report and Accounts 2015
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 on pages 135 to 138 and in the consolidated statement of
changes in equity of the consolidated financial statements.
Other reserves:
Balance at 31 March 2013
Share based payments
Change in fair value of derivative financial instruments
Balance at 31 March 2014
Share based payments
Change in fair value of derivative financial instruments
Balance at 31 March 2015
Profit and loss account:
Balance at 31 March 2014
Profit for the year
Dividends paid
Balance at 31 March 2015
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
Equity settled
share based
payments
£m
6.6
1.6
–
8.2
2.0
–
10.2
Merger
Reserve
£m
8.7
–
–
8.7
–
–
8.7
Hedging
Reserve
£m
–
–
(2.9)
(2.9)
–
(0.3)
(3.2)
2015
£m
184.5
(16.6)
94.1
0.1
2.0
(0.3)
263.8
337.0
600.8
Total
£m
15.3
1.6
(2.9)
14.0
2.0
(0.3)
15.7
£m
128.1
184.5
(16.6)
296.0
2014
£m
20.5
(14.5)
0.1
–
1.6
(2.9)
4.8
332.2
337.0
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 on page 139.
Workspace Group PLC Annual Report and Accounts 2015
147
Strategy and performance 16-53Governance 54-104Financial statements 105-147Additional information 148-153Overview 01-15 FIVE-YEAR PERFORMANCE
2011 – 2015
Rents receivable
Service charges and other income
Revenue
Trading 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
2015
£m
63.8
19.8
83.6
45.1
(18.5)
26.6
360.0
359.9
231.4p
12.04p
19.4
1,408.9
14.5
(277.1)
1,146.3
24%
24%
£7.12
£7.03
31 March
2014
£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
46%
46%
£4.99
£4.96
31 March
2013
£m
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
65%
64%
£3.48
£3.48
31 March
2012
£m
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
72%
70%
£3.05
£3.08
31 March
2011
£m
52.0
16.8
68.8
36.3
(22.1)
14.2
52.8
53.5
45.4p
7.99p
9.5
713.4
(12.8)
(366.8)
333.8
110%
106%
£2.83
£2.86
*
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.
PERFORMANCE METRICS
Workspace Group:
Number of estates
Lettable floorspace (million sq. ft.)
Number of lettable units
Average unit size (sq. ft.)
Rent roll of occupied units
Overall rent per sq. ft.
Overall occupancy
Enquiries (number)
Lettings (number)
BlackRock Workspace Property Trust:
Number of estates
Lettable floorspace (million sq. ft.)
Number of lettable units
Average unit size (sq. ft.)
Rent roll of occupied units
Average rent per sq. ft.
Overall occupancy
EPRA Measures
EPRA Earnings per share
EPRA Net Asset Value per share
EPRA NNNAV
EPRA Cost Ratio
148
Workspace Group PLC Annual Report and Accounts 2015
31 March
2015
31 March
2014
31 March
2013
31 March
2012
31 March
2011
86
4.7
4,626
1,011
83
4.5
4,653
967
92
5.0
4,668
1,070
75
4.2
4,525
919
96
5.1
4,856
1,049
£69.4m £58.3m £52.7m £50.2m £48.9m
£11.47
£12.98
83.6%
87.0%
11,535
12,440
1,051
1,014
£18.79
88.7%
14,664
1,313
£15.12
85.8%
12,754
1,020
£11.79
85.3%
12,103
981
16
14
12
0.5
0.5
0.5
435
410
318
1,260
1,300
1,756
£7.1m £6.4m £7.0m
£14.20
£14.66
£16.13
90.4%
87.7%
93.9%
11
0.4
313
1,407
£4.7m
£11.82
89.8%
8
0.3
281
1,147
£3.1m
£10.57
92.1%
18.9p
£7.03
£7.01
34%
15.4p
£4.96
£4.91
33%
–
–
–
–
–
–
–
–
–
–
–
–
PROPERTY PORTFOLIO 2015
Property name
Acton Business Centre
Archer Street Studios
Arches Business Centre
Atlas Business Centre
Baden Place*
Barley Mow Centre
Belgravia Workshops
Bounds Green Industrial Estate
Bow Enterprise Park
Bow Office Exchange
Burford Road Business Centre*
Canalot Studios
Cargo Works
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
Edinburgh House
Enterprise House Hayes**
Europa Studios*
Exmouth House
Fairways Business Centre
160 Fleet Street
Grand Union Studios
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
Kingsmill Business Park*
Leroy House
Leyton Industrial Village
Linton House
Little London*
6 Lloyds Avenue*
Lombard House
Mallard Place
Mare Street Studios
Marshgate Business Centre
Postcode
NW10 6TD
W1D 7AZ
UB2 4AU
NW2 7HJ
SE1 1YW
W4 4PH
N19 4NF
N11 2UL
E3 3QY
E3 3QP
E15 2ST
W10 5BN
SE1 9PG
NW10 6RB
UB2 4BD
W4 5PY
N22 6XJ
EC1V 1JN
EC1R 0AT
SL6 8BR
E2 8HD
NW10 6JZ
NW10 7JH
E1 1DU
SE11 5DP
UB3 1DD
NW10 6ND
EC1R 0JH
E10 7QT
EC4A 2DQ
W10 5AS
WC1X 8AQ
EC1N 8SB
EC1N 8SB
SE27 9SF
EC1N 7RJ
SW8 4AS
E1 9HR
EC2A 4PS
UB7 8JD
SW9 6DE
KT1 3AP
N1 3QP
E10 7QP
SE1 0LH
SE1 2BA
EC3N 3AX
CR0 3JP
N22 6TS
E8 3QE
E15 2NH
Category
