WORKSPACE
UNDERSTANDS
WORK SPACE
ANNUAL REPORT
AND ACCOUNTS 2016
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6
2016 Financial Highlights
Profit Before Tax
(£m)
+9%
Trading Profit After
Interest (£m)
EPRA NAV Per Share
(£)
Dividend Per Share
(pence)
+65%
+31%
+25%
2016
2015
2014
391.3
360.0
2016
2015
2014
252.5
26.6
20.5
43.9
2016
2015
2014
9.23
7.03
2016
2015
2014
4.96
15.05
12.04
10.63
Like-for-like Rent Roll
(£m)
Like-for-like Rent Per sq. ft.
(£)
Property Valuation
(£m)
Total Return
(%)
+15%
+16%
+21%
26%
2016
2015
48.8
42.3
2016
2015
22.37
19.22
2016
2015
2014
1,779
1,423
2016
2015
2014
1,078
26.3
36.7
34.7
Total Shareholder Return
(%)
Customer Satisfaction
(%)
-7%
-7
2016
2015
2014
76%
47
2016
2015
2014
76
76
77
78
Online
For the latest news
and information about
Workspace’s properties
and customer offer go to
www.workspace.co.uk
Entrance at
160 Fleet Street, Midtown
d "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Strong
performance
from active
management
and capital
recycling
Overview
IFC 2016 Financial Highlights
02 At a Glance
Strategic Report
04 Chairman’s Statement
06 Our Market
18 Chief Executive’s
Strategic Review
32 Key Performance Indicators
34 Our Business Model
36 Resources and Relationships
43 Principal Risks and
Uncertainties
52 Going Concern and
Viability Statement
53 Business Review
Our Governance
63 Chairman’s Governance
Investment Committee
Statement
66 The Board
69 Corporate Governance Report
69 Executive Committee
72
73 Risk Committee
88 Nomination Committee
91 Audit Committee
98
Directors’ Remuneration
Report
120 Report of the Directors
124 Statement of Directors’
Financial Statements
125 Independent Auditors’
Report to the Members
of Workspace Group PLC
131 Consolidated Income
Statement
131 Consolidated Statement
of Comprehensive Income
132 Consolidated Balance Sheet
133 Consolidated Statement
of Changes in Equity
134 Consolidated Statement
of Cash Flows
135 Notes to the Financial
Statements
164 Independent Auditors’ Report
to the Members of Workspace
Group PLC (Parent Company)
166 Parent Company Balance
Sheet
167 Parent Company Statement
of Changes in Equity
168 Notes to the Parent Company
Financial Statements
Additional Information
171 Five-year Performance
171 Performance Metrics
172 Property Portfolio 2016
174 Glossary of Terms
176 Investor Information
IBC Workspace Group Online
Responsibilities
01 "Workspace Group PLC Annual Report and Accounts 2016
At a Glance
Our business has two distinct
parts that come together to create
superior value for shareholders
Workspace is a
property company
Workspace is a FTSE 250 Real Estate Investment
Trust with a portfolio worth £1.8bn.
We own properties in London and invest heavily in the
development and design of our buildings, transforming
them to meet our customers’ needs. We make strategic
acquisitions to meet the growing demand for our type of
space, buying in both established and up-and-coming
locations where we see opportunities to create value.
We refurbish
Undertake major refurbishment projects to add new space
by adding floors and expanding existing buildings, or
upgrade existing space. We design smart, dynamic and
comfortable environments creating new atriums, terraces,
cafés, co-working areas and meeting rooms.
We reposition
Carry out light, internal refurbishments to enhance space
and bring it up to the exacting standards of our discerning
customers.
The Record Hall
Hatton Garden
Westbourne Studios
Portobello
We redevelop
Partner with residential developers to transform light
industrial sites into mixed-use schemes, creating brand new
business centres and generating significant returns.
We provide business-grade connectivity
Provide a digital infrastructure that offers business-class
connected services to support growing businesses. The
secure, super-fast and resilient network allows us to enable
our buildings with intelligent Wi-Fi so our customers can
work how and where they want.
The Biscuit Factory
Bermondsey
Entrance at Cargo Works,
Southbank
02 "Workspace Group PLC Annual Report and Accounts 2016
Cargo Works
Southbank
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Workspace is an
operator focused on
its customers
We are home to around 4,000 New and Growing
Companies in some 70 properties across London.
We build long-term relationships with our customers, a
hugely diverse spread of the New and Growing Companies
who are driving the London economy. Our Centre
Managers get to know the people in their buildings but give
them freedom, making it easy for them to come and go as
their companies evolve and grow.
With the customer every step of the way
Workspace is unique in that every touch point with its
customers, from their initial enquiry to the lease negotiation,
is handled by a member of the in-house team.
1. Search for space
The majority of customers find Workspace online thanks to
our in-house Marketing team and digital marketing strategy,
while we also have a strong recommendation rate from
existing customers and their clients.
1.
Search for
space
6.
Renewal
2.
Enquiry
From search
to moving in
5.
Moving day
3.
Viewings
4.
Lease
negotiation
03 "Workspace Group PLC Annual Report and Accounts 2016
2. Enquiry
The Workspace Enquiries team speaks to the customer
about their requirements and outlines available options.
3. Viewings
Workspace Centre Managers show the customer around
multiple sites and units, enabling them to make the
right decision.
4. Lease negotiation
The Workspace Lettings team draws up an offer letter for
the chosen office space and negotiates the lease with the
customer.
5. Moving day
The customer moves in with support from their dedicated
Centre Manager and immediately becomes a member of
the Workspace community.
6. Renewal
If a customer wants to stay, the Workspace Renewals team
draws up a new lease and, in many cases, supports an
expansion or move to a new Workspace centre.
Customer base – top 10 categories
Marketing
Fashion
Finance
Architect
Software Design
Brand Design
Business Consultancy
Not-For-Profit
IT
Film
Chairman’s Statement
Of course, as we grow and widen our presence across
London, we do so with recognition of the role we must play
in the local community. We work hard to look at ways in
which our presence can benefit those around us and we
are proud of the way in which, for example, our annual
Inspiresme Week enables us to connect our customers and
their businesses with the local young people who will be
core to the future economic success of London.
That the UK’s capital city is robust and growing healthily is
not in doubt. The outcome of the EU referendum and the
appointment of the new London mayor will provide new
challenges and opportunities to its future. As home to New
and Growing Companies, I believe that we have the right
strategy to continue to be responsive to the Capital’s
evolution and, in playing our part in support of these
customers, continue to provide exceptional value to all
of our stakeholders.
Daniel Kitchen
Non-Executive Chairman
The last few years have seen Workspace develop a very
clear strategy of providing a home for New and Growing
Companies (‘NGCs’) in London and intensively managing
the buildings in which our customers work. This approach
continues to prove successful and has resulted in another
year of strong revenue growth and record profit. Group
net rental income was £74.1m, an increase of 28.4%, profit
before tax was £391.3m, up 8.7% over last year, and EPRA
NAV per share was £9.23, an increase of 31.3%.
Reflecting the continued momentum in income generation
thanks to these strong results, the Board is recommending
an increase in the final dividend to 10.19p per share. This
represents an increase in the total dividend for the year
of 25% to 15.05p per share.
Having a clear strategy is one thing, but our ability to
deliver it operationally is the real key to our success. In
our case, from the Asset Management teams with their
understanding of individual customer needs, to the deep
expertise and market knowledge in our Development
and Investment teams, our people work together with a
single-minded focus on delivering for our customers.
On behalf of the Board, I would like to thank them for the
expertise and dedication that continues to bring our
strategy to life and produce such outstanding results.
This deep well of expertise has helped us remain alive to
the changing needs of our customers and the way in which
working in London is evolving. We are seeing continued
strong demand from NGCs for office space in different
areas and in different sizes, and are delighted with the pace
of letting up at our new or upgraded business centres.
Therefore, we are adding judiciously to our portfolio and
have been disposing of light industrial assets, recycling
capital into business centres where we can add more value.
04 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Daniel Kitchen
Non-Executive
Chairman
Photographed
on the March
Board tour
talking to
Chris Nobbs of
MBJ London at
Canalot Studios,
Ladbroke Grove.
Being alive
to changing
customer trends
and to an evolving
London economy
allows us to move
quickly to position
our portfolio and
continue to
generate growth.
05 "Workspace Group PLC Annual Report and Accounts 2016
Our Market
07 London
property market
07 London
development
market
08 London for New
and Growing
Companies
10 Workspace in
the competitive
landscape
Café at Grand Union Studios,
Ladbroke Grove
06 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
London property market
London continues to be one of the world’s most attractive cities for
investment in commercial real estate. In the first three months of 2016,
a total of £3.5bn was invested in London offices, with total investment
volumes remaining on a par with the same period in 2015. The market
continues to be dominated by international investors, who were involved
in 67% of all transactions1.
At Workspace, we have been successful in acquiring five new properties in
the year and have stepped away from many more transactions where we’ve
seen pricing move beyond levels we are comfortable with, given our robust
IRR targets. During the year, we have seen the market shift as geopolitical
uncertainties, including concerns over a slowdown in China and the EU
referendum in the UK, have led to a pause for breath from some capital
market investors.
Our confidence in our business model is high, with our business centres
proving hugely popular across a wide range of London locations. With
the proven success of our model in newly developed buildings, converted
warehouses and refurbished mid-century office blocks, we are able to take
advantage of a wider variety of acquisition opportunities. In the last year, for
example, we have acquired successfully in core locations, such as Clerkenwell
and Islington, as well as in emerging areas of London, such as Wood Green,
Surrey Quays and Earlsfield.
London development market
In the first quarter of 2016, construction of commercial property in London
was at its highest level since 2008 with construction starts up about 20%
from the previous quarter2. This is in response to a vacancy rate in London
running at 2.8% compared to a long-term average of 5.3%3. Construction
inflation has continued to rise in London, with contractors being selective in
the size and types of contract they are prepared to bid on.
1. Source: CBRE.
2. Source: The JLL and Glenigan UK Commercial Construction Activity Index.
3. Source: CBRE.
07 "Workspace Group PLC Annual Report and Accounts 2016
Our Market
continued
In response to the tight construction market, Workspace has forged
long-term relationships with a select number of contractors and trade
contractors in order to ensure that competitive prices are achieved for
new construction projects. In addition, Workspace’s redevelopment model,
whereby third party developers or housebuilders build and return new
commercial property to Workspace, has proved particularly successful in
removing the risk of inflation.
London for New and Growing Companies
London continues to be a vibrant home for business and is maintaining
its draw for highly skilled individuals seeking employment. It is the leading
global centre for talent and high-skills work, employing 47% of all high-skill
workers across Europe’s leading business cities1. It is little wonder then that
the demand for office space in London is increasing. Office employment
rose by 29.3% in the 10 years to 2014 and it is forecasted to rise by a further
11% in the subsequent five years2.
Against this backdrop, Workspace is seeing continued strong demand
for the tailored product we provide in our business centres for New and
Growing Companies.
The forecast rise in office
employment between
2014 and 2019
London is the leading
global centre for talent
and high-skills work
+11%
No.1
1. Source: Deloitte.
2. Source: Oxford Economics.
08 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Responding to market trends
Market trend
Workspace response
The population of London continues to grow and more
and more small businesses are making London their
home.
We continue to add business centre space all over
London and expect to deliver nearly 600,000 sq. ft. of
new and upgraded space in the next three years to
cater for the ongoing demand from New and Growing
Companies.
Investment in infrastructure in London continues apace
and improved transport links are opening up new areas of
London, as well as encouraging more travel into the city.
We are acquiring and refurbishing or redeveloping
properties in areas where we see regeneration
potential. For example, our properties in and around
Farringdon will greatly benefit from Crossrail.
Ways of working continue to adapt with small businesses
becoming increasingly mobile and less tied to a fixed
location.
We are rolling out building-wide Wi-Fi across our
portfolio so that customers can move between them
and remain connected to their network.
Businesses are becoming more and more digitally
dependent and have greater requirements than ever for
high-speed, resilient connectivity.
Co-working has moved to the mainstream as the
importance of the community has grown, whether online
or physical.
We invest heavily in the technology infrastructure in
our buildings and have developed a tailored, business
grade connected services offer for customers. We
continue to invest in technology for our own business
and operating systems to ensure we remain ahead of
customer trends.
Workspace was an early mover into co-working, opening
Club Workspace in 2011, and we have continued to
expand that offer, now with 16 locations around London.
In addition, our programme of business insight events for
all customers encourages networking and inter-trading.
Occupiers are expressing a deeper interest in their
environmental footprint and their impact on the
communities in which they operate.
We have engaged Jones Lang LaSalle to undertake a
‘Healthy Buildings’ study assessing the sustainability of
our buildings and the impact of that on our customers.
We run a number of programmes to engage with our
local communities, including Inspiresme Week, which
saw 71 students take up work placements with
Workspace and its customers and resulted in four
students being offered further employment.
09 "Workspace Group PLC Annual Report and Accounts 2016
Our Market
continued
Workspace in the competitive landscape
Investors often ask who our competitors are and it’s a difficult question to
answer as our business model is unique.
The commercial real estate landscape in London, and the various offers that
are available to business occupiers in that market, sits along a spectrum
that covers everything from the conventional landlord on the one hand to
the fully serviced office operator on the other.
On one end are traditional landlords who own freehold portfolios and let
large amounts of space, unfurnished, to tenants on long-form leases with
little or no flexibility. The landlords provide very limited services and the
buildings, which tend to have a corporate design, require minimal
operational management or interaction with customers.
On the other end of the spectrum, serviced office operators take space
on a long leasehold basis and sublet it, fully furnished, typically charging
tenants by the desk, plus additional charges for bureau services ranging
from concierge and admin support to call answering. Historically the space
let by these operators again leaned towards corporate design, however
over the last few years, new players have entered the serviced office market
bringing with them more modern designs and a bias towards co-working
and break-out spaces.
Workspace has long sat in the middle of this spectrum for several reasons.
In one sense, we are a conventional landlord as we own our real estate.
However, we are unique in letting our space on flexible leases that can be
broken at short notice. We refer to customers, rather than tenants, and
build relationships with them to better understand how we can meet their
needs and help their businesses grow. We charge by the square foot with a
service charge that covers communal facilities, such as lifts, and customers
pay for their connected services and utilities on top. We ensure that all our
business centres are equipped with facilities such as on-site cafés, break-out
spaces for networking and a rolling calendar of business insight events.
Unlike serviced office operators, we do not furnish the units we let as we
know our customers want to personalise their space, putting their own
brand on it.
10 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
What makes
us different in
the market?
Understanding
what works
for our
properties,
customers
and our
shareholders...
Entrance at Grand Union Studios,
Ladbroke Grove
11 "Workspace Group PLC Annual Report and Accounts 2016
Our Market
continued
Ownership
works
We own the
freehold of
our properties
which allows us
to reshape our
portfolio as and
when we choose.
This year we
were able to
move quickly
in selling light
industrial
properties
when we saw
opportunities
to capture
significant value.
Ownership
also gives us
the freedom
to adapt our
buildings as
customer
requirements
and trends
evolve. We
can refurbish,
redevelop and
reposition our
properties,
adding more
space where
possible and
constantly
upgrading
the offer.
Number of properties
owned by Workspace
69
Total sq. ft.
3.8m
All of our properties
are in zones
1-5
12 "Workspace Group PLC Annual Report and Accounts 2016
PADDINGTON
KING’S
CROSS
WEST
END
SHOREDITCH
FARRINGDON
OLD
STREET
BETHNAL
GREEN
STRATFORD
CANARY
WHARF
ISLINGTON
THE
CITY
LONDON
BRIDGE
WATERLOO
KENNINGTON
EARLS COURT
VICTORIA
BATTERSEA
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
ISLINGTON
PADDINGTON
KING’S
CROSS
WEST
END
SHOREDITCH
FARRINGDON
OLD
STREET
BETHNAL
GREEN
STRATFORD
THE
CITY
LONDON
BRIDGE
WATERLOO
KENNINGTON
EARLS COURT
VICTORIA
BATTERSEA
13 "Workspace Group PLC Annual Report and Accounts 2016
CANARY
WHARF
Like-for-like property
Acquisitions
Redevelopments
Refurbishments
Crossrail
Northern Line extension
Our Market
continued
Flexibility
works
The short break
clause on our
two or three-year
lease gives our
customers the
freedom to grow
their business.
The space we
provide to our
customers is
entirely flexible
and can be
personalised
to suit their
business and
their brand.
Break-out space at Chester
House, Kennington Park
14 "Workspace Group PLC Annual Report and Accounts 2016
Break-out area at
160 Fleet Street,
Midtown
Overview
Strategic report
Our governance
Financial statements
Additional information
The contract
that customers
sign for their
connectivity is
as flexible as the
lease they sign –
it matches the
length of that
lease.
Super-fast,
resilient
technology
works
Our properties
have a digital
infrastructure
that provides
business-class
connected
services to
support growing
businesses.
The network
is secure,
super-fast and
resilient and our
buildings are
enabled with
intelligent Wi-Fi,
allowing our
customers to
work how and
where they want.
Break-out area at
160 Fleet Street,
Midtown
15 "Workspace Group PLC Annual Report and Accounts 2016
Our Market
continued
Club Workspace locations
across London
16
Club Workspace at
Vox Studios, Vauxhall
16 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Our latest
customer survey
revealed that
around 50% of
customers sell
to others within
the building and
around 50%
buy from other
customers in
the building.
Collaboration
works
The design of
our business
centres, with
their cafés,
break-out spaces,
co-working
areas and
meeting rooms,
encourages
collaboration
between
customers
who want to
exchange ideas
and network
with like-minded
businesses.
17 "Workspace Group PLC Annual Report and Accounts 2016
Chief Executive’s
Strategic Review
Jamie Hopkins
Chief Executive
Officer
Photographed on
the March Board
tour talking to
Stuart Lancaster,
Centre Manager,
at Canalot Studios,
Ladbroke Grove.
Owning our
own buildings
means we can
act quickly to
support customers
in the face of
fast-changing
technology.
18 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
It is an extremely exciting time to be a New and Growing Company
in London. Huge leaps in technology, improved transportation links
and new neighbourhoods of economic growth are all acting as
catalysts for entrepreneurship. Beyond that, the way in which these
companies want to work is driving a raft of new expectations and
requirements when it comes to finding a home for their businesses.
Against that backdrop, our strategy of owning our own unique
buildings and digital infrastructure, while having direct customer
relationships and providing flexible leases and the right lifestyle
facilities, is proving immensely popular and differentiating us from
others in the market. Our strong results this year, with trading profit
after interest up 65% to £43.9m and rent roll up 12.7%, are testament
to our approach and our commitment to delivering superior
shareholder returns over the long term.
Across London we are seeing activity spread from traditional
working hubs to new areas and we have been acting quickly to
add to our portfolio of properties to support businesses in these
new locations. For example, this year we gained planning consents
for two major refurbishments to create brand new business centres
in Hoxton and Shoreditch and we completed five acquisitions, adding
to existing clusters of properties and increasing our footprint in areas
with regeneration potential.
Trading profit after
interest
+65%
19 "Workspace Group PLC Annual Report and Accounts 2016
Chief Executive’s
Strategic Review
continued
Owning iconic buildings is only part of the story. Today I’m often
asked about how technology and innovation is affecting property
and work space and I answer that they are driving significant
changes to demand for services and facilities that must be reflected
quickly. Thanks to our uniquely close dialogue with customers,
we understand what’s needed and our rolling refurbishment
and redevelopment programme helps keep us at the forefront
in addressing this evolution, adding new facilities and diversifying
our portfolio in response.
We have found that by far the most common requirement for
customers is access to business-class connected services, intelligent
building-wide Wi-Fi and a secure, super-fast and resilient network.
Investing in these areas is an essential cornerstone of our strategy,
helping us to provide not only what customers want today but also
to be prepared for the next wave of changes and needs in the future.
We know how important our customer relationships are, both in
terms of responding to day-to-day requirements in our business
centres and in acting to anticipate new demands. We spend time
on research, gathering data and insight in addition to the feedback
we receive in our regular conversations with customers and
satisfaction surveys.
Keeping Workspace, our buildings and our customers aligned
like this will ensure that we continue to strengthen our reputation
as the home to New and Growing Companies across London.
Jamie Hopkins
Chief Executive Officer
20 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
The right
strategy
continues
to drive
performance
Right
market
London is growing
and changing.
Page 23
WORKSPACE
UNDERSTANDS
WORK SPACE
Right
brand
Increasing
recognition
and reputation.
Page 31
Right
properties
Creating
modern growth
environments.
Page 25
Right
people
Driving
performance.
Page 29
Right
customers
New and Growing
Companies.
Page 27
Meeting rooms at
160 Fleet Street, Midtown
21 "Workspace Group PLC Annual Report and Accounts 2016
Chief Executive’s
Strategic Review
continued
22 "Workspace Group PLC Annual Report and Accounts 2016
Right
market
London is
growing and
changing
We are focused on growing
our portfolio of properties
in London and increasing
our market share.
Why London is the right
market for Workspace
– As a global
entrepreneurial capital,
London is one of the
largest homes to New
and Growing Companies.
– London continues to
evolve with huge
investment in
infrastructure and
development opening
up new areas and
creating regeneration
opportunities.
– We have a deep
knowledge of and
significant expertise in
operating in the London
property market, with
excellent relationships
with local planning
authorities.
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Strategy in action
in 2015/16
– Planning consents
gained for two major
refurbishments to
create brand new
business centres in
Hoxton and Shoreditch
and for two mixed-use
redevelopments in
Stratford and
Raynes Park.
– Involved in transactions
worth over £230m,
including completing five
acquisitions, adding
to existing clusters of
properties and increasing
our footprint in areas with
regeneration potential.
– Continued to see a broad
spread of demand from
New and Growing
Companies all across
London.
Looking forward
– Continue to grow
footprint across London
through targeted
acquisitions to satisfy
demand from New and
Growing Companies.
– Seek planning consents
at eight further
refurbishment and
redevelopment schemes.
View from customer unit
in new building at Vox
Studios, Vauxhall
23 "Workspace Group PLC Annual Report and Accounts 2016
Chief Executive’s
Strategic Review
continued
24 "Workspace Group PLC Annual Report and Accounts 2016
Right
properties
Creating
modern growth
environments
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
– Large scale mixed-use
redevelopment scheme
completed in Ladbroke
Grove with new business
centre, Grand Union
Studios, letting up faster
than expected and at
a higher price point.
– Grand Union Studios
achieved a BREEAM
Excellent certification
and an Energy
Performance Certificate
of A (20).
– Continued disposal of
light industrial properties,
recycling capital into
business centres where
Workspace can add
more value.
– Invested in significant
upgrades to connectivity
in our properties,
installed one of the
UK’s first 10GB fibre
connections and 1.3GB
community Wi-Fi into
a commercial multi-let
building.
Looking forward
– Complete refurbishment
of The Record Hall,
Hatton Garden, and
continue with major
refurbishment projects
at Holywell Centre and
Cremer Business Centre.
– Continue roll out of
technology infrastructure,
including installation of
building-wide Wi-Fi
across our business
centres.
– Continue to educate our
customers on how they
can help us manage our
buildings in the most
environmentally
responsible way.
We identify, develop and
manage smart, dynamic
and comfortable buildings,
where people and their
businesses thrive and grow.
Why investment in
our properties is so
important
– Our refurbishment and
redevelopment pipeline
creates new, higher
quality space with
increased employment
density helping to satisfy
demand and allowing
us to drive pricing.
– The design of our
buildings is all-important
and drives demand: we
are catering for how our
customers want to work,
providing more break-out
areas, cafés, meeting
rooms and event space,
as well as business-grade
technology.
– New and Growing
Companies are
discerning customers
so Workspace needs
to remain ahead
of constantly evolving
trends in order to remain
their go-to home.
Strategy in action
in 2015/16
– Total rent roll up
12.7% in the year, while
like-for-like rent per
sq. ft. was up 16.4% and
like-for-like occupancy
remained stable at 90.7%.
– Completed major
refurbishments at Cargo
Works, The Print Rooms
and Vox Studios, adding
67,000 sq. ft. of higher
quality net lettable space
and achieving pricing
growth ahead of
forecasts. Repositioning
projects also completed
at Westbourne Studios
and Gray’s Inn Road.
Refurbished Club
Workspace and entrance
at The Print Rooms,
Southwark
25 "Workspace Group PLC Annual Report and Accounts 2016
Chief Executive’s
Strategic Review
continued
26 "Workspace Group PLC Annual Report and Accounts 2016
Right
customers
New and
Growing
Companies
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
– Launched a new sales
brochure to clarify the
Workspace offer and
enhance the customer’s
viewing experience.
– Encouraged 59 customer
businesses to provide
work placements to 71
students from 19 local
schools for Inspiresme
Week. Four students
were subsequently
offered further work
experience.
Looking forward
– Continue to evolve
customer platforms and
expand range of business
insight events to educate
and inform, encourage
networking and inter-
trading and continue
to build the Workspace
community.
– Ensure our best in class
technology offer is at
the forefront of the
market for New and
Growing Companies.
– Continue to grow Club
Workspace with three
new clubs in the pipeline
and two refurbishments
planned.
– Align with the right
partners to enhance
our offer for customers
beyond the office space
we provide.
We continue to build our
understanding of our
customers to better cater
to their needs and enhance
demand for our space.
Why New and Growing
Companies are the right
customer for Workspace
– The market of New and
Growing Companies in
London is huge and
continues to grow.
– NGCs are fuelling
London’s economy and
growing at a faster rate
than large corporates.
– There is a lack of
competition offering
high-quality space,
flexible leases and wider
customer benefits,
ensuring continued
demand for Workspace’s
offer.
Strategy in action
in 2015/16
– 299 customers expanded
in the year either taking
larger space or additional
units.
– Conducted research
into our customer base
to better understand
what sectors they are
operating in and how
they do business.
– Continued to expand
Club Workspace, now
with 16 locations across
London. Fourteen Club
customers grew into
the main Workspace
portfolio in the year.
– Published a new
customer magazine,
HomeWork, providing
news and insight of
relevance to New and
Growing Companies.
– Continued to roll out
business insight events
with partner, Knowledge
Peers, to educate
customers on topical
issues and encourage
networking.
Caspar Thykier, CEO of
Zappar, in their new office
at Barley Mow Centre,
Chiswick
27 "Workspace Group PLC Annual Report and Accounts 2016
Chief Executive’s
Strategic Review
continued
28 "Workspace Group PLC Annual Report and Accounts 2016
Right
people
Driving
performance
We invest in the right talent
to deliver our strategy and
provide the right solutions
for our customers.
Why our in-house talent is
so important
– We have a scalable
operational platform,
managing all marketing,
enquiries, lettings and
renewals activity in-
house without having
to rely on brokers.
– By controlling all the
touch points with our
customers – from the first
enquiry through to the
viewing, lease negotiation
and move – we are able
to build a deep
understanding of
demand across London
and the needs of a NGC.
– Centre staff act as the
first point of contact
with customers and are
therefore first to hear
about customers’
business performance
and future occupational
requirements.
– Strong expertise and
market knowledge in
our Development and
Investment teams ensure
Workspace is well
positioned to acquire
new properties and
generate superior value
from our existing
portfolio.
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Strategy in action
in 2015/16
– Expanded investment
team to take advantage
of opportunities for
strategic acquisitions.
– 1,237 training days
completed by employees
on areas including Health
& Safety, Social Media,
Customer Service,
Conflict Resolution and
Networking & Events.
– 16 employees supported
through further studies
and 28 long service
awards given, including
23 for more than 10 years’
employment.
– Supported six employees
to trek eight hours a day
over six days to climb
the 4,167 metres to the
summit of Mount
Toubkal in Morocco,
raising over £17,000
for youth charity, XLP.
– 12 Workspace employees
provided work
placements to 14
students for Inspiresme
Week.
Looking forward
– Launch new intranet and
internal communications
platform to engage all
employees in the
business and enhance
communication between
head office and on-site
staff.
– Continue with existing
training for all employees
and introduce new
courses on Recruitment
and Facilitating Events.
– Set up a skills matrix for
all employees to identify,
develop and track
employee skill sets.
– Implement new HR
system, including
self-service elements.
Centre Manager
meeting a customer at
repositioned 160 Fleet
Street, Midtown
29 "Workspace Group PLC Annual Report and Accounts 2016
Chief Executive’s
Strategic Review
continued
30 "Workspace Group PLC Annual Report and Accounts 2016
Right
brand
Increasing
recognition and
reputation
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
– Environmental efforts
recognised through
Workspace’s continued
inclusion in the
FTSE4Good Index.
– Continued to work with
the right partners that
reflect our brand
proposition and added
value for customers:
developed our connected
services offer with Excell
Group, provided
customers with premium
access to the Informed
Funding alternative
finance platform and
offered storage solutions
through Lovespace.
Looking forward
– Refresh our social media
strategy to increase reach
and take advantage of
opportunities to tell our
brand story to customers
and prospects.
– Enhance interaction with
our customers through
development of our
digital strategy, including
the evolution of customer
platforms.
We are focused on
increasing our brand reach
to encourage long-term
advocacy, drive pricing and
improve performance.
Why the Workspace
brand remains important
– With increased noise
around the concepts of
‘flexible working’ and
‘co-working’, it has
become more important
for Workspace to
highlight its differentiated
offer.
– The Workspace brand
encompasses the
ownership and
development of our real
estate as well as the
provision of solutions for
our customers.
– We design our properties
to reflect our brand
proposition and customer
offer, without placing too
much emphasis on our
own branding within the
building.
Strategy in action
in 2015/16
– Launched new website,
successfully integrating
the customer offer under
one site, including
meeting rooms, co-
working and community.
– Upgraded meeting
rooms across the
portfolio and created
an online platform,
expanding our brand
reach beyond Workspace
customers.
– Launch of HomeWork
magazine helped to
position Workspace as
the go-to brand for New
and Growing Companies.
Repositioned atrium
and café at Canterbury
Court, Kennington
Park, Kennington
31 "Workspace Group PLC Annual Report and Accounts 2016
Our Key Performance Indicators
Profit Before Tax
(£m)
+9%
2016
2015
2014
391.3
360.0
252.5
Trading Profit After
Interest (£m)
+65%
2016
2015
2014
26.6
20.5
43.9
EPRA NAV Per Share
(£)
+31%
2016
2015
2014
9.23
7.03
4.96
Dividend Per Share
(pence)
+25%
2016
2015
2014
15.05
12.04
10.63
Like-for-like Rent Roll
(£m)
+15%
2016
2015
48.8
42.3
Definition
Profit before tax is income for
the year less all expenditure,
excluding taxation.
Why this is important
to Workspace
Profit before tax is a key
external measure of
profitability of the Group
and includes our trading
profit, other income and
expenses and also the
movement on our property
valuation.
Progress in 2015/16
Profit before tax for 2015/6
was £391.3m, 9% higher
than the previous year.
Time period measured
Six monthly
Definition
Trading profit is net rental
income, joint venture
trading income and finance
income less administrative
expenses and finance costs.
Why this is important
to Workspace
Trading profit is a key
measure for Workspace. We
report and review this figure
at Board level on a monthly
basis compared to previous
years and to budget.
Trading profit demonstrates
the underlying performance
of the trading business and
strength of our business
model. Both the CEO and
CFO are incentivised on
Trading profit.
stands at £43.9m, a 65%
increase compared to the
previous year. Income for
the year has been enhanced
by our targeted acquisitions
and the successful
completion and letting
up of a number of key
refurbishment and
redevelopment projects.
Progress in 2015/16
Trading profit for the year
Time period measured
Monthly
Definition
EPRA NAV per share is
a definition of net asset
value as set out by the
European Public Real
Estate Association. It
represents net assets
after excluding financial
derivatives and deferred
taxation relating to
valuation movements
and derivatives.
Definition
The dividend payment per
share in issue.
Why this is important
to Workspace
EPRA NAV is a key external
measure for property
companies and is used to
benchmark against share
price. It is a useful measure
for Workspace as it
excludes any exceptional
items and movements on
financial derivatives.
Progress in 2015/16
Our EPRA NAV at 31 March
2016 was £9.23, up 31%
from the prior year.
Therefore at 31 March 2016,
Workspace share price was
trading at an 18% discount
to EPRA NAV.
Time period measured
Six monthly
Why this is important
to Workspace
We aim to provide good
returns for our shareholders,
and also work within our REIT
requirements for income
distribution. Dividend per
share is a key measure of
the returns we are providing
to our investors.
Progress in 2015/16
Due to our rising levels of
trading profits, we have
increased our interim and
final dividends for 2015/16
by 25%.
Time period measured
Six monthly
Definition
Like-for-like properties are
those which have been held
throughout a 12 month
period and have not been
subject to a refurbishment or
redevelopment programme
in the last 24 months.
Rent roll is the current
net rents receivable for
occupied units at the date
of reporting.
Why this is important
to Workspace
Like-for-like rent roll is an
important measure for our
business and shows the
performance of our core
portfolio of properties.
We monitor the like-for-like
rent roll on a weekly basis
in weekly management
meetings and also as a key
performance indicator in our
monthly Board meetings.
Progress in 2015/16
Like-for-like rent roll has
gone from strength to
strength, increasing by 15%
compared to March 2015.
This demonstrates the
strong performance of our
core assets and our ability
to drive rents on our
portfolio.
Time period measured
Weekly
32 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Like-for-like Rent Per
sq. ft. (£)
+16%
2016
2015
22.37
19.22
Definition
Rent per square foot is the
rent roll divided by the
occupied area generating
that rent roll.
Why this is important
to Workspace
Like-for-like occupancy,
rent roll and pricing give us
vital information on the
performance of our core
properties and early
indicators of any decline in
these KPIs mean we can be
timely in investigating and
reacting to these changes.
Progress in 2015/16
Like-for-like rent per sq. ft.
has increased significantly
in the year, up 16%, with
average rent up from £19.22
to £22.37.
Time period measured
Weekly
Property Valuation
(£m)
+21%
2016
2015
2014
1,779
1,423
1,078
Definition
The independent valuation
of our property portfolio,
currently valued by CBRE
Limited.
Why this is important
to Workspace
Our properties are critical
to our business and the
valuation demonstrates the
value we are delivering to
our shareholders and a
measure of how well we
are managing our buildings
and driving rental income.
Whilst we cannot control
yield movements, we can
enhance the value of our
properties through active
asset management,
including refurbishment and
redevelopment activity.
Progress in 2015/16
We have had another
good year for property
valuation movement with
the underlying gain for the
year at 21% demonstrating
how we are driving rents
and managing our space
effectively.
Time period measured
Six monthly
Total Return
(%)
26%
2016
2015
2014
26.3
36.7
34.7
Definition
Total Return is the return
for the year combining the
valuation movement on our
portfolio and the income
achieved in the year.
Why this is important
to Workspace
This measure shows how
our property portfolio has
performed in terms of both
valuation change and
income generated. This
figure is produced by MSCI,
an independent Investment
Property Databank, and is
compared to a benchmark
group so that we can see
how we are performing
relative to other similar
companies. Total Return,
and performance against
the benchmark, forms part
of the Board’s bonus
objectives.
Progress in 2015/16
We have maintained a good
return this year, driven by a
strong uplift in the property
valuation, and have
outperformed compared
to the IPD benchmark.
Time period measured
Six monthly
Total Shareholder Return
(%)
-7%
-7
2016
2015
2014
47
76
Definition
Total Shareholder Return
is the return obtained by a
shareholder, calculated by
combining both share price
movements and dividend
receipts.
Why this is important
to Workspace
This measure is important
to Workspace as it
shows the value that our
shareholders receive from
investing in Workspace
shares. This measure forms
part of the performance
criteria within our LTIP
scheme for Directors and
Senior Managers.
Progress in 2015/16
Total Shareholder Return
was down in the year, due
to a fall in our share price
in the fourth quarter.
Time period measured
Annually
Customer Satisfaction
(%)
76%
2016
2015
2014
Definition
Our customer satisfaction
score is based on responses
to customer surveys.
76
77
78
Why this is important
to Workspace
Our customers are at the
heart of our business and
we regularly seek to obtain
their comments and
feedback to understand
their overall satisfaction
with our offering. We use
the findings from the survey
results to prompt changes
to what we offer our
customers and for training
and development plans for
our staff.
Progress in 2015/16
Customer satisfaction
remained relatively stable in
the year, despite significant
increases in pricing.
Time period measured
Annually
33 "Workspace Group PLC Annual Report and Accounts 2016
Our Business Model
Our business model
How it works
Acquisition and
ongoing ownership
of freehold
We
reposition
We
refurbish
We
redevelop
Customer offer
Drives
advocacy
Creates
value
Acquisition and ongoing ownership of freehold
Workspace acquires the freehold of properties
across London and operates them as business
centres, providing leased accommodation to New
and Growing Companies. We are not a trader but
hold our assets for the long-term, driving them for
income. Owning the freehold enables Workspace
to constantly upgrade and transform its properties
to increase their value, as well as to reshape the
portfolio as and when we choose.
We will dispose of properties where we believe
we can no longer add value or if the property
falls below our robust return targets.
Customer offer
Workspace targets New and Growing Companies
as our principal market segment and a key
differentiator for our customers is our unique offer.
There are five key aspects of our offer:
Drives advocacy
Our aim is to build long-term advocacy from our
customers, employees and suppliers which helps
to sustain the value of the business over the
longer term.
Creates value
Our business model is set up to capture the value
that we create and we do so in two ways:
– Driving rental income from leasing space.
– Repositioning assets.
– Benefiting from yield movement in the year.
Underpinned by our resources
and relationships
Our environment
Managing our environmental impact in a proactive
and positive way is important to us.
We have a varied portfolio of buildings and work hard
to merge appropriate environmental technologies with
the historic features of our buildings.
Our communities
Our sites have a central place
in the many communities we
occupy across London. It is
important to us that these areas
thrive and we feel very strongly
that we have a responsibility
to help make this happen.
Our suppliers and partners
As a business, we recognise
that our success is partially
dependent on the strong
relationships that we develop
with our suppliers and partners.
34 "Workspace Group PLC Annual Report and Accounts 2016
What we do
We reposition
We carry out light internal
refurbishments to drive rents
and enhance the property
value.
In 2015/16, we carried out
repositioning projects at
Westbourne Studios and
Gray’s Inn Road.
We refurbish
We grow our footprint by
expanding existing properties
and adding new floors.
During the year, we completed
three refurbishments at The
Print Rooms, Vox Studios
and Cargo Works.
We redevelop
We create brand new business
centres on existing sites as part
of mixed-use developments in
partnership with residential
developers.
The redevelopment at Grand Union
Studios opened in March 2016.
1. Customer journey
From an initial enquiry to taking
out a lease for our space, every
touch point with a customer is
dealt with by the Workspace
in-house team, without the need
for agents, lawyers or brokers.
Once a customer moves in, Centre
Managers provide the support
needed and work to build
communities at each of our sites to
create synergistic benefits for our
customers to meet and potentially
work with other small businesses.
2. Flexibility
New and Growing Companies need
shorter flexible leases to meet the
changing demands on their business.
Workspace provides leasing
arrangements that limit the property
risk for customers and enable them
to change their space requirements
as their business grows.
3. Super-fast resilient technology
We provide a digital infrastructure that
gives our customers the business-
grade connectivity they need.
4. Community benefits
Regular events provide customers
with valuable business insights and
networking opportunities, while our
carefully selected partners offer
further support and services.
5. Collaborative environments
Our business centres are designed
to facilitate collaborative working
between customers with cafés, break-
out spaces, co-working areas and
meeting rooms. Around 50% of our
customers trade with one another.
We work hard to showcase our
customers’ businesses and help
promote them through social
media, videos, articles in our
customer magazine and through
inviting them to attend events or
speak on panels at our business
insight events.
Our employees benefit from salaries,
bonus arrangements and an
employee share scheme.
Encouraging advocacy
We run a referral scheme
called ‘Member get member’
for our customers who
recommend Workspace to
others, with rewards given if
their recommendation results
in a new customer taking
space.
