Workspace Group Annual Report 2018

FY2018 Annual Report · Workspace Group

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The
Workspace
Advantage

Workspace Group PLC
Annual Report and Accounts 2018

Delivering The Workspace Advantage
Some of the stories from our year

Powering performance

and direct
customer
relationships is…

Seeing
around
corners
Our people are
unique
Our centre managers
are legends. Meet
Mesut and Marnie
– their specialist
subject is seeing
things before they
happen, which is
why customers in
East London love
Workspace.

Page 13.

If you don’t
listen, you
can’t hear
Our response to market
Platform value
trends keeps us ahead
Anisha is our Head of
Our unique, in-house marketing and
Marketing. Constantly
operational platform means we build close
listening and responding
to the market, analysing
relationships with our thousands of
customer trends as well
as loads of data. All of
customers. The data and insight we gather
which helps engage
as a result can be acted on immediately,
customers throughout
their Workspace journey.
ensuring we remain ahead of the game and
provide the best service to our customers.

Page 5.

Website visits per month

Customer viewings per month

Customer enquiries per month

New lettings per month

Website page views per month

Offer letters per month

95,336

238,868

1,016

90%

565

THINKING
LIKE A
CUSTOMER

317

The right partners
See how Bryony and
architects Squire &
Partners have created
a cutting-edge new
environment for our
customers at The Frames
in Shoreditch.

Page 43.

Customer advocacy score

Renewals per month

I’m going to run
this business
one day
Working with our
suppliers and partners
See how we worked
with XLP to get Sam an
apprenticeship at Cogent.
It has given him hope of
a career and stimulated
ambitions in him he didn’t
know he had.

Page 19.

Our people
This year we have
showcased some of the
amazing people who
help us deliver The
Workspace Advantage
across London.

The front cover shows
some of our people
in action.

Governance
73 Chairman’s governance

statement
75 Leadership
82 The Board
92 Executive Committee
94 Relations with shareholders
97 Effectiveness
100 Nomination Committee

Report

103 Accountability
104 Audit Committee Report
111 Risk Committee
112 Investment Committee
113 Remuneration
135 Report of the Directors
139 Statement of Directors’

responsibilities in respect
of the Annual Report and
the Financial Statements

Financial Statements
140 Independent Auditors’
Report to the Members
of Workspace Group PLC

146 Consolidated income

statement

146 Consolidated statement
of other comprehensive
income

147 Consolidated balance sheet
148 Consolidated statement
of changes in equity
149 Consolidated statement

of cash flows

150 Notes to the financial

statements

179 Parent Company balance

sheet

180 Parent Company statement

of changes in equity
181 Notes to the Parent
Company financial
statements

Additional Information
184 Five-year performance
184 Performance metrics
185 Property portfolio 2018
187 Glossary of terms
188 Investor information
IBC Communicating with

our investors

Driving
growth
and
adding
value.

Overview
IFC Delivering The Workspace

Advantage

IFC The Workspace Advantage

at a glance

2 Another year of strong

performance

Strategic Report
3 Chairman’s statement
Maximising our advantage
8 Understanding and

responding to market trends

16 A business model designed
to create long-term value
22 A focus on Doing the Right

Thing helps us to manage
our key resources and
relationships

28 Chief Executive’s Strategic

Review

35 Measuring strategic success
46 Using risk to help make the
right strategic decisions
57 Going concern and viability

statement
Delivering the advantage
in 2017/18
62 Business review
71 Key property statistics

I love
spinning
plates

Asset management
Roshi is an asset manager
with 23 properties in his
portfolio. You’ll often find
Roshi on site, talking to
centre managers,
obsessing over details.
It’s what he does.

Page 59.

1 Workspace Group PLC Annual Report and Accounts 2018

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The Workspace Advantage at a glance
Two distinct parts that come together
to drive growth and add value.

Combining
asset
ownership…

Portfolio value
Asset ownership ensures control and ability
to adapt properties. Our extensive pipeline
of refurbishment and redevelopment
projects provides significant opportunity
to add value over the long term.

Properties in London

Space in our portfolio

Property portfolio

£2.3bn

3.7m sq. ft.

New and upgraded space coming
to market in 2018/19

456,000 sq. ft.

and direct
customer
relationships is…

Platform value
Our unique, in-house marketing and
operational platform means we build close
relationships with our thousands of
customers. The data and insight we gather
as a result can be acted on immediately,
ensuring we remain ahead of the game and
provide the best service to our customers.

Website visits per month

Customer viewings per month

95,336

565

Website page views per month

Offer letters per month

238,868

317

Customer enquiries per month

New lettings per month

1,016

Customer advocacy score

Renewals per month

90%

Powering performance

Driving
growth
and
adding
value.

Overview
IFC Delivering The Workspace

Advantage

IFC The Workspace Advantage

at a glance

2 Another year of strong

performance

Strategic Report
3 Chairman’s statement
Maximising our advantage
8 Understanding and

responding to market trends

16 A business model designed
to create long-term value
22 A focus on Doing the Right

Thing helps us to manage
our key resources and
relationships

28 Chief Executive’s Strategic

Review

35 Measuring strategic success
46 Using risk to help make the
right strategic decisions
57 Going concern and viability

statement
Delivering the advantage
in 2017/18
62 Business review
71 Key property statistics

I love
spinning
plates

Asset management
Roshi is an asset manager
with 23 properties in his
portfolio. You’ll often find
Roshi on site, talking to
centre managers,
obsessing over details.
It’s what he does.

Page 59.

1 Workspace Group PLC Annual Report and Accounts 2018

Governance
73 Chairman’s governance

statement
75 Leadership
82 The Board
92 Executive Committee
94 Relations with shareholders
97 Effectiveness
100 Nomination Committee

Report

103 Accountability
104 Audit Committee Report
111 Risk Committee
112 Investment Committee
113 Remuneration
135 Report of the Directors
139 Statement of Directors’

responsibilities in respect
of the Annual Report and
the Financial Statements

Financial Statements
140 Independent Auditors’
Report to the Members
of Workspace Group PLC

146 Consolidated income

statement

146 Consolidated statement
of other comprehensive
income

147 Consolidated balance sheet
148 Consolidated statement
of changes in equity
149 Consolidated statement

of cash flows

150 Notes to the financial

statements

179 Parent Company balance

sheet

180 Parent Company statement

of changes in equity
181 Notes to the Parent
Company financial
statements

Additional Information
184 Five-year performance
184 Performance metrics
185 Property portfolio 2018
187 Glossary of terms
188 Investor information
IBC Communicating with

our investors

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Another year of strong performance

Chairman’s statement

2018 financial highlights

Profit before tax

EPRA NAV per share*

Adjusted trading profit after interest*

£170.4m
£60.7m +20%
£10.37 +8.8%
27.39p +30%
+8.6%

Like-for-like rent roll

Dividend per share

2018 non-financial highlights

Average enquiries per month

Everyone at Workspace –
from centre managers to Non-
Executive Directors – is focused
on delivering The Workspace
Advantage. The Board and
I would like to thank all our
colleagues for wholeheartedly
embracing our strategy and for
working so hard to achieve our
objectives. The work we have
done internally this year to
articulate our Company culture
and values has highlighted the
fantastic ethos that Workspace
people bring to work each day.
The drive that our people exhibit
extends beyond the day-to-day
operations of our business,
and I am extremely proud
of the work we do to support
our local communities.

With London continuing to offer
strong growth opportunities,
and the structural shift in the
real estate market towards our
business model, the Board and
I have every confidence in the
future of this business.

We strongly believe that we
have the right strategy, the right
business model and the right
team in place to continue to
deliver value for shareholders
over the long term.

Daniel Kitchen
Non-Executive Chairman

This year, we have seen London
retain its robust nature as a
global centre for business. The
city continues to be a thriving,
vibrant hub of commerce and
culture, despite the political
and economic uncertainty that
abounds. With a growing number
of businesses attracted to London
and those already here continuing
to rethink their occupational
strategies, it remains the ideal
home for Workspace.

Against this backdrop, the
business has delivered another
excellent set of results, driving
both income and capital growth.
Net rental income has risen 21%
to £95.6m and we have seen our
EPRA Net Asset Value per share
increase by 8.8% to £10.37.

This strong financial performance
and outlook has given the Board
the confidence to recommend a
30% increase in the total dividend,
demonstrating our commitment
to a progressive dividend policy
and our continued focus on
driving income growth.

Over the last year, the Board
has approved the acquisition
of some larger properties in very
attractive locations. Properties
such as The Salisbury in the City
and Centro Buildings in Camden
are fantastic additions to the
Workspace portfolio, and we
are excited about the future
asset management and income
growth opportunities these will
provide. We also have a huge
amount of activity ongoing
across our existing portfolio, with
a number of new and extensively
refurbished buildings launching
from our project pipeline over
the next year.

Customer advocacy

1,016
90%

* See pages 66 to 70 of the Business Review, notes 8 and 9 on pages 159 and 160
and the Glossary for definitions.

2 Workspace Group PLC Annual Report and Accounts 2018

3 Workspace Group PLC Annual Report and Accounts 2018

Governance overview
To understand how governance
underpins The Workspace
Advantage:
– Nomination Committee on

page 100

– Audit Committee on page 104
– Risk Committee on page 111
– Investment Committee on

page 112

– Remuneration Committee

on page 113

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IF YOU
DON’T
LISTEN,
YOU CAN’T
HEAR

4 Workspace Group PLC Annual Report and Accounts 2018

5 Workspace Group PLC Annual Report and Accounts 2018

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How Anisha, Head of
How Anisha, Head of
Marketing, helps us deliver
Marketing, helps us deliver
The Workspace Advantage
The Workspace Advantage

Listening to our customers and
Listening to our customers and
reading our market is a big part of my team’s
reading our market is a big part of my team’s
job and we are constantly thinking about how
job and we are constantly thinking about how
to optimise the customer experience.
to optimise the customer experience.

It is all about ensuring that our prospects
It is all about ensuring that our prospects
and customers have exactly what they need,
and customers have exactly what they need,
and all the right information at their fingertips,
and all the right information at their fingertips,
when they need it. We want our product to
when they need it. We want our product to
be visually engaging and we’ve adopted
be visually engaging and we’ve adopted
VR technology to showcase new
VR technology to showcase new
buildings before they launch.
buildings before they launch.

Everything we do is about making
Everything we do is about making
our customers feel engaged throughout
our customers feel engaged throughout
their Workspace journey.
their Workspace journey.

Anisha Patel
Anisha Patel
Head of Marketing,
Head of Marketing,
pictured with her team
pictured with her team
at Kennington Park, Oval.
at Kennington Park, Oval.

To see how our market
To see how our market
understanding helps to shape
understanding helps to shape
our customer offer
our customer offer
go to page 8.
go to page 8.

4 Workspace Group PLC Annual Report and Accounts 2018

6
6

7 Workspace Group PLC Annual Report and Accounts 2018

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Maximising our advantage

Understanding and responding
to market trends

Workspace’s
leading-edge
offer is proving
increasingly
appealing to
all businesses
in London.

To help us maintain
our market
advantage we:

1. Listen to the
constantly
changing trends
that affect the
London market.

2. Maintain an
up-to-date
understanding
of what our
customers need
and respond
appropriately.

3. Evolve and
innovate to
stand out from
the crowd in
a competitive
landscape.

Super connected:
Delivering The
Workspace Advantage
requires all parts of
our business to work
together.

An up-to-date market
understanding is critical
to our overall success.

Our market knowledge means
we can ensure our business
model and strategy are aligned
to current market trends. It also
allows our Audit and Risk
Committees to monitor our risk

mitigation activities – including
the assessment of potential
new risks if the market changes.

– A business model designed
to create long-term value –
page 16

– A focus on Doing the Right
Thing helps us to manage
our resources and
relationships – page 22
– Chief Executive’s strategic

review – page 28

– Using risk to help make the
right strategic decisions –
page 46

– Business review – page 62
– Our governance – page 72

1. Listen to the constantly changing trends

that affect the London market.

London trend
London is still seen
as a global hub for
business

London trend
The spotlight on flexible
space continues to grow,
along with demand from
across the business
spectrum

London trend
London continues
to attract significant
investment capital

London trend
Smaller businesses are
driving the economy

Description
Despite continuing political and
economic uncertainty, there is
no sign of London losing its
lustre as a business and cultural
centre. London represents 23%
of national output and generates
just under £400bn every year
in economic activity1.

Description
In 2017, flexible space providers
took up over 21% of Central
London office space4. The
majority of this space is let to
operators, but the year also saw
traditional landlords launching
flexible space products as
businesses of all shapes and
sizes are now demanding
flexibility.

Description
Transaction volumes in London’s
investment market rose 33% in
20172, overcoming the political
headwinds of the previous year.
This demand for London real
estate has continued into 2018,
with £2.25bn worth of
commercial deals transacted
in Q1 20185.

Description
Since 2010, the number of small
and medium-sized enterprises
in London has grown by 41%2.
These businesses are powering
the economy, providing 60%
of private sector jobs and 47%
of turnover6.

What this means for
Workspace
London remains the ideal home
for Workspace. With 5.8m
workers and 128,0002 new jobs
created in the year to October
2017, we believe the capital
holds great opportunities for
our business. There is no let
up expected – a Knight Frank
survey predicts almost 900,000
jobs will be created in the
next decade.

What this means for
Workspace
Increased interest in our market
is positive for Workspace as our
model has long been focused
on flexibility. We continue to
reiterate our differentiated
position to customers and
investors to ensure all
stakeholders understand
The Workspace Advantage
and what differentiates our
model and offer.

5.8m

Workers in London3

10.7m

Sq. ft. of flexible space
in Central London4

What this means for
Workspace
With significant capital chasing
commercial assets in London,
our investment team has built
extensive knowledge of the
assets that would work for our
model and is nimble enough
to move quickly when an
opportunity arises. We have a
strict hurdle rate for acquisitions
but have a strong track record
of finding value in the market.

£2.25bn

Commercial deals in Q1 20185

What this means for
Workspace
Our offer is open to all but
the built-in flexibility means
The Workspace Advantage is
particularly attractive to growing
businesses. We continue to see
strong demand for our space
and reported 351 expansions
in the year as customers have
grown with Workspace.

41%

Increase in small businesses
in London since 20102

Link to our strategy
– Right Market

Link to our strategy
– Right Market
– Right Customers
– Right Properties

Link to our strategy
– Right Properties
– Right Market

Link to our strategy
– Right Customers

1. GLA Economics Current Issues Note 57, May 2018.
2. The London Report 2018, Knight Frank.
3. Human Capital: Disruption, Opportunity and Resilience in London’s workforce,

4. Co-working 2018, Cushman & Wakefield.
5. Central London Quarterly – Offices Q1 2018, Knight Frank.
6. Small Business, Big Ambition: FSB General Election Manifesto 2017.

Centre for London, 2018.

8 Workspace Group PLC Annual Report and Accounts 2018

9 Workspace Group PLC Annual Report and Accounts 2018

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Understanding and responding to market trends
continued

2. Maintain an up-to-date understanding

of what our customers need and
respond appropriately.

Customer trend
Businesses want
built-in flexibility and
a well-designed work
environment that
encourages collaboration

Customer trend
Employers are
increasingly focused
on providing healthy
workplaces

Customer trend
Technology is all-
important, both in the
provision of solutions
for customers and in
creating a more
engaging customer
experience

Customer trend
There is a drive for
companies to articulate
a wider purpose beyond
making a profit

Description
While the growth of SMEs
and start-ups in London has
undoubtedly driven increased
demand for flexibility, this trend
has now reached larger
businesses. Securing and
retaining talent is a challenge
for every business and the right
working environment can have
a great impact on that.

What this means for
Workspace
We have always built flexibility
into our offer, as we want our
customers to be able to grow
or contract but remain with
Workspace. The design of our
spaces has become increasingly
important, and we are constantly
evolving the look and feel of our
buildings, as well as the
amenities we provide, in line
with changing trends.

Description
Cushman & Wakefield reports
that up to 90% of companies’
operational expenditure is on
employees1. It is therefore no
surprise that employers have
woken up to the productivity
benefits that healthy workplaces
can deliver. A recent survey
found that 87% of real estate
leaders said health and wellbeing
was the biggest change in
sustainability issues in the past
five years2.

What this means for
Workspace
Many of our customers cycle or
run to work and we are installing
dry cycle storage and showers
at our centres as a result.
For example, at China Works,
a major refurbishment near
Vauxhall, we have retrofitted
the basement with 75 bicycle
spaces, six showers and
36 lockers.

Description
With operations becoming
increasingly digital, all businesses
expect best-in-class technology
as a basic requirement in their
space. A survey conducted for
the Federation of Small
Businesses found that 94%
of companies surveyed interact
with customers and suppliers
online, while 94% use internet
banking for their business2.

Description
Many businesses are considering
their role in the local community
and in society as a whole.
Investors are also increasingly
focused on ESG (Environment,
Social and Governance) factors
and the impact that companies
have on the environment and
on society.

What this means for
Workspace
Workspace has committed to
rolling out WiredScore
accreditations across its
portfolio, with 50 buildings
targeted for Wired Certified
Gold or Platinum by 2019.
Internally, technology is crucial
to enhancing the customer’s
experience, for example, through
the use of Virtual Reality tours
of upcoming property launches.

What this means for
Workspace
We know that our customers
want to have a positive impact
on the world around them.
In line with our Doing the Right
Thing strategy, we run a number
of initiatives, from education
on recycling to facilitating
apprenticeships, with our
customer and supplier base
for London’s disadvantaged
young people.

£40,000

Raised for various charities
by Workspace people and
customers across our portfolio

351

Customer expansions
in 2017/18

311

Cycling spaces installed across
the portfolio in 2017/18

Workspace buildings Wired
Certified Gold or Platinum

3. Evolve and innovate to stand out from
the crowd in a competitive landscape.

Workspace operates in an
increasingly popular segment
of the real estate market, with
‘flexible’ space fast becoming
an industry buzzword. With that
comes inevitable confusion, as
there are many different players
offering different products under
different descriptions, from
co-working to managed space
to flexi space.

Competition
This year has seen a further shift
in the real estate market as ways
of working continue to change.
Major landlords and developers,
who traditionally let space to
large corporates, are now either
signing leases to skilled operators
who can bring in the smaller,
more disruptive businesses
of the future, or alternatively,
launching new products
themselves in order to try and
tap into this market directly.

Workspace history
in flexible space
With a 30-year history offering
leases on flexible terms,
Workspace’s business model
– generating value through
ownership of properties and
a focus on direct customer
relationships – has not changed.

However, we are very aware
of the need to constantly
innovate and evolve our
offer as trends develop and
customer requirements change,
as shown opposite.

We have a rolling programme
of refurbishments and
redevelopments to upgrade
our historic and characterful
buildings to modern standards,
and we are constantly on the
lookout for new buildings in
dynamic locations to add
to our portfolio.

We work hard to ensure that our
customer offer, The Workspace
Advantage, remains up-to-date.
We provide inspiring spaces that
customers personalise and furnish
themselves, with best-in-class,
reliable and secure technology
throughout the building.

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Link to our strategy
– Right Properties
– Right Customers
– Right Brand

Link to our strategy
– Right People
– Right Properties

Link to our strategy
– Right Brand
– Right Customers

Link to our strategy
– Right Brand
– Right People

1. The Occupier Edge, Sixth Edition 2018, Cushman & Wakefield.
2. Engage – The Future of Sustainability Issue 1, Greengage.
3. Reassured, Optimised, Transformed: Driving digital demand among small

businesses, Federation of Small Businesses, September 2015.

10 Workspace Group PLC Annual Report and Accounts 2018

11 Workspace Group PLC Annual Report and Accounts 2018

SEEING
AROUND
CORNERS

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12 Workspace Group PLC Annual Report and Accounts 2018

13 Workspace Group PLC Annual Report and Accounts 2018

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How Mesut Ulusoylu, Cluster
How Mesut Ulusoylu, Cluster
Centre Manager in East
Centre Manager in East
London, helps us deliver
London, helps us deliver
The Workspace Advantage
The Workspace Advantage

Seeing around corners is an art I’ve
Seeing around corners is an art I’ve
perfected over the last couple of years.
perfected over the last couple of years.
It means seeing things before they
It means seeing things before they
happen. From the big things, like a
happen. From the big things, like a
customer running out of space, to the
customer running out of space, to the
little, such as water bottles in the
little, such as water bottles in the
meeting rooms not being refilled.
meeting rooms not being refilled.

In my job, I worry about how I can
In my job, I worry about how I can
do more for our customers. Knowing
do more for our customers. Knowing
what they like (and don’t like) is all
what they like (and don’t like) is all
part of my day. Showing we care
part of my day. Showing we care
about that is a big part of how
about that is a big part of how
Workspace does things.
Workspace does things.

Mesut Ulusoylu
Mesut Ulusoylu
Cluster Centre Manager,
Cluster Centre Manager,
pictured with Marnie
pictured with Marnie
Otton, Centre Manager,
Otton, Centre Manager,
Pill Box, Bethnal Green.
Pill Box, Bethnal Green.

To see the role our
To see the role our
people and our values
people and our values
play in value creation
play in value creation
go to pages 16 to 17.
go to pages 16 to 17.

12 Workspace Group PLC Annual Report and Accounts 2018

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15 Workspace Group PLC Annual Report and Accounts 2018

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Maximising our advantage

A business model designed to create
long-term value

Key inputs

How we create and capture value
How we create and capture value

The key inputs are what we
need to run Workspace. Our
value-creating activities are
designed to develop and
strengthen each of them.

Our value-creating activities
are split into Portfolio (Asset
ownership which ensures control
and provides us with the ability
to adapt properties) and

Platform (Marketing and
direct relationships which
allow us to attract and retain
the right customers).

Super connected:
Delivering The
Workspace Advantage
requires all parts of
our business to work
together.

Our aim is to create value for
the long term.

To deliver this, our value creating
activities are guided by:
– Our values, which help drive
our behaviours and deliver
The Workspace Advantage.
– Governance which helps us
make the right decisions.
– The ongoing mitigation

of our principal risks and
uncertainties which helps
show us where and when
we think we can create value.
– Market insight which guides
how we use the key inputs
to our Business Model.

– Our strategy which is regularly

assessed by the Board.

– Understanding and

responding to market trends
– page 8

– A focus on Doing the Right

Thing helps us to manage our
resources and relationships
– page 22

– Chief Executive’s strategic

review – page 28

– Using risk to help make the
right strategic decisions –
page 46

– Business review – page 62
– Our governance – page 72

1
Financial strength
Strong cash flow and prudent
balance sheet management
allow us to execute our strategy.

2
The right people
Workspace people display
deep knowledge in their
subjects, have an inquisitive
nature and thirst for innovation,
and show genuine care for our
customers, our communities
and each other.

3
Our properties
We have a portfolio of high
quality, well-located assets
in London.

4
Doing the right thing
We work hard to improve our
practices internally and actively
encourage suppliers and
customers to do the same,
to ensure we have a positive
impact on our communities
and society as a whole.

5
Customer relationships
We enjoy strong relationships
with the thousands of
businesses in our space.
Our success is dependent
on staying ahead of the trends
and delivering the best service
to our customers.

Right
market
Right
London is
growing and
market
changing

The
Workspace
Advantage

Right
brand
Right
Increasing
recognition
brand
and reputation

Right
properties
Right
Creating
modern growth
properties
environments

Right
Right
people
Driving
people
performance

Right
Right
customers
customers
Open to all

We generate value through
intensifying use at existing
sites, often creating brand-new
business centres in partnership
with residential developers.

Acquisition and ongoing
ownership of assets
Workspace acquires properties
across London. Owning our
assets enables us to constantly
upgrade and transform them
to increase their value and drive
rental growth. We will dispose
of properties where we believe
we can no longer add value or
if the property falls below our
robust return targets.

Portfolio
Adding value to
our properties
We own all our properties
and operate them to generate
income over the long term.
We have a strong pipeline
of refurbishment and
redevelopment projects,
and also take advantage
of acquisition opportunities
to further grow the business.

There are three core value-
creating activities:

Like-for-like rental growth
We carry out light internal
refurbishments to enhance both
pricing and property values.

Existing projects
We have a rolling programme
of refurbishments to upgrade
or expand our existing
properties and grow our
footprint in London.

Guided by our values, governance,
risk mitigation, market insight and strategy

Platform
Adding value for
our customers
Workspace’s marketing
platform provides us with
valuable customer relationships
and insight. We market to all
businesses across London
and our unique customer
offer is a key differentiator.

There are three core value-
creating activities:

Connectivity
Workspace invests in
state-of-the-art technology
infrastructure to ensure
customers can work how
and where they want.

Personalisation
There are no constraints placed
on our customers, with flexible
lease terms, a range of spaces
and secure, unlimited data
downloads and uploads.

Communities
Workspace customers are
connected to each other via
a range of networking and
business insight events run
by our centre managers.
Being part of a community of
Workspace customers across
London provides a range
of benefits, from social
connections to insights that
support business growth.

Key outcomes

Creating value means we can
grow the business, continue
to attract and retain the right
people as well as provide the
best service to our customers.

1
Financial strength
Consistent returns to
shareholders, a 30% increase
in the dividend and a strong
balance sheet that gives us
confidence to continue to
grow the business.

Our Business Review is
on pages 62 to 71 and our
Balance Sheet on page 147.

2
The right people
Working for a leading business.
Access to development
opportunities and a values-
driven culture that rewards
success.

Our People are discussed
in detail in our Resources and
Relationships section on pages
22 to 27.

3
Our properties
Properties that customers
and London love. Our portfolio
value has increased to £2.3bn
in the year.

Details of our properties are
outlined in the Business Review
on pages 62 to 71.

4
Doing the Right Thing
We focused on improving
recycling rates in 2017/18,
holding educational roadshows
at our properties, with those
centres showing a 10%
improvement in recycling
rates afterwards.

5
Customer relationships
Our customers benefit from
our proactive approach,
which helps them focus on their
business. In 2017/18 we carried
out minor refurbishment works
at several centres, upgrading
the space and service for
our customers.

Our sustainability performance
is detailed in our Resources
and Relationships section
on pages 22 to 27 and at
www.workspace.co.uk/
investors/doing-the-right-thing

The relationships we have with
our suppliers and partners and
the communities in which we
operate are detailed in our
Resources and Relationships
section on pages 22 to 27.

16 Workspace Group PLC Annual Report and Accounts 2018

17 Workspace Group PLC Annual Report and Accounts 2018

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I’m going
to run this
business
one day

18 Workspace Group PLC Annual Report and Accounts 2018

19 Workspace Group PLC Annual Report and Accounts 2018

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How Sam Taylor, who we
How Sam Taylor, who we
helped place as an apprentice
helped place as an apprentice
at Cogent, helps us deliver
at Cogent, helps us deliver
The Workspace Advantage
The Workspace Advantage

XLP came to me with the
XLP came to me with the
chance to join Cogent as an
chance to join Cogent as an
apprentice nearly two years ago
apprentice nearly two years ago
and I was so excited!
and I was so excited!

To learn and thrive under
To learn and thrive under
Cogent has been amazing so far.
Cogent has been amazing so far.
Thanks to Workspace and XLP,
Thanks to Workspace and XLP,
this apprenticeship has given
this apprenticeship has given
me hope for a different career,
me hope for a different career,
which I really appreciate, as
which I really appreciate, as
the university route was
the university route was
just not for me.
just not for me.

Sam Taylor
Sam Taylor
Apprentice at
Apprentice at
Workspace supplier,
Workspace supplier,
Cogent Electrical
Cogent Electrical
Services Ltd,
Services Ltd,
pictured with Ian Hiley,
pictured with Ian Hiley,
Community Projects
Community Projects
Manager at XLP, outside
Manager at XLP, outside
The Frames, Shoreditch.
The Frames, Shoreditch.

To see how we help
To see how we help
to bring the next generation
to bring the next generation
into the business place
into the business place
go to page 24.
go to page 24.

18 Workspace Group PLC Annual Report and Accounts 2018

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21 Workspace Group PLC Annual Report and Accounts 2018

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Maximising our advantage

A focus on Doing the Right Thing
helps us to manage our key resources
and relationships

Our customers
Relationship:
We foster direct
relationships with
our customers to
ensure we’re able
to listen, understand
and respond to
their needs.

Page 26.

Our properties
Resource:
Over the last 30
years, we have built
a portfolio of
fantastic properties
– some full of
history and others
brand new. It is our
responsibility
to future proof
these buildings and
ensure they are
sustainable so that
they can continue
to play an important
role in their
communities.

Page 24.

Our people
Resource:
Our people are our
greatest resource
and we have a
diverse mix of skills
and experience in
our teams.

Relationship:
Ensuring our
people are
motivated and
committed is key to
the success of this
business.

Page 24.

Our suppliers
and partners
Resource:
From building
contractors to
architects, cleaners
and technology
providers, we rely
on suppliers and
partners to help
us deliver The
Workspace
Advantage.

Relationship:
Maintaining good
working relationships
with these groups is
of vital importance.

Page 24.

Our communities
Relationship:
It is important to
both Workspace
and our customers
that we engage
with and positively
impact the
communities in
which we’re based.

Page 27.

Our brand
Resource:
A strong and
confident brand
helps us market
directly to
customers and
drives enquiries
for our space.

Page 27.

Social

E n v ironmental

Right
market

Right
brand

Right
properties

Doing the
Right Thing

Right
people

Right
customers

Doing the right thing
Our Doing the Right Thing
strategy ensures that we operate
responsibly in our dealings with
all stakeholders and reinforces
our commitment to the
sustainable growth of this
business.

The strategy has been in place
for over a year now and has
delivered some excellent results.
From providing volunteering
and fundraising support to
our selected charities to
championing environmental
initiatives that ensure our
buildings and supply chains have
a positive rather than negative
impact on the environment.

Over the following pages,
we look at our key resources
and relationships in more detail,
highlighting particular
achievements in the year and
targets for the following year.

Super connected:
Delivering The
Workspace Advantage
requires all parts of
our business to work
together.

We depend on developing
long-lasting relationships and
harnessing our key resources
to ensure we can continue to
grow our business and deliver
The Workspace Advantage.

To achieve this sustainable
growth we:
– Acquire, develop and future
proof properties in the most
exciting locations across
London.

– Build strong partnerships

with our suppliers.

– Empower our people to

deliver the best offer to our
customers.

– Leverage our unique brand

positioning within the industry.

– Continuously reinforce and
strengthen our customer
relationships.

– Positively impact the

communities in which we
operate, supporting the next
generation to enter the
workplace.

– Understanding and

responding to market trends
– page 8

– A business model designed
to create long-term value –
page 16

– Chief Executive’s strategic

review – page 28

– Using risk to help make the
right strategic decisions –
page 46

– Business review – page 62
– Our governance – page 72

Awards, accreditations and partnerships

Global Real Estate
Sustainability
Benchmark (‘GRESB’)

We gained a Green Star for the
fourth year in a row. This year we
improved our score from 76 to
81, exceeding both the GRESB
Average score of 63 and the
Peer Average score of 73. Our
GRESB public disclosure level
was Grade A (group average
Grade B). GRESB 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
for reporting in line with the 2017
European Sustainability Best
Practice Recommendations
(EPRA SBPRs) for the fourth
year in a row. These awards are
intended to raise the standards
and consistency of sustainability
reporting for listed real estate
companies across Europe.

Carbon Disclosure
Project (‘CDP’)

We achieved a B in our Carbon
Disclosure Project score,
exceeding the sector score
average of C. Scores were based
on disclosure, awareness,
management and leadership with
regards to carbon management
and climate change risk.

FTSE4Good Index

Better Buildings
Partnership (BBP)

We are a member of the BBP,
a collaboration of the UK’s
leading commercial property
owners working together to
improve the sustainability
of commercial buildings.

Islington Sustainable
Energy Partnership

Workspace has a representative
on the steering committee.

We were once again included
in the FTSE4Good Index, which
helps us assess our achievements
against a transparent and
evolving global corporate
responsibility standard. The
FTSE4Good Index Series
measures companies’
Environmental, Social and
Governance (ESG) practices.
This year, we achieved 3.2 out
of 5 (Absolute Rating) and 82%
(Relative Percentile Score).

Investors in People

We continued to hold our
Investors in People accreditation
for the 19th year in a row, having
achieved the highest possible
level, a Gold Award in September
2016 (re-accreditation is every
three years). In order to achieve
Gold, we had to provide 126
additional evidence
requirements. The Standard
defines what it takes to lead,
support and manage people
well for sustainable results.

Green Electricity

The majority of our electricity
supplies are on a green tariff.
SSE Green is 100% renewable
energy generated by a variable
mix of hydro-electric, offshore
and onshore wind. This year
we have calculated our market-
based emissions in addition
to location-based emissions
for our Scope 2 reporting.

22 Workspace Group PLC Annual Report and Accounts 2018

23 Workspace Group PLC Annual Report and Accounts 2018

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A focus on Doing the Right Thing helps us to manage our key
resources and relationships
continued

New cycle storage
at China Works.

Our properties

At Workspace, we value
long-term ownership of our
properties. We believe this helps
us to generate more value for
shareholders, but it also means
that we are building sustainable
properties that will last long into
the future. We take pride in the
work we do to reposition,
refurbish or redevelop our
buildings to ensure they meet
customer needs and are suitably
future proofed.

Over the year, we have
continued our efforts to reduce
the environmental impact of
our properties and their related
supply chains. On-site, our asset
managers and centre teams
work hard to create healthy
environments for our customers.

We have begun to install solar
panels across our estate. Five
properties have been fitted with
solar panels so far, generating
87,738 kilowatt hour per annum,
and we have plans to install
them at a further six properties.
Overall in 2017/18, we increased
our renewable energy generation
from solar by 78% year-on-year.

Case study:
Cycling facilities
Thanks to an increased focus
amongst our customers on the
health and wellbeing of their
employees, as well as a desire
to promote sustainable
methods of transport, we have
invested in the cycling facilities
across our portfolio. During
the year, we have installed 311
bicycle storage spaces, 30
showers and 212 lockers into
our business centres. We have
also rolled out a mobile bicycle
service and repairs surgery
that visits our centres regularly.

Targets for the coming year
– Continue to roll out installation

of solar panels at suitable
sites.

– Reduce our absolute Scope 1
and Scope 2 Greenhouse Gas
Emissions across our portfolio
by 16% by 2020.

– Ensure any new electricity

contracts are on a green tariff.

Case study:
Cocoa Studios at The Biscuit
Factory
This is a brand-new building
on the wider Biscuit Factory
estate. The building has been
rated BREEAM Excellent
Design Stage, which takes
into account the 76 cycle
storage spaces, exceeding
requirements, natural
ventilation in all office units,
high-thermal-efficiency
glazing, water metering and
leak detection in place and
38 sq. m. of solar PV panels.
The site has also achieved
a Considerate Constructors
Score (CCS) of 40/50 and
an A grade EPC rating.

Our suppliers and
partners

We could not operate our
business without calling on the
services of key suppliers and
partners. We take great care in
selecting the organisations we
work with, and it is in our interest
to build strong relationships
and ensure our goals and
commitment to sustainability
are aligned.

Our people

Harnessing the right culture is
important in any organisation to
enhance performance and unite
the business around common
behaviours that will help it to
achieve its goals.

At Workspace, we have a
fantastic culture and pride
ourselves in employing people
with a diverse mix of skills,
experience and backgrounds.

Case study:
Apprenticeships
Over the last two years, we
have started holding workshops
with our charity partner XLP,
to educate our suppliers on
the value of apprenticeships
and to facilitate introductions
with some of the young people
XLP supports.

This year, we caught up with
Sam Taylor, one of those
young people. Following our
introduction to XLP, Sam was
employed as an apprentice by
Cogent Electrical Services Ltd,
one of our suppliers. Sam has
been employed for 18 months
now and has worked across
many of our developments,
including The Frames in
Shoreditch. Read his
thoughts on the opportunity
on page 20.

Targets for the coming year
– Roll out XLP apprenticeship
workshops for customers,
as well as suppliers.
– Achieve a CCS score

of at least 38/50 for all
developments and major
refurbishments in 2018/19.
– Divert at least 95% of non-

hazardous demolition waste
and construction waste by
weight from landfill for all
developments and major
refurbishments in 2018/19.

– Procure at least 95% of timber

from certified sustainable
sources (FSC Equivalent)
in 2018/19.

Case study:
Articulating our values
This year, we have kicked off a
project to articulate the values
and behaviours that make
Workspace people unique
and that form the successful
culture that is delivering
The Workspace Advantage.

This project has highlighted
the unique qualities
Workspace people bring
to work and exhibit every day.
Our people demonstrate deep
knowledge in their subjects,
have an inquisitive nature
and thirst for innovation and
show genuine care for our
customers, our communities
and each other.

Long service awards
We believe it is this culture that
encourages long-term service
and are proud that our people
can build long careers at
Workspace. During the year,
27 people achieved long service
awards, of which 17 were for
10 years or more.

Number of workshops held
to help articulate our values

The number of people involved
in the articulation of our values

100

To be successful
you need a mix of
great properties and
customers. But to be
successful over the
long term you also
need the right people,
culture and values.

Jamie Hopkins
Chief Executive Officer

48 Workspace people
completed an 8.5 mile
row down the Thames,
raising £23,500 for AHOY.

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24 Workspace Group PLC Annual Report and Accounts 2018

25 Workspace Group PLC Annual Report and Accounts 2018

A focus on Doing the Right Thing helps us to manage our key
resources and relationships
continued

Learning and development
A thirst for knowledge and
learning is one of our values
and, as a result, we run a regular
programme to provide training
and development opportunities
to all our employees. This
ensures they remain motivated
and committed and are
constantly enhancing their
skills and experience.