Like-for-like
Like-for-like
Redevelopment
Like-for-like
Joint Venture
Refurbishment
Like-for-like
Refurbishment
Redevelopment
Like-for-like
Joint Venture
Like-for-like
Refurbishment
Joint Venture
Joint Venture
Like-for-like
Like-for-like
Joint Venture
Like-for-like
Redevelopment
Refurbishment
Like-for-like
Like-for-like
Like-for-like
Acquisition
Joint Venture
Joint Venture
Like-for-like
Like-for-like
Acquisition
Redevelopment
Acquisition
Refurbishment
Refurbishment
Like-for-like
Refurbishment
Like-for-like
Redevelopment
Refurbishment
Joint Venture
Like-for-like
Joint Venture
Like-for-like
Refurbishment
Refurbishment
Joint Venture
Joint Venture
Redevelopment
Like-for-like
Like-for-like
Redevelopment
Lettable
floor area
sq. ft.
51,040
14,984
40,725
152,501
25,472
70,232
32,373
121,902
12,000
36,962
21,284
49,746
71,770
46,178
72,097
14,255
117,454
32,584
52,879
29,686
41,395
1,562
10,304
40,077
68,468
86,590
26,114
58,931
47,091
41,111
2,000
35,716
3,888
10,961
23,531
–
58,100
19,786
21,798
39,077
373,495
40,151
46,564
132,024
23,339
31,101
34,645
64,310
10,150
38,312
92,673
6,043
753,569
16,532
31,712
879,321
Net rent roll
of occupied
ERV
units
£000s
£000s
744,836
698,334
1,207,500
978,666
374,300
303,452
1,301,177
1,272,368
799,550
569,169
1,886,945
1,613,281
477,822
426,365
959,770
848,947
78,000
78,000
310,807 345,300
338,500
331,762
1,266,412
1,674,193
2,537,112 3,720,780
580,719
550,069
1,258,550
1,260,151
233,592
230,240
1,422,651
1,003,063
1,192,250
443,366
3,450,633 3,878,235
243,360
780,980
16,400
51,600
927,382
1,500,001 2,054,000
343,352
442,710
2,481,634 3,196,330
455,266
1,250,093 2,153,070
33,800
33,800
1,877,900
630,540
–
74,353
575,435
428,132
205,535
200,114
–
–
1,152,890
918,989
333,440
271,585
644,271
543,622
278,696
290,070
5,676,155 8,816,187
473,382 472,400
1,067,021
1,243,553
907,794
823,700
1,327,566
673,870
82,500
585,863
498,710
1,020,845
1,071,372
582,150
681,134
1,083,204
377,019
82,500
466,331
295,050
226,637
457,775
412,835
Workspace Group PLC Annual Report and Accounts 2015
149
Financial statements 105-147Additional information 148-153Strategy and performance 16-53Governance 54-104Overview 01-15 Net rent roll
of occupied
units
£000s
1,301,556
888,846
264,120
437,555
894,102
195,000
486,056
1,211,283
ERV
£000s
2,903,560 5,315,022
491,600 643,300
870,205
1,159,419
327,493 408,070
88,588
15,734
1,376,669
1,144,311
396,084
498,750
210,353 456,500
1,686,826
967,640
318,900
507,000
1,076,300
195,000
607,369
1,340,178
1,880,464 2,269,287
301,649
1,950,291
730,720
851,240
2,879,818 3,127,274
397,400
304,862
–
–
585,660
488,263
4,495,356 4,525,967
1,535,205
1,172,910
1,299,054
561,000
1,037,412
1,615,758
947,200
2,032,632 2,260,806
1,218,641
1,044,038
881,239
760,199
826,446
687,572
1,187,897
195,628
1,037,631
–
688,091
1,640,125
490,991
187,917
1,771,853
728,770
821,394
PROPERTY PORTFOLIO 2015 CONTINUED
Property name
Postcode
Metal Box Factory
SE1 0HS
Morie Street Business Centre
SW18 1SL
Pall Mall Deposit
W10 6BL
Park Royal Business Centre
NW10 7LQ
Park Royal House
NW10 7JH
Parkhall Business Centre
SE21 8EN
Parma House
N22 6XF
Peer House
WC1X 8LZ
Pill Box
E2 6GG
Poplar Business Park
E14 9RL
Progress Way Business Park*
CR0 4XD
Q West
TW8 0GP
Quality Court
WC2A 1HR
Quicksilver Place
N22 6XH
Rainbow Industrial Estate
SW20 0JK
Riverside
SW18 4UQ
ScreenWorks
N5 2EF
Shaftesbury Centre
W10 6BN
Southbank House
SE1 7SJ
Spectrum House
NW5 1LP
Stratford Office Village
E15 4BZ
SE16 4DG
The Biscuit Factory – Investment
The Biscuit Factory – Redevelopment SE16 4DG
The Faircharm
The Ivories
The Leathermarket
The Light Box
The Light Bulb
The Wenlock
Thurston Road
Union Court*
Uplands Business Park
Vestry Street Studios
Westbourne Studios
Westminster Business Square
Whitechapel Technology Centre
Zennor Tradepark
SE8 3DX
N1 2HY
SE1 3ER
W4 5PY
SW18 4GQ
N1 7EU
SE13 7SH
SW4 6JP
E17 5QN
N1 7RE
W10 5JJ
SE11 5JH
E1 1DU
SW12 0PS
* BlackRock Joint Venture
** Enterprise House Hayes LLP Joint Venture
Category
Refurbishment
Like-for-like
Like-for-like
Like-for-like
Redevelopment
Like-for-like
Like-for-like
Acquisition
Refurbishment
Redevelopment
Joint Venture
Like-for-like
Like-for-like
Like-for-like
Redevelopment
Like-for-like
Redevelopment
Like-for-like
Like-for-like
Like-for-like