Sharing and sustaining value
The value we create is shared
with our shareholders in the
form of a progressive dividend
policy and growth in the value
of the business. This year we
increased the total dividend by
25% to 15.05 pence per share.
Our people
Our people form the heart of
our business. They drive our
successes and make our
business what it is today.
How it works
Acquisition and ongoing ownership of freehold
Workspace acquires the freehold of properties
across London and operates them as business
centres, providing leased accommodation to New
and Growing Companies. We are not a trader but
hold our assets for the long-term, driving them for
income. Owning the freehold enables Workspace
to constantly upgrade and transform its properties
to increase their value, as well as to reshape the
portfolio as and when we choose.
We will dispose of properties where we believe
we can no longer add value or if the property
falls below our robust return targets.
Customer offer
Workspace targets New and Growing Companies
as our principal market segment and a key
differentiator for our customers is our unique offer.
There are five key aspects of our offer:
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
What we do
We reposition
We carry out light internal
refurbishments to drive rents
and enhance the property
value.
In 2015/16, we carried out
repositioning projects at
Westbourne Studios and
Gray’s Inn Road.
We refurbish
We grow our footprint by
expanding existing properties
and adding new floors.
During the year, we completed
three refurbishments at The
Print Rooms, Vox Studios
and Cargo Works.
We redevelop
We create brand new business
centres on existing sites as part
of mixed-use developments in
partnership with residential
developers.
The redevelopment at Grand Union
Studios opened in March 2016.
1. Customer journey
From an initial enquiry to taking
out a lease for our space, every
touch point with a customer is
dealt with by the Workspace
in-house team, without the need
for agents, lawyers or brokers.
Once a customer moves in, Centre
Managers provide the support
needed and work to build
communities at each of our sites to
create synergistic benefits for our
customers to meet and potentially
work with other small businesses.
2. Flexibility
New and Growing Companies need
shorter flexible leases to meet the
changing demands on their business.
Workspace provides leasing
arrangements that limit the property
risk for customers and enable them
to change their space requirements
as their business grows.
3. Super-fast resilient technology
We provide a digital infrastructure that
gives our customers the business-
grade connectivity they need.
4. Community benefits
Regular events provide customers
with valuable business insights and
networking opportunities, while our
carefully selected partners offer
further support and services.
5. Collaborative environments
Our business centres are designed
to facilitate collaborative working
between customers with cafés, break-
out spaces, co-working areas and
meeting rooms. Around 50% of our
customers trade with one another.
Drives advocacy
Our aim is to build long-term advocacy from our
customers, employees and suppliers which helps
to sustain the value of the business over the
longer term.
Creates value
Our business model is set up to capture the value
that we create and we do so in two ways:
– Driving rental income from leasing space.
– Repositioning assets.
– Benefiting from yield movement in the year.
Our environment
Managing our environmental impact in a proactive
and positive way is important to us.
We have a varied portfolio of buildings and work hard
to merge appropriate environmental technologies with
the historic features of our buildings.
Encouraging advocacy
We run a referral scheme
called ‘Member get member’
for our customers who
recommend Workspace to
others, with rewards given if
their recommendation results
in a new customer taking
space.
Sharing and sustaining value
The value we create is shared
with our shareholders in the
form of a progressive dividend
policy and growth in the value
of the business. This year we
increased the total dividend by
25% to 15.05 pence per share.
Our people
Our people form the heart of
our business. They drive our
successes and make our
business what it is today.
We work hard to showcase our
customers’ businesses and help
promote them through social
media, videos, articles in our
customer magazine and through
inviting them to attend events or
speak on panels at our business
insight events.
Our employees benefit from salaries,
bonus arrangements and an
employee share scheme.
Our communities
Our sites have a central place
in the many communities we
occupy across London. It is
important to us that these areas
thrive and we feel very strongly
that we have a responsibility
to help make this happen.
Our suppliers and partners
As a business, we recognise
that our success is partially
dependent on the strong
relationships that we develop
with our suppliers and partners.
Left page: Club Workspace,
160 Fleet Street, Midtown
Right page: Break-out area,
160 Fleet Street, Midtown
35 "Workspace Group PLC Annual Report and Accounts 2016
Resources and Relationships
Our Environment
Managing our environmental impact in a proactive and
positive way is important to us. We have a varied portfolio
of buildings, some of which are true ‘new builds’, but most
of which are older buildings which we have redeveloped
while retaining many of their historic features. It is this that
gives our buildings the character that our customers look
for in their office space.
Short and long-term targets are set and energy, water
and waste action plans are implemented for our assets,
refurbishments and new developments. These include
customer engagement and site staff training in order to
ensure buildings are managed as efficiently as possible,
and initiatives to help reduce our environmental impact
and lower building operational costs.
Case study:
Sub-metering for customers
Our new Optergy system is an exciting web-based Building
and Energy Management System (‘BEMS’) that we are
currently rolling out across our portfolio. Initially being
trialled at The Light Bulb, Grand Union Studios and Barley
Mow, the tool allows us to review detailed energy
consumption profiles, enabling us to manage our systems
more intelligently and efficiently. It will also provide our
customers with the ability to log in to view their own
energy profile, giving them greater control over their
consumption. Optergy will give us an opportunity to work
with our customers, providing support and education on
how they can better manage and reduce their energy
consumption, as well as accurate billing information.
Case study:
New development – Grand Union Studios,
Ladbroke Grove
Grand Union Studios is a brand new 65,000 sq. ft. business
centre in Ladbroke Grove, which opened in early 2016. The
development embodied the sustainable and responsible
procurement, development and construction principles
that we are seeking to embed into all of our developments
through our challenging sustainability construction targets.
It achieved exemplary results in respect of our sustainable
construction targets, notably gaining a BREEAM ‘Excellent’
certification, in part due to its Combined Heat and Power
installation. Grand Union Studios has an Energy
Performance Certificate of A (20) which means that our
customers will benefit from being located in a high
performance building.
In all our development work we are conscious of the need
to be considerate to our neighbours and the wider public
and this is reflected in the Grand Union Studios
development which achieved a Considerate Constructors
Scheme ‘Excellent’ certification and won a National
Bronze Site Award. We recognise that the responsible
procurement of building materials can improve the
sustainability of our supply chain, and ultimately our
buildings, so we ensured that 100% of the timber used in
this development was from FSC certified sources. We are
committed to minimising the amount of construction waste
that goes to landfill and we are proud that 100% of the
construction waste from the Grand Union development
was diverted from landfill.
Waste has been a key focus for us over the last year and
we have strengthened the relationship we have with our
waste contractor to further increase recycling rates across
our portfolio and divert waste from landfill. Our recycling
rate for the year across the whole portfolio increased to
60%.
Over the coming year, we will continue to focus on
improving the accuracy of our waste data and our internal
reporting, in particular considering the benefits of a
move from gravimetric to volumetric measures and from
average weights to actuals. We are also looking to roll out
an enhanced engagement strategy with our customers
around waste and how we can work together to
collectively improve our environmental performance.
Targets for the coming year
– Reduce landlord controlled (communal) energy
consumption by 10% by April 2017.
– Reduce our overall carbon intensity by 20% by 2020.
– Complete our energy reduction targets and action plan
for our 10 buildings that consume the most energy.
– Reduce like-for-like water intensity to 0.50m3 by April
2017.
– Provide more recycling bins at our properties, including
clothing collection bins for selected charities.
36 "Workspace Group PLC Annual Report and Accounts 2016
Awards and accreditations
Global Real Estate Sustainability Benchmark
(‘GRESB’) – We gained a Green Star for the second
year in a row for the GRESB Survey. In 2015, we
increased our GRESB score from 69 to 76, exceeding
both the GRESB Average score of 55 and the Peer
Average score of 69. The GRESB survey allows us
and our investors to measure our sustainability
performance within the real estate sector.
European Public Real Estate Association
(‘EPRA’) – We were awarded another Gold in
the European Public Real Estate Association
(EPRA) Sustainability Awards for 2015. We were
one of 21 companies that achieved exceptional
compliance with the EPRA Sustainability Best
Practices Recommendations in our public
reports and disclosures.
Carbon Disclosure Project (‘CDP’) – In 2015,
we increased our CDP score from 86B to 98B.
This shows our investors what we are doing
internally to manage our carbon emissions and
protect ourselves from climate change risk.
FTSE4Good Index – We were once again
included in the FTSE4Good Index, which
helps us assess our achievements against a
transparent and evolving global corporate
responsibility standard.
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Our People
Our people form the heart of our business. They drive our
successes and make our business what it is today. We want
all employees to feel proud to come to work for Workspace
each day and proud of what we, as a collective group, can
and have achieved.
We strive to create a culture that is challenging and
rewarding for all of our people. We are committed to
supporting our people in developing skills to further their
career aspirations and to have broader experiences they
may not otherwise get outside of their life at Workspace.
Values and culture
Our culture is engaging, challenging and focused on
performance, with a high level of involvement from senior
and executive management. We have effective performance
management systems which ensure that the skills and
competencies of our employees continue to develop as the
company evolves and grows, in part delivered by identifying
appropriate training and development programmes.
We have reward systems in place, based on individual
performance and contribution to the Group, that are
designed to incentivise superior performance.
We are proud that our culture encourages our people to
stay with Workspace for the long-term and develop their
careers with us. During the year, 28 members of staff
achieved long service awards, 23 of which were for more
than 10 years of service.
Workspace head office
Repositioned café at Canterbury Court,
Kennington Park, Kennington
Length of service
People snapshot
Number of years
0–5
5–10
10–15
15–20
20+
Number of employees
124
44
19
22
5
Diversity
Creating a thriving and diverse workforce is a high priority
for us as a business. A diverse workforce means we are
attracting the best people for our business and promoting
diversity of ideas.
Workspace employs enthusiastic, committed and well-
trained people. We recognise the benefits of diversity of
skills, knowledge and independence, as well as gender,
ethnicity and sexual orientation and are fully committed
to an active Equal Opportunities Policy covering
recruitment and selection, 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 evenly split with a total of 53% female and
47% male employees. We are an inclusive employer, which
encourages creativity and provides an environment for
people to develop and enhance their skills. Our culture is
based on the principles of mutual respect and non-
discrimination irrespective of nationality, age, disability,
gender, religion or sexual orientation.
37 "Workspace Group PLC Annual Report and Accounts 2016
Age range
18–25
25–35
35–45
45–55
55–65
65+
No of
employees
16
82
59
33
19
5
% of total Average age
22.59
30.14
38.98
50.76
59.57
66.23
7.48
38.32
27.57
15.42
8.88
2.34
Males at Workspace, which
represents 47% of the
workforce
Females at Workspace,
which represents 53%
of the workforce
101
113
Different nationalities
represented at Workspace
Average age of
our people
20+
38.65
Resources and Relationships
continued
Learning and development
We recognise the importance of career development and
progression, and therefore the ongoing training and
development of our people, in order to encourage
retention and to support our succession planning process.
Number of employees supported
2015/16
2014/15
Number
% Number
%
Number of employees
supported
16
7.5
10
4.8
Case study:
Employee development
Nico Riley joined Workspace in 2012 as a Lettings
Negotiator, having completed a degree in Real Estate.
Following two years of good performance in that role, in
2014 Nico moved to the Professional Services Department
where he was able to gain vital experience in order to
complete his Assessment of Professional Competence
(‘APC’) exams to become a qualified Chartered Surveyor.
As a result of his hard work and new qualifications, assisted
by our support, in January 2016, Nico was promoted to the
role of Investment Manager within the Investment team.
Supporting our people in giving back
We have a passionate and enthusiastic team of people at
Workspace who are keen to develop and nurture strong
links with our local communities. It is important to us that
we provide opportunities for our people to volunteer and
get involved in community projects run by our charity
partners.
During the year we continued to work with four key
charities by giving financial support, offering commercial
space for their activities and by providing mentoring
support to young people. Last year, Workspace employees
carried out 29 volunteering days.
In addition to the charities we support, our centre staff
develop local community projects, with commitment of
staff time to support the projects, as well as drawing on
a charities budget which is agreed each year by the
Executive Committee. During the year, charitable donations
from Workspace totalled £35,116. An additional £15,786
was donated to charity following fundraising events held
for employees and customers at sites around the portfolio.
Furthermore, we provided lettings in kind to charities
worth £56,627.
Targets for the coming year
– Target two FareShare food drives next year, plus one
depot day.
– Increase number of volunteering days in the year.
– Continue to facilitate and encourage further training and
development.
We aim to have training and development plans in place for
all employees according to individual requirements, which
are identified and discussed at appraisal meetings with line
managers.
Last year, training sessions and presentations were
provided on a wide range of topics, including but not
limited to:
– People management
– Social media
– Customer services
– Networking and events
– Business rates
– Data protection
– Energy and sustainability
Training days
Training days
Employees trained
Training days per employee
2015/16
1,237
173
5.78
2014/15
631
146
3.05
Supporting further education
Whilst direct workplace training is essential, we also
recognise the importance of supporting our people to
pursue wider learning passions. We support a range of
development activities, providing coaching and mentoring,
sponsorship of further education and professional
qualifications, as well as providing paid leave to complete
recognised training courses that support career
aspirations.
Over the last year, we have supported 16 people in
undertaking externally recognised courses as part of our
strong commitment to attracting and retaining the very
best talent, and making Workspace a great place to work.
Courses taken included:
– Facilities Management (BIFM – British Institute of
Facilities Management)
– Marketing (CIM – Chartered Institute of Marketing)
– MSc Real Estate
– Leadership for Property Development (RICS – Royal
Institute Chartered Surveyors)
– ACCA –Association of Chartered Certified Accountants
– CIMA – Chartered Institute of Management Accountants
– HR Management
– MSc Surveying
Number of Workspace
employees supported in
undertaking externally
recognised courses
16
38 "Workspace Group PLC Annual Report and Accounts 2016
Workspace employees
volunteering with FareShare
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Case study:
Climbing 4,167 metres for XLP
For our employees, supporting our charities doesn’t just
stop at work. For six dedicated employees this year it meant
flying to Morocco to complete the challenge of a lifetime.
Trekking eight hours a day over six days and climbing
4,167 metres to reach the summit of Mount Toubkal in
Morocco, our team experienced freezing cold temperatures,
unprecedented snow levels and sleep deprivation to
successfully reach the summit. Through various fundraising
initiatives both inside and outside of the business, the team
raised an amazing £17,000 for XLP, a charity that creates
positive futures for young people growing up on deprived
inner city estates in and around London and one that
Workspace is a long-term supporter of.
‘Day two was quite treacherous as there
was more ice and snow than the guides
had anticipated and we had to slowly
make our way across what can only be
described as an ice cliff! Overall, it was an
amazing experience though and one that
none of us would have missed. And once
we returned and were able to hand over
the cheque to XLP, it was all worth it.’
Bryony Gerega
Development Executive
Case study:
Fighting hunger and tackling food waste
with FareShare
FareShare is a wonderful charity that we have supported
for many years. FareShare saves good food destined for
waste and redistributes it to charities and community
groups who transform it into healthy and nutritious hot
meals for vulnerable and hungry people. That contact with
vulnerable people, through provision of food, then allows
charity workers to start a dialogue with them and initiate
the next steps towards getting them the wider help
they need.
Over the last year, 17 of our employees have volunteered
with FareShare over eight separate days, helping collect
food outside supermarkets, sort food at FareShare’s
warehouse and distribute it personally to the charities
and community groups that the organisation supports.
This is a partnership that all at Workspace are keen to see
continue. We are committed to increasing our number of
volunteers in the next 12 months, as well as holding food
drives across our own sites to enable more of our
customers and employees to support the charity.
‘It’s really amazing for someone like me,
who sits at their desk all day, to get out
there and not just help with the physical
work but also to actually see the people
we’re helping. It’s been so rewarding.’
Tara Dooley
Accounts Payable Manager
39 "Workspace Group PLC Annual Report and Accounts 2016
Workspace team handing £17,000
cheque to Ian Hiley from XLP
Amount raised for XLP
£17,000
Resources and Relationships
continued
Our Communities
Our sites have a central place in the many communities we
occupy across London. It is important to us that these
areas thrive and we feel strongly that we have a
responsibility to help make this happen. We do this through
a range of means, including supporting local charities and
community groups with funding, the provision of free
space and enabling, facilitating and encouraging our
employees to volunteer in their local community.
In addition to our corporate and individual employee
support, we also recognise that we have a unique
opportunity to facilitate opportunities for our customers to
engage with their local communities, leveraging the impact
that we can have as a standalone business.
The nature of our business means that our properties are
already attracting New and Growing Companies into these
communities. With this comes increased employment, skills
and prosperity to these areas. Our customers are time poor
and running a successful small business is hard work,
however many are also passionate about their local
community, and so we engage with them and try to
provide easy ways for them to get involved with and
support their area.
In the coming year, we will be launching exciting new plans
to help more of our sites engage with the charities and
community groups in their locality, widening our reach and
the positive impact we can generate even further. Our
ultimate aspiration is to make a positive contribution to
each and every community we are a part of.
Targets for the coming year
– Expand Inspiresme Week, targeting businesses
outside of Workspace and a greater number of
students.
– Increase commitment to MyBnk programme by
funding a minimum of three more programmes in
the coming year.
Case study:
‘Business Battle’ with MyBnk
This year we partnered with MyBnk to provide enterprise
education to 15 young people aged 12-19 from XLP through
an initiative called ‘Business Battle’. These young people
struggle specifically with low motivation and behavioural
problems.
Business Battle brings together a team of young people to
create, implement and evaluate their own business idea
using real money in a competitive market. The programme
comprises six steps which are carried out over a week.
Step 1. Ideas generation
An introduction that inspires young people to generate
their own ideas, considering the target audience’s wants
and needs.
Step 2. Product design, budget and costs
Young people refine their ideas into a final ‘design’, and
then research suppliers to create a materials list within their
set budget of £40.
Step 3. Logistics and production
Utilising each member’s strengths, teams delegate tasks to
create their product/service ready for the market.
Step 4. Pricing and marketing
Evaluating the production process, pricing structures are
decided, as well as a marketing strategy to attract and sell
to customers.
Step 5. Sell, sell, sell!
Teams attend a pre-designated market to advertise and
sell the designed products or services to a real customer
audience.
Step 6. Reflection
A practical evaluation activity is run. Winners are
announced and prizes handed out.
The XLP group excelled on the course, paying back their
loan in full and making a profit of a further 75% on invested
capital. Their first entrepreneurial experience boosted
confidence and helped them to realise their entrepreneurial
potential. B3 Media, a Workspace customer, supported the
programme by creating a promotional video of the event.
‘I decided to take on MyBnk’s enterprise
challenge to develop my skills in business.
I really underestimated the amount of
planning that goes into making something
as simple as a market stall successful,
particularly things like market research
and identifying our unique selling point.’
Emmanuel
Young mentee at XLP
Workspace has committed to expanding its support
of the programme, funding a further three courses in
the coming year.
40 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Case study:
Raising aspirations through Inspiresme Week
Inspiresme Week is an annual event founded by
Workspace and the GLA and run by Business in the
Community. Now in its fourth year, the programme has
gone from strength to strength.
In the coming year, we are considering how to expand
the reach of Inspiresme Week even further, targeting
businesses outside of Workspace’s customer base, and
providing even more students with valuable work
experience.
In February 2016, Inspiresme Week saw 71 students from 19
schools across London attend 4-day work placements with
59 of our customers’ and suppliers’ businesses, as well as
with Workspace itself. The aim was to provide specific
work experience in many different fields, in addition to an
introduction to what it means to work in an entrepreneurial
or small business.
Following a hugely successful programme, four students
were offered further work experience by the businesses
they spent time with. For example, The Travel Advice
Centre, based at Workspace’s Belgravia Workshops,
offered their student a summer placement which she will
take up in June 2016.
At the end of the experience, 80% of students said the
placement helped them decide what they wanted to do
in the future and 76% said they would consider setting
up their own business.
The winning team presenting their
social enterprise idea to the judges at
the Inspiresme Week celebratory event
An Inspiresme Week student working
with Hopscotch Consulting at Metal Box
Factory, Bankside
41 "Workspace Group PLC Annual Report and Accounts 2016
Case study:
Lovespace
Workspace enters into partnerships with businesses which
provide added value services to our customers. One such
partner is Lovespace, a disruptive self-storage business
which collects and delivers, as well as stores anything from
filing cabinets to excess stock. Workspace has been in
partnership with Lovespace since 2014 and to date 53 of
our customers have used them for a range of business
solutions, including archiving, operations, de-cluttering,
storing stock and office moves. Lovespace, a Workspace
customer itself and based at 60 Gray’s Inn Road, provides
our customers with an exclusive discount for the service.
Targets for the coming year
– Facilitate further apprenticeships with our suppliers and
customers, with support from XLP.
– Continue to evaluate partnership opportunities that add
value to our business, customers and brand.
Resources and Relationships
continued
Our Suppliers and Partners
As a business, we recognise that our success is partially
dependent on the strong relationships that we develop
with our suppliers and partners. We seek to ensure that all
suppliers and partners share our corporate commitment to
providing excellent service to our customers and wider
stakeholders and that we form strong and mutually
beneficial partnerships wherever possible, working
collaboratively to this end.
Case study:
Working with our suppliers to support local employment
As a business we have long supported XLP, a charity that
supports young people struggling with issues including
family breakdown, poverty, unemployment and
educational failure, as well as criminality and gang
behaviour. We support XLP in a number of ways: financially,
through direct volunteering and also through providing
young people with placements on our community
programmes, such as Inspiresme Week. In addition, we are
incredibly excited to have successfully helped to place
three young people into apprenticeships with some of our
suppliers in the last year.
As a property owner, landlord and developer, we are aware
of the skills gaps in the construction industry, as well as
the new requirements for companies to hire apprentices.
Through our close relationship with XLP, we also regularly
meet young people who are desperate for an opportunity
to gain skills and employment that will enable them to
create a prosperous future for themselves. It seemed
logical to us, therefore, to introduce some of our suppliers
to XLP to help create and fill new apprenticeship
opportunities, with XLP providing further support and
mentoring for the young person once they have been
placed with the contractor. In addition to the three
apprenticeships already secured this year, we are currently
in discussions with a number of other suppliers to expand
this number in the coming year.
We support XLP
financially, and also
through providing young
people with placements
on our community
programmes
XLP
42 "Workspace Group PLC Annual Report and Accounts 2016
Principal Risks
and Uncertainties
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Risk Management is an integral part of all our activities and
risks and opportunities are considered 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 corporate
actions, property transactions and monitoring
performance.
We have a Risk Management structure in place to capture,
document and manage risk which is appropriate for our size
and business model. Our aim is to manage each of our risks
and mitigate them so that they fall within the risk appetite
level we are prepared to tolerate for each risk area.
The Risk Management structure is underpinned by close
working relationships between the Executive Directors,
Senior Management and other team members, which
enhances our ability to efficiently capture, communicate
and action any risk issues identified.
We have an established Risk Committee which co-ordinates
risk management activities throughout the Group and
prepares regular reports to the Board and Audit
Committee. 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 good communication
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.
Risk registers for all functional 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.
Overall, we review principal risks from two angles:
1. Strategic risks
– These are risks which impact achievement of our
strategy and objectives.
– They are identified, assessed and managed by the
Executive Committee.
– Strategic risks are owned by the Board.
– The Board is satisfied that we continue to operate within
our desired risk appetite for our strategic risks.
2. Operational risks
– These risks cover all areas of the business, such as
Finance, Operations, Investment and Development.
– These risks are identified, assessed, managed and
owned by the Executive Committee.
– Day-to-day operational risks are closely reviewed and
managed by the Executive Committee and Senior
Management.
– Changes in operational risks are reported to the Board
and Audit Committee as appropriate.
We then consider each risk in turn to understand and
assess how they are mitigated by the controls and
procedures in place.
43 "Workspace Group PLC Annual Report and Accounts 2016
Our Risk Management structure
I
T
D
U
A
L
A
N
R
E
T
X
E
Board and Audit Committee
Executive Committee
First line
of defence
Second line
of defence
Third line
of defence
Management
controls
Financial
control
Policy and
procedure
Security
Risk
Committee
and ad hoc
review/audit
Risk
management
Quality control
Key
Performance
Indicators
Compliance
Current assessment of principal business risks
i
n
a
t
r
e
c
t
s
o
m
A
l
l
y
e
k
L
i
l
e
b
i
s
s
o
P
l
y
e
k
i
l
n
U
e
r
a
R
IMPACT
Y
T
I
I
L
B
A
B
O
R
P
2
1
3
2
1
3
8
5
7 4 10
5
9
6
8
7
9 10
4
11
11
6
Insignificant
Low
Medium
High
Severe
Pre-mitigation
Post-mitigation
1. Financing
2. Valuation
3. Customer
4. Development
5. London
6. Investment
7. Regulatory
8. Business interruption
9. Brand
10. Staff and
resourcing
11. Cyber security
Principal Risks
and Uncertainties
continued
Risk category:
1. Financing
Principal risk:
Reduced availability and increased
cost of bank financing
Link to
strategy:
– Right markets
– Right properties
Change from
last year:
Unchanged
Potential impact
on the business
– Inability to fund business
plans.
– Restricted ability to invest
in new opportunities.
– Increased interest costs.
What we have
done in 2015/16
Successfully amended
and extended bank
facilities. At the end of the
year we have significant
headroom on our facilities
and a stable interest rate
profile.
Key metrics:
£134m
headroom on loan facilities
Mitigation
We regularly review funding
requirements for business
plans and ensure we have
a wide range of options to
fund our forthcoming plans.
We also prepare a five-year
business plan which
is reviewed and updated
annually.
We have a broad range of
funding relationships in
place and regularly review
our refinancing strategy.
We also maintain a specific
interest rate profile via use
of fixed rates and swaps on
our loan facilities so that our
interest payment profile is
stable.
Strategy day – review
of five-year plan
alongside strategy
After the Board Strategy
Day in September 2015,
all strategic risks were
reviewed and reassessed
to ensure all were still valid
and considered any
possible omissions.
The Management Board
was also consulted on the
validity of the strategic risks
via a Management Board
meeting covering risk. The
outcome of these reviews
saw the addition of two new
risks: staff and resourcing
and cyber security.
44 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Risk category:
2. Valuation
Principal risk:
Value of our properties declining as a result
of the macroeconomic environment, external
market or internal management factors
Link to
strategy:
– Right markets
– Right properties
Potential impact
on the business
– Impact on loan covenants
(Loan to Value).
Change from
last year:
Unchanged
Vox Studios
Vauxhall
45 "Workspace Group PLC Annual Report and Accounts 2016
Mitigation
Market-related valuation
risk is largely dependent
on external factors which
we cannot influence.
However, we continue to
do the following to ensure
we are aware of any
market changes, and are
generating the maximum
value from our portfolio:
– 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 continue to drive
progress made in
achieving planning
consent for mixed-use
development schemes.
What we have
done in 2015/16
We have maintained a low
LTV ratio, protecting us
from any potential adverse
changes in the market.
During 2015/16, we have
made significant progress
with our programme of
refurbishment works,
enhancing the standard
and desirability of our
properties. In the year we
launched 229,000 sq. ft.
of new and upgraded
business space.
Key metrics:
+21%
Increase in underlying
property valuation
16%
Low loan to value ratio
Vox Studios
During the year
we completed the
refurbishment of Vox
Studios, Vauxhall, where
we created 51,000 sq. ft.
of new space and upgraded
a further 6,000 sq. ft.
The newly refurbished
property has let well and
is now becoming a vibrant
business centre with a
café/bar, Club Workspace
and high quality meeting
rooms.
The CBRE valuation
at 31 March 2016 had
increased by £26m.
This is a 72% underlying
increase compared to the
value at March 2015.
Principal Risks
and Uncertainties
continued
Risk category:
3. Customer
Link to
strategy:
– Right markets
– Right properties
– Right customers
– Right people
– Right brand
Change from
last year:
Unchanged
Principal risk:
Demand by businesses for space within
our properties declining as a result of social,
economic or competitive factors
Potential impact
on the business
– Fall in occupancy levels
at our properties.
– Poor customer feedback
and low satisfaction
score.
– Falling rent roll and
property valuation.
Mitigation
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
customer leads and pipeline
of deals. We also utilise
social media, backed up by
a busy events programme
which has further helped us
to engage with customers.
This differentiates us as we
provide not only space but
also an opportunity to
network with other
businesses based in our
portfolio.
What we have
done in 2015/16
We continue to liaise with
our customers at each step
of their journey with
Workspace (see ‘At a
Glance’, pages 02 and 03).
We also continue to
increase our social media
presence, and run our
networking business events.
Key metrics:
90.7%
Like-for-like occupancy
12,353
Enquiries per year
1,212
Lettings per year
Cargo Works
Southbank
Engaging with customers
Our engagement and
understanding of our
customers and their
requirements continues to
improve and evolve, adding
to the relationships we build
with them. We assist
customers with their
requirements for moving as
their business needs change
– whether it be moving to
different areas within our
portfolio, or moving to a
larger or smaller space. Last
year, we completed 1,212
deals of which 30% were
with existing customers
helping them to move
within our portfolio,
accommodating their
changing needs and
requirements.
46 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Risk category:
4. Development
Principal risk:
Impact on underlying income
and capital growth
Link to
strategy:
– Right markets
– Right properties
– Right customers
– Right people
Change from
last year:
Unchanged
Potential impact
on the business
– Failure to deliver
expected returns on
developments.
– Cost over runs.
– Delayed delivery of
key projects.
Mitigation
For every potential
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.
Appraisals are presented
for Investment Committee
approval and sign-off is
required for every project.
The Investment Committee
reviews progress on
refurbishments and
redevelopments every
fortnight, against project
timings and cost budgets
both during and after the
completion of a project.
What we have
done in 2015/16
We continue to progress
our redevelopment
pipeline, assessing each
new scheme on a fair and
consistent basis. We are
improving and enhancing
our progress regarding the
tracking, forecasting and
monitoring of our major
projects.
Key metrics:
4
Redevelopments and
refurbishments completed
in year
5
Redevelopments and
refurbishments underway
The Record Hall
Hatton Garden
47 "Workspace Group PLC Annual Report and Accounts 2016
Principal Risks
and Uncertainties
continued
Risk category:
5. London
Principal risk:
Dependability on the London
market and economy
Link to
strategy:
– Right markets
– Right customers
Change from
last year:
Unchanged
Potential impact
on the business
– Impact on demand for
space if London
adversely affected by
a major incident.
Mitigation
Having been based within
the London market for a
number of years, we know
our markets and areas well.
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
that we are aware of any
changes coming through
ahead of time.
What we have
done in 2015/16
We have undertaken an
enhanced review of our
five-year plan, aligned to
work undertaken on the
Viability Statement. This
has included some stress
testing of key performance
measures and covenants,
were there to be a major
incident affecting London,
or major changes in
demand for space and
property valuations.
Risk category:
6. Investment
Principal risk:
Poor investment decisions regarding
acquisitions and disposals
Link to
strategy:
– Right markets
– Right properties
– Right customers
– Right brand
Change from
last year:
Unchanged
Potential impact
on the business
– Poor timing of disposals.
– Poor timing of
acquisitions.
– Failure to achieve
expected returns.
Mitigation
We undertake regular
monitoring of asset
performance and
positioning of our portfolio
with periodic detailed
portfolio reviews.
For each new acquisition
we undertake thorough
due diligence and detailed
appraisals prior to purchase.
We also monitor acquisition
performance against target
returns.
Property disposals are
subject to detailed review
and Board approval.
What we have
done in 2015/16
A detailed review was
undertaken and due
consideration given to
the decision to dispose of
11 properties throughout
the year. These disposals
were in line with our
strategy of repositioning
our portfolio and brand to
meet our strategic goals
and deliver strong returns
against the most recent
valuations.
We have acquired five
further 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. Following
acquisition, monthly
reviews on performance
against expectations are
provided to the Board.
48 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Risk category:
7. Regulatory
Principal risk:
Failure to meet regulatory requirements
Link to
strategy:
– Right people
– Right brand
Change from
last year:
Unchanged
Potential impact
on the business
– Fines or penalties for
failure to adhere to
regulations.
– Failure to identify
and respond to the
introduction of new
requirements.
What we have
done in 2015/16
We have been working
closely with HMRC and our
tax advisers to ensure we
are aware of emerging
issues and keeping up to
date with changes.
We continue to be
compliant with our status
as a REIT.
Key metrics:
0
RIDDOR Health and
Safety incidents
Mitigation
REIT conditions are
monitored and tested on a
regular basis and reported
to the Board. We work
closely with HMRC and our
tax advisers to ensure we
are aware of emerging
issues and keeping up to
date with changes.
Close working relationship
maintained with appropriate
authorities and all relevant
issues openly disclosed.
Advisers engaged to
support best practice.
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 to
keep abreast of any actual
or potential Issues.
Risk category:
8. Business Interruption
Principal risk:
Major external events result in Workspace
being unable to carry out its business for
a sustained period
Link to
strategy:
– Right properties
– Right people
– Right brand
Change from
last year:
Unchanged
Potential impact
on the business
– Loss of critical data.
– Loss of access for
customers to work at
our business centres.
– Potential loss of income.
Mitigation
We have robust Business
Continuity Plans and
procedures in place which
are regularly tested and
updated.
What we have
done in 2015/16
We have undertaken a
further review and
testing of our Business
Continuity Plans.
IT controls and safeguards
are in place across all our
systems, including a specific
standalone data centre
back-up facility.
We have started to
obtain information and
understanding on the
Business Continuity Plans
and procedures of many
of our third party suppliers.
49 "Workspace Group PLC Annual Report and Accounts 2016
Principal Risks
and Uncertainties
continued
Risk category:
9. Brand
Principal risk:
Failure to meet customer and
external stakeholder expectations
Link to
strategy:
– Right customers
– Right people
– Right brand
Change from
last year:
Unchanged
Potential impact
on the business
– Damage to brand and
perception by customers
and stakeholders.
– Adverse publicity
impacting on demand
from new customers.
Mitigation
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
developed a customer
engagement plan to ensure
we are interacting with our
customers in a variety of
ways, including the use of
social media.
What we have
done in 2015/16
The use of social media
channels, such as Twitter,
to engage with our
customers 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.
We maintain regular
communication with all
stakeholders and key
shareholders. We hold
investor presentations,
roadshows and an annual
Capital Markets Day.
Key metrics:
76%
Customer survey score
Launch of our new website
During the year we
launched a new website
for customers and investors.
We are featuring more
information on our
customers, their profiles,
areas of business and
utilising links to social
media feeds.
The new website makes
the journey and contact
that the customer has with
us much more streamlined
and facilitates arrangement
of viewings, the booking of
meeting rooms and the
overall Workspace
community.
50 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
What we have
done in 2015/16
For more information
go to Resources and
Relationships on page 36.
Risk category:
10. Staff and resourcing
Principal risk:
Failure to recruit and retain the correct staff
resource to implement our strategy effectively
Link to
strategy:
– Right customers
– Right people
– Right brand
New risk
Potential impact
on the business
– Reduced ability to action
strategy successfully.
– Insufficient resource to
manage increased
demands as the
Company grows.
Mitigation
We have a robust
recruitment process in
place to ensure that there
is an appropriate level of
interviewing and scrutiny
of new joiners.
We have various incentives
to align staff objectives with
those of the Group to help
ensure staff are working in
the best interests of the
Group and its stakeholders.
This is supported by a
robust appraisal and review
process for staff.
Our HR team run a detailed
training and development
programme to ensure staff
are supported and
encouraged to progress
their learning and study
opportunities.
Risk category:
11. Cyber security
Principal risk:
Major cyber security incident impacting
Workspace or our customers
Link to
strategy:
– Right properties
– Right people
– Right brand
New risk
Potential impact
on the business
– Loss of critical data.
– Financial loss due to
fraud.
– Reputational damage.
– Potential loss of income.
Mitigation
Monitoring information on
security threats and targets.
Monitoring guidance and
best practice issued by
Government and advisors.
Review of IT systems and
infrastructure in place to
ensure these are as robust
as possible.
What we have
done in 2015/16
We have progressed
our work on implementing
actions from our cyber
security action plan and
started to increase
awareness of threats
and risks through
education and training
programmes for
employees.
51 "Workspace Group PLC Annual Report and Accounts 2016
Going Concern and
Viability Statement
Going Concern
The Group’s activities, strategy and performance are
explained in the Strategic Report on pages 04 to 61.
Sensitivity analyses are prepared to understand the impact
of the identified risks on solvency and liquidity. The specific
risks which were evaluated are as follows:
Further detail on the financial performance and financial
position of the Group is provided in the financial
statements on pages 131 to 163.
Specific
risk
Risk
category
Sensitivity
analysis
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 this reason, the Directors believe that it is
appropriate to continue to adopt the Going Concern basis
in preparing the Group’s accounts.
A decline in demand
for space from
New and Growing
Companies which
impacts on occupancy
and pricing levels.
Valuation;
Customer;
London; Brand
Viability Statement
In accordance with provision C.2.2 of the 2014 revision of
the Code, the Board has assessed the prospects of the
Group over a longer period than the 12 months that has in
practice been the focus of the ‘Going Concern’ statement.
Changes in the
London real estate
environment which
impact on commercial
property yields.
Valuation;
London
The assessment is based on the Group’s Strategic Review
which is performed on an annual basis by the Board and
Executive Committee. The Strategic Review includes a
debate of the Group’s strategy and business model, which
are central to understanding the future prospects of the
business and a review of the Group’s five-year plan.
Particular attention is given to existing development and
redevelopment commitments, long-term financing
arrangements, compliance with financing and REIT
covenants and existing macro-economic factors.
The Group’s Strategy and business model are described on
pages 21 to 31 and on pages 34 to 35.
The Group’s five-year plan is underpinned by a detailed
financial model based on assumptions around the key
drivers of revenue, profit, capital expenditure and cash flow.
London;
Business
Interruption
Financing
Terrorist events in
London impacting
on the infrastructure
and attractiveness of
London as a global
centre for business
and culture.
Changes in the
economic and
UK regulatory
environment impacting
on the availability and
pricing of debt.
Reductions in
pricing and
occupancy as
experienced
during the last
recession over a
two-year period.
Expansion
in yields as
experienced
during the last
recession over a
two-year period.
Reduction of
10% in pricing
and 10%
reduction in
occupancy
within one year.
Inability to
refinance debt
facilities falling
due in the
five-year period.
The key assumptions underpinning the plan are:
– Conservative growth in pricing with stable occupancy
The Board conducted this review for the five-year period to
31 March 2021 which was selected for the following reasons:
levels for the like-for-like properties.
– Refurbishment and redevelopment schemes are
delivered in line with current plans and reach stabilised
occupancy levels within one to two years at current
market-based pricing levels.
– The Retail Bond, which becomes repayable in October
2019 and revolver bank facilities of £150m, which
become repayable in June 2021, can be extended
or refinanced on acceptable terms.
The Group benefits from having some 4,000 customers
spread across 69 locations in London. These customers are
in a wide range of sectors with no sector representing
more than 10% of total rent roll and no individual customer
representing more than 1% of total rent roll.
The Board has considered the key risks and mitigating
factors that could impact the Group, details of which can
be found on pages 43 to 51. Those risks that could have an
impact on the ongoing success of the Group’s strategy
were identified and the resilience of the Group to the
impact of these risks in severe yet plausible scenarios has
been evaluated.
52 "Workspace Group PLC Annual Report and Accounts 2016
a) The Group’s strategic review covers a five-year period.
b) Our current project pipeline spans five years. This covers
the time for the currently planned major refurbishments
and redevelopments to progress from initiation to
completion.
c) The average period to maturity of the Group’s
committed facilities is 4.8 years.
The conclusion of these sensitivity analyses is that the
Group would have adequate headroom in its facilities and
covenants to continue operations for the period under
review. On this basis, the Directors have a reasonable
expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the
five-year period stated above.