Our rigorous training programme,
led by both internal and external
providers, covers a wide range
of topics, including:
– People management.
– Customer services.
– Networking and events.
– Social media.
– Conflict resolution.
– Data protection.
– Energy and sustainability.

Over the last year, we have also
launched a series of training
days, held twice annually, for our
on-site staff. These are run by a
mix of internal managers and
help to build relationships
between site and head office
colleagues, while ensuring that all
employees are aware of updated
systems and processes, as well
as non-operational initiatives,
such as those from our Doing
the Right Thing committee.

During the year, we provided 148
hours of training for centre staff
on a wide range of subjects.

We 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 supported
six 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 during the year
included:
– Certificate in Marketing.
– Accountancy (ACCA –

Association of Chartered
Certified Accountants,
CIMA – Chartered Institute
of Management Accountants
and AAT – Association of
Accounting Technicians).

– Real Estate (MSc).

Supporting our team
to do the right thing
Our desire and ability to give
back to our communities came
through strongly in the
employee workshops we held
to help articulate our values.
The Doing the Right Thing
committee works hard to
provide opportunities for
employees to volunteer or
fundraise for our chosen causes.

During the year, members of
our team gave 61 work days to
volunteer for charities, plus an
additional 60 personal days, and
along with customers, raised
£40,000 for various charities.

Case study:
Engaging our Facilities team
to reduce gas consumption
Having started to roll out
smart metering at our
properties, we had access to
data that allowed us to engage
with our in-house Facilities
Management team to reduce
gas consumption and
greenhouse gas emissions.
We held several educational
workshops throughout the
year and quarterly meetings
with senior team members to
track progress. Following
these efforts, gas consumption
decreased by 3% in the year.

Targets for the coming year
– Continue to engage our
Facilities Managers on
improving energy performance
of buildings they manage.

– Continue to support

employees through training
and professional development
programmes.

Our customers

The relationships we build and
maintain with our customers are
among the most critical for the
business, and constantly
enhancing these relationships
is central to our strategy.
The Workspace Advantage is all
about providing a best-in-class
service to our customers and
giving them support that
goes beyond the space they
let from us.

We continue to roll out our
programme of business insight
events, which bring customers
together from across the whole
portfolio and provide valuable
insight and learning alongside
networking opportunities. This
year, event themes included ‘the
rise of the bots’, digital finance
and the impact of neuroscience
on brand psychology.

We have seen a great response
from our customers to initiatives
that have a positive impact on
our communities and the
environment, and therefore
continue to engage with
customers on these. Social
media is one of the tools we use
to communicate with customers,
and the social posts that use the
#doingtherightthing hashtag are
some of our best-performing
posts, with engagement on
average 11% higher than
other posts.

Workspace Business Insight
event at Kennington Park.

Case study:
Recycling initiatives
We have continued to roll out
initiatives to improve recycling
rates across the portfolio. We
held 12 recycling roadshows
during the year, with the
centres visited demonstrating,
on average, a 10%
improvement in recycling
rates. We have put in place
new, clear consistent signage
throughout our centres and
launched our ‘recyclopedia’,
a customer information pack
to provide recommendations
and education on recycling.
As part of this work, we have
also committed to tackling
food waste, with food waste
streams introduced at 80%
of our cafés and a fast food
waste event held in
conjunction with the North
London Waste Authority at
The Chocolate Factory in
Wood Green, with 66
customers in attendance.

Our efforts during the year
have paid off, and we achieved
an average recycling rate
across our buildings of 66%
above our target of 65%.

Targets for the coming year
– Work with our customers to

increase the average recycling
rate across all buildings where
Workspace are responsible for
waste management to 70%
by 31 March 2019, whilst
maintaining 100% diversion
from landfill.

– Launch customer benefits

platform online for customers
to cross-promote services
and products.

– Continue to expand the

Workspace events programme.

Our communities

Our extensive footprint across
London means that we operate
in many different communities
throughout the city, and we
take our role as a landlord and
employer in those communities
seriously.

Through our programme
of refurbishments and
redevelopments, we aim to bring
high-quality business space to
the local communities, along
with the valuable custom and
footfall that comes with that.

One of the priorities of our Doing
the Right Thing strategy is to
leverage the business skills and
knowledge we have internally
at Workspace, as well as the
network of companies in our
space, to support disadvantaged
young people in London. The
support we provide takes a
number of forms, from running
careers events and assembly
talks at a school local to our
head office, to offering CV
workshops, interview practice
and apprenticeship opportunities
to young people from inner city
estates through our partnership
with the charity XLP.

Days Workspace staff spent
volunteering or fundraising
for charitable causes

121

Amount raised by Workspace
staff for the 2018 AHOY charity
rowing race

£23,500

This year, as an extension of
our hugely successful InspiresMe
work experience programme,
we decided to wrap up all of
the activity we do with young
people under the InspiresMe
umbrella and aim to roll it out
further across our network.
We will work with our centre
managers to build relationships
with schools local to all our
buildings and invite customers to
take part in InspiresMe activities,
such as the careers workshops.

Case study:
AHOY
Following the success of the
three Workspace teams who
took part in the Meridian Pull
Challenge in 2016, last year
we decided to expand the
challenge. In March 2018,
eight Workspace boats, with
six people in each, rowed
8.5 miles down the Thames
to Greenwich. The teams had
set themselves an ambitious
fundraising target of £16,000
for AHOY, the charity that uses
watersports to work with
disadvantaged and at-risk
young people. Fundraising
initiatives included a raffle,
bring-and-buy sale and
themed events throughout
the year. The teams exceeded
their fundraising target, raising
a total of £23,500 for AHOY.

Targets for the coming year
– Roll out InspiresMe events

with local schools for
customers across Workspace
business centres.

– Continue to work with charity
partners, XLP and MyBnk,
to run workshops for
disadvantaged young people
in London.

Our brand

Our brand is one of the most
important tools at our disposal
to excite and engage with
customers, and consequently
to drive enquiries for our space.

Our customers want to put their
own brand and identity on the
space they let from us, so our
brand is not hugely visible inside
our buildings. However, our
in-house Marketing team works
hard to ensure that the brand
is highly visible to businesses
as they start their search for
office space.

The Workspace Advantage
brand campaign that we ran
last year was effective in further
raising awareness of our brand
and offer.

Case study:
Brand Tracker
As part of the campaign
we launched in 2017, we
commissioned a brand tracker
survey to better understand
how far our brand reaches
consumers outside of our
customer base and the level
of awareness of Workspace
versus key competitors in
the market.

The survey was conducted
both before and after the
campaign went live to analyse
its effectiveness. We were
pleased to see that awareness
of Workspace increased
strongly following the
campaigns, with particular cut
through on our customer offer.
We also saw immediate action
taken as a result of the
campaigns, with web traffic
increasing significantly and
first-time visits to the site
up 38% year-on-year.

Targets for the coming year
– Ongoing communication

of The Workspace Advantage
positioning using social, digital
and traditional media.

– Continue the annual survey
to track brand awareness.

26 Workspace Group PLC Annual Report and Accounts 2018

27 Workspace Group PLC Annual Report and Accounts 2018

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Maximising our advantage

Chief Executive’s strategic review

What
makes us
different?

We are
income
focused:
£60.7m +20%
+8.6%

Adjusted trading profit after interest

Like-for-like rental growth

This year has seen, if possible,
an even greater spotlight on our
part of the real estate market.
We have seen a number of new
entrants and a never-ending
stream of media interest in the
growth of co-working. However,
despite the inevitable confusion
around the different ‘flexible’
office space products on offer,
I am delighted that Workspace
continues to cut through
the noise.

Demand for our space, driven
by our in-house marketing
efforts, has remained strong.
That strength of demand and
activity, with an average of 1,016
enquiries and 93 lettings per
month, has delivered excellent
income growth, and that is what
Workspace is really all about –
relentlessly driving income
growth across our portfolio
over the long term.

As a property company,
Workspace values ownership
of its assets. We nurture our
properties, seeking and capturing
opportunities to reposition,

refurbish and redevelop them
over time in order to meet
changing customer requirements
and deliver income growth.

Total rent roll was up 26.1%
in the year to £112.9m, and I
am particularly pleased that we
delivered rental growth at our
like-for-like properties of 8.6%.
The rental income growth has
continued to translate into a
very positive trading profit
performance, which increased
by 20% to £60.7m in the year.

28 Workspace Group PLC Annual Report and Accounts 2018

29 Workspace Group PLC Annual Report and Accounts 2018

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Chief Executive’s strategic review
continued

We are
customer
focused:
1,016
15

Buildings that are Wired Certified Gold or Platinum

Customer enquiries per month in 2017/18

We are
future
focused:

Project pipeline 2018–2021
sq. ft.
100,000

80,000

60,000

40,000

20,000

140,000

120,000

100,000

80,000

60,000

40,000

20,000

2017

2019
1. Easton Street
Completed projects Projects underway Projects with planning Pipeline Design
2. Brickfields
3. Pall Mall Deposit
4. Mare Street Studios
5. Bow Enterprise Park

2018
1. China Works
2. The Biscuit Factory
– Cocoa Studios

2019

2018

3. The Fuel Tank
4. Goswell Road
5. The Frames
6. Edinburgh House
7. Vox Studios (Phase 2)
8. Gray’s Inn Road
9. The Light Box

(Phase 3)

6. The Light Bulb

(Phase 2)

2020
1. Chocolate

2020

Factory (Part)

2. The

Shaftesbury
Centre

3. Leroy House
4. Greville Street

2021+

2021+
1. Marshgate
2. Rainbow Industrial Estate
3. Chocolate Factory (part)/

Parma House

4. Poplar Business Park

(Phase 2/3)

5. Havelock Terrace
6. Fitzroy Street
7. Alexandra House

Our industry, rightly so, has
become increasingly focused on
providing a service to customers
beyond their four walls. Since its
foundation, Workspace has
marketed directly to customers,
building strong relationships and,
as a result, developing a unique
understanding of their needs.
This focus on the customer,
coupled with ownership of our
real estate, allows us to adapt
our buildings and continually
evolve our offer.

This year, for example, we made
a commitment to roll out
WiredScore certifications across
our portfolio. Our achievement
of 15 Wired Certified Gold or
Platinum ratings so far
demonstrates the significant
work we are undertaking to
ensure our customers have
access to the best, most secure
and reliable technology
infrastructure in their space.

Whether debating the latest
technology innovations, looking
at potential property acquisitions
or reviewing our portfolio for
the next refurbishment or
redevelopment opportunity,
Workspace is always focused
on the future. With that in mind,
we regularly consider the depth
and experience of the Executive
Committee and, as a result, in
October 2017, John Robson was
promoted to the role of Asset
Management Director.

I am delighted that we have
delivered such a strong
performance over the last five
years, and believe we have the
right strategy in place to continue
to grow the business and deliver
further value for shareholders.

We have an extensive pipeline
of refurbishment and
redevelopment projects, and
during the coming year we will
complete nine projects, bringing
456,000 sq. ft. of new and
upgraded space to the market.
In the last year, we have also
acquired three large properties,
adding significant rental income
to our portfolio. Some of these

properties come with longer-
term leases in place but
provide attractive repositioning
opportunities in the future
alongside our existing project
pipeline.

With continued strong demand
for our product, a growing
potential customer base and a
robust balance sheet, Workspace
is well positioned for the future.

Jamie Hopkins
Chief Executive Officer

30 Workspace Group PLC Annual Report and Accounts 2018

31 Workspace Group PLC Annual Report and Accounts 2018

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Projects to be completed
in 2018/19

Projects underway
Projects with planning
Pipeline design

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Chief Executive’s strategic review
continued

The right
strategy
drives future
performance.

Right
market
London is
growing and
changing

The
Workspace
Advantage

Right
brand
Increasing
recognition
and reputation

Right
properties
Creating
modern growth
environments

Right
people
Driving
performance

Right
customers
Open to all

Super connected:
Delivering The
Workspace Advantage
requires all parts of
our business to work
together.

Our five strategic priorities
frame and help direct the
implementation of The
Workspace Advantage.

To help with the assessment
and successful delivery of our
strategy, the Board regularly
invites external advisers, as well
as internal Workspace teams,
into the Boardroom to share
insights and knowledge.

Our Executive Directors and
senior management team
spend a significant amount
of time out and about in the
business, visiting centres,

talking to centre managers and
meeting customers, as well as
analysing the competition.

All of this informs our
understanding of the market,
determines how we create
value through our business
model and feeds into our
risk assessments.

– Understanding and

responding to market trends
– page 8

– A business model designed
to create long-term value –
page 16

– A focus on Doing the Right
Thing helps us to manage
our resources and
relationships – page 22

– Using risk to help make the
right strategic decisions –
page 46

– Business review – page 62
– Our governance – page 72

32 Workspace Group PLC Annual Report and Accounts 2018

33 Workspace Group PLC Annual Report and Accounts 2018

Each year, the Board reviews
the strategy to ensure it remains
relevant for our business and
our market, while continuing
to deliver the best returns
for shareholders.

We believe that by placing The
Workspace Advantage at the
heart of the strategy, the whole
business has a central focus to
work towards.

We continue to have five
strategic pillars that drive value
for the business.

Strategic priorities that
drive Portfolio value
Right market
With its position as a global hub
for business and culture, London
remains the right market for our
business. The opportunity in
London is extremely attractive,
with strong demand from all
types of businesses for our
offer. We continue to see
opportunities to acquire new
assets that meet customer
demand for our space and
will deliver attractive returns
to shareholders, and our deep
market insight ensures we are
able to move quickly when these
opportunities arise.

Right properties
We have a high-quality portfolio
of properties in dynamic London
locations and we are constantly
upgrading our assets. We are
delivering capital and income
growth by letting up the new
and upgraded space delivered
by our extensive refurbishment
and redevelopment pipeline.
We remain focused on creating
and, opportunistically, acquiring
the right properties that will
attract our customers.

Fuel Tank, Deptford
(opening Summer 2018).

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Strategic priorities that
drive Platform value
Right customers
Our properties are open to all
and our customer base is made
up of some of London’s fastest
growing and established
businesses from a broad mix
of sectors. Our customers range
from freelancers, consultants
and early-stage businesses right
up to well-known brands and
established companies.

Right people
Employing the right people
continues to be critical for
the success of the business.
Workspace’s people display
deep knowledge of their
subjects, have an inquisitive
nature and a thirst for innovation,
and show genuine care for our
customers, our communities
and each other.

Right brand
Workspace has a strong brand,
and we work hard to ensure
that our offer is highly visible
to prospective customers as
they embark on their search for
office space. Digital marketing,
a strong social media presence
and employees who live our
values are all key to attracting
and retaining customers and
ensuring high levels of customer
satisfaction.

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Chief Executive’s strategic review
continued

Strategic priorities that drive Portfolio value

Strategic priorities that drive Platform value
Strategic priorities that drive Platform value

Strategic priority:
Right market

Strategic priority:
Right properties

Strategic priority:
Right customers

Strategic priority:
Right people

Strategic priority:
Right brand

Measuring
strategic
success

Financial KPIs

1.
Net rental
income £m

2.
Adjusted trading
profit after interest
£m

Description
Our portfolio is exclusively
based in London, where we
see continued strong customer
demand and opportunities to
acquire attractive real estate.

What we said we would
do in 2017/18
Seek opportunities to grow
our footprint in London and
add value by acquiring new
freehold properties.

Description
Creating the right environments
for our customers is critical and
our rolling programme of asset
management, refurbishment and
redevelopment projects ensures
our properties remain at the
cutting-edge of customer
requirements.

What we said we would
do in 2017/18
Continue to deliver on our
strong project pipeline to
improve the estate and further
grow our footprint.

Description
A key part of The Workspace
Advantage is the communities of
businesses that we create within
our centres, with regular insight
and networking events to
encourage further collaboration.

Description
Having the right skills and
experience within Workspace
is critical, but as important is
maintaining the right culture to
drive behaviours and therefore
business performance.

What we said we would
do in 2017/18
Open our offer to all businesses,
no matter their sector or size.
Roll out the brand campaign
to raise our profile among
prospects.

What we said we would
do in 2017/18
Ensure understanding of
and engagement with The
Workspace Advantage across
different departments and teams.

The market trends that
influenced our progress
Relevant London trends
– London is still seen as

a global hub for business.

– London continues

to attract significant
investment capital.

Relevant customer trends
– Businesses want built-in

flexibility and a well-designed
work environment that
encourages collaboration.

The market trends that
influenced our progress
Relevant London trends
– The spotlight on flexible
space continues to grow,
along with demand from
across the business spectrum.

Relevant customer trends
– Businesses want built-in

flexibility and a well-designed
work environment that
encourages collaboration.
– Employers are increasingly

focused on providing
healthy workplaces.

The market trends that
influenced our progress
Relevant London trends
– Small businesses are driving

the economy.

– The spotlight on flexible
space continues to grow,
along with demand from
across the business spectrum.

Relevant customer trends
– Businesses want built-in

flexibility and a well-designed
work environment that
encourages collaboration.

The market trends that
influenced our progress
Relevant customer trends
– Employers are increasingly

focused on providing
healthy workplaces.
– There is a drive for

companies to articulate
a wider purpose beyond
making a profit.

What we achieved in 2017/18
– Three major acquisitions in
exciting locations, adding
458,700 sq. ft. to the portfolio.
– Customer enquiries remained
strong at an average 1,016
per month.

What we achieved in 2017/18
– Recently launched properties
are letting up well, e.g. The
Record Hall reached 78.9%
occupancy in 10 months.
– Continued work on project

pipeline, with nine completing,
in 2018/19.

What we achieved in 2017/18
– 131 customer events held

during the year.

– 351 customers expanded
within Workspace during
the year.

What we achieved in 2017/18
– Worked with people across
the business to articulate
our company values, which
will help us to deliver The
Workspace Advantage.

What we aim to do in 2018/19
Continue to pursue acquisitions
in London where we see
opportunities to create value.

What we aim to do in 2018/19
Progress our extensive project
pipeline to drive income and
capital growth.

What we aim to do in 2018/19
Bring upgraded space to the
market for our customers and
launch online benefits platform.

What we aim to do in 2018/19
Launch the new Workspace
values, ensure engagement
with all employees and reward
successes.

Link to relevant principal risks
1, 2, 3, 4, 5, 10

Link to relevant principal risks
1, 2, 3, 4, 5, 8, 10

Link to relevant principal risks
3, 4, 5, 6, 9, 10, 11

Link to relevant principal risks
3, 4, 6, 7, 8, 9, 11

Link to relevant KPIs
Financial: 3, 5, 6, 7, 8
Non-financial: 2, 5

Link to relevant KPIs
Financial: 1, 2, 3, 4, 5, 6, 7, 8
Non-financial: 2, 4, 5, 6

Link to relevant KPIs
Financial: 1, 5, 6
Non-financial: 1, 2, 3, 4, 5, 6, 8

Link to relevant KPIs
Financial: 1, 2, 5, 6
Non-financial: 1, 5, 6, 7, 8

Description
In a competitive marketplace,
our brand is increasingly
important. Supported by
The Workspace Advantage
positioning, it has never
been stronger.

What we said we would
do in 2017/18
Roll out our brand campaign
to ensure The Workspace
Advantage is well recognised
and understood by customers
and prospects. Put in place
a brand tracker survey to
analyse awareness.

The market trends that
influenced our progress
Relevant London trends
– The spotlight on flexible
space continues to grow,
along with demand from
across the business spectrum.

Relevant customer trends
– Businesses want built-in

flexibility and a well-designed
work environment that
encourages collaboration.
– Technology is all-important,

both in the provision of
solutions for customers and
in creating a more engaging
customer experience.

What we achieved in 2017/18
– 1.1m website hits during

the year.

– 38% increase in first-time

visits year-on-year thanks to
The Workspace Advantage
brand campaign.

What we aim to do in 2018/19
Continue brand tracker survey
and drive further engagement
with the brand through social
media.

Link to relevant principal risks
3, 4, 5, 6, 7, 8, 9, 11

Link to relevant KPIs
Financial: 1, 2, 5, 6, 9
Non-financial: 1, 2, 3, 4, 5, 6, 8

34 Workspace Group PLC Annual Report and Accounts 2018

35 Workspace Group PLC Annual Report and Accounts 2018

2018

2017

2016

95.6

2018

60.7

79.2

74.1

2017

2016

50.7

43.9

+21%

+20%

Definition
Net rental income is the rental
income receivable after payment
of direct property expenses,
such as service charge costs,
and other direct unrecoverable
property expenses.

Definition
Adjusted trading profit after
interest is net rental income,
joint venture trading income
and finance income less
administrative expenses
and finance costs.

Further details in note 8 to the
financial statements.

Why this is important
to Workspace
Adjusted trading profit after
interest is a key measure for
Workspace and determines
dividend growth. We report and
review this figure at Board level
on a monthly basis compared
to previous years and to budget.

Adjusted trading profit after
interest demonstrates the
underlying performance of the
trading business and strength
of our business model. Both the
CEO and CFO are incentivised
on adjusted trading profit
after interest.
Movement in 2017/18
Adjusted trading profit after
interest for the year was £60.7m,
up 20% on the previous year.
Net rental income is the key
driver of trading profit thanks
to our relatively fixed cost base.

Why this is important
to Workspace
This is one of the most
important metrics for
Workspace as it drives our
trading profit, which in turn
determines dividend growth.

Movement in 2017/18
The increase in the year was
driven by significant growth in
rental income at our like-for-like
properties and an increase in
rental income from completed
projects thanks to the letting
up of new and upgraded space.
This year, acquisitions were also
a key driver of net rental income,
as we acquired three properties
with existing income in place.

Time period measured
Monthly

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Chief Executive’s strategic review
continued

Financial KPIs
Financial KPIs
continued
continued

3.
EPRA NAV
per share £

4.
Dividend per
share pence

5.
Like-for-like rent
roll growth %

6.
Like-for-like rent
per sq. ft. growth %

7.
Property
valuation £m

2018

2017

2016

10.37

2018

27.39

2018

8.6

9.53

9.23

2017

2016

21.07

15.05

2017

2016

7.6

2018

2017

12.9

13.7

15.4

2016

16.4

+8.8%

+30%

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.

Further details in note 9 to the
financial statements.

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.

Definition
The dividend payment per share
in issue.

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.

+8.6%

Definition
Like-for-like properties are
those with stabilised occupancy,
excluding recent acquisitions
and buildings impacted by
significant refurbishment or
redevelopment activity.

Rent roll is the current annualised
net rents receivable for occupied
units at the date of reporting.

Why this is important
to Workspace
Like-for-like rent roll growth
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.

+7.6%

Definition
Like-for-like rent per sq. ft. is the
like-for-like rent roll divided by
the occupied area generating
that rent roll.

Why this is important
to Workspace
Like-for-like occupancy, pricing
and rent roll 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.

Movement in 2017/18
Our EPRA NAV at 31 March 2018
was £10.37, up 8.8% from the
prior year.

Movement in 2017/18
A positive trading profit
performance and confidence in
our outlook, as well as adhering
to distribution requirements as
a REIT, have driven the Board to
recommend a 30% increase to
the total dividend for 2017/18.

Movement in 2017/18
Like-for-like rent roll has
continued to grow, increasing
by 8.6% year-on-year. This
demonstrates the strong
performance of our core assets
and the continued strong
demand for our product.

Movement in 2017/18
Like-for-like rent per sq. ft.
has increased by 7.6% in the
year, with average rent up
from £33.00 per sq. ft.
to £35.50 per sq. ft.

Time period measured
Six monthly

Time period measured
Weekly

2018

2017

2016

2,280

1,844

1,779

+5%*

*Underlying

Definition
The independent valuation of
our property portfolio, currently
valued by CBRE Limited.

See note 10 for reconciliation
to IFRS carrying value of
investment property.

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.

Movement in 2017/18
We have achieved an underlying
gain for the year of 5%. The uplift
in valuation of our like-for-like
portfolio was driven largely by
pricing growth, with equivalent
yield moving in by 0.1%. The
increase in valuation was also
driven by our acquisition of three
major properties in the year,
offset by disposals.

See Property Valuation section
of the Business Review on
page 67 for more detail.

Time period measured
Six monthly

The Record Hall has seen a
significant uplift in valuation
in the year.

36 Workspace Group PLC Annual Report and Accounts 2018

37 Workspace Group PLC Annual Report and Accounts 2018

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continued

Financial KPIs
continued

8.
Total Property
Return %

9.
Total Shareholder
Return %

Workspace customer,
MyDrive’s office at
The Leather Market.

11.3

8.2

2018

2017

2016

2018

2017 0.8

26.3

2016 (7)

29.4

11.3%

29.4%

Definition
Total Property Return is the
return for the year combining
the valuation movement on
our portfolio and the income
achieved in the year.

Definition
Total Shareholder Return is the
return obtained by a shareholder,
calculated by combining both
share price movements and
dividend receipts.

See Glossary of Terms
on page 187.

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 (‘IPD’), and is
compared to a benchmark group
so that we can see how we are
performing relative to similar
companies. Total Property
Return, and performance against
the benchmark, forms part of the
senior management team’s
bonus objectives.

Movement in 2017/18
Capital and income returns have
led us to outperform compared
to the IFD benchmark.

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 the
senior management team.

Movement in 2017/18
The strong return is due to
the progressive dividend policy
combined with positive growth
in share price over the year.

Non-financial KPIs

1.
Customer
advocacy %

2.
Customer
enquiries
monthly average

3.
Website visits
million per year

4.
Offer letters
monthly average

2018

2017

2018

2017

1,016

2018

1.14

2018

1,060

2017

0.85

2017

317

323

90%

Definition
Our customer advocacy score is
based on responses to customer
surveys, which are conducted
twice per year by an independent
third party organisation.

1,016

Definition
Customer enquiries represent
the number of enquiries we
receive for our space. Enquiries
come through our website, via
phone, from walk-ins or existing
customers looking to expand,
contract or move locations.

1.14m

Definition
Website visits measure the
number of times individuals visit
our website.

317

Definition
Offer letters are sent to
prospects once they have
viewed one or multiple
Workspace units and requested
an offer containing pricing
information and lease terms.

Why this is important
to Workspace
Our customers are at the heart
of our business and we regularly
seek to obtain feedback to
understand their overall
satisfaction with our offering. We
use the findings from the survey
to prompt changes to what we
offer our customers and to train
our staff. The customer
advocacy score also forms part
of the bonus objectives for
senior management.

Why this is important
to Workspace
Measuring enquiries helps us to
assess the strength of demand
for our product. Our internal
marketing platform generates
enquiries both on and offline and
we can dial up digital marketing
spend to target enquiries as
required, for example around
the launch of a new building.

Why this is important
to Workspace
Our website is our most
important marketing tool, with
the majority of enquiries coming
via the site. We are constantly
upgrading our site to ensure all
the information our customers
might require is visible and easy
to access.

Why this is important
to Workspace
Measuring the number of offer
letters we send out allows us
to assess the success of our
customer viewings and demand
for our space.

Movement in 2017/18
We had a fantastic response
rate to our customer survey this
year and the overall customer
advocacy score increased in
the year from 88% to 90%.

Movement in 2017/18
Customer enquiries remained
steady year-on-year thanks
to continued demand for
our space.

Movement in 2017/18
Website visits increased during
the year, thanks to The
Workspace Advantage
campaign driving traffic to
the site from digital advertising
and social media activity.
Of particular note, first-time
visits to the site increased by
38% year-on-year.

Movement in 2017/18
The average number of offer
letters per month remained
broadly flat during the year
reflecting the continued
demand for our space following
customer viewings.

Time period measured
Six monthly

Time period measured
Annually

Time period measured
Six monthly

Time period measured
Daily

38 Workspace Group PLC Annual Report and Accounts 2018

39 Workspace Group PLC Annual Report and Accounts 2018

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Chief Executive’s strategic review
continued

Non-financial KPIs
Non-financial KPIs
continued
continued

5.
New lettings
monthly average

6.
Renewals
monthly average

7.
Employee
volunteering days

8.
Customer events

Workspace Business Insight dinner
held at The Leather Market on the
subject of ‘The rise of the bots’.

2018

2017

2018

121

2018

131

2017

180

2018

2017

Definition
This measures the number of
lettings that Workspace signs
every month.

Definition
This measures the number of
lease renewals that we sign with
existing customers every month.

Why this is important
to Workspace
This is a key measure for the
business as lettings drive our
net rental income and, as a
result, trading profit.

Why this is important
to Workspace
Renewals are important as
they demonstrate how sticky
our customers are and help
us to capture reversion on
our portfolio.

Movement in 2017/18
Good levels of lettings have
continued throughout 2017/18
thanks to strong demand for
our space.

Movement in 2017/18
Despite being slightly down
year-on-year, we continued
to deliver good levels of lease
renewals during the year.

121

Definition
The number of days spent
by employees volunteering
or fundraising for our
selected charities.

131

Definition
The number of events held
at our centres for customers.
These include informal
networking events, as well
as business insight events
and consultations on topics,
such as alternative finance.

Why this is important
to Workspace
Giving back to our communities
is important to Workspace, and
we have a number of chosen
charities that we support as part
of our Doing the Right Thing
strategy. In particular, we believe
we are well positioned to provide
educational and careers support
to disadvantaged young people
as part of our InspiresMe
programme, and many of our
employees have got behind
this work.

Why this is important
to Workspace
Holding events to encourage
collaboration amongst
customers and to create
communities in our centres is a
key element of The Workspace
Advantage. The insights and
networking opportunities these
events provide help customers
to grow their businesses and,
in turn, aids customer retention.

Movement in 2017/18
The significant increase in the
year is largely because we added
personal days donated by
employees to volunteering
activities. This figure includes 61
working days and 60 personal
days. Going forward, we will
include both personal and
working days.

Movement in 2017/18
This number will move around
year to year as we do not have
a specific target. It is important
that we continue to run a
significant number of events
across our centres during
the year.

Time period measured
Weekly

Time period measured
Annually

Time period measured
Monthly

40 Workspace Group PLC Annual Report and Accounts 2018

41 Workspace Group PLC Annual Report and Accounts 2018

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4THINKING
4THINKING

LIKE A
LIKE A
CUSTOMER
CUSTOMER

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How Bryony,
How Bryony,
Development Executive,
Development Executive,
helps us deliver The
helps us deliver The
Workspace Advantage
Workspace Advantage

Each refurbishment or
Each refurbishment or
redevelopment project is a blank
redevelopment project is a blank
canvas and starts with a discussion
canvas and starts with a discussion
about the latest customer trends.
about the latest customer trends.

We have to think of everything
We have to think of everything
before we start, from where to put
before we start, from where to put
the comms room to how much
the comms room to how much
breakout space to create and the
breakout space to create and the
number of bicycle racks to install.
number of bicycle racks to install.
We work closely with our architects
We work closely with our architects
to fi nd the right solutions and
to fi nd the right solutions and
create the best environments
create the best environments
for our customers.
for our customers.

Bryony Gerega
Bryony Gerega
Development Executive
Development Executive
at Workspace, pictured
at Workspace, pictured
with architects from
with architects from
Squire & Partners at
Squire & Partners at
The Frames, Shoreditch.
The Frames, Shoreditch.

See how our teams help
See how our teams help
mitigate Customer
mitigate Customer
and Development risks
and Development risks
go to pages 51 and 52.
go to pages 51 and 52.

42 Workspace Group PLC Annual Report and Accounts 2018

44
44

45 Workspace Group PLC Annual Report and Accounts 2018

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Maximising our advantage

Using risk to help make the right
strategic decisions

Super connected:
Delivering The
Workspace Advantage
requires all parts of
our business to work
together.

In isolation risk mitigation helps
us manage specific subjects and
areas of the business. However,
when brought into our day-to-
day activities successful risk
management has helped us
maximise our advantage in 2018.

Market understanding
Monitoring the fundamentals
of the London market helped
us spot opportunities as well as
assess what our customers want.

Property acquisition
In 2018 risk mitigation helped us
assess the right opportunities –
where we knew we could deliver
our unique customer offer.

Development
We successfully guarded against
negative reputational impact on
nine ongoing refurbishments
where we were investing to
deliver The Workspace
Advantage.

– Understanding and

responding to market trends
– page 8

– A business model designed
to create long-term value
– page 16

– A focus on Doing the Right

Thing helps us to manage our
resources and relationships
– page 22

– Chief Executive’s strategic

review – page 28

– Business review – page 62
– Our governance – page 72

Aligning risks and strategy
In order to deliver our strategy and The Workspace Advantage
throughout the business we must ensure that we maintain a balance
between safeguarding against potential risks and taking advantage
of all potential opportunities.

Risk categories

Risk category:
Risk category:
1. Financing
1. Financing

Risk category:
Risk category:
2. Valuation
2. Valuation

Principal risk:
Principal risk:
Reduced availability of financing options resulting in inability
Reduced availability of financing options resulting in inability
to meet business plans or satisfy liabilities.
to meet business plans or satisfy liabilities.

Principal risk:
Principal risk:
Value of our properties declining as a result of external market
Value of our properties declining as a result of external market
or internal management factors.
or internal management factors.

Risk category:
Risk category:
3. Customer demand
3. Customer demand

Principal risk:
Principal risk:
Demand for our accommodation declining as a result of social,
Demand for our accommodation declining as a result of social,
economic or competitive factors.
economic or competitive factors.

Risk category:
Risk category:
4. Development
4. Development

Risk category:
Risk category:
5. Investment
5. Investment

Principal risk:
Principal risk:
Cost inflation and timing delays.
Cost inflation and timing delays.

Principal risk:
Principal risk:
Underperformance due to inappropriate strategy on acquisitions
Underperformance due to inappropriate strategy on acquisitions
and disposals.
and disposals.

Risk category:
Risk category:
6. Brand and reputation
6. Brand and reputation

Principal risk:
Principal risk:
Failure to meet customer and external stakeholder expectations.
Failure to meet customer and external stakeholder expectations.

Risk category:
Risk category:
7. Regulatory
7. Regulatory

Principal risk:
Principal risk:
The introduction of new requirements that inhibit activity. Failure
The introduction of new requirements that inhibit activity. Failure
to meet regulatory requirements leading to fines or tax penalties.
to meet regulatory requirements leading to fines or tax penalties.

Risk category:
Risk category:
8. Business interruption
8. Business interruption

Principal risk:
Principal risk:
Major events mean that Workspace is unable to carry out its
Major events mean that Workspace is unable to carry out its
business for a sustained period.
business for a sustained period.

Risk category:
Risk category:
9. Resourcing
9. Resourcing

Risk category:
Risk category:
10. London
10. London

Principal risk:
Principal risk:
Failure to progress with strategy due to inability to recruit and
Failure to progress with strategy due to inability to recruit and
retain correct staff.
retain correct staff.

Principal risk:
Principal risk:
Changes in the political, infrastructure and environmental dynamics
Changes in the political, infrastructure and environmental dynamics
of London lead to reduced demand from our customers.
of London lead to reduced demand from our customers.

Risk category:
Risk category:
11. Cyber security
11. Cyber security

Principal risk:
Principal risk:
Loss of data or income due to cyber security attack on our
Loss of data or income due to cyber security attack on our
business and on that of our customers.
business and on that of our customers.

Our strategic priorities
Our strategic priorities
Right market
Right market
We operate within
We operate within
the London market
the London market
which continues to
which continues to
be a resilient and
be a resilient and
vibrant market in
vibrant market in
which to operate.
which to operate.

Right properties
Right properties
We deliver capital
We deliver capital
and income growth
and income growth
by upgrading and
by upgrading and
acquiring the right
acquiring the right
properties in
properties in
dynamic locations.
dynamic locations.

Right customers
Right customers
Our customers
Our customers
are at the heart
are at the heart
of everything
of everything
we do and we
we do and we
are committed
are committed
to providing them
to providing them
with a best-in-
with a best-in-
class service.
class service.

Right people
Right people
We need the
We need the
right people and
right people and
expertise to deliver
expertise to deliver
our strategy.
our strategy.

Right brand
Right brand
We work hard to
We work hard to
ensure our brand
ensure our brand
is reflective of our
is reflective of our
product, our
product, our
customers and
customers and
our culture.
our culture.

More information
More information
on page 50
on page 50

More information
More information
on page 51
on page 51

More information
More information
on page 52
on page 52

More information
More information
on page 53
on page 53

More information
More information
on page 54
on page 54

More information
More information
on page 55
on page 55

More information
More information
on page 56
on page 56

46 Workspace Group PLC Annual Report and Accounts 2018

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Activities in 2017/18

1
We have undertaken extensive
review of Data Protection to
ensure all staff are fully aware
of GDPR legislation and
requirements. We have also
created a specific Data
Protection Risk register to fully
understand our risk exposure
and document the controls
we have in place to mitigate
these risks.

2
We have undertaken a variety of
internal audits of our properties
covering financial, operational,
health and safety and facilities
management issues. This review
process also helps strengthen
communication with our staff
out on-site.

Areas of focus for 2018/19
We have a rolling plan of risk management objectives and over the
coming year plan the following activities:

1
Continuing to ensure we are
safeguarded with regard to
cyber security and that we are
keeping aware of risks and
issues in this area changing as
technology changes. We are
progressing with a detailed
review and updating of our
IT risks as this is a rapidly
evolving area.

2
Implementing risk management
software to help effectively
capture findings from our
internal property site reviews,
third party audits and detailed
information to show our key
controls are operating.

Using risk to help make the right strategic decisions
continued

Whilst our strategy remains
broadly unchanged, 2017/18
has been an exciting year
with us undertaking significant
acquisition activity and
accelerating our capital
expenditure on a number of
large refurbishment and asset
management schemes. We have
also continued to reshape the
portfolio with the sale of some
industrial centres. Taking
advantage of opportunities
but ensuring we are considering
the risks related to these
opportunities is key, and we aim
to do this as part of our business
activity rather than as a
standalone exercise.