Like-for-like
Like-for-like
Redevelopment
Redevelopment
Like-for-like
Like-for-like
Like-for-like
Redevelopment
Like-for-like
Redevelopment
Joint Venture
Like-for-like
Acquisition
Like-for-like
Refurbishment
Like-for-like
Like-for-like
Lettable
floor area
sq. ft.
103,501
21,696
49,350
30,306
10,289
117,815
34,984
10,077
50,409
58,849
31,002
40,447
16,924
27,810
1,000
99,493
61,867
12,617
63,137
46,463
52,137
216,485
89,067
–
24,814
125,785
61,964
52,126
31,152
–
67,794
280,497
22,759
56,484
57,133
37,935
66,054
150
Workspace Group PLC Annual Report and Accounts 2015
The Company’s advisers include:
Independent auditors
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
1 Embankment Place
London WC2N 6RH
Solicitors
Slaughter and May
One Bunhill Row
London EC1Y 8YY
Clearing bankers
The Royal Bank of Scotland
280 Bishopsgate
London EC2M 4RB
Joint stockbrokers
Bank of America Merrill Lynch
2 King Edward Street
London EC1A 1HQ
Liberum Capital Limited
Ropemaker Place
Level 12
25 Ropemaker Street
London EC2Y 9LY
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 BS13 8AE
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 an investor website, which holds,
amongst other information, a copy of the latest annual
report and accounts, a list of properties held by
the Group and copies of all press announcements.
The site can be found at www.workspace.co.uk
Registered office and headquarters
Chester House
Kennington Park
1–3 Brixton Road
London SW9 6DE
Registered number: 2041612
Telephone:
Facsimile:
Web:
Email:
+44 (0) 20 7138 3300
+44 (0) 20 7247 0157
www.workspace.co.uk
investor.relations@workspace.co.uk
Company Secretary
Carmelina Carfora
Workspace Group PLC Annual Report and Accounts 2015
151
Financial statements 105-147Additional information 148-153Strategy and performance 16-53Governance 54-104Overview 01-15
GLOSSARY OF TERMS
Adjusted underlying earnings are based on trading
profit after interest adjusted to exclude exceptional items.
Loan to value is the current loan balance divided by
the current value of properties owned by the Group.
BWPT BlackRock Workspace Property Trust, a joint
venture property fund with the BlackRock UK Property
Fund in which the Group holds a 20.1% interest.
Cash rent roll is the current net rents receivable for
occupied units.
Earnings per share (EPS) is the profit after taxation
divided by the weighted average number of shares in
issue during the period.
Market rental values (see ERV).
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.
Employee Share Ownership Trust (ESOT) is the trust
created by the Group to hold shares pending exercise
of employee share options.
Occupancy percentage is the area of space let divided
by the total net lettable area (excluding land used for
open storage).
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%.
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.
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.
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.
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.
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 is the Investment Property Databank Ltd, a company
that produces an independent benchmark
of property returns.
Total Shareholder Return (TSR) is the return obtained by
a shareholder calculated by combining both share price
movements and dividend receipts.
IPD Quarterly Universe is the IPD quarterly universe
property fund benchmark of approximately 250 (£50bn)
UK domestic property funds.
Trading profit after interest is net rental income,
joint venture trading and finance income, less
administrative expenses, less finance costs.
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.
152
Workspace Group PLC Annual Report and Accounts 2015
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 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
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Studios
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Share price and information
Publications archive
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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
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These materials contain ECF (Elemental
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