Business Review
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
comparatives have been restated for the industrial properties
sold during the year, and properties transferred to and from
the refurbishment and redevelopment categories.
The like-for-like rent roll has continued to grow strongly, up
15.4% (£6.5m) in the year to £48.8m. The rental growth has
come from the increases achieved in pricing with occupancy
stable (averaging 91% through the year). Like-for-like rent per
sq. ft. is up 16.4% to £22.37 in the year to 31 March 2016.
Like-for-like
properties
Number of
properties
Occupancy
Rent roll
Rent per
sq. ft.
31 Mar
2016
31 Dec
2015
30 Sep
2015
30 Jun
2015
31 Mar
2015
36
36
90.7% 91.3%
36
91.8%
£48.8m £47.1m £46.2m £44.7m £42.3m
36
91.1% 90.4%
36
£22.37
£21.67
£21.31 £20.57 £19.22
Rent roll growth in the second half of the year was 5.6%
compared to 9.2% in the first half. The first half included a
very strong first quarter of growth of 5.7%, growth in the
subsequent three quarters has averaged 3.0%.
If all the like-for-like properties were at 90% occupancy at
the estimated rental values at 31 March 2016, the rent roll
would be £56.9m, £8.1m higher than the rent roll at
31 March 2016.
Rent roll performance
It has been another year of strong performance and
intense activity across the Group with total rent roll up
12.7% (£8.8m) in the year to £78.2m.
Rent roll at 31 March 2015
Like-for-like portfolio
Completed projects
Projects underway
Acquisitions
Disposals
Rent roll at 31 March 2016
£m
69.4
6.5
6.1
(0.3)
1.3
(4.8)
78.2
Continued growth in like-for-like rent roll has been
complemented by the significant increases in rent at
recently opened buildings which are letting-up at pace.
We are also accelerating our project activity which has
had a small adverse impact on rent in the year. There is a
reduction in rent roll from the disposal of industrial estates
completed during the year. However, this has been offset by
the increase in rent roll at the properties we have acquired
in recent years. Further details on rent roll growth by
category are set out below:
Like-for-like portfolio
The like-for-like portfolio represents 62% of the Group’s total
rent roll as at 31 March 2016. It comprises properties which
have not been impacted over the last 24 months by either
major refurbishment or redevelopment activity. Prior period
Grand Union Studios
Ladbroke Grove
53 "Workspace Group PLC Annual Report and Accounts 2016
Business Review
continued
Completed projects
This category comprises the six refurbishment and
redevelopment projects completed within the last
24 months.
Metal Box Factory
The Light Bulb
Cargo Works
Vox Studios
The Print Rooms
Grand Union Studios
Total
3
PADDINGTON
Rent increase
in year
£2.0m
£1.1m
£1.1m
£0.7m
£1.0m
£0.2m
ISLINGTON
Occupancy at
31 March 2016
88%
91%
92%
73%
75%
30%
£6.1m
76%
SHOREDITCH
FARRINGDON
OLD
STREET
BETHNAL
GREEN
KING’S
CROSS
WEST
END
The refurbishment of Metal Box Factory, Bankside and
the opening of the new business centre, The Light Bulb
in Wandsworth Town Centre completed in the previous
financial year. The upgrade of Cargo Works, Southbank,
completed in April 2015. We have seen strong growth
in rents each year at these buildings as the new and
upgraded space has been let, and they are now reaching
stabilised occupancy levels.
The refurbishment of both Vox Studios, Vauxhall and
The Print Rooms, Southwark completed in January 2016.
Demand has been strong at these properties with overall
occupancy reaching 79% by the end of May 2016. Grand
Union Studios, a new business centre in Ladbroke Grove,
opened in March 2016. Again, demand has been very
strong and occupancy had reached 50% by the end of
May 2016.
STRATFORD
If all six buildings were at 90% occupancy at the estimated
rental values at 31 March 2016, the rent roll would be
£19.4m, £6.1m higher than the 31 March 2016 rent roll.
THE
CITY
2
4
LONDON
BRIDGE
WATERLOO
1
KENNINGTON
EARLS COURT
VICTORIA
BATTERSEA
Overall occupancy at Vox
Studios and The Print Rooms
by the end of May 2016
CANARY
WHARF
79%
1. Vox Studios
Vauxhall
2. Cargo Works
Southbank
3. Grand Union Studios
Ladbroke Grove
4. The Print Rooms
Southwark
54 "Workspace Group PLC Annual Report and Accounts 2016
Acquisitions and disposals
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
1
ISLINGTON
SHOREDITCH
2
FARRINGDON
OLD
STREET
4
KING’S
CROSS
WEST
END
PADDINGTON
BETHNAL
GREEN
STRATFORD
THE
CITY
LONDON
BRIDGE
WATERLOO
KENNINGTON
CANARY
WHARF
3
EARLS COURT
VICTORIA
BATTERSEA
5
Acquisitions:
1.
2. Angel House
Alexandra House
3. Cannon Wharf
4. Easton Street
5. Garratt Lane
Projects underway
We are currently underway on four refurbishments at an
estimated total cost of £85m. This comprises The Record
Hall in Hatton Garden, Holywell Centre in Shoreditch
and Cremer Business Centre in Hoxton. In each case, the
existing buildings are being demolished and replaced by
new business centres. We are also refurbishing and adding
new space at Barley Mow Centre, Chiswick.
The rent roll at 31 March 2016 at these refurbishments was
£2.4m, down £0.4m in the year as we obtained vacant
possession at Holywell Centre ahead of demolition. There
will be a further rent roll reduction of £0.7m in the current
year as we obtain vacant possession at Cremer Business
Centre. The short-term reduction in rent and income we
are seeing at these properties will be replaced in due
course by a significant uplift in rent as the buildings are
completed and let. Assuming 90% occupancy at the
estimated rental values at 31 March 2016 the rent roll at
these four buildings would be £10.5m.
There are currently five mixed-use redevelopment projects
underway. The buildings have been vacated and sold to
residential developers for a consideration comprising of
cash and, at two properties, new business centres (which
will be built at no cost to Workspace). At the estimated
rental values at 31 March 2016, and assuming 90%
occupancy of the new business space, the rent roll would
be £2.2m (31 March 2016: £nil).
Holywell Centre
Shoreditch
Holywell Centre
Shoreditch
55 "Workspace Group PLC Annual Report and Accounts 2016
4. Easton Street
Farringdon
Acquisitions are held separately from our like-for-like
category until we have at least 12 months of stabilised
performance history following any planned repositioning.
During the year, we have acquired five properties for £101m
with a rent roll at 31 March 2016 of £2.1m.
There was a net reduction of £0.8m in rent roll at four
properties acquired in previous financial years. Growth of
£0.8m in rent roll at 60 Gray’s Inn Road, Holborn and 160
Fleet Street, Midtown following successful upgrade and
refurbishment programmes, was offset by the reduction of
£1.5m in rent at Edinburgh House, Vauxhall where we have
now obtained vacant possession ahead of a planned major
refurbishment, with a surrender premium received of
£5.4m.
We completed the sale of eleven industrial properties
during the year for £95m, with rent roll at the time of
disposal of these properties of £5.4m. These disposals are
in line with our strategy to dispose of industrial estates,
recycling capital into targeted acquisitions where we can
add more value. As at 31 March 2016 we only had two
industrial estates remaining in our like-for-like portfolio,
valued at £43m.
0
2
0
,
1
4
3
0
,
1
4
9
9
0
7
0
,
1
Joint venture income represents our share of net rental
income less associated administrative expenses, primarily
from the BlackRock Workspace Property Trust
(BlackRock JV) in which we have a 20.1% interest.
Business Review
continued
Enquiries and lettings
Enquiry levels have been consistently high averaging
1,029 per month in the year with a good lettings
momentum in the fourth quarter of the year. There are
fluctuations from quarter to quarter linked to the timing
of marketing initiatives, particularly around the launch of
new space and acquisitions.
Average number of enquiries and lettings per month
2
3
2
,
1
1,400
1,200
1,000
800
600
400
200
0
2
1
2
0
1
0 31 Mar
2015
Enquiries
30 Jun
2015
Lettings
8
0
1
30 Sep
2015
3
7
31 Dec
2015
6
1
1
31 Mar
2016
Good levels of enquiries and lettings have continued into
the current financial year, with enquiries averaging 1,047
per month and lettings 111 per month to the end of May
2016. We would expect to see some reduction in activity
levels in June 2016 ahead of the EU referendum.
Profit performance
Trading profit after interest for the year (which includes our
share of the trading profit of joint ventures after interest) is
£43.9m, up 65% compared to the prior year.
£m
Net rental income
Joint venture income
Administrative expenses
Net finance costs
Adjusted trading profit after interest
31 Mar
2016
74.1
1.3
(14.6)
(16.9)
43.9
31 Mar
2015
57.7
1.2
(13.8)
(18.5)
26.6
Net rental income increased by 28% (£16.4m) in the year to
£74.1m with the two key drivers of organic income growth
being the growth in rents at like-for-like properties from
increases in pricing and at completed projects from the
letting up of new and upgraded space.
56 "Workspace Group PLC Annual Report and Accounts 2016
£m
Like-for-like properties
Completed projects
Refurbishments in progress
Redevelopments in progress
Acquisitions
Disposals
Total net rental income
Growth in
Year
8.0
4.8
0.8
0.1
2.9
(0.2)
16.4
31 Mar
2016
44.0
10.1
8.0
3.0
4.8
4.2
74.1
Administration costs are up 5.8% (£0.8m) in the year.
Underlying costs (excluding share based costs) are up
12.4% (£1.3m) to £11.8m. There is an increase in head office
headcount of seven in the year to 92 associated with higher
levels of marketing and project activity, and increases in
salaries averaging 4.5%. Share based costs are reduced by
15.2% (£0.5m) to £2.8m, due to the decline in share price in
the second half of the financial year.
Net finance costs have reduced by £1.6m (8.6%) in the
year. Average borrowings over the year were £9m lower
than in the prior year with the average interest rate
reduced from 5.4% to 5.1%. The marginal cost of undrawn
facilities at 31 March 2016 was 1.8%.
Total profit before tax reported for the year is £391.3m,
8.7% higher than the profit reported in the prior year.
£m
Adjusted trading profit after interest
Change in fair value of investment
properties
Other income
Other items
Profit before tax
31 Mar
2016
43.9
296.6
39.0
11.8
391.3
31 Mar
2015
26.6
318.0
10.1
5.3
360.0
Adjusted underlying earnings
per share
26.8p
17.2p
The reported change in fair value of investment properties of
£296.6m reflects the increase in the CBRE valuation in the
year of £307.8m, adjusted for overage and other property
assets that are reclassified in the accounts as deferred
consideration.
Other income includes the change in fair value of deferred
consideration (cash and overage) of £9.5m, and a lease
surrender premium of £5.4m. It also includes the estimated
performance fee payable to Workspace of £24.1m from the
BlackRock JV in relation to the conclusion of the BlackRock
Workspace joint venture’s five year term.
Other items include the profit on disposal of investment
properties of £8.1m and gains from share in joint ventures
(excluding trading items) of £2.9m.
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Like-for-like properties
The 18% (£130m) increase in value of the like-for-like
properties came from an uplift in rental pricing (representing
63% of the total increase) and a 0.3% reduction in net initial
yield (representing 37% of the increase).
Estimated Rental Value
(‘ERV’) per sq. ft.
Rent per sq. ft.
Equivalent Yield
Net Initial Yield
Capital Value per sq. ft.
31 Mar
2016
31 Mar
2015
£26.29
£22.37
6.4%
5.0%
£359
£21.79
£19.22
6.5%
5.3%
£299
Change
+21%
+16%
-0.1%
-0.3%
+20%
We have seen a significant re-assessment in ERV estimates
at our like-for-like properties with the growth in ERV per
sq. ft. at 21% well ahead of the growth in rent per sq. ft. of
16%. As a result, the equivalent yield of our like-for-like is
reduced by 0.1% in the year compared to the 0.3%
reduction in net initial yield.
Completed projects
The significant uplift of 42% (£93m) in value of completed
projects reflects the pricing levels that have been achieved
at these properties since launch. These rental levels are
ahead of original expectations and previous CBRE rental
value estimates. The largest increases in value over the year
have been at:
– Vox Studios, up £26m.
– Metal Box Factory, up £24m.
– Grand Union Studios, up £14m.
– The Print Rooms, up £13m.
The overall valuation metrics for completed projects are set
out below:
ERV per sq. ft.
Rent per sq. ft.
Equivalent Yield
Net Initial Yield
Capital Value per sq. ft.
31 Mar
2016
£49.07
£39.40
6.1%
3.8%
£705
Refurbishments
We have seen an uplift of 15% (£25m) in the value of the
refurbishments pipeline as a result of planning consents
achieved and an uplift in pricing expectations. This is in
light of the pricing levels achieved at recently completed
and comparable properties in these locations.
Redevelopments
The uplift of 32% (£45m) in the value of redevelopment
projects reflects increases in the values of properties
where we have obtained mixed-use planning consents.
This includes:
– Rainbow Industrial Estate, up £14m.
– The Lightbulb (Phase 2), up £7m.
– The Biscuit Factory, up £6m.
– Marshgate Business Centre, up £4m.
Dividend
Our dividend policy is based on the growth in trading
profits taking into account the distribution requirements
that we have as a Real Estate Investment Trust. For the
current year, the Board has proposed a final dividend of
10.19 pence per share, an increase of 25% on the prior year
(2015: 8.15 pence), which will be paid on 5 August 2016 to
shareholders on the register at 8 July 2016. This dividend
will be paid as a Property Income Distribution.
Property valuation
At 31 March 2016, the wholly owned portfolio was
independently valued by CBRE at £1,779m, an underlying
increase of 20.9% (£308m) in the year. The main
movements in the valuation over the year are set out below:
Property valuation movement over one year (£m)
2,000
1,750
1,500
1,423
(85)
(30)
56
107
308
1,779
1,250
1,000
750
500
250
0
2014/15 Property
disposals
Capital
receipts
Capex Acqui-
sitions
Revalu-
ation
2015/16
We saw a revaluation uplift of 9.6% (£143m) in the first
half of the year and an increase of 10.2% (£165m) in the
second half. The increase in the second half is despite the
adverse impact of the increase in stamp duty introduced
in March 2016.
Set out below is a summary of the full year revaluation
uplift and valuation at 31 March 2016 by property type:
£m
Like-for-like properties
Completed projects
Refurbishments
Redevelopments
Acquisitions
Overage
Disposals
Total
No. of
properties
36
6
7
11
9
–
–
69
Revaluation
uplift
130
93
25
45
(2)
10
7
308
Valuation
864
316
192
186
194
27
–
1,779
57 "Workspace Group PLC Annual Report and Accounts 2016
Disposals
In November 2015, we sold Leyton Industrial Estate, E10 for
£23m. This 135,500 sq. ft. industrial estate was sold at a
premium of 25% to the March 2015 valuation (in line with
the September 2015 valuation) at a net initial yield of 4.8%.
In December 2015, we sold a portfolio of three light
industrial properties in Park Royal, NW10 for £7.0m. These
properties were sold at a net initial yield of 4.9% and a 16%
premium to the September 2015 valuation.
In March 2016, we sold a portfolio of five industrial
properties for £64m comprising 396,000 sq. ft. of lettable
space. The portfolio was sold at a 12% premium to the
September 2015 valuation and at a net initial yield of 5.4%
and capital value of £171 per sq. ft.
During the year we also disposed of our 50% stake in
Enterprise Hayes LLP for £3.1m and two small properties
in Maidenhead and Park Royal for £0.6m.
Refurbishment activity
It has been another active year with an acceleration in the
level of capital expenditure across a range of properties.
We completed the upgrade of Cargo Works, Southbank,
in April 2015 and launched the new and upgraded space
at Vox Studios, Vauxhall, and The Print Rooms, Southwark,
in January 2016. We obtained planning permission for the
construction of new business centres at the Holywell
Centre, Shoreditch in June 2015 and Cremer Business
Centre, Hoxton in October 2015. The two new business
centres will deliver 108,000 sq. ft. of new space at an
estimated cost of £50m.
A summary of the current status of the refurbishment
programme is set out below:
Projects
Completed
(current year)
Underway
Starting in
2016/17
Design stage
Total
Number
Capex
spent
Capex to
spend
Refurbished
and
new space
(sq. ft.)
3
4
2
6
£29m
£15m
Nil
165,000
£70m 239,000
–
–
£11m 179,000
£91m 386,000
£172m 969,000
15
£44m
Business Review
continued
Overage
Pricing evidence from residential sales has resulted in an
uplift in the expected overage we may receive at a number
of our contracted residential schemes, namely a £4m uplift
at Bow Enterprise Park (Phase 1), £3m uplift at Poplar
Business Park (Phase 1) and £3m uplift at Grand Union
Studios.
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 in this financial year:
– In June 2015, we acquired 25/28 Easton Street, WC1 for
£16.6m at a capital value of £794 per sq. ft. The property
is well located in Clerkenwell close to Exmouth market
and complements our existing cluster of buildings in this
popular Midtown area. The converted warehouse style
offices, with net lettable area of 21,000 sq. ft., comprises
basement, ground and three upper floors with potential
for extension in due course. It was acquired from
Amnesty International, and will be reconfigured as a
multi-let business centre at the conclusion of a two year
leaseback to Amnesty International.
– In June 2015, we acquired Angel House, EC1 for £34.0m
at a capital value of £738 per sq. ft. and a net initial yield
of 3.7% off a low average passing rent of £29 per sq. ft.
This attractive Art-Deco building extends to five floors
providing 46,000 sq. ft. of net lettable space and is well
located for Angel, Old Street and King’s Cross St Pancras
stations with six other Workspace buildings nearby. It
offers excellent potential for repositioning to capture
rental uplift in due course. In January 2016, we obtained
vacant possession of the first floor which is currently
being refurbished.
– In October 2015, we acquired the former Mecca Bingo
site in Garratt Lane, Wandsworth for £26.1m. This site,
which comprises a vacant 43,000 sq. ft. bingo hall and
200 space car park has been a long-term land assembly
target for Workspace. It adjoins Riverside, an existing
100,000 sq. ft. office and workshop building. We are
currently in discussion with the planners for a major
mixed-use redevelopment and in the interim period have
let the entire site to a trampoline operator.
– In October 2015, we acquired Alexandra House, N22 for
£14.0m. This 55,000 sq. ft. office building is currently let
to the London Borough of Haringey at a low passing rent
of £10 per sq. ft. with a rent review currently underway.
The property was purchased at a capital value of £255
per sq. ft and at an initial yield of 3.7%.
– In October 2015, we acquired Cannon Wharf business
centre, in Surrey Quays, SE8. This newly built 33,500 sq.
ft. property was purchased for £10.4m at a capital value
of £310 per sq. ft. Occupancy had reached 38% by the
end of May 2016.
58 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
We also have a further two properties where discussions
are well advanced with planners for mixed-use
redevelopments for 240 residential units and are in early
discussions with the planners on two further mixed-use
schemes for 650 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 low at £0.2m (2015: £0.2m). A summary of the
movements in cash flow are set out below:
Net cash from operations after interest
Dividends paid
Capital expenditure
Property acquisitions
Property disposals
Capital receipts
Distributions and proceeds from joint ventures
Other items
Net movement in year
£m
49
(21)
(57)
(107)
93
30
9
(2)
(6)
(270)
(276)
We would expect the remaining capital expenditure on the
refurbishment projects detailed above to be incurred
relatively evenly (subject to planning on some of the design
stage schemes) over the next three years.
Redevelopment activity
Many of our properties are in areas where there is strong
demand for mixed-use redevelopment. Our model is to use
our expertise, knowledge and local relationships to obtain a
mixed-use planning consent and then 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.
A summary of the current status of contracted
redevelopments is set out below:
Completed
2
354
£6m
Nil
Underway
5
1,545
£96m
£7m
Total
7
1,899
£102m
£7m
Number
Residential units
Cash received
Cash to come
Estimated overage
to come
New space (sq. ft.)
£16m
117,000
£11m
£27m
84,000 201,000
Debt at 31 March 2015 (net of cash)
Debt at 31 March 2016 (net of cash)
We expect to receive the majority of the outstanding cash
and overage on these contracted schemes over the next 18
months.
Financing
The Group has £410m of committed facilities as detailed
below:
Private placement notes
Private placement notes
UK fund
Retail bond
Bank facilities
Facility
£148.5m
£9m
Maturity
June 2023
June 2020
£45m June 2022/2023
October 2019
June 2021
£57.5m
£150m
Total facilities
£410m
The Private Placement notes comprise $100m (£64.5m) of
US dollar ten year notes, £84m of Sterling ten year notes
and £9m of seven year Sterling floating rate notes. The US
dollar notes have been fully hedged against Sterling for ten
years. The overall interest rate on the £148.5m ten year
fixed rate notes is 5.6%. A UK Fund has provided a ten year
floating rate facility which reduces by 50% (£22.5m) at the
end of year nine. A seven year £57.5m Retail Bond (listed
on ORB) was issued in October 2012 and carries a coupon
of 6.0%.
In addition to the above, we have seven schemes with
mixed-use planning consents for 1,059 residential units and
182,000 sq. ft. of new business centre space that are not
yet contracted for sale. This includes three planning
consents obtained over the last year:
– We received planning permission in June 2015 for the
redevelopment of Lombard House, Croydon for a
mixed-use scheme comprising 96 residential units and
23,000 sq. ft. of light industrial space.
– In September 2015 we received planning consent at
Rainbow Industrial Estate, Raynes Park for a mixed-use
redevelopment comprising 224 residential units and
37,000 sq. ft. of new commercial and light industrial
space.
– In December 2015 we received planning consent at
Marshgate Business Centre, Stratford for a mixed-use
redevelopment comprising 200 residential units and a
new 34,000 sq. ft. business centre.
59 "Workspace Group PLC Annual Report and Accounts 2016
Business Review
continued
On 30 June 2015, we agreed terms with our three existing
relationship banks to amend and extend our bank debt
facilities. The existing £50m term loan and £100m revolver
facilities were replaced by a new £150m revolver facility
with the maturity extended from June 2018 to June 2020.
The revised terms also provided for the potential extension
of the revolver facility for a further two one year terms to
June 2022 and a potential increase in the quantum of the
facility from £150m to £250m. We also cancelled £95m of
short term interest rate hedges out to June 2018 at a cost
of £2.1m.
In June 2016 we exercised the option for the first extension
of the maturity term of our £150m revolver facility by a
year to June 2021. Following this extension, the average
maturity of our facilities on a proforma basis as at 31 March
2016, was 5.9 years (31 March 2015: 5.8 years).
Our hedging strategy is to fix the cost of our longer-term
borrowings but maintain flexibility around our shorter-term
revolver facilities. At 31 March 2016, 50% of our debt
facilities are at fixed rates, representing 69% of our debt
on a drawn basis.
At 31 March 2016, undrawn facilities (including cash) were
£134m, loan to value was 16% (31 March 2015: 19%) and
interest cover (based on net rental income) was 4.5 times,
giving us good headroom on all of bank, placement notes
and bond covenants.
Facilities by type
5.
1.
2.
4.
3.
1. Private placement notes 36%
2. Private placement notes 2%
3. UK fund 11%
4. Retail bond 14%
5. Bank facilities 37%
Net assets
Net assets increased in the year by £372m to £1,518m, the
most significant item being the £308m increase in the
value of our investment portfolio. EPRA net asset value per
share at 31 March 2016 was £9.23 (31 March 2015: £7.03), an
increase of 31.3% in the period.
At 31 March 2015
Property valuation surplus
Trading profit after interest
Joint venture performance fee
Dividends paid in year
Other
At 31 March 2016
£
7.03
1.88
0.27
0.15
(0.13)
0.03
9.23
BlackRock Workspace Property Trust (‘BlackRock JV’)
We have a 20.1% interest in the BlackRock JV for which we
act as a property manager. It continued to perform well
during the year with underlying rent roll growth of 31%
(£1.5m) excluding disposals. The property valuation has
increased by 27% (excluding capital expenditure and
disposals) to £131m at 31 March 2016. Four industrial estates
were sold in June 2015 for £32.1m at a net initial yield of 6.8%.
The five year term of the BlackRock JV came to an end
in February 2016 and we have agreed with our partner,
the BlackRock Property Fund, to sell the remaining eight
properties to bring the joint venture to a conclusion.
The sales process is underway and in May 2016 we sold
Chandelier Building, Old Oak Common for £13.2m (a surplus
of £1.8m to its valuation at 31 March 2016) at a net initial
yield of 4.5%.
Based on the returns achieved over the life of the
BlackRock JV, a performance fee is payable to Workspace.
Using the valuation of the properties at 31 March 2016 and
the returns achieved over the last five years, this fee is
estimated at £24.1m. In accordance with IFRS recognition
rules, this fee has been recognised in the Consolidated
income statement for the year.
60 "Workspace Group PLC Annual Report and Accounts 2016
Key Property
Statistics
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
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 Mar 2016
Quarter ended
31 Dec 2015
Quarter ended
30 Sep 2015
Quarter ended
30 Jun 2015
Quarter ended
31 Mar 2015
£1,779m
69
3.8
4,554
£114.0m
£78.2m
£24.32
85.8%
2.4
£48.8m
£22.37
90.7%
£131m
8
0.3
£7.9m
£6.3m
£23.01
95.8%
–
77
4.2
4,725
–
£80.8m
£22.39
85.8%
2.4
£47.1m
£21.67
91.3%
–
8
0.3
–
£5.9m
£22.03
93.9%
£1,631m
75
4.2
4,663
£98.1m
£79.0m
£21.11
89.8%
2.4
£46.2m
£21.31
91.1%
£119m
8
0.3
£7.3m
£5.6m
£20.49
96.5%
–
76
4.2
4,613
–
£75.6m
£20.19
89.5%
2.4
£44.7m
£20.57
90.4%
–
8
0.3
–
£5.1m
£19.21
92.2%
£1,423m
75
4.2
4,525
£90.3m
£69.4m
£18.79
88.7%
2.4
£42.3m
£19.22
91.8%
£133m
12
0.5
£8.9m
£7.1m
£16.13
93.9%
Note:
The like-for-like category has been restated for the following:
– Disposals completed during the year.
– The inclusion of Screenworks, Islington, The Pill Box, Bethnal Green and Vestry Street Studios, Old Street.
– The exclusion of The Leathermarket, Bermondsey which is subject to an extensive refurbishment.
The Strategic Report on pages 04 to 61 was approved by the Board of Directors on 7 June 2016 and signed on its
behalf by:
Jamie Hopkins
Chief Executive Officer
Graham Clemett
Chief Financial Officer
Entrance at 160 Fleet Street,
Midtown
61 "Workspace Group PLC Annual Report and Accounts 2016
Our Governance
63 Chairman’s
Governance
Statement
66 The Board
69 Corporate
Governance
Report
69 Executive
Committee
72 Investment
Committee
73 Risk Committee
88 Nomination
Committee
91 Audit Committee
98 Directors’
Remuneration
Report
120 Report of the
Directors
124 Statement
of Directors’
Responsibilities
Meeting room at
Vox Studios, Vauxhall
62 "Workspace Group PLC Annual Report and Accounts 2016
Chairman’s Governance Statement
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
An effective Board
Our externally facilitated performance evaluation is
conducted every three years. The last one was conducted
in March 2015 and it confirmed that the Board and its
Committees operate effectively, with all Directors
contributing to the overall performance of the Group.
The performance evaluation process for this year was led
by me and assisted by the Company Secretary. This year’s
review took the form of a questionnaire which was
completed by the Directors and members of the Executive
Committee. The questionnaires covered the processes and
performance of the Board and its Committees. The
Company Secretary consolidated the responses and
prepared reports for me, as Chairman, as well as for the
Chairmen of the relevant Committees. The findings were
discussed at our Board meeting in March 2016.
The performance of the Executive Directors was assessed
by the Remuneration Committee as part of the salary
review process.
I am delighted to confirm that no significant issues were
raised and the view of the Board is that the governance
structure, together with the Board and its Committees, all
continue to operate effectively, with a positive and open
culture.
However, as a Board we want to continue to strengthen our
governance and the evaluation highlighted a few specific
recommendations that form the basis of our action plan for
the current year. Details of these recommendations can be
found on page 84 of the Corporate Governance Report.
Furthermore, I am satisfied that the Non-Executive
Directors, all of whom are standing for re-election at the
forthcoming Annual General Meeting, continue to be
effective and show a high level of commitment to their
roles.
The independence of our Non-Executive Directors is
extremely important to us in maintaining good governance.
I mentioned last year that the Board will annually assess the
independence of Stephen Hubbard, prior to his
reappointment at the AGM. 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, and in view of
this continuing relationship, the Board has considered
Stephen’s independence as a Non-Executive Director. The
Board is completely satisfied that he remains independent
in judgement and character. It has been agreed that
Stephen will not take part in any considerations of the
valuation of the Group’s property portfolio. In addition, he
will have no involvement in any discussions or decisions
regarding CBRE or the fees paid to them.
‘We are committed to conducting
business responsibly. Corporate
Governance is an integral part of
the way we manage our business.’
Daniel Kitchen
Non-Executive Chairman
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 2016.
The Corporate Governance Report provides insights about
how the Board operated during the year and the key issues
considered. The Company fully complied with the UK
Corporate Governance Code throughout the year. Full
details of the Company’s governance arrangements in
compliance with the Principles of the UK Corporate
Governance Code are included on page 65 to 124.
Why is good governance important to us?
The Board of Workspace is committed to conducting
business responsibly and in a sustainable manner having
regard to the long-term success of the business. In doing
so, we believe it is essential to maintain high standards of
Corporate Governance in terms of leadership,
remuneration matters, accountability, Board effectiveness
and our relationship with shareholders.
Corporate Governance at Workspace is treated as an
important discipline which complements our desire to
continuously improve the performance of the Company.
Our approach to governance is set by the Board and our
Executive Committee ensures that the approach is
effectively implemented across the business.
63 "Workspace Group PLC Annual Report and Accounts 2016
Review of risks
An area of increasing focus for the Company is around
cyber security risk. This is being closely monitored by the
Risk Committee and the Board, with useful guidance
published by both the Government and our advisors.
Workspace recognises the serious and increasing threat
that cyber crime represents to all businesses, and the
potential it has to cause significant interruption to
businesses, as well as financial losses. Consequently, in
order to recognise the heightened threat, we have included
cyber security as a distinct risk in its own right in our risk
register for regular review. We are also undertaking a
review of our IT security to ensure we adhere to best
practice wherever possible. We remain focused on
reviewing and improving the IT infrastructure and
enhancing our internal processes to allow us to identify
potential attacks and take appropriate, mitigating action.
We are also increasing our efforts to raise staff awareness
in this area by issuing updates through internal
communication and training.
This year we have published our Viability Statement which
can be found on page 52 and takes into account the
principal risks faced by the Group.
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.
Daniel Kitchen
Non-Executive Chairman
7 June 2016
Chairman’s Governance Statement
continued
We are keen to ensure that Non-Executive Directors are
provided with sufficient information, access to our portfolio
and people, to enable them to support and offer
constructive challenge to the executive management team.
They engaged in visits to a number of the Company’s
properties during the year. The feedback from both the
Non-Executive Directors and our on-site staff is that these
visits are very constructive and we will continue them in
future.
During the year, I also held a number of Board dinners,
ahead of scheduled Board meetings. We have found that
the dinners provide a further opportunity to engage in
open debate between Directors on a wide range of matters
affecting the business. As a result, I find that the debate at
the following formal meeting is generally more focused,
with constructive and well formulated views expressed by
the Non-Executive Directors.
Meeting our shareholders
We have continued to operate a comprehensive investor
relations programme during the year with our Executive
Directors regularly meeting with investors and analysts.
I am available to meet shareholders when required.
Succession planning
The Board is actively engaged in succession planning for
both Executive and Non-Executive Directors. This ensures
that the Board composition continues to be appropriate
and, therefore, effective. This is delivered through a series
of reviews during the year, which covers both Executive
Director and Senior Management succession and
development.
New legislation
The revised Corporate Governance Code (2014) has been
applied by the Company in preparing this Annual Report
and Accounts and the Board has received a number of
briefings and discussed in detail the implementation of the
new provisions including risk management and the Viability
Statement.
The Modern Slavery Act came into force in October 2015.
Having conducted a review of the requirements and
completed a risk review, action has been taken to
incorporate a compliance clause in our standard supplier
contract. A formal policy dealing with slavery and human
trafficking has also been prepared and a programme of
staff training is also being conducted.
The Board also considered the implications of the Market
Abuse Regulations, effective from July 2016, and we are
making the appropriate changes to our internal processes,
together with a programme of training for relevant staff.
64 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
How governance supports our strategy
The Board plays a critical role in setting the strategic direction of the
business and ensuring that through its governance framework it is
being delivered. Effective risk management is a key part of protecting
shareholder value by being proactive and responsive as a business in a
fast-paced market. The principles in the Code set the framework for
how the Board, through its governance activities, provides effective
oversight of delivering against the strategy.
Leadership
The Board is
responsible for setting
the tone to embed the
Group’s strategy into
the business. The
Board carefully
monitors the progress
of the strategy and
receives regular
briefings on the state
of the London
property market. On
an annual basis the
Board has a strategy
day to review progress
and ensure that the
strategy and business
plans are responsive to
the market conditions.
Accountability
The work of the Audit
Committee plays an
important role to
provide the necessary
safeguards to
manage risks and
achieve high
standards in
transparency and
accountability to
shareholders.
Effectiveness
The Nomination
Committee continues
to make sure the
Board has the
necessary skills and
experience to
understand the
market and provide
challenge to the
business to deliver
the strategy.
Remuneration
Through the work of
the Remuneration
Committee, the
Company’s policy is
to align reward of the
Executive Directors
with the performance
of the Company and
incentivise long-term
and sustainable value.
Relations with
Shareholders
Explaining the
strategy and how it is
being operationalised
through our business
model is an important
part of the Board’s
work in keeping
shareholders
informed on the
business’
performance and
future prospects.
Chris Girling
Senior Independent
Non-Executive Director
Daniel Kitchen
Non-Executive
Chairman
G o o d Governance
Maria Moloney
Non-Executive
Director
Graham Clemett
Chief Financial
Officer
Relations w it h S
Jamie Hopkins
Chief Executive
Officer
R
e
m
u
n
e
r
a
t
i
o
n
e h o l d e r s
r
a
h
1.
Right
market
Our
strategy
5.
Right
brand
Lea
d
e
rs
h
i
p
2.
Right
properties
4.
Right
people
3.
Right
customers
s
s
e
n
e
ctiv
e
ff
E
Damon Russell
Non-Executive
Director
Stephen Hubbard
Non-Executive
Director
Accountabili t y
Executive Board member and
Executive Committee member
Senior Independent
Non-Executive Director
Non-Executive Director
65 "Workspace Group PLC Annual Report and Accounts 2016
The Board
Executive Directors
‘We have an extremely
strong Board of Directors at
Workspace. They are all very
skilled individuals who bring
with them valuable and
significant experience. This,
I believe, contributes to the
effectiveness of the Board
and therefore its ability to
motivate our team to deliver
excellent performance.’
Daniel Kitchen
Non-Executive Chairman
Board tenure
3.
1.
2.
1. 0-3 years 14%
2. 3-5 years 43%
3. 5+ years 43%
Board diversity
2.
1.
1. Female 14%
2. Male 86%
Board experience
8.
7.
6.
5.
4.
1.
2.
3.
1. Property 24%
2. Financial 16%
3. Construction 12%
4. Telecoms and media 12%
5. Advisory 12%
6. Legal 12%
7. Local council 6%
8. Utility 6%
Jamie Hopkins
Chief Executive Officer
Graham Clemett
Chief Financial Officer
Appointment to the Board:
June 2010 as a Non-Executive
Director and appointed Chief
Executive Officer on 1 April 2012.
Committee memberships:
– Chairman of the Executive
Committee.
Appointment to the Board:
Graham Clemett joined the Board as
Chief Financial Officer in July 2007.
Committee memberships:
– Member of the Executive
Committee.
– Member of the Investment
– Chairman of the Investment
Committee.
Committee.
– Chairman of the Risk Committee.
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.
Previous appointments:
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.
Skills and business experience:
– Strategic development and
execution experience.
– Motivating people and
encouraging teams to deliver
their objectives.
Current external appointments:
Graham was appointed as
Non-Executive Director and
Chairman of the Audit Committee
for The Restaurant Group plc with
effect from 1 June 2016.
Previous appointments:
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.
Skills and business experience:
– Significant experience of financing
and capital raising.
– Over eight years in the Group he
has a detailed knowledge of
operations.
– Strong strategic and commercial
skills.
– Well-developed leadership and
– Strong experience of investor
management skills.
– Strong commercial skills.
– Significant property experience.
– Strong experience of investor
relations.
relations.
66 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Non-Executive Directors
Daniel Kitchen
Non-Executive Chairman
Chris Girling
Senior Independent Non-Executive
Director and Chairman of the
Audit Committee
Maria Moloney
Non-Executive Director and
Chairman of the Remuneration
Committee
Appointment to the Board:
Daniel Kitchen was appointed to the
Board in June 2011 and subsequently
assumed the role of Chairman at the
AGM in July 2011.
Independent:
Yes.
Committee memberships:
Chairman of the Nomination
Committee and a member of the
Remuneration Committee.
Current external appointments:
Daniel is currently Chairman of
Hibernia REIT plc, Applegreen plc, a
Non-Executive Director of LXB Retail
Properties Plc, Irish Takeover Panel
Limited and Governor of St Patrick
Hospital in Dublin.
Previous appointments:
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.
Skills and business experience:
– Detailed knowledge of the Group.
– Strong leadership skills.
– Strategy development and
execution.
Appointment to the Board:
Chris Girling was appointed to the
Board in February 2013. On the
recommendation of the Nomination
Committee, the Board agreed to
extend his appointment for a further
three years from February 2016.
Independent:
Yes.
Committee memberships:
Chairman of the Audit Committee,
Member of the Remuneration and
Nomination Committees.
Current external appointments:
Chris Girling, a Chartered
Accountant, 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.
Previous appointments:
Chris Girling was previously Group
Finance Director of Carillion PLC
from 1999 to 2007 and Vosper
Thornycroft PLC for 10 years.
Skills and business experience:
– Previously CFO of FTSE 250 plc’s
for 18 years.
– Strong financial skills.
– Detailed knowledge of risk
assessment and management
systems.
– Strong financial skills and
– Experience of infrastructure and
previously a CFO for eight years
for a property development and
investment company.
– Experience of acquisitions and
disposals.
development projects.
Appointment to the Board:
Maria Moloney was appointed to the
Board in May 2012.
Independent:
Yes.
Committee memberships:
Member of the Audit and
Nomination Committees and
Chairman of the Remuneration
Committee.
Current external appointments:
She is currently on the Board and
a Trustee of the Northern Ireland
Cancer Centre in Belfast.
Previous appointments:
Maria 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.
Skills and business experience:
– Strong marketing and commercial
skills.
– A lawyer by background with
significant legal and Corporate
Governance experience.
– Business development and
strategy development.
– Strategic business assessments
across diverse market sectors.
Executive Board member and
Executive Board member and
Executive Committee member
Executive Committee member
Senior Independent
Senior Independent
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
67 "Workspace Group PLC Annual Report and Accounts 2016
The Board
continued
Non-Executive Directors continued
Company Secretary
Damon Russell
Non-Executive Director
Stephen Hubbard
Non-Executive Director
Carmelina Carfora
Company Secretary
Appointment to the Board:
Stephen Hubbard was appointed to
the Board in July 2014.
Date appointed:
Carmelina Carfora was appointed as
Company Secretary in March 2010.
Independent:
Yes.
Committee memberships:
Member of the Remuneration, Audit
and Nomination Committees.
Current external appointments:
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. He is also Chairman of
London Business Network and a
member of the advisory board for
Redevco which is a pan-European
property holding company.