2017/18 has also seen continued
change and uncertainty within
the political and economic
environment and there remains
some uncertainty over the
outcome of the EU Referendum.
We haven’t seen or assessed any
direct impact of this environment
on our business, but are
continuing to ensure we are
closely reviewing Key
Performance Indicators and
our forecast to detect any issues.
We continue to ensure low levels
of gearing and active cash and
financing forecasting.

Risk culture
Risk management continues
to be an integral part of all
our activities. Risks and
opportunities are considered
in every business decision we
make. It is embedded in our
culture to consider potential risks
of any new business decision.
We focus on key risks which
could impact on the
achievement of our strategic
goals and therefore on the
performance of our business.

We are fortunate to have
created a positive culture within
Workspace which encourages
open communication and
engagement. This enables staff
from all areas of the business
to feel free to raise risks or
opportunities, no matter how
small, to their managers and
teams. Having this culture helps
ensure that information is
communicated across the
business well.

Risks are considered at every level
of the business including when
approving corporate transactions,
property acquisitions and
disposals and whenever
undertaking refurbishment
and redevelopment projects.

The Executive Committee
meets weekly to discuss key
performance measures and
any change in these, meaning
they are ideally placed to notice
any concerning changes or
early warnings.

Further information on our KPIs
can be found on pages 35 to 40.

Risk appetite
Risk appetite reflects the overall
level of risk acceptable with
regards to our principal business
risks. The Board is responsible
for deciding the amount of risk
it is willing to take.

High risk, after considering
the controls we have in place
to mitigate risks, is not generally
tolerated. We work towards a
medium to low risk profile,
ensuring that we have mitigating
actions in place to bring each
risk down to within the agreed
risk appetite. Currently all our
principal strategic risks are
subject to the same moderate
risk appetite.

Risk Management Structure
We have an established Risk
Management Structure in place
to help us capture, document
and manage risks facing our
business. We monitor this
structure to ensure it is
appropriate for our company
size, culture 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 a Risk Committee,
which meets regularly and has
responsibility for co-ordinating
risk management activities
throughout the Group. It
prepares regular reports to the
Board and Audit Committee.

The Risk Committee comprises
the Chief Executive Officer,
the Operations Director and
Company Secretary, alongside
the Head of Finance, the Head
of IT Operations and other 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.
We also invite centre managers
to attend Risk Committee
meetings on a rolling basis.

Risk registers for all business
areas are maintained and risks
are assessed against a defined
scoring mechanism to ensure
consistency.

Overall, we review risks from
two angles:

1. Principal Business (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 ultimately

owned by the Board.
– The Board and the Audit

Committee receive regular
updates on these Principal
Risks three times a year.

– The Board is satisfied that we
continue to operate within our
desired risk appetite for our
Strategic Risks.

Our Strategic Risks are shown
in the heat map and in detail
on pages 50 to 56.

2. Operational risks
– These are lower level risks

covering day-to-day
processes and procedures
and regulation requirements.

– These cover all areas of the
business, such as Finance,
Operations, Investment
and Development.

– These risks are 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.

n
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o
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A

y
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L

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s
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P

y
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i
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U

Further details on the
Risk Committee can be
found in our Governance
section on page 111.

y
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P

e
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R

Insigniﬁcant
Impact

Pre-mitigation
Post-mitigation

Our Risk Management Structure

Board and Audit Committee

Executive Committee

First line
of defence

Second line
of defence

Third line
of defence

– Management

controls.
– Policy and
procedure.

Ongoing review
and audit by
Risk Committee.

– Financial control.
– Security.
– Risk

management.
– Quality control.
– Key

Performance
Indicators.
– Compliance.

Current assessment of Principal Business Risks

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O
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Low

Medium

High

Severe

1 Financing
2 Valuation
3 Customer demand
4 Development
5
Investment
6 Brand and reputation
7 Regulatory
8 Business interruption
9 Resourcing
10 London
11 Cyber security

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48 Workspace Group PLC Annual Report and Accounts 2018

49 Workspace Group PLC Annual Report and Accounts 2018

Using risk to help make the right strategic decisions
continued

Risk category:
1. Financing

Risk category:
2. Valuation

Laura Hamblett,
Assistant Centre Manager
at Clerkenwell Workshops.

Risk category:
3. Customer demand

Principal risk:
Reduced availability of financing options resulting
in inability to meet business plans or satisfy liabilities.

Principal risk:
Value of our properties declining as a result of external
market or internal management factors.

Principal risk:
Demand for our accommodation declining as a result
of social, economic or competitive factors.

Dashboard

Impact
Severe

Probability (post-mitigation)
Unlikely

Change from last year
No change

Risk appetite
Medium

Link to strategy
– Right markets.
– Right properties.

Right
market

Right
brand

Right
properties

The
Workspace
Advantage

Right
people

Right
customers

Link to KPIs
7. Property valuation.
8. Total Property Return.

Key metrics

+5%Increase in underlying

property valuation

Risk impact
– Covenants (Loan to Value).
– Impact on share price.

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.

Risk management in action
We have maintained a low LTV
ratio, protecting us from any
potential adverse changes
in the market.

During the year we have made
significant progress with our
programme of refurbishment
works, enhancing the standard
and desirability of our properties.

Dashboard

Impact
Severe

Probability (post-mitigation)
Unlikely

Change from last year
No change

Risk appetite
Medium

Link to strategy
– Right markets.
– Right properties.

Right
market

Right
brand

Right
properties

The
Workspace
Advantage

Right
people

Right
customers

Key metrics

£300m

£200m new Private Placement
Notes and £100m of increased
bank facility

23%Loan to value remains

low after new acquisitions

Risk impact
– Inability to fund business

plans.

– Restricted ability to invest

in new opportunities.
– Increased interest costs.
– Negative reputational impact
amongst lenders and in the
investment community.

Mitigation
We regularly review funding
requirements for business plans
and 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. There is further detail
in the Viability Statement on
page 57.

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 interest rates and swap
arrangements on our loan
facilities so that our interest
payment profile is stable.

Risk management in action
Having made plans to acquire
several large buildings during
the year and continue with
our extensive number of
refurbishment schemes, it was
imperative we continue to have
good financing arrangements
in place. We always aim to have
a variety of funding sources and
maturity dates. In the summer
of 2017, we raised £200m of
new Private Placement Notes
for eight and 10-year periods,
helping us get the funding
to action our acquisition and
refurbishment plans, alongside
extending our debt maturity.
We also increased our bank
facility by £100m.

50 Workspace Group PLC Annual Report and Accounts 2018

51 Workspace Group PLC Annual Report and Accounts 2018

Dashboard

Impact
Severe

Probability (post-mitigation)
Unlikely

Change from last year
No change

Risk appetite
Medium

Link to strategy
– Right markets.
– Right properties.
– Right customers.
– Right people.
– Right brand.

Right
market

Right
brand

Right
properties

The
Workspace
Advantage

Right
people

Right
customers

Link to KPIs
5. Like-for-like rent roll.

Key metrics

91.6%Like-for-like occupancy
12,189
90%Customer advocacy score

Enquiries in the year

Risk impact
– Fall in occupancy levels

at our properties.
– 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.

We also stress test our business
plans to assess the sensitivity
we could tolerate if demand
from our customers reduced.
This can be found in the Viability
Statement on page 57.

Risk management in action
We launched a second phase
of our successful Workspace
Advantage campaign to raise
our brand awareness.

We continue to liaise with
our customers at each step of
their journey with Workspace.
We seek out their feedback and
comments on their experience
with Workspace, and utilise
results to make changes
and improvements.

We also continue to increase our
social media presence, and have
seen increasing popularity of our
networking business events.

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Using risk to help make the right strategic decisions
continued

Risk category:
4. Development

Principal risk:
Cost inflation and timing delays.

Dashboard

Impact
High

Probability (post-mitigation)
Unlikely

Change from last year
No change

Risk appetite
Medium

Link to strategy
– Right markets.
– Right properties.
– Right customers.
– Right people.
– Right brand.

Right
market

Right
brand

Right
properties

The
Workspace
Advantage

Right
people

Right
customers

Link to KPIs
7. Property valuation.
8. Total Property Return.

Key metrics

6Mixed-use redevelopment

projects underway or
contracted for sale

Risk impact
– Failure to deliver expected
returns on developments.

– Cost overruns.
– Delayed delivery of key

projects.

– Poor reputation amongst

contractors and customers
if projects are delayed.

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.

Risk category:
5. Investment

Risk category:
6. Brand and reputation

Principal risk:
Under performance due to inappropriate strategy
on acquisitions and disposals.

Principal risk:
Failure to meet customer and external stakeholder
expectations.

Dashboard

Impact
High

Risk impact
– Poor timing of disposals.
– Poor timing of acquisitions.
– Failure to achieve expected

returns.

– Negative reputational impact

Dashboard

Impact
High

Probability (post-mitigation)
Unlikely

amongst investors and
sell-side analysts.

Probability (post-mitigation)
Unlikely

Change from last year
No change

Risk appetite
Medium

Link to strategy
– Right markets.
– Right properties.
– Right customers.
– Right brand.

Right
market

Right
brand

Right
properties

The
Workspace
Advantage

Right
people

Right
customers

Link to KPIs
3. EPRA NAV per share.
8. Total Property Return.
9. Total Shareholder Return.

Key metrics

Acquisitions in financial year

£368m
£125m

Proceeds from disposals

Change from last year
No change

Risk appetite
Medium

Link to strategy
– Right customers.
– Right people.
– Right brand.

Right
market

Right
brand

Right
properties

The
Workspace
Advantage

Right
people

Right
customers

Link to KPIs
5. Like-for-like rent roll.
10. Customer advocacy.

Key metrics

8.6%Like-for-like rent roll growth

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 via the monthly
Board Pack.

Property disposals are subject
to detailed review, appraisal
and Board approval.

Risk management in action
In the year we acquired The
Salisbury, a landmark building in
Finsbury Circus. This acquisition
was reviewed and analysed in
detail prior to exchange so that
any potential risks were taken
into account. Detailed
investment appraisals and due
diligence work was undertaken.
Following acquisition, monthly
reviews on performance against
expectations have been
provided to the Board.

Risk impact
– Damage to brand and
perception amongst
customers and stakeholders.
– Adverse publicity impacting

on demand from new
customers.

– Worse reputation amongst
all stakeholders as a result.

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.

We maintain regular
communication with all
stakeholders and key
shareholders. We hold investor
presentations, roadshows and
an annual Capital Markets Day.

Risk management in action
We launched a second phase
of our successful Workspace
Advantage campaign to raise
our brand awareness.

The use of social media channels,
such as Twitter, to engage with
our customers continues to be
very successful and helped to
create business communities
within our centres.

52 Workspace Group PLC Annual Report and Accounts 2018

53 Workspace Group PLC Annual Report and Accounts 2018

Work ongoing at
redevelopment site,
Fuel Tank in Deptford.

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Using risk to help make the right strategic decisions
continued

Risk category:
7. Regulatory

Risk category:
8. Business interruption

Principal risk:
Failure to meet regulatory requirements leading
to fines or tax penalties, or the introduction of new
requirements that inhibit activity.

Principal risk:
Major events mean that Workspace is unable to carry
out its business for a sustained period.

Risk impact
– Loss of critical data.
– Loss of access for customers

to work at our business
centres.

– Potential loss of income.
– Potential negative impact
on reputation amongst
customers.

Mitigation
We have robust Business
Continuity Plans and procedures
in place which are regularly
tested and updated.

IT controls and safeguards are
in place across all our systems,
including a specific standalone
data centre back-up facility.

Risk management in action
We have developed a crisis
management plan to document
how we would deal with a major
incident or downtime with our
systems. This is to enhance
our business continuity plans
and ensure that key senior
staff are aware of roles and
responsibilities in the event
of any business interruption.

Dashboard

Impact
Medium

Risk impact
– Fines or penalties for failure
to adhere to regulations.

– Failure to identify and respond

to the introduction of new
requirements.

Dashboard

Impact
High

Probability (post-mitigation)
Possible

– Health and Safety breaches.
– Negative impact on reputation

Probability (post-mitigation)
Unlikely

Change from last year
No change

Risk appetite
Medium

Link to strategy
– Right properties.
– Right people.
– Right brand.

Right
market

Right
brand

Right
properties

The
Workspace
Advantage

Right
people

Right
customers

Link to KPIs
10. Customer advocacy.

Change from last year
No change

Risk appetite
Medium

Link to strategy
– Right people.
– Right brand.

Right
market

Right
brand

Right
properties

The
Workspace
Advantage

Right
people

Right
customers

Key metrics

195Staff trained on GDPR

in year

amongst investors and
partners/suppliers.

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.

The Risk Committee provides
regular updates to the Board
on emerging risks and issues.

The Company Secretary issues
a detailed briefing to the Board
regularly.

The Group’s Head of Health
and Safety meets regularly with
the Chief Executive Officer to
keep abreast of any actual or
potential Issues.

Risk management in action
Regulatory risk has been a key
focus for Workspace in 2017/18
with impending changes to
GDPR requirements and also
us falling into the HMRC Senior
Accounting Officer regime
(SAO) with gross assets being
over £2bn.

We have reviewed our taxation
strategy document which
outlines our overall approach
to tax and the controls we have
in place to ensure compliance.
This is being published on our
website. We have also
undertaken some detailed
reviews of key taxation areas and
developed a rolling programme
of reviews.

Risk category:
9. Resourcing

Principal risk:
Failure to progress with strategy due to inability
to recruit and retain correct staff.

Dashboard

Impact
High

Probability (post-mitigation)
Unlikely

Change from last year
No change

Risk appetite
Medium

Link to strategy
– Right customers.
– Right people.
– Right brand.

Right
market

Right
brand

Right
properties

The
Workspace
Advantage

Right
people

Right
customers

Link to KPIs
1. Net Rental Income growth.
2. Adjusted trading profit after

interest.

3. EPRA NAV per share.
4. Dividend per share.
5. Like-for-like rent roll.
6. Like-for-like rent per sq. ft.
7. Property valuation.
8. Total Property Return.
9. Total Shareholder Return.

Key metrics

22Internal promotions in year

Risk impact
– 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 management in action
Our staff are what makes our
business work and drive the
success of the Company,
alongside making our business
centres a fun and vibrant place
to work for both staff and
customers. We wanted to build
on the culture we have and
ensure we are communicating
this well, so a series of staff
workshops were held to discuss,
debate and celebrate the culture
we have and consider how we
can further improve and
enhance this.

We also continue to develop
our staff with the aim to making
them feel committed and
engaged to work towards
delivering our overall objectives.
We have had a number of
internal promotions in the year
reflecting the commitment and
quality of our staff.

GDPR
Extensive review of our data has been
undertaken throughout the year in advance
of GDPR requirements with us reviewing our
document retention policies, documenting
all our key data in information asset registers
and a detailed training programme for all
staff. This has been a useful review
programme and helped to identify some
efficiencies and changes to how we store,
retain and manage data.

54 Workspace Group PLC Annual Report and Accounts 2018

55 Workspace Group PLC Annual Report and Accounts 2018

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Using risk to help make the right strategic decisions
continued

Going Concern and Viability Statement

Risk category:
10. London

Risk category:
11. Cyber security

Principal risk:
Changes in the political, infrastructure and
environmental dynamics of London lead to reduced
demand from our customers.

Principal risk:
Loss of data or income due to cyber security attack
on our business and on that of our customers.

Dashboard

Impact
High

Probability (post-mitigation)
Unlikely

Change from last year
No change

Risk appetite
Medium

Link to strategy
– Right markets.
– Right properties.
– Right customers.

Right
market

Right
brand

Right
properties

The
Workspace
Advantage

Right
people

Right
customers

Link to KPIs
2. Adjusted trading profit after

interest.

5. Like-for-like rent roll.
6. Like-for-like rent per sq. ft.
7. Property valuation.
9. Total Shareholder Return.

Risk impact
– Impact on demand for space
if London adversely affected
by a major incident.

Mitigation
Having been based within
London for over 30 years,
we have a deep knowledge
of our markets and locations.

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.

Risk management in action
With the ongoing uncertainty
in the political and economic
environment on the back of the
EU Referendum, it is important
that we remain vigilant to any
potential issues or impacts that
we foresee. We have yet to see
any specific impact on our
business, but we continue to
monitor our key performance
indicators each month so that
we could quickly react to any
trends identified. We also ensure
we have adequate financing
arrangements in place from a
variety of sources and a spread
of maturity dates, and undertake
a five-year plan with some
scenario testing.

Dashboard

Impact
High

Probability (post-mitigation)
Unlikely

Change from last year
No change

Risk appetite
Medium

Link to strategy
– Right customers.
– Right people.
– Right brand.

Right
market

Right
brand

Right
properties

The
Workspace
Advantage

Right
people

Right
customers

Link to KPIs
10. Customer advocacy.

Risk impact
– Loss of critical data.
– Financial loss due to fraud.
– Reputational damage
amongst customers.
– Potential loss of income.

Mitigation
Monitoring information on
security threats and targets.

Monitoring guidance and best
practice issued by Government
and advisers.

Review of IT systems and
infrastructure in place to ensure
these are as robust as possible.

Risk management in action
Cyber security and the safety
and security of our systems and
data remains key for us. This area
is more of a challenge due to the
constant evolution of technology
and the risks which are posed.

Work has been undertaken
by the Head of I.T. Operations
to map out risks and controls in
much greater depth. Staff have
also been required to complete
a detailed cyber security training
module with ongoing training
and workshops planned.

Going Concern
The Group’s activities, strategy
and performance are explained
in the Strategic Report on pages
3 to 71.

Further detail on the financial
performance and financial
position of the Group is provided
in the financial statements on
pages 140 to 178.

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.

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 taking
account of the current position
and principal risks of the business.

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 latest strategy day was held
in September 2018 and reviewed
the detailed business plan for the
five years to 2022. The plan was
updated in April 2018 to extend
it to 2023 and to include the
Centro acquisitions. This plan was
reviewed at the Audit Committee
meeting on 30 May 2018.

The business plan is underpinned
by a detailed financial model
based on assumptions around
the key drivers of revenue, profit,
capital expenditure and cash flow.

The key assumptions
underpinning the plan are:
– Conservative growth in pricing
with stable occupancy 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
2022, can be extended on
acceptable terms.

The Group’s strategy and
business model are described
on pages 16 and 28.

The Board has considered the
key risks and mitigating factors
that could impact the Group,
details of which can be found on
pages 46 to 56. 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.

Sensitivity analyses are prepared
to understand the impact of the
identified risks on solvency and
liquidity. The specific risks which
were evaluated are shown in the
table on the right.

The Group benefits from having
thousands of customers spread
across 66 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. For this
reason, the highest risk to the
Group is an event or series of
events that would impact on
the London economy and
property market.

Of the scenarios tested, the most
significant impact would be to
the level of available facilities
resulting from an inability to
refinance existing facilities.

56 Workspace Group PLC Annual Report and Accounts 2018

57 Workspace Group PLC Annual Report and Accounts 2018

To mitigate this risk, the Group
continually reviews funding
requirements and maintains a
close relationship with existing
and potential funding partners to
ensure the continuing availability
of debt finance. Also, the
maturity of debt facilities is
spread over a number of years
to avoid a concentration of risk
in one period and gearing is
relatively low with LTV of 23%
as at year end.

There are a number of mitigating
factors that were not considered
in the scenarios tested but which
could be actioned:
– Disposal of assets.
– Reduction in dividend.
– Reduction in refurbishment

programme.

The Board conducted this
review for the five-year period to
31 March 2023, which was selected
for the following reasons:

Risk sensitivity analyses

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 5.5 years.

The conclusion of these
sensitivity analyses is that the
Group would have adequate
means to maintain 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.

Specific risk

Risk category

Sensitivity analysis

A decline in demand
for space which
impacts on occupancy
and pricing levels.

– Valuation.
– Customer.
– London.

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 and expansion in
yields as experienced
during the last
recession over a
one-year period.

Inability to refinance
debt facilities falling
due in the five-year
period.

– Valuation.
– London.

– London.
– Business

interruption.

– Financing.

Changes in the
London real estate
environment which
impact on commercial
property yields.

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.

Changes in the
London residential
market which impacts
on ability to realise
cash proceeds at
redevelopment
schemes.

– Valuation.
– Development.
– London.

Reduction in cash
proceeds from
non-contracted
redevelopment
schemes.

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I LOVE
SPINNING
PLATES

58 Workspace Group PLC Annual Report and Accounts 2018

59 Workspace Group PLC Annual Report and Accounts 2018

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How Roshi Klair
How Roshi Klair
helps us deliver The
helps us deliver The
Workspace Advantage
Workspace Advantage

I am always on the move.
I am always on the move.

With 23 properties to manage,
With 23 properties to manage,
I spend my days visiting sites
I spend my days visiting sites
all over London, chatting to
all over London, chatting to
centre managers about new
centre managers about new
customers moving in or to our
customers moving in or to our
Facilities Technicians about
Facilities Technicians about
any issues on site.
any issues on site.

There’s a lot on my plate but
There’s a lot on my plate but
it’s worth it when I see happy
it’s worth it when I see happy
customers using our space.
customers using our space.

Roshi Klair
Roshi Klair
Asset Manager at
Asset Manager at
Workspace, pictured in
Workspace, pictured in
the newly refurbished
the newly refurbished
cafe, Grandpa Joe’s, at
cafe, Grandpa Joe’s, at
The Chocolate Factory
The Chocolate Factory
in Wood Green.
in Wood Green.

To read a comprehensive
To read a comprehensive
review of everything
review of everything
we have done in 2018
we have done in 2018
go to pages 62 to 71.
go to pages 62 to 71.

58 Workspace Group PLC Annual Report and Accounts 2018

60
60

61 Workspace Group PLC Annual Report and Accounts 2018

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Delivering the advantage in 2017/18

Business review
How we performed in 2017/18

At a glance

Total Rent Roll

Estimated cost of refurbishment projects underway

£112.9m
£152m
£368m

Acquisitions in the year

Our portfolio

Like-for-like
Acquisitions
Redevelopments
Refurbishments
Crossrail
Northern Line extension

WOOD
GREEN

ISLINGTON

CAMDEN

KING’S
CROSS

SHOREDITCH

LADBROKE
GROVE

FARRINGDON

OLD
STREET

BETHNAL
GREEN

STRATFORD

PADDINGTON

WEST
END

THE
CITY

LONDON
BRIDGE

WATERLOO

VICTORIA

KENNINGTON

CANARY
WHARF

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BATTERSEA

WANDSWORTH

Properties

Acquisitions in 2017/18

Refurbishments underway

Redevelopments underway

Like-for-like

Acquisitions

Refurbishments

Redevelopments

Crossrail

Northern Line extension

For the complete property
listing, see pages 185 to 186.

For more Acquisition details,
see page 68.

For more Refurbishment
details, see page 68.

For more Redevelopment
details, see page 69.

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Properties featured in the business review

CHISWICK

HAMMERSMITH

EARLS COURT

Property
Centro Buildings
Location
Camden, NW1
What we did
Acquired in two parts in
February and April 2018
for a total of £186m.

Property
The Chocolate Factory
Location
Wood Green, N22
What we did
We have received planning permission for a mixed-use
redevelopment of The Chocolate Factory and Parma House to
provide 230 new homes and 26,000 sq. ft. of new commercial
space to add to our existing space there.

Property
The Record Hall
Location
Farringdon, EC1
What we did
Having completed a major
refurbishment in May 2017,
The Record Hall reached 78.9%
occupancy by the end of
March 2018.

NW1

N22

EC1

62 Workspace Group PLC Annual Report and Accounts 2018

63 Workspace Group PLC Annual Report and Accounts 2018

Table 1
Enquiries and lettings

Quarter ended

Average number
per month

Enquiries
Lettings

31 Mar
2018

1,111
92

31 Dec
2017

858
86

30 Sep
2017

1,039
97

30 Jun
2017

1,055
95

31 Mar
2017

1,183
101

Table 2
Like-for-like rent roll

Like-for-like properties

Rent roll growth
Occupancy movement
Rent per sq. ft. growth

Table 3
Acquisitions

The Salisbury
Fitzroy Street
Alexandra House
Centro Buildings**

Total

Six months ended

31 Mar
2018

30 Sep
2017

4.3%
(0.7)%
4.8%

4.1%
1.5%
2.7%

31 Mar
2017

6.2%
(0.3%)
6.7%

30 Sep
2016

7.1%
0.2%
5.7%

Acquired

Jun 2017
Apr 2017
Oct 2015
Feb 2018

Lettable
area

(sq. ft.)

Rent Roll
at 31 March
2018

Occupancy
at 31 March
2018

235,000
93,000
55,000
131,000

£11.2m*
£4.9m
£0.7m
£4.9m

£21.7m

90.3%
100%
100%
85.2%

There is ground rent of 22% of rents received payable to the
City of London Corporation.

** Excludes Centro 1 & 2 acquired in April 2018

Business review
continued

Enquiries and lettings
We have seen a good level
of demand for space at our
business centres across London
with enquiries averaging 1,016
per month (2017: 1,060), and
lettings averaging 93 per month
(2017: 99).

See Table 1, right.

We saw an increase in enquiry
levels in the fourth quarter of
the year, following the seasonally
quieter third quarter, and the
good levels of enquiries and
lettings have continued into
the current financial year.

Rent roll
Total rent roll, representing
the annual net rental income
at a given date, was up 26.1%
(£23.4m) to £112.9m at
31 March 2018:

Rent Roll

At 31 March 2017
Like-for-like portfolio
Completed projects
Refurbishment
and Redevelopment
Projects
Acquisitions
Disposals
Other

At 31 March 2018

£m

89.5
5.2
3.6

(1.7)
21.0
(3.9)
(0.8)

112.9

The total estimated rental
value (ERV) of the portfolio,
comprising the ERV of the
like-for-like portfolio, properties
acquired and those currently
undergoing refurbishment or
redevelopment (but only
including properties at the
design stage at their current rent
roll and occupancy) is £167.6m.
Assuming a 90% occupancy
level at all properties, except
those at the design stage, this
equates to a rent roll of £151.3m,
£38.4m higher than the current
rent roll.

Like-for-like Portfolio
The like-for-like portfolio
represents 58% of the total
rent roll as at 31 March 2018.
It comprises properties with
stabilised occupancy, excluding
recent acquisitions and buildings
impacted by significant
refurbishment or redevelopment
activity. The like-for-like portfolio
has been restated in the year for
two properties transferred in
from completed projects, three
disposals and one property
transferred to the acquisition
category. Like-for-like trends
reported for previous financial
years are not restated for the
property transfers made in the
current financial year.

The like-for-like rent roll has
increased by 8.6% (£5.2m) in the
year to £65.9m. Rent roll growth
of 4.3% in the second half of the
year compares to 4.1% in the first
half. The growth over the year
has come from a 7.6% increase
in rent per sq. ft. to £35.50 and
a 0.8% increase in occupancy
to 91.6%.

See Table 2, right.

If all the like-for-like properties
were at 90% occupancy at the
CBRE estimated rental values at
31 March 2018, the rent roll would
be £72.5m, £6.6m higher than
the actual cash rent roll at
31 March 2018.

Completed Projects
Rent roll increased by £3.6m
at the six completed projects to
£14.7m. This category includes a
new business centre, The Record
Hall, in Holborn which opened
in May 2017 where occupancy
reached 78.9% by the end
of March 2018.

Enquiries per month

1,016

64 Workspace Group PLC Annual Report and Accounts 2018

New lettings per month

If the six buildings were all at
90% occupancy at the CBRE
estimated rental values at
31 March 2018, the rent roll would
be £17.0m, £2.3m higher than
the 31 March 2018 rent roll.

Projects Underway –
Refurbishments
We are currently underway on
12 refurbishment projects that
will deliver 638,000 sq. ft.
of new and upgraded space.
As at 31 March 2018, rent roll was
£6.6m, down £1.6m in the year.
We expect to complete seven
of these refurbishments in the
coming financial year delivering
376,000 sq. ft. of new and
refurbished space.

The short-term reduction in rent
roll at these refurbishments will
be replaced in due course by a
significant uplift in rent as they
complete and the new and
upgraded space is let. Assuming
90% occupancy at the CBRE
estimated rental values at
31 March 2018, the rent roll at
these twelve buildings once they
are completed would be £26.4m,
an uplift of £19.8m.

Projects Underway –
Redevelopments
There are currently six mixed-use
redevelopment projects
underway or contracted for sale.
The buildings are vacated upon
sale and Workspace receives a
consideration comprising cash,
and at four of these properties,
new business centres (built at
no cost to Workspace) providing
135,000 sq. ft. of net lettable
space. Two of these business
centres will be returned to
us in the coming financial year
providing 80,000 sq. ft. of
new space.

Assuming 90% occupancy at the
CBRE estimated rental values at
31 March 2018, the rent roll at the
four new business centres we will
receive back would be £3.4m.

Projects at Design Stage
These are properties where we
are planning a refurbishment or
redevelopment that has not yet
commenced. In a number of
cases this is because we are
awaiting planning consent.
The rent roll at these properties
at 31 March 2018 was £4.1m,
down £0.1m in the year.

Acquisitions
This category comprises recent
acquisitions and properties
where we need to obtain
vacant possession before
we can progress with our
repositioning plans:
– The Salisbury, Finsbury Circus
is a multi-let building where
there is a rolling refurbishment
programme to upgrade the
common areas and customer
units as they fall vacant, as we
reposition The Salisbury as a
Workspace business centre.
– Fitzroy Street, Fitzrovia and
Alexandra House, Wood
Green are currently let to
single occupiers until 2020
and 2021 respectively. We plan
in due course to refurbish and
reposition these buildings as
multi-let business centres.

– The Centro buildings in

Camden (including the two
buildings we acquired in April
2018) have the potential to be
reconfigured as a Workspace
business centre. With a
number of the existing
customers on longer leases
this will take time, although
there is 33,000 sq. ft. of
recently refurbished space
that is immediately available
to let.

Northern Line extension

Redevelopments

Refurbishments

Acquisitions

Like-for-like

Crossrail

See Table 3, left.

If the four properties in this
category were at 90% occupancy
at the CBRE estimated rental
values at 31 March 2018, the rent
roll would be £27.9m, an uplift of
£6.2m in total, with £4.2m of the
uplift at The Salisbury.

The cash rent roll at acquisition
of Centro 1 & 2 was £1.8m, which
will increase to £3.8m by the end
of December 2018 at the end
of rent free periods for three
existing customers in October
and December 2018.

Disposals
In line with our strategy,
we completed the sale of two
non-core industrial estates and
one small commercial building
in the year (at an overall 38%
premium to their 31 March 2017
book value) with the loss of
£3.9m of rent roll.

65 Workspace Group PLC Annual Report and Accounts 2018

N22

WOOD
GREEN

NW1

CAMDEN

W1T

WEST
END

EC2

FARRINGDON

THE
CITY

Acquisitions
– The Centro buildings, Camden, NW1.
– 13-17 Fitzroy Street, Fitzrovia, W1T.
– The Salisbury, Finsbury Circus, EC2.
– Alexandra House, Wood Green, N22.

EC2

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The Salisbury, Finsbury Circus, EC2
The Salisbury was acquired in June 2017 for £160m. Multi-let to
over 100 customers, the property provides 235,000 sq. ft. of net
lettable space and will be repositioned over time as a Workspace
business centre.

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Business review
continued

Profit performance
Adjusted trading profit after
interest for the year is up 20%
(£10.0m) on the prior year
to £60.7m.

The profit on sale of investment
properties of £26.6m includes
£23m from the sale of the
Zennor Road and Uplands
industrial estates.

Adjusted underlying earnings
per share is up 20.3% to 36.8p,
in line with the increase in adjusted
trading profit after interest.

Dividend
Our dividend policy is based on
the growth in adjusted trading
profit after interest taking into
account our investment and
acquisition plans and the
distribution requirements that
we have as a REIT. The current
intention is to grow the dividend
on a covered trading profit basis.
The significant growth in trading
profit in recent years has given
rise to a higher distribution
requirement and we have
therefore reduced the minimum
dividend cover from 1.3 to 1.2
times adjusted underlying
earnings per share.

A final dividend of 18.55p (2017:
14.27p) will be paid on 3 August
2018 to shareholders on the
register at 6 July 2018. The 30%
increase in both the interim and
final dividend for the year
reflects the strong financial
performance and the Board’s
confidence in the outlook for
the Company. The dividend
will be paid as a Property
Income Distribution.

See Table 4, right.

Net rental income increased
by 21% (£16.4m) in the period
to £95.6m.

See Table 5, right.

Total administration costs
are up 7% in the year to £16.1m,
with underlying costs (excluding
share based costs) up 8%
(£1.0m) to £13.8m. Staff costs
are up 7% (£0.6m) to £8.9m
with an increase of five in
average head office headcount
to 103 and staff salary increases
averaging 3%, with other costs
up £0.4m to £4.9m.

Net finance costs increased
by 37% (£5.1m) in the year.
The average net debt balance
over the year was £166m higher
than in the prior year, whilst the
average interest rate has
reduced from 5.2% to 4.3%.
This interest rate includes the
commitment fee on the undrawn
revolver facility. The marginal
cost of the undrawn revolver
facility is 1.5% over LIBOR.

Profit before tax for the year
increased by 92% to £170.4m.

See Table 6, right.

The change in fair value of
investment properties of £82.5m
reflects the underlying increase
in the CBRE valuation in the
period of £102m reduced by
acquisition related costs of £14m
and the change in fair value of
overage which is reclassified
in the accounts as deferred
consideration.

Table 4
Adjusted trading profit after interest

£m

Net rental income
Joint venture income
Administrative expenses – underlying
Administrative expenses – share related
Net finance costs

Adjusted trading profit after interest

Table 5
Net rental income

£m

Like-for-like properties
Completed projects
Projects underway
Projects at design stage
Acquisitions
Disposals

Total net rental income

Table 6
Profit before tax

£m

Adjusted trading profit after interest
Change in fair value of investment properties
Profit on sale of investment properties
Exceptional finance costs
Joint venture performance fee
Other items

Profit before tax

Diluted earnings per share
Adjusted underlying earnings per share

31 Mar
2018

95.6
–
(13.8)
(2.3)
(18.8)

60.7

31 Mar
2017

79.2
0.3
(12.8)
(2.3)
(13.7)

50.7

31 Mar
2018

31 Mar
2017

61.3
11.8
6.0
3.2
12.3
1.0

95.6

31 Mar
2018

60.7
82.5
26.6
–
–
0.6

170.4

104.0p
36.8p

55.6
9.2
7.3
3.3
0.6
3.2

79.2

31 Mar
2017

50.7
39.5
(0.6)
(1.4)
0.4
0.2

88.8

53.5p
30.6p

Adjusted underlying earnings per share is up

20.3%

Current refurbishments
We have seen an uplift of 3.0%
(£9m) in the value of current
refurbishments to £308m as
these schemes near completion.
There was a £3m uplift at each
of Southbank House (to be
renamed China Works) and
Edinburgh House in Vauxhall
which are both due to open
in the Summer of 2018 and a
£5m uplift at The Light Box in
Chiswick where we expect the
refurbishment to complete in
the Autumn of 2018.

Current redevelopments
There is a reduction of 2.1%
(£4m) in the value of current
redevelopment projects to
£187m. This comprises:
– A reduction of £8m in the

value of Rainbow Industrial
Estate, Raynes Park where
we obtained a mixed-use
planning consent in
September 2015 but have
been informed by Network
Rail that the property may
be safeguarded in relation
to Crossrail 2.

– Assumptions on the required
level of affordable housing
have increased which has
reduced the value of schemes
that do not yet have planning
consent by £8m.

– An increase of £12m in the

value at schemes that already
have planning consent,
including a £4m uplift in
the value of the consented
residential scheme at
Marshgate near the Olympic
Park, and an uplift of £4m
for overage at the Arches.

Table 7
Property valuation

Valuation at 31 March 2017
Revaluation uplift
Capital expenditure
Acquisitions
Acquisition costs
Disposals
Capital receipts

Valuation at 31 March 2018

£m

1,844
102
77
382
(14)
(87)
(24)

2,280

Table 8
Like-for-like properties valuation metrics

ERV per sq. ft.
Rent per sq. ft.
Equivalent Yield
Net Initial Yield
Capital Value per sq. ft.

Table 9
Completed projects valuation metrics

31 March
2018

£39.80
£35.50
6.5%
5.4%
£549

31 March
2017

£37.59
£33.00
6.6%
5.5%
£506

Change

+5.9%
+7.6%
(0.1%)
(0.1%)
+8.5%

ERV per sq. ft.
Rent per sq. ft.
Equivalent Yield
Net Initial Yield
Capital Value per sq. ft.

Portfolio valuation

31 Mar
2018

£47.80
£45.07
5.8%
4.6%
£734

£2.3bn

Property valuation
At 31 March 2018, the wholly
owned portfolio was
independently valued by CBRE at
£2,280m, an underlying increase
of 5.0% (£102m) in the year.

The main movements in the
valuation over the year are set
out in Table 7, right.

There was a lower revaluation
uplift in the second half of the
year of 1.1% (£23m), compared
to an uplift of 3.9% (£79m) in
the first half. This uplift excludes
acquisition costs of £14m
(primarily stamp duty).
A summary of the full year
valuation and uplift by property
type is set out below:

£m

Valuation Uplift

Like-for-like
Properties
Completed
Projects
Refurbishments
Redevelopments
Acquisitions

1,112

290
308
187
383

25
9
(4)
(1)

Total

2,280 102

Like-for-like Properties
There was a 7.0% (£73m)
increase in the valuation of
like-for-like properties to £1,112m,
comprising:
– An increase in ERV per sq. ft.
of 5.9% equating to an uplift
in value of some £61m; and
– A 0.1% reduction in equivalent
yield equating to an increase
in value of some £12m.