Skills and business experience:
– Many years’ experience of
operating within the property
sector.
– Experience of regeneration and
development projects.
– Investment and transactions.
– Detailed knowledge of risk
assessment and management
systems.
– Strong financial skills.
Responsibilities:
Carmelina is Secretary to the Board
and its Committees, ensuring
compliance with its procedures and
providing advice on governance
matters. At the direction of the
Chairman, she is responsible for
ensuring the Board receives
accurate, timely and relevant
information. She also co-ordinates
the induction of new Board
members and the provision of
ongoing training and development
of the Board.
Carmelina’s other responsibilities
include: monitoring and compliance
with legislation such as the Data
Protection Act and Modern Slavery
Act; administration, vesting and
granting of awards under the
Company’s share schemes; and
compliance with other regulatory
regimes.
Background and relevant experience:
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.
Appointment to the Board:
Damon Russell was appointed to the
Board in May 2013. On the
recommendation of the Nomination
Committee, the Board agreed to
extend his appointment for a further
three years from May 2016.
Independent:
Yes.
Committee memberships:
Member of the Remuneration, Audit
and Nomination Committees.
Current external appointments:
Damon holds advisory roles for a
number of smaller companies in the
digital media sector. He 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.
Previous appointments:
He was previously Non-Executive
Director of iannounce before
its merger with Legacy.com in
May 2013.
Skills and business experience:
– Extensive digital and media
technology experience.
– Strong strategic and commercial
understanding.
– Significant experience in alliances,
ventures and partnerships.
– Knowledge of service related
industry requirements and key
client relationships.
68 "Workspace Group PLC Annual Report and Accounts 2016
Non-Executive Director
Corporate Governance Report
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Executive Committee
Executive Committee
Role of the Executive Committee:
The Executive Committee is responsible
for the successful implementation
of the Company strategy and for
the performance of the Group. It will
also review the effectiveness of our
governance processes to ensure that
they are embedded within the Company.
– Developing the Group strategy and
budget for approval by the Board.
– Reviewing and approving capital
expenditure within the authorities
delegated by the Board.
– Monitoring of operational and financial
results against plans and budgets.
– Collectively responsible for the
day-to-day running of the business.
– Developing leadership skills and the
future talent of the business so that
strong succession plans are in place
as the Group develops.
– Analyse and review initiatives of
particular interest to the Company
and present these to the Board as
appropriate.
– Ensure the effectiveness of risk
management and control procedures.
The Committee has met 19 times
during the year ended 31 March 2016.
Number of planning consents gained
4
Enquiries in 2015/16
12,353
1
2
3
4
Members of the Executive Committee:
1. Jamie Hopkins
Chief Executive Officer
Specific responsibilities:
Strategic management; investor
relations; day-to-day operations;
acquisitions and disposals;
health and safety; staff; equal
opportunities; remuneration; training
and development; Chairman of the
Executive, Investment, Risk and
Charity Committees; and
development of the brand.
2. Graham Clemett
Chief Financial Officer
Specific responsibilities:
Finance; treasury; tax; company
secretarial and compliance; investor
relations; and information technology.
3. Chris Pieroni
Operations Director
Specific responsibilities:
Portfolio performance; asset
management; lettings; marketing;
rent reviews and renewals; new
business development; and charity
and social initiatives.
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. Chris was Chairman of the
Business Centre Association 2014–2016.
4. Angus Boag
Development Director
Specific responsibilities:
Planning consents; redevelopment
and refurbishment projects; valuations;
sustainability and environmental
strategy; and project management.
Background and relevant experience:
Angus joined the Group in June 2007
as Development Director. He has
extensive experience in property and
construction management and is
responsible for adding value to the
Group’s assets through planning
consents, development and joint
ventures. Angus also manages all the
building works across the portfolio
and is responsible for the valuations of
the Group’s property. Angus also sets
the Group’s corporate social
responsibility and sustainability
programme. Before joining the Group,
Angus was Managing Director of
Manhattan Loft Corporation and a
Principal at PA Consulting Group.
69 "Workspace Group PLC Annual Report and Accounts 2016
Corporate Governance Report
continued
1.
2.
3.
Customer relationships
are vital to our strategy
so we actively engage
with customers so they
understand our offer
and we get real-time
information from them.
Chris Pieroni pictured
with Nick Robinson
and Roisin O’Shea,
from International
Sports Consulting at
Grand Union Studios.
1.
Health and Safety is an
important consideration
for all properties and an
issue the Board reviews.
Jamie Hopkins is pictured
on-site at Grand Union
Studios reviewing health
and safety practices with
Chris Alison, one of our
facilities managers.
2.
One of the issues
highlighted in the 2015
evaluation of the Board
is the need for increased
interaction between
the Board and Senior
Management.
The Executive Team
are pictured with Daniel
Kitchen, Chairman, and
Chris Girling, Senior
Independent Director,
at Westbourne Studios.
Executive Committee in action
Understanding the business
and how it is responding to the
challenges and opportunities in
the marketplace is an important
part of the Executive Committee’s
role. The Executive Committee
provides day-to-day leadership
of the business, working closely
with Senior Managers and staff
to create and protect value across
the portfolio.
Daniel Kitchen
Non-Executive Chairman
70 "Workspace Group PLC Annual Report and Accounts 2016
3.
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
71 "Workspace Group PLC Annual Report and Accounts 2016
Composition of the Committee –Jamie Hopkins, Chief Executive Officer –Graham Clemett, Chief Financial Officer –Chris Pieroni, Operations Director –Angus Boag, Development DirectorGiven the nature of capital expenditure or initiatives that are likely to be presented to the Investment Committee, it is also attended by: –John Robson, Head of Asset Management –Jonathan Shelton, Head of Investment –James Friedenthal, Head of Corporate Development –Clare Dundas, Head of Corporate Communications –Mike Webber, Financial Planning and Analysis Manager –Carmelina Carfora, Company Secretary (Secretary to the Investment Committee)The Investment Committee is chaired by Jamie Hopkins and meets every two weeks.Role of the Investment Committee –Review and approve disposals and acquisitions of investment property assets which will also be approved by the Board, in particular with a value of more than £2m. –Approve and monitor asset management initiatives greater than £0.1m. –Approve and monitor progress on all refurbishment and redevelopment programmes to ensure they are progressing in line with budget and are on target to meet completion dates. Issues covered in 2015/16 –Reviewed and approved the disposal of 11 industrial properties for £95m. –Reviewed and approved the acquisition of five properties for £101m. –Approved refurbishment and redevelopment activity, including monitoring progress at four projects that completed in the year. –Considered options for and approved upgrades to technology infrastructure in our buildings. Workspace owned an industrial estate in Leyton, E10, comprising a total of 135,544 sq. ft. In 2013 and 2014, the property underwent a two-phased refurbishment programme which saw new units being built on the estate, resulting in increased occupancy and improved rents. In line with the strategy to focus on business centres, where Workspace can add more value to customers, the Investment Committee considered the disposal of Leyton Industrial Village in 2015. The property was placed on the market and sold for £23m, a premium of 25% on the March 2015 valuation and in line with the September 2015 valuation. Significant interest was generated from a number of potential buyers and we were pleased to have sold it at such a substantial premium to book value.ISLINGTONCase study:Disposal of Leyton Industrial Village – November 2015 ‘In reviewing areas of significant expenditure across the business, the Investment Committee not only supports the successful implementation of the Company strategy but also offers robust challenge and ensures that risk assessments are conducted.’Jamie HopkinsChief Executive Officer1. Leyton Industrial VillageLeyton1Corporate Governance ReportcontinuedInvestment CommitteeLeft to right: James Friedenthal, Jonathan Shelton and John Robson72 "Workspace Group PLC Annual Report and Accounts 2016 Composition of the Committee –Jamie Hopkins, Chief Executive Officer –Chris Pieroni, Operations Director –Carmelina Carfora, Company Secretary –Vivienne Frankham, Head of Finance –Kate Ankers, Chief Accountant –David Rees, Finance Manager –Claire Dracup, Head of Support Services1In addition, employees from across the business, specifically, Centre Managers, will attend meetings of the Committee, by invitation, where they are asked to share any information which they feel is relevant in order to assist the Committee in evaluating possible future risks to the Company.The following also attended meetings of the Committee during the year, again by invitation, in order to discuss their risk registers and to contribute to the discussions relating to their respective areas of expertise: –Chief Financial Officer –Development Director –Head of IT –Head of Support Services –Other senior staffThe Risk Committee is chaired by Jamie Hopkins and meets every month.Role of the Risk CommitteeThe Risk Committee’s responsibilities include, but are not limited, to the following: –To drive and co-ordinate Workspace policy and procedure and training in relation to risk management. –To promote and publicise risk management awareness throughout the organisation. –To challenge Executive Director review and appraisal of risk. –To co-ordinate and manage a planned annual programme of review and testing of risks and controls aligned to requirements. –To oversee and advise the Board on the current risk exposures of the Company and future risk strategy. –To engage internal or external resource for the review and testing of risks and processes as agreed in the annual plan, or as required. –To co-ordinate reports and papers for the Board and Audit Committee as required. –To review reports on any breaches of risk limits or controls to the Board and agree proposed action. –To consider any developments in the external environment or regulation which may impact on risk considerations.Issues covered in 2015/16During the year, the Risk Committee undertook the following tasks: – Reviewed and discussed the strategic risks for circulation to the Audit Committee and for inclusion in the Annual Report. – Considered the operational risk registers for each functional area and agreed any changes. – Received presentations from Senior Management, concerning controls over certain parts of the business or specific risks. – Agreed an annual internal control review programme which is also circulated to the Audit Committee. –Developed a robust framework for preparation of the Viability Statement. –Discussed cyber security risk and agreed to include it as a distinct item in the risk register.Cyber crime represents a serious and increasing threat to businesses. Consequently, in order to recognise the heightened threat, cyber security has been included as a distinct risk in its own right, in our risk register and will be the subject of regular review.Given the potential impact of a cyber-attack on our operations, it is being closely monitored by the Risk Committee and the Board, whilst monitoring guidance published by both the Government and our external advisors.Case study:Cyber security riskWorkspace head officeRisk Committee1. Joined Committee from April 2016.73 "Workspace Group PLC Annual Report and Accounts 2016OverviewStrategic ReportOur GovernanceFinancial StatementsAdditional Information Matters reserved for its decision
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, business objectives and annual
budgets.
– Succession planning for the Board and Senior
Management.
– Approval of significant funding decisions.
– Review and approval of corporate transactions.
Other day-to-day operational decisions are delegated by
the Board to the Executive Committee, subject to formal
delegated authority limits. The schedule of matters
reserved for the Board’s decision can be accessed on the
Company website at www.workspace.co.uk
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.
Details of the Group strategy are set out in the Strategic
Report on pages 4 to 61.
Details of the risk management and internal control system
can be found on page 97.
Board and Committee meetings attendance
The Board has regular scheduled meetings throughout the
year. It held nine meetings during the year under review.
Supplementary meetings or Board conference calls are held
between formal Board meetings as and when necessary.
The Board has a number of standing Committees, namely
Nomination, Audit and Remuneration to which specific
responsibilities have been delegated and for which written
terms of reference have been agreed. Further details of the
work of these Committees can be found on pages 88 to 119.
The Directors are expected to attend all meetings of the
Board, the 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 2016 are set out in the table below.
Corporate Governance Report
continued
Compliance with the UK Corporate Governance Code
The Company has, throughout the year ended 31 March
2016, fully complied with the provisions of the UK
Corporate Governance Code (the ‘Code’) published in
September 2014 which is the version of the Code which
applies to the Company for its financial year. A copy of
the Code is available at www.frc.org.uk. The application of
the principles contained in the Code is described below.
Detailed reports on the Nomination Committee, the Audit
Committee and Remuneration Committee can be found
on pages 88 to 97 and pages 98 to 119.
Leadership
Our governance framework which is shown on page 65
illustrates how our internal processes operate, all of which
support good governance practices throughout the Group.
The Executive Directors also provide regular updates to the
Board on different aspects of the business ranging from
progress being made on our refurbishment and
redevelopment projects, trading performance, the rationale
for acquisitions and disposals and how these are aligned to
our strategy and, informing the Board on the discussions
held with analysts and investors.
Furthermore, the Board’s visit to some of our properties is
an important part of them understanding the business first
hand. For example, the Board site visits in March 2016
proved beneficial as it provided the opportunity for the
Board to interact with site staff. Non-Executive Directors
had the opportunity to meet with local management and
centre staff, to reinforce and extend their knowledge and
understanding of some key properties within the portfolio.
All of these factors provide a different perspective for
our Board which enables the Non-Executive Directors to
support and offer constructive challenge to the executive
management team.
The role of 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 key responsibilities of our Board and those matters
reserved for its decision are as follows:
Responsibilities
– Agree strategic plans and business objectives.
– Approve the acquisition of investment properties and
disposals.
– Review and agree financing arrangements and capital
expenditure.
– Review the Group’s systems of internal control,
governance and risk management.
74 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Scheduled meetings and member attendance
Daniel Kitchen
Jamie Hopkins
Graham Clemett
Chris Girling1
Damon Russell
Maria Moloney
Stephen Hubbard
Board
9/9
9/9
9/9
9/9
9/9
9/9
9/9
Audit Remuneration Nomination
2/2
10/10
–
–
–
–
1/2
10/10
2/2
10/10
2/2
10/10
2/2
10/10
–
–
–
3/3
3/3
3/3
3/3
Notes:
1. Chris Girling did not attend one meeting of the Nomination
Committee as the business of the meeting was in relation to his
reappointment as a Director of the Company.
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 the Committee Chairman prior to the meeting.
Board Committees
The Board has a number of standing Committees, namely
the Remuneration, Audit, and Nomination 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 Nomination, 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 88
to 119.
Division of responsibilities
The Roles of the Chairman and Chief Executive Officer
The roles and responsibilities of the Non-Executive
Chairman and Chief Executive Officer are separate, and the
division of responsibilities has been clearly established.
The Chairman, Daniel Kitchen, is primarily responsible for
the operation and leadership of the Board and ensuring its
effectiveness. The Chief Executive Officer, Jamie Hopkins,
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 Chairman
The Chairman sets the Board’s agenda and ensures that
important matters, in particular strategic issues, receive
adequate time and attention at meetings. 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
and informal dinners with the Non-Executive Directors,
without the Executive Directors being present. The
discussions largely revolved around succession planning
and other matters of interest.
When Daniel Kitchen became Chairman in July 2011, he was
considered to be independent on appointment. The Board
considers the Chairman to be independent.
Non-Executive Directors
The Senior Independent Director, Chris Girling, is available
to provide an alternative communication channel for
shareholders if required. He can also deputise for the
Chairman in his absence.
The Senior Independent Director also chairs an annual
meeting of the Executive and Non-Executive Directors,
without the Chairman present, to appraise the Chairman’s
performance and address any other matters which the
Directors might wish to raise. The Senior Independent
Director conveys the outcome of these discussions to the
Chairman.
75 "Workspace Group PLC Annual Report and Accounts 2016
Corporate Governance Report
continued
Leadership structure
The leadership of the Company is based on strong and
effective governance through information and knowledge
sharing throughout the business. In discharging its
obligations, along with their own skills and experience, the
Board draws on the expertise throughout the business and
from external advisors to ensure that its judgements are
based on sound and timely information. For that reason,
we do not show our Governance as a traditional hierarchy
but as the Board table and all of those who provide input to
the Board’s work.
The Board
Executive Directors
Jamie Hopkins, Chief Executive Officer
Role: With extensive experience in the property sector,
Jamie provides strategic direction for the Company,
business development and investor relations.
Graham Clemett, Chief Financial Officer
Role: To manage the Group’s financial activity, Graham
has extensive experience in finance and banking.
Non-Executive Directors
Daniel Kitchen, Non-Executive Chairman
Role: As Chairman of the Board, Daniel is also Chairman
of the Nomination Committee. He brings independence
and strong leadership skills.
Chris Girling, Senior Independent Non-Executive
Director and Chairman of the Audit Committee
Role: To independently advise the Board, Chris has a
detailed knowledge of risk assessment and infrastructure
development experience.
Maria Moloney, Non-Executive Director and
Chairman of the Remuneration Committee
Role: Maria brings a wealth of experience from a legal
background, as well as property and telecoms.
Damon Russell, Non-Executive Director
Role: Member of the Remuneration, Nomination and
Audit Committees. Damon brings extensive TMT
experience to the Board.
Stephen Hubbard, Non-Executive Director
Role: Stephen has a wealth of experience in the property
sector. As a member of each of the Board Committees he
provides further independent advice to the Board.
Company Secretary
Carmelina Carfora, Company Secretary
Role: Carmelina is Secretary to the Board and its
Committees, providing governance and compliance advice.
Board Committees
Nomination Committee
Role: To continually develop the skills and experience of
the Board and to meet the changing needs of the business.
Audit Committee
Role: To review and report on the Group’s financial
reporting, internal controls and risk management process.
Remuneration Committee
Role: To ensure that remuneration arrangements underpin
the Group’s strategy and to attract and retain critical talent.
Internal Committees
Executive Committee
Jamie Hopkins, Chief Executive Officer
Role: Overall management of the Company strategy,
investor relations and daily operations of the Group.
Graham Clemett, Chief Financial Officer
Role: Overseeing the Group’s financial activity, treasury tax,
Company secretarial and governance, and managing the
Group’s IT strategy.
Angus Boag, Development Director
Role: Responsible for the planning and development of
properties, managing the portfolio and Corporate Social
Responsibility.
Chris Pieroni, Operations Director
Role: To manage the Company assets, professional
services and overall business operations and development.
Investment Committee
Role: To ensure that any significant expenditures across
the business are made in support of the Company strategy.
Risk Committee
Role: To manage strategic and operational risks in each
functional area of the business and assess internal controls.
Senior Management
Role: To assist the CEO in managing the day-to-day
activities of the Group.
External
Independent Auditors
Role: To audit the financial and non-financial matters
within the Group to ensure the Company’s compliance with
applicable accounting standards, laws and regulation and
report to shareholders.
Independent advisors
Role: To advise the Board on valuation, legal matters
and market developments.
76 "Workspace Group PLC Annual Report and Accounts 2016
Leadership structure
Board activity
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Strategy and b usin e ss o
e
c ti v
b j e
Daniel Kitchen
Non-Executive
Chairman
Graham Clemett
Chief Financial
Officer
Jamie Hopkins
Chief Executive
Officer
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r
Chris Girling
Senior Independent
Non-Executive Director
m
a
n
c
e
o
f
t
h
e
Maria Moloney
Non-Executive
Director
b
u
s
i
n
e
s
s
Damon Russell
Non-Executive
Director
Stephen Hubbard
Non-Executive
Director
A unique mix
of skills, inputs
and insights
Knowledge sha r i n g
c c e ssio n planning
u
S
‘Our leadership provides agile and responsive
decision-making to keep pace with a dynamic
marketplace within the safeguards of a sound
governance framework.’
Jamie Hopkins
Chief Executive Officer
77 "Workspace Group PLC Annual Report and Accounts 2016
Corporate Governance Report
continued
Board activities in 2015/16
In the Boardroom:
The Board met formally throughout the year, with
main meetings timed around the financial calendar and
additional meetings convened to consider an annual
cycle of topics including the annual strategy day, key
management and financial updates, review of risk as
well as the approval of acquisitions and refurbishment
programmes. Attendance at Board and Committee
meetings held during the year is shown on page 75.
Engaging with the business:
In March 2016, as part of a planned Board
tour, the Board and members of the
Executive Committee visited four properties:
– Angel House, Angel
– Canalot Studios, Ladbroke Grove
– Grand Union Studios, Ladbroke Grove
– Westbourne Studios, Portobello
The Board also met with centre staff
and customers.
78 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
The following six areas represent the primary focus of the
Board in discharging its governance obligations and
promoting the overall performance and long-term growth
of the business.
1. Strategy
The Board plays an active role in ensuring that the business has
the right strategy for current and expected market conditions.
Progress in 2015/16
– Held a review of strategy with the Executive Directors
and other members of the Senior Management team.
– Received an overview of the annual Capital Markets Day
with analysts and investors which was held in October 2015.
– Held a separate meeting with the Chief Executive Officer
to review succession planning.
2. Trading performance
The Board regularly monitors performance and the balance
sheet to assess whether the strategy is effective and
whether the business model is responding and adapting to
customer needs and overall trends and conditions in the
London property market.
Progress in 2015/16
– Reviewed monthly performance against budget and other
finance matters, including budgets and business plans.
– Considered, in detail, the annual and interim results,
interim management statements and dividends.
– Discussed treasury and cash management matters.
– Discussed Group tax matters.
– Received updates on market and broker reports.
These sites were selected for the Board tour as they
represented a good cross section of activity within
the business, comprising a redevelopment, a past
refurbishment, a repositioning and a new acquisition.
The full calendar of events undertaken by the
Board are detailed on pages 79 to 81.
79 "Workspace Group PLC Annual Report and Accounts 2016
Angel House, Angel
Acquired June 2015
This property is currently undergoing a planned
refurbishment of reception and common parts.
Corporate Governance Report
continued
3. Property valuation and investment
Maximising the value of our properties requires the Board
to approve investment decisions based on robust market
data and financial analysis. The Board reviews and
challenges the valuation of the portfolio and reviews and
approves major development projects.
Progress in 2015/16
– Considered and approved the property valuations
performed by CBRE.
– Approval of redevelopment activity and major
refurbishments.
– Significant investment decisions including five property
acquisitions during the year of £101m and we realised
£95m from the disposal of six industrial properties.
– Received updates from the Development Director on
the status of planning consents.
4. Governance, risk and internal controls
Robust governance and risk management are crucial to the
Board’s role in protecting the business’ balance sheet along
with maximising opportunities for growth and returns. The
Board regularly reviews governance requirements and
assesses the adequacy of risk management including the
effectiveness of internal controls and risk reporting.
Progress in 2015/16
– Regularly reviewed the principal risks and risk appetite.
– Received reports on Health and Safety and the activity
undertaken in terms of staff training and audits being
undertaken.
– Received reports on governance issues, including legal
and regulatory updates. This also included an overview
of the new Market Abuse Regulations provided by the
Company legal advisers in March 2016 and other specific
updates provided by the Auditors, PwC.
– Considered the AGM resolutions and voting outcomes.
– Conducted a review of the Company’s Viability
Statement.
Canalot Studios, Ladbroke Grove
Acquired December 2002
This property has undergone major refurbishment works
over the last 10 years.
80 "Workspace Group PLC Annual Report and Accounts 2016
Grand Union Studios, Ladbroke Grove
Acquired July 1987
A brand new building completed in December 2015
following a mixed-use redevelopment scheme.
5. Shareholder engagement
The Board is committed to active dialogue with
shareholders and seeking their views on relevant
governance matters.
Progress in 2015/16
– Reviewed reports from the Company’s brokers on
shareholder feedback from the Annual Capital Markets
Day and meetings with the Chief Executive Officer and
Chief Financial Officer.
– Reviewed the 2015 AGM Shareholder Circular and proxy
voting figures.
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
6. Succession planning and Board performance
The Board understands that the strength of its governance
relies on having the right mix of skills and experience
around the Board room table and ensuring there is
continuity in Board membership. The Board conducts a
rigorous evaluation of its performance each year and
actively plans for succession.
Progress in 2015/16
– Conducted the Board evaluation for the period to
31 March 2016 and reviewed the actions arising from
the external Board Evaluation conducted in 2015.
– Conducted a review of succession planning for the
Board and Senior Managers and discussed training and
development requirements.
Regular agenda items discussed:
In addition to the matters noted, the Board regularly
receive briefings from senior staff and external advisors.
It considers matters such as compliance with legislation,
employee relations and other relevant issues to ensure
there is a strong focus on promoting a positive and
innovative culture throughout the business.
Westbourne Studios, Portobello
Acquired January 2002
A long-held asset in our like-for-like portfolio which
we continue to upgrade, most recently having refreshed
the atrium.
81 "Workspace Group PLC Annual Report and Accounts 2016
Corporate Governance Report
continued
Effectiveness
Board composition
As at 31 March 2016, the Board comprised the Chairman,
two Executive Directors and four Independent Non-
Executive Directors.
Further biographical information on each of our Directors
can be found on pages 66 to 68, which shows the breadth
of their skills and experience and membership to the
Committees. All of our Directors have significant
experience and knowledge of the sector in which we
operate. The Non-Executive Directors bring industry
experience from a wide range of backgrounds.
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 Independent Non-Executive Directors
meets the requirement of the Code for at least half the
Board, excluding the Chairman, to be independent Non-
Executive Directors.
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,
was specifically considered. The Board is satisfied that he
remains independent and has established a protocol to
ensure that Stephen has no involvement, at any stage, in
the Group’s valuation exercise. He also takes no part in any
of the discussions concerning CBRE’s role and fees.
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 Nomination 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.
Appointments to the Board
The Nomination Committee, is chaired by Daniel Kitchen,
the Company Chairman and comprises all of the Non-
Executive Directors. As needs arise, the Committee is
assisted by external search consultants.
The Committee ensures that there is a formal, rigorous
and transparent procedure for the appointment of new
Directors, with the first step being a detailed evaluation of
the current composition of the Board, taking into account
the balance of skills, experience, knowledge and diversity.
The Committee then prepares a candidate specification for
approval by the Board.
There has been no Board Director recruitment activity for
the year under review.
In accordance with the Code, all Directors wishing to
continue will retire and offer themselves for re-election
by shareholders at the Annual General Meeting on
14 July 2016.
The Nomination Committees terms of reference can be
found at www.workspace.co.uk.
Further work of the Nomination Committee can be found
on pages 88 to 90.
Independent advice
The Directors can, for the purpose of discharging their
duties, obtain independent professional advice at the
Company’s expense. No Director had reason to use this
facility during the year.
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, 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 gender, skills and experience is
maintained. Further details on our diversity policy can be
found on page 37.
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 at Board
meetings.
Details of the business experience and skills held by
each Director can be found in the Directors’ biographies
section of this Annual Report on pages 66 to 68.
82 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
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.
Non-Executive Directors will seek approval from the
Chairman, prior to assuming additional external
commitments which may affect their time available to
devote to the Company. The Board is advised of any
changes.
The Board is satisfied that all Non-Executive Directors are
contributing effectively to the operation of the Board.
Positions held by the Non-Executive Directors are detailed
in the section on Directors’ biographies on pages 67 to 68.
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.
Induction, training and development
All new Non-Executive Directors joining the Workspace
Board, undertake a formal and personalised induction
programme. This will cover, for example, the operation and
activities of the Group (including site visits and meeting
members of the Senior Management team), the Group’s
principal strategic risks; the role of the Board, the decision
making matters reserved to it; the responsibilities of the
Board Committees; and the strategic objectives.
Board induction programme
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.
We recognise that our Directors have a diverse range of
experience, and so we encourage them to attend external
seminars and briefings at the Company’s expense in areas
considered appropriate for their professional development.
Furthermore, through participation at meetings and
through visits to estates, meetings with Senior
Management and advisers, Directors also increase their
knowledge and familiarity of the Group. This will assist
them individually, as members of the Board and also on the
Committees on which they serve.
Our Non-Executive Directors engage fully in the ongoing
development programme. During the year, this was
delivered in a number of ways, including:
– Specific, tailored training for our Audit Committee,
delivered by PricewaterhouseCoopers LLP. The key
themes focused around the developments in financial
and narrative reporting, accounting and auditing
standards and the requirements for publishing a Viability
Statement.
– Updates were provided to the Remuneration Committee
on changes in remuneration governance and new
disclosure requirements.
– Regular updates on regulatory and legislative
developments, which are provided to the whole Board
by the Company Secretary.
Information and support to the Board
The Directors have access to independent professional
advice at the Company’s expense, as well as to the advice
and services of the Company Secretary, Carmelina Carfora.
Her biography can be found on page 68. Through the
Chairman, Carmelina is responsible for advising the Board
on matters of Corporate Governance and ensuring that
Board procedures are complied with. The Board and its
Committees receive high-quality, up-to-date information
for them to review in good time before each meeting.
In consultation with the Chairman, the Chief Executive
Officer and Chief Financial Officer, the Company Secretary
manages the provision of information to the Board for their
formal Board meetings and at other appropriate times.
The Board uses an electronic Board paper system which
provides quick, easy and secure access to Board papers
and materials. Prior to each Board meeting the Directors
receive, through this system, the agenda and supporting
papers to ensure that they have the latest and relevant
information in advance of the meeting.
After each Board meeting, the Company Secretary
operates a comprehensive follow up procedure to ensure
that actions are completed as agreed by the Board.
The Chief Executive Officer and the Chief Financial Officer
ensure that the Board is kept fully aware on a timely basis
of business matters relating to the Group.
83 "Workspace Group PLC Annual Report and Accounts 2016
Corporate Governance Report
continued
Board performance evaluation
Outcome of our 2014/15 external Board evaluation
The progress achieved during the year for those actions
identified as part of the external Board evaluation
conducted in 2014/15 is detailed below.
Refine structure of the strategy day and how strategic
discussions may be facilitated.
Progress during 2015/16:
Annual Board strategy day held in September 2015.
Senior Managers were invited to attend parts of the
meeting to provide an overview of ongoing initiatives.
To continue to focus on succession planning, with
greater visibility of the succession plans for Senior
Management.
Progress during 2015/16:
Succession and development plans for Senior
Management were reviewed and discussed during
the year.
Review current induction process with the
introduction of customer engagement.
Progress during 2015/16:
The current induction programme remains under
review and will continue to evolve depending on any
specific requirements of new Directors who are
appointed to the Board.
Non-Executive Directors to be advised of customer
events during the year to which they may attend.
Progress during 2015/16:
Customer events will be notified to Non-Executive
Directors as appropriate.
84 "Workspace Group PLC Annual Report and Accounts 2016
The Board recognises the benefit of annual evaluation,
enabling it to improve its effectiveness and that of its
Committees and Directors. For the year under review,
the Company Secretary facilitated the Board effectiveness
review, having undertaken an externally facilitated
evaluation last year.
2015/16 Board effectiveness review
Topics discussed by Directors:
– How the Board works together.
– The Company’s strategic objectives.
– How well the Board members understand the
competencies and capabilities of Senior Management.
– Succession planning.
– The continued evolution of Board training and
development.
The Company Secretary reviewed the responses and
discussed them with the Chairman. The results of the
evaluation were then presented at the March 2016
Board meeting.
The feedback from this year’s Board effectiveness review
was positive. It concluded that the Board is working well,
and that each Director continues to contribute effectively
and demonstrate commitment to their roles.
The themes noted for further action are detailed below.
Maintain focus on succession planning, resourcing,
and training and development needs of Board
members.
Proposed actions:
The Board plans to continue to focus on succession
planning. The Company Secretary will work with
individual Board members and the Board more generally,
to identify and develop appropriate training and
development requirements.
Continue the ongoing programme of Board
engagement with the business through activities such
as site visits.
Proposed actions:
The Board has requested that the Senior Management
team develop a programme of activities for the
forthcoming year.
Chairman’s evaluation
The Senior Independent Director chairs an annual meeting
of Executive and Non-Executive Directors, without the
Chairman present, to appraise the Chairman’s performance
and to address any other matters which the Directors
might wish to raise. The outcome of these discussions is
conveyed by the Senior Independent Director to the
Chairman. During the year under review, it was 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.
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Accountability
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 position and performance, business model
and strategy.
The Group’s strategy and business model can be found on
pages 4 to 61. A statement of the Directors’ responsibilities
regarding the financial statements is set out on page 124.
Internal Control and Risk Management
The Board has reviewed the Group’s system of internal
controls and risk management throughout the year.
Processes and procedures have been established to enable
the Directors to report on the effectiveness of internal
controls in compliance with the Code. These processes
and procedures involve the analysis, evaluation and
management of the key risks to the Group. Further details
are contained in Principal risks and uncertainties on
page 97.
An assessment of the principal risks facing the Company is
set out on pages 43 to 51.
Going Concern and Viability Statement
Going Concern disclosures are included alongside the
Viability Statement on page 52.
Takeover directive
Share capital structures are included in the Directors’
Report on pages 121 and 122.
Audit Committee and Auditors
The Audit Committee comprises four independent
Non-Executive Directors. It met three times during the year
under review, with meetings organised around the
Company’s reporting schedule.
Chris Girling, the Chairman of the Audit Committee, has
been determined by the Board to have relevant financial
experience as required by the Code.
The Audit Committee meets at least twice a year with its
Auditors, PwC, with no Company management present.
Further details on the work of the Audit Committee can be
found in the Audit Committee Report on pages 91 to 97.
Details of the composition of the Audit Committee are set
out on page 91.
Remuneration
The principal responsibility of the Remuneration
Committee is to determine and agree, with the Board, the
overall remuneration principles and the framework for
remuneration of the Executive Directors.
Details of the Directors’ remuneration can be found on
pages 98 to 119.
Re-election of Directors
All Directors will stand for re-election at the AGM on 14 July
2016. Following the 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 enables them to discharge
their duties effectively in fulfilling their duties on the Board
and as members of the Board Committees. Consequently,
the Board is of the opinion that the Directors seeking
re-election at the Annual General Meeting have continued
to give effective counsel and commitment to the Company
and, accordingly should be reappointed by the Group’s
shareholders at the upcoming Annual General Meeting.
Mr Hopkins and Mr Clemett have service contracts and
details can be found on page 117. None of the Non-
Executive Directors have service contracts.
The appointment of Daniel Kitchen may be terminated
by either him or the Company giving six months’ notice
in writing.
Chris Girling and Damon Russell’s first term of appointment
as Non-Executive Directors expired on 7 February 2016
and 29 May 2016 respectively. Following a review of their
performance, the Nomination Committee recommended
that their appointment should be extended for a further
three-year term. This recommendation was agreed by
the Board.
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 66
to 68.
85 "Workspace Group PLC Annual Report and Accounts 2016
Corporate Governance Report
continued
Relations with Shareholders
Workspace Investor Relations Programme
Shareholder engagement
A high priority is given to communication with shareholders
and the Company maintains regular dialogue with all
investors, including major institutions and private client
fund managers. The Company has a comprehensive
investor relations programme. The Chief Executive Officer,
Chief Financial Officer and the Head of Corporate
Communications meet regularly with institutional
shareholders and sell-side analysts to present the
Company’s results and discuss the business model,
strategy and marketplace. The Company also engages with
shareholders through various online communications, at
the Annual General Meeting and at an annual Capital
Markets Day, as well as external investor conferences.
Discussions with institutional shareholders are held
throughout the year on a range of issues 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 financial 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 Chairman is also available to meet with shareholders,
independently of the Executive Directors, as required.
Workspace investor relations programme includes
the following activities:
1. Analyst Engagement
The Executive Committee engages with sell-side analysts
formally at the Full and Half Year results presentations.
In addition, the Finance Director and Head of Corporate
Communications are in regular dialogue with analysts
throughout the year as they update their models and
publish research on the Company.
Why it is important: The sell-side analyst community provides
regular research on the Company to existing and prospective
investors and it is important that analysts have up to date
and accurate information in order to present a fair view.
Frequency: Two formal meetings per year, plus regular
ongoing dialogue.
2. Investor Roadshows
In addition to the results presentations, which investors
attend as well as analysts, management carry out investor
roadshows in the UK after the Full and Half Year results,
generally spending four to five days on the road in London
and Edinburgh. Additional roadshows are arranged on an
ad hoc basis to regional cities in the UK, Continental
Europe and the US.
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/investors.
Why they are important: The roadshows give shareholders
an opportunity to meet with management one-on-one or
in small groups, discuss the results, business model and
strategy and raise any concerns they may have.
The Company launched new customer and investor
websites in December 2015. This is an important means
of communication and a key source of information for
shareholders and prospective investors. It contains RNS
announcements, a live share price feed and calculator and
other information including an archive of published results
and reports, press releases, details about the Group’s
assets and contact information for the Company’s
operational and investor relations team.
Overall balance of activities 2015/16
5.6.7.
1.
2.
3.
4.
1. Analyst Engagement 2
2. Investor Roadshows 2
3. Webcasts 2
4. Bank & Industry Conferences 8
5. Investor Tours 10
6. The Annual General Meeting 1
7. Capital Markets Day 1
86 "Workspace Group PLC Annual Report and Accounts 2016
Frequency: Two formal roadshows per year, plus up to
two further roadshows arranged ad hoc.
3. Webcasts
The Full and Half Year results presentations are streamed
on the Company website via a live webcast and made
available for replays following the event.
Why they are important: The webcasts allow analysts and
investors to follow the results presentation if they cannot
attend the event in person and broaden the Company’s
reach to investors based overseas.
Frequency: Twice per year.
4. Bank & Industry Conferences
The Executive Directors and Senior Management team
regularly attend and present at Real Estate conferences
held by banks and industry bodies, e.g. EPRA, in the UK,
Europe and US.
Why they are important: They are a good opportunity to
keep abreast of industry trends, build relationships with key
players in the sector and demonstrate the strength and depth
of the management team. Additionally, they often provide an
opportunity to hold one-on-one and group meetings with
investors outside of the formal roadshow schedule.
Frequency: Around eight conferences per year.
Workspace Investor Relations Programme
The Company continues to make full and transparent
disclosure through its Full and Half Year Results. In addition,
the Company published Regulatory News Services (‘RNS’)
announcements on corporate activity during the course
of the year, such as acquisitions and announcements of
planning approval, as well as two quarterly trading updates.
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Workspace investor relations programme includes
the following activities:
5. Investor Tours
Tours of the Group’s assets are organised regularly, both
proactively and on request, for existing and prospective
investors. These are carried out by the Executive Directors and
the Head of Corporate Communications, with asset managers
and other management team members often present.
Why they are important: The tours showcase the properties
within the portfolio and the high levels of activity ongoing
across the Group. They demonstrate the business model
in action and introduce investors to a broad spread of
Workspace employees, including Centre Managers.
Frequency: More than 10 tours conducted per year.
6. The Annual General Meeting
Held annually, the Annual General Meeting takes place at
the Company Headquarters and is attended by the full
Board of Directors. Details of the resolutions to be
proposed at the Annual General Meeting on 14 July 2016
can be found in the Notice of Annual General Meeting
which is available at www.workspace.co.uk and will be
dispatched to shareholders who have requested a hard
copy of the documentation from the Company. All
shareholders are invited to vote on the Resolutions and
the results are made available after the meeting and
published on our investor website.
Activities by Executive Committee Member 2015/16
Jamie Hopkins
Chief Executive Officer
6.
5.
7.
1.
2.
4.
3.
1. Analyst Engagement
2. Investor Roadshows
3. Webcasts
4. Bank & Industry Conferences
5. Investor Tours
6. The Annual General Meeting
7. Capital Markets Day
Graham Clemett
Chief Financial Officer
6.
5.
7.
1.
2.
4.
3.
1. Analyst Engagement
2. Investor Roadshows
3. Webcasts
4. Bank & Industry Conferences
5. Investor Tours
6. The Annual General Meeting
7. Capital Markets Day
Chris Pieroni
Operations Director
4. Bank & Industry Conferences
5. Investor Tours
6. The Annual General Meeting
7. Capital Markets Day
4.
7.
5.
Angus Boag
Development Director
4. Bank & Industry Conferences
5. Investor Tours
6. The Annual General Meeting
7. Capital Markets Day
4.
6.
7.
5.
Why it is important: It provides shareholders with a forum
to put questions to the Board of Directors and to vote on
important issues within the business, such as remuneration.
Frequency: Once a year.
6.
7. Capital Markets Day
The Capital Markets Day is held once a year and includes
a tour of the Group’s properties and in some cases, a
management presentation. The Executive Directors are all
present on the tour, as well as Centre Managers and other
members of the management team.
Why it is important: As well as showcasing the Group’s
properties, it allows Workspace to demonstrate how it is
driving value and growth from its real estate and customer
proposition. Analyst feedback from the 2015 Capital Markets
Day was that the tour ‘brought the assets to life’, ‘was
informative’ and ‘shows just how profitable their
developments are’. In addition, the small group format was
appreciated as it provided plenty of time and access to the
Senior Management.