See Table 8, right.

Completed projects
The uplift of 9.4% (£25m) in value
of the six completed projects to
£290m reflects the strong
demand and pricing levels that
have been achieved at these
properties since launch. The most
significant uplifts in the year being
£9m at The Record Hall and £10m
at The Leather Market.

The overall valuation metrics for
completed projects are set out
in Table 9, right.

66 Workspace Group PLC Annual Report and Accounts 2018

67 Workspace Group PLC Annual Report and Accounts 2018

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Business review
continued

Acquisitions
Three properties were acquired
in the financial year:
– In April 2017, we acquired

13-17 Fitzroy Street, Fitzrovia
for £99m. This property
comprises 92,700 sq. ft. of
net lettable space, currently
let in its entirety to Arup until
September 2022 at annual
rent of £4.9m (£53 per sq. ft.),
rising to £6.0m (£65 per sq. ft.)
in March 2021. Arup plans to
relocate from this building and
the lease provides for its early
exit with effect from
September 2020 with a rolling
nine-month break option.
– In June 2017, we acquired The
Salisbury at 28-31 Finsbury
Circus for £160m. This
multi-let property provides
235,000 sq. ft. of net lettable
space. It was acquired at a
capital value of £661 per sq. ft.
and a net initial yield of 5.0%.
– In February 2018, we acquired
five of the Centro buildings in
Camden for £109m. These
buildings provide 131,000 sq. ft.
of net lettable space and were
acquired at a capital value of
£831 per sq. ft. and a net initial
yield of 4.2%.

In April 2018, we acquired the
remaining two Centro buildings
(Centro 1 & 2) for £77m. They
provide 85,000 sq. ft. of net
lettable space and were acquired
at a capital value of £901 per sq. ft.
and a net initial yield of 4.9%.

Acquisitions

Disposals
We completed the sale of three
properties in the year for £84m
(this excludes redevelopment
sales), with a profit of £23m on
the book cost at 31 March 2017.
– In May 2017, we sold

Uplands industrial estate
in Walthamstow for £50m.
The industrial estate totalled
290,000 sq. ft. of net lettable
space with an average rent
per sq. ft. of £5.70. The
property was sold at a
premium of 25% (£10m) to
the 31 March 2017 valuation
at a net initial yield of 3.1%.
– In September 2017, we sold

Zennor Road industrial estate
in Balham for £30m. This three
acre site was sold at a
premium of 84% (£13.7m)
to the 31 March 2017 valuation
at a net initial yield of 2.9%.

– In March 2018, we sold

Quicksilver, Wood Green, a
small commercial building for
£3.5m in line with its valuation.

Disposals

Refurbishment
activity
It has been a very active year
with good progress made across
a range of refurbishment
projects and an accelerated level
of capital expenditure. We
completed the refurbishments
at The Leather Market, London
Bridge and Barley Mow Centre,
Chiswick in August 2017 and
launched The Record Hall,
a new business centre in Holborn,
in May 2017.

A summary of the status of
the refurbishment pipeline at
31 March 2018 is set out below:

Of the 12 refurbishment projects
underway, we are currently
on-site at eleven with completion
expected at seven during the
coming financial year.

In April 2018, we received
planning permission for a major
refurbishment at Shaftesbury
Centre, Ladbroke Grove. The
existing 13,000 sq. ft. building
will be replaced by a new
business centre providing 41,000
sq. ft. of lettable space at an
estimated cost of £15m.

Refurbishment programme summary

Projects

Number

Underway
Design stage
(without planning)

Capex
spent

Capex to
spend

Upgraded and
new space (sq. ft.)

£65m

£87m

639,000

–

£59m

225,000

Refurbishments underway

Refurbishments completed

WOOD
GREEN

W10

LADBROKE
GROVE

CAMDEN

EC1

WEST
END

SE1

LONDON
BRIDGE

CHISWICK

Refurbishment activity
– Barley Mow Centre, Chiswick, W4.
– The Leather Market, London Bridge, SE1.
– The Record Hall, Holborn, EC1.
– Shaftesbury Centre, Ladbroke Grove, W10.

Like-for-like

Acquisitions

Refurbishments

Redevelopments

Crossrail

Northern Line extension

SE1

The Leather Market, London Bridge, SE1
We completed the refurbishment of The Leather Market in August
2017, having entirely repositioned the entrance, creating a striking new
atrium and café, as well as upgrading customer units across the site.
The business centre has seen a significant uplift in valuation thanks to
the strong demand and pricing levels that have been achieved since
completion of the project.

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
and limited risk to Workspace.
We receive back a combination
of cash, new commercial space
and overage in return for the
sale of the residential scheme
to the developer.

It has been a busy and successful
year of redevelopment activity,
highlights include:
– In June 2017, we sold the

third and final phase of the
residential scheme at Bow
Enterprise, Devons Road. This
final phase, comprising 130
residential units, was sold for
£6.3m in cash and the return
of a new 40,000 sq. ft.
business centre.

– In June 2017, we received a

£7.9m overage payment from
the sale of the residential units
in the first phase of the Bow
Enterprise redevelopment.

– In September 2017, we

completed the sale of the
second phase of the
redevelopment of The Light
Bulb, Wandsworth, of 77
residential units for £7.8m
in cash, together with the
delivery in due course of
15,000 sq. ft. of new
commercial space.
– In October 2017, we

completed the sale of Arches
Business Centre for £13m. We
obtained a planning consent
on this site for 110 residential
units. In February 2018, we
agreed to remove our overage

provision in return for cash
payment of £4.3m payable
during 2018/19.

– In November 2017, we
completed the sale of
Stratford Office Village for
£14m. We obtained a mixed-
use planning consent on this
site in 2016 for 101 residential
units and 13,000 sq. ft. of
commercial space.

– In March 2018, we were

granted planning permission
for a significant mixed-use
redevelopment on 2.3 acres
of our Chocolate Factory and
Parma House properties in
Wood Green. This will provide
230 new homes and 26,000
sq. ft. of new commercial
space, of which 20,000 sq. ft.
is within the residential
development and 6,000 sq. ft.
is a roof top extension of our
Chocolate Factory building
which we are retaining and
currently refurbishing.

A summary of the status of
the redevelopment pipeline at
31 March 2018 is set out below.

The sale of the residential
schemes at the six redevelopment
schemes underway is expected
to deliver £113m in cash (of which
£102m has already been received)
and four new commercial
buildings. Two of these
commercial buildings are in the
final stages of construction and
will open this year.

There are four schemes at the
design stage with mixed-use
planning consents which are
not yet contracted for sale and
discussions with the planners for
the redesignation of land use at
the two schemes at the design
stage without planning are also
progressing well.

Redevelopments underway

Redevelopment programme summary

68 Workspace Group PLC Annual Report and Accounts 2018

69 Workspace Group PLC Annual Report and Accounts 2018

Underway
Design stage
(with planning)
Design stage
(without
planning)

No. of
properties

Residential
units

Cash
received

Cash/
overage to
come

New commercial
space (sq. ft.)

1,435

£102m

£11m

135,000

866

463

–

144,000

–

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Business review
continued

Cash flow
The Group generates strong
operating cash flow in line with
trading profit, with good levels
of cash collection. Bad debts
are low in the year at £0.2m
(March 2017: £0.3m). A summary
of the movements in cash flow
are set out in Table 10, right.

Financing
In June 2017, we exercised the
options to extend the maturity
of our revolver bank facility by
a year to 2022 and increase the
quantum of the facility from
£150m to £250m.

In August 2017, we completed
the placing of £200m of private
placement notes, comprising
£80m of eight year notes and
£120m of ten year notes at
a blended fixed rate coupon
of 3.14%.

The Group had £14m of cash
and £531m of drawn debt at
31 March 2018 with £665m of
committed facilities as detailed
in Table 11, right.

All facilities are provided on an
unsecured basis with an average
maturity of 5.5 years (31 March
2017: 5.2 years). The average
interest cost of our fixed rate
private placement notes has
reduced to 4.2% from 5.5%
following the £200m issue in
August 2017. The retail bond
has a fixed interest rate of 6%.
Our revolver bank facilities are
provided at a floating rate of
1.65% over LIBOR. At 31 March
2018, 61% of our facilities are at
fixed rates, representing 76% of
our borrowings on a drawn basis.

At 31 March 2018, loan to value
was 23% (31 March 2017: 13%)
and interest cover (based on
net rental income) was 5.1 times
(31 March 2017: 5.8), providing
good headroom on all facility
covenants. The loan to value
increases to 25% on a pro forma
basis following the acquisition
of Centro 1 & 2 in April 2018 with
the available headroom on our
facilities reducing from £148m
to £71m.

Net assets
Net assets increased in the year
by £134m to £1,713m. EPRA
net asset value per share at
31 March 2018 was up 8.8% to
£10.37 in the year (31 March 2017:
£9.53), with an increase of 2.3%
(£0.23) in the second half of the
year following an increase of
6.4% (£0.61) in the first half.
The calculation of EPRA net
asset value per share is set out
in note 9 of the accounts.

See Table 12, right.

Table 10
Movements in cash flow

£m

Net cash from operations after interest
Dividends paid
Capital expenditure
Purchase of investment properties
Property disposals
Capital receipts
Distributions and proceeds from joint ventures
Other

Net movement
Opening Debt (net of cash)

Closing Debt (net of cash)

31 Mar
2018

74
(37)
(74)
(370)
128
9
–
(5)

(275)
(242)

(517)

31 Mar
2017

53
(27)
(58)
(11)
8
23
46
–

34
(276)

(242)

A reconciliation of net debt can be found in note 16(b) of the financial
statements.

Table 11
Committed facilities

Private placement notes
Retail bond
Bank facilities

Total

Table 12
EPRA NAV per share

Drawn
amount

Facility

£357.5m £357.5m
£57.5m £57.5m
£116.0m £250m

£531m £665m

Maturity

2020-2027
2019
2022

At 31 March 2017
Property valuation surplus
Property acquisition costs
Adjusted trading profit after interest
Dividends paid in year
Profit on sale of investment properties
Other

At 31 March 2018

9.53
0.59
(0.09)
0.37
(0.23)
0.16
0.04

10.37

Key property statistics

Half year
31 Mar 2018

Half year
30 Sep 2017

Half year
31 Mar 2017

Half year
30 Sep 2016

3.6
4,544

3.6
4,306

£2,280m £2,139m £1,844m £1,780m
69

Workspace Group
Portfolio
Property valuation
Number of properties
Lettable floorspace
3.7
(million sq. ft.)
3.7
Number of lettable units
4,521
4,539
Rent roll of occupied units £112.9m £104.8m £89.5m £84.8m
£26.86
Average rent per sq. ft.
£36.05
Overall occupancy
84.2%
85.5%
Like-for-like number
of properties
Like-for-like lettable floor
space (million sq. ft.)
Like-for-like rent roll growth
Like-for-like rent per sq. ft.
growth
Like-for-like occupancy
movement

£33.80
85.2%

£28.41
87.0%

1.5% (0.3%)

2.0
4.3%

2.3
6.2%

2.1
4.1%

2.3
7.1%

4.8%

0.2%

6.7%

5.7%

2.7%

(0.7)%

Note:
1. The like-for-like category has been restated in the current financial

–

year for the following:
The transfer in of The Print Rooms, Southwark and Vox Studios,
Vauxhall from completed projects
The disposal of Uplands Industrial Estate, Walthamstow, Zennor Road
Industrial Estate, Balham and Quicksilver, Wood Green
The transfer out of Alexandra House, Wood Green to the acquisition category

–
2. Like-for-like statistics for prior years are not restated for the changes made

to the like-for-like property portfolio in the current financial year.

The Strategic Report on pages 3 to 71 was approved by the Board
of Directors on 5 June 2018 and signed on its behalf by:

Jamie Hopkins
Chief Executive Officer

Graham Clemett
Chief Financial Officer

Private placement completed in the year

£200m

EPRA NAV per share

£10.37

China Works, SE1.

70 Workspace Group PLC Annual Report and Accounts 2018

71 Workspace Group PLC Annual Report and Accounts 2018

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Governance

Chairman’s governance statement

Compliance with the
UK Corporate Governance Code
The Company has, throughout the year
ended 31 March 2018, fully complied with the
provisions of the UK Corporate Governance
Code. We also recognise that there are
ongoing discussions about the structure
of the Code, which we are monitoring.

Where to find the information

Leadership

The Board

Executive Committee

Relations with shareholders

Effectiveness

Nomination Committee Report

Accountability

Audit Committee Report

Risk Committee

Investment Committee

Remuneration

100

103

104

111

112

113

Leadership
The Board is responsible for
setting the Group’s strategy.
It carefully monitors the
progress of the strategy to
ensure that it remains relevant
in our marketplace.

Accountability
The Audit Committee plays
an important role by providing
the necessary safeguards to
manage risks and achieve high
standards of transparency and
accountability to shareholders.

Relations with shareholders
Explaining the strategy and
how it is being implemented,
through our business model,
is an important part of the
Board’s work in keeping
shareholders informed on
the business’s performance
and future prospects.

Effectiveness
The Nomination Committee
continues to make sure the Board
has the necessary skills and
experience to provide challenge
to the business to deliver its
strategic objectives.

Remuneration
Through the work of the
Remuneration Committee,
the Company’s policy is to align
the reward of the Executive
Directors with the performance
of the Company and incentivise
long-term and sustainable
value creation.

Dear Shareholder
On behalf of the Board, I am pleased to introduce the Corporate
governance report for the year ended 31 March 2018.

Good governance is important to us
It has been another successful year for the Company. As Chairman,
I am responsible for ensuring that the Board operates effectively and
that it continues to uphold a high standard of corporate governance.

The Board of Workspace is committed to conducting business
responsibly and ensuring that our governance structures at Board
and Committee level remain appropriate for our business while
supporting the delivery of our overall strategy. Across the business,
we adopt a disciplined approach to the management of our people,
our operations, our processes and structures. This discipline ensures
we maintain strong governance in terms of leadership, Board
effectiveness, accountability, remuneration matters and our
relationship with shareholders.

Details of our governance framework can be found on page 76.

Our strategic priorities
The Company’s business model and strategy are outlined on pages
16 and 28.

The Board takes seriously our responsibility for ensuring that the
Group delivers on its strategic objectives. We regularly debate the
effectiveness of the strategy and oversee the Executive Committee
to ensure that it is being implemented successfully. The Board
continues to believe that the current strategy is the right one for
the business at this time.

Our culture
We have done some work this year to articulate the behaviours and
values that drive our performance and delivery of The Workspace
Advantage. This work has demonstrated the dynamic culture
at Workspace, which is felt by everyone within the Company.
Our people have deep knowledge of their subjects, inquisitive
natures and a thirst for innovation and exhibit genuine care for our
customers, our communities and each other. This culture which is
also exhibited by the Board creates an environment for good
governance.

‘ The Board is focused on delivering
The Workspace Advantage to all
stakeholders. This means adhering to
high governance standards, maintaining
regular engagement with investors and
stakeholders and a relentless focus on
internal controls and risk management.’

Daniel Kitchen
Non-Executive Chairman

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72 Workspace Group PLC Annual Report and Accounts 2018

73 Workspace Group PLC Annual Report and Accounts 2018

Chairman’s governance statement
continued

Board performance evaluation
This year the Board benefited from the insights gained from an
external evaluation of its performance. We appointed Advanced
Boardroom Excellence Limited to facilitate the external Board
effectiveness review in March 2018, with a remit to consider the
way in which we carry out our role as Directors of Workspace and
conduct ourselves in the boardroom, as well as the Board’s structure
and processes.

The review covered the Board, its Committees, individual Directors
and the Company Secretary. The review included interviews with
each of the Directors, members of the Executive Committee and
the Company Secretary. The findings were reported back to me
and the output was reviewed at the April 2018 Board Meeting.

I am pleased to confirm that no significant issues were raised, and
the review confirmed that the Board and its Committees continue
to operate in an efficient and effective manner.

Further details of the recommendations can be found on page 99
of the Corporate Governance Report.

Non-Executive Directors
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. Each year, we
particularly consider Stephen Hubbard’s independence as he is
Chairman of CBRE UK and a member of their Management Board.
Following a rigorous assessment, the Board is completely satisfied
that Stephen remains independent in judgement and character.
Further information can be found on page 98.

Meeting our shareholders
It is important that, as a Board, we listen to our shareholders and are
aware of their views on strategy and governance. The Company has
continued to operate a comprehensive investor relations programme
during the year, with our Executive Directors regularly meeting with
investors and analysts and feeding back to the Board. I am available
to meet with investors on request and encourage an open dialogue
on all matters, including any points they may wish to discuss with
respect to Board governance.

General Data Protection Regulation (‘GDPR’)
The implementation of GDPR in May 2018 has provided an added
impetus to continue to evolve the controls and processes we have
in place on data protection. As the business grows and adopts new
practices and technologies, this will continue to be front of mind for
the Board and the wider business.

I am pleased with the progress we have made this year across the
governance agenda and trust that you will find this governance
report helpful and informative.

We also extend our thanks to all of our shareholders for your
continued support as we look forward to delivering continued
success in the years ahead.

Daniel Kitchen
Non-Executive Chairman
5 June 2018

Leadership

Strong direction
from the Board
enables the
management team
to focus on delivering
the Group’s strategic
objectives.

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74 Workspace Group PLC Annual Report and Accounts 2018

75 Workspace Group PLC Annual Report and Accounts 2018

Daniel Kitchen
Non-Executive Chairman

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Leadership
continued

Our Board
Led by our Chairman, Daniel Kitchen, the Board provides the
leadership of the Company and is collectively responsible and
accountable to shareholders for the Company’s long-term success,
leadership, strategy, values, standards, control and management.
It sets strategy and oversees its implementation. Our Directors are
highly skilled professionals, who bring a range of skills, perspectives
and corporate experience. Collectively, they have many years of
experience gained in a wide range of businesses and sectors, as
illustrated on pages 80 to 90. The skills of Board members include
property, finance, retail, marketing, telecoms, media, law and general
corporate experience. Two Executive Directors also serve as
Non-Executive Directors on external boards.

The Board meets regularly and there is an annual cycle of topics
considered at meetings. The Executive Directors provide regular
updates to the Board on many aspects of the business, ranging from
trading performance, progress being made on our refurbishment and
redevelopment projects, the rationale for acquisitions and disposals
and how these are aligned to strategy. They also inform the Board
on the discussions held with analysts and investors. The Company
Secretary and external advisers periodically update the Board on
regulatory changes. In particular, the Board considered the
implications of the General Data Protection Regulation and the
Data Protection Act 2018 which came into force in May 2018
and regulations in general, including the revised Corporate
Governance Code.

Our governance framework

Executive Committee
Number of meetings in 2017/18:

Leadership

The Board
Number of meetings in 2017/18:

Investment Committee
Number of meetings in 2017/18:

More information on pages 92 and 93.

More information on pages 75 to 80.

More information on page 112.

Effectiveness

Accountability

Remuneration

Nomination Committee
Number of meetings in 2017/18:

Audit Committee
Number of meetings in 2017/18:

Remuneration Committee
Number of meetings in 2017/18:

More information on pages 102 to 102.

More information on pages 103 to 110.

More information on pages 113 to 134.

Risk Committee
Number of meetings in 2017/18:

More information on page 111.

Our governance framework, which is illustrated in the chart on
page 76, supports the development of good governance practices
across the Group. The Executive Committee has the responsibility
for ensuring that the policies and practices set at Board level are
effectively communicated and implemented across the business.
Our intranet is also used as a platform for employees to access our
policies, and they are kept up-to-date on the latest Company news.

Annual Board tours provide opportunities for the Board to enhance
their understanding of the business first-hand, visiting selected
properties. In September 2017, the Board undertook site visits to
the two new properties recently acquired. These visits to both The
Salisbury and 13-17 Fitzroy Street helped the Board to assess the
effectiveness of the current strategy. It demonstrated the future
potential within the portfolio and ensured that Directors remain
up-to-date with ongoing developments in the business.

Employees below Board level are invited to present to the Board
on operational topics. During the year, our Energy & Sustainability
Manager updated the Board on our ‘Doing the Right Thing’ strategy,
while our Head of Marketing presented results from The Workspace
Advantage advertising campaign.

The Board draws on expertise throughout the business and from
external advisers to ensure that its judgements are based on sound
and timely information.

The Board operates through a robust risk management and internal
control system, details of which can be found on page 110. Detailed
in this section are the main Committees that are used by the Board
to embed strict corporate governance practices.

The terms and conditions of appointment of Non-Executive Directors,
including the expected time commitment, are available for inspection
at the Company’s registered office.

If any Director has concerns about the running of the Company
or proposed action which cannot be resolved, these concerns are
recorded in the Board Minutes. No such concerns arose during the
year under review.

Annual review of strategy
Whilst the Board considers strategy throughout the year, it also
holds an annual deep dive strategy day, together with the Executive
Committee. In September 2017, the meeting covered the potential
impact of external changes in our market, amongst other things.
Additionally, the Head of Marketing provided an update on the
marketing campaign conducted during the year.

Our annual strategy review is essential in reinforcing our commitment
to keep strategy at the forefront of discussions, and to ensure that our
strategy remains relevant in our changing marketplace.

Meetings
The Board discharges its responsibilities through an annual programme
of Board and Committee meetings which are scheduled throughout
the year, with main meetings timed around the Company’s financial
calendar. Additional meetings are convened to consider an annual
cycle of topics, including the annual strategy day, key management
and financial updates, review of risk as well as the approval of
acquisitions and refurbishment programmes. In the year ended
31 March 2018, the Board met formally on nine occasions, including
a strategy day in September 2017. Supplementary meetings or
conference calls are held between formal Board meetings as required.

The Board engaged with the Company’s advisers during the year and
there was a presentation from the Company’s brokers in July 2017.
The Group’s Valuer, CBRE, presented to the Audit Committee meeting
in May 2018 and circulated a report to the meeting in November 2017.
The CBRE presentation covered the valuation of the property portfolio
and the wider market in which the Company operates.

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.

Individual Directors’ attendance at each of the Board and Committee
meetings held during the year ended 31 March 2018 are set out in the
table to the right.

Scheduled meetings and member attendance

Daniel Kitchen
Jamie Hopkins
Graham Clemett
Chris Girling
Damon Russell
Maria Moloney1
Stephen Hubbard

Board

Audit Remuneration

Nomination

9/9
9/9
9/9
9/9
9/9
9/9
9/9

–
–
–
3/3
3/3
3/3
3/3

8/8
–
–
8/8
8/8
8/8
8/8

2/2
–
–
2/2
2/2
1/2
2/2

1. Maria Moloney did not attend one meeting of the Nomination Committee as

the business of the meeting was in relation to her reappointment as a Director
of the Company.

Should the Directors be unable to attend meetings, they would be
provided with papers to allow them to make their views known to the
Chairman ahead of that meeting.

Periodically, the Chairman meets the Non-Executive Directors without
the Executive Directors present and maintains regular contact with
Jamie Hopkins, the Chief Executive Officer, and other members of the
management team.

Matters reserved for the Board
To help retain control of key decisions, the Board has a formal
schedule of reserved matters that require its approval. Matters
reserved include:
– Company strategy.
– Dividend policy.
– 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 is reviewed at least
once a year and can be accessed on the Company website at
www.workspace.co.uk.

76 Workspace Group PLC Annual Report and Accounts 2018

77 Workspace Group PLC Annual Report and Accounts 2018

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Leadership
continued

Board Committees
The Board has a number of standing Committees, namely the
Nomination, Audit, and Remuneration Committees, to which specific
responsibilities have been delegated. These Committees enable the
Board to operate effectively and ensure a strong governance
framework.

Further details of the work of these Committees can be found
on pages 100 to 134.

Each Committee has 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 the Committees is comprised of independent Non-Executive
Directors of the Company who are appointed by the Board. Board
members receive minutes of meetings and comprehensive papers
in advance of Committee meetings, and a Committee can request
presentations or reports on areas of interest.

The activity of each Committee is described on pages 100 to 134.

The Company Secretary is secretary to each Committee.

Roles, responsibilities and composition
The roles and responsibilities of the Non-Executive Chairman and
Chief Executive Officer are separate, with a clear division of
responsibilities between them. The Chairman is responsible for the
leadership of the Board, and the Chief Executive Officer manages and
leads the business.

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 comprises the
Chairman, four Non-Executive Directors, all of whom are independent,
and two Executive Directors. This meets the requirement of the Code
for at least half the Board, excluding the Chairman, to be independent
Non-Executive Directors.

The Directors have a wide range of business skills. Their biographical
details can be found on pages 84 to 90, which show the breadth
of their skills and experience and membership of the Committees.
All of our Directors have significant experience and knowledge of the
sector in which we operate.

Division of responsibility

Board activities in 2017/18

Chairman

Chief
Executive
Officer

Senior
Independent
Director

Non-Executive
Directors

As Chairman, Daniel Kitchen, is primarily responsible
for the operation, leadership and overall effectiveness
of the Board. The Chairman sets the Board’s agenda
and ensures that the Board as a whole plays a full and
constructive part in the development of the Group’s
strategy. The Chairman facilitates the effective
contribution of the Non-Executive Directors and
ensures all Directors receive accurate, timely and
clear information.

Other responsibilities include:
– With the Nomination Committee, ensuring

that the Board remains appropriately balanced
to deliver the Group’s strategic objectives and
to meet the requirements of good corporate
governance.

– Ensuring that there is effective communication

with the Group’s shareholders.

The Chairman is not involved in an executive capacity
in any of the Group’s activities.

Jamie Hopkins is the Chief Executive Officer. Jamie
is responsible for leading and managing the business,
and is accountable to the Board for the financial and
operational performance of the Group, the
achievement of the strategic objectives set by the
Board and delivery of The Workspace Advantage
to all stakeholders.

The Board appointed Chris Girling to the position
of Senior Independent Director on 16 July 2014.
In performing this role, Chris provides an alternative
communication channel for shareholders, if required,
and is available to meet with investors on request.
He can also deputise for the Chairman in his absence
and counsel all Board colleagues.

Chris 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. Chris then conveys the outcome of
these discussions to the Chairman.

The Non-Executive Directors have a broad mix of
business skills, knowledge and experience acquired
across different business sectors. This allows them
to provide independent and external perspectives
to Board discussions.

Board engagement with the business
In order to ensure good quality decision making and oversight,
all Directors stay up-to-date with events and developments in the
business, as well as external factors such as the changing governance
landscape, regulation and Shareholder views.

To read more about the Board’s tours of our new acquisitions, please
see page 77.

Strategy
The Board regularly debates the relevance and
effectiveness of the strategy to ensure it is the right one
for the business in current and future market conditions.

Activities in 2017/18
– Worked with the Executive Directors to review the

current strategy and ensure its continued relevance.

– Held a Board Strategy Day in September 2017.
– The annual Board tour took place in September 2017.
Directors visited two recent acquisitions, 13-17 Fitzroy
Street and The Salisbury.

– Completion of £200m Private Placement in August

2017.

Trading performance
The Board regularly monitors performance to assess whether the
business model is effective in driving enquiries and ensuring we
continue to meet customer needs and adapt to overall trends and
conditions in the London property market.

Activities in 2017/18
– Reviewed progress against the five-year business plan and

updating the plan as required.

– Reviewed monthly financial performance against budget and
other finance matters, including budgets and business plans.

– Considered in detail, the annual and interim results, and dividends.
– Discussed treasury and cash management matters.
– Discussed Group tax matters.
– Received updates on market and broker reports.
– Meetings were held throughout the year between the Auditors

and the Audit Committee.

Property valuation and investment
The Board reviews and challenges the valuation of the portfolio, and
reviews and approves major development projects and acquisitions
and disposals.

Activities in 2017/18
– Considered and approved the independent valuation of the

Group’s property portfolio performed by CBRE.

– Approval of redevelopment activity and major refurbishments.
– Received updates from the Development Director on the status

of planning consents.

– Disposal of Uplands Business Park for £50m in May 2017.
– Disposal of Stratford Office Village for £14m in September 2017.
– Disposal of Zennor Road Industrial Estate for £30m in August

2017.

– Acquisition of The Salisbury for £158.7m in June 2017.
– Acquisition of Centro Buildings for £109m in January 2018.

Risk management and internal controls
Robust governance and risk management are crucial to the
Board’s role in protecting the business, 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.

Activities in 2017/18
– Regularly reviewed the principal risks of the business.
– Received reports on Health and Safety and activities

undertaken in terms of staff training and ongoing audits.
– Received reports on governance issues, including legal

and regulatory updates.

– Reviewed the Group’s preparedness for the

implementation of GDPR, including regular updates on
activities facilitating compliance.

– Received updates from the Risk Committee.
– Reviewed the Company’s Viability Statement.

Shareholder engagement
The Board is committed to an open dialogue with
all shareholders and actively seeks their views on
relevant governance matters.

Activities in 2017/18
– Reviewed reports from the Company’s brokers
and advisers, outlining shareholder views and
providing feedback on Company presentations
or events.

– Reviewed the 2017 AGM Shareholder Circular and

proxy voting figures.

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 Boardroom table and ensuring there is
continuity in Board membership. The Board conducts a
rigorous evaluation of its performance each year and the
evaluation is externally facilitated every three years.

Activities in 2017/18
– Conducted an external Board evaluation for the year to

31 March 2018.

– Conducted a review of succession planning for the Board

and Senior Managers.

– Considered and approved the reappointment of Maria
Moloney as a Non-Executive Director and Chair of the
Remuneration Committee.

78 Workspace Group PLC Annual Report and Accounts 2018

79 Workspace Group PLC Annual Report and Accounts 2018

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Non-Executive Directors

Board Committees

Leadership
continued

Leadership structure
The Board is collectively
responsible for the Company’s
long-term success and the
delivery of its strategic and
operational objectives.

The Board sets the strategic
direction, governance and values
of the Group and has ultimate
responsibility for its management
and performance.

The Board draws on the
expertise within the business and
from external advisers to ensure
that its judgements are based on
sound and timely information.

The Board operates through
a sound risk management and
internal control system; more
on which can be found on
page 110. Detailed in the risk
section are the main Committees
that are used by the Board to
embed strict corporate
governance practices.

The Board

Executive Directors

Daniel Kitchen
Non-Executive Chairman
Role: As Chairman of the Board
and Chairman of the Nomination
Committee, Daniel 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. Chris chairs the
Audit Committee and is a
member of the Remuneration
and Nomination Committees.

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. Maria chairs the
Remuneration Committee and
is a member of the Audit and
Nomination Committees.

Jamie Hopkins
Chief Executive Officer
Role: With extensive experience
in the property sector, Jamie is
responsible for the delivery of
strategy, business development,
investor relations, corporate and
social responsibility.

Graham Clemett
Chief Financial Officer
Role: To manage the Group’s
financial activity. Graham has
extensive experience in finance
and banking.

Damon Russell
Non-Executive Director
Role: Damon brings extensive
TMT experience to the Board,
and is a member of the
Remuneration, Nomination
and Audit Committees.

Stephen Hubbard
Non-Executive Director
Role: Stephen has a wealth
of experience in the property
sector. Stephen is a member
of the Audit, Remuneration
and Nomination Committees.

Company Secretary

Carmelina Carfora
Company Secretary
Role: Carmelina is Secretary to
the Board and its Committees,
providing governance and
compliance advice.

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: Executive management
of the Company and the daily
operations of the Group.

Graham Clemett
Chief Financial Officer
Role: Overseeing the Group’s
financial activity, treasury, tax,
Company secretarial,
governance and compliance,
and managing the Group’s
IT strategy.

Angus Boag
Development Director
Role: Responsible for the planning
and development of properties,
and sustainability.

Chris Pieroni
Operations Director
Role: Responsible for corporate
and business development,
including marketing and
communications.

John Robson
Asset Management Director
Role: Responsible for the asset
management of the portfolio,
including lettings, lease renewals,
refurbishments and facilities
management.

Investment Committee
Role: To ensure that any
significant expenditure across
the business is made in support
of the Company’s strategy.

Risk Committee
Role: To manage strategic
and operational risks in each
functional area of the business
and assess internal controls.

Disclosure Committee
Role: To assist the Company
to make timely and accurate
disclosures of information
required to meet the legal and
regulatory obligations arising
from the Market Abuse
Regulations.

Senior Management
Role: To assist the Chief
Executive Officer in managing
the day-to-day activities of
the Group.

External

Independent Auditors
Role: To obtain reasonable
assurance about whether
the financial statements as
a whole are free from material
misstatements, whether due
to fraud or error, and to give
an opinion to the shareholders
in an auditor’s report.

Independent Advisers
Role: To provide expert guidance
to the Board and Senior
Management on specific areas
which support the efficient
operation of the Group.

To help deliver The Workspace Advantage,
the Board regularly absorbs insight from around
the business and from external experts.

Right
market

Right
brand

Right
properties

The
Workspace
Advantage

Right
people

Right
customers

The Board Company Secretary Nomination Committee
Audit Committee Remuneration Committee Executive Committee
Senior Management Independent Auditors Independent Advisers

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80 Workspace Group PLC Annual Report and Accounts 2018

81 Workspace Group PLC Annual Report and Accounts 2018

Board tenure

Board experience

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. Utilities 6%

1. 0–3 years 14%
2. 3–5 years 43%
3. 5+ years 43%

Board diversity

1. Male 86%
2. Female 14%

We asked our Board
members what The
Workspace Advantage
means to them.

Apr
2017

May
2017

Jul
2017

Sep
2017

Nov
2017

Jan
2018

Feb
2018

Mar
2018

Here’s what they said…

Leadership
continued

The Board
Our Board comprises highly skilled
individuals who bring valuable and
varied experience to the Boardroom.
The business benefits from their strong
external networks, as well as insight
drawn from regular engagement with
colleagues internally.

The Board met nine times
during the year ended
31 March 2018

The Board

Jamie Hopkins
Chief Executive Officer

Daniel Kitchen
Non-Executive Chairman

Maria Moloney
Non-Executive Director

Graham Clemett
Chief Financial Officer

Chris Girling
Senior Independent Non-Executive Director

Stephen Hubbard
Non-Executive Director

Damon Russell
Non-Executive Director

Executive Directors
Non-Executive Chairman
Non-Executive Directors
Senior Independent Non-Executive Director
Meeting attended

82 Workspace Group PLC Annual Report and Accounts 2018

83 Workspace Group PLC Annual Report and Accounts 2018

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The Board

Executive Directors

Appointment to the Board
Jamie joined the Board in
June 2010 as a Non-Executive
Director and was appointed
Chief Executive Officer on
1 April 2012.

Committee memberships
Chairman of the
Executive Committee,
Investment Committee,
Risk Committee and
Disclosure Committee.

Current external appointments
Jamie was appointed as
Non-Executive Director to the
Board of St. Modwen Properties
PLC with effect from 1 March 2018.

Previous appointments
Jamie 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
deal execution experience.
– Well-developed leadership,

motivational and management
skills.

– Entrepreneurial with strong

commercial skills.
– Significant property

experience.

– Strong experience of investor

relations.

Appointment to the Board
Graham joined the Board
as Chief Financial Officer
in July 2007.

Committee memberships
Member of the
Executive Committee,
Investment Committee and
Disclosure Committee.

Current external appointments
Graham is currently a Non-
Executive Director and Chairman
of the Audit Committee for The
Restaurant Group Plc, having
been appointed on 1 June 2016.

Previous appointments
Previously, Graham was Finance
Director for UK Corporate
Banking at RBS Group PLC.
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.

– With over ten years in the
Group, he has a detailed
knowledge of operations.

– Strong strategic and
commercial skills.

– Strong experience of investor

relations.

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The Workspace Advantage
is the backbone to our strategy
and provides a central focus for
everyone within the business
to work towards.

The Workspace Advantage
is about the added value
we provide to customers
beyond the space they rent
– it’s about the flexibility,
the technology and the
communities we create.

84 Workspace Group PLC Annual Report and Accounts 2018

85 Workspace Group PLC Annual Report and Accounts 2018

Jamie Hopkins
Chief Executive Officer

Graham Clemett
Chief Financial Officer

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The Board
continued

Non-Executive Directors

Appointment to the Board
Daniel was appointed to the
Board in June 2011 and
subsequently assumed the role
of Chairman at the AGM in July
2011. On the recommendation
of the Nomination Committee,
the Board agreed to extend his
appointment for a further three
years from June 2017.

Independent
Yes.

Committee memberships
– Chairman of the

Nomination Committee.

– Member of the

Remuneration Committee.

Current external appointments
Daniel is currently Chairman
of Hibernia REIT plc and
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
Daniel was previously Deputy
Chief Executive at Heron
International plc and prior to
that was Finance Director at
Green Property Plc 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.

– Strong financial skills,

previously a CFO for eight
years for a property
development and
investment company.

– Experience of acquisitions

and disposals.

The Workspace Advantage
uniquely positions us in our
marketplace and is delivering
results across the business.

The Workspace Advantage
is about providing a great
working environment to
support growing customers.

Appointment to the Board
Chris 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 Committee
and Nomination Committee.

Current external appointments
Chris, a Chartered Accountant,
is currently a Non-Executive
Director and Chairman of the
Audit Committee of both Keller
PLC and South East Water
Limited. He is Chair of Trustees
for the Slaughter and May
Pension Fund.

Previous appointments
Chris was Group Finance
Director of Carillion PLC from
1999 to 2007 and Vosper
Thornycroft PLC from 1991
to 1999.

Skills and business experience
– CFO of FTSE 250 Companies

for 17 years.