Frequency: Once a year.
87 "Workspace Group PLC Annual Report and Accounts 2016
Corporate Governance Report
continued
Nomination Committee Report
Dear Shareholder
Welcome to the Report of the Nomination Committee for
the year ended 31 March 2016. Each year, the Nomination
Committee undertakes a review of the Group’s succession
plans for the purpose of ensuring that the membership and
composition of the Board, including the balance of skills,
continue to be appropriate. During the year, the
Nomination Committee met twice and attendance at these
meetings is shown on page 75.
This year, succession planning of Senior Management was
a particular area of focus for the Nomination Committee.
The Committee considered reports on the subject in
respect of Executive Directors and Senior Managers.
As part of its work to promote a strong and effective
culture, the Nomination Committee considered the
personal development and training requirements of senior
staff . The Nomination Committee is keen to promote
opportunities for staff to develop and advance the culture
of Workspace.
Both Chris Girling and Damon Russell completed their first
three-year term as at May 2016. Consequently, the
Committee considered their independence prior to
recommending to the Board that their reappointments
should be extended.
Succession planning and development
We have continued to develop and monitor succession
plans both at the Board and at Senior Manager level. The
Chief Executive Officer presented to the Committee details
of the succession planning and development programmes
for Senior Management.
Board effectiveness and skills
As part of its work on the Board’s effectiveness, the
Nomination Committee activities included:
– Consideration of the number of Executive and Non-
Executive Directors on the Board and whether the
balance is appropriate to ensure optimum effectiveness.
– Reviewing the balance of industry knowledge, relevant
experience, skills and diversity on the Board.
– Assessment and confirmation that all the Non-Executive
Directors remain independent.
This year, as it does annually, the Board conducted an
evaluation of its own performance. It was conducted
internally and facilitated by myself and the Company
Secretary.
The results of this review were discussed as part of the
Board meeting in March 2016. The Nomination Committee
is confident that each Director remains committed to their
role; the Board continues to work well and has an
appropriate and diverse mix of skills and industry
knowledge. The Directors collectively bring a range of
expertise and experience of different business sectors to
Board deliberations, which encourage constructive and
challenging debate around the boardroom table.
‘We continue to monitor the composition of
the Board so that future succession
planning is managed effectively.’
Daniel Kitchen
Chairman of the Nomination Committee
Composition of the Committee
Daniel Kitchen
Chairman of the Nomination Committee
Members of the Committee
– Stephen Hubbard
– Maria Moloney
– Chris Girling
– Damon Russell
For full biographies see pages 67 and 68.
Role of the Committee
Review and recommend the structure, size and
composition of the Board and its Committees. It is also
responsible for succession planning of the Board and
Senior Management. The Committee promotes the overall
effectiveness of the Board and its Committees.
Issues covered in 2015/16
– Succession planning.
– Training and development.
– Reappointment of Board members.
Areas of focus in 2016
– Continue to develop and monitor succession plans
both at Board and Senior Management level.
– Monitor the length of tenure of the Chairman and
Non-Executive Directors.
– Consider the composition of the Board to ensure that
there is an effective balance of skills, experience and
knowledge.
88 "Workspace Group PLC Annual Report and Accounts 2016
A stable BoardEffective succession planning has been an ongoing priority for the Nomination Committee along with ensuring the Board continues to be effective in carrying out its responsibilities. With the renewal of the term of the majority of Non-Executive Directors, the focus this year has been on continuing to develop the Board.The Nomination Committee continues to work to balance the skills and experience of the Board members to meet the changing needs of the business.The mix of skills keeps us relevant and up-to-date with the market.Board experience 20161. Property 24%2. Financial 16%3. Construction 12%4. Telecoms and media 12%5. Advisory 12%6. Legal 12%7. Local council 6%8. Utility 6%1.2.3.4.5.6.7.8.Directors’ tenure as at 31 March 2016Jamie Hopkins*†Graham Clemett*Daniel KitchenMaria MoloneyChris GirlingDamon RussellStephen HubbardInitial term* 12-month rolling contract.† Appointed Executive Director in March 2012 and Chief Executive Officer in April 2012.Duration of current term2011201220132014201520162017201820192020July 2014 – June 2017June 2011 – May 2014June 2014 – May 2017May 2012 – April 2015May 2015 – April 2018February 2013 – January 2016February 2016 – January 2019May 2013 – April 2016May 2016 – April 2019Commenced March 2012Commenced July 200789 "Workspace Group PLC Annual Report and Accounts 2016OverviewStrategic ReportOur GovernanceFinancial StatementsAdditional Information Corporate Governance Report
continued
Corporate Governance
During the year, the Committee also reviewed and agreed
Terms of Reference for the Nomination Committee. There
were no significant changes made to the existing Terms
of Reference. These can be found on our website at
www.workspace.co.uk.
Diversity
The Board’s policy on diversity is that selection should be
based on the best person for the role and to ensure that its
composition has an appropriate balance of skills and
diversity to meet the requirements of the business. The
Board considers that quotas are not appropriate in
determining its composition, and has therefore chosen not
to set targets. The benefits of diversity, including gender
diversity, will continue to be an active consideration
whenever changes to the Board’s composition are
contemplated. Further details on diversity can be found on
page 37. Gender diversity of the Board and Company is set
out below:
Gender diversity
2.
1.
The Board
1. Female 1
2. Male 6
Senior Management
1. Female 9
2. Male 12
All employees
1. Female 113
2. Male 101
1.
2.
2.
1.
Non-Executive appointments and time commitments
In making recommendations to the Board on
Non-Executive Director appointments, the Nomination
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.
Prior to accepting any additional commitments, Non-
Executive Directors will, in the first instance, discuss these
with the Company Chairman. Agreement of the Board is
then required to ensure that any conflicts of interest are
identified and that they will continue to have sufficient time
available to devote to the Company.
Independence and re-election to the Board
The composition of the Board is reviewed annually by the
Nomination Committee to ensure that there is an effective
balance of skills, experience and knowledge.
The Committee conducted a specific review of the
independence of Chris Girling and Damon Russell in the
year as their three-year appointments were due to expire
on 7 February 2016 and 29 May 2016, respectively. Neither
Chris nor Damon was present during the Committee’s
discussion. Having conducted its review, the Committee
was satisfied that it was appropriate to recommend to the
Board that Chris and Damon’s appointments should be
extended for a further three years, subject to re-election by
shareholders at the Annual General Meeting on 14 July 2016.
In accordance with the Code, all Directors wishing to
continue in office will retire and offer themselves for
re-election by shareholders at the 2016 Annual General
Meeting.
Further biographical information on each of our Directors
can be found on pages 66 to 68, which shows the
breadth of experience brought to our boardroom table.
This year, as it does annually, the Board conducted an
evaluation of its own performance. It was conducted
internally and facilitated by myself and the Company
Secretary.
Daniel Kitchen
Chairman of the Nomination Committee
7 June 2016
90 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Audit Committee Report
Dear Shareholder
On behalf of the Audit Committee, I am pleased to present
its report for the financial year ended 31 March 2016.
The Audit Committee met three times during the year.
Attendance at these meetings is shown in the table on
page 75. To ensure compliance with the Code, the
Committee’s membership is limited to Independent
Non-Executive Directors of the Company.
The right skills
The Board is satisfied that I have the required level of
relevant financial and accounting experience required by
the provisions of the Code, to perform the role of
Chairman, having previously held chief financial officer
positions in public companies. I am also a Chartered
Accountant and I continue to chair the Audit Committee
for another public limited company.
The Audit Committee collectively has the skills and
experience required to fully discharge its duties. The
Committee is authorised by the Board to seek any
information necessary to fulfil its duties to obtain
independent legal, accounting or other professional advice,
at the Company’s expense, which might be necessary for
the fulfilment of its duties.
A clear focus on material issues
During the year under review, the Committee has
continued to review and report to the Board on the Group’s
financial and narrative reporting, internal control and risk
management processes and the performance,
independence and effectiveness of the external auditor,
PricewaterhouseCoopers LLP (‘PwC’). This report
describes the Committee’s main activities since my last
report in 2015.
‘Managing risks and being transparent
continue to be our focus to ensure the
long-term viability of the business.’
Chris Girling
Chairman of the Audit Committee
Composition of the Committee
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 67 and 68.
Role of the Committee
The Committee is responsible for overseeing internal risk
management and effective internal controls, financial
reporting and appropriate external audit arrangements.
Issues covered in 2015/16
– Financial reporting.
– Effectiveness of the external audit.
– Portfolio evaluation.
– Review of risk (including Viability Statement).
– Review of significant judgements and fair, balanced and
understandable assessment.
The Audit Committee has a key role in reviewing the
narrative reporting and ensuring the financial statements
provide a true and fair view of the Group’s financial affairs.
As part of this review process, we considered the
significant financial judgements made during the year
along with other key financial reporting issues. In this
context, we considered the following three significant
issues for which further detail is provided on page 94:
– Valuation of the investment portfolio.
– BlackRock Workspace Property Trust (‘BlackRock JV’)
performance fee.
– Compliance with the REIT regime.
Areas of focus in 2016
– Ensure that the principal risks identified by the Board
are effectively managed and that the system of internal
controls is robust.
– Review actions to strengthen the controls in place to
During the year, we also considered, as we do on a regular
basis, the potential for fraud in revenue recognition, scope
for management override of controls and compliance with
regulation including satisfying the requirements for REIT
status.
manage ‘cyber security risk’.
– The Viability Statement and changes in the 2014
Corporate Governance Code.
– Review the significant judgements applied in the
preparation of the Annual Report and Accounts.
– Review the independence and effectiveness of the
external auditors.
91 "Workspace Group PLC Annual Report and Accounts 2016
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 93 and 94.
The Audit Committee also received updates from the
external auditor to discuss changes in governance and
reporting requirements. Specifically, we have monitored
the procedures in place to address the requirements of the
revised UK Corporate Governance Code 2014 (the ‘Code’)
around internal control and risk management.
Corporate Governance Report
continued
The principal business risks facing the Company, which
have been subject to robust assessment by the Board, are
set out on pages 43 to 51, and the ongoing review and
monitoring of the Group’s risk management and internal
control systems are described on page 97.
The Audit Committee and the Board have considered and
assessed the long-term viability of the Company as
required by the Code. An explanation of how we
conducted this assessment can be found on page 95 and
our Viability Statement is located on page 52.
The Committee’s main role and responsibilities are set out
in its terms of reference.
Meetings
Meetings of the Audit Committee coincide with key dates
in the financial reporting and audit cycle. During the year,
the Committee met on three occasions to discharge its
responsibilities.
We also have in attendance at meetings, by invitation of
the Committee, those people and advisors listed below:
Ongoing challenge and improvement
As a Committee we are continually looking at opportunities
to improve our effectiveness and better understand the risks
and opportunities of the markets in which the Group
operates. The Committee conducted a performance
evaluation of its performance, facilitated by the Company
Secretary. The topics covered in the review were focused on
the core business model and risks, the skills and experience
of the Audit Committee members, independence of the
external auditors and the quality of interaction with them.
The results of the review were then discussed at the meeting
held in February 2016. The outcome of this review was
positive and the Committee did not identify any material
weaknesses in its effectiveness or operations. Accordingly,
it was concluded that, consistent with the Code and its own
terms of reference, the Audit Committee is discharging its
obligations in an effective manner.
I meet regularly with both the Company’s external auditor,
PricewaterhouseCoopers LLP and the Chief Financial
Officer, to discuss key issues relevant to the Committee’s
work. Ensuring these lines of communication are open and
working well is vital to the success of the Committee in
carrying out its work.
The external auditor has the opportunity to meet with the
Audit Committee without any Executive Directors present
whenever necessary and the Audit Committee ensures
that this happens at least once a year. During the year,
the Audit Committee held one meeting with
PricewaterhouseCoopers LLP without management being
present, in order to receive feedback from them on matters
such as the quality of interaction with management.
In order to ensure ongoing compliance with regulatory
developments, the Committee’s terms of reference are
reviewed annually. Whilst the terms of reference were
reviewed during the year, no significant changes were
made and they are available on the Company’s website
at www.workspace.co.uk.
In the year ahead we plan to continue to ensure the Group’s
risk management and internal controls remain robust and
to help secure the long-term success of the Company.
Chris Girling
Chairman of the Audit Committee
7 June 2016
92 "Workspace Group PLC Annual Report and Accounts 2016
Attendee
Daniel Kitchen
Jamie Hopkins
Graham Clemett
Vivienne Frankham
Angus Boag
Chris Pieroni
PricewaterhouseCoopers LLP External Auditors
Grant Thornton
CBRE
Position
Chairman
Chief Executive Officer
Chief Financial Officer
Head of Finance
Development Director
Operations Director
Tax Advisers
Valuers
The Committee Chairman reports the outcome of
meetings to the Board.
The Committee has a rolling agenda that ensures it gives
thorough consideration to matters of particular importance
to the Company, identifying key areas of focus and
emerging topics as 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 Directors are responsible for preparing the Annual
Report. At the request of the Board, the Committee also
advises and recommends to the Board whether 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.
To make this assessment the Committee had a detailed
work programme throughout the year that commenced
with considering new reporting requirements and overall
planning for the development of the Annual Report and
Accounts. That work programme included:
– Comprehensive review of risks and internal controls
including reports from the Risk Committee.
– Development of key themes and issues for the Annual
Report and Accounts given the business’ strategy,
business model and performance.
– Reports from Senior Management.
– Advice and reviews from external advisors such as
CBRE.
– Review and assurance work of the external auditor.
– Detailed review of the drafts of the Annual Report and
Accounts, including a comprehensive review by the
Senior Management team.
– Considered the requirements to publish a Viability
Statement.
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Based on its review of the relevant evidence, the
Committee was satisfied that the Annual Report and
Accounts was fair, balanced and understandable and
provided its recommendation to the Board. The Board’s
statement on the Annual Report and Accounts is set out
in the Statement of Directors’ Responsibilities on page 124.
Main activities of the Audit Committee in relation
to the year ended 31 March 2016
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 page 97.
The table below summarises the agenda items covered
at the Committee’s meetings during this period:
Financial and narrative
reporting
– Reviewed the full and half year results and associated announcements.
– Reviewed the Group’s Annual Report and Accounts to consider whether, taken as a
whole, they were fair, balanced and understandable and whether they provide the
necessary information for shareholders to assess the Company’s position and
performance.
– Received corporate reporting updates and considered the approach to the 2016
Annual Report.
External audit
– Reviewed and considered the PwC Reports to the Audit Committee following the
Half Year and Full Year audit.
– Discussed the Board representation letter.
– Considered the appropriateness of the Group’s accounting policies and practices.
– Reviewed the performance of the external auditor and the effectiveness of the
external audit process.
– Discussed the audit and non-audit fees and independence of the external auditor,
taking into consideration relevant professional and regulatory developments, including
mandatory auditor tendering.
– Reviewed the Audit Quality Review Report on PricewaterhouseCoopers LLP’s audit
findings for the prior year.
– Considered the adequacy of the Group’s procedures with regard to the objectivity and
independence of the external auditor, PwC.
– Considered the full and half year valuation of the Group’s property portfolio and the
external valuation process. Meetings were held with the external valuers to consider
the portfolio valuation.
– Discussed the Group’s compliance with REIT legislation and general tax matters.
Independence and
objectivity of the
external auditor
Portfolio valuation
Taxation and REIT
compliance
Corporate Governance
– Received updates from PwC on compliance and changes in Corporate Governance
matters.
– Considered the appropriateness of the Group’s Viability Statement and Going Concern
assumption. The Viability Statement and Going Concern is set out on page 52.
– Conducted the annual evaluation of the Audit Committee.
– Reviewed the terms of reference for the Committee.
– Received training and technical updates from the Company Secretary and PwC.
Review of risk
– Review of principal business risks, Risk Management and internal controls. Principal
risks and Risk Management are set out on pages 43 to 51.
– Review of fraud risk.
– Review of cyber security risk.
93 "Workspace Group PLC Annual Report and Accounts 2016
Corporate Governance Report
continued
Significant issues
considered by
the Committee
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 and, in particular, the key
judgements made by management in preparing the financial statements.
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.
BlackRock Workspace
Property Trust
(‘BlackRock JV’)
performance fee
Compliance with the
REIT regime
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 newly refurbished and redeveloped properties and properties where 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, as well as an explanation for how the valuation
is audited. 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.
As property manager of the BlackRock JV, the Group is entitled to a performance fee at
the end of the five-year term of the fund in February 2016. This is based on the returns
achieved over the life of the joint venture. Using the valuation of the remaining properties
at 31 March 2016 and the returns achieved over the last five years, the fee is estimated at
£24.1m. In accordance with IFRS recognition rules, this fee of £24.1m has been recognised
as Other income within the financial statements. The Committee has considered the
probability of the fee being received and the reliability of the calculation and is satisfied
with the treatment in the financial statements.
As a Real Estate Investment Trust (‘REIT’), Workspace must comply with specific rules
so as to benefit from the tax exempt status on its property rental income. 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.
During the year, the Group has been in discussions with HMRC regarding the treatment
of overage in the calculation of the Balance of Business Test. These discussions have now
concluded and HMRC have confirmed that there is no impact on the Group’s tax exempt
status for 2015.
As at the date of these financial statements, the Group recorded Other income of
£24.1m relating to the performance fee due at the end of the five-year term of the
BlackRock JV. Recognition of this fee will cause the Group to fail the 75% Balance of
Business test for the current year. Two consecutive breaches are required for the Group
to incur a minor breach. There is no reason to expect that any further breaches will occur
and so impact on the Group’s tax exempt status is not expected.
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.
94 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Viability Statement process
The Going Concern and Viability Statements can be found
on page 52.
Developing a robust Viability Statement
In developing the Group’s Viability Statement, the Group
strengthened its existing process to ensure risks were
identified, understood and assessed over the period. The
following factors were considered:
– The Group’s current financial and operational position
and the current economic outlook.
– The Group’s cash flows, financing headroom and
financial ratios.
– Assessment of key risks and their potential impact
on the business model.
The process we undertook
Stage 1:
Risk identification
We reviewed both strategic
and operational risks to
identify the principal risks
to viability over the period
under consideration. We
considered the risks that
would impact solvency and
liquidity either individually
or in combination with
other risks.
Stage 2:
Risk assessment
For each risk, we
considered:
– Our risk appetite (the
level of risk the Board is
willing to take).
– The controls in place to
mitigate the risk.
– The quantum of risk.
Stage 3:
Scenario modelling
analysis
For those risks identified
as being severe enough to
impact the viability of the
Group, we performed
sensitivity analysis to
understand the potential
impact on liquidity and
financial ratios.
Stage 4:
Conclusions
The Board was presented
with the findings from this
analysis and given the
opportunity to question
the process and findings.
Who was involved
Who was involved
Who was involved
Who was involved
Executive Committee
Executive Committee
Executive Committee
The Board
Risk Committee
Risk Committee
Senior Management
Audit Committee
Senior Management
Senior Management
Executive Committee
Senior Management
External Auditors
95 "Workspace Group PLC Annual Report and Accounts 2016
Corporate Governance Report
continued
Audit tendering
PwC has been Workspace’s auditor since 1988. During
the current financial year, in order to maintain good
governance, we will be placing the external audit out to
tender, with an audit rotation for the following year ending
31 March 2018.
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 2017 audit will be
proposed at the AGM.
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 mandates
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 fees
Details of audit and non-audit fees paid to PwC can be
found in note 2 on page 140.
Annual auditor assessment
Annually, the Committee assess the qualifications, expertise
and resources, and independence of the Group’s external
auditors, as well as the effectiveness of the audit process. It
does this through discussion with the Chief Financial Officer
and confirmations from the external auditor.
PricewaterhouseCoopers LLP has confirmed to the
Committee that:
– The audit of the consolidated financial statements is
undertaken in accordance with the UK Firms’ internal
policies and procedures to ensure the objectivity of their
audit report.
– They have internal procedures in place to identify any
aspects of non-audit work which could compromise
their role as auditors and to ensure the objectivity of
their audit report.
– They believe that, in their professional judgement, the
safeguards they have in place sufficiently guard against
the threats to independence. Consequently, PwC
consider that they have maintained their auditor
independence throughout the year.
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 is 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.
The Audit Committee will be considering a formal policy
specifying the types of non-audit service for which use of
the external auditor is pre-approved. This is in response to
the ‘Guidance on Audit Committees’ issued by the Financial
Reporting Council (‘FRC’) in April 2016.
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:
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.
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.
96 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
The Risk Committee formally reports to the Audit
Committee at least twice a year on strategic and key
operational risks, emerging issues and any internal control
review work undertaken.
The Group aims to continuously strengthen its risk
management processes, with the involvement of the Audit
Committee to ensure these processes are embedded
throughout the organisation. The Audit Committee has
reviewed the Group’s system of controls including financial,
operational, compliance and risk management during the
year with no significant failings or weaknesses identified.
However, any such system can only provide reasonable and
not absolute assurance against any material misstatement
or loss.
Further information on the Group’s risks is detailed on
pages 43 to 51.
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.
Chris Girling
Chairman of the Audit Committee
7 June 2016
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.
A familiarity threat
This is where, because of a too long or too close a
relationship, the external auditor’s independence is
affected.
– The Audit Committee will prohibit the hiring of former
employees of the external auditor associated with the
Group’s audit into management roles with significant
influence within the Group within two years following
their association with the audit, unless the Chairman of
the Audit Committee gives prior consent. Annually, the
Audit Committee will be advised of any new hires
caught by this policy. However, there have been no
instances of this occurring. In addition, PwC will rotate
their lead audit partner every five years.
– The Audit Committee will monitor on an ongoing basis
the relationship with the external auditors to ensure
their continuing independence, objectivity and
effectiveness by reviewing their tenure, quality and
fees.
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.
Risk management and internal control
The Audit Committee has a key role in ensuring
appropriate governance and challenge around risk
management. It also sets the tone and culture within the
organisation regarding risk management and internal
control.
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.
97 "Workspace Group PLC Annual Report and Accounts 2016
Corporate Governance Report
continued
Directors’ Remuneration Report
Annual Statement from the Chairman of the
Remuneration Committee
Composition of the Committee
Maria Moloney
Chairman of the Remuneration Committee
Members of the Committee
– Daniel Kitchen
– Chris Girling
– Stephen Hubbard
– Damon Russell
For full biographies see pages 67 and 68.
Highlights of Committee activities in 2015/16
– Benchmarked and reviewed the remuneration
arrangements for the Executive Directors and for the
Chairman’s fee.
– Conducted a full shareholder consultation on executive
salary arrangements.
– Considered the vesting outcome of the 2012 and 2013
LTIP awards.
– Approved the LTIP Awards to Executive Directors and
Senior Managers.
– Reviewed customer satisfaction measurement
methodology.
– Considered the changing legislation with regard to
pensions and how this may impact Executive Directors
and staff.
– Monitored developments in Corporate Governance and
market trends.
– Reviewed the terms of reference of the Remuneration
Committee.
– Reviewed the effectiveness of the Committee through
the evaluation process which, for the year under review,
was conducted internally.
– Considered Senior Managers’ salary, bonus and long
‘Exceptional Company performance has,
once again this year, produced strong
reward outcomes from our long-term
plans. We firmly believe that this is the
outcome of the ingrained ‘pay for
performance’ culture which is the
foundation stone of our Remuneration
Policy and which drives returns for our
shareholders and employees alike.’
Maria Moloney
Chairman of the Remuneration Committee
Dear Shareholders
Group performance – demonstrably strong
As you will have seen already in the Annual Report, the
Group continued to perform strongly in 2015/16 and has
delivered another year of exceptional results for
shareholders, achieving levels of performance which are
outstanding versus the sector in general, with trading profit
after interest up 65% to £43.9m (2015: £26.6m) and Net
Asset Value per share up 31% to £9.23 (2015: £7.03).
Actual performance of strategic and financial measures
Over the last seven years, the Company’s total shareholder
return has grown by 35% p.a. and has significantly
outperformed comparator indices, as shown by the
chart below.
Seven-year Total Shareholder Return
1,000
800
600
400
200
0 31 Mar
2009
31 Mar
2010
31 Mar
2011
31 Mar
2012
31 Mar
2013
31 Mar
2014
31 Mar
2015
31 Mar
2016
Workspace Group PLC
FTSE All-Share Index
FTSE 350 Real Estate
Supersector Index
FTSE Small Capitalisation Index
FTSE 250 Index
term incentive levels for the forthcoming year.
The Remuneration Report is colour-coded as follows:
– Analysed the proposal for malus and clawback to be
included in incentive arrangements.
Fixed elements
Variable elements
Fixed elements
– Salary
– Benefits
– Pension
SIP/SAYE
Annual Bonus
LTIP
Shareholding Guidelines
98 "Workspace Group PLC Annual Report and Accounts 2016
The table below shows a number of the Company’s KPIs and how they are linked to incentive arrangements. The Committee is pleased to report another year of strong performance and continued strong returns for our shareholders in comparison to the rest of the FTSE.20162015+65%Trading profit after interest Up 65% to £43.9m+30% Trading profit after interestUp 30% to £26.6m+31%Net Asset Value per share Up 31% to £9.23+42% Net Asset Value per share Up 42% to £7.0326% Total return of 26% vs. 11% for IPD quarterly universe37% Total return of 37% vs. 17% for IPD quarterly universe+25%Dividend per share for full year Up 25% to 15.05p+13%Dividend per share for full year Up 13% to 12.04p76% Customer satisfaction77% Customer satisfaction-7% Total Shareholder Return47% Total Shareholder ReturnIncluded in Annual BonusIncluded in LTIPRemuneration architecture at a glanceThe table above shows that our performance metrics which have delivered substantial value to our shareholders have been reflected in the salary increases, the annual bonuses paid and the release of the long-term incentive awards. –In keeping with the approved remuneration policy, we have decided to maintain the increase in annual salaries for the Executive Directors in line with the average increase for colleagues generally. –An annual bonus equal to 114.4% of base salary has been awarded to each of Jamie Hopkins and Graham Clemett, reflecting the strong corporate performance and the personal contributions made. –The 2013 Long-Term Incentive Plan awards fully vested on three-year performance to 31 March 2016, reflecting the value created for shareholders. These LTIP awards are due to vest in June 2016 and will be subject to a one-year holding period during which clawback provisions apply. Further detail can be found on pages 112 to 113.CEO single figure vs. KPIsThe Committee strives to foster a strong performance culture through the remuneration framework and, as part of this, monitors the pay-performance alignment of executive pay. This is demonstrated by the chart below, which compares the CEO single figure, since appointment, to the Company’s three-year annualised Total Shareholder Return and Net Asset Value growth. 080706050403020104,0003,5003,0002,5002,0001,5001,00050002012/132013/142014/152015/16966.9480.0480.3479.5487.4488.62,545.1499.4514.71,374.1547.4TSR growthNAV growthFixed elementsCEO single figure (£000) (left axis)Annual Bonus LTIPAnnualised three-year performance (% p.a.) (right axis)3,533.12,436.2CEO single figure vs. KPIs480.0966.9960.3960.3The Committee also introduced some refinements to pay arrangements this year which are within the current policy: –The introduction of clawback for annual bonus payments made in respect of the 2015/16 financial year. –Both malus and clawback will apply for annual bonus payments made in respect of 2016/17 onwards. –Malus will apply for LTIP awards to be granted in June 2016 onwards. LTIP awards are already subject to clawback during the post-vesting holding period. –During the year, the Committee reviewed the Chairman’s fee considering the time commitment required, responsibilities, and fees paid at companies of similar size and complexity. In particular, the Committee and the Board more generally considered the demands of the role, particularly in light of the significant success of the Company over recent years, and the Chairman’s strong contribution. His experience at Workspace and his knowledge of the real estate sector are highly valued by the Board. The Committee reviewed fees paid to Chairmen at other property companies and at companies of similar size and complexity, and was concerned that the Chairman’s fee, which has been reviewed once only since the Chairman was appointed five years ago, was well below comparators. The Committee therefore decided to increase his fee from £135,000 to £175,000, which moves the Chairman’s fee to a level more competitive with comparators reviewed.99 "Workspace Group PLC Annual Report and Accounts 2016OverviewStrategic ReportOur GovernanceFinancial StatementsAdditional Information The wider Company
As noted above, as part of its role, the Committee monitors
the remuneration arrangements across the wider Company
as an integral part of the strong performance culture driving
our business. The Committee extended LTIP participation to
a wider group of Senior Managers, for the second
consecutive year. These awards are subject to the same
challenging TSR and NAV performance conditions as apply
for the Executive Directors.
The Committee is also pleased to report that the first award
under the Share Incentive Plan vested during the year. The
value of these shares has increased from a share price of £3.42
at grant in March 2013, to a share price of £7.60 at vesting.
The year ahead
Workspace is a strong Company, with a strong and
committed leadership team. As the Company continues to
evolve, our Remuneration Policy will be further considered
to ensure that we remain focused on performance.
Our Remuneration Policy is in the third year of its
operation. In light of this and the need to ensure that our
policy remains appropriate, it will be reviewed during the
year and presented for approval by shareholders at the
2017 AGM. In doing so, we will consult with major
shareholders and appropriate institutional groups as part
of our continuous commitment to engaging openly with
shareholders as stated above.
In conclusion
We have made considerable efforts to present to you a
report which is easily followed as an account of the way in
which the Committee has implemented the Directors
Remuneration Policy during the last financial year.
The Committee members hope that you will agree with
them that the outcome for the Executive Directors
justifiably reflects the very strong performance of the
Company and we will be seeking your approval for the
2016 Directors’ Annual Report on Remuneration as set out
on pages 109 to 119, at the Annual General Meeting on 14
July 2016.
Maria Moloney
Chairman of the Remuneration Committee
7 June 2016
#
Corporate Governance Report
continued
Remuneration Policy – core principles
– As a Committee, we strive to foster a strong
performance culture through a remuneration package
which is heavily long-term performance based.
– Awards must be determined by reference to the delivery
of the Group’s annual and longer-term business plans
which reinforce sustainable growth and valuable returns
to shareholders.
– In turn, we must ensure that rewards are valued by
executives and are competitive in our key talent markets
to enable us to attract and retain the high calibre of
executives who are in demand and who can continue to
drive the very strong performance you have evidenced
over recent years.
– Monitoring of arrangements across the wider business
as a key element of our strong performance culture,
which is engaging, determined and results oriented.
– Ongoing dialogue with, and feedback from, our
shareholders is fundamental to our work. We are
committed to consultation prior to making any
significant change to Remuneration Policy and we
consider AGM feedback when reviewing and considering
its implementation.
You may recall that we submitted our Remuneration Policy
for approval by shareholders at the Annual General
Meeting in July 2014, receiving 99.26% votes for the Policy.
The Committee was also pleased with the level of support
of the Annual Report on Remuneration in 2015, receiving
98.10% of votes in favour.
Given that level of support and the fact that no material
changes to that policy are contemplated, we do not
propose to resubmit the Policy for approval this year.
Shareholder support
As ever, the Remuneration Committee takes its role very
seriously and we constantly endeavour to demonstrate
how much we value shareholder understanding and
support, and to improve the presentation of our
remuneration strategy in a manner which allows our
shareholders to fully understand the rationale behind
our key decisions.
For example, we have added a new table providing our
‘remuneration at a glance’ which summarises the key
decisions for the year under review and for the year ahead;
see page 101. Further additions include illustrations of how
our remuneration elements cascade through the
organisation (see page 108) and of our pay-for-performance
alignment (please refer to the CEO single figure vs. KPIs
chart shown on page 99).
‘A significant part of an Executive’s
reward is linked to the performance of
the business with a clear line of sight
between business performance and
delivery of shareholder value.’
Maria Moloney
Chairman of the Remuneration Committee
100 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
1. Our Executive remuneration at a glance
Glossary of terms
EPRA NAV: Net assets after excluding mark to market adjustments of
effective cash flow hedges and deferred tax relating to
revaluation movements, capital allowances and derivatives.
Trading
profit after
interest:
Net rental income, joint venture trading and finance
income, less administrative expenses, less finance costs.
TSR:
IPD:
The return obtained by a shareholder calculated by
combining both share price movements and dividend
receipts.
The Investment Property Databank Ltd, a company that
produces an independent benchmark of property returns.
Malus:
Downward adjustment of unpaid or unvested awards.
Clawback: Recovery of paid or vested awards (up to the value net
of tax).
SAYE:
SIP:
An HMRC-approved Save As You Earn share option scheme.
An HMRC-approved Share Incentive Plan.
Our remuneration strategy and principles
Our Remuneration Policy remains unchanged from that
previously approved by shareholders in 2014.
Key elements of the Executive remuneration policy
Fixed
elements
Salary
Pension
Benefits
Variable
elements
Annual
Bonus
Up to 120%
of salary
Year
2
1
3
4
2015/16 operation
2016/17 operation
From 1 April 2015, Executive Director
salaries were:
– CEO £450,000 (c.7% increase)
– CFO £275,000 (5% increase).
From 1 April 2016, Executive Director
salaries are:
– CEO £468,000 (4% increase)
– CFO £286,000 (4% increase).
– 16.5% of salary defined contribution or
– No change.
cash in lieu of pension.
– Includes company mobile phone, car
– No change.
allowance, private health insurance, and
death in service cover and other benefits
provided from time to time.
– No change.
– Malus and clawback provisions
apply; see page 104 for further
details.
Performance
period
LTIP
investment
period
– Corporate bonus up to 90% of salary
based on:
– Trading profit after interest (50%)
– Portfolio Capital return vs. IPD (30%)
– Customer satisfaction (10%).
– Outcome is adjusted by a factor in range
of 0.67 to 1.33 for personal performance.
– Executive Directors awarded bonuses of:
– CEO 114.4% of salary
– CFO 114.4% of salary.
– Minimum deferral requirement of 25% of
bonus earned which may be invested in
the LTIP.
– Clawback provisions apply.
Long-term
incentive
plan
Up to 100%
of salary for
performance
shares and
100% for
matching
shares
– July 2015 grants to Executive Directors:
– 2016 grants to Executive Directors
Performance
period
Holding
period
– Performance shares of 100% of salary
– Matching shares of 56% of salary for
the CEO and 100% for the CFO.
– 2016 LTIP awards are based:
– Relative NAV (33%)
– Relative TSR (33%)
– Absolute TSR growth (33%).
– Subject to a one-year post-vesting
anticipated to be:
– Performance shares of 100% of
salary
– Matching shares of up to 100% of
salary (linked to executive
investment in LTIP).
– No change to performance
conditions.
holding period during which clawback
provisions apply.
– Malus and clawback provisions apply;
see page 105 for further details.
Further details on Remuneration Policy can be found on pages 102 to 108.
101 "Workspace Group PLC Annual Report and Accounts 2016
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. In particular, in designing the
Remuneration Policy, the Committee has considered the
requirements of Schedule A of the UK Corporate
Governance Code (the ‘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 2016/17. The sections
subject to audit are highlighted accordingly.
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 investor and investor body
guidelines more generally.
Corporate Governance Report
continued
2. 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 which took effect from that
date. A copy of the full Policy Report approved by our
shareholders at the 2014 AGM can be found in the 2014
Directors’ Remuneration Report. During the year, the
Committee reviewed and strengthened its malus and
clawback provisions on incentive awards and the policy has
been updated to reflect this; see pages 104 and 105 of the
policy table.
This Remuneration Policy is in the third year of its
operation. In light of this and the need to ensure that it
remains appropriate, the Committee will review the policy
during the year ahead, before submitting it for formal
approval by shareholders at the 2017 AGM.
We have summarised on the following pages how the
policy was operated in 2015/16 and how it is intended to be
operated in 2016/17.
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 strive 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,
encourages executives to retain shares until minimum
shareholding requirements have been met, and requires
Executives to invest their own funds in Company shares.
102 "Workspace Group PLC Annual Report and Accounts 2016
Summary table
Purpose and
link to strategy
Operation
Base salary
To reflect market
value of the role
and an individual’s
experience,
performance and
contribution.
Reviewed on an annual basis, with
any increases normally taking effect
from 1 April. 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.
– Salary increases across the Group.
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Opportunity
Operation in the year
ended 31 March 2016
Operation in the year
ending 31 March 2017
Jamie Hopkins (CEO)
£450,000.
Jamie Hopkins (CEO)
£468,000 (4% increase).
Graham Clemett (CFO)
£275,000.
Graham Clemett (CFO)
£286,000 (4% increase).
For further information
please see the Directors’
Annual Report on
Remuneration on page 110.
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)
16.5% of salary.
Graham Clemett (CFO)
16.5% of salary.
No change.
For further information
please see the Directors’
Annual Report on
Remuneration on page 110.
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.
Fixed elements
103 "Workspace Group PLC Annual Report and Accounts 2016
Corporate Governance Report
continued
Purpose and
link to strategy
Operation
Opportunity
Operation in the year
ended 31 March 2016
Operation in the year
ending 31 March 2017
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 financial year so
shareholders can fully assess
the basis for any pay-outs
under the annual bonus.
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.
Bonus deferral
and LTIP
investment
provide further
alignment with
shareholder
interests.
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.
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.
In exceptional circumstances, the
Committee has the ability to exercise
discretion to override the formulaic
bonus outcome within the limits of
the plan where it believes the
outcome is not truly reflective of
performance and to ensure fairness
to both shareholders and
participants.
From 2015/16, annual bonus awards
are subject to clawback provisions
for up to one year in the event of a
material misstatement of the Group’s
results or an act of gross misconduct
by a participant. For 2016/17 annual
bonus and onwards, malus
provisions additionally apply in
circumstances comparable to those
listed above.
Awards under the bonus are
non-pensionable.
Performance conditions and
weightings (‘Wt.’):
Corporate
Measure
Wt.
50% Trading profit after
interest (% growth on
prior year)
30% Capital Return from
portfolio versus a
defined comparator
Benchmark compiled
by IPD
Customer satisfaction
10%
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 2015/16 performance
targets, their level of
satisfaction and the
corresponding bonus
earned please see the
Directors’ Annual Report on
Remuneration on pages 110
and 111.
Variable elements
104 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Purpose and
link to strategy
Operation
Opportunity
Operation in the year
ended 31 March 2016
Operation in the year
ending 31 March 2017
LTIP
To reinforce
delivery of
sustained
long-term sector
outperformance;
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.
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 the event of
a material misstatement of the Group’s
results for any financial year during the
performance period or an act of gross
misconduct by a participant. For LTIP
awards granted from 2016, malus
provisions additionally apply in
circumstances comparable to those
listed above.
The award levels and performance
conditions are reviewed in advance of
grant by the Remuneration Committee
to ensure they remain appropriate.
Dividends may accrue on LTIP awards
and be paid on those shares which vest.
Non-pensionable.
Plan provides for
annual awards of:
– Performance shares
of up to 100% of
salary (200% in
exceptional
circumstances).
– 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.
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.
Grant sizes for:
Jamie Hopkins (CEO)
– Performance Awards
(100% of salary).
– Matching Awards
(56% 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 the
FTSE350 Real Estate
(excluding Agencies).
– 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 2015
LTIP awards please see
page 112 of the Directors’
Annual Report on
Remuneration.
Current shareholdings
(based on a share price of
£7.83 at 31 March 2016) are:
– CEO 135% of salary.
– CFO 303% of salary.
Note both Directors
exceed the shareholding
requirement using the
average share price over the
financial year (of £8.88).
No change to maximum LTIP
opportunities or the
performance conditions.
The Committee will
keep Executive Director
shareholdings under review
over the current year.
2013 LTIP awards vesting
fully for performance in
June 2016 are subject to a
one-year holding period.
Current shareholdings1
including the net value of
these awards exceed the
shareholding requirement.
See page 115 for further details.
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.
For full details please see
pages 113 and 119 of the
Directors’ Annual Report
on Remuneration.
No change.