– Strong financial skills.
– Detailed knowledge

of risk assessment and
management systems.

– Experience of infrastructure
and development projects.

86 Workspace Group PLC Annual Report and Accounts 2018

87 Workspace Group PLC Annual Report and Accounts 2018

Daniel Kitchen
Daniel Kitchen
Non-Executive Chairman and
Non-Executive Chairman and
Chairman of the Nomination Committee
Chairman of the Nomination Committee

Chris Girling
Senior Independent Non-Executive Director and
Chairman of the Audit Committee

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The Board
continued

Non-Executive Directors
continued

Our unique in-house
marketing and operational
platform, which enables direct
engagement with our
customers, is a key
differentiator of The
Workspace Advantage.

Appointment to the Board
Maria was appointed to the
Board in May 2012. On the
recommendation of the
Nomination Committee, the
Board agreed to extend her
appointment for a further
three years from May 2018.

Independent
Yes.

Committee memberships
– Chairman of the

Remuneration Committee.

– Member of the

Audit Committee and
Nomination Committee.

Current external appointments
Maria 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
Company, the Independent
Television Commission (London)
and The Broadcasting Authority
of Ireland (Dublin).

Skills and business experience
– Strong marketing and
commercial skills.

– A lawyer by background, with
significant legal and corporate
governance experience.

– Business and strategy

development.

– Strategic business

assessments across diverse
market sectors.

Appointment to the Board
Damon 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 Committee,
Audit Committee and
Nomination Committee.

Current external appointments
Damon holds advisory roles for
a number of smaller companies
in the digital media, sport and
finance sectors. He is currently
Chairman of New Telecom
Express Group, an interactive
media service provider he
co-founded in 1989. Telecom
Express was sold to AMV BBDO,
part of the Omnicom Group, in
1998. In 2004, Damon led a
successful management buyout.
He has almost 30 years’
experience in this fast-paced and
ever-evolving, dynamic industry.

Previous appointments
Damon 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.

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The Workspace
Advantage sums up our
ethos: terrific locations
to work in, up-to-the-minute
technology, a great sense
of community and joined-
up thinking – all of which
allows businesses to
concentrate on what they’re
here to do... thrive!

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88 Workspace Group PLC Annual Report and Accounts 2018

89 Workspace Group PLC Annual Report and Accounts 2018

Maria Moloney
Non-Executive Director and
Chairman of the Remuneration Committee

Damon Russell
Non-Executive Director

The Board
continued

Non-Executive Directors
continued

Company Secretary

Appointment to the Board
Stephen was appointed to the
Board in July 2014. On the
recommendation of the
Nomination Committee, the
Board agreed to extend his
appointment for a further three
years from July 2017.

Independent
Yes.

Committee memberships
Member of the
Remuneration Committee,
Audit Committee and
Nomination Committee.

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 Non-Executive Chairman
of LXI REIT PLC and a member
of the advisory board of
Redevco, 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.

Date appointed
Carmelina was appointed
Company Secretary
in March 2010.

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: corporate governance,
monitoring and compliance with
legislation, administration, vesting
and granting of awards under
the Company’s share schemes.

Background and
relevant experience
Carmelina 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.

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The Workspace Advantage
is providing exactly what
London’s growing and vibrant
economy needs: office space
on flexible terms in convenient
locations with great amenities.

Workspace has a fantastic
culture with collaboration
at the heart of it. This means
all our people are focused
on delivering the Advantage
to our customers
and shareholders.

90 Workspace Group PLC Annual Report and Accounts 2018

91 Workspace Group PLC Annual Report and Accounts 2018

Stephen Hubbard
Non-Executive Director

Carmelina Carfora
Company Secretary

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Executive Committee

Role of the Executive Committee

Composition of the Executive Committee

The Executive Committee is responsible for the successful
implementation of the Company’s strategy and for the operational
performance of the Group. It reviews the effectiveness of our
governance, financial and risk management processes to ensure
that they are embedded within the Group.

21The Committee met

21 times during the year
ended 31 March 2018

Activities in 2017/18
– Developing the Group strategy and budget for approval by the

Board.

– Monitoring of operational and financial results against plans and

budgets.

– Considering regulatory developments and the GDPR compliance

programme.

– Reviewing and approving capital expenditure within the authorities

delegated by the Board.

– 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.

– Analysing and reviewing initiatives of particular interest to the
Company and presenting these to the Board as appropriate.

– Ensuring the effectiveness of risk management and control

procedures.

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 and Risk Committees; and development
of the brand.

Full biography on page 84.

2. Graham Clemett
Chief Financial Officer
Specific responsibilities
Finance; treasury; tax; company secretarial, governance and
compliance; investor relations; and information technology.

Full biography on page 85.

3. Chris Pieroni
Operations Director
Specific responsibilities
Corporate and business development; marketing; and new business
initiatives.

Background and relevant experience
Chris joined the Group as Operations Director in October 2007. 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 from 2014–2016.

4. Angus Boag
Development Director
Specific responsibilities
Planning consents; redevelopment and refurbishment projects;
joint ventures; valuations; sustainability and environmental strategy;
and project management.

Background and relevant experience
Angus joined the Group in June 2007 as Development Director.
He has expertise 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
construction across the portfolio and has responsibility for the
sustainability programme.

5. John Robson
Asset Management Director
Specific responsibilities
Asset management of the portfolio, including lettings, lease renewals,
refurbishments and facilities management.

Background and relevant experience
John joined Workspace in May 2008 as an Asset Manager. John was
promoted to Head of Asset Management in February 2013 and Asset
Management Director in October 2017. Prior to joining Workspace,
John qualified as a chartered surveyor and worked for Legal &
General Investment Management, London Merchant Securities and
ING Real Estate.

92 Workspace Group PLC Annual Report and Accounts 2018

93 Workspace Group PLC Annual Report and Accounts 2018

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The Executive Team
pictured at The Pill Box

1. Jamie Hopkins
Chief Executive Officer

2. Graham Clemett
Chief Financial Officer

3. Chris Pieroni
Operations Director

4. Angus Boag
Development Director

5. John Robson
Asset Management Director

The Pill Box
A 50,000 sq. ft. business centre
in Bethnal Green that sits in our
like-for-like portfolio and
continues to perform well.
A former pharmaceutical
factory, Workspace carried
out a full refurbishment of the
property in 2013, creating a
fantastic space for creative
businesses, with an award-
winning café, co-working space,
roof terrace looking over the city
and a gym in the basement.

Relations with
Shareholders

Engaging
with Shareholders
is a priority for
our business to
ensure good
understanding of our
investment case.

Jamie Hopkins
Chief Executive Officer

Workspace recognises the importance of active engagement with
Shareholders in order to create a productive and regular dialogue
that is not solely limited to financial calendar events.

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 and at the
annual Capital Markets Day. All
RNS announcements, including
quarterly trading updates, are
sent to analysts throughout the
year. In addition, the Chief
Financial Officer and Head of
Corporate Communications are
in regular dialogue with analysts
as they update their models and
publish research on the
Company.

Why it is important
Sell-side analysts write
independent research on
the Company, which is sent
to existing and prospective
investors. It is therefore
important that analysts have
up-to-date and accurate
information on the business
and its strategy in order to
present a fair view.

Frequency
Three formal meetings per year,
plus regular ongoing dialogue.

The Company has a comprehensive investor relations programme,
including regular engagement with investors, major institutions and
private client fund managers.

Throughout the year, meetings are arranged, both proactively and
on request, for the Chief Executive Officer, Chief Financial Officer and
Head of Corporate Communications with institutional Shareholders
and sell-side analysts to discuss the Company’s business model,
strategy and marketplace, as well as update on performance.
These visits often include site visits which provide Shareholders
with valuable insight into the business. The Chairman is also available
to meet with major Shareholders, independently of the Executive
Directors, as required.

The Group’s investor website, www.workspace.co.uk/investors,
holds all presentations made to analysts and investors for interim
and full year results, as well as webcasts, and is also used as a means
of providing additional sources of information for Shareholders. The
website is kept up-to-date with RNS announcements, share price
performance and other news, as well as details of the Group’s
sustainability strategy and achievements.

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 at www.workspace.co.uk/investors.

During the year, the Chief Executive Officer, Chief Financial Officer
and Head of Corporate Communications held over 135 meetings with
UK and overseas institutional investors, comprising both current and
potential Shareholders. Meetings involved either group or individual
presentations and, in some cases, tours of the portfolio. The tours
provide a good opportunity to see the Group’s properties,
understand our strategy, and to meet customers, members of our
management team and centre staff.

Twice a year, following the results roadshows, a detailed report is
collated for the Board, including feedback from investors and sell-side
analysts. This highlights Shareholders’ views on the Company’s
performance, strategy and any concerns they have raised.

Annual General Meeting
The Directors use the occasion of the AGM to engage with
Shareholders, and it is an opportunity for Shareholders to ask
questions of the Chairman, members of the Board Committees and
other Directors, both during the meeting and to meet informally
afterwards.

2. Investor roadshows
In addition to the results’
presentations, which investors
and analysts attend,
management carry out investor
roadshows in the UK
immediately after the Full
and Half Year results, generally
spending four to five days on
the road in London and
Scotland. Additional roadshows
are arranged during the year
to regional cities in the UK,
Continental Europe and the US.

Why they are important
The roadshows give
Shareholders an opportunity to
meet with management one-on-
one or in small groups to discuss
the results, business model and
strategy, and raise any questions
they may have about the
Company and its performance.

Frequency
Two formal roadshows per
year, plus at least two further
roadshows arranged as
necessary.

3. Webcasts
The Full and Half Year Results
presentations are streamed on
the Company’s website via a live
webcast and made available for
replays following the event.

Why they are important
The webcasts allow analysts
and investors to hear the
management team present the
results if they cannot attend the
event in person, and broaden the
Company’s reach to investors
based overseas.

Frequency
Twice per year.

Overall balance of activities 2017/18

1. Analyst engagement 3
2. Investor roadshows 4
3. Webcasts 2
4. Bank and industry conferences 6
5. Investor tours 14
6. The Annual General Meeting 1
7. Capital Markets Day 1

6. 7.

94 Workspace Group PLC Annual Report and Accounts 2018

95 Workspace Group PLC Annual Report and Accounts 2018

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Our ongoing investor relations calendar of events

Regular programme

Investor
meetings

Investor
tours

Calendar of events

– AGM
– Q1 Business Update

2018

July

August

September

– US and UK investor

October

November

December

January

February

March

April

May

June

conferences

– Capital Markets Day

– Half Year Results
– Investor roadshow

– Investor conference
– Q3 Business Update

– Year end
– US and UK investor

conferences

– Full Year Results
– Investor roadshow

Relations with Shareholders
continued

4. Bank and 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
Conferences provide a good
opportunity to meet a large
number of investors and industry
associates in one place. They
often include presentations or
panel discussions on industry
trends and allow the Executive
Directors to build relationships
with key players in the sector, as
well as 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.

6. The Annual General Meeting
The Annual General Meeting
(‘AGM’) will be held at the
Company’s business centre at
160 Fleet Street, London EC4A
2DQ and is attended by the full
Board of Directors. Details of
the resolutions to be proposed
at the AGM on 13 July 2018
can be found in the Notice
of AGM, 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.

Why it is important
The AGM provides Shareholders
with a forum to put questions to
the Board of Directors, and to
vote on important issues within
the business.

Frequency
Six conferences attended
this year.

Frequency
Once a year.

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, Centre Managers
and other team members
often present.

Why they are important
The tours showcase the
properties within the portfolio
and demonstrate the operational
model Workspace has adopted,
as well as the high levels of
activity ongoing across the
Group. They allow investors
to see the space being used
by customers and demonstrate
the business model and strategy
in action.

Frequency
14 tours conducted this year.

7. Capital Markets Day
The Capital Markets Day is
held once a year and includes
either a tour of the Group’s
properties or management
presentations. The Executive
Directors are all present, as well
as a group of Centre Managers
and other members of the
management team.

Why it is important
As well as showcasing the
Group’s properties, the Capital
Markets Day allows Workspace
to educate analysts and
investors on different aspects
of the business and demonstrate
how it is driving value and
growth from its real estate and
customer proposition. We have
scheduled the next Capital
Markets Day for October 2018,
when we expect to conduct
a tour of several properties
and provide insights into our
customer base.

Frequency
Once a year.

Effectiveness

Diversity of skills,
knowledge and
experience is essential
in ensuring that we
have a strong
and highly effective
Board.

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Daniel Kitchen
Chairman of the
Nomination Committee

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96 Workspace Group PLC Annual Report and Accounts 2018

97 Workspace Group PLC Annual Report and Accounts 2018

Induction, training and development
All new Non-Executive Directors joining the Board undertake a
formal and personalised induction programme which is designed
to give him or her an understanding of the Company’s business,
governance and stakeholders. 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 the Board; the responsibilities of the Board Committees;
and the Board’s strategic objectives.

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. The Company’s principal external advisers
provide updates to the Board, at least annually, on the latest
developments in their respective fields.

Our Company Secretary also provides regular updates to the Board
and its Committees on changes in legal, regulatory and corporate
governance matters.

During the year, we organised presentations for the Board and its
Committees on the following areas:
– Changes being proposed to the UK Corporate Governance Code.
– Executive remuneration trends and best practice.
– Cyber security.
– Requirements of the General Data Protection Regulation.
– Updates on our sustainability initiatives.

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.

Effectiveness
continued

Independence of Non-Executive Directors
During the year, the Board considered the independence of all of the
Non-Executive Directors, save for the Chairman who was deemed
independent by the Board at the date of his appointment.

The Board considers that our Non-Executive Directors remain
independent from 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
robust and independent manner and bring constructive challenge to
Board discussions and independent decision-making to their Board
and Committee duties.

As in previous years, the independence of Stephen Hubbard was
specifically considered during the year. Stephen is Chairman of CBRE
UK and is a member of their Management Board. CBRE are the
Group’s external independent valuers. Stephen does not take part in
any considerations of the valuation of the Group’s property portfolio at
either Board or Committee level. Furthermore, he has no involvement
in any discussions or decisions regarding the appointment of CBRE or
the fees paid to them. The Board is satisfied and continues to conclude
that Stephen remains independent both in character and judgement.

Re-election of Directors
In accordance with the UK Corporate Governance Code, all Directors
will stand for re-election at the Annual General Meeting (‘AGM’) on
13 July 2018. Following the Board evaluation review during the year,
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, as
members of the Board and the Board Committees. Consequently, the
Board is of the opinion that the Directors continue to give effective
counsel and commitment to the Company and, accordingly, should
be re-appointed by the Company’s Shareholders at the upcoming
AGM. The explanatory notes in the Notice of Meeting for the AGM
state the reasons why the Board believes that the Directors proposed
for re-election at the AGM should be re-appointed.

Mr Hopkins and Mr Clemett have service contracts and details can
be found on page 133. None of the Non-Executive Directors have
service contracts and are given letters of appointment.

The appointment of Daniel Kitchen may be terminated by either him
or the Company giving six months’ notice in writing.

Maria Moloney’s second term of appointment as Non-Executive
Director expired on 22 May 2018. Following a review of her
performance, the Nomination Committee recommended that her
appointment should be extended for a further three-year term.
This recommendation was agreed by the Board in March 2018.

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.

Commitment
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. The Board is satisfied that each of the Non-
Executive Directors is able to devote sufficient time to the Company’s
business. Letters of appointment for the Non-Executive Directors are
available for inspection at the AGM.

Non-Executive Directors seek approval from the Chairman, prior to
assuming additional external commitments which may affect their
time available to devote to the Company’s business. The Board is
advised of any changes.

All Directors allocate sufficient time to discharge their responsibilities
effectively. Directors notify the Chairman of any alterations to their
external commitments, as they arise, with an indication of the time
commitment involved. There were no changes during the year.

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 86 to 90.

External appointments
On 1 March 2018, Jamie Hopkins became a Non-Executive Director
of St. Modwen Properties PLC.

On 1 June 2016, Graham Clemett was appointed as a Non-Executive
Director of The Restaurant Group Plc.

Executive Directors are permitted to take a Non-Executive position
in another company or organisation in order to broaden their skills
and experience. The appointment to such positions is subject to
the approval of the Board which considers, in particular, the time
commitment required.

Information and support to the Board
The Board and its Committees are provided with comprehensive
papers in a timely manner to ensure that members are fully briefed
on matters to be discussed at their meetings.

The Directors have access to the advice and services of the Company
Secretary, Carmelina Carfora. Her biography can be found on
page 91. Through the Chairman, Carmelina is responsible for advising
the Board on matters of corporate governance and ensuring
compliance with Board procedures.

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 utilises an electronic Board paper system which provides
immediate and secure access to Board papers and materials. Prior to
each Board meeting, the Directors receive 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.

Board performance evaluation
The Board recognises that annual performance evaluations
enable it to improve its effectiveness and that of its Committees
and Directors. In accordance with our policy to undertake
the Board evaluation process externally every three years,
our Board evaluation for the year under review was undertaken
by Advanced Boardroom Excellence Limited, an independent
third party, which carries out no other work for the Company.
The evaluation covered the Board, Board Directors and its
Committees. Individual meetings were held with each Director,
members of the Executive Committee and the Company
Secretary. The report was discussed at the April Board Meeting.

Outcomes
Overall, the evaluation considered that the Chairman and Chief
Executive have an excellent working relationship which delivers
clear leadership. In particular, we were pleased that the report
highlighted the following strengths:
– The Board and its Committees continued to work well and that

the Directors contribute effectively and demonstrate
commitment to their roles;

– The Board’s culture is one of openness and constructive debate;
the style and tone was seen as respectful, with a collegiate and
supportive environment;

– Debates held by the Board are seen as inclusive and dynamic;

and

– The agenda is well structured, thus enabling Board members
to prepare for meetings and ensure that decisions are made
in good time.

The evaluation also reinforced the Board’s commitment to the
following:
– Strategy should continue to feature on the Board’s agenda;
– Continue with the focus on succession planning for both

Executive and Non-Executive Directors and for senior roles
across the business;

– As the revised UK Corporate Governance Code unfolds, consider
how the Board will engage with its stakeholders more generally,
and how it might further develop the structure of its engagement
with the business.

Chairman’s evaluation
The Senior Independent Director normally chairs an annual meeting
of Executive and Non-Executive Directors, without the Chairman
present, to appraise the Chairman’s performance and to address
any other matters which the Directors might wish to raise. The
outcome of these discussions is conveyed by the Senior
Independent Director to the Chairman. During the year under
review, the Chairman’s performance was appraised as part of the
external Board evaluation. It concluded that the Chairman is highly
respected and he was complimented for his leadership, experience
and for his inclusive style during Board meetings.

Having considered the results of the review, the Board is satisfied
that the Chairman continues to be effective and shows a high level
of commitment in discharging his responsibilities.

98 Workspace Group PLC Annual Report and Accounts 2018

99 Workspace Group PLC Annual Report and Accounts 2018

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Nomination Committee Report

The
Workspace
Advantage

Helping to deliver
The Workspace Advantage:

The right balance of skills,
knowledge and experience on the
Board and Executive Committee
help us to deliver The Workspace
Advantage to all our stakeholders.

Daniel Kitchen
Chairman of the
Nomination Committee

Role of the Committee
The Nomination Committee considers the structure, size and
composition of the Board. It regularly reviews the balance, skills
and experience of the Board, advising on succession planning and
making appropriate recommendations to ensure that the Board
is appropriately balanced to support the Group’s strategy. It is
responsible for reviewing the Group’s senior leadership needs
and leads on the process for Board appointments.

Composition of the Committee
– Daniel Kitchen – Chairman.
– Stephen Hubbard.
– Maria Moloney.
– Chris Girling.
– Damon Russell.

For full biographies, see pages 86 to 90.

Mar
2018

May
2017

Attendance

Daniel Kitchen
Stephen Hubbard
Maria Moloney1
Chris Girling
Damon Russell

Meeting attended

1. Maria Moloney did not attend the meeting in March 2018, as the business of the
meeting was in relation to her reappointment as a Director of the Company.

Directors’ tenure as at 31 March 2018

during the year ended 31 March 2018.2

The Committee meets as required and did so on two occasions

Nomination Committee activities in 2017/18
– Considered Board succession plans.

– Reviewed the composition of the Board and its Committees.

Remit of the Nomination Committee
– Reviewing the structure, size and composition, including the skills,
knowledge, independence, experience and diversity of the Board,
and making recommendations with regard to any changes.

– Agreed the extension to the letter of appointment for

Maria Moloney.

– Reviewed the Committee’s Terms of Reference.

– Reviewing the results of the Board performance evaluation process

– Considered and recommended the re-election of each

that relate to the composition of the Board.

Director at the AGM.

– Considering succession planning for Directors and other senior

– Received updates from the Chief Executive Officer on

Executives, to ensure progressive refreshing of the Board.

– Evaluating the balance of skills, knowledge and independence on

the Board and, in light of this evaluation, preparing a description of
the role and capabilities required for a particular appointment and
its expected time commitment.

succession planning for the Executive Committee and Senior
Management team.

Executive Directors
Jamie Hopkins*†

Graham Clemett*‡

Senior Independent Director

Chris Girling

Non-Executive Chairman
Daniel Kitchen

Non-Executive Directors
Maria Moloney1

Damon Russell

Stephen Hubbard

Dear Shareholder
On behalf of the Committee, welcome to the Report of the
Nomination Committee for the year ended 31 March 2018. Whilst
there have been no changes to the Board during the financial year,
the Nomination Committee has continued to support the Board in
ensuring its composition has the right balance of skills, experience,
independence and knowledge to support the business and to fulfil
the Board’s responsibility to Shareholders.

The Committee’s role and responsibilities are set out in its Terms of
Reference, which are reviewed annually and approved by the Board.
These are available on the Company’s website at www.workspace.co.uk.

Succession planning
The key objective of the Committee is to regularly review the skills
and experience of the Board and to ensure that it is of the right size,
structure and composition. The Committee plays a vital role in
ensuring that Workspace is headed by a Board which is collectively
responsible for the long-term success of the Company. We continue
to focus on the need to ensure that there are no gaps in the skills or
experience as members of the Board reach the end of their relevant
terms. In doing so, last year we stated that as a general principle,
new Non-Executive Directors would join the Board two years prior
to existing members reaching the end of their relevant term. This will
ensure that the evolution of the Board’s membership is planned and
properly managed. This approach will continue to be the focus of the
Committee as it considers the mix and diversity of skills and experience
that will be required of prospective Board members in the context
of the Group’s medium- and long-term strategy.

The length of tenure of our Non-Executive Directors is contained
on page 133.

During the year, changes were made to the membership of the
Executive Committee. We regularly consider the depth and
experience on the Executive Committee and, as a result, in October
2017, we approved the internal promotion of John Robson to the role
of Asset Management Director. John has worked for the Company
since May 2008 and his biography can be found on page 92.

Looking forward
Looking forward to 2018, the Committee will continue with its review
of succession plans in the context of the Group’s strategy and to
ensure an orderly and progressive evolution of the Board’s
membership.

Daniel Kitchen
Chairman of the Nomination Committee
5 June 2018

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2

1
1

0
2

2
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0
2

3
1
0
2

4
1
0
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5
1
0
2

6
1
0
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7
1
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8
1
0
2

9
1
0
2

0
2
0
2

1
2
0
2

Board experience

Initial term

Second term

Duration of current term

* 12-month rolling contract.
† Appointed Non-Executive Director in June 2010 and Chief Executive Officer

in April 2012.

‡ Appointed Chief Financial Officer in July 2007.
1. Maria Moloney’s second term expired in May 2018. On the recommendation of
the Nomination Committee, the Board agreed to extend her term to May 2021.

For dates of letters of appointment and unexpired terms for
Non-Executive Directors, see page 133.

For details of Executive Directors’ service contracts, see page 133.

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. Utilities 6%

100 Workspace Group PLC Annual Report and Accounts 2018

101 Workspace Group PLC Annual Report and Accounts 2018

Nomination Committee Report
continued

Members of the Committee
All members of the Committee are independent Non-Executive
Directors, with each bringing a wealth of commercial experience,
across a range of industries. The Committee is responsible for
keeping its composition under review and for making
recommendations to the Board as to its membership.

The Chairman of the Board chairs all meetings of the Committee
unless a matter relates to the Chairman, in which case the Senior
Independent Director (SID) is invited to take the Chair.

How the Committee operates
The Committee met formally on two occasions, primarily to progress
succession planning and to discuss the annual re-election of Directors
and the reappointment of Maria Moloney, approval of which was
granted by the Board in March 2018.

The meetings are usually held immediately prior to, or following a
Board Meeting, though the Committee also meets on other occasions
on an ad hoc basis, as required.

Only members of the Committee have the right to attend meetings.
However, an invitation to attend meetings is, on occasion, extended
to the Chief Executive Officer, in order that the Committee can
understand his views, particularly on key talent within the business.

Appointments to the Board
The Nomination Committee is chaired by the Chairman of the
Company and comprises all of the Non-Executive Directors. As the
need arises, the Committee is assisted by external search consultants.

Skills and knowledge of the Board
A key responsibility of the Committee is to ensure that the Board
maintains a balance of skills, knowledge and experience appropriate
to the operation of the business and required to deliver the strategy.
The Committee is satisfied that the Board continues to have an
appropriate mix of skills and experience to operate effectively. In
addition, the Directors collectively have many years of experience,
all gained from a broad range of businesses. They bring a range of
expertise and knowledge of different business sectors to Board
deliberations, which encourage constructive and challenging debate
around the Boardroom table.

The Board experience by sector is illustrated on page 101.

Diversity
The Board recognises the importance of diversity, both in its
membership and in the Group’s employees. The Board understands
the rationale for, and has followed the discourse on, quotas to achieve
diversity. Its policy on diversity is that selection should be based on
the best person for the role, and to ensure that its composition is
diverse and has an appropriate balance of skills, experience and
requisite knowledge to successfully deliver the Group’s strategy.
The benefits of diversity, including gender and ethnic 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 pages 124 and 135.
The gender diversity of the Board and Company is set out below.

Board diversity

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 Board

Male

Female 1

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.

Independence and re-election to the Board
As at 31 March 2018, the Board comprises the Chairman, two
Executive Directors and four Non-Executive Directors. The
biographies of all members of the Board outlining the experience
they bring to their roles are set out on page 80 and pages 84 to 90.

The composition of the Board is reviewed annually by the Nomination
Committee.

The Committee conducted a review of the independence of Maria
Moloney in the year as she reached the end of her current three-year
term in May 2018. Maria was not present during the Committee’s
discussion. Having conducted its review, the Committee was satisfied
that it was appropriate to recommend to the Board that Maria’s
appointment should be extended for a further three years.

Further details on the independence of Directors and their re-election
can be found on page 98 and on page 3 of the 2018 AGM Notice
of Meeting.

In accordance with the Code, all the Directors will retire and offer
themselves for re-election by shareholders at the 2018 Annual
General Meeting.

Further biographical information on each of our Directors can be
found on pages 84 to 90.

Senior Management

Male

Female

All employees

Male

Female

129

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 from 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 discuss the details with the 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.

Corporate Governance
During the year, the Committee reviewed the 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.

Accountability

Transparency
and effective
risk management
remain a focus.

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Chris Girling
Chairman of the
Audit Committee

The Directors consider that the Annual Report and Accounts taken
as a whole is fair, balanced and understandable, and provides the
information necessary for Shareholders to assess the Company’s
performance, business model and strategy.

The Group’s strategy and business model can be found on pages 16
and 28. A statement of the Directors’ responsibilities regarding the
financial statements is set out on page 139.

Internal control and risk management
The Board 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 the principal
risks and uncertainties section on page 46.

An assessment of the principal risks facing the Company is set out
on pages 46 to 56 and key performance indicators are on pages 35
and 40.

Going Concern and Viability Statement
Going Concern disclosures are included alongside the Viability
Statement on page 57.

Takeover directive
Share capital structures are included in the Directors’ Report
on page 136.

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 External
Auditors, with no Company management present.

Further details on the work of the Audit Committee can be found
in the Audit Committee Report on pages 104 to 110. Details of the
composition of the Audit Committee are set out on page 105.

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102 Workspace Group PLC Annual Report and Accounts 2018

103 Workspace Group PLC Annual Report and Accounts 2018

Audit Committee Report

The
Workspace
Advantage

Helping to deliver
The Workspace Advantage:

Delivering The Workspace
Advantage requires the Audit
Committee to play a key role in
ensuring the integrity of financial
reporting and the maintenance of
a sound internal control system.

Role of the Committee
Our role is to monitor the integrity of the financial statements
of the Group, review and report to the Board on significant
reporting issues and judgements, and review and assess the
adequacy and effectiveness of the Company’s internal financial
controls and other internal control systems.

Composition of the Committee
All members of the Committee, detailed below are independent
Non-Executive Directors with a good diversity of experience,
including property and finance. The Chair, Chris Girling, is a
qualified accountant and has an appropriate level of recent and
relevant financial experience to discharge his duties as Chair of
the Committee.
– Chris Girling – Chairman
– Maria Moloney
– Damon Russell
– Stephen Hubbard

For full biographies see pages 87 to 90.

Dear Shareholder
As Chairman of the Audit Committee, I am pleased to present the
Committee’s report for the financial year ended 31 March 2018.

The Report of the Audit Committee details the key activities of the
Committee during the year under review, alongside its principal
responsibilities. The Audit Committee, reporting to the Board,
oversees the financial reporting process, monitors the effectiveness
of internal control, risk management and the statutory audit.

External Auditor – Transition to KPMG LLP
Following the decision to undertake an audit tender in January 2017,
a recommendation to appoint KPMG LLP as the Group’s new External
Auditor for the 2017/18 financial year was approved by the Board in
January 2017, and was subsequently approved by Shareholders at
the 2017 AGM.

In order to achieve as smooth a transition as possible, a plan was
drawn up early on with the aim of familiarising the new lead audit
partner, Richard Kelly, and his team with the Workspace business.
KPMG had meetings with and shadowed the work of PwC LLP (PwC),
the outgoing External Auditor, during the year-end process for 2017.

May
2017

Nov
2017

Feb
2018

Introductory meetings were also held with senior management and
members of the finance team to enhance KPMG’s understanding of
the Group and key business processes.

Attendance

Chris Girling
Maria Moloney
Damon Russell
Stephen Hubbard

Meeting attended

I am pleased to report that the transition to KPMG from PwC went
well and they have gained a good understanding of the business
over the last year. We look forward to working with KPMG over the
coming years.

We thank PwC for their services and for supporting a smooth
transition.

In future years, the Company intends to put the external audit out
to tender at least every 10 years.

Review of 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 and internal control and risk management processes.

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 valuation of the investment portfolio as a
significant issue, for which further details are provided on page 108.

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 regulations.

A description of the main activities and information on the other
significant issues that the Committee considered during the year
can be found on page 107.

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Chris Girling
Chairman of the Audit
Committee

The Company Secretary acts as the secretary to the Committee and
attends all meetings.

The Audit Committee met three times during
the year ended 31 March 2018

Remit of the Audit Committee
– Monitor the integrity of financial statements.

– Provide an opinion to the Board that the Annual Report and

Accounts, taken as a whole, is fair, balanced and understandable.

– Review and report to the Board on significant financial reporting

issues and judgements.

– Review the adequacy of the Company’s financial controls.

– Review and monitoring of risk management and internal controls.

– Ensure that at least once every 10 years the audit services contract

is put out to tender.

– Make recommendations to the Board on the reappointment of the

Company’s External Auditors and their remuneration.

104 Workspace Group PLC Annual Report and Accounts 2018

105 Workspace Group PLC Annual Report and Accounts 2018

Audit Committee Report
continued

Risk Management
The principal business risks facing the Company, which have been
subject to robust assessment by the Board, are set out on pages 46
to 56, and the ongoing review and monitoring of the Group’s risk
management and internal control systems are described on page 110.

The Audit Committee and the Board have continued to assess the
long-term viability of the Company, as required by the UK Corporate
Governance Code. Further information can be found on page 108
and our Viability Statement is located on page 57.

Audit Committee evaluation
As a Committee, we are continually looking at opportunities to
improve our effectiveness. The performance of the Committee was
reviewed during the year as part of the external review of the Board
and its Committees. The topics covered in the review focused on the
skills and experience of the Audit Committee members, the number
of meetings held and the quality of interaction between Committee
members and members of the management team.

I am pleased that all aspects of the review were positive and that the
Committee continues to operate effectively.

Governance
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 that 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
5 June 2018

Members of the Committee
All members of the Committee are independent Non-Executive
Directors, who collectively have the skills and experience required
to discharge their duties.

The Board is satisfied that Chris Girling, who was appointed
Committee Chairman in July 2014, has the necessary level of relevant
financial and accounting experience required by the provisions of the
UK Corporate Governance Code to perform the role of Chairman,
having previously held Chief Financial Officer positions in public
companies. Chris is also a Chartered Accountant and he continues
to chair the Audit Committee for another public limited company.

Meetings of the Committee
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, in May and November 2017 and in February
2018. In addition, the Committee met in May 2018 to discuss the
Annual Report, the property valuations and the findings of the
external auditor. Meetings of the Committee generally take place
just prior to the Board meeting.

Meetings are attended by the External Auditor and members of the
Group’s senior management team. Those people and advisers listed
below attend meetings, at the request of the Committee Chair.

Attendee

Daniel Kitchen
Jamie Hopkins
Graham Clemett
Vivienne Frankham
Angus Boag
Chris Pieroni
KPMG LLP
Grant Thornton
CBRE

Position

Chairman
Chief Executive Officer
Chief Financial Officer
Head of Finance
Development Director
Operations Director
External Auditor
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.

Meetings with the External Auditor
At least once a year, usually preceding a Committee meeting, the
Committee meets separately with the external audit engagement
partner to give the Auditors an opportunity to discuss matters
without the executive management team being present in order
to receive feedback from them on matters such as the quality of
interaction with management.

The Committee Chairman also holds separate one-to-one meetings
with the Chief Financial Officer and the External Auditor (KPMG were
appointed as the External Auditor during 2017/18), typically ahead of
Committee meetings, in order 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 and to ensure that sufficient time is devoted to matters
at the subsequent meetings.

Meetings with CBRE
In addition, the Committee Chairman will also meet with the Group’s
independent property valuers (CBRE) to consider the valuation of
our property portfolio.

2018 Annual Report and Accounts – Fair, Balanced and Understandable
The Directors are responsible for preparing the Annual Report. The Committee reported that based on its review of the relevant evidence,
it was satisfied that the Annual Report:
– 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.

The Board’s statement on the Annual Report and Accounts is set out in the Statement of Directors’ responsibilities on page 139.

Main activities of the Audit Committee in relation to the year ended 31 March 2018
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 110.

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 2018 Annual Report and

Accounts.

– Considered the appropriateness of the Group’s accounting policies and practices.

External audit

– Reviewed and considered the KPMG Reports to the Audit Committee following the Half Year review

and Full Year audit.

– Discussed the Board’s Representation Letter.
– 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.

– Considered the adequacy of the Group’s procedures with regard to the objectivity and independence

of the External Auditor, KPMG.

Independence and objectivity
of the External Auditor

Portfolio valuation

– 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.

Taxation and REIT compliance

– Discussed the Group’s compliance with REIT legislation and general tax matters.

Corporate Governance

– Received updates from the External Auditor on compliance and changes in Corporate Governance

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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 57.

– Considered the results of the external evaluation of the Audit Committee.
– Reviewed the Terms of Reference for the Committee.
– Received training and technical updates from the Company Secretary and the External Auditor.
– Received an update from PwC on Cyber Security.

Reviewed the principal risks

– Reviewed the principal business risks, risk management and internal controls. The principal risks and

risk management system are set out on pages 46 to 56.

– Reviewed fraud risk.

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106 Workspace Group PLC Annual Report and Accounts 2018

107 Workspace Group PLC Annual Report and Accounts 2018

Audit Committee 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 area of focus
during the year is set out below:

Matter considered

Action taken by the Committee

Valuation of the investment
property portfolio

The valuation of the investment property portfolio is inherently subjective, requiring significant judgement.
The outcome is significant for the Group in terms of its investment decisions, results and remuneration.

The valuation is conducted externally by independent valuers. The valuers presented the year-end
valuation to the Audit Committee. The Audit Committee reviewed the methodology and outcomes of the
valuation, challenging the key assumptions and judgements. The objectivity and independence of the
valuers is monitored by the Audit Committee. KPMG 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.

In addition, the Audit Committee considered a number of other judgements which have been made by management, none of which had
a significant impact on the Group results.

Viability Statement process
The Viability Statement can be found on page 57.

Going Concern statement
The Going Concern statement can be found on page 57.

Developing a robust Viability Statement
In continued development of the Group’s Viability Statement,
existing processes were strengthened to ensure risks were identified,
understood and reassessed 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.
– Reassessment of key risks and their potential impact on the

business model.

The process we undertook

Stage 1
Risk identification

Stage 2
Risk assessment

Stage 3
Scenario sensitivity analysis

Stage 4
Conclusions

The Board

Audit Committee

Executive Committee

Risk Committee

Senior Management

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.

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.

External Auditor

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.

The Board was presented with
the findings from this analysis
and given the opportunity
to question the process
and findings.

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’s External Auditor.

The Group may use the External Auditor for relevant financial work
for a variety of reasons, including their knowledge of the Group and
understanding of our sector, 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
KPMG for the past financial year. The Committee has considered in
detail the nature and level of non-audit services provided by KPMG
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 considered 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. Consequently, it was agreed that all non-audit work
and fees would be reported to the Audit Committee.

In addition, the Audit Committee will assess the threats of self-review
by the External Auditor, self-interest, advocacy, familiarity and
management. These are set out below and considered in relation
to KPMG’s services:

A self-review threat
This is where, in providing a service, the KPMG audit team could
potentially evaluate the results of a previous KPMG service.

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
properties. 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.

A self-interest threat
Where a financial or other interest (of an individual or KPMG) 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, the scope of work and fees must be approved
in advance by the Chief Financial Officer, the Committee Secretary
and the Chairman of the Audit Committee. For larger assignments,
in excess of £100,000 this would involve a competitive tender
process, unless there are compelling commercial or timescale
reasons to use the External Auditor or another specific
accountancy firm.

– It will not accept significant contingent fee arrangements with

the External Auditor.

An advocacy threat
This is where KPMG or KPMG personnel promote an audit client’s
position to the extent where KPMG’s objectivity as External Auditor
is compromised.

– The Group will not use KPMG 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. There have been no instances of this
occurring.

– The Audit Committee will monitor on an ongoing basis the

relationship with the External Auditors, to ensure its continuing
independence, objectivity and effectiveness by reviewing its
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 KPMG for any services which would

be considered management responsibility.

Audit fees
Details of audit and non-audit fees paid to KPMG can be found
in note 2 on page 154.

The only non-audit service performed by KPMG in the year was
the review of the Group’s half year results.

108 Workspace Group PLC Annual Report and Accounts 2018

109 Workspace Group PLC Annual Report and Accounts 2018

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Audit Committee Report
continued

Risk Committee

Annual Auditor assessment
Annually, the Committee assess the qualifications, expertise,
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.

As the financial year ended 31 March 2018 is KPMG’s first as External
Auditor, an assessment on external audit effectiveness will be
completed later in 2018, when sufficient time has passed with KPMG
in post. The Committee will consider aspects such as KPMG’s
experience and expertise, the extent to which the audit plan had been
met and the content of its audit reports.

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.

As part of its deliberations, the Committee reviews a report on the
audit firm’s own internal quality control procedures together with the
policies and processes for maintaining independence and monitoring
compliance with relevant requirements.

KPMG LLP has confirmed to the Committee that:
– The audit of the consolidated financial statements is undertaken

in accordance with the UK Firm’s internal policies and procedures
to ensure the objectivity of its audit report.

– It has internal procedures in place to identify any aspects of

non-audit work which could compromise its role as auditors and
to ensure the objectivity of its audit report.

– It believes that, in their professional judgement, the safeguards

they have in place sufficiently guard against the threats to
independence.

Consequently, KPMG consider that it has maintained its auditor
independence throughout the year.

Furthermore, on the request of the Audit Committee, the views of key
members of the finance team were sought on the handover process
from PwC, the outgoing External Auditor. It was confirmed that
KPMG had carried out a smooth handover process.

The Committee are satisfied that the Auditors are independent.

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 through 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 46 to 56.

Whistleblowing
The Group has a ‘whistleblowing procedure’ through which
employees may report, in confidence and anonymously if preferred,
concerns about suspected impropriety or wrongdoing in any matters
affecting the business. No matters were reported during the year.

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
5 June 2018

Role of the Risk Committee
The 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 communicate risk management awareness,
both financial and non-financial throughout the organisation.
– To challenge Executive Directors’ 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 consider the Viability Statement and the related sensitivity

analysis and report to the Audit Committee.

– To engage internal or external resources 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 consider any developments in the external environment
or regulation, which may impact on risk considerations.

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 Services.
– Tom Rahman, Head of IT Operations.

The Risk Committee is chaired by Jamie Hopkins.

In addition, employees from across the business, specifically centre
managers, 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 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.
– Other senior staff.

The
Workspace
Advantage

Helping to deliver
The Workspace Advantage:

By constantly assessing and
managing the risks to our operations
and strategy, the Risk Committee
ensures that the business
can continue to deliver The
Workspace Advantage.

Jamie Hopkins
Chairman of the
Risk Committee

Activities in 2017/18
– 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.

– Discussed cyber security risks and agreed to include it as a distinct

item in the risk register.

– Discussed changes in the regulatory environment and likely impact

on the Company.

– Discussed the implications of the GDPR and the ongoing

compliance programme.

the year ended 31 March 20185

The Risk Committee met five times during

110 Workspace Group PLC Annual Report and Accounts 2018

111 Workspace Group PLC Annual Report and Accounts 2018

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Investment Committee

The
Workspace
Advantage

Helping to deliver
The Workspace Advantage:

Owning and investing in the right
assets is key to delivering The
Workspace Advantage for our
customers and enhancing the
value of our portfolio for
shareholders.

Jamie Hopkins
Chairman of the
Investment Committee

Brickfields, Hoxton E2 8HD
Opening 2019
Located in trendy Hoxton, just
up the road from Shoreditch.
Wrapped around a central
atrium to allow natural light to
flood the space. Complete with
an on-site café, stylish meeting
rooms and breakout spaces.

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, those 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 projects to ensure they are progressing in line
with budget and are on target to meet completion dates.

– Review and approve additional business development projects.

Composition of the Committee
– Jamie Hopkins, Chief Executive Officer.
– Graham Clemett, Chief Financial Officer.
– Chris Pieroni, Operations Director.
– Angus Boag, Development Director.
– John Robson, Asset Management Director.
– Richard Swayne, Head of Investment.
– Clare Marland, Head of Corporate Communications.
– Mike Webber, Head of Financial Planning and Analysis.
– Simon Webb, Head of Professional Services.
– Carmelina Carfora, Company Secretary (Secretary to the

Investment Committee)

The Investment Committee is chaired by Jamie Hopkins.

Activities in 2017/18
– Signed off significant refurbishment and redevelopment activity,

including monitoring progress of ongoing projects, such as
Brickfields in Hoxton and China Works on the South Bank.

– Approved the acquisitions of the Centro estate in Camden in

January and April 2018 for a total of £185m, and The Salisbury,
located in Finsbury Circus, for £158.7m.

– Agreed the disposals of Stratford Office Village in September
2017 for £14m and Zennor Road Industrial Estate, in Balham,
in August 2017 for £30m.

– Received updates from the development team on planning
consents awarded for a major refurbishment scheme at
The Shaftesbury Centre, in Ladbroke Grove and for a mixed
use development scheme at The Chocolate Factory and
Parma House, Wood Green, Haringey N22.

The Investment Committee met 20 times during
the year ended 31 March 2018

Remuneration

The Remuneration
Policy rewards
performance in
keeping with the
successful delivery
of our strategy.

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The principal responsibility of the Remuneration Committee is
to determine and agree the overall remuneration principles and the
framework for remuneration of the Executive Directors and senior
management team.

Maria Moloney
Chairman of the
Remuneration Committee

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112 Workspace Group PLC Annual Report and Accounts 2018

113 Workspace Group PLC Annual Report and Accounts 2018

Remuneration
continued

Where is the information?

Letter from the Chairman of the Remuneration Committee

115 Our approach to fairness and wider workforce considerations

Remuneration Report at a glance

What is our Remuneration Policy?

Additional context on our Executive Directors’ pay

118

120

122

How do we cascade remuneration through the Company?

How did we implement the Policy in 2017/18?

Additional information

124

126

127

133

Who is on the Committee, how many times did we meet and what did we do?

We met as a Committee eight times during the year. We believe it is important that the Committee keeps up-to-date on an ongoing basis
during the year to ensure discussions are timely where business decisions may affect remuneration. Below we set out the key activities the
Committee undertook during the year.

Maria
Moloney
(Chairman)

Daniel
Kitchen

Chris
Girling

Stephen
Hubbard

Damon
Russell

Key agenda items

The
Workspace
Advantage

Helping to deliver
The Workspace Advantage:

New Policy taken to vote at the 2017 AGM
with approval of

99.7%

Once the Board has determined and agreed the
Company’s strategic ambitions, the Remuneration
Committee seeks to set a Remuneration Policy which
is aligned with the delivery of those ambitions. Our
role is to ensure that the remuneration arrangements
for Executive Directors and other members of the
senior management team appropriately reward
performance, as well as offering
encouragement to successfully deliver
our strategy and create Shareholder
value in a responsible manner.

Maria Moloney
Chairman of the
Remuneration Committee

April
2017

May
2017

July
2017

Sept
2017

Nov
2017

Jan
2018

Mar
2018

– Remuneration Policy review – status update.
– Annual bonus 2016/17 – preliminary outcomes.
– Update on progress of the Directors’ Remuneration Report

for 2017.

– 2017 AGM Season update.
– Salary increases for Executive Directors.

– Annual bonus outcome for 2016/17.
– Approval of the new Long Term Incentive Plan (‘LTIP’) and the

Deferred Bonus Rules.

– LTIP awards for 2017.
– CEO remuneration review.
– Further draft of Directors’ Remuneration Report for 2017.
– Annual bonus 2017/18 targets.
– Review of the performance conditions in connection with the

2014 LTIP vesting.

– All staff remuneration overview.

– The 2017 Share Incentive Plan and LTIP awards.
– Initial discussion on Executive Director objectives for 2017/18.

– Corporate Governance reforms update.
– Review of adviser to the Remuneration Committee.

– Executive Directors’ remuneration review.
– Review of remuneration and the service agreement for new

Executive Committee member.

– Discussion on dividends payable on LTIP and deferred bonus

shares.

– Review of fees for the Company Chairman.

– 2018 Directors’ Remuneration Report update.
– Operation of Policy for 2018/19.
– UK corporate governance update.
– Terms of reference for the Remuneration Committee.

– First draft of Directors’ Remuneration Report for 2018.
– Incentive operating guidelines for Executive Directors.
– Discussion on the external evaluation of the Committee.

Letter from the Chairman
of the Remuneration Committee

Dear Shareholders,

Strategic ambition and link to remuneration
Our Remuneration Policy continues to be closely aligned to our
strategy and to the delivery of The Workspace Advantage to
customers and Shareholders alike. We aim to be transparent in the
reporting of Executive remuneration. Our objective is to encourage
a performance culture which delivers strong and consistent
Shareholder returns and to reward this performance fairly and
competitively.

In devising the Policy, the Remuneration Committee (REMCO) seeks
to ensure that it:
– Is tightly aligned to strategy – to achieving stretching targets

which demonstrate delivery of Workspace’s strategy.

– Is based on pay for performance – linked to Company performance

through variable pay instruments.

– Is competitive – benchmarked both internally with reference to

Workspace senior management, to foster a culture of shared drive
and commitment to the success of the Company, and externally
against companies of comparable size and complexity.

– Has long-term alignment to Shareholder value by encouraging
shareholdings in the Company by the Executive Directors and
other members of the Executive Committee.

– Is corporate governance compliant – taking full consideration

of evolving Shareholder and public attitudes towards Executive
pay and associated best practice.

– Is risk-assessed – to ensure that Shareholder interests are guarded

and that excessive or inappropriate risk is avoided.

As I noted in my letter last year, to ensure alignment with Workspace’s
intent to be a sustainable investment, the REMCO worked hard to
produce our new Remuneration Policy, which was presented to you
as Shareholders at the 2017 AGM. Your vote of 99.7% in favour of the
new Policy reassures us of your assessment that the Policy is fit for
the purpose of driving the long-term success of the Company.

We have summarised the key elements of this Policy on pages 120
to 121 for ease of reference.

How we performed in 2017/18
Since the AGM in 2017, much of the work of the REMCO has centred
on overseeing the implementation of the new Policy and monitoring
its performance.

We are happy that the Company is reporting another year of record
net rental income, continued capital growth and strong trading profit.
This gives us confidence that our employees are motivated to deliver
The Workspace Advantage to customers and perform above
expectations for Shareholders.

Demand has remained strong for our unique offer of market-leading
office environments and for the supporting connectivity, events and
community which are core to The Workspace Advantage.

For full biographies of the Committee members, see pages 86 to 90.

Who supports the Committee?

During the year, we 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 the
Senior Management team. The Company Secretary attended each meeting as Secretary to the Committee. No Director was present for any
discussions that related directly to their own remuneration. Details on our advisers are shown on page 133.

114 Workspace Group PLC Annual Report and Accounts 2018

115 Workspace Group PLC Annual Report and Accounts 2018

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Remuneration
continued

Key performance metrics
Net cash flow from operating activities was £74m, which illustrates
the cash-generating capability of Workspace’s portfolio, following
a strategy focused on operational excellence and cost efficiency.

The business has made great progress on executing our extensive
refurbishment and redevelopment project pipeline, with a continued
focus on delivering projects within budget and on schedule.

Personal performance and Committee assessment of performance
As noted above, our philosophy is to reward value creation and give
appropriate recognition to our team’s focus on delivering The
Workspace Advantage. Executive Directors’ compensation is delivered
through variable pay elements whereby outcomes are conditional
on the achievement of stretching targets. To ensure this, we pay a
fixed salary and link variable remuneration to the delivery of annual
objectives and long-term business performance. A large part of the
remuneration package is delivered in shares, and members of the
Executive Committee are required to build up significant
shareholdings.

In line with our continued commitment to transparency and best
practice disclosure, full details of objectives and the REMCO’s
assessment of Directors’ individual performance are outlined on
page 128.

The REMCO believes that these measures appropriately recognise
and reward success against the business strategy as outlined on
page 16.

Decisions made
Against the performance outlined above, the REMCO made the
following decisions regarding the remuneration of the Executive
Directors.

Pay increase in line with inflation and the rest of the Company
The REMCO has decided to increase the Executive Directors’ salaries
by 3%. This increase is felt to be appropriate in the light of the
Directors’ contribution to the Group’s strong financial position over
2017/18. It remains consistent with the average salary increase across
the Company and in line with the median increases awarded to the
general UK employee population.

Annual bonus
An annual bonus opportunity of 120% of salary and a Long Term
Incentive Plan (‘LTIP’) opportunity of 200% of salary operate for the
CEO and the CFO.

The performance measures for the annual bonus are adjusted trading
profit after interest (60%), Total Property Return (24%), customer
satisfaction (12%) and personal performance (24%). Personal
performance measures are described in detail on page 128.

In assessing pay for performance against our challenging targets,
the REMCO approved the annual bonus outcome of 100% of
maximum (or 120% of salary) and no discretion was required to
be applied.

2017 LTIP
Performance conditions for LTIP awards made under the new Policy
are based on relative Total Shareholder Return (50%) and Total
Property Return against an IPD index (50%). The balance of the two
measures selected is aligned to our strategy of driving income growth
and enhancing Shareholder value.

As noted above, Workspace’s investment case is built on the delivery
of long-term sustainable performance and creation of long-term
Shareholder value. For this reason, we have long holding periods,
significant shareholding requirements and the majority of our
incentives are weighted towards the LTIP, see page 121. Furthermore,
a performance underpin ensures that the comparative performance is
consistent with business performance and the Shareholder experience.

2015 LTIP
The 2015 LTIP award vested at 62.7%.

Pay in the wider context
The REMCO believes in aligning the direction of Executive
remuneration with that of the wider workforce, ensuring a shared
culture and a consistent focus on achieving Workspace’s purpose,
delivering our strategy and adhering to our Company values.
We look to appropriately reward all employees who demonstrate
deep knowledge of their subject, an inquisitive nature and thirst for
innovation and genuine care for our customers, our communities
and each other. These newly articulated values will be built into our
recruitment and appraisal processes over the coming year, as part
of a wider engagement and communications plan.

The REMCO is primarily responsible for determining the appropriate
pay for the Executive Directors and the senior management team,
and ensuring that their remuneration is closely linked to performance.

We are also acutely aware of our duty to pay close attention to the
pay conditions and levels across the Company as a whole, to ensure
that movements in our remuneration packages are both internally
consistent and externally competitive. We continue to believe in our
current approach, where the Remuneration Policy of our Executive
Directors is aligned with that of other employees. This ensures that
the CEO’s pay is not only externally benchmarked but is also internally
proportionate to that of the CFO, senior management and employees
across the Company.

To assist in this, the REMCO receives updates from the Executives on
their discussions and consultations with employees on remuneration.
The REMCO also monitors information on bonus payments and share
awards made to the wider senior management team.

During the year, the Government announced that the Directors’
Reporting Regulations will be amended to require disclosure of
the ratio of CEO pay to the pay of their UK workforce, alongside
a narrative explaining changes to the ratio over time and how the
ratio relates to pay and conditions across the wider workforce. In line
with our commitment to transparent reporting, we have decided to
disclose this information prior to the requirements coming into force,
and this can be seen on page 125.

Please also see the graph on page 117 which demonstrates how our
CEO pay matches our TSR performance. Further details can also be
found on page 125.

Gender pay
The UK gender pay gap reporting requirement, designed to provide
transparency in relation to the difference between men’s and
women’s earnings within a company, came into effect on 6 April 2017
for companies employing more than 250 people. While Workspace
is not of the size required to disclose our gender pay gap, we believe
in providing equal pay for work of equal value, not just because it
is a legal requirement but because it is the right thing to do.

The Board and leadership team recognises that inclusion and
diversity in all its forms are vital in ensuring diversity of thought,
experience and skills within a company. The REMCO will monitor the
collation of information on Workspace’s pay structures and closely
follow the wider review of gender pay issues over the next year.

Remuneration Committee evaluation
The performance of the REMCO was reviewed during the year as part
of the external review of the Board and its Committees. I am pleased
to say that the REMCO continues to operate effectively.

In conclusion
This has been another very strong year, with notable successes for
the Company. The REMCO is satisfied that we have the right Policy
in place to support the implementation of our strategy, to allow us to
continue to act fully in line with corporate governance best practice
and to allow us to bring sustainable gains to our Shareholders.

Summary of our reward philosophy
and how we apply it in practice

Our key objective is to help promote the long-term success of the
Company by supporting an effective pay-for-performance culture
which allows us to retain, motivate and attract highly skilled
Executives to execute the Company’s strategy.

All of the performance measures in the annual and long-term
incentive plans align to the Company’s strategic priorities, as
shown on page 118. We believe our annual bonus provides a
good balance in rewarding financial performance for the year and
also focusing Executives on the non-financial factors which help
drive long-term success, such as customer satisfaction and other
operational and strategic objectives. The LTIP measures
of Relative Total Shareholder Return (TSR) and Total Property
Return (TPR) are well aligned to our strategy of driving income
growth and enhancing Shareholder value and incentivise
out-performance of our peers.

This is the first year of our new Policy which:

– Simplified our long-term incentives by removing the matching
plan so that now only a single Long Term Incentive Plan (LTIP)
operates.

In a rapidly evolving remuneration landscape, we attach great
importance to a continuous dialogue with institutional investors and
their representative bodies.

– Increased the bonus deferral in shares from 25% to 33%.
– Retained the maximum bonus opportunity of 120% and

maximum LTIP opportunity of 200% of salary.

In keeping with the extensive consultation which we undertook
as we developed our new Policy, we will continue to consult with
Shareholders should there be any potential material changes to
implementation of the Policy in the future, to ensure that our
Remuneration Policy remains aligned with the long-term strategy.

Your input and voting outcomes in recent years suggest that you are
in agreement with our Policy and approach. Our aim is to achieve an
appropriate balance between fixed and variable remuneration, based
on long-term performance criteria which are tied to the strategy and
the risk appetite of the Company.

I would like to take the opportunity to thank Shareholders for their
support over recent years and we look forward to continued dialogue
going forward. In the meantime, if you would like to discuss any
aspect of our Remuneration Policy, please feel free to contact me
through our Company Secretary, Carmelina Carfora, at
carmelina.carfora@workspace.co.uk.

Maria Moloney
Chairman of the Remuneration Committee
5 June 2018

– Increased the holding period on the LTIP from one to two years.
– Increased the time period during which malus and clawback

provisions can be applied for both the annual bonus and the LTIP.

– Increased shareholding guidelines from 150% to 200% of salary.
– Removed the exceptional pension maximum and introduced

a maximum pension provision of 16.5% p.a.

How does our CEO pay match up to our TSR performance?
The chart below demonstrates the strong long-term alignment
of our CEO pay and the returns to our Shareholders. We have
achieved this through the CEO receiving a high proportion of his
remuneration in shares and through our performance compensation
which is based on measures which directly support the
implementation of our strategy.

This chart compares the TSR performance of the Group against
the FTSE 250 and the FTSE 350 Real Estate indices since 2009.
These have been chosen as appropriate comparisons as Workspace
is a constituent of the FTSE 250 and measures performance under
the LTIP against constituents of the FTSE 350 Real Estate index.

Single ﬁgure against our long-term performance

1200

1000

800

600

400

200

31 Mar
2009

31 Mar
2010

31 Mar
2011

31 Mar
2012

31 Mar
2013

31 Mar
2014

31 Mar
2015

31 Mar
2016

31 Mar
2017

31 Mar
2018

CEO single ﬁgure
Workspace Group plc TSR

FTSE 250 index
FTSE 350 Real Estate Supersector index

116 Workspace Group PLC Annual Report and Accounts 2018

117 Workspace Group PLC Annual Report and Accounts 2018

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Remuneration
continued

Remuneration Report at a glance

Workspace Executive pay
The components of remuneration

Fixed

The Remuneration Report is colour coded as follows:
Fixed elements

Variable elements

Shareholding
Shareholding

guidelines

Annual bonus
Long Term

Incentive Plan (LTIP)

Salary
Pension
Benefits

Variable

Salary

Pension

Benefits

Annual
bonus

LTIP

Total
remuneration

How do our incentive performance measures align to our strategy?
In executing our strategy, based on The Workspace Advantage, we aim to create value and positive outcomes for our Shareholders and all other
stakeholders. We continually consider the performance measures we use for our incentives to ensure they support the delivery of our strategy.

The diagram below demonstrates how our incentive measures align to our strategy which has The Workspace Advantage at its heart.

Variable components

Annual bonus

Variable components

LTIP (2017 onwards)

Link to strategy
The measures provide a good balance of rewarding operational
excellence, customer relationships and building deep market
knowledge, which are the foundations of Workspace’s future growth.

Link to strategy
The balance of the two measures is well aligned to our strategy of
driving income growth and enhancing Shareholder value over the
longer term.

24%

4. Personal
performance

60%

1. Adjusted trading profit
after interest

Right
market

Right
brand

Right
properties

The
Workspace
Advantage

Right
people

Right
customers

12%

2. Customer
satisfaction

24%

3. Total Property
Return (TPR)
versus IPD

50%

1. Total Property
Return (TPR)
versus IPD

Right
market

Right
brand

Right
properties

The
Workspace
Advantage

Right
people

Right
customers

50%

2. Total Shareholder
Return (TSR). Relative
to FTSE 350 property
companies

Business context
2017/18 out-turns against KPIs

£60.7m

Adjusted trading
profit after interest
(2016/17: £50.7m)

+4.2%

Total Property Return
outperformance
of IPD benchmark
(2016/17: 2.4%)

89.3%

Customer
satisfaction
(2016/17: 88%)

£10.37

Net Asset Value
per share
(2016/17: £9.53)

18.55p

Dividend per share
(2016/17: 14.27p)

8.4% p.a.

Absolute TSR over
three financial years
to 31 March 2018
which is the
performance period
of 2015 LTIP

Remuneration in respect of 2017/18

What did our Executive Directors earn during the year?

Fixed components
Jamie Hopkins, CEO

Graham Clemett, CFO

Salary: £479,700 (effective from 1 April 2017)

Salary: £293,200 (effective from 1 April 2017)

Pension: 16.5% of base salary

Benefits: include car allowance,
private health insurance and other benefits

Pension: 16.5% of base salary

Benefits: include car allowance,
private health insurance and other benefits

Variable components

Annual bonus 2017/18 out-turn

The following table sets out outcomes under the annual bonus.

Threshold
(0% payable)

Adjusted trading profit
after interest

Threshold: £57.9m

Target: £58.9m

Total Property Return

Threshold: Benchmark

Customer satisfaction

Threshold: 70%

Personal performance

Threshold: 0%

Maximum
(100% payable)

Max: £59.9m
Actual: £60.7m

Max: Benchmark+2%
Actual: Benchmark +4.2%

Max: 80%
Actual: 89.3%

Max: 100%
Actual: 100%

Outcome
(% salary)

60%/60%

CEO Actual
£000

£287.8

CFO Actual
£000

£175.9

24%/24%

12%/12%

24%/24%

£115.1

£57.6

£115.1

£70.4

£35.2

£70.4

Total

120%/120%

£575.6

£351.8

More detail on the outcomes against personal objectives are set out on page 128. It should be noted that adjusted trading profit after interest
exceeded the maximum.

2015 LTIP out-turn

The following table sets out outcomes under the 2015 LTIP performance measures, over the period 1 April 2015 to 31 March 2018.

Growth in NAV relative
to the constituents of the
FTSE 350 Real Estate
Index excluding agencies.

TSR relative to the
constituents of the FTSE
350 Real Estate Index
excluding agencies.

Absolute TSR

Total 62.7%

Threshold
(0% payable)

Threshold: 51st

Maximum
(100% payable)

Max: 75th
Actual: 94th

Outcome
(% award)

33.3%/33.3%

Threshold: 51st

Max: 75th

21.4%/33.3%

Actual: 64th

Threshold: 8% p.a.

Actual: 8.4% p.a.

Max: 17% p.a.

7.9%/33.3%

62.7%/100%

The share price used is the 3 month average to 31 March 2018 of £9.75.

CEO % vesting
and outcome
£000

Performance
shares:
Outcome:
£300.9

CFO % vesting
and outcome
£000

Performance
shares:
Outcome:
£183.9

Matching shares:
Outcome:
£167.5

Matching shares:
Outcome:
£183.9

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For the annual bonus, weightings are
shown as a percentage of salary.

For the LTIP, weightings are shown
as a percentage of the Awards.

Single figure for 2017/18 (£000)
Jamie Hopkins, CEO

£1,623.8

Single figure for 2017/18 (£000)
Graham Clemett, CFO

£1,083.1

118 Workspace Group PLC Annual Report and Accounts 2018

119 Workspace Group PLC Annual Report and Accounts 2018

Remuneration
continued

What is our Remuneration Policy?

In this section we provide a summary of the key elements of the
Remuneration Policy for Executive Directors approved by Shareholders
at our 2017 AGM on 14 July. In addition, we have set out how the
Policy was operated in 2017/18 and how it is intended to be operated
in 2018/19. You can find the full Policy at www.workspace.co.uk.

– Promoting a long-term ownership culture by encouraging the

acquisition and retention of shares amongst the Executive Directors.

– Ensuring that we are totally au fait with the constantly changing

regulatory and governance environment.

What is our objective?
Our main objective is to help promote the long-term success of the
Company, by:
– Supporting an effective pay for performance culture which allows
us to retain, motivate and attract highly skilled Directors, who have
a clear purpose and are of the necessary calibre to execute the
Company’s strategy.

– Achieving a strong alignment between Executive and Shareholder

interests.

Summary table for Executive Directors

How do we take into account Shareholder views?
We have an ongoing dialogue with Shareholders and welcome
feedback on Directors’ remuneration. As part of the Policy review
carried out in 2017, the Committee consulted with major Shareholders
representing 70% of the share capital and the main investor bodies.

Element

Base Salary
To reflect market
value of the role
and an individual’s
experience,
performance and
contribution.

Pension
To provide market
competitive
pensions.

Benefits
To provide market
competitive
benefits.

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1
/
8
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0
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0
2
/
9
1
0
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2
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2
0
2

2
2
/
1
2
0
2

Operation

Opportunity

Operation in the year
ended 31 March 2018
2017/18

Operation in the year
ending 31 March 2019
2018/19

Jamie Hopkins (CEO)
– £479,700.
Graham Clemett (CFO)
– £293,200.

Jamie Hopkins (CEO)
– £494,090.
Graham Clemett (CFO)
– £302,000.

Increases are
applied in line
with the outcome
of the review.
There is no
prescribed
maximum.

Increases for
Executive
Directors will
typically be in line
with those of the
wider workforce.

Salaries are normally
reviewed annually.

Salary levels take
account of:
– Role, performance
and experience.

– Business performance

and the external
economic
environment.
– Salary levels for
similar roles at
relevant comparators.

– Salary increases
across the Group.

Directors participate in a
defined contribution
pension scheme or may
receive a cash allowance
in lieu of pension
contribution.

Benefits typically
include car allowance,
private health insurance,
and death in service
cover. In addition,
Directors are eligible to
participate in all-
employee share plans,
currently the SAYE and
Share Incentive Plan.

Up to 16.5% of
salary.

Jamie Hopkins (CEO)
– 16.5% of salary.
Graham Clemett (CFO)
– 16.5% of salary.

No change.

Include car allowance,
private health insurance
and other benefits.

No change.

Benefits may
vary by role and
individual
circumstance,
and are reviewed
periodically.

There is no
overall maximum.

Element

Annual bonus
To reinforce and
reward delivery of
annual strategic
business priorities,
based on
performance
measures relating
to both Group
and individual
performance.

Bonus deferral
provides
alignment with
Shareholder
interests.

Long Term
Incentive Plan
(LTIP)
To reward and
align to the
delivery of
sustained long-
term sector
outperformance
and to align the
interests of
participants with
those of
Shareholders.

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0
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2
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0
2

2
2
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1
2
0
2

Operation

Opportunity

Operation in the year
ended 31 March 2018
2017/18

Operation in the year
ending 31 March 2019
2018/19

No change to type of
performance condition or
the respective weightings
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.

No change to maximum
LTIP opportunities or the
performance conditions.

A portion of the annual
bonus is deferred into
shares for a period of
three years. The deferral
is 33% of bonus earned.

The maximum
bonus potential
for Executive
Directors is 120%
of salary p.a.

Maximum opportunity:
Jamie Hopkins (CEO)
– Up to 120% of salary.
Graham Clemett (CFO)
– Up to 120% of salary.

Dividend equivalents
may be accrued on
deferred shares.

The Committee may
apply malus and
clawback in
circumstances of gross
misconduct, material
misstatement of the
Group’s results, or an
error in calculation,
up to the end of the
deferral period.

The Committee may
grant annual awards of
Performance Shares
which vest after three
years, subject to
performance conditions.

Vested shares are
subject to a further
two-year holding period.

The Committee has
discretion to apply
malus and clawback to
awards (see above for
reasons) up to the end
of the holding period.

Dividend equivalents
may be accrued on
shares in respect of
the performance and
holding period.

Normal maximum
award of up to
200% of salary
per annum.

Performance conditions
and weightings (as % of
salary):
– Adjusted trading profit
after interest (60%).
– Total Property Return

(TPR) (24%).

– Customer satisfaction

(12%).

– Personal performance

(24%).

Executive Directors
awarded bonuses of:
Jamie Hopkins (CEO)
– 120% of salary.
Graham Clemett (CFO)
– 120% of salary.

Deferral of 33% of bonus
earned. See page 127 for
further details on
outcomes.

Grant sizes for:
Jamie Hopkins (CEO)
– 200% of salary.
Graham Clemett (CFO)
– 200% of salary).

Performance conditions
are:
– 50% Total Shareholder
Return (TSR) relative
to FTSE 350 property
companies.

– 50% Total Property
Return (TPR) versus
IPD.

– A performance

underpin will apply
which allows the
Committee to reduce
vesting if performance
is inconsistent with the
overall performance of
the business.

The 2015 LTIP vested in
the year at 62.7% of the
award. See page 129
for further details on
outcomes.

Shareholding
requirement

Shareholding guidelines for Executive Directors
of 200% of salary.

Current shareholdings* are:
– CEO: 270% of salary.
– CFO: 463% of salary.

No change.

*Based on a share price of £9.15 being the average share price over the year up to 31 March 2018 and salaries of £479,700 and £293,200 for Jamie Hopkins and
Graham Clemett respectively.

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121 Workspace Group PLC Annual Report and Accounts 2018

Remuneration
continued

How does our target total compensation compare to our peers?
The following chart shows the relative position of target total compensation for our Executive Directors compared to our peers.

Chief Executive Officer

Positioning of total
remuneration of
Company relative to
market benchmarks

Chief Finance Officer

Positioning of total
remuneration of
Company relative to
market benchmarks

Top
Quartile

Second
Quartile

Third
Quartile

Bottom
Quartile

Top
Quartile

Second
Quartile

Third
Quartile

Bottom
Quartile

FTSE 250

FTSE 350 Real Estate

FTSE 250

FTSE 350 Real Estate

When we set the target total compensation for the Executive Directors, one of the factors the Committee considers is the competitive market
for our Executive Directors, which we believe is the FTSE 250 and FTSE 350 Real Estate Sector, and the size of the Company compared to
these peers. The Committee hopes the Executives will deliver above target performance, and this has been the case over recent years.

Additional context on our Executive Directors’ pay

What is our 2017/18 single figure compared to our Policy?
When Shareholders approved our Remuneration Policy in 2017,
we set out scenarios for the potential remuneration to be earned
by our Executive Directors under the Policy for various performance
assumptions. We have set out, at right, the actual single figure
of remuneration for the Executive Directors against these scenarios
to demonstrate how the actual remuneration paid lines up with
our Policy.

We have separated out the effect of share price growth on the
share-based elements of the single figure for each Executive
Director (see page 127 for details). A high proportion of our Directors’
package is made up of shares, supporting the alignment of
Executive pay with the interests of our Shareholders. The increased
value in our remuneration from share price appreciation is beneficial
for both Executive Directors and Shareholders.

Salary: Latest known salary.
Pension: Current contribution rate of 16.5% of salary.
Benefits: As provided in the single figure table on page 127.
Annual bonus: Minimum – no bonus payable; on-target – 50% of
maximum potential bonus; maximum – maximum potential bonus.
LTIP: Minimum – no LTIP vesting; on-target – 20% of maximum
(threshold vesting); maximum – maximum LTIP vesting.
Share price growth: portion of LTIP vesting value attributable
to share price growth since grant.

Single ﬁgure
Jamie Hopkins, CEO
£000s

Single ﬁgure
Graham Clemett, CFO
£000s

2,500

2,000

1,500

1,000

500

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1,500

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What is our minimum shareholding requirement and has it
been met?
The following table shows that our Executive Directors have met
their minimum shareholding requirements, and therefore already
have strong alignment with our Shareholders. In addition, the table
shows the substantial amount of equity which can potentially be
earned by our Executive Directors over the next period, further
increasing their exposure to the share price performance of the
Company and ensuring that their holdings will increase over time.

Overall link to remuneration and equity of the Executive Directors
Our Executive Directors are encouraged to hold a high number of
shares in order to ensure their interests align to those of the
Shareholders, and that they take a long-term view of the sustainable
performance of the Company. As such, our Directors are impacted
by the share price over the year in the same way as our Shareholders.

The table to the right sets out the single figure for 2017/18, the
number of shares held by the Director at the beginning and end of
the financial year, and the impact on the value of these shares taking
the opening price and closing price for the year.

Share interests
Jamie Hopkins, CEO
%

Share interests
Graham Clemett, CFO
%

1,000

900

800

700

600

500

400

300

200

100

200% of
salary

1,000

900

800

700

600

500

400

300

200

100

200% of
salary

Owned outright or vested.
Unvested and not subject to performance.
Subject to performance.

See page 130 for more details.

Calculated using annual average share price to 31 March 2018 of £9.15.

2017/18 single figure

Shares held at
start of year

Shares held at
end of year

Value of shares
at start of year
(£000s)1

Value of shares
at end of year
(£000s)2

Difference (£000)

Jamie Hopkins

Graham Clemett

£1,623.8

130,525

133,082

£1,083.1

147,674

142,627

£1,025

£1,159

£1,320

+£295

£1,415

+£256

1 Based on a closing share price on 31 March 2017 of £7.85.
2 Based on a closing share price on 31 March 2018 of £9.92.

122 Workspace Group PLC Annual Report and Accounts 2018

123 Workspace Group PLC Annual Report and Accounts 2018

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Remuneration
continued

Our approach to fairness and wider workforce considerations
Our approach to fairness and wider workforce considerations

When making remuneration decisions for the Executive Directors,
we consider pay, policies and practices elsewhere in the Group.
The Committee receives regular updates from the Executive Directors
on employee feedback. The Committee also monitors bonus payout
and share award data.

In this section, we provide context to our Director pay by explaining
our employee policies and our approach to fairness, as well as the
ratio of CEO pay to that of the wider workforce.

Communication with employees
The Board are committed to ensuring there is an open dialogue with
our employees over various decisions. 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. This 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
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’) and the
Share Incentive Plan (‘SIP’).

Equal opportunities
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.

We are an organisation which uses everyone’s talents and abilities,
and where diversity is valued. The Company ensures its promotion
and recruitment practices are fair and objective, and encourages
the continuous development and training of its employees, as well
as the provision of equal opportunities for the training and career
development of all employees. Further details of this are shown
on page 26.

Retirement benefit provision
The Group provides retirement benefits for the majority of its
employees. The Group’s commitment with regard to pension
contributions, consistent with the prior year, ranges from 6% to
10% of an employee’s salary, excluding Executive Directors.

The pension scheme is open to every employee in accordance
with the new Government auto-enrolment rules.

Pay comparisons
The chart to the right shows
the single figure of remuneration
for our CEO over time, and the
pay of our average employee,
each rebased to 2009. We have
also included our TSR
performance over this period.

In advance of the incoming
regulatory requirement to
disclose the ratio of CEO pay to
workforce pay, the Committee
have chosen to disclose this
ratio on a variety of bases, as
shown at the bottom of the
table to the right.

What does the chart show?
The chart shows that there is
a strong correlation between
our CEO pay and the Total
Shareholder Return of the
Company. We have achieved
this through the CEO receiving
a high proportion of his
remuneration in shares and
through the variable pay within
his package being based on
measures which directly support
the implementation of our
strategy. The chart also shows
that our average employee
pay has trended upwards
over this period.