Note:
1. The value of awards was calculated with reference to the share price at the year-end on 31 March 2016 of £7.83. The value of 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%.
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. During the year, the Executive
Directors did not hold any appointments. Mr Clemett was
appointed a Non-Executive Director and Chairman of the
Audit Committee of The Restaurant Group plc, effective
1 June 2016.
105 "Workspace Group PLC Annual Report and Accounts 2016
Corporate Governance ReportcontinuedRemuneration Policy scenarios compared to actual outcomes for performance periods ending in 2015/16The following charts illustrate the application of the Remuneration Policy under different performance scenarios for the Executive Directors of the Company compared to the single figure of total remuneration for 2015/16 which includes the vesting of the 2013 LTIP.Chief Executive Officer (£000)Chief Financial Officer (£000)2,7502,0001,5001,00050002,2502,5001,7501,250750250MinimumOn-targetMaximum100%55%28%27%18%27%45%2,0601,0315632,7502,0001,5001,00050002,2502,5001,7501,250750250MinimumOn-targetMaximum100%55%28%27%18%27%45%1,268638352Actual 2015/1622%21%29%28%2,4361,7712,7502,0001,5001,00050002,2502,5001,7501,250750250Actual 2015/1621%19%31%29%1,6482,7502,0001,5001,00050002,2502,5001,7501,2507502501,168Fixed elementsAnnual BonusLTIPShare price gainFixed elementsAnnual BonusLTIPShare price gain Actual outcome for 2015/16 is higher than the ‘maximum’ scenario as it includes the impact of strong share price growth between grant and vesting of the 2013 LTIP (this is excluded from the performance scenarios). Actual outcome for 2015/16 is higher than the ‘maximum’ scenario as it includes the impact of strong share price growth between grant and vesting of the 2013 LTIP (this is excluded from the performance scenarios).106 "Workspace Group PLC Annual Report and Accounts 2016 Remuneration Policy scenarios compared to actual
outcomes for performance periods ending in 2015/16
Chief Executive Officer (£000)
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
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 Company’s Articles of Association. The
Remuneration Committee recommends the Remuneration
Policy and level of fees for the Chairman of the Board.
The current policy is:
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.
Purpose
and link to
strategy
Fees
To reflect the time commitment in
performing the duties and responsibilities
of the role.
The following assumptions have been made for the policy
scenarios, and the projected value of the LTIP excludes
the impact of share price movement:
Operation
Annual fee for the Chairman.
Component Minimum On-target Maximum
Variable
LTIP
No LTIP
vesting
20% of
maximum
(Thresh-
old
vesting)
Maximum
LTIP
vesting
(200% of
salary1)
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.
Annual
Bonus
No bonus
payable
50% of
maximum
potential
bonus
Maximum
potential
bonus
(120% of
salary)
Opportunity
Fee increases are applied in line with the
outcome of the review.
Fixed
Other
benefits
Benefits as provided in the
single table on page 109
Pension
Current contribution rate of
16.5% of salary
Base salary
Latest known salary
Note:
1. Assumes full uptake of investment opportunity.
Operation
in the year
ended
31 March
2016
Chairman’s fee:
£135,000
NED base fee:
£45,000
Chair of Audit Committee fee:
£10,000
Chair of Remuneration Committee fee:
£10,000
Operation
in the year
ending
31 March
2017
Chairman’s fee:
£175,000
For further information, please see
page 110.
NED base fee:
£47,250
Chair of Audit Committee fee:
£10,500
Chair of Remuneration Committee fee:
£10,500
107 "Workspace Group PLC Annual Report and Accounts 2016
Corporate Governance Report
continued
Wider approach to remuneration throughout
the Company
The Group’s wider people policies are reported separately
on pages 37 to 39. 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. Additionally,
all employees participate in annual bonuses. All members
of the Executive Committee and some senior staff are
eligible to participate in the Company’s LTIP. Please see the
diagram below.
Executive Committee members 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
senior staff.
During the year, we extended LTIP participation to a wider
group of employees for a second consecutive year to
further reinforce the strong performance culture.
The following diagram demonstrates how key objectives
are reflected consistently in plans operating at all levels
within the Company.
Eligibility
Number of
eligible
participants1
Element
Details
Executive
Committee
4
Shareholding
Guidelines
Supports alignment of Executives’ interests with
shareholders.
c. 46
LTIP
Executive
Committee
and Senior
Management
The LTIP reinforces delivery of long-term sector
outperformance. We extended LTIP
participation for a second consecutive year to
further reinforce the strong performance culture.
All employees
214
Annual Bonus
(as at 31 March
2016)
All employees participate in annual bonuses.
Opportunities and performance conditions may
be tailored to reflect individual’s role and
responsibilities.
SAYE and SIP
Encourages employee engagement and
reinforces our strong performance culture.
Enables all employees to share in the long-term
success of the Company and aligns participants
with shareholder interests.
Fixed
(salary, benefits, pension
with a 2:1 match)
Salaries are set to reflect market value of the
role and aid recruitment and retention. All
employees are eligible for a 2:1 match on
employee pension contributions of 3% or 5% of
salary and receive a combination of benefits
relevant for the role.
Note:
1. Subject to requirements on timing of awards as detailed in the relevant plan rules and/or completion of probationary periods.
108 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
3. 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 2016/17. Disclosure also details outstanding share 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 2016 and the prior year:
Salary
Benefits1
Annual Bonus2
LTIP3
Other – SAYE, SIP4
Pension5
Total
Jamie Hopkins
2015/16
£000
450.0
17.6
514.7
1,374.1
5.5
74.3
2,436.2
2014/15
£000
419.0
17.5
488.6
2,545.1
n/a
62.9
3,533.1
Graham Clemett
2015/16
£000
275.0
19.2
314.5
990.6
3.2
45.4
1,647.9
2014/15
£000
261.9
19.1
305.4
1,763.7
2.2
43.2
2,395.5
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.
2. Annual bonus: This is the total bonus earned in respect of performance during the relevant year. For 2015/16 (and 2014/15), the
Committee set a minimum deferral requirement of 25% of the bonus earned. For 2015/16, this deferral was equivalent to £128,677 for
Mr Hopkins and £78,636 for Mr Clemett. For 2014/15, this was equivalent to £122,144 for Mr Hopkins and £76,343 for Mr Clemett.
Further details of annual bonus awards for 2015/16 can be found in the Annual Report on Remuneration on pages 110 and 111.
3. LTIP: The 2015/16 figure includes the estimated value of 2013 LTIP shares that vested on performance to 31 March 2016; 100% of the
2013 LTIP awards vested on performance. The share price is the trailing three-month average share price to 31 March 2016 of £7.85.
This will be reported in the 2016/17 Remuneration Report based on the share price on date of vesting. Further details of the LTIP awards
vesting can be found in the Annual Report on Remuneration on pages 112 and 113.
The 2014/15 figures include the value of 2012 LTIP shares at vesting. As described in last year’s Remuneration Report, the value has
been updated based on the share price on the dates of vesting (18 June 2015 for the CFO and 19 November 2015 for the CEO) of £8.90
and £9.20 respectively.
The value of LTIP awards vesting is higher than the value shown in the pay scenario charts on page 106 due to the impact of share price
appreciation between grant and vesting.
4. SAYE, SIP: The 2015/16 figures include awards of SIP shares and SAYE options: 107 SIP free shares were awarded to Mr Hopkins and to
Mr Clemett on 18 September 2015 and the value is calculated using the share price at date of award (£9.306); 2,475 SAYE options were
granted to Mr Hopkins and 1,237 SAYE options were granted to Mr Clemett on 24 July 2015, and the value is the embedded value at
grant based on an exercise price of £7.27 set at 80% of the market value of a share on the invitation date. See pages 113 and 119 for
further details. The 2014/15 figure for Mr Clemett includes an award of 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.
5. Pension: During 2015/16 Mr Hopkins received £52,700 as a Company contribution to a defined contribution plan and the remainder as a
cash allowance in lieu of pension contribution; Mr Clemett received his pension as a cash allowance in lieu. No further breakdown is
required.
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 2016 and the prior year:
Non-Executive Director
Base fee
Additional fees2
Total3
Daniel Kitchen
Maria Moloney
Chris Girling
Damon Russell
2015/16
£000
135.0
–
135.0
2014/15
£000
135.0
–
135.0
2015/16
£000
45.0
10.0
55.0
2014/15
£000
45.0
10.0
55.0
2015/16
£000
45.0
10.0
55.0
2014/15
£000
44.9
7.5
52.4
2015/16
£000
45.0
–
45.0
2014/15
£000
45.0
–
45.0
Stephen Hubbard1
2015/16
£000
45.0
–
45.0
2014/15
£000
32.1
–
32.1
Notes:
1. Stephen Hubbard was appointed as a Director on 16 July 2014.
2. Additional fees were paid to Maria Moloney as Chair of the Remuneration Committee and to Chris Girling as Chairman of the Audit
Committee.
3. In addition, Daniel Kitchen, Maria Moloney and Chris Girling were reimbursed for out-of-pocket expenses incurred in attending meetings
in connection with the discharge of their duties, of £3,500, £8,700 and £2,600 respectively.
109 "Workspace Group PLC Annual Report and Accounts 2016
Corporate Governance Report
continued
During the year, the Committee reviewed the Chairman’s fee considering the time commitment required, responsibilities,
and fees paid at companies of similar size and complexity. In particular, the Committee, and the Board more generally,
considered the demands of the role, particularly in light of the significant success of the Company over recent years, and
the Chairman’s strong contribution. His experience at Workspace and his knowledge of the real estate sector are highly
valued by the Board. The Committee reviewed fees paid to Chairmen at other property companies and at companies of
similar size and complexity, and was concerned that the Chairman’s fee, which has only been reviewed once since the
Chairman was appointed five years ago, was well below comparators. The Committee therefore decided to increase his
fee from £135,000 to £175,000, which moves the Chairman’s fee to a level more competitive with comparators reviewed.
With effect from 1 April 2016, the Non-Executive Directors receive a base fee of £47,250 (2015: £45,000), with an
additional fee for the Audit and Remuneration Chairs of £10,500 (2015: £10,000)
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. During the year, the Committee reviewed 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, the Committee increased the CEO’s salary from £450,000 to £468,000 (a 4% increase) and the
CFO’s salary from £275,000 to £286,000 (a 4% increase) from 1 April 2016. The next salary review date for Executive
Directors will be 1 April 2017.
The average salary increase across the Group for the year commencing 1 April 2016 is 4%.
For 2016/17, both Executive Directors will receive cash in lieu of pension of 16.5% per annum.
Annual bonus scheme (audited)
For 2015/16, 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 2015/16 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 2015/16 the Committee
allowed Executive Directors to make an equivalent investment in the LTIP.
The performance measures, targets and outcomes for 2015/16 Executive Director annual bonuses are shown below.
Against each measure the bonus starts to be paid on the achievement of 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 2015/16 are as follows:
Achieved
Opportunity and outcome
as a % of salary
Corporate
Weighting Measure
50%
Trading profit after interest
Threshold
£30.9m
Benchmark
Stretch
£33.5m
£43.9m
Benchmark+2%
Benchmark*+12.3%
70%
80%
76%
Subject to Committee assessment
(see commentary below)
Jamie
Hopkins
50%
50%
30%
30%
10%
6%
1.33
1.33
Graham
Clemett
50%
50%
30%
30%
10%
6%
1.33
1.33
Annual bonus
Opportunity
Outcome
120.0%
114.4%
120.0%
114.4%
30%
10%
Capital Return from portfolio
versus a defined comparator
Benchmark compiled by IPD
Customer satisfaction
Strategic and
personal
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)
Note:
* Actual benchmark Capital Return was 14.0%.
110 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Assessment of personal objectives
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 stretch trading profit
after interest
Broaden portfolio profile
– Target exceeded by 31%.
– Trading profit after interest up 65.0% to £43.9m.
– Outperformed IPD quarterly Universe by 14.9% and outperformed the
comparator benchmark by 12.3%.
– Property Valuation up 20.9% to £1,779m.
– Total Dividend up 25.0% to 15.05p per share.
– Net Asset Value up 31.3% to £9.23 per share.
Diversify funding
– Amendment and extension of bank facilities completed in June 2015 with
maturity extended from June 2018 to June 2020.
Operational
Deliver marketing plan
– Strong customer demand and pricing increases.
Deliver and let up new and
refurbished buildings
– Four refurbishment and redevelopment projects completed during the year
providing a total of 132,000 sq. ft. of new and upgraded space.
– Like-for-like rent roll up 15.4% (£6.5m) in the year to £48.8m.
Accelerate change of use planning
applications
– Planning consent achieved for three mixed-use redevelopments and two
major refurbishments in Shoreditch and Hoxton.
Increase brand awareness and
customer service
– New website launched and published new customer magazine and sales
brochure to outline the benefits of being a Workspace customer.
Investment
Complementary acquisitions
– Five properties acquired in strategic London locations for £101m and with a
rent roll at 31 March 2016 of £2.1m.
Non-core disposals
– Completed the sale during the year of 11 industrial properties for £95m.
Grow alternative income streams
– Continue to develop initiatives including Club Workspace, connected service
offer, meeting rooms and design services.
Following consideration of the above, the Committee awarded Jamie Hopkins and Graham Clemett a gross bonus
of £514,710 and £314,545 respectively, subject to clawback provisions for one year as described in the policy table.
25% of earned bonuses will be invested in the LTIP.
111 "Workspace Group PLC Annual Report and Accounts 2016
Corporate Governance Report
continued
LTIP awards (audited)
Summary of performance conditions
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 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 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 2013 and 2014 LTIP cycles, relative performance is measured against the constituents of the
FTSE 350 Real Estate Index. For the 2015 LTIP cycle, 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. 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 one year before the shares
can be sold.
2015 LTIP awards
A summary of performance measures, weightings and targets for 2015 LTIP awards granted during the year is
provided below:
Performance
condition
Level of
performance
Threshold
Maximum
One-third
Growth in Net Asset Value
relative to comparators1
% of award
Company’s
vesting3
percentile rank
51st percentile
20%
75th percentile 100%
One-third
TSR (share price growth plus
reinvested dividends) relative
to comparators1
% of award
Company’s
vesting3
percentile rank
51st percentile
20%
75th percentile 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 2015 LTIP cycle is the constituents of the FTSE 350 Real Estate Index excluding Agencies.
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.
4. Performance conditions for the 2013 and 2014 LTIP cycles are in line with those stated in the table above. The comparator group for
these cycles is the constituents of the FTSE 350 Real Estate Index.
The following awards were granted during the year under the 2015 LTIP:
CEO
CFO
Date of grant
26 June 2015
26 June 2015
Market price
at date of
award2
£9.1408
£9.1408
Performance share award
Face value
Number of
shares
£
49,229 449,992
274,992
30,084
% of salary
100%
100%
Matching share award1
Number of
shares
27,407
30,084
Face value
£
250,522
274,992
% of salary
56%
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 £9.1408, the average mid-market closing price over the three dealing days
23, 24 and 25 June 2015, in accordance with the LTIP plan rules.
2013 LTIP vesting outcome (audited)
The three-year performance period of 2013 LTIP awards ended on 31 March 2016.
Over the three years from 1 April 2013 to 31 March 2016, Workspace’s three-year NAV growth of 38.3% p.a. placed it first
(100th percentile) against its comparator group (the FTSE 350 Real Estate) which warrants 100% of this element vesting
(equivalent to 33.3% of LTIP shares awarded). Workspace’s three-year TSR of 148% (or 35.4% p.a.) places it first (100th
percentile) against the FTSE 350 Real Estate which warrants 100% of this element vesting (equivalent to 33.3% of LTIP
shares awarded). Workspace’s three-year absolute TSR of 35.4% p.a. warrants 100% of this element vesting (equivalent to
33.3% of LTIP shares awarded).
The Committee considered this together with the underlying business performance of Workspace and concluded that
100% of the 2013 LTIP shares awarded to the Executive Directors would vest. These awards are due to vest on 26 June
2016, subject to a one-year holding period and clawback provisions.
112 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
The table below summarises the LTIP interests held by the CEO and CFO and the estimated value at vesting:
Achieved in full
Threshold
51st percentile
51st percentile
Stretch
75th percentile
Rank 1st = 100th percentile
75th percentile
Rank 1st = 100th percentile
17% p.a.
35.4% p.a.
Absolute TSR
8% p.a.
Weighting
33.3%
33.3%
33.3%
Measure
Relative NAV
Relative TSR
LTIP (% maximum) vesting
Interests held1
Number of shares vesting
Date vesting
Value as shown in the single figure (£000s)2
Payout as % maximum
33.3%
33.3%
33.3%
100%
CFO
126,182
126,182
CEO
175,024
175,024
26 June 2016
£1,374.1
£990.6
Notes:
1. For the CEO, LTIP interests held comprises 100,945 performance shares and 74,079 matching shares. Similarly, for the CFO, it
comprises 63,091 performance shares and 63,091 matching shares.
2. The value is calculated as the number of shares vesting multiplied by the average three-month share price to 31 March 2016 of £7.85.
These awards will be reported in the 2017 Remuneration Report based on the share price on date of vesting.
Statement of implementation of policy in 2016/17
Please see the policy table on pages 103 to 105 which summarises implementation of policy in 2016/17.
Save As You Earn (‘SAYE’)
The SAYE is an HMRC approved scheme under which employees (including Executive Directors) are invited to make
regular monthly contributions over three or five years to purchase shares through options which are granted at 80% of
the market value of a share on the invitation date.
On 24 July 2015, 2,475 options were granted to the CEO and 1,237 options were granted to the CFO at an exercise price
of £7.27, based on 80% of the market value of a share at the invitation date. The contract maturity date is 1 September
2018. SAYE awards are offered on consistent terms to all employees.
Share Incentive Plan (‘SIP’)
The SIP is an HMRC approved scheme under which the Company may grant free shares to employees (including
Executive Directors). Employees may also be invited to buy partnership shares, and the Company may then match the
number of partnership shares with ‘matching shares’ which vest after a minimum of three years. Dividends accrue on free,
partnership and matching shares.
On 18 September 2015, 107 SIP free shares were awarded to the CEO and the CFO based on a share price at date of
award of £9.306. These awards will vest in three years. SIP awards are offered on consistent terms to all employees.
The SIP was implemented in 2013 and, in March 2013, the Company granted SIP share awards of up to £1,000 of free
shares per employee. These awards vested during the year. The value of these shares has more than doubled from a share
price of £3.42 at grant to a share price of £7.60 at vesting in March 2016.
113 "Workspace Group PLC Annual Report and Accounts 2016
Corporate Governance Report
continued
Share-based awards and dilution
The Company’s share schemes are funded through a combination of shares purchased in the market and new-issue
shares, as appropriate. The Company monitors the number of shares issued under these schemes and their impact on
dilution limits. The Company’s usage of shares compared to the relevant dilution limits set by the Investment Association
(‘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 2016 is detailed below.
As of 31 March 2016, around 5.8m (3.5%) and 5.2m (3.2%) 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
Executive Share Plans
Limit
Actual
10.0%
5.0%
3.5%
3.2%
Payments for loss of office (audited)
There were no payments for loss of office during the year.
Payments to past Directors (audited)
There were no payments to past Directors during the year.
Share ownership and share interests (audited)
The table below shows the interests of the Directors and connected persons in shares (owned outright or vested). There
have been no changes in the interests in the period between 31 March 2016 and 7 June 2016.
Chairman
Daniel Kitchen1
Executive Directors
Jamie Hopkins2
Graham Clemett3
Non-Executive Directors
Maria Moloney4
Chris Girling
Damon Russell
Stephen Hubbard5
31 March
2016
31 March
2015
37,500
37,500
77,431
106,506
148,756
73,159
2,027
Nil
Nil
8,150
Nil
Nil
Nil
Nil
Notes:
1. Daniel Kitchen acquired 1,000 6% sterling Bonds on 2 October 2012 at a price of £100 per Bond.
2. Jamie Hopkins was awarded 276,642 shares in November 2015 as a result of the 2012 LTIP award vesting, of which 130,021 shares were
sold to meet income tax and National Insurance liabilities. Mr Hopkins disposed of 146,421 shares in November 2015 at a share price of
£9.00, and disposed of 83,358 shares in November 2015 at a share price of £9.00.
3. Graham Clemett was awarded 198,168 shares in June 2015 as a result of the 2012 LTIP vesting, of which 94,130 shares were sold to
meet income tax and National Insurance liabilities. A further 10,000 shares arising from this award were also disposed of. Mr Clemett
disposed of 70,000 shares in July 2015 at a share price of £9.45.
4. Maria Moloney acquired 2,027 shares on 26 February 2016 at a share price of £7.31.
5. Stephen Hubbard acquired 8,150 shares on 14 August at a share price of £9.75.
114 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
The Committee has adopted guidelines for Executive Directors and other senior Executives to encourage substantial
long-term share ownership of at least 150% of salary to be achieved within five years of appointment. The chart below
shows the shareholdings as a percentage of salary of the CEO and the CFO based on a share price of £7.83 at year-end
on 31 March 2016. Note that the value of these shareholdings has fallen over recent months due to the change in share
price; both Directors would meet the shareholding requirement using the average share price over the financial year
(of £8.88).
The Committee will keep Executive Director shareholdings under review over the current year.
2013 LTIP awards vesting fully for performance in June 2016 are subject to a one-year post-vesting holding period. These
awards are currently captured under ‘share awards not yet vested’ in the chart below.
Share interests
Jamie Hopkins1
150% of salary
Owned outright or vested
Unvested and subject to deferral
Subject to performance
135%
164%
194%
Graham Clemett
303%
195%
229%
Notes:
1. Appointed on 1 April 2012 (i.e. four years from appointment).
Value of awards was calculated with reference to share price at the year-end on 31 March 2016 of £7.83. The value of 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%.
The table below shows the Executive Directors’ interests in shares.
Executive Director
Graham Clemett
Jamie Hopkins
Type
Shares
Market value options1
Shares
Market value options1
Owned or
vested outright2
106,506
Nil
77,431
Nil
Unvested and
subject to deferral3
126,182
3,197
175,024
2,475
Subject to
performance4
152,004
Nil
210,483
Nil
Total
384,692
3,197
462,938
2,475
Notes:
1. Market value options include SAYE options outstanding and not yet matured as at 31 March 2016. The exercise price of these was set at
80% (in accordance with HMRC and the plan rules) of the market value of a share at the invitation date. See page 119 for further details.
2. Total shares owned outright or vested includes 107 free shares awarded under the SIP to each of Mr Clemett and Mr Hopkins on 18
September 2015.
3. The interests in shares comprise those LTIP awards granted in 2013 which are no longer subject to performance but are due to vest on
26 June 2016, of 126,182 shares for Mr Clemett and 175,024 shares for Mr Hopkins.
4. The interest in shares of 152,004 for Mr Clemett, and the interest in shares of 210,483 for Mr Hopkins consist of the total LTIP awards
made in 2014 and 2015, details of which can be found on page 118 of this Report.
115 "Workspace Group PLC Annual Report and Accounts 2016
Corporate Governance Report
continued
Seven-year TSR performance review
The chart below compares the
Total Shareholder Return (‘TSR’)
performance of the Group with
benchmark indices over the last seven
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.
Workspace Group PLC
FTSE 350 Real Estate Supersector Index
FTSE All-Share Index
FTSE Small Capitalisation Index
FTSE 250 Index
1,400
1,200
1,000
900
800
700
600
500
400
300
200
100
0
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
Since 1 April 2009, Total
Shareholder Return has
increased by 709%, or
35% p.a. (i.e. on an
annualised basis) and
since 1 April 2012, Total
Shareholder Return has
increased by 263% or
38% p.a.
31 Mar
2009
31 Mar
2010
31 Mar
2011
31 Mar
2012
31 Mar
2013
31 Mar
2014
31 Mar
2015
31 Mar
2016
–
573.7
–
748.7
27.4
1,359.6
960.3
–
966.9 3,533.1 2,436.2
–
–
–
–
–
–
–
41.7% 85.5%
339.4
165.3
–
–
75%
303.7
100%
480.0
–
–
97.8%
479.5
–
–
97.2% 114.4%
488.6
514.7
–
–
–
–
–
–
0%
–
–
–
–
–
0% 66.5%
642.9
–
–
–
–
–
–
–
–
–
100%
2,545.1
–
–
100%
1,374.1
–
–
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 214 (2015: 207). All employees are eligible for consideration for an annual
bonus.
Executive Director
Salary
Taxable benefits
Annual variable
Total
116 "Workspace Group PLC Annual Report and Accounts 2016
2016
£450.0k
£17.6k
£514.7k
£982.3k
CEO
2015
£419.0k
£17.5k
£488.6k
£925.1k
% change
7.4%
0.6%
5.3%
6.2%
All other
employees
% change
4.5%
5.9%
21.0%
8.8%
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
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 2015 and ended 31 March 2016.
Employee remuneration
Distribution to shareholders
7.9%
25.8%
2015
2016
£16.5m
£17.8m
£19.4m
£24.4m
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
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)
7 February 2013
(7 February 2016)1
29 May 2013
(29 May 2016)2
16 July 2014
Unexpired term as at
31 March 2016
15 months
26 months
35 months
Date of
appointment/last
reappointment at AGM
2015
2015
2015
2 months
16 months
2015
2015
Notice period
6 months
3 months
3 months
3 months
3 months
Notes:
1. On 4 November 2015 and on the recommendation of the Nomination Committee, the Board agreed to renew Mr Girling’s letter of
appointment, extending his tenure for a further three-year term from 7 February 2016.
2. On 23 March 2016 and on the recommendation of the Nomination Committee, the Board agreed to renew Mr Russell’s letter of
appointment, extending his tenure for a further three-year term from 29 May 2016.
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 2015/16
The Committee met formally on 10 occasions during the year under review. Attendance by individual Committee
members at meetings is detailed on page 75.
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.
117 "Workspace Group PLC Annual Report and Accounts 2016
Corporate Governance Report
continued
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. Fees paid in respect of support to the Committee during the year under review were
£58.5k, on the basis of time and materials. Other than in relation to advice on remuneration neither Kepler Associates nor
its parent, Mercer, provided any other services to the Company.
Summary of shareholder voting at the 2015 AGM
The table below shows the results of the advisory vote on the 2014/15 Remuneration Report at the 2015 AGM on 15 July
2015. The table also shows the results for the binding vote on the Policy Report at the 2014 AGM. 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.
Approve Policy Report
Approve Annual Report on Remuneration
Director
For (including discretionary)
Against
Total number of votes
86,708,943
649,528
% of votes cast Total number of votes
125,405,152
2,432,512
99.26%
0.74%
Total votes cast (excluding withheld votes)
Votes withheld1
Total votes cast (including withheld votes)
87,358,471
43,394
87,401,865
100%
127,837,664
1,040
127,838,704
% of votes cast
98.10%
1.90%
100%
Note:
1. A withheld vote is not a vote in law and is not counted in the calculation of the proportion of votes cast for and against a resolution.
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 2015
Lapsed during the year
Vested during the year
At 31 March 2016
Performance2
Invested3 Matching4 Performance Matching Performance
Invested Matching Performance Invested Matching
Name
Jamie Hopkins
19/11/2012
26/06/2013
26/06/2014
26/06/20151
Graham Clemett
18/06/2012
26/06/2013
26/06/2014
26/06/20151
100,945
164,117 112,525 112,525
19,631 74,079
73,469 16,000 60,378
–
–
–
99,084 23,780 99,084
16,719 63,091
63,091
12,168 45,918
45,918
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(164,117) (112,525) (112,525)
–
–
–
–
–
–
–
–
–
–
–
100,945
–
19,631 74,079
73,469 16,000 60,378
7,263 27,407
49,229
(99,084) (23,780) (99,084)
–
–
–
–
–
–
–
–
–
–
63,091
45,918
30,084
–
–
16,719 63,091
12,168 45,918
7,972 30,084
Notes:
1. Awards will vest subject to the satisfaction of performance conditions detailed on pages 112 to 113 over the three-year performance
period.
2. Performance Awards made to the Executive Directors: Awards in June 2012 were 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, in
June 2014 awards were in respect of 100% of salary based on a share price at date of award of £5.7033 and in June 2015 awards were in
respect of 100% of salary based on a share price at date of award of £9.1408.
3. 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 114 of this Report.
4. Matching Awards were granted to participants who purchased Invested Shares or who used shares acquired during and since the Rights
Issue as Invested Shares. 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, in 2014 matching shares granted were up to 100% of salary for Mr Clemett and 82% of salary for Mr Hopkins,
and in 2015 matching shares granted were up to 100% of salary for Mr Clemett and 56% of salary for Mr Hopkins.
118 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
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.
At
01/04/2015
4,6631
–
2922
–
4,6631
1,9601
–
2922
–
Granted
during the
year
–
2,4751
–
1072
–
–
1,2371
–
1072
Lapsed
during the
year
–
–
–
–
–
–
–
–
–
Vested in
year
(4,663)
–
(292)
–
(4,663)
–
–
(292)
–
At
31/03/2016
–
2,475
–
107
–
1,960
1,237
–
107
Exercise
price
£1.93
£7.27
–
–
£1.93
£4.59
£7.27
–
–
Normal exercise date
From
01.09.2015
01.09.2018
22.03.2016
18.09.2018
01.09.2015
01.09.2017
01.09.2018
22.03.2016
18.09.2018
To
01.03.2016
01.03.2019
–
–
01.03.2016
01.03.2018
01.03.2019
–
–
Jamie Hopkins
Graham Clemett
Notes:
1. SAYE scheme.
2. SIP scheme.
There have been no changes in Directors’ interests over options in the period between the balance sheet date and
7 June 2016.
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
7 June 2016
119 "Workspace Group PLC Annual Report and Accounts 2016
Report of the Directors
The Directors present their report on the affairs of the
Group together with the audited financial statements for
the year ended 31 March 2016.
Profit and dividends
The Group’s profit after tax for the year attributable to
shareholders amounted to £388.9m (2015: £350.9m).
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. As at 31 March 2016 the
Company had eight active subsidiaries, four of which are
property investment companies owning properties in
Greater London. The other four companies are: 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 Workspace
Glebe Limited, which is an intermediate holding company.
The Group currently has two joint ventures, BlackRock
Workspace Property Trust and Generate Studio Limited.
A full list of the Company’s subsidiaries and other related
undertakings appears on page 162.
During the year, the Group simplified its structure and
reduced the number of active subsidiaries. In July 2015, the
Group sold its share of the Enterprise House Investments
LLP joint venture.
Significant events which occurred during the year are
detailed in the Chairman’s introduction on page 04 the
Chief Executive Officer’s Strategic Review on pages 18 to
20 and the Business Review on pages 53 to 60.
A description of the principal risks and uncertainties facing
the Company can be found on pages 43 to 51. Details of
the Company’s health and safety policies can be found on
page 122 and information on its environmental and
community engagement activities can be found on pages
36 to 42.
This section of the Annual Report sets out the information
required to be disclosed by the Company in the Directors’
Report. Certain matters that would otherwise be disclosed
in the Directors’ Report have been reported elsewhere in
the Annual Report and consequently this Directors’ Report
should be read in conjunction with the Strategic Report
on pages 6 to 61, which includes our report on Resources
and Relationships on pages 36 to 42, and the Corporate
Governance Report for the year ended 31 March 2016 on
pages 69 to 119, which are incorporated by reference into
this Directors’ Report.
The interim dividend of 4.86 pence (2015: 3.89 pence) was
paid in February 2016 and the Board is proposing to
recommend the payment of a final dividend of 10.19 pence
(2015: 8.15 pence) per share to be paid on 5 August 2016 to
shareholders whose names are on the Register of Members
at the close of business on 8 July 2016. This makes a total
dividend of 15.05 pence (2015: 12.04 pence) for the year.
Directors
There are currently seven Directors on the Board of
Workspace Group PLC. Unless otherwise determined by
ordinary resolution of the Company, the Directors shall not
be less than two or more than ten in number.
In accordance with the requirements of the UK Corporate
Governance Code, all the Directors will offer themselves for
re-election at the Annual General Meeting on 14 July 2016.
The Directors of the Company all held office throughout
the year. The current Directors and their biographies can
be found on pages 66 to 68. Details of Directors’
remuneration are provided in the Remuneration Report
on pages 98 to 119. Details of the Directors’ shareholdings
in the share capital of the Company and options over
shares are provided on pages 114 to 115 and 118 to 119.
Directors’ indemnity
Under the Company’s Articles of Association, to the extent
permitted by the Companies Act, the Company indemnifies
any Director, Secretary or other Officer of the Company
against any liability and may purchase and maintain
insurance against such liability. The Board understands that
the provision of such indemnification is in keeping with
current market practice and believes that it is in the best
interest of the Group to provide such indemnities in order
to attract and retain high calibre Directors and Officers.
The Company purchased and maintained Directors’ and
Officers’ liability insurance during the year and at the date
of approval of the Directors’ Report.
Directors’ conflicts of interest
During the year, no Director had any beneficial interest in
any contract significant to the Company’s business, other
than a contract of employment.
The Company has procedures in place for managing
conflicts of interest. Should a Director become aware that
they, or their connected parties, have an interest in an
existing or proposed transaction with the Company, they
are required to notify the Board in writing or verbally at the
next Board Meeting.
120 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Going Concern and the Viability Statement
The Company’s Going Concern and Viability Statements
can be found on page 52.
The Group’s activities, strategy and performance are
explained in the Strategic Report on pages 6 to 61.
Further detail on the financial performance and financial
position of the Group is provided in the financial
statements on pages 131 to 163.
Employees
The Group highly values 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 is supplemented by updates on the intranet.
These briefings also serve as an informal forum for
employees to ask questions about the Company.
Share schemes are a long-established and successful part
of our total reward package, encouraging and supporting
employee share ownership. In particular, all employees are
invited to participate in the Company’s Savings Related
Share Option Scheme (‘SAYE’).
The Company is committed to an active Equal
Opportunities Policy from recruitment and selection,
through training and development, performance reviews
and promotion. All decisions relating to employment
practices are objective, free from bias and based solely
upon work criteria and individual merit. The Company is
responsive to the needs of its employees, customers and
the community at large. We are an organisation which uses
everyone’s talents and abilities, where diversity is valued.
The Company remains supportive of the employment
and advancement of disabled persons and ensures its
promotion and recruitment practices are fair and objective.
The Company encourages the continuous development
and training of its employees and the 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 27 on page 163.
Further information on Group employees can be found on
pages 37 to 38, 108 and 142.
Share capital and control
As at 31 March 2016, the Company’s issued share capital
comprised a single class of 162,404,600 Ordinary Shares of
£1.00 each. Details of the Company’s issued share capital
are set out on page 157.
Full details of share options and awards under the terms
of the Company’s share incentive plans can be found on
pages 158 to 161.
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.
Restrictions on transfer of shares
There are no restrictions on the transfer of ordinary shares
in the Company other than in relation to certain restrictions
that are imposed from time to time by laws and regulations
(for example insider trading laws). In addition, pursuant
to the Listing Rules of the Financial Conduct Authority,
Directors and certain officers and employees of the Group
require the approval of the Company to deal in ordinary
shares of the Company.
Substantial shareholdings in the Company
As at 31 March 2016, 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
Aberdeen Group
Legal & General Group PLC
Number of
shares
Percentage
held
44,633,123
13,455,286
13,168,163
7,473,576
6,344,494
5,027,562
27.48%
8.29%
8.11%
4.60%
3.91%
3.10%
Note:
* 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.
121 "Workspace Group PLC Annual Report and Accounts 2016
Report of the Directors
continued
As at 24 May 2016, the following interests in voting rights
over the issued share capital of the Company had been
notified.
Shareholder
The London & Amsterdam Trust
Company Limited*
Old Mutual PLC
BlackRock Inc
Standard Life PLC
Aberdeen Group
Legal & General Group PLC
Number of
shares
Percentage
held
44,633,123
13,519,164
12,831,135
7,407,417
6,540,144
5,034,730
27.48%
8.32%
7.90%
4.56%
4.03%
3.10%
Note:
* Full name of shareholders include Rovida Holdings Limited,
RR Investment Company Ltd, Mr SN Roditi, Mrs PA Roditi and
The Belvedere Realty Investment Company Limited.
Purchase of own shares
Under the Company’s Articles of Association, the Company
may purchase any of its own shares. The Company was
granted authority at the 2015 Annual General Meeting to
make market purchases of its own ordinary shares. This
authority will expire at the conclusion of the 2016 Annual
General Meeting and a resolution will be proposed to
renew this authority. No ordinary shares were purchased
under this authority during the year.
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 page 97.
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.
Political donations
The Company and its subsidiaries made no political
donations during the year (2015: Nil).
Articles of Association
A number of changes are being proposed to the Articles
of Association to reflect developments in practice and to
provide clarification and flexibility. These are summarised in
the 2016 Notice of Annual General Meeting.
Greenhouse gas (‘GHG’) emissions
In line with the requirements of The Greenhouse Gas
Emissions (Directors’ Reports) Regulations 2013 we have
continued to benchmark and report our emissions that
result from our business activities. Emissions are calculated
from the following sources:
Scope 1 Emissions – direct emissions
– On-site fuel combustion:
Gas or oil purchased for our assets. This includes tenant
consumption where we procure gas on their behalf.
– Fugitive emissions:
Refrigerant leaks from owned air-conditioning (‘RAC’)
equipment.
– Company vehicles:
Fuel combustion and refrigerant leakage.
Scope 2 Emissions – indirect emissions
– Purchased electricity:
Electricity purchased for our assets. This includes tenant
consumption where we procure electricity on their
behalf.
– Purchased heat:
Heat purchased for our assets. This includes tenant
consumption where we procure district heat on their
behalf.
122 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
To tackle our emissions we have focused on energy
efficiency measures within our existing portfolio, as well
as incorporating energy efficiency measures such as
natural ventilation and LED lighting into our new
developments.
We will continue to focus on energy efficiency initiatives
within our buildings and engage with our occupiers to
ensure that our emissions decline over time.
This data has been verified to a limited level of assurance
by Carbon Credentials.
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 the following locations:
Section Topic
1
Interest capitalised
4
Details of long-term
incentive schemes
Location in the Annual Report
Financial Statements,
page 145, note 10
Remuneration Report
page 112 to 113 and 118
All the information cross-referenced above is hereby
incorporated by reference into this Directors’ Report.
2016 Annual General Meeting
The 30th Annual General Meeting of the Company will be
held at Chester House, Kennington Park, 1-3 Brixton Road,
London SW9 6DE on Thursday 14 July 2016 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 sent to shareholders who have
elected to receive hard copies of shareholder information
and is also available on the Company’s website.
By Order of the Board
Carmelina Carfora
Company Secretary
7 June 2016
Carbon emissions by source (tCO2e)
In order to satisfy the requirements we report both
absolute emissions and emissions as an intensity ratio,
this is based on net lettable and occupied area.
Source of Emissions
Scope 1 (Direct
Emissions)
Workspace
Gas
Fugitive Emissions
Vehicle Emissions
Joint Venture
Gas
Heating Oil
Fugitive Emissions
2012/13 2013/14 2014/15 2015/16
%
Change
4,222 3,846 3,515 3,375 -20%
3,959 3,535 3,194 2,847
458
7
244
4
169
2
216
2
60
31
0
64
28
2
51
20
2
42
20
2
10,822 11,290 12,405 12,366 +14%
Scope 2 (Indirect
Emissions)
Workspace
Purchased Electricity 10,510 10,956 12,037 12,129
Purchased Heat
84
Joint Venture
Purchased Electricity
334
368
312
0
0
0
153
15,044 15,136 15,920 15,741
+5%
Total
Net Lettable Area
tCO2e/m2
Occupied space
Area tCO2e/m2
0.030 0.031 0.035 0.036
0.035 0.036 0.040 0.041
Notes:
1. Previous data has been recalculated to account for changes
and additions.
2. Emissions from vacant units have been omitted from data
collection as they are considered to be immaterial.