What does the table show?
We have set out the ratio of
CEO pay to that of the wider
workforce on a variety of bases,
and, over time, at the bottom of
the table to the right. There is
significant volatility in this ratio,
and we believe that this is
caused by the following:

– Our CEO pay is made up of a
higher proportion of incentive
pay than that of our
employees, in line with the
expectations of our
Shareholders. This introduces
a higher degree of variability
in his pay each year which
affects the ratio;

– The value of long-term

incentives which measure
performance over three years
is disclosed in pay in the year
it vests, which increases the
CEO pay in that year, again
impacting the ratio for that
year;

– Long-term incentives are
provided in shares, and
therefore an increase in share
price over the three years
magnifies the impact of a
long-term incentive award
vesting in a year.

We recognise that the ratio is
driven by the different structure
of the pay of our CEO versus
that of our employees, as well as
the make-up of our workforce.
This ratio varies between
businesses even in the same
sector. What is important from
our perspective is that this ratio
is influenced only by the
differences in structure, and not
by divergence in fixed pay
between the CEO and wider
workforce.

Where the structure of
remuneration is similar, as for
the Executive Committee and
the CEO, the ratio is much more
stable over time.

What is the year-on-year
change in our CEO
remuneration?
The Committee monitors the
changes year-on-year between
our CEO pay and average
employee pay, shown in the
table to the right. As per our
Policy, salary increases applied
to Executive Directors will
typically be in line with those
of the wider workforce.

CEO single figure
Average worker pay
Workspace Group plc TSR

The table below sets out the
single figure and CEO pay ratio
on various bases over the past
nine years.

1,000

800

600

400

200

31 Mar 2009

31 Mar 2010

31 Mar 2011

31 Mar 2012

31 Mar 2013

31 Mar 2014

31 Mar 2015

31 Mar 2016

31 Mar 2017

31 Mar 2018

CEO single figure of total remuneration
£000
Jamie Hopkins1
Harry Platt2

–
573.7

–
748.7

27.4
1,359.6

960.3
–

966.9
–

3,533.1
–

2,262.7
–

2,205.6
–

1,623.8
–

Annual bonus pay-out
Jamie Hopkins (% of
maximum opportunity)
Harry Platt (% of maximum
opportunity)

LTIP vesting
Jamie Hopkins (% of
maximum opportunity)
Harry Platt (% of maximum
opportunity)

Ratio of single total
remuneration figure shown
to employees as a whole

Ratio of single total
remuneration figure shown
to mean of Executive
Committee members

–

100%

97.8%

97.2%

95.3%

100%

41.7%

85.5%

75%

–

66.5%

–

100%

88.7%

62.7%

–

29x

79x

–

27x

72x

–

19x

48x

34x

128x

0.8x

1.6x

1.1x

1.4x

1.2x

13x

21x

14x

13x

46x

–

to employee
mean3
to employee
median

–

11x

–

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.
3. ‘Employee mean’ based on staff costs for the Group and the average number of persons employed during the year, sourced from the Financial Note to the Accounts.

Executive Director

Salary
Taxable benefits
Annual variable

Total

CEO

2017
£000

468.0
18.1
561.6

1,047.7

All other
employees

% change

2.5%
3.8%
2.5%

2.5%

3.7%
11.2%
6.2%

4.7%

2018
£000

479.7
18.8
575.6

1,074.1

The table above 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 217 (2017: 203). All employees are eligible for consideration for an annual bonus.

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124 Workspace Group PLC Annual Report and Accounts 2018

125 Workspace Group PLC Annual Report and Accounts 2018

Remuneration
continued

How do we cascade remuneration through the Company?

How did we implement the Policy in 2017/18?

All staff in the Company are eligible to participate in the Company’s
bonus scheme, all-employee share schemes, pension scheme, life
assurance arrangements and medical insurance benefits. Additionally,
all employees participate in an annual bonus plan. All members of the
Executive Committee and some senior staff are eligible to participate
in the Company’s LTIP.

Executive Committee members are also required to adhere to the
Company’s shareholding guidelines.

The following diagram demonstrates how Workspace’s key objectives
are reflected consistently in plans operating at all levels within the
Company.

Eligibility

Executive Committee

Number of people that this
applies to1

Element

Shareholding
guidelines

Details

Supports alignment of
Executives’ interests with
Shareholders.

Executive Committee and
Senior Management

All employees

51
208(as at 31 March 2018)

LTIP

Annual bonus

SAYE and SIP

Fixed
(salary, benefits, pension
with a 2:1 match)

The LTIP reinforces delivery
of long-term sector
outperformance.

All employees participate in
annual bonuses. Opportunities
and performance conditions
may be tailored to reflect an
individual’s role and
responsibilities.

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.

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.

Single figure of Executive Directors (audited)
The table below sets out a single figure for the total remuneration received by each Executive Director for the year ended 31 March 2018 and
the prior year:

Salary
Benefits1
Annual bonus2
LTIP3
Other – SAYE, SIP
Pension4

Total

Jamie Hopkins

Graham Clemett

2017/18
£000

2016/17
£000

2017/18
£000

2016/17
£000

479.7
18.8
575.6
468.5
2.0
79.2

468.0
18.1
561.6
1,076.2
4.5
77.2

293.2
19.9
351.8
367.8
2.0
48.4

286.0
19.9
343.2
738.4
2.3
47.2

1,623.8

2,205.6

1,083.1

1,437.0

1. Benefits: Taxable value of benefits received in the year by Executive Directors includes 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 2016/17 and 2017/18, the Committee set a minimum deferral

requirement of 33% of the bonus earned. For 2017/18, this deferral of 33% was equivalent to £189,961 for Mr Hopkins and £116,107 for Mr Clemett.

3. LTIP: The 2017/18 figure includes the estimated value of 62.7% of the 2015 LTIP shares that vested based on performance to 31 March 2018. The share price used is the

three-month average to 31 March 2018 of £9.75. This will be updated in next year’s report to reflect the share price on the date of vesting. The 2016/17 figures have been
updated to reflect the share price on the date of vesting of £9.07.

4. Pension: During 2017/18 each of Messrs Hopkins and Clemett received a cash allowance in lieu of pension contribution.

Annual bonus payout in respect of 2017/18
For 2017/18 the maximum bonus opportunity for the Executive Directors was 120% of salary. Payouts are subject to the assessment of
performance against stretching financial, strategic and personal performance targets, and are calculated on a straight-line basis from 0%
at threshold to 100% at maximum performance. Executive Directors will be required to defer 33% of their bonus into Company shares for
three years. The stretching targets were set based on the Company’s budgeting process, which takes account of market expectation,
planned acquisitions and disposals of assets, and aspirations around Company growth.

The performance measures, targets and outcomes for each measure are shown below:

Weighting
as a % of
salary

Measure

Corporate

60%

Adjusted trading profit after
interest

24%

Total Property Return from
portfolio versus a defined
comparator Benchmark
compiled by MSCI

Threshold

£57.9m

Benchmark

12%

Customer satisfaction

70%

Achieved

Maximum

£59.9m
£60.7m

Benchmark+2%
Benchmark +4.2%

80%
89.3%

Individual
performance

24%

Personal performance
(see below for full details
of targets and assessment)

See below for full details

Annual bonus

Opportunity

Outcome (% of salary)

Opportunity and
outcome as a % of salary

Jamie
Hopkins

Graham
Clemett

60%
60%

24%
24%

12%
12%

24%

120%

60%
60%

24%
24%

12%
12%

24%

120%

As a result the following cash bonus and deferred bonus shares will be awarded:

CEO
CFO

Outcome (£000)

£575.6

£351.8

Cash bonus

Deferred bonus shares

£385,679
£235,733

£189,961
£116,107

1. Subject to requirements on timing of awards as detailed in the relevant plan rules and/or completion of probationary periods.

126 Workspace Group PLC Annual Report and Accounts 2018

127 Workspace Group PLC Annual Report and Accounts 2018

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Remuneration
continued

Personal objectives
The Executive Directors’ personal objectives focus on the delivery of the strategic priorities for the business and the successful management
of risk. Based on a review of achievement against the personal objectives set out below, the Committee has awarded Jamie Hopkins and
Graham Clemett 24% of salary under this element.

Objective

Target

Achievements in year

Active property
portfolio
management

– Identify scale acquisition opportunities across

– Three major acquisitions in key strategic locations completed

London and look to acquire where return
criteria can be met.

for £368m.

– Complete disposal of legacy industrial
properties provided good value can
be achieved.

– Continue to identify and progress

opportunities for refurbishment and
redevelopment across the portfolio.

– Two industrial estates sold for £80m, a 40% premium to their

March 2017 valuation.

– Four residential redevelopments sold for £41m in cash, and

55,000 sq. ft. of new commercial space.

– Excellent progress on extensive pipeline of refurbishment and
redevelopment projects with 18 projects currently underway
to deliver 774,000 sq. ft. of new and upgraded space.

– Continue to identify opportunities to grow

– 22% growth in meeting room income and launch of customer

ancillary income alongside maximising core
rental income growth.

cleaning services.

– 8.6% growth in like-for-like rent roll.

Maintain a low
risk business
profile

– Conduct appropriate due diligence on all

– Acquisitions successfully completed and integrated; refurbishments

acquisitions, refurbishment and
redevelopment projects.

and redevelopments delivered to plan.

– Maintain strong customer demand through

– Brand positioning refreshed and extensive branding campaign

efficient marketing expertise.

successfully conducted across London.

– Ensure that a high-quality comms

infrastructure is provided to customers.

– Customer enquiries averaged 1,016 per month in 2017/18.

– WiredScore assessments underway across the portfolio with 15
already scoring Gold or Platinum and work ongoing to achieve
Gold or Platinum ratings at the rest.

– Match scale, diversification and maturity
of debt facilities to Company’s funding
requirements.

– Secured £200m of new private placement notes with blended

maturity of nine years and fixed rate of coupon of 3.1%.

– Extended maturity of bank facilities to five years and increased

quantum by £100m to £250m.

– Ensure appropriate preparation for new

– Preparation well advanced for new GDPR legislation in May 2018.

regulations.

– Ongoing review of potential higher risk areas

– Regular review by the Executive and Risk Committee of risk

LTIP award vesting in respect of 2017/18
The 2015 LTIP awards measured performance over the period 1 April 2015 to 31 March 2018. Details of the performance targets and
achievement against them are set out in the table below:

Weighting

1/3 of award

Measure

Growth in Net Asset Value
relative to comparators

TSR (share price growth plus
reinvested dividends) relative
to comparators

Threshold

51st percentile

Maximum

Payout as % maximum

75th percentile
Actual: 94th

75th percentile

Actual: 64th

1/3 of award

Absolute TSR

8.0% p.a.

17.0% p.a.

Actual: 8.4% p.a.

33.3%

21.4%

7.9%

62.7%

LTIP (% maximum) vesting

Number of shares vesting (audited)
– Performance share award
– Matching share award
Value of shares vesting*
– Performance share award
– Matching share award
Date vesting

CEO

CFO

30,866
17,184

£300,944
£167,544

18,862
18,862

£183,905
£183,905

26 June 2018

* Given the vesting date share price of £9.75, which is the three-month average price to 31 March 2018.

The Committee considered performance set out in the table above together with the underlying business performance of Workspace
and concluded that 62.7% of the 2015 LTIP award should vest.

These awards are subject to a one-year holding period and malus and clawback provisions. The 2016 LTIP awards are based on the same
targets and weightings as the 2015 LTIP award shown above, measured over the period 1 April 2018 to 31 March 2019.

LTIP awards made during the 2017/18 financial year
Under the current Policy, awards (conditional shares) under the LTIP are granted to a maximum of 200% of salary. Awards under the 2017 LTIP
are subject to the performance conditions detailed in the table below measured over the period 1 April 2017 to 31 March 2020.

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across the business.

– External review of IT function completed and cyber security

training undertaken for all staff.

– Detailed external tax compliance review completed.

Threshold2 (20% vesting)
Maximum2 (100% vesting)

Relative TSR vs. sector group1
(1/2 of award)

Total Property Return versus London IPD index
(1/2 of award)

Median
Upper quartile

Comprehensive
investor
engagement
programme

– Provide added value investor briefing and

– Positive feedback from investors and analysts following the full and

presentation sessions.

half year result presentations and investor tours.

– Ensure that all identified key existing and
potential investors offered 1:1 meetings
at least annually.

– 100 1:1 or group meetings with European existing and potential
investors and 30 1:1 or group meetings with North American
existing and potential investors. 135 meetings in total.

– Extend reach of North American investor

programme.

– Three property tours conducted for North American investors.
– Attendance and presentations at five property conferences in the

People
engagement
– Doing The
Right Thing

Customers:
– Improve recycling levels and energy efficiency.

Staff:
– Encourage local community engagement and

UK and one in the US.

– 12 recycling roadshows conducted, new recycling information pack

sent to all customers and new signage at all centres.

– ‘Your energy’ portal facility launched at three buildings enabling

customers to monitor their energy consumption.

– 121 volunteering days completed by staff, comprising 61 work days

and 60 personal.

related charity opportunities.

– Various charity events undertaken by Workspace staff during

Suppliers:
– Establish sustainability standards.

– Minimum sustainable development standards launched for all new

developments and refurbishments.

the year raising £31,039 for local charities.

– An additional £40,000 raised for charity at events held by staff

and customers across our business centres.

1. The comparator group for the 2017 LTIP cycle is the constituents of the FTSE 350 Real Estate Index excluding agencies.
2. There is straight-line vesting between the ‘Threshold’ and ‘Maximum’ performance levels.

A performance underpin will apply which allows the Committee to reduce vesting if performance is inconsistent with the overall performance
of the business.

The following awards were granted during the year under the 2017 LTIP (audited):

CEO
CFO

Date of grant

20 July 2017
20 July 2017

Market price at
date of award1

£8.9033
£8.9033

Performance Share award

Face value

Number of shares

% of salary

107,757
65,863

959,393
586,398

200%
200%

1. The share price for calculating the levels of awards was £8.9033, see table above, the average mid-market closing price over the three dealing days 17, 18 and 19 July 2017,

in accordance with the LTIP rules.

Deferred shares were granted (as conditional shares) under the 2016/17 bonus of 20,119 shares to Mr Hopkins and 12,295 shares to Mr Clemett
on 26 June 2017 based on a share price of £9.1382.

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128 Workspace Group PLC Annual Report and Accounts 2018

129 Workspace Group PLC Annual Report and Accounts 2018

Remuneration
continued

Single figure for Non-Executive Directors (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 2018
and the prior year:

Non-Executive Director

Base fee
Additional fees

Total

Daniel Kitchen

Maria Moloney

Chris Girling

Damon Russell

Stephen Hubbard

2017/18
£000

2016/17
£000

2017/18
£000

2016/17
£000

2017/18
£000

2016/17
£000

2017/18
£000

2016/17
£000

2017/18
£000

2016/17
£000

178.5
–

178.5

175.0
–

175.0

48.2
10.5

58.7

47.3
10.5

57.8

48.2
10.5

58.7

47.3
10.5

57.8

48.2
–

48.2

47.3
–

47.3

48.2
–

48.2

47.3
–

47.3

1. Additional fees were paid to Maria Moloney as Chairman of the Remuneration Committee and to Chris Girling as Chairman of the Audit Committee.
2. Expenses incurred by Non-Executive Directors represent the cost to the Group, being gross of taxation. In 2017/18, 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 £2,800, £13,428 and £3,072 respectively.

Share ownership and share interests (audited)
The shareholding guideline for Executive Directors is 200% of salary. 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 2018 and 5 June 2018.
Both Executive Directors have exceeded the shareholding guidelines.

Chairman
Daniel Kitchen1

Executive Directors
Jamie Hopkins
Graham Clemett

Non-Executive Directors
Maria Moloney
Chris Girling
Damon Russell
Stephen Hubbard

31 March
2018

31 March
2017

44,700

133,082
142,627

130,525
147,674

2,027
Nil
Nil
15,290

1. Daniel Kitchen acquired 1,000 6% Sterling Bonds on 2 October 2012 at a price of £100 per Bond.

The table below shows the Executive Directors’ interests in shares.

Executive Director

Jamie Hopkins

Graham Clemett

Type

Owned outright
or vested2

Shares
Market value options1

133,082
Nil

142,627
Nil

Unvested and
not subject to
performance3

68,169
3,474

50,019
1,737

Subject to
performance4

220,777
Nil

134,931
Nil

Total

422,028
3,474

327,577
1,737

1. Market value options include SAYE options outstanding not yet matured as at 31 March 2018. 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 134 for further details.

2. Total shares owned outright or vested shares.
3. The interests in shares comprise those LTIP awards granted in 2015 which are no longer subject to performance but are due to vest on 26 June 2018, of 37,724 shares
for Mr Clemett and 48,050 shares for Mr Hopkins. In addition, the gross number of deferred bonus shares awarded in 2017 of 20,119 for Mr Hopkins and 12,295 for
Mr Clemett are also included in this figure,

4. The interest in shares of 134,931 for Mr Clemett and the interest in shares of 220,777 for Mr Hopkins consist of the total LTIP awards made in 2016 and 2017,

details of which can be found on page 134 of this Report.

External appointments
It is the Board’s policy to allow Executive Directors to take up one Non-Executive position on the Board of another company, subject to the
prior approval of the Board. Any fee earned in relation to outside appointments is retained by the Executive Director. Mr Clemett was appointed
a Non-Executive Director and Chairman of the Audit Committee of The Restaurant Group plc, effective 1 June 2016. Mr Clemett is paid an
annual fee of £60,000. Mr Hopkins was appointed a Non-Executive Director of St. Modwen Properties PLC, effective from 1 March 2018,
and is paid an annual fee of £45,921.

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 2017 and ended 31 March 2018.

Employee remuneration

Distribution to shareholders

2018

2017

£20.6m

£18.6m

10.8%

2018

2017

£44.9m

30.5%

£34.4m

How will we apply the Policy in 2018/19

We believe that the Policy continues to be fit for purpose going forward, and therefore the Committee is not proposing to make any
changes for 2018/19.

Base salary
The Committee reviewed Executive Directors’ salaries and the following salaries are effective from 1 April 2018.

CEO

2018

2017

£494,090

£479,700

CFO

2018

2017

The average salary increase across the Group for the year commencing 1 April 2018 is 3%.

Benefits and pension
No change.

£302,000

£293,200

Annual bonus
There is no change to the annual bonus maximum potential in 2018/19, and this will continue to be 120% of salary for Executive Directors.

No changes are being made to the performance measures and they will be:

Adjusted trading profit
after interest
(60% of salary)

Total Property Return
(24% of salary)

Customer satisfaction
(12% of salary)

Personal performance
(24% of salary)

33% of the total bonus paid will be deferred into shares for three years. Dividend equivalents may be accrued on deferred shares.

Whilst we believe that disclosing the exact performance conditions and targets for the personal performance would not be in the best interests
of Shareholders, we remain committed to best practice disclosure. We therefore set out below some of the categories that the Committee will
consider in respect of evaluating personal performance, and examples of the nature of some of the goals under these (excluding exact targets).
Full disclosure on the targets, performance achieved and resulting bonus payouts for 2018/19 will be provided in next year’s report.

130 Workspace Group PLC Annual Report and Accounts 2018

131 Workspace Group PLC Annual Report and Accounts 2018

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Remuneration
continued

Personal objectives 2018/19

Objective

Target

Active property portfolio management

– Identify scale acquisition opportunities across London and look to acquire

Maintain low risk business profile

where return criteria can be met.

– Continue to identify and progress opportunities for refurbishment and

re development across the portfolio.

– Preparation for, and compliance with, evolving regulatory requirements.
– Monitor and update IT systems and processes as appropriate to optimise

efficiency and security.

– Ensure that the Company and its staff are aware of, and protected from

existing and emerging cyber security threats.

Investor engagement programme

– Comprehensive timetable of visits, site tours and presentations to both

Additional information

Payments for loss of office (audited)
None.

Payments to past Directors (audited)
None.

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:

Notice period

existing and potential investors.

– Delivery of high quality, added value presentations and briefings to

investors and analysts.

Executive Director

Jamie Hopkins
Graham Clemett

Position

Effective date of contract

From Company

From Director

Chief Executive Officer
Chief Financial Officer

3 February 2012
31 July 2007

12 months
12 months

People engagement – ‘Doing the Right Thing’

– Encourage staff engagement with local communities and potential

charity opportunities.

– Develop and launch a values based staff engagement programme.

Long-Term Incentive Plan (LTIP)
Maximum award 200% of salary. The performance measures are such that 50% will be based on Total Property Return against a London
focused IPD index and 50% will be based on relative TSR against FTSE 350 Real Estate companies. The targets for the two elements are
as follows:

Total Shareholder Return relative to FTSE 350 Real Estate
Supersector index excluding agencies

Total Property Return versus London focused IPD index

Threshold vesting
(20% of maximum)

Maximum vesting
(100% of maximum)

Median

Upper quartile

A holding period of two years will apply to any vested shares under the LTIP.

To ensure any payouts are fully reflective of underlying performance, the LTIP underpin allows the Committee to reduce vesting should
the Committee believe that the relative TSR and/or relative TPR performance is inconsistent with the overall performance of the business.

Non-Executive Director fees
The fees for Non-Executive Directors are reviewed and agreed annually. The fees, which are effective from 1 April 2018, are set out in the table
below.

Chairman
NED base fee
Chair of Audit Committee fee
Chair of Remuneration Committee fee

2018 fee

2017 fee

% change

£183,855 £178,500
£49,640 £48,195
£10,500 £10,500
£10,500 £10,500

3
3
0
0

The Chairman and Non-Executive Directors have letters of appointment. Dates of the Directors’ letters of appointment are set out below:

Name

Daniel Kitchen
Maria Moloney
Chris Girling
Damon Russell
Stephen Hubbard

Date of original appointment
(date of reappointment)

Date of appointment/
last reappointment at AGM

6 June 2011 (6 June 2017)
22 May 2012 (22 May 2018)
7 February 2013 (7 February 2016)
29 May 2013 (29 May 2016)
16 July 2014 (16 July 2017)

2017
2017
2017
2017
2017

Notice period

6 months
3 months
3 months
3 months
3 months

The Directors are subject to annual re-election at the AGM. Non-Executive Directors’ letters of appointment and Executive Directors’ contracts
are available to view at the Company’s registered office.

Who are the Committee’s advisers?
During the year, the Committee appointed PwC LLP as independent adviser to the Committee following a selection process. PwC LLP
is a founding member of the Remuneration Consultants Group and voluntarily operates under the Code of Conduct in relation to Executive
remuneration consulting in the UK. The Committee is satisfied that the PwC LLP engagement partner and team, which provide remuneration
advice to the Committee, do not have connections with the Group that may impair their objectivity and independence. The fees charged by
PwC LLP for the provision of independent advice to the Committee since their appointment in September 2017 were £28,500. The Committee
retained Deloitte LLP as its advisers for the first half of the year. Deloitte LLP, who are also founding members and signatories of the
Remuneration Consultants Group, provided independent advice. The fees paid to Deloitte LLP were £46,859 for that period.

Other than in relation to advice on remuneration, neither PwC LLP nor Deloitte LLP provided any other services to the Company.

Voting at the Company’s AGMs
The table below sets out the results of the most recent Shareholder votes on the Policy Report and the advisory vote on the 2016/17 Annual
Report on Remuneration at the 2017 AGM on 14 July 2017. The Committee views this level of Shareholder support as a strong endorsement
of the Company’s Policy and its implementation.

Policy Report (2017 AGM)
Annual Report on Remuneration
(2017 AGM)

Percentage of votes cast

Number of votes cast

For and Discretion

99.72

99.06

Against

0.28

0.94

For and Discretion

108,262,655

Against

308,916

107,554,174

1,017,396

Withheld1

1,728

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.

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 2018 is detailed on the next page.

132 Workspace Group PLC Annual Report and Accounts 2018

133 Workspace Group PLC Annual Report and Accounts 2018

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Remuneration
continued

Report of the Directors

As of 31 March 2018, around 4.4% and 3.7% 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

4.4%

10.0%

5.0%

3.7%

Supplementary information on Directors’ remuneration
Outstanding LTIP awards
Details of current awards outstanding to the Executive Directors are detailed below.

Name

Performance2

Invested3 Matching4 Performance

Matching Performance

Invested

Matching Performance

Invested

Matching

At 1 April 2017

Lapsed during the year

Vested during the year

At 31 March 2018

Jamie Hopkins
26/06/20141
26/06/20151
23/06/20161
20/07/20171,5

Graham Clemett
26/06/20141
26/06/20151
23/06/20161
20/07/20171,5

73,469
49,229
56,510
–

45,918
30,084
34,534
–

16,000
7,263
14,975
–

60,378
27,407
56,510
–

(8,302)
–
–
–

(6,823)
–
–
–

(65,167) (16,000)
–
–
–

–
–
–

(53,555)
–
–
–

12,168
7,972
9,151
–

45,918
30,084
34,534
–

(5,189)
–
–
–

(40,729)
–
–
–

(12,168)
–
–
–

(40,729)
–
–
–

–
49,229
56,510
107,757

–
30,084
34,534
65,863

–
7,263
14,975
–

–
27,407
56,510
–

–
7,972
9,151
–

–
30,084
34,534
–

1. Awards will vest subject to the satisfaction of performance conditions detailed on page 129 over the three-year performance period.
2. Performance Awards made to the Executive Directors: In June 2014, awards were in respect of 100% of salary based on a share price at date of award of £5.7033;

in June 2015 awards were in respect of 100% of salary based on a share price at date of award of £9.1408 and in July 2017, awards were in respect of 200% of salary
based on a share price at date of award of £8.9033. 88.7% of the 2014 Awards vested on 26 June 2017.

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 130 of this Report.

4. Matching Awards were granted to participants who purchased Invested Shares. In 2014, matching shares granted were up to 100% of salary for Mr Clemett and 82%

of salary for Mr Hopkins, in 2015 matching shares granted were up to 100% of salary for Mr Clemett and 56% of salary for Mr Hopkins and in 2016, matching shares were
granted up to 100% of salary for each of Messrs Clemett and Hopkins.

5. The LTIP awards granted in July 2017, were made under the new LTIP approved by Shareholders at the AGM in July 2017.

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.

Jamie Hopkins

Graham Clemett

At
01/04/2017

Granted
during the
year

Lapsed
during the
year

Vested in
year

At
31/03/2018

Exercise
price

1071
–
3,474

1,960
1,737
1071
–

–
2281
–

–
–
–
2281

–
–
–

–
–
–
–

–
–
–

(1,960)
–
–
–

107
228
3,474

–
1,737
1071
228

–
–
£5.18

–
£5.18
–
–

Normal exercise date

From

–
18.09.2018
31.08.2017
–
01.09.2019 01.03.2020

–

–
01.09.2019 01.03.2020
–
18.09.2018
–
31.08.2017

1. Each of Messrs Hopkins and Clemett were granted awards under the Share Incentive Plan in 2015 and 2017.

There have been no changes in Directors’ interests over options in the period between the balance sheet date and 5 June 2018.

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
5 June 2018

The Directors present their report on the affairs of the Group
together with the audited financial statements for the year ended
31 March 2018.

Workspace Group PLC is incorporated in the UK and registered
as a public limited company in England and Wales. Its headquarters
are in London and it is listed on the main market of the London
Stock Exchange.

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 3 to 71, which provides a
description of the Company’s business model and strategy. It also
includes our report on Resources and Relationships, Principal Risks
and Uncertainties and the Going Concern and Viability Statement.

The Corporate Governance Report and Chairman’s Governance
Report for the year ended 31 March 2018 on pages 73 to 139,
are incorporated by reference into this Directors’ Report.

Principal activities and business review
The Group is engaged in property investment and letting business
space to London businesses. As at 31 March 2018 the Company
had 10 active subsidiaries, five of which are property investment
companies owning properties in Greater London. The other five
companies are: Workspace Management Limited; Workspace 16
(Jersey) Limited, LI Property Services Limited, Workspace Glebe
Limited and Workspace 17 (Jersey) Limited. A full list of the
Company’s subsidiaries and other related undertakings appears
on page 177.

Significant events which occurred during the year are detailed in
the Chairman’s statement on page 3, the Chief Executive Officer’s
strategic review on pages 28 to 34 and the Business Review on
page 62.

A description of the principal risks and uncertainties facing the
Company can be found on pages 46 to 56. Details of the Company’s
health and safety policies can be found on page 136 and information
on its environmental and community engagement activities can be
found on pages 22 to 27.

Profit and dividends
The Group’s profit after tax for the year attributable to shareholders
amounted to £171.4m (2017: £88.7m).

The interim dividend of 8.84 pence (2017: 6.80 pence) was paid
in February 2018 and the Board is proposing to recommend the
payment of a final dividend of 18.55 pence (2017: 14.27 pence) per
share to be paid on 3 August 2018 to shareholders whose names are
on the Register of Members at the close of business on 6 July 2018.
This makes a total dividend of 27.39 pence (2017: 21.07 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
10 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 13 July 2018.

The Directors of the Company all held office throughout the year.
The current Directors and their biographies can be found on pages
84 to 90. Details of Directors’ remuneration are provided in the
Remuneration Report on pages 113 to 134. Details of the Directors’
shareholdings in the share capital of the Company and options over
shares are provided on pages 130 and 134.

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.

Going Concern and the Viability Statement
The Company’s Going Concern and Viability Statements can be found
on page 57.

The Group’s activities, strategy and performance are explained in the
Strategic Report on pages 3 to 71.

Further detail on the financial performance and financial position
of the Group are provided in the financial statements on pages
146 to 178.

Employees
The Group values highly the commitment of its employees and has
maintained its practice of communicating business developments
to them in a variety of formats. The Group’s employees are kept
informed of its activities and performance through a series of
Director-led staff briefings at key points during the year and the
circulation of corporate announcements and other relevant
information to staff which 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’).

134 Workspace Group PLC Annual Report and Accounts 2018

135 Workspace Group PLC Annual Report and Accounts 2018

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Report of the Directors
continued

The Company is committed to an active Equal Opportunities Policy
from recruitment and selection, through training and development,
performance reviews and promotion. All decisions relating to
employment practices are objective, free from bias and based solely
upon work criteria and individual merit. The Company is responsive
to the needs of its employees, customers and the community at large.
We are an organisation, which uses everyone’s talents and abilities,
where diversity is valued.

The Company remains supportive of the employment and
advancement of disabled persons and ensures its promotion and
recruitment practices are fair and objective.

The Company encourages the continuous development and training
of its employees and the provision of equal opportunities for the
training and career development of all employees.

The Group provides retirement benefits for the majority of its
employees. Details of the Group pension arrangements are set out
in note 26 on page 178.

Further information on Group employees can be found on pages
26, 126 and 156.

Share capital and control
As at 31 March 2018, the Company’s issued share capital comprised
a single class of 163,806,591 Ordinary Shares of £1.00 each. Details
of the Company’s issued share capital are set out on page 172.

Full details of share options and awards under the terms of the
Company’s share incentive plans can be found on pages 172 to 175.

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 2018, the following interests in voting rights over the
issued share capital of the Company had been notified.

As at 24 May 2018 the following interests in voting rights over the
issued share capital of the Company had been notified.

Shareholder

The London & Amsterdam Trust
Company Limited
Quilter Plc
Standard Life
BlackRock Inc
Prudential Group

Number of
shares

Percentage
held

44,750,229
16,545,092
12,448,340
12,327,240
8,639,954

27.32
10.10
7.60
7.53
5.27

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 2017 Annual General Meeting to make market purchases of its
own ordinary shares. This authority will expire at the conclusion of the
2018 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 110.

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.

Shareholder

The London & Amsterdam Trust
Company Limited
Old Mutual
BlackRock Inc
Standard Life
Prudential Group

Number of
shares

Percentage
held

Political donations
The Company and its subsidiaries made no political donations during
the year (2017: Nil).

44,770,817
17,396,569
12,480,475
12,459,207
8,731,583

27.33
10.62
7.62
7.61
5.33

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 2 emissions – indirect emissions
– Purchased electricity:

Electricity purchased for our assets. This includes tenant
consumption where we procure electricity on their behalf.

– Purchased heat:

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.

Heat purchased for our assets. This includes tenant consumption
where we procure district heat on their behalf.

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

Scope 2 (indirect emissions)
Workspace
Purchased electricity (location-based)
Purchased electricity (market-based)
Purchased heat
Joint venture
Purchased electricity

Total
Net lettable area tCO2e/m2
Occupied space area tCO2e/m2

2012/13

2013/14

2014/15

2015/16

2016/17

2017/18

% Change

4,222

3,846

3,515

3,375

3,181

3,192

-24%

3,959
169
2

3,535
216
2

3,194
244
4

2,847
458
7

2,849
319
4

2,804
383
5

60
31
0

64
28
2

51
20
2

42
20
2

5
3
0

0
0
0

10,822

11,290

12,405

12,366

10,110

8,863

-18%

10,510
–
0

312

15,044
0.030
0.035

10,956
–
0

334

15,136
0.031
0.036

12,037
–
0

368

15,920
0.035
0.040

12,129
–
84

153

15,741
0.036
0.041

10,005
–
92

13,292
0.037
0.044

8,762
1,004
100

12,055
0.035
0.041

-20%

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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.
6. Note that when reporting totals, the location-based emissions are used.

Performance
The 2017/18 Greenhouse Gas (GHG) emissions across the portfolio
have decreased by 20% against our 2012/13 baseline and have
decreased by 9% compared to the previous year. The portfolio has
grown in size since 2012/13 and we have been increasing the amount
of air-conditioned floor space we let, which has increased our overall
portfolio carbon intensity compared to the baseline year. However,
we have reduced our 2017/18 carbon intensity compared to the
previous year.

The reduction in our 2017/18 GHG emissions and intensity can be
attributed to a number of factors including divestment of four assets,
three major refurbishment projects which had a strong focus on
energy efficiency and the delivery of portfolio wide energy efficiency
projects. Another contributing factor to the year-on-year reduction
is a decrease in the carbon dioxide emission factor for UK electricity
generation, which is attributed to a significant decrease in coal
generation and an increase in gas and renewables generation.

For the first time we are also undertaking market-based reporting
where we quantify the GHG emissions for our electricity consumption
using the carbon dioxide emissions factor provided to us by our
supplier, rather than using the UK grid average. As we have chosen
to procure a significant proportion of our energy from a verifiable
renewable energy contract, that ensures energy is generated by
a variable mix of hydro-electric, offshore and onshore wind, we are
able to report that our market-based GHG emissions are 1,004 tCO2e
which is significantly less than using the UK grid average. Where
possible, we are continuing to increase the number of supplies that
are included within our renewable energy contract to further reduce
our GHG emissions.

Achievements
We have proactively identified and delivered a range of energy
management projects across our portfolio including technology
and infrastructure upgrades, improved data management and
employee engagement.

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136 Workspace Group PLC Annual Report and Accounts 2018

137 Workspace Group PLC Annual Report and Accounts 2018

Report of the Directors
continued

One of the main initiatives was the targeted installation of the
Optergy Building Management System (BMS) which is a smart
metering technology that has enabled real-time energy monitoring
at the building level right down to individual plant equipment.
The data provided by the BMS has enabled us to engage with our
in-house Facility Management teams to improve energy management
practices and reduce GHG emissions. Other initiatives that have been
implemented include ongoing LED lighting upgrades, ongoing
Automatic Meter Reading (AMR) installations, BMS and boiler
optimisation, insulation improvements and refurbishment projects.

Future
To further reduce our GHG emissions, we will continue to focus on
designing and implementing energy efficiency initiatives within our
buildings and actively engage with both our site staff and customers
to implement energy conservation measures. We have set
challenging objectives and targets for the next year and will be
monitoring our performance throughout the year to ensure that
we achieve our goal of reducing our GHG emissions.

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

Location in the Annual Report

Interest capitalised

Financial Statements, page 156
note 4

Details of long-term
incentive schemes

Remuneration Report, pages
129, 130 and 134

All the information cross-referenced above is hereby incorporated
by reference into this Directors’ Report.

Post Balance sheet events
Details of post Balance sheet events can be found on page 178.

2018 Annual General Meeting
The 32nd Annual General Meeting of the Company will be held at the
Company’s business centre at 160 Fleet Street, London EC4A 2DQ on
Friday 13 July 2018 at 10.00am. 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
5 June 2018

Statement of Directors’ responsibilities
in respect of the Annual Report and the
Financial Statements

The Directors are responsible for preparing the Annual Report and
the Group and Parent Company financial statements in accordance
with applicable law and regulations.

Company law requires the Directors to prepare Group and Parent
Company financial statements for each financial year. Under that
law they are required to prepare the Group financial statements
in accordance with International Financial Reporting Standards
as adopted by the European Union (IFRSs as adopted by the EU)
and applicable law and have elected to prepare the Parent Company
financial statements in accordance with UK accounting standards,
including FRS 101 Reduced Disclosure Framework.

Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Group and Parent Company and of their
profit or loss for that period. In preparing each of the Group and
Parent Company financial statements, the Directors are required to:
– select suitable accounting policies and then apply them

Responsibility statement of the Directors in respect of the annual
financial report
We confirm that to the best of our knowledge:
– the financial statements, prepared in accordance with the

applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss of the
Company and the undertakings included in the consolidation taken
as a whole; and

– the Strategic Report includes a fair review of the development

and performance of the business and the position of the issuer and
the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties
that they face.

We consider the Annual Report and Accounts, taken as a whole,
is fair, balanced and understandable and provides the information
necessary for Shareholders to assess the Group’s position and
performance, business model and strategy.

consistently;

Signed on behalf of the Board on 5 June 2018 by:

Jamie Hopkins
Chief Executive Officer

Graham Clemett
Chief Financial Officer

– make judgements and estimates that are reasonable, relevant,

reliable and prudent;

– for the Group financial statements, state whether they have been

prepared in accordance with IFRSs as adopted by the EU;
– for the Parent Company financial statements, state whether

applicable UK accounting standards have been followed, subject
to any material departures disclosed and explained in the Parent
Company financial statements;

– assess the Group and Parent Company’s ability to continue as a

going concern, disclosing, as applicable, matters related to going
concern; and

– use the going concern basis of accounting unless they either

intend to liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.