3. Calculations based upon a 5% materiality threshold.
4. Joint venture emissions as a proportion of our equity share.
5. DEFRA Environmental Reporting Guidelines and the financial
control approach applied.
This year GHG emissions across the portfolio have
increased by 5% against our 2012/13 baseline. Compared to
the previous year GHG emissions across the portfolio have
decreased by 1%.
This increase can be mainly attributed to the addition of a
number of new buildings to the portfolio. Since 2012, we
have grown in size increasing the amount of air-conditioned
floor space we let, which has increased our overall portfolio
carbon intensity. Both of these factors mean that our scope
1 and scope 2 purchased energy emissions have increased
alongside our scope 1 fugitive emissions.
123 "Workspace Group PLC Annual Report and Accounts 2016
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 are fair, balanced and
understandable and provide the information necessary
for shareholders to assess the Company’s performance,
business model and strategy.
Each of the Directors, whose names and functions are
detailed on pages 66 to 68 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.
– The Strategic Report contained on pages 4 to 61
includes a fair review of the development and
performance of the business and position of the Group,
together with a description of the principal risks and
uncertainties that it faces.
Signed on behalf of the Board on 7 June 2016 by:
Jamie Hopkins
Chief Executive Officer
Graham Clemett
Chief Financial Officer
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.
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.
– 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.
124 "Workspace Group PLC Annual Report and Accounts 2016
Independent Auditors’ Report to the
Members of Workspace Group PLC
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
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 2016 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
The financial statements, included within the Annual
Report and Accounts (the ‘Annual Report’), comprise:
– the Consolidated balance sheet as at 31 March 2016;
– the Consolidated income statement 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, 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 IFRSs as
adopted by the European Union, and applicable law.
Our audit approach
Overview
Materiality
Audit
scope
Areas
of focus
– Overall Group materiality:
£18.8 million which represents 1%
of total assets.
– Specific materiality of £5.5 million
used for certain Consolidated
income statement line items, being
a percentage of profit before tax,
net finance costs and investment
property valuation movements.
– All work in support of the Group
audit opinion is performed by the
Group audit team.
– Valuation of investment properties
due to materiality and the level of
judgement involved.
– Accounting treatment in relation to
the BlackRock Workspace
Property Trust joint venture due to
the application of IFRS 11 and the
recognition of the performance fee
in the current year.
– Compliance with the REIT regime
due to the impact of the tax
exempt status on the Group’s
business and the financial
statements.
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.
125 "Workspace Group PLC Annual Report and Accounts 2016
Independent Auditors’ Report to the
Members of Workspace Group PLC
continued
Area of focus
Valuation of investment properties
Refer to page 94 (Audit Committee Report), pages 145 to
147 (Notes to the financial statements – note 10), page 135
(Significant judgements, key assumptions and estimates),
and page 136 (Significant accounting policies).
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
£1,749.4 million as at 31 March 2016 and the revaluation
gain of £296.6 million is included within ‘Change in fair
value of investment property’ in the Consolidated
income statement.
The property valuations are carried out by external 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 includes yield and Estimated Rental Value
(‘ERV’) movements (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.
126 "Workspace Group PLC Annual Report and Accounts 2016
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 2016 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. As part
of our evaluation we assessed the independence of CBRE
given the Non-Executive Director role of Stephen Hubbard.
We also discussed the scope of its work and reviewed the
terms of its engagement. 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 2015. Where relevant, we
were able to corroborate the explanations for yields and ERV
movements with comparable property transactions and
market benchmarks.
We found that yields and ERVs were predominantly
consistent with comparable benchmarking information for
the asset location and that the assumptions applied
appropriately reflected 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 had been 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. We noted that the overall
valuation primarily increased as a result of a larger quantity
of higher quality and valued available lettable space.
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 for 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,
quantity surveyor reports and cash to check that they had
been correctly capitalised; and
– visited selected properties within the portfolio over the
course of the year for physical verification purposes.
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
How our audit addressed the area of focus
We obtained and read the documentation and contracts
governing the structure of the joint arrangement, the
relevant board minutes and other supporting information.
This provided sufficient evidence that Workspace has shared
control over the key strategic and operational decisions
meaning that, consistent with the prior year, it was
appropriate for the BlackRock JV investment to be equity
accounted for as a joint venture.
We were also satisfied that sufficient and appropriate
disclosures in accordance with IFRS 11 have been included
within note 12(a) to the Consolidated financial statements.
We obtained management’s calculations supporting the
value of the performance fee and were able to confirm that
the inputs to, and mechanics of, the calculation were
accurate and in line with the contract. Management
obtained confirmation of the amount due by the other joint
venture partner.
We were satisfied that the recognition of the performance fee
in the current period was appropriate as the service period
has expired and the amount can now be reliably estimated.
We confirmed our understanding of management’s overall
approach to checking their compliance with the REIT regime
requirements to our satisfaction.
We obtained management’s calculations and supporting
documentation for the current and preceding year Balance
of Business tests, testing the inputs, calculation and
application of the rules.
With respect to the calculation of the Balance of Business
test for 2015, we saw the confirmation from HMRC that
concluded that management’s basis of calculation was
appropriate. This provided us with good evidence to
concur with management’s conclusion that no breach
occurred in 2015.
For 2016, based on our work on the calculations and
supporting documentation, we were satisfied with
management’s conclusion that Workspace generated more
than 50% and less than 75% of its total accounting profits
from its property rental business. We also considered
management’s forecasts for future periods and these
supported their conclusions that the likelihood of accounting
profits from its property rental business being below 75% of
total accounting profits is remote.
Area of focus
Investment in BlackRock Workspace Property Trust joint
venture (‘BlackRock JV’)
Refer to page 94 (Audit Committee Report), pages 147
to 148 (Notes to the financial statements – note 12(a)),
page 135 (Significant judgements, key assumptions and
estimates), and page 137 (Significant accounting policies).
We focused on this area due to the particular judgement
surrounding the continued treatment of the investment as
a joint venture given Workspace’s 20.1% investment, and
the accounting treatment and recognition of the
performance fee in the current year.
Management concluded that based on their day to day
operation and the contractual arrangements in place,
BlackRock JV was a joint venture at 31 March 2016 and should
be equity accounted in the Group Financial Statements.
Under the joint venture agreement, Workspace is entitled
to a performance fee for the services it provided in its
capacity as the property manager of the joint venture
from the date of inception until the earlier of the end of
the service period, being 22 February 2016, or exit from
the joint venture agreement. The fee is based on
outperformance of benchmarks specified in the joint
venture agreement and completion of the service period.
Based on the criteria above, Workspace has recognised a
performance fee of £24.1m within ‘Other Income’ in the
Consolidated income statement. An accrual for the full value
of this liability has been recognised by the BlackRock JV in
their accounts.
Compliance with the REIT regime
Refer to page 94 (Audit Committee Report), pages 142 to
143 (Notes to the financial statements – note 6) and
page 135 (Significant judgements, key assumptions and
estimates).
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 of the regime.
We focused on this area because the rules are complex
and the tax exempt status has a significant impact on the
Group’s business and the Group financial statements.
Last year (2015) we noted that the Group was in
discussions with HMRC regarding the application of the
REIT criteria. Following these discussions, Management
concluded that there was no breach of the criteria last year.
In the current year, due to the receipt of the £24.1m
BlackRock JV performance fee (see previous Area of
focus), Workspace generated less than 75% of its total
accounting profits from its property rental business. If the
level generated from the property rental business falls
below 75% of its total accounting profits next year,
Workspace may be deemed to fail the Balance of Business
test, which represents a minor breach of the REIT regime
criteria. It is noted that if the Balance of Business test
results in accounting profits from property rental falling
below 50% in any one year this would trigger an immediate
REIT compliance breach and potential loss of REIT status.
We therefore considered the Balance of Business test for
2015, 2016 and 2017 to understand whether a breach had
occurred or was likely to occur in future periods.
127 "Workspace Group PLC Annual Report and Accounts 2016
We agreed with the Audit Committee that we would report
to them misstatements identified during our audit above
£0.4 million (2015: £0.2 million) 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
Directors’ statement, set out on page 52, in relation to
going concern. We have nothing to report having
performed our review.
Under ISAs (UK & Ireland) we are required to report to you
if we have anything material to add or to draw attention to
in relation to the Directors’ statement about whether they
considered it appropriate to adopt the going concern basis
in preparing the financial statements. We have nothing
material to add or to draw attention to.
As noted in the Directors’ statement, the Directors have
concluded that it is appropriate to adopt the going concern
basis in preparing the financial statements. 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.
Independent Auditors’ Report to the
Members of Workspace Group PLC
continued
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 active entities, eighteen
dormant entities and the Group’s two 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 on the
individual financial statement line items and disclosures and
in evaluating 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
How we
determined it
Rationale for
benchmark
applied
Specific
materiality
How we
determined it
Rationale for
benchmark
applied
£18.8 million (2015: £13.4 million).
1% of total assets.
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 level
based on total assets.
£5.5 million (2015: £2.0 million).
A percentage of profit before tax, net
finance costs and investment property
valuation movements.
A number of key performance indicators
of the Group are driven by income
statement items and we therefore
applied a lower specific materiality to
the components of profit before tax,
excluding net finance costs and
investment property valuation
movements.
128 "Workspace Group PLC Annual Report and Accounts 2016
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 is:
– materially inconsistent with the
We have no
exceptions to
report.
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 85, in accordance with provision
C.1.1 of the UK Corporate Governance
Code (the ‘Code’), that they consider the
Annual Report taken as a whole to be
fair, balanced and understandable and
provides the information necessary for
members to assess the Group’s position
and performance, business model and
strategy is materially inconsistent with
our knowledge of the Group acquired
in the course of performing our audit.
– the section of the Annual Report on
pages 91 to 97 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.
We have no
exceptions to
report.
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
The Directors’ assessment of the prospects of the
Group and of the principal risks that would threaten
the solvency or liquidity of the Group
Under ISAs (UK & Ireland) we are required to report
to you if we have anything material to add or to draw
attention to in relation to:
– the Directors’ confirmation on page 92
We have
nothing
material to
add or to
draw
attention to.
We have
nothing
material to
add or to
draw
attention to.
We have
nothing
material to
add or to
draw
attention to.
of the Annual Report, in accordance with
provision C.2.1 of the Code, that they
have carried out a robust assessment
of the principal risks facing the Group,
including those that would threaten its
business model, future performance,
solvency or liquidity.
– the disclosures in the Annual Report that
describe those risks and explain how
they are being managed or mitigated.
– the Directors’ explanation on page 52 of
the Annual Report, in accordance with
provision C.2.2 of the Code, as to how
they have assessed the prospects of the
Group, over what period they have done
so and why they consider that period to
be appropriate, and their statement as
to whether they have a reasonable
expectation that the Group will be able
to continue in operation and meet its
liabilities as they fall due over the period
of their assessment, including any related
disclosures drawing attention to any
necessary qualifications or assumptions.
Under the Listing Rules we are required to review the
Directors’ statement that they have carried out a robust
assessment of the principal risks facing the Group and the
Directors’ statement in relation to the longer-term viability
of the Group. Our review was substantially less in scope
than an audit and only consisted of making inquiries and
considering the Directors’ process supporting their
statements; checking that the statements are in alignment
with the relevant provisions of the Code; and considering
whether the statements are consistent with the knowledge
acquired by us in the course of performing our audit. We
have nothing to report having performed our review.
129 "Workspace Group PLC Annual Report and Accounts 2016
Independent Auditors’ Report to the
Members of Workspace Group PLC
continued
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.
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 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 2016 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
7 June 2016
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 ten
further provisions of the 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 124, the Directors are
responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on
the financial statements in accordance with applicable law
and ISAs (UK & Ireland). Those standards require us to
comply with the Auditing Practices Board’s Ethical
Standards for Auditors.
This report, including the opinions, has been prepared
for and only for the Company’s members as a body in
accordance with Chapter 3 of Part 16 of the Companies Act
2006 and for no other purpose. We do not, in giving these
opinions, accept or assume responsibility for any other
purpose or to any other person to whom this report is
shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
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.
130 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Notes
1
1
1
2
3(a)
3(b)
3(c)
10
2
4
4
16(f)
12(a)
6
19
2016
£m
101.2
(27.1)
74.1
(14.6)
59.5
8.1
(0.1)
39.0
296.6
403.1
0.1
(17.0)
0.9
4.2
391.3
(2.4)
388.9
388.9
–
388.9
2015
£m
83.6
(25.9)
57.7
(13.8)
43.9
0.3
–
10.1
318.0
372.3
0.1
(18.6)
(2.2)
8.4
360.0
(0.1)
359.9
350.9
9.0
359.9
8
8
240.3p
237.3p
231.4p
227.4p
Notes
16(f)
19
2016
£m
388.9
2015
£m
359.9
1.4
390.3
390.3
–
390.3
(0.3)
359.6
350.6
9.0
359.6
Consolidated income statement
For the year ended 31 March 2016
Revenue
Direct costs
Net rental income
Administrative expenses
Trading profit excluding share of joint ventures
Profit on disposal of investment properties
Loss on disposal of joint ventures
Other income
Change in fair value of investment properties
Operating profit
Finance income
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
Basic earnings per share (pence)
Diluted earnings per share (pence)
Consolidated statement of comprehensive income
For the year ended 31 March 2016
Profit for the financial year
Other comprehensive income:
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 135 to 163 form part of these financial statements.
131 "Workspace Group PLC Annual Report and Accounts 2016
Consolidated balance sheet
As at 31 March 2016
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
Assets held for sale
Total assets
Current liabilities
Trade and other payables
Deferred tax
Non-current liabilities
Borrowings
Derivative financial instruments
Total liabilities
Net assets
Shareholders’ equity
Share capital
Share premium
Investment in own shares
Other reserves
Retained earnings
Total shareholders’ equity
EPRA net asset value per share
Notes
10
11
12(a)
12(b)
13
16(e) & (f)
13
14
10
15
6
16(a)
16(e) & (f)
2016
£m
2015
£m
1,749.4
0.6
2.0
22.3
4.2
14.2
3.9
1,796.6
52.0
27.8
–
79.8
1,876.4
1,408.9
0.4
2.0
28.6
1.0
8.7
0.3
1,449.9
18.9
42.6
0.3
61.8
1,511.7
(48.4)
(1.1)
(49.5)
(45.4)
–
(45.4)
(309.3)
–
(309.3)
(358.8)
(317.4)
(2.6)
(320.0)
(365.4)
1,517.6
1,146.3
20
20
22
21
162.4
135.9
(8.9)
19.0
1,209.2
1,517.6
161.1
136.8
(8.8)
15.7
841.5
1,146.3
9
£9.23
£7.03
The notes on pages 135 to 163 form part of these financial statements.
The financial statements on pages 131 to 163 were approved and authorised for issue by the Board of Directors on
7 June 2016 and signed on its behalf by:
J Hopkins
G Clemett
Directors
132 "Workspace Group PLC Annual Report and Accounts 2016
Consolidated statement of changes in equity
For the year ended 31 March 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
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
interest
Share based payments
Balance at 31 March 2015
Profit for the year
Change in fair value of derivatives
Total comprehensive income
Transactions with owners:
Share issues
Own shares purchase (net)
Dividends paid
Share based payments
Balance at 31 March 2016
Notes
21
20
7
19
23
21
20
7
23
Attributable to owners of the parent
Share
capital
£m
145.6
–
–
–
Share
premium
£m
58.2
–
–
–
Investment
in own
shares
£m
(8.9)
–
–
–
Other
reserves
£m
14.0
–
(0.3)
(0.3)
Retained
earnings
£m
517.2
350.9
–
350.9
Total
share-
holders’
equity
£m
726.1
350.9
(0.3)
350.6
Non-
controlling
interests
£m
–
9.0
–
9.0
15.5
–
–
–
–
161.1
–
–
–
1.3
–
–
–
162.4
78.6
–
–
–
–
136.8
–
–
–
(0.9)
–
–
–
135.9
0.1
–
–
–
–
(8.8)
–
–
–
–
(0.1)
–
–
(8.9)
–
–
–
–
2.0
15.7
–
1.4
1.4
–
(16.6)
–
(10.0)
–
841.5
388.9
-
388.9
94.2
(16.6)
–
(10.0)
2.0
1,146.3
388.9
1.4
390.3
–
–
–
1.9
(0.1)
–
(21.1)
–
19.0 1,209.2
0.3
(0.1)
(21.1)
1.9
1,517.6
–
–
11.0
(20.0)
–
–
–
–
–
–
–
–
–
–
Total
equity
£m
726.1
359.9
(0.3)
359.6
94.2
(16.6)
11.0
(30.0)
2.0
1,146.3
388.9
1.4
390.3
0.3
(0.1)
(21.1)
1.9
1,517.6
The notes on pages 135 to 163 form part of these financial statements.
133 "Workspace Group PLC Annual Report and Accounts 2016
Consolidated statement of cash flows
For the year ended 31 March 2016
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
Proceeds from disposal of joint ventures
Other income (overage receipts)
Purchase of investments
Movement in funding balances with joint ventures
Income distributions 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
Own shares purchase (net)
Acquisition of non-controlling interests
Dividends paid
Net cash (outflow)/inflow from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
The notes on pages 135 to 163 form part of these financial statements.
134 "Workspace Group PLC Annual Report and Accounts 2016
Notes
18
12(a)
12(a)
21
16(b)
19
7
18
18
2016
£m
2015
£m
67.6
0.1
(17.9)
–
49.8
(107.4)
(55.4)
123.0
(0.4)
(0.8)
6.3
3.1
0.7
(1.7)
0.2
1.2
(31.2)
0.3
–
(1.0)
(1.7)
(10.0)
(0.1)
–
(20.9)
(33.4)
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
(14.8)
38.9
42.6
27.8
3.7
42.6
Notes to the financial statements
For the year ended 31 March 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
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
continue to be accounted for as a joint venture.
BlackRock Workspace Property Trust performance fee
As property manager of the BlackRock Workspace
Property Trust joint venture, the Group is entitled to a
performance fee at the end of the five year term of the
fund in February 2016. This is based on the Group’s
performance as property manager over the service period.
Other income of £24.1m has been included within the
Consolidated financial statements given the service period
has expired and the level of the performance fee can be
reliably estimated.
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.
During the year, the Group recorded Other income of
£24.1m for the performance fee relating to the BlackRock
Workspace Property Trust joint venture (see above).
Recognition of this fee will cause the Group to fail the
75% Balance of Business income test for the current year.
Two consecutive breaches are required for the Group to
incur a minor breach. There is no reason to expect that any
further breaches will occur in future periods and so no
impact on the Group’s tax exempt status is expected.
The Directors intend that the Group should continue as
a REIT for the foreseeable future, with the result that
deferred tax is not recognised on temporary differences
relating to the property rental business which is within the
REIT structure.
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.
135 "Workspace Group PLC Annual Report and Accounts 2016
Notes to the financial statements
continued
Significant accounting policies
The significant accounting policies adopted in the
preparation of these Consolidated financial statements
are set out below. These policies have been consistently
applied to all years presented unless stated otherwise.
Basis of consolidation
The Consolidated financial statements include the
financial statements of the Company and all its subsidiary
undertakings up to 31 March 2016. 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 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.
136 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
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 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.
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.
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.
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.
Trade and other payables
Trade and other payables are initially recognised at fair
value and subsequently held at amortised cost.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, restricted
cash in the form of tenants’ deposits and deposits held on
call with banks. Bank overdrafts are included in current
liabilities but within cash and cash equivalents for the
purpose of the cash flow statement.
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.
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.
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.
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.
137 "Workspace Group PLC Annual Report and Accounts 2016
Notes to the financial statements
continued
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 21.
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.
Share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares are shown in
equity as a deduction, net of tax, from the proceeds.
Investment in own shares
The Group operates an Employee Share Ownership Trust
(‘ESOT’) and a trust for the Share Incentive Plan (‘SIP’).
When the Group funds these trusts in order to purchase
Company shares, the loan is deducted from shareholders’
equity as investment in own shares.
Non-controlling interests
The Group recognises any non-controlling interest (‘NCI’)
in the acquiree at the NCI’s proportionate share of the
acquiree’s identifiable net assets.
A NCI was recognised last year for the Glebe Proceeds
Share Agreement (note 19). Total comprehensive income
and loss was attributed to the NCI in line with the terms
of the relevant contract. For the Glebe Proceeds Share
Agreement, amounts were attributed to the NCI when
it was considered probable that the Group 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.
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 NCI (that is, through equity).
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.
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 19.
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.
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.
138 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
These 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
Annual improvements 2014 Changes to IFRS 5/IFRS 7/
Content
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
Amendment: IAS 7
Amendment: IAS 12
IFRS 16
IAS 19/IAS 34
Financial instruments
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
Statement of cash flows on
disclosure initiatives
Recognition of deferred tax
assets for unrealised losses
Leases
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.
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 2016 the Group adopted the
following accounting standards and guidance:
Standard or interpretation
Annual improvements 2012 Changes to IFRS 2/IFRS 3/
Content
IFRS 8/IFRS 13/IAS 16/
IAS 37/IAS 39
Annual improvements 2013 Changes to IFRS 1/IFRS 3/
IFRS 13/IAS 40
139 "Workspace Group PLC Annual Report and Accounts 2016
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
2016
Direct
costs
£m
(1.9)
(18.5)
(3.6)
(3.1)
(27.1)
Net rental
income
£m
77.7
(2.2)
(3.6)
2.2
74.1
Revenue
£m
63.8
15.3
–
4.5
83.6
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
79.6
16.3
–
5.3
101.2
All of the properties within the portfolio are geographically close to each other and have similar economic features and
risks and all information provided to the Executive Committee is aggregated and reviewed in total as one portfolio. As a
result management have determined that the Group operates a single operating segment providing business
accommodation for rent in London.
2. Operating profit
The following items have been charged in arriving at operating profit:
Depreciation1
Staff costs (including share based costs)1 (note 5)
Repairs and maintenance expenditure on investment properties
Trade receivables impairment (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
2016
£m
0.8
16.2
2.9
0.2
0.3
0.1
0.2
2015
£m
0.7
15.3
3.5
0.3
0.2
0.1
0.2
2016
£000
2015
£000
149
32
181
34
15
49
2016
£m
7.5
0.9
1.9
4.3
14.6
143
31
174
138
20
158
2015
£m
6.8
1.3
2.0
3.7
13.8
140 "Workspace Group PLC Annual Report and Accounts 2016
3(a). Profit on disposal of investment properties
Proceeds from sale of investment properties (net of sale costs)
Book value at time of sale (including assets held for sale)
Profit on disposal
Realisation of profits on sale of properties out of joint ventures (note 12(a))
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
2016
£m
122.7
(115.0)
7.7
0.4
8.1
2015
£m
99.0
(98.7)
0.3
–
0.3
£0.4m (2015: £nil) above relates to previously unrealised profit from the sale of property by the Group to joint ventures.
£1.5m (2015: £1.5m) of the proceeds for the year were in the form of deferred consideration, of which the full amount is
outstanding at 31 March 2016 (31 March 2015: £1.5m) and is included in the Consolidated Balance Sheet under non-current
and current trade and other receivables.
3(b). Loss on disposal of joint ventures
Proceeds from disposal of joint ventures
Carrying value at time of disposal (note 12(a))
Loss on disposal
3(c). Other income
Joint venture performance fee
Change in fair value of deferred consideration
Lease surrender premium
2016
£000
3.1
(3.2)
(0.1)
2016
£m
24.1
9.5
5.4
39.0
2015
£000
–
–
–
2015
£m
–
10.1
–
10.1
The Group as property manager to the BlackRock Workspace Property Trust joint venture is due a performance fee
based on the returns achieved over the five year term of the fund. The five year term came to an end in February 2016
and the Group has agreed with its partner to sell the remaining properties to bring the joint venture to a conclusion.
Based on the returns achieved over the life of the fund and the valuation at 31 March 2016 of the remaining properties the
fee was estimated at £24.1m. In accordance with IAS 18 recognition rules this has been recognised as income for the year.
The value of deferred consideration (cash and overage) from the sale of investment properties has been re-valued by
CBRE Limited at 31 March 2016 and 31 March 2015. The amounts receivable are included in the Consolidated balance
sheet under non-current and current trade and other receivables (note 13).
The lease surrender premium is in respect of an amount received from a tenant in order to break their lease.
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
141 "Workspace Group PLC Annual Report and Accounts 2016
2016
£m
0.1
0.1
(2.7)
(13.9)
(0.8)
(0.5)
0.9
(2.2)
2.2
(17.0)
2015
£m
0.1
0.1
(3.6)
(14.7)
(0.8)
(0.3)
0.8
(7.2)
7.2
(18.6)
Notes to the financial statements
continued
5. Employees and Directors
Staff costs for the Group during the year were:
Wages and salaries
Social security costs
Other pension costs (note 27)
Cash settled share based costs (note 23)
Equity settled share based costs (note 23)
Less costs capitalised
The monthly average number of people employed during the year was:
Head office staff (including Directors)
Estates and property management staff
2016
£m
12.8
1.4
0.8
0.9
1.9
17.8
(1.6)
16.2
2015
£m
11.2
1.3
0.7
1.3
2.0
16.5
(1.2)
15.3
2016
Number
92
119
211
2015
Number
85
114
199
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 98 to 119. These form part of the financial statements.
6. Taxation
Current tax:
UK corporation tax
Adjustments to tax in respect of previous periods
Deferred tax:
On origination and reversal of temporary differences
Total taxation charge
2016
£m
1.3
–
1.3
1.1
1.1
2.4
2015
£m
–
0.1
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 20%
(2015: 21%). 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 20% (2015: 21%)
Effects of:
REIT exempt income
Changes in fair value not subject to tax as a REIT
Change in fair value of derivatives not subject to tax
Share-based payment adjustments
Other income
Adjustments to tax in respect of previous periods
Losses carried forward previously unrecognised
Losses brought forward
Total taxation charge
2016
£m
391.3
(4.2)
387.1
77.4
(10.3)
(59.3)
(0.5)
(3.0)
0.2
–
0.3
(2.4)
2.4
2015
£m
360.0
(8.4)
351.6
73.8
(5.8)
(66.3)
–
(0.7)
0.2
0.1
(1.2)
–
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. A substantial amount of other income
has been recorded this year (note 3(c)). £30.7m (2015: £6.7m) of this income is subject to tax and so the Group has a
higher tax charge than in previous years. The Group estimates that as the majority of its future profits will be exempt
from tax, it will have a very low tax charge.
142 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Changes to the UK corporation tax rates were substantively enacted as part of Finance Bill 2015 on 26 October 2015.
These include reductions to the main rate to reduce the rate to 19% from 1 April 2017 and to 18% from 1 April 2020.
Deferred taxes at the balance sheet date have been measured using these enacted tax rates and reflected in these
financial statements.
The Group currently has unrecognised tax losses carried forward of £1.4m (2015: £3.6m) calculated at a corporation tax
rate of 19% (2015: 20%).
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 liabilities (net)
2016
£m
3.1
(4.2)
(1.1)
2015
£m
2.3
(2.3)
–
The movement in deferred tax assets 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
Charged to income statement
At 31 March 2016
Deferred tax assets
At 1 April 2014
Credited to income statement
At 31 March 2015
(Credited)/charged to income statement
At 31 March 2016
7. Dividends
Ordinary dividends paid
For the year ended 31 March 2014:
Final dividend
For the year ended 31 March 2015:
Interim dividend
Final dividend
For the year ended 31 March 2016:
Interim dividend
Dividends for the year
Timing difference on payment of withholding tax
Dividends cash paid
Other income
(overage receipts)
£m
–
2.3
2.3
1.9
4.2
Expenses
(share-based
payment)
£m
–
–
–
(1.1)
(1.1)
Tax losses
£m
–
(2.3)
(2.3)
0.3
(2.0)
Total
£m
–
2.3
2.3
1.9
4.2
Total
£m
–
(2.3)
(2.3)
(0.8)
(3.1)
Payment
date
Per
share
2016
£m
2015
£m
August 2014
7.09p
–
10.3
February 2015
August 2015
3.89p
8.15p
–
13.2
6.3
–
February 2016
4.86p
7.9
21.1
(0.2)
20.9
–
16.6
(0.1)
16.5
In addition the Directors are proposing a final dividend in respect of the financial year ended 31 March 2016 of 10.19 pence
per ordinary share which will absorb an estimated £16.5m of revenue reserves and cash. If approved by the shareholders
at the AGM, it will be paid on 5 August 2016 to shareholders who are on the register of members on 8 July 2016. The
dividend will be paid as a REIT Property Income Distribution (‘PID’) net of withholding tax where appropriate.
143 "Workspace Group PLC Annual Report and Accounts 2016
Notes to the financial statements
continued
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 properties
Adjustments for non-controlling interests share of change in fair value of investment property
Profit on disposal of investment properties
Loss on disposal of joint ventures
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 (note 3(c))
Non-controlling interest (less adjustment above)
Taxation
Adjusted underlying earnings
2016
£m
388.9
(296.6)
–
(8.1)
0.1
(0.9)
(5.6)
77.8
2.7
(39.0)
–
2.4
43.9
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
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. Adjusted underlying earnings
represents trading profits after interest, including trading profits of joint ventures. Taxation in the Consolidated income
statement for both years is in respect of 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
2016
Number
161,843,774
2,018,833
163,862,607
2016
240.3p
237.3p
47.5p
26.8p
1. EPRA earnings per share and adjusted underlying earnings per share are calculated on a diluted basis.
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
2016
£m
1,517.6
(3.9)
1,513.7
2016
Number
162,404,600
(122,362)
162,282,238
1,673,407
163,955,645
2015
Number
151,635,965
2,649,360
154,285,325
2015
231.4p
227.4p
18.9p
17.2p
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
EPRA net assets per share
2016
£9.23
2015
£7.03
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’).
144 "Workspace Group PLC Annual Report and Accounts 2016
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 assets held for sale
Less: classified as trade and other receivables
Total investment properties
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
2016
£m
1,408.9
107.4
–
54.3
0.9
(114.7)
296.6
1,753.4
–
(4.0)
1,749.4
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
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 4.8% (2015: 5.2%). The total amount of capitalised interest
included in investment properties is £6.7m (2015: £5.8m).
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 58.
Investment properties include buildings under finance leases of which the carrying amount is £7.1m (2015: £7.1m).
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 2016 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.
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.
145 "Workspace Group PLC Annual Report and Accounts 2016
Notes to the financial statements
continued
10. Investment properties continued
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 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
2016
£m
1,778.6
(36.3)
–
7.1
1,749.4
2015
£m
1,423.4
(21.3)
(0.3)
7.1
1,408.9
The Group’s Investment properties are carried at fair value and under IFRS 13 are required to be analysed by level
depending on the valuation method adopted. The different valuation methods are as follows:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date.
Level 2 – Use of a model with inputs (other than quoted prices included in Level 1) that are directly or indirectly
observable market data.
Level 3 – Use of a model with inputs that are not based on observable market data.
As noted in the Significant judgements, key assumptions and estimates section, property valuations are complex and
involve data which is not publicly available and involves a degree of judgement. All 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.
ERVs – per sq. ft.
Equivalent yields
Range
£7–£83
£28–£65
£20–£63
£15–£35
£16–£56
Weighted
average
£26
£49
£44
£26
£38
Range
4.5%–8.2%
5.2%–6.4%
5.3%–7.0%
5.0%–7.0%
2.5%–7.0%
Weighted
average
6.4%
6.1%
5.6%
6.4%
5.2%
Key unobservable inputs:
Property category
Like-for-like
Completed projects
Refurbishments
Redevelopments
Other
Head leases
Total
1 = Income capitalisation method.
2 = Residual value method.
Valuation
£m
864
316
192
176
194
7
1,749
Valuation
technique
1
1
2
2
1
n/a
146 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Sensitivity analysis:
A +/- 10% movement in ERVs or a +/- 25 basis points movement in yields would result in the following increase/decrease
in the valuation.
£m
Like-for-like
Completed projects (refurbishments)
Refurbishments
Redevelopments
Other
11. Property, plant and equipment
Cost or valuation
Balance at 31 March 2014
Additions during the year
Balance at 31 March 2015
Additions during the year
Disposals during the year
Balance at 31 March 2016
Accumulated depreciation
Balance at 31 March 2014
Charge for the year
Balance at 31 March 2015
Charge for the year
Disposals during the year
Balance at 31 March 2016
Net book amount at 31 March 2016
Net book amount at 31 March 2015
12(a). Investment in joint ventures
The Group’s investment in joint ventures represents:
Balance at 1 April
Capital distributions received*
(Repayment)/payment of loans to joint ventures
Share of gains
Income distributions received*
Disposal of joint ventures (note 3(a))
Realisation of profits on sale of properties out of joint ventures (note 3(a))
Balance at 31 March
+/- 10% in ERVs
+86/-86
+32/-32
+24/-24
+12/-12
+19/-19
+/- 25 bps in yields
-32/+35
-12/+14
-11/+15
-5/+5
-9/+10
Equipment
and fixtures
£m
7.2
0.7
7.9
0.8
(3.6)
5.1
5.2
0.7
5.9
0.8
(3.6)
3.1
2.0
2.0
2016
£m
28.6
(6.3)
(0.2)
4.2
(1.2)
(3.2)
0.4
22.3
Total
£m
7.2
0.7
7.9
0.8
(3.6)
5.1
5.2
0.7
5.9
0.8
(3.6)
3.1
2.0
2.0
2015
£m
23.1
(2.0)
0.2
8.4
(1.1)
–
–
28.6
* Capital distributions are from proceeds on disposal of investment properties. Income distributions are from trading profits.
The Group had the following joint ventures during the year:
BlackRock Workspace Property Trust
Enterprise House Investments LLP*
Generate Studio Limited
Partner
BlackRock UK Property Fund
Polar Properties Limited
Whitebox Creative Limited
Established
February 2011
April 2012
February 2014
Ownership
20.1%
50%
50%
Measurement
method
Equity
Equity
Equity
* The Company sold its share in this joint venture in July 2015.
147 "Workspace Group PLC Annual Report and Accounts 2016
Notes to the financial statements
continued
12(a). Investment in joint ventures continued
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 was established to obtain mixed-use planning consent and redevelop Enterprise
House, Hayes for new residential and commercial space. The Group sold its share in this joint venture in July 2015.
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
The net assets of BlackRock Workspace Property Trust included above are £110.5m (2015: £127.9m).
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
2016
£m
130.6
6.3
1.8
(27.8)
110.9
2016
£m
9.5
(2.9)
6.6
(1.8)
(13.9)
0.8
27.5
19.2
(0.1)
19.1
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
The profit after tax of BlackRock Workspace Property Trust included above is £18.9m (2015: £34.4m).
There are no differences in accounting policies between the Group and the joint ventures.
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
Disposal of joint ventures
Closing net assets 31 March
Group’s interest
Unrealised surplus on sale of properties to joint ventures
Carrying amount
148 "Workspace Group PLC Annual Report and Accounts 2016
2016
£m
134.7
19.1
(31.5)
(4.7)
(0.4)
(6.3)
110.9
22.4
(0.1)
22.3
2015
£m
111.6
37.0
(10.0)
(4.3)
0.4
–
134.7
29.1
(0.5)
28.6
12(b). Other investments
The Group holds the following investments:
9% of share capital of Mailstorage Ltd
10% of share capital of The Excell Group plc
13. Trade and other receivables
Non-current trade and other receivables
Prepayments and accrued income
Deferred consideration on sale of investment properties (see below)
Deferred consideration on sale of investment properties:
Balance at 1 April
Additions (cash receivable)
Less: classified as current
Change in fair value (note 3(c))
Balance at 31 March
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
2016
£m
1.2
3.0
4.2
2016
£m
7.2
7.0
14.2
2016
£m
8.7
1.6
(12.8)
9.5
7.0
2015
£m
1.0
–
1.0
2015
£m
–
8.7
8.7
2015
£m
11.2
1.5
(14.1)
10.1
8.7
The deferred consideration arising on the sale of investment properties relates to cash and overage. The conditional value
of the portion of the receivable that relates to overage is held at fair value through profit and loss – £4.0m (2015: £7.2m).
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 gain of £9.5m (31 March 2015: £10.1m) (note 3(c)).
Current trade and other receivables
Trade receivables
Less provision for impairment of receivables
Trade receivables – net
Prepayments and accrued income
Deferred consideration on sale of investment properties
2016
£m
3.4
(0.4)
3.0
19.7
29.3
52.0
2015
£m
2.8
(0.4)
2.4
2.4
14.1
18.9
Accrued income (non-current and current) includes £24.1m (2015: £nil) in respect of a performance fee for the BlackRock
Workspace Property Trust joint venture (note 3(c)).
Receivables at fair value:
Included within deferred consideration on sale of investment properties is £29.3m (2015: £13.1m) 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.
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
149 "Workspace Group PLC Annual Report and Accounts 2016
2016
£m
0.4
0.2
(0.2)
0.4
2015
£m
0.3
0.3
(0.2)
0.4
Notes to the financial statements
continued
13. Trade and other receivables continued
As at 31 March 2016, 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 2016
£m
2.6
0.3
0.5
3.4
Impaired
2016
£m
(0.1)
(0.1)
(0.2)
(0.4)
Not
impaired
2016
£m
2.5
0.2
0.3
3.0
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
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
2016
£m
24.5
3.3
27.8
2015
£m
40.3
2.3
42.6
Tenants’ deposit deeds represent returnable cash security deposits received from tenants and are ring-fenced under the
terms of the individual lease contracts.
15. Trade and other payables
Trade payables
Other tax and social security payable
Corporation tax payable
Tenants’ deposit deeds (note 14)
Tenants’ deposits
Accrued expenses
Amounts due to related parties (note 24)
Deferred income – rent and service charges
2016
£m
3.7
0.5
1.3
3.3
16.0
20.3
0.4
2.9
48.4
2015
£m
3.9
3.9
–
2.3
13.3
18.8
0.4
2.8
45.4
There is no material difference between the above amounts and their fair values due to the short-term nature of the payables.
16. Borrowings
(a) Balances
Non-current
Bank loans (unsecured)
6% Retail Bond (unsecured)
5.6% Senior US Dollar Notes 2023 (unsecured)
5.53% Senior Notes 2023 (unsecured)
Senior Floating Rate Notes 2020 (unsecured)
Other term loan (unsecured)
Finance lease obligations
150 "Workspace Group PLC Annual Report and Accounts 2016
2016
£m
38.3
56.9
69.7
83.8
9.0
44.5
7.1
309.3
2015
£m
48.8
56.8
67.6
83.7
9.0
44.4
7.1
317.4
(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
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
2016
£m
309.3
(7.1)
3.2
(5.4)
300.0
(24.5)
275.5
2015
£m
317.4
(7.1)
3.0
(3.3)
310.0
(40.3)
269.7
At 31 March 2016 the Group had £110m (2015: £100m) of undrawn bank facilities and £24.5m of unrestricted cash
(2015: £40.3m). £10m 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
Finance leases
Repayable in five years or more
(d) Interest rate and repayment profile
2016
£m
57.5
49.0
193.5
300.0
(3.2)
5.4
302.2
2015
£m
50.0
57.5
202.5
310.0
(3.0)
3.3
310.3
7.1
309.3
7.1
317.4
Current
Bank overdraft due within one year or on demand
–
Base +2.25%
Variable
On demand
Principal at
period end
£m
Interest
rate
Interest
payable
Repayable
Non-current
Private Placement Notes:
5.6% Senior US Dollar Notes
5.53% Senior Notes
Senior Floating Rate Notes
Other term loan
Revolver loan
6% Retail Bond
64.5
84.0
9.0
5.6%
5.53%
LIBOR +3.5%
{ 22.5
22.5
40.0
57.5
300.0
LIBOR +3.5%
LIBOR +3.5%
LIBOR +1.65%
6.0%
Half Yearly
Half Yearly
Half Yearly
Quarterly
Quarterly
Monthly
Half Yearly
June 2023
June 2023
June 2020
May 2022
May 2023
June 2020
October 2019
In June 2015 the existing £50m term loan and £100m revolver facilities were replaced by a new £150m revolver facility
with maturity extended from June 2018 to June 2020 and with reduced rates. The revised terms also provided for the
potential extension of the revolver facility for a further two one-year terms to June 2022 and a potential increase in the
quantum of the facility from £150m to £250m.
151 "Workspace Group PLC Annual Report and Accounts 2016
Notes to the financial statements
continued
16. Borrowings continued
(e) Derivative financial instruments
The following derivative financial instruments are held:
Cash flow hedge – cross currency swap
Amount
$100m/£64.5m
Rate payable
(%)
5.66%
Term/expiry
June 2023
The £95m (1.87%) interest rate swap to June 2018 was broken in June 2015 with a cash payment of £1.7m. This was valued
as a £2.6m liability at 31 March 2015.
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 other comprehensive income.
(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 other comprehensive income
Derivative financial instruments:
Cash flow hedge – derivatives used for hedging
Financial assets at fair value through profit or loss
Deferred consideration
2016
Book value
£m
2016
Fair value
£m
2015
Book value
£m
2015
Fair value
£m
38.3
56.9
162.5
44.5
7.1
309.3
38.3
59.7
162.5
44.5
7.1
312.1
48.8
56.8
160.3
44.4
7.1
317.4
48.8
62.1
160.3
44.4
7.1
322.7
–
–
2.6
2.6
(3.9)
(3.9)
(3.9)
(3.9)
(0.3)
2.3
(0.3)
2.3
33.3
33.3
20.3
20.3
The fair value of the Retail Bond has been established from the quoted market price at 31 March 2016 and is thus a Level 1
valuation as defined by IFRS 13.
In accordance with IFRS 13 disclosure is required for financial instruments that are carried in the financial statements at
fair value. The fair values of all the Group’s financial derivatives have been determined by reference to market prices and
discounted expected cash flows at prevailing interest rates and are Level 2 valuations. There have been no transfers
between levels in the year.
The different levels of valuation hierarchy as defined by IFRS 13 are set out in note 10.
The total change in fair value of derivative financial instruments recorded in the income statement was a £0.9m profit
(2015: loss of £2.2m). This is net of £1.7m (2015: £nil) cash paid to break the interest rate swap.
The total change in fair value of derivative financial instruments recorded in other comprehensive income was a £1.4m
profit (2015: loss of £0.3m).
152 "Workspace Group PLC Annual Report and Accounts 2016
(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) Other financial liabilities at amortised cost
Borrowings (excluding finance leases)
Finance lease liabilities
Trade and other payables excluding non-financial liabilities2
Total
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
2016
£m
3.9
2015
£m
0.3
33.3
20.3
27.8
6.0
33.8
71.0
2016
£m
–
302.2
7.1
43.7
353.0
353.0
42.6
4.9
47.5
68.1
2015
£m
2.6
310.3
7.1
38.7
356.1
358.7
Trade and other receivables exclude prepayments of £26.9m (2015: £2.4m) and non cash deferred consideration of £33.3m (2015: £20.3m).
1.
2. Trade and other payables exclude other tax and social security of £0.5m (2015: £3.9m), corporation tax of £1.3m (2015: £nil) and
deferred income of £2.9m (2015: £2.8m).
(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
2016
£m
0.5
1.8
48.7
51.0
(43.9)
7.1
2015
£m
0.5
1.8
49.3
51.6
(44.5)
7.1
153 "Workspace Group PLC Annual Report and Accounts 2016
Notes to the financial statements
continued
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 2016 69% (2015: 97%) 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 £0.5m (2015: £0.1m).
(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 70 properties.
The largest 10 single tenants generate less than 6% (2015: 7%) 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 £19.3m (2015: £15.6m).
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 (cash and overage) on the sale of investment properties is contractual and valued regularly by the
external valuer based on current and future market factors. Cash and cash equivalents and financial derivatives are held
with major UK high street banks 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)
154 "Workspace Group PLC Annual Report and Accounts 2016
2016
£m
27.8
3.0
29.3
7.0
67.1
2015
£m
42.6
2.4
14.1
8.7
67.8
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
(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 £150m (2015: £100m). At 31 March 2016 headroom excluding overdraft and cash was £110m (31 March 2015: £100m).
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 2016
Financial liabilities
Bank loans
6% Retail Bond
Private Placement Notes
Other term loan
Finance lease liabilities
Trade and other payables†
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†
Carrying
amount
£m
40.0
57.5
157.5
45.0
7.1
43.7
350.8
Carrying
amount
£m
50.0
57.5
157.5
45.0
2.6
7.1
38.7
358.4
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
0.9
3.5
8.7
1.8
0.5
43.7
59.1
0.9
3.5
8.7
1.8
0.5
–
15.4
0.9
3.5
8.7
1.8
0.5
–
15.4
41.0
59.3
192.1
51.5
49.5
–
393.4
43.7
69.8
218.2
56.9
51.0
43.7
483.3
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
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
† Trade and other payables exclude other tax and social security of £0.5m (2015: £3.9m), corporation tax of £1.3m (2015: £nil) and
deferred income of £2.9m (2015: £2.8m).
155 "Workspace Group PLC Annual Report and Accounts 2016
Notes to the financial statements
continued
17. Financial risk management objectives and policy continued
(d) Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern,
and monitor an appropriate mix of debt and equity financing.
Equity comprises issued share capital, reserves and retained earnings as disclosed in the Consolidated statement of
changes in equity. Debt comprises 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 2016 Group equity was £1,517.6m (2015: £1,146.3m), and Group net debt (debt less cash at bank and in hand)
was £275.5m (2015: £269.7m). Group gearing at 31 March 2016 was 19% (2015: 24%).
The Group’s borrowings are 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
Loss on disposal of joint ventures
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
2016
£m
391.3
0.8
0.3
(8.1)
0.1
(33.6)
(296.6)
1.9
(0.9)
(0.1)
17.0
(4.2)
(0.5)
0.2
67.6
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
2016
£m
24.5
3.3
27.8
2015
£m
40.3
2.3
42.6
19. 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 were no time limits.
156 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
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.
On settlement the Group derecognised non-controlling interests of £20m and recorded a decrease in equity attributable to
owners of the parent of £10m.
Profit and comprehensive income attributable to NCI was £nil (2015: £9.0m).
20. 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
2016
Number
162,404,600
2015
Number
161,107,649
2016
£m
162.4
2016
Number
161,107,649
1,296,951
162,404,600
2015
£m
161.1
2015
Number
145,616,695
15,490,954
161,107,649
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 issued 1,296,951 (2015: 863,462 shares) shares during the year to satisfy the exercise of share options.
Balance at 1 April
Issue of shares
Balance at 31 March
21. Other reserves
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 based payments
Change in fair value of derivative financial instruments (cash flow hedge)
Balance at 31 March 2016
Share Capital
2016
£m
161.1
1.3
162.4
2015
£m
145.6
15.5
161.1
Share Premium
2016
£m
136.8
(0.9)
135.9
2015
£m
58.2
78.6
136.8
Equity
settled
share based
payments
£m
8.2
2.0
–
10.2
1.9
–
12.1
Merger
reserve
£m
8.7
–
–
8.7
–
–
8.7
Hedging
reserve
£m
(2.9)
–
(0.3)
(3.2)
–
1.4
(1.8)
Total
£m
14.0
2.0
(0.3)
15.7
1.9
1.4
19.0
157 "Workspace Group PLC Annual Report and Accounts 2016
Notes to the financial statements
continued
22. Investment in own shares
The Company has an Employee Share Ownership Trust (‘ESOT’) and a trust for the Share Incentive Plan (‘SIP’). Shares are
purchased in the market for distribution at a later date in accordance with the terms of the various share schemes. The
shares are held by independent trustees. No shares were purchased for the ESOT during the year and no shares were
transferred to employees on the exercise of share options. At 31 March 2016 the number of shares held by the ESOT
totalled 75,226 (2015: 75,226).
The SIP is governed by HMRC rules (note 23(iii)). 20,651 shares were purchased for the Plan in September 2015 at a cost
of £0.2m and 8,584 surplus shares were sold for £0.1m. At 31 March 2016 the number of shares held for the SIP totalled
47,136 (2015: 39,128).
Balance at 1 April
Shares purchased for the Trusts
Shares issued/sold from the Trusts
Balance at 31 March
23. Share-based payments
The Group operates a number of share schemes:
2016
£m
8.8
0.2
(0.1)
8.9
2015
£m
8.9
–
(0.1)
8.8
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 2015 LTIP scheme 402,421 performance and matching shares were awarded in June 2015 to Directors and
Senior Management (2014 LTIP scheme: 597,967).
Details of the movements for the LTIP scheme during the year were as follows:
At 31 March 2014
Granted
Exercised
Lapsed
At 31 March 2015
Granted
Exercised
Lapsed
At 31 March 2016
LTIP
Number
2,655,889
597,967
(762,587)
(1,656)
2,489,613
402,421
(1,141,871)
(27,348)
1,722,815
The average closing share price at the date of exercise of shares exercised during the year was £8.85 (2015: £6.00).
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.
158 "Workspace Group PLC Annual Report and Accounts 2016
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
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
2016
914p
Nil
3
1%
2%
25%
305p
306p
2015
570p
Nil
3
1%
2%
29%
221p
211p
The relative NAV is a non-market based condition and the intrinsic value is therefore the share price at date of grant
of 914 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.
II) Employee share option schemes
The Group operates a Save As You Earn (‘SAYE’) share option scheme and an Executive Share Option Scheme (‘ESOS’)
for which there have been no grants since 2008. Grants under ESOS were normally exercisable between three and ten
years from the date of grant and normally granted at the market price ruling at the date of grant.
Grants under the SAYE scheme are normally exercisable after three or five years saving. In accordance with UK practice, the
majority of options under the SAYE schemes are granted at a price 20% below the market price ruling at the date of grant.
Details of the movements for the ESOS and SAYE schemes during the year were as follows:
Options outstanding
At 31 March 2014
Options granted
Options exercised
Options lapsed
At 31 March 2015
Options granted
Options exercised
Options lapsed
At 31 March 2016
ESOS
SAYE
Number
32,565
–
–
(14,624)
17,941
–
–
(17,941)
–
Weighted
exercise
price
£16.12
–
–
£13.16
£18.53
–
–
£18.53
–
Number
340,587
126,060
(100,879)
(11,262)
354,506
86,251
(155,081)
(17,983)
267,693
Weighted
exercise
price
£2.06
£4.59
£1.39
£3.89
£3.09
£7.27
£1.93
£5.33
£4.95
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 average closing share price at the date of exercise for the SAYE options exercised during the year was £8.73
(2015: £7.30).
86,251 SAYE share options were granted in the year (2015: 126,060 shares).
159 "Workspace Group PLC Annual Report and Accounts 2016
Notes to the financial statements
continued
23. Share-based payments continued
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
2016
SAYE
3 year
908p
727p
25%
3
1%
2%
25%
2016
SAYE
5 year
908p
727p
25%
5
1%
2%
25%
2015
SAYE
3 year
550p
459p
28%
3
1%
2%
25%
2015
SAYE
5 year
550p
459p
28%
5
1%
2%
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
2016
2015
Grant date
24 July 2015
24 July 2015
Fair value of award
222p
259p
Grant date
25 July 2014
25 July 2014
Fair value of award
135p
151p
III) Share incentive plan (‘SIP’)
All staff were granted £1,000 worth of shares in both March 2013 and September 2015. 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. 20,651 shares were granted in the year (2015: nil shares). 12,643
(2015: 1,168) shares were exercised in the year and 3,426 (2015: 2,044) shares lapsed.
IV) Year end summary
At 31 March 2016 in total there were 2,034,218 (2015: 2,901,188) share awards/options exercisable on the Company’s
ordinary share capital. These are analysed below:
Date of grant
LTIP
26 June 2013
26 June 2014
26 June 2015
SAYE
30 July 2012
31 July 2013
31 July 2013
25 July 2014
25 July 2014
25 July 2015
25 July 2015
SIP
22 March 2013
18 September 2015
Exercise
price
–
–
–
£1.93
£3.47
£3.47
£4.59
£4.59
£7.27
£7.27
–
–
Ordinary
shares
Number
740,197
585,236
397,382
18,652
48,584
8,644
106,228
6,927
77,174
1,484
24,236
19,474
Vested
and
exercisable
–
–
–
Exercisable between
26.06.2016
26.06.2017
26.06.2018
Exercisable between
–
–
–
–
–
–
–
01.09.2017
01.09.2016
01.09.2018
01.09.2017
01.09.2019
01.09.2018
01.09.2020
Exercisable between
24,236
–
22.03.2016
18.09.2018
–
–
–
01.03.2018
01.03.2017
01.03.2019
01.03.2018
01.03.2020
01.03.2019
01.03.2021
22.03.2018
18.09.2020
Total
2,034,218
24,236
The share awards/options outstanding at 31 March 2016 had a weighted average remaining contractual life of: LTIP –
1.1 years (2015: 1.1 years), SAYE – 1.6 years (2015: 1.4 years), SIP – 1.1 years (2015: 1 year).
160 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
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
2016
£m
1.9
0.9
2.8
The total liability at the end of the year in respect of cash-settled share based schemes was £1.1m (2015: £1.6m).
24. Related party transactions
Transactions for the year ended 31 March:
Capital distributions received from joint ventures (note 12(a))
Repayment/payment of loans to joint ventures (note 12(a))
Fee income and recharges to joint ventures (including performance fees)
Fee income and recharges from joint ventures
Income distributions received from joint ventures (note 12(a))
Fees paid to CBRE Limited
2016
£m
6.3
0.2
25.1
(1.2)
1.2
(0.2)
2015
£m
2.0
1.3
3.3
2015
£m
2.0
(0.2)
0.9
(0.7)
1.1
(0.2)
Balances with joint ventures at 31 March:
Amounts payable to joint ventures (note 15)
(0.4)
(0.4)
Fee income and recharges to joint ventures includes a performance fee of £24.1m (2015: £nil). Refer to note 3(c) for details.
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
2016
£m
3.0
0.2
1.2
4.4
2015
£m
2.9
0.2
1.1
4.2
25. Capital commitments
At the year end the estimated amounts of contractual commitments for future capital expenditure not provided for were:
Construction or redevelopment of investment property
2016
£m
18.8
2015
£m
42.3
161 "Workspace Group PLC Annual Report and Accounts 2016
Notes to the financial statements
continued
26. Subsidiary and other related undertakings
The Company’s subsidiary and other related undertakings at 31 March 2016, and up to the date of signing the financial
statements, are listed below.
Except where indicated otherwise, the Company owns 100% of the ordinary share capital of the following subsidiary
undertakings incorporated and operating in the UK, all of which are consolidated in the Group’s financial statements:
Name
Workspace 12 Limited*
Workspace 13 Limited
Workspace 14 Limited
Workspace 16 (Jersey) Limited†
Workspace Glebe Limited
Glebe Three Limited*
LI Property Services Limited
Workspace Management Limited
Workspace 1 Limited*
Workspace 2 Limited*
Workspace 3 Limited*
Workspace 4 Limited*
Workspace 5 Limited*
Workspace 6 Limited
Workspace 7 Limited*
Workspace 8 Limited*
Workspace 9 Limited*
Workspace 10 Limited
Workspace 11 Limited
Workspace 15 Limited
Workspace Holdings Limited
Anyspacedirect.co.uk Limited
Enerjet Limited
Redhill Workspace Limited
London Industrial (Kingsland Viaduct) Limited
Vylan Limited
Workspace Newco 1 Limitedˆ
Workspace Newco 2 Limitedˆ
Nature of business
Property Investment
Property Investment
Property Investment
Investor in joint venture
Holding Company
Property Investment
Insurance Agents
Property Management
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Holding Company
Holding Company
100% of the ordinary share capital of these subsidiaries is held by other Group companies.
*
† Company registered in Jersey.
ˆ
Incorporated after 31 March 2016.
The Company’s other related undertakings are as follows:
Name
BlackRock Workspace Property Trust*
Generate Studio Limited
Country of
incorporation or
operation
Jersey
UK
Class of shares held
n/a
Ordinary
Ownership
20.1%
50%
* This undertaking is held by another Group company. The address of its principal place of business is Liberté House, 19-23 La Motte
Street, St Helier, Jersey JE2 4SY.
See Note 12(a) for further details of these other related undertakings.
162 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
27. 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 £0.8m (2015:
£0.7m) representing contributions payable by the Group to the fund and is charged through operating profit.
The Group’s commitment with regard to pension contributions, consistent with the prior year, 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 186 (2015: 181).
28. 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
2016
£m
0.1
0.1
0.2
2016
£m
34.7
5.0
1.5
41.2
2015
£m
0.1
–
0.1
2015
£m
29.4
5.8
0.5
35.7
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.
29. Post balance sheet events
In June 2016 the Group exercised the option for the first extension of the maturity term of the £150m revolver facility for
a year to June 2021.
163 "Workspace Group PLC Annual Report and Accounts 2016
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
Company’s affairs as at 31 March 2016;
– 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
The financial statements, included within the Annual
Report and Accounts (the ‘Annual Report’), comprise:
– the Parent Company balance sheet as at 31 March 2016;
– the Parent Company 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, 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 United
Kingdom Accounting Standards, comprising FRS 101
‘Reduced Disclosure Framework’, and applicable law
(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.
Adequacy of accounting records and information and
explanations received
Under the Companies Act 2006 we are required to report
to you if, in our opinion:
– we have not received all the information and
explanations we require for our audit; or
– adequate accounting records have not been kept by the
Parent Company, or returns adequate for our audit have
not been received from branches not visited by us; or
– the financial statements and the part of the Directors’
Remuneration Report to be audited are not in
agreement with the accounting records and returns.
We have no exceptions to report arising from this
responsibility.
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.
164 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
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 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 2016.
Sonia Copeland
(Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
7 June 2016
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 124, 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.
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.
165 "Workspace Group PLC Annual Report and Accounts 2016
Parent Company balance sheet
As at 31 March 2016
Fixed assets
Investments
Derivative financial instruments
Current assets
Debtors: amounts falling due after more than one year
Debtors: amounts falling due within one year
Cash and cash equivalents
Total assets
Current liabilities
Creditors: amounts falling due within one year
Current tax liabilities
Creditors: amounts falling due after more than one year
Borrowings
Derivative financial investments
Total liabilities
Net assets
Capital and reserves
Share capital
Share premium
Investment in own shares
Other reserves
Retained earnings
Total shareholders’ equity
Notes
2016
£m
2015
£m
C
F
D
D
E
F
F
G
G
G
G
612.6
3.9
616.5
7.2
413.6
0.2
421.0
1,037.5
(115.9)
(0.1)
(116.0)
(302.2)
–
(302.2)
(418.2)
638.3
0.3
638.6
–
394.2
0.6
394.8
1,033.4
(119.7)
–
(119.7)
(310.3)
(2.6)
(312.9)
(432.6)
619.3
600.8
162.4
135.9
(8.9)
19.0
310.9
619.3
161.1
136.8
(8.8)
15.7
296.0
600.8
The notes on pages 168 to 170 form part of these financial statements.
The financial statements on pages 166 to 170 were approved by the Board of Directors on 7 June 2016 and signed on its
behalf by:
J Hopkins
G Clemett
Directors
Workspace Group PLC
Registered number 2041612
166 "Workspace Group PLC Annual Report and Accounts 2016
Parent Company statement of
changes in equity
For the year ended 31 March 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
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
Share based payments
Balance at 31 March 2015
Profit for the year
Change in fair value of derivatives
Total comprehensive income
Transactions with owners:
Share issues
Own shares purchase (net)
Dividends paid
Share based payments
Balance at 31 March 2016
Share
capital
£m
145.6
–
–
–
15.5
–
–
161.1
–
–
–
1.3
–
–
–
162.4
Share
premium
£m
58.2
–
–
–
Investment
in own
shares
£m
(8.9)
–
–
–
Other
reserves
£m
14.0
–
(0.3)
(0.3)
Retained
earnings
£m
128.1
184.5
–
184.5
78.6
–
–
136.8
–
–
–
(0.9)
–
–
–
135.9
0.1
–
–
(8.8)
–
–
–
–
(0.1)
–
–
(8.9)
–
–
2.0
15.7
–
1.4
1.4
–
–
–
1.9
19.0
–
(16.6)
–
296.0
36.1
–
36.1
(0.1)
–
(21.1)
–
310.9
Total
share-
holders’
equity
£m
337.0
184.5
(0.3)
184.2
94.2
(16.6)
2.0
600.8
36.1
1.4
37.5
0.3
(0.1)
(21.1)
1.9
619.3
The notes on pages 168 to 170 form part of these financial statements.
167 "Workspace Group PLC Annual Report and Accounts 2016
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 Financial Reporting Standard 101 (‘FRS 101’)
‘Reduced Disclosure Framework’.
Significant Accounting Policies
i. Investments
Investments are carried in the Company’s balance sheet at
cost less impairment. Impairment reviews are performed
by the Directors when there has been an indication of
potential impairment.
Adoption of FRS 101 this year has meant that the prior year
financial statements prepared under old UK GAAP have
had to be restated. The date of transition to FRS 101 is
deemed to be 1 April 2014.
There has been no change in the results or financial
position of the Company for the year ended 31 March 2015
as a result of the adoption of FRS 101 and hence no
reconciliation of equity has been prepared.
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. The financial statements
are presented in Sterling.
In preparing the financial statements the Company has
taken advantage of the following disclosure exemptions
conferred by FRS 101:
a) The requirements of IAS 7 to provide a Statement of
cash flows for the year;
b) The requirements of IAS 1 to provide a statement of
compliance with IFRS;
c) The requirements of IAS 1 to disclose information on the
management of capital;
d) The requirements of paragraphs 30 and 31 of IAS 8
Accounting Policies, Changes in Accounting Estimates
and Errors to disclose new IFRS’s that have been issued
but are not yet effective;
e) The requirements in IAS 24 Related Party Disclosures to
disclose related party transactions entered into between
two or more members of a group, provided that any
subsidiary which is a party to the transaction is wholly
owned by such a member;
f) The requirements of IFRS 7 on financial instruments
disclosures; and
g) The requirements of paragraphs 91-99 of IFRS 13 Fair
Value Measurement to disclose information of fair value
valuation techniques and inputs.
The above disclosure exemptions are allowed because
equivalent disclosures are included in the Group
Consolidated financial statements.
Impairment and reversal of impairment is taken to the
profit and loss account.
ii. Share based payment and investment in own shares
Incentives are provided to employees under share option
schemes. The Company has established an Employee
Share Ownership Trust (‘ESOT’) to satisfy part of its
obligation to provide shares when Group employees
exercise their options. The Company provides funding
to the ESOT to purchase these shares.
The Company has also established an employee Share
Incentive Plan (‘SIP’) which is governed by HMRC rules.
The Company itself has no employees. When the Company
grants share options to Group employees as part of their
remuneration, the expense of the share options is reflected in
a subsidiary undertaking, Workspace Management Limited.
The Company recognises this as an investment in subsidiary
undertakings with a corresponding increase to equity.
The disclosure requirements for share-based payments are
met in note 23 of the Group Consolidated financial
statements.
iii. Borrowings
Details of borrowings are described in note F to the Parent
Company financial statements. Costs associated with the
raising of finance are capitalised, amortised over the life of
the instrument and charged as part of interest costs.
iv. Derivative financial instruments and hedge accounting
The accounting policy for derivative financial instruments
and hedge accounting are the same as those for the Group
and are set out on pages 137 and 138. Disclosure
requirements are provided in note 16 to the Consolidated
financial statements.
v. Foreign currency translation
The accounting policy for foreign currency translation is
the same as that for the Group and is set out on page 137.
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 £36.1m (2015: £184.5m). £14.4m
dividends were received in the year from subsidiary
undertakings (2015: £185m).
Auditors’ remuneration of £10,000 (2015: £10,000) has
been borne by a subsidiary undertaking.
Dividend payments are disclosed in note 7 to the
Consolidated financial statements.
168 "Workspace Group PLC Annual Report and Accounts 2016
C. Investments
Cost
Balance at 31 March 2015
Additions in the year
Disposals In the year
Balance at 31 March 2016
Impairment
Balance at 31 March 2015
Impairment charge in the year
Balance at 31 March 2016
Net book value at 31 March 2016
Net book value at 31 March 2015
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Investment
in subsidiary
undertakings
£m
Investment
in joint
ventures
£m
Other
investments
£m
659.0
77.1
–
736.1
23.5
101.2
124.7
611.4
635.5
1.8
–
(1.8)
–
–
–
–
–
1.8
1.0
0.2
–
1.2
–
–
–
1.2
1.0
Total
£m
661.8
77.3
(1.8)
737.3
23.5
101.2
124.7
612.6
638.3
Impairment charge of £101.2m (2015: £1.9m reversal of impairment loss) is in respect of two subsidiary undertakings.
Following these impairments the Directors believe that the carrying value of the investments is supported by their
underlying net assets less impairment.
Refer to note 26 of the Consolidated financial statements for the list of subsidiary and other related undertakings.
The Company sold its 50% interest in Enterprise House Investments LLP during the year. The Company has a 50% interest
in Generate Studio Ltd, a company incorporated in the UK.
Other investments represent 9% of the share capital of Mailstorage Ltd, a company incorporated in the UK.
D. Debtors
Amounts falling due after more than one year
Prepayments and accrued income
Amounts falling due within one year
Amounts owed by Group undertakings
Corporation tax asset
Prepayments and accrued income
2016
£m
7.2
7.2
2016
£m
396.7
–
16.9
413.6
2015
£m
–
–
2015
£m
394.0
0.2
–
394.2
Accrued income (non-current and current) includes £24.1m (2015: £nil) in respect of a performance fee for the BlackRock
Workspace Property Trust joint venture (see note 3(c) of the Consolidated financial statements).
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
2016
£m
110.7
0.8
4.4
115.9
2015
£m
114.1
0.6
5.0
119.7
Amounts owed to Group undertakings are unsecured and repayable on demand. Interest is paid to Group undertakings.
169 "Workspace Group PLC Annual Report and Accounts 2016
Notes to the Parent Company
financial statements
continued
F. Creditors: amounts falling due after more than one year
Interest rate
LIBOR+1.65%
5.6%
5.53%
LIBOR+3.5%
LIBOR+3.5%
6.0%
Repayable
June 2020
June 2023
June 2023
June 2020
May 2022 and May 2023
October 2019
Borrowings and financial instruments
Bank loan
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
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:
Cash flow hedge – cross currency swap
Amount
$100m/£64.5m
Rate payable
(%)
Term/
expiry
5.66% June 2023
2016
£m
40.0
69.9
84.0
9.0
45.0
57.5
305.4
(3.2)
302.2
2016
£m
57.5
49.0
198.9
305.4
2016
£m
3.9
3.9
2015
£m
50.0
67.8
84.0
9.0
45.0
57.5
313.3
(3.0)
310.3
2015
£m
50.0
57.5
205.8
313.3
2015
£m
0.3
0.3
The £95m (1.87%) interest rate swap to June 2018 was broken in June 2015 with a cash payment of £1.7m. This was valued
as a £2.6m liability at 31 March 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 20 to 23 on pages 157 to 161 and in the Statement of changes in equity.
Other reserves:
Balance at 31 March 2014
Share based payments
Change in fair value of derivative financial instruments
Balance at 31 March 2015
Share based payments
Change in fair value of derivative financial instruments
Balance at 31 March 2016
Equity settled
share based
payments
£m
8.2
2.0
–
10.2
1.9
–
Merger
Reserve
£m
8.7
–
–
8.7
–
–
Hedging
Reserve
£m
(2.9)
–
(0.3)
(3.2)
–
1.4
12.1
8.7
(1.8)
Total
£m
14.0
2.0
(0.3)
15.7
1.9
1.4
19.0
170 "Workspace Group PLC Annual Report and Accounts 2016
Five-year Performance (unaudited)
2012–2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
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
2016
£m
79.6
21.6
101.2
60.8
(16.9)
43.9
391.3
388.9
240.3p
15.05p
24.4
1,749.4
53.0
(284.8)
1,517.6
19%
19%
£9.35
£9.23
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
* 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
171 "Workspace Group PLC Annual Report and Accounts 2016
31 March
2016
£m
31 March
2015
£m
31 March
2014
£m
31 March
2013
£m
31 March
2012
£m
75
4.2
4,525
919
86
4.7
4,626
1,011
83
4.5
4,653
967
69
3.8
4,554
834
92
5.0
4,668
1,070
£78.2m £69.4m £58.3m £52.7m £50.2m
£11.79
£15.12
£24.32
85.3%
85.8%
85.8%
12,103
12,754
12,353
981
1,020
1,212
£12.98
87.0%
12,440
1,014
£18.79
88.7%
14,664
1,313
8
0.3
282
1,064
£6.3m
£23.01
95.8%
47.5p
£9.23
£9.26
31%
14
12
0.5
0.5
410
318
1,756
1,300
£7.1m £6.4m
£14.66
£16.13
87.7%
93.9%
18.9p
£7.03
£7.01
34%
15.4p
£4.96
£4.91
33%
16
0.5
435
1,260
£7.0m
£14.20
90.4%
–
–
–
–
11
0.4
313
1,407
£4.7m
£11.82
89.8%
–
–
–
–
Property Portfolio 2016
Property name
Alexandra House
Angel House
Archer Street Studios
Arches Business Centre
Barley Mow Centre
Belgravia Workshops
Bow Enterprise Park
Bow Office Exchange
Canalot Studios
Cannon Wharf
Cargo Works
Chiswick Studios
Chocolate Factory
Clerkenwell Workshops
Cremer Business Centre
E1 Studios
East London Works
Easton Street
Edinburgh House
Exmouth House
Faircharm
160 Fleet Street
Garratt Lane
Grand Union Studios
60 Gray's Inn Road
12-13 Greville Street
14 Greville Street
Havelock Terrace
Highway Business Park
Holywell Centre
Kennington Park
Leroy House
Lombard Business Centre
Mallard Place
Mare Street Studios
Marshgate Business Centre
Metal Box Factory
Morie Street
Pall Mall Deposit
Parkhall Business Centre
Parma House
Peer House
Poplar Business Park
Q West
Quality Court
Quicksilver Place
Rainbow Industrial Estate
Postcode
N22 7TR
EC1V 7LQ
W1D 7AZ
UB2 4AU
W4 4PH
N19 4NF
E3 3QY
E3 3QP
W10 5BN
SE8 5EN
SE1 9PG
W4 5PY
N22 6XJ
EC1R 0AT
E2 8HD
E1 1DU
E1 1DU
WC1X 0DS
SE11 5DP
EC1R 0JH
SE8 3DX
EC4A 2DQ
SW18 4LZ
W10 5AD
WC1X 8AQ
EC1N 8SB
EC1N 8SB
SW8 4AS
E1 9HR
EC2A 4PS
SW9 6DE
N1 3QP
CR0 3JP
N22 6TS
E8 3QE
E15 2NH
SE1 0HS
SW18 1SL
W10 6BL
SE21 8EN
N22 6XF
WC1X 8LZ
E14 9RL
TW8 0GP
WC2A 1HR
N22 6HX
SW20 0JK
Category
Acquisition
Acquisition
Like-for-like
Redevelopment
Refurbishment
Like-for-like
Redevelopment
Like-for-like
Like-for-like
Acquisition
Refurbishment
Like-for-like
Like-for-like
Like-for-like
Refurbishment
Like-for-like
Like-for-like
Acquisition
Acquisition
Like-for-like
Redevelopment
Acquisition
Acquisition
Redevelopment
Acquisition
Refurbishment
Refurbishment
Like-for-like
Redevelopment
Refurbishment
Like-for-like
Like-for-like
Redevelopment
Like-for-like
Like-for-like
Redevelopment
Refurbishment
Like-for-like
Like-for-like
Like-for-like
Like-for-like
Acquisition
Redevelopment
Redevelopment
Like-for-like
Like-for-like
Redevelopment
Lettable
floor area
sq. ft.
54,843
45,808
14,984
40,725
55,112
32,373
12,273
36,962
49,746
33,269
72,696
14,255
116,960
52,879
41,395
40,112
38,605
22,800
–
58,605
–
40,427
43,000
66,874
39,440
3,989
10,961
58,100
19,786
21,800
361,993
46,565
66,750
10,150
38,312
92,673
107,418
21,697
49,285
118,206
34,984
10,234
56,930
55,129
16,924
27,810
154,871
Net rent roll of
occupied units
£000s
550,000
1,146,726
846,211
324,158
1,678,477
465,814
–
310,926
1,733,910
226,621
3,836,391
290,623
1,141,604
3,643,274
650,170
1,096,335
798,633
173,667
–
3,037,117
–
1,462,151
–
267,960
1,197,823
68,666
382,584
1,021,613
318,837
–
7,192,234
1,155,237
387,440
82,500
534,094
310,394
4,890,594
574,963
1,104,387
1,461,873
433,268
177,010
844,919
495,963
964,383
333,600
509,111
ERV
£000s
1,371,075
2,199,000
1,241,700
383,700
1,907,131
524,332
78,000
363,400
1,932,079
856,340
4,503,350
373,595
1,683,317
4,031,213
940,140
1,224,238
1,356,095
1,254,000
2,739,000
3,607,100
–
2,040,930
688,000
2,284,069
2,218,010
–
685,224
1,274,730
333,440
663,915
10,536,409
1,243,684
708,070
96,000
614,401
508,170
6,965,922
692,300
1,325,332
1,931,425
500,550
455,500
957,270
845,000
1,198,300
333,700
517,369
172 "Workspace Group PLC Annual Report and Accounts 2016
Property name
Riverside
ScreenWorks
Southbank House
Spectrum House
Stratford Office Village
The Biscuit Factory (1)
The Biscuit Factory (2)
The Ivories
The Leathermarket
The Light Box
The Light Bulb
The Pill Box
The Print Rooms
The Record Hall
The Shaftesbury Centre
Thurston Road
Uplands Business Park
Vestry Street Studios
Vox Studios
Wenlock Studios
Westbourne Studios
Zennor Road
Postcode
SW18 4UQ
N5 2EF
SE1 7SJ
NW5 1LP
E15 4BZ
SE16 4DG
SE16 4DG
N1 2HY
SE1 3ER
W4 5PY
SW18 4GQ
E2 6GG
SE1 0LH
EC1N 7RJ
W10 6BN
SE13 7SH
E17 5QN
N1 7RE
SE11 5JH
N1 7EU
W10 5JJ
SW12 0PS
Category
Like-for-like
Like-for-like
Like-for-like
Like-for-like
Like-for-like
Redevelopment
Like-for-like
Like-for-like
Refurbishment
Like-for-like
Redevelopment
Like-for-like
Refurbishment
Refurbishment
Like-for-like
Redevelopment
Like-for-like
Like-for-like
Refurbishment
Like-for-like
Like-for-like
Like-for-like
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
Lettable
floor area
sq. ft.
100,411
60,601
62,242
46,463
52,139
–
225,944
24,814
124,879
71,947
52,534
50,409
45,830
–
12,628
–
280,496
22,759
103,921
31,152
58,652
66,135
Net rent roll of
occupied units
£000s
1,475,835
2,118,047
1,805,835
864,093
830,154
–
3,298,505
548,024
5,095,850
1,555,298
1,127,270
1,425,439
1,568,470
–
247,551
–
1,620,023
690,327
1,720,893
1,020,987
2,291,234
805,444
ERV
£000s
1,584,259
3,196,900
2,402,656
1,045,482
879,060
–
4,814,613
713,978
5,717,837
1,877,862
1,454,280
2,074,825
2,590,827
–
308,886
750,750
1,951,996
1,050,200
4,181,565
1,473,666
2,814,510
978,261
173 "Workspace Group PLC Annual Report and Accounts 2016
Glossary of Terms
Adjusted underlying earnings are based on trading profit
after interest adjusted to exclude exceptional items.
BlackRock JV 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.
Employee Share Ownership Trust (‘ESOT’) is the trust
created by the Group to hold shares pending exercise of
employee share options.
EPRA NAV is a definition of net asset value as set out by
the European Public Real Estate Association. It represents
net assets after excluding mark to market adjustments
of effective cash flow hedges (financial derivatives) and
deferred tax relating to revaluation movements, capital
allowances and derivatives.
Equivalent yield is a weighted average of the initial yield
and reversionary yield and represents the return a property
will produce based upon the timing of the occupancy of
the property and timing of the income receivable. This is
approximated by the reversionary yield multiplied by the
Group trend occupancy of 90%.
Estimated rental value (‘ERV’) or market rental value is
the Group’s external valuers’ opinion as to the open market
rent which, on the date of valuation, could reasonably be
expected to be obtained on a new letting or rent review.
Exceptional items are significant items of income or
expense that by virtue of their size, incidence or nature are
shown separately on the Income Statement to enable a full
understanding of the Group’s financial performance.
Gearing is the Group’s net debt as a percentage of net
assets.
Gearing on adjusted net assets is the Group’s net debt
as a percentage of net assets excluding mark to market
derivative adjustments.
Initial yield is the net rents generated by a property or
by the portfolio as a whole expressed as a percentage of
its valuation.
Interest cover is the number of times net interest payable
is covered by operating profit.
IPD is the Investment Property Databank Ltd, a company
that produces an independent benchmark of property
returns.
IPD Quarterly Universe is the IPD quarterly universe
property fund benchmark of approximately 240 (£196bn)
UK domestic property funds.
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.
Loan to value is the current loan balance divided by the
current value of properties owned by the Group.
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.
Occupancy percentage is the area of space let divided
by the total net lettable area (excluding land used for
open storage).
Open market value is an opinion of the best price at which
the sale of an interest in the property would complete
unconditionally for cash consideration on the date of
valuation (as determined by the Group’s external valuers).
Profit/(loss) before tax (‘PBT’) is income less all
expenditure other than taxation.
Property Income Distribution (‘PID’) a dividend generally
subject to withholding tax that a UK REIT is required to pay
from its tax-exempted property rental business and which
is taxable for UK resident shareholders at their marginal
tax rate.
REIT is a Real Estate Investment Trust as set out in the
UK Finance Act 2006 Sections 106 and 107. REITs pay no
corporation tax on profits derived from their property
rental business.
174 "Workspace Group PLC Annual Report and Accounts 2016
Overview
Strategic Report
Our Governance
Financial Statements
Additional Information
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.
Total Shareholder Return (‘TSR’) is the return obtained by
a shareholder calculated by combining both share price
movements and dividend receipts.
Trading profit after interest is net rental income, joint
venture trading and finance income, less administrative
expenses, less finance costs.
Unique web visits is the number of unduplicated (counted
only once) visitors to a website over the course of a
specified time period.
175 "Workspace Group PLC Annual Report and Accounts 2016
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
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 3UR
Joint stockbrokers
Bank of America Merrill Lynch
2 King Edward Street
London EC1A 1HQ
Liberum Capital Limited
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
176 "Workspace Group PLC Annual Report and Accounts 2016
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
About us
What we do
Our strategy
Leadership team
Company history
Governance
Investor centre
Results centre
Regulatory news
Financial calendar
Share price information
Shareholder information
Sustainability
CEO’s introduction
Our sustainability strategy
Sustainability performance
Accreditations
Case studies
Our policies
Media centre
News
Image gallery
Video gallery
Media contacts
WORKSPACE GROUP PLC
Chester House
Kennington Park
1-3 Brixton Road
London
SW9 6DE
Telephone: +44 (0)20 7138 3300
Web: www.workspace.co.uk
Email: investor.relations@workspace.co.uk
If you require information regarding
business space in London call
+44 (0)20 7369 2390 or visit
www.workspace.co.uk
This Report is printed on materials which
are FSC® certified from well-managed forests.
These materials contain ECF (Elemental
Chlorine Free) pulp and are 100% recyclable.
Designed by Gather
(a Workspace Group customer)
+44 (0)20 7610 6140
www.gather.london
a "Workspace Group PLC Annual Report and Accounts 2016