The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Parent Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Parent Company and enable them to ensure
that its financial statements comply with the Companies Act 2006.
They are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error, and
have general responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the Group and to prevent
and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors’ Report,
Directors’ Remuneration Report and Corporate Governance
Statement that complies with that law and those regulations.

The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company’s
website. Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.

138 Workspace Group PLC Annual Report and Accounts 2018

139 Workspace Group PLC Annual Report and Accounts 2018

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Independent Auditor’s Report
to the members of Workspace Group PLC

1. Our opinion is unmodified
We have audited the financial statements of Workspace Group PLC
(‘the Company’) for the year ended 31 March 2018 which comprise
the Consolidated and Parent Company’s Balance Sheets, the
Consolidated Income Statement, the Consolidated Statement of
Other Comprehensive Income, the Consolidated Statement of Cash
Flows, the Consolidated and Parent Company’s Statement of
Changes in Equity, and the related notes, including the accounting
policies on pages 146 to 183.

In our opinion:
– the financial statements give a true and fair view of the state of the
Group’s and of the Parent Company’s affairs as at 31 March 2018
and of the Group’s profit for the year then ended;

– the Group financial statements have been properly prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union;

– the Parent Company financial statements have been properly

prepared in accordance with UK accounting standards, including
FRS 101 Reduced Disclosure Framework; and

– the financial statements have been prepared in accordance with

the requirements of the Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the IAS Regulation.

Basis for opinion
We conducted our audit in accordance with International Standards
on Auditing (UK) (‘ISAs (UK)’) and applicable law. Our responsibilities
are described below. We believe that the audit evidence we have
obtained is a sufficient and appropriate basis for our opinion. Our
audit opinion is consistent with our report to the Audit Committee.

We were appointed as Auditor by the Shareholders on 14 July 2017.
The period of total uninterrupted engagement is for the one financial
year ended 31 March 2018. We have fulfilled our ethical responsibilities
under, and we remain independent of the Group in accordance with,
UK ethical requirements including the FRC Ethical Standard as
applied to listed public interest entities. No non-audit services
prohibited by that standard were provided.

Overview
Materiality:
Group financial
statements as a whole

Lower materiality:
components of
adjusted trading profit
after interest

Coverage

£22.0 million
0.9% of total Group assets

£3.0 million
4.9% of profit before tax excluding fair
value valuation movements and profit on
disposals

100% of total Group assets

Risks of material misstatement

Recurring risk
(Group)

Recurring risk
(Parent)

Valuation of investment property

Accounting for financial instruments

2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and
include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had
the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. We
summarise below the key audit matters, in decreasing order of audit significance, in arriving at our audit opinion above, together with our key
audit procedures to address those matters and, as required for public interest entities, our results from those procedures. These matters were
addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial
statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate
opinion on these matters.

The risk

Our response

Valuation of investment
property (Group)
(Group: £2,288.7 million;
2017: £1,839.0 million)

Subjective valuation
Investment properties is the largest balance in the
financial statements and is held at fair value in the
Group’s financial statements.

Refer to page 105 (Audit
Committee Report),
page 150 (accounting policy)
and page 161 (financial
disclosures).

The portfolio is externally valued by qualified
independent valuers, CBRE.

Each property is unique and determining fair value
requires significant judgement and estimation, in
particular over the key assumptions of the estimated
rental value and the yield. The key assumptions will
be impacted by a number of factors including
location, quality and condition of the building and
occupancy. Valuing investment properties either
under development or with development potential
can be further complicated by the need to assess
the likelihood of planning consent and an allowance
for developer’s profit. Whilst comparable market
transactions can provide valuation evidence, the
flexible office sector is still maturing and the unique
nature of each property means that a key factor in
the property valuations are the assumptions made
by the valuer.

Data capture
Each property valuation includes source data
provided by management and relied on as
accurate by the external valuer, primarily the
database of tenancy contracts. The relatively short
average lease length in the Workspace portfolio and
reduced market comparable information for such
flexible office space means the valuer is more reliant
on tenancy data to support their market rent
assumptions than may be the case in other property
sectors. Therefore the valuation is more sensitive
to the source data than may be the case for more
mature sectors with longer leases. Further, given the
higher turnover of tenants, the valuers will have less
working knowledge of the current tenancy position,
and less reason to question changes.

Our procedures included:
– Assessing valuer’s credentials: We assessed
CBRE’s objectivity, professional qualifications
and experience through discussions with them
and reading their valuation report.

– Methodology choice: We critically assessed the
methodology used by the valuers by using our
own property valuation specialist to assist us in
considering whether the valuation report is in
accordance with the RICS Valuation Professional
Standards ‘the Red Book’, IFRS and that the
valuation methodology adopted is appropriate
by reference to acceptable valuation practice.
– Benchmarking assumptions: With the assistance
of our own property valuation specialist, we held
discussions with CBRE to critically assess
movements in property values. For a sample of
properties selected using various criteria including
analysis of the value of a property as well as
correlation with movements in market rent, we
evaluated and challenged as appropriate the key
assumptions upon which these valuations were
based, including those relating to forecast market
rents and yields, by making a comparison to our
own understanding of the market.

– Test of detail: We compared a sample of key
inputs used in the valuations, such as rental
income and lease length to the Group’s property
management system and lease contracts.

– Test of detail: For a selection of properties under
development, we assessed the progress of the
development and evaluated assumptions over
constructions costs, agreeing them to construction
contracts and management’s project appraisals.

– Assessing transparency: We considered the

adequacy of the Group’s disclosures about the
degree of estimation and sensitivity to key
assumptions made when valuing properties.

Our results
– We found the valuation of investment properties

to be acceptable.

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140 Workspace Group PLC Annual Report and Accounts 2018

141 Workspace Group PLC Annual Report and Accounts 2018

Independent Auditor’s Report
to the members of Workspace Group PLC
continued

Accounting for derivatives
(Parent)
Refer to page 150
(accounting policy)
and page 167
(financial disclosures).

The risk

Our response

Our procedures included:
– Test of detail: We agreed the carrying value of
derivatives to valuations obtained directly from
counter-party valuers.

– Reperformance: In addition, we engaged our

internal specialists who performed independent
valuations using independent market data.

– Accounting analysis: We assessed whether the
classification and accounting of the cash flow
hedge was appropriate in addition to reviewing
whether the changes in fair value are correctly
classified within other comprehensive income.

Our results
– We consider derivatives to be accounted for

appropriately.

Accounting application
The Parent Company has derivative financial
instruments of £2.5 million (2017: £12.1 million).
The cash flow hedge is against a $100 million/£64.5
million loan (2017: $100 million/£64.5 million).

The Parent Company has 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 Parent
Company has created a synthetic Sterling fixed rate
liability totalling £64.5 million (2017: £64.5 million).
The swaps have been externally valued and are
designated as a cash flow hedge with changes in fair
value dealt with in other comprehensive income.

The valuations of the swaps are based on market
movements which can fluctuate in the year. It is not
at a high risk of significant misstatement or subject
to significant judgement. However, due to their
materiality in the context of the Parent Company
financial statements, this is considered to be the area
that had the greatest effect on our overall Parent
Company audit.

3. Our application of materiality and an overview of the scope
of our audit
Materiality for the Group financial statements as a whole was set
at £22.1 million, determined with reference to a benchmark of total
assets (of which it represents 0.9%).

In addition, we applied materiality of £3.0 million to Group
components of adjusted trading profit after interest (as defined
by the Group on page 35) which comprises net rental income,
administrative expenses and net finance costs for which we believe
misstatements of lesser amounts than materiality for the financial
statements as a whole could be reasonably expected to influence
the Company’s members’ assessment of the financial performance
of the Group.

Materiality for the Parent Company financial statements as a whole
was set at £21.0 million, determined with reference to a benchmark
of Company net assets, of which it represents 3.1%.

We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £0.7 million (Group),
£0.6 million (Parent Company) or £0.15 million for misstatements
relating to procedures performed to the lower materiality, in addition
to other identified misstatements that warranted reporting on
qualitative grounds

The components within the scope of our work accounted for the
percentages illustrated opposite.

The Group team performed the audit of the Group as if it was a single
aggregated set of financial information. The audit was performed
using the materiality levels set out above.

Group revenue

100%

100

Group proﬁt before tax

100%

100

Total Group assets
£2,339.2m (2017: £1,897.1m)

Group materiality
£22.0m

Group total assets

£22.0m
Whole financial
statements materiality

£3.0m
Materiality applied to
Group components
of adjusted trading
profit after interest

£0.7m
Misstatements reported
to the Audit Committee

100%

100

Full scope for Group audit purposes 2018

Total assets

Group materiality

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142 Workspace Group PLC Annual Report and Accounts 2018

143 Workspace Group PLC Annual Report and Accounts 2018

Independent Auditor’s Report
to the members of Workspace Group PLC
continued

4. We have nothing to report on going concern
We are required to report to you if:
– we have anything material to add or draw attention to in relation to
the Directors’ statement on page 139 to the financial statements on
the use of the going concern basis of accounting with no material
uncertainties that may cast significant doubt over the Group and
Company’s use of that basis for a period of at least twelve months
from the date of approval of the financial statements; or

– if the related statement under the Listing Rules set out on page 138

is materially inconsistent with our audit knowledge.

We have nothing to report in these respects.

5. We have nothing to report on the other information in the
Annual Report
The Directors are responsible for the other information presented
in the Annual Report together with the financial statements.
Our opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion
or, except as explicitly stated below, any form of assurance
conclusion thereon.

Our responsibility is to read the other information and, in doing so,
consider whether, based on our financial statements audit work, the
information therein is materially misstated or inconsistent with the
financial statements or our audit knowledge. Based solely on that
work we have not identified material misstatements in the other
information.

Strategic report and Directors’ report
Based solely on our work on the other information:
– we have not identified material misstatements in the Strategic

report and the Directors’ report;

Disclosures of principal risks and longer-term viability
Based on the knowledge we acquired during our financial statements
audit, we have nothing material to add or draw attention to in relation
to:
– the Directors’ confirmation within the Going Concern and Viability

Statement on page 57 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 and liquidity;

– the Principal Risks and Uncertainties disclosures describing these
risks and explaining how they are being managed and mitigated;
and

– the Directors’ explanation in the Going Concern and Viability

Statement of how they have assessed the prospects of the Group,
over what period they have done so and why they considered that
period to be appropriate, and their statement as to whether they
have a reasonable expectation that the Group will be able to
continue in operation and meet its liabilities as they fall due over
the period of their assessment, including any related disclosures
drawing attention to any necessary qualifications or assumptions.

Under the Listing Rules we are required to review the Going Concern
and Viability Statement. We have nothing to report in this respect.

Corporate governance disclosures
We are required to report to you if:
– we have identified material inconsistencies between the

knowledge we acquired during our financial statements audit and
the Directors’ statement that they consider that the Annual Report
and financial statements taken as a whole is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Group’s position and performance,
business model and strategy; or

– in our opinion the information given in those reports for the
financial year is consistent with the financial statements; and
– in our opinion those reports have been prepared in accordance

– the section of the Annual Report describing the work of the Audit

Committee does not appropriately address matters communicated
by us to the Audit Committee; or

with the Companies Act 2006.

Directors’ Remuneration Report
In our opinion the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act 2006.

We are required to report to you if the Corporate Governance Report
does not properly disclose a departure from the eleven provisions of
the UK Corporate Governance Code specified by the Listing Rules for
our review.

We have nothing to report in these respects.

6. We have nothing to report on the other matters on which we
are required to report by exception
Under the Companies Act 2006, we are required to report to you if,
in our opinion:
– adequate accounting records have not been kept by the Parent

Company, or returns adequate for our audit have not been received
from branches not visited by us; or

– the Parent Company financial statements and the part of the

Directors’ Remuneration Report to be audited are not in agreement
with the accounting records and returns; or

– certain disclosures of Directors’ remuneration specified by law are

not made; or

– we have not received all the information and explanations we

require for our audit.

We have nothing to report in these respects.

7. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 139,
the Directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error; assessing the Group and
Parent Company’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern; and using the going
concern basis of accounting unless they either intend to liquidate the
Group or the Parent Company or to cease operations, or have no
realistic alternative but to do so.

Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or other irregularities (see below), or error, and
to issue our opinion in an Auditor’s Report. Reasonable assurance is
a high level of assurance, but does not guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud,
other irregularities or error and are considered material if, individually
or in aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the financial
statements.

A fuller description of our responsibilities is provided on the FRC’s
website at www.frc.org.uk/auditorsresponsibilities.

Irregularities – ability to detect
We identified areas of laws and regulations that could reasonably
be expected to have a material effect on the financial statements
from our sector experience and through discussion with the Directors
(as required by auditing standards).

We had regard to laws and regulations in areas that directly affect the
financial statements including financial reporting (including related
company legislation) and taxation legislation. We considered the
extent of compliance with those laws and regulations as part of our
procedures on the related financial statement items.

With the exception of any known or possible non-compliance, and
as required by auditing standards, our work in respect of these was
limited to enquiry of the Directors and inspection of regulatory and
legal correspondence.

We communicated identified laws and regulations throughout our
team and remained alert to any indications of non-compliance
throughout the audit.

As with any audit, there remained a higher risk of non-detection of
non-compliance with relevant laws and regulations (irregularities),
as these may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls.

8. The purpose of our audit work and to whom we owe our
responsibilities
This report is made solely to the Company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to them
in an Auditor’s Report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company’s members, as
a body, for our audit work, for this report, or for the opinions we
have formed.

Richard Kelly (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London E14 5GL
5 June 2018

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144 Workspace Group PLC Annual Report and Accounts 2018

145 Workspace Group PLC Annual Report and Accounts 2018

Consolidated income statement
For the year ended 31 March 2018

Consolidated balance sheet
As at 31 March 2018

Revenue
Direct costs

Net rental income
Administrative expenses

Trading profit

Profit/(loss) on disposal of investment properties
Loss on disposal of joint ventures
Other income
Other expenses
Change in fair value of investment properties

Operating profit

Finance income
Finance costs
Exceptional finance costs
Gains from share in joint ventures

Profit before tax
Taxation

Profit for the financial year after tax

Basic earnings per share
Diluted earnings per share

Consolidated statement
of other comprehensive income
For the year ended 31 March 2018

Profit for the financial year
Other comprehensive income:
Items that may be classified subsequently to profit or loss:
Cash flow hedge – transfer to income statement
Cash flow hedge – change in fair value

Total comprehensive income for the year

The notes on pages 150 to 178 form part of these financial statements.

Notes

1
1

1
2

3(a)
3(b)
3(c)
3(d)
10

4
4
4
12(a)

8
8

2018
£m

128.9
(33.3)

95.6
(16.1)

79.5

26.6
–
0.6
–
82.5

2017
£m

108.8
(29.6)

79.2
(15.1)

64.1

(0.6)
(0.2)
2.1
(1.2)
39.5

189.2

103.7

–
(18.8)
–
–

170.4
1.0

171.4

0.1
(13.7)
(1.4)
0.1

88.8
(0.1)

88.7

104.8p
104.0p

54.5p
53.5p

2018
£m

171.4

8.5
(9.5)

170.4

2017
£m

88.7

10.3
(8.1)

86.5

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

Total assets

Current liabilities
Trade and other payables
Deferred tax

Non-current liabilities
Borrowings

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

2018
£m

2017
£m

10 2,288.7
1.4
2.9
0.1
3.2
–
2.5

11
12(a)
12(b)
13
16(e) & (f)

2,298.8

1,839.0
0.7
2.9
0.3
3.1
7.3
12.1

1,865.4

13
14

15
6

22.4
18.0

40.4

25.2
6.5

31.7

2,339.2

1,897.1

(75.5)
–

(75.5)

(52.2)
(0.9)

(53.1)

16(a)

(550.8)

(626.3)

(265.5)

(318.6)

1,712.9

1,578.5

19
19
21
20

163.8
135.3
(9.3)
19.4
1,403.7

163.2
135.4
(8.9)
18.7
1,270.1

1,712.9

1,578.5

£10.37

£9.53

The notes on pages 150 to 178 form part of these financial statements.

The financial statements on pages 146 to 178 were approved and authorised for issue by the Board of Directors on 5 June 2018 and signed
on its behalf by:

J Hopkins
G Clemett
Directors

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146 Workspace Group PLC Annual Report and Accounts 2018

147 Workspace Group PLC Annual Report and Accounts 2018

Consolidated statement of changes
in equity
For the year ended 31 March 2018

Balance at 31 March 2016

Profit for the financial year
Other comprehensive income for the year

Total comprehensive income

Transactions with owners:
Share issues
Dividends paid
Share based payments

Balance at 31 March 2017

Profit for the financial year
Other comprehensive income for the year

Total comprehensive income

Transactions with owners:
Share issues
Own shares purchase (net)
Dividends paid
Share based payments

Balance at 31 March 2018

The notes on pages 150 to 178 form part of these financial statements.

Attributable to owners of the parent

Share
premium
£m

Investment
in own
shares
£m

Other
reserves
£m

Retained
earnings
£m

Total
Share-
holders’
equity
£m

135.9

(8.9)

19.0

1,209.2

1,517.6

–
–

–

(0.5)
–
–

–
–

–

–
–
–

–
(2.2)

(2.2)

–
–
1.9

88.7
–

88.7

(0.1)
(27.7)
–

88.7
(2.2)

86.5

0.2
(27.7)
1.9

Share
capital
£m

162.4

–
–

–

0.8
–
–

163.2

135.4

(8.9)

18.7

1,270.1

1,578.5

–
–

–

0.6
–
–
–

–
–

–

(0.1)
–
–
–

163.8

135.3

–
–

–

–
(0.4)
–
–

(9.3)

–
(1.0)

(1.0)

–
–
–
1.7

171.4
–

171.4

–
–
(37.8)
–

171.4

(1.0)

170.4

0.5
(0.4)
(37.8)
1.7

19.4 1,403.7

1,712.9

Notes

19
7
22

7
22

Consolidated statement of cash flows
For the year ended 31 March 2018

Cash flows from operating activities
Cash generated from operations
Interest received
Interest paid
Tax

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)
Performance fee from joint venture
Purchase of investments
Movement in funding balances with joint ventures
Income distributions from joint ventures

Net cash (outflow)/inflow from investing activities

Cash flows from financing activities
Proceeds from issue of ordinary share capital
Finance costs for new/amended borrowing facilities
Exceptional finance costs
Settlement and re-couponing of derivative financial instruments
Repayment of bank borrowings
Draw down of bank borrowings and Private Placement Notes
Own shares purchase (net)
Dividends paid

Net cash inflow/(outflow) from financing activities

Net increase/(decrease) in cash and cash equivalents

Cash and cash equivalents at start of year
Cash and cash equivalents at end of year

The notes on pages 150 to 178 form part of these financial statements.

Notes

12(a)

16(b)
16(b)

2018
£m

2017
£m

93.2
–
(18.8)
(0.2)

74.2

(370.4)
(73.8)
128.1
(1.1)
(1.0)
–
–
8.7
–
(0.1)
–
0.2

(309.4)

0.5
(1.9)
–
(0.1)
(294.0)
580.0
(0.4)
(37.4)

246.7

69.7
0.1
(15.0)
(1.4)

53.4

(10.8)
(56.8)
7.8
(0.4)
(1.8)
2.7
18.7
23.8
24.5
–
0.4
0.6

8.7

0.2
(0.3)
(0.9)
–
(55.0)
–
–
(27.4)

(83.4)

11.5

(21.3)

18
18

6.5
18.0

27.8
6.5

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148 Workspace Group PLC Annual Report and Accounts 2018

149 Workspace Group PLC Annual Report and Accounts 2018

Notes to the financial statements
For the year ended 31 March 2018

Workspace Group PLC (the ‘Company’) and its subsidiaries (together
‘the Group’) are engaged in property investment in the form of letting
of high-quality business accommodation to businesses across London.

The Company is a public limited company which is listed on the
London Stock Exchange and is incorporated and domiciled in the UK.

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.

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 details of the going concern assessment
can be found on page 57.

The financial statements have been prepared under the historical cost
convention as modified by the revaluation of investment properties
and certain 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 valuer
as the fair value of its investment properties. The valuation is based
upon the key assumptions of estimated rental values and market
based yields. With regard to redevelopments and refurbishments,
future development costs and an appropriate discount rate are also
used. In determining fair value the valuers make reference to market
evidence and recent transaction prices for similar properties.

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.

Basis of consolidation
The Consolidated financial statements include the financial statements
of the Company and all its subsidiary undertakings up to 31 March 2018.
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 until 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 Consolidated income statement.

Investment properties 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 plus an adjustment for the
carrying amount of the finance lease obligation. The corresponding
rental obligations, net of finance charges, are included in current and
non-current borrowings. Each lease payment is allocated between
liability and finance charges so as to achieve a constant rate on the
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.

Acquisitions
Where properties are acquired through corporate acquisitions and
there are no significant assets (other than investment property) and
liabilities, and without a business being acquired, the acquisition is
treated as an asset acquisition. In all other cases, the acquisition is
treated as a business combination.

Intangible assets
Intangible assets are stated at historical cost, less accumulated
amortisation. Acquired computer software licences and external
costs of implementing or developing computer software programs
and websites are capitalised. These costs are amortised over their
estimated useful lives of five years on a straight-line basis.

Costs associated with maintaining computer software programs
are recognised as an expense as they fall due.

Property, plant and equipment
Equipment and fixtures
Equipment and fixtures 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.

Depreciation is provided using the straight-line method to allocate the
cost less estimated residual value over the assets’ estimated useful
lives which range from four to 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
Investments 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.

Trade and other receivables
Trade and other receivables are recognised initially at fair value
and subsequently measured at amortised cost less provision for
impairment where it is established there is objective evidence that
the Group will not be able to collect all amounts due according to
the original terms of the receivable. The amount of the provision
is the difference between the asset’s carrying amount and the
present value of estimated future cash flows. The provision is
recorded in the Consolidated income statement.

Deferred consideration on the disposal of investment properties
is included within trade and other receivables. It is fair valued on
recognition and at each year end with any movement taken to
Other operating income.

Trade and other payables
Trade and other payables are initially recognised at fair value and
subsequently held at amortised cost.

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151 Workspace Group PLC Annual Report and Accounts 2018

Notes to the financial statements
continued

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.

Share capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares are shown in equity as a
deduction, net of tax, from the proceeds.

Investment in own shares
The Group operates an Employee Share Ownership Trust (‘ESOT’)
and a trust for the Share Incentive Plan (‘SIP’). When the Group funds
these trusts in order to purchase Company shares, the loan is
deducted from Shareholders’ equity as investment in own shares.

Operating segments
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker. The
chief operating decision maker is the person or group that allocates
resources to and assesses the performance of the operating
segments of an entity. The Group has determined that its chief
operating decision maker is the Executive Committee of the
Company. The Group considers that it has only one operating
segment being a single portfolio of commercial property providing
business accommodation for rent in London.

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 Consolidated
income statement on a straight-line basis over the lease term. Rent
received in advance is deferred in the Consolidated balance sheet and
recognised in the period to which it relates 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 charges and other costs directly
recoverable from tenants and non-recoverable costs directly
attributable to investment properties and other revenue streams.

Exceptional items
Exceptional items are those items that in the Directors’ view are
required to be separately disclosed by virtue of their size or incidence
to enable a full understanding of the Group’s financial performance.

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.

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 Consolidated 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.

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 20.

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 Consolidated 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 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.

New accounting standards, amendments and guidance
a) During the year to 31 March 2018 the Group adopted the following

accounting standards and guidance:
– Amendments to IFRS 12 Disclosure of Interests in Other Entities

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 Consolidated 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.

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 earnings must be

distributed.

Dividend distributions
Final dividend distributions to the Company’s Shareholders are
recognised as a liability in the Group’s financial statements in the
period in which the dividends are approved, while interim dividends
are recognised when paid.

and IAS 28 Investments in Associates and Joint Ventures –
amendments regarding the consolidation exemption.

– Amendment: IAS 7 Statement of cash flows on disclosure

initiatives.

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 but are not expected to have a significant impact on the
Group’s financial statements or will result in changes to
presentation and disclosure only. They have not been adopted
early by the Group:

Standard or interpretation

Content

IFRS 9

IFRS 15

IFRS 16

Financial instruments

Revenue from contracts with
customers

Leases

IFRS 9 – Financial Instruments
This standard covers the classification and measurement of financial
instruments. Having carried out an assessment of the standard, the
Group believes the main impact will be the measurement and
presentation of trade receivables due to the change in impairment
model to expected credit losses. It is not currently expected that any
impact will be material.

IFRS 15 – Revenue from contracts with customers
This standard is based on the principle that revenue is recognised
when control passes to a customer. In our case, the standard is most
applicable to the recognition point for service charge income and
disposals of investment properties. As the standard excludes rental
income, which falls within the scope of IAS 17/IFRS 16 – Leases, it is
not expected that IFRS 15 will have a significant impact on the
Group’s financial statements. There may be changes to presentation
and disclosure.

IFRS 16 – Leases
For operating leases in excess of one year, this standard requires
lessees to recognise a right-of-use asset and a related lease liability
representing the obligation to make lease payments. The right-of-use
asset is assessed for impairment annually and is amortised on a
straight-line basis. The lease liability is amortised using the effective
interest method. Lessor accounting is substantially unchanged from
current accounting. Therefore, since the Group is primarily a lessor,
this standard does not significantly impact the Group’s financial
statements.

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153 Workspace Group PLC Annual Report and Accounts 2018

Notes to the financial statements
continued

1. Analysis of net rental income and segmental information

3(a). Profit on disposal of investment properties

Rental income
Service charges
Empty rates and other non-recoverables
Services, fees, commissions and sundry income

2018

Direct
costs
£m

(3.4)
(21.8)
(5.0)
(3.1)

Net rental
income
£m

102.7
(4.1)
(5.0)
2.0

Revenue
£m

106.1
17.7
–
5.1

2017

Direct
costs
£m

(2.0)
(18.5)
(4.8)
(4.3)

Revenue
£m

86.8
15.4
–
6.6

128.9

(33.3)

95.6

108.8

(29.6)

Net rental
income
£m

84.8
(3.1)
(4.8)
2.3

79.2

Proceeds from sale of investment properties (net of sale costs)
Book value at time of sale (including assets held for sale)

Profit/(loss) on disposal
Realisation of profits on sale of properties out of joint ventures (note 12)

2018
£m

128.1
(101.5)

26.6
–

26.6

2017
£m

7.8
(8.5)

(0.7)
0.1

(0.6)

Proceeds from sale of investment properties includes £14.0m (March 2017: £Nil) of capital receipts in relation to two part disposals.

All of the properties within the portfolio are geographically close to each other and have similar economic features and risks. Management
information utilised by the Executive Committee to monitor and review performance is reviewed as one portfolio. As a result, management
have determined that the Group operates a single operating segment providing business accommodation for rent in London.

3(b). Loss on disposal of joint ventures

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

2018
£m

1.1
18.6
2.6
0.3
0.3
0.1
0.2

2017
£m

0.9
17.1
2.7
0.2
0.2
0.1
0.2

2018
£000

2017
£000

150
20

170

30
–

2018
£m

8.9
0.6
1.7
4.9

16.1

155
33

188

35
20

2017
£m

8.3
0.4
1.9
4.5

15.1

Proceeds from disposal of joint ventures (net of costs)
Carrying value at time of disposal (note 12)

Loss on disposal

2018
£m

0.3
(0.3)

–

2017
£m

18.7
(18.9)

(0.2)

The Group sold its share in Generate Studio Limited in March 2018. The BlackRock Workspace Property Trust joint venture was sold in June
2016 with the loss on sale being recognised in the prior year.

3(c). Other income

Joint venture performance fee
Change in fair value of deferred consideration
Rights of light compensation
Income from investments

2018
£m

–
0.4
–
0.2

0.6

2017
£m

0.4
(0.5)
2.2
–

2.1

The value of deferred consideration (cash and overage) from the sale of investment properties has been revalued by CBRE Limited at 31 March
2018 and 31 March 2017. The amounts receivable are included in the Consolidated balance sheet under non-current and current trade and other
receivables (note 13).

3(d). Other expenses

Impairment of other investments

2018
£m

–

2017
£m

(1.2)

In the prior year, the Group provided 100% against its investment in Mailstorage Ltd, resulting in a charge of £1.2m.

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154 Workspace Group PLC Annual Report and Accounts 2018

155 Workspace Group PLC Annual Report and Accounts 2018

Notes to the financial statements
continued

4. Finance income and costs

Interest income

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 on financing activities
Cash flow hedge – transfer from equity

Finance costs

Exceptional finance costs
Total finance costs

2018
£m

–

(2.8)
(16.0)
(0.7)
(0.9)
1.6
(8.5)
8.5

(18.8)

–
(18.8)

2017
£m

0.1

(1.2)
(12.8)
(0.7)
(0.5)
1.5
(10.3)
10.3

(13.7)

(1.4)
(15.1)

The exceptional finance costs of £1.4m were incurred in the prior year for the repayment of the £45m UK fund debt in September 2016 and
comprised of a £0.9m repayment fee and £0.5m unamortised finance costs and legal fees relating to this debt.

5. Employees and Directors

Staff costs for the Group during the year were:

Wages and salaries
Social security costs
Other pension costs (note 26)
Cash settled share based costs (note 22)
Equity settled share based costs (note 22)

Less costs capitalised

The monthly average number of people employed during the year was:

Head office staff (including Directors)
Estates and property management staff

2018
£m

15.6
1.9
0.8
0.6
1.7

20.6
(2.0)

18.6

2017
£m

13.9
1.7
0.7
0.4
1.9

18.6
(1.5)

17.1

2018
Number

2017
Number

103
114

217

98
108

206

The emoluments and pension benefits of the Directors are determined by the Remuneration Committee of the Board and are set out in detail
in the Directors’ Remuneration Report on pages 113 to 134. These form part of the financial statements.

Total Directors’ emoluments for the financial year were £4.1m (2017: £4.3m), comprising of £2.1m (2017: £2.1m) of Directors’ remuneration,
£1.8m (2017: £2.1m) gain on exercise of share options and £0.2m (2017: £0.1m) of contributions to pension plans in respect of two Directors
(2017: two).

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 (credit)/charge

2018
£m

–
(0.1)

(0.1)

(0.9)

(1.0)

2017
£m

0.6
(0.3)

0.3

(0.2)

0.1

The tax on the Group’s profit for the year differs from the standard applicable corporation tax rate in the UK of 19% (2017: 20%). The differences
are explained below:

Profit before taxation
Adjusted gains from share in joint ventures

Tax at standard rate of corporation tax in the UK of 19% (2017: 20%)
Effects of:
REIT exempt income
Changes in fair value not subject to tax as a REIT
Share based payment adjustments
Overage income subject to tax when received
Adjustments to tax in respect of previous periods
Losses carried forward previously unrecognised
Utilisation of losses unrecognised brought forward
Other non-taxable expenses

Total taxation (credit)/charge

2018
£m

170.4
–

170.4

32.4

(17.1)
(15.7)
(0.4)
0.6
(0.1)
0.1
(0.8)
–

(1.0)

2017
£m

88.8
(0.1)

88.7

17.7

(10.3)
(7.9)
(0.5)
1.2
(0.3)
–
–
0.2

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. Other income of £0.6m (2017: £2.1m) has been recorded this year (note 3(c)). £0.1m
(2017: £0.8m) of this income is subject to tax. The Group estimates that as the majority of its future profits will be exempt from tax, future tax
charges are likely to be low.

Changes to the UK corporation tax rates were ‘substantively enacted’ and ‘fully enacted’ on 6 and 15 September 2016 respectively as part of
the Finance Bill 2016. These changes include reductions to the main rate of corporation tax from 19% to 17% from 1 April 2020. Deferred taxes at
the balance sheet date have been measured using the rates expected to apply to the period when the asset is realised or the liability is settled.

The Group currently has an unrecognised asset in relation to tax losses carried forward of £0.3m (2017: £1.0m) calculated at a corporation tax
rate of 19% (2017: 19%).

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)

2018
£m

0.8

(0.8)

–

2017
£m

0.9

(1.8)

(0.9)

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157 Workspace Group PLC Annual Report and Accounts 2018

Notes to the financial statements
continued

6. Taxation continued
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 2016
Charged to income statement

At 31 March 2017
Credited to income statement

At 31 March 2018

Deferred tax assets

At 1 April 2016
Charged to income statement

At 31 March 2017
Charged to income statement

At 31 March 2018

7. Dividends

For the year ended 31 March 2016:
Final dividend

For the year ended 31 March 2017:
Interim dividend
Final dividend

For the year ended 31 March 2018:
Interim dividend

Dividends for the year
Timing difference on payment of withholding tax

Dividends cash paid

Other
income
(overage
receipts)
£m

4.2
(2.4)

1.8
(1.0)

0.8

Expenses
(share
based
payment)
£m

(1.1)
0.2

(0.9)
0.1

(0.8)

Tax losses
£m

(2.0)
2.0

–
–

–

Total
£m

4.2
(2.4)

1.8
(1.0)

0.8

Total
£m

(3.1)
2.2

(0.9)
0.1

(0.8)

Payment
date

Per
share

2018
£m

2017
£m

August 2016

10.19p

–

16.5

February 2017
August 2017

6.80p
14.27p

–
23.3

11.2
–

February 2018

8.84p

14.5

37.8
(0.4)

37.4

–

27.7
(0.3)

27.4

In addition, the Directors are proposing a final dividend in respect of the financial year ended 31 March 2018 of 18.55 pence per ordinary share
which will absorb an estimated £30.4m of revenue reserves and cash. If approved by the Shareholders at the AGM, it will be paid on 3 August
2018 to Shareholders who are on the register of members on 6 July 2018. The dividend will be paid as a REIT Property Income Distribution
(‘PID’) net of withholding tax where appropriate.

8. Earnings per share

Earnings used for calculating earnings per share:

Basic and diluted earnings
Change in fair value of investment properties
Profit/(loss) on disposal of investment properties
Loss on disposal of joint venture

EPRA earnings

Adjustment for non-trading items:
Group’s share of joint venture other expenses
Other expenses
Exceptional finance costs
Other income
Taxation (credit)/charge

Adjusted trading profit after interest

2018
£m

171.4
(82.5)
(26.6)
–

62.3

–
–
–
(0.6)
(1.0)

60.7

2017
£m

88.7
(39.5)
0.6
0.2

50.0

0.1
1.2
1.4
(2.1)
0.1

50.7

Earnings have been adjusted to derive an earnings per share measure as defined by the European Public Real Estate Association (‘EPRA’) and
an adjusted underlying earnings per share measure.

Number of shares used for calculating earnings per share:

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 share
Adjusted underlying earnings per share1

1. Adjusted underlying earnings per share is calculated on a diluted basis.

2018
Number

163,495,793
1,293,620

164,789,413

2017
Number

162,833,428
2,892,100

165,725,528

2018

104.8p
104.0p
37.8p
36.8p

2017

54.5p
53.5p
30.2p
30.6p

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159 Workspace Group PLC Annual Report and Accounts 2018

Notes to the financial statements
continued

9. Net assets per share

Net assets used for calculating net assets per share:

Net assets at end of year (basic)
Derivative financial instruments at fair value

EPRA net assets

Number of shares used for calculating net assets per share:

Shares in issue at year-end
Less own shares held in trust at year-end
Dilution due to share option schemes

2018
£m

1,712.9
(2.5)

1,710.4

2017
£m

1,578.5
(12.1)

1,566.4

2018
Number

163,806,591
(163,874)
1,262,717

2017
Number

163,199,045
(118,274)
1,227,537

Number of shares for calculating diluted adjusted net assets per share

164,905,434

164,308,308

EPRA net assets per share

2018

£10.37

2017

£9.53

Net assets have been adjusted and calculated on a diluted basis to derive a net asset per share measure as defined by EPRA.

10. Investment properties

Balance at 1 April
Purchase of investment properties
Capital expenditure
Acquisition of finance lease
Capitalised interest on refurbishments (note 4)
Disposals during the year
Change in fair value of investment properties

Balance at 31 March

2018
£m

1,839.0
382.4
75.6
9.1
1.6
(101.5)
82.5

2,288.7

2017
£m

1,749.4
–
57.1
–
1.5
(8.5)
39.5

1,839.0

Investment properties represent a single class of property being business accommodation for rent in London.

During the year the Group acquired three properties, Salisbury House, 13-17 Fitzroy Street and Centro Buildings for a combined £382m,
including acquisition costs of £14m.

Capitalised interest is included at a rate of capitalisation of 4.4% (2017: 5.2%). The total amount of capitalised interest included in investment
properties is £9.6m (2017: £8.2m).

The change in fair value of investment properties is recognised in the Consolidated income statement.

Investment properties include buildings with a carrying amount of £291m (2017: £105m) held under finance leases with a carrying amount
of £16.1m (2017: £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 2018 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.

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.

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
Head leases treated as finance leases under IAS 17

Total investment properties per balance sheet

2018
£m

2017
£m

2,279.6
(7.0)
16.1

1,844.0
(12.1)
7.1

2,288.7

1,839.0

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.

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160 Workspace Group PLC Annual Report and Accounts 2018

161 Workspace Group PLC Annual Report and Accounts 2018

Notes to the financial statements
continued

10. Investment properties continued
The following table summarises the valuation techniques and inputs used in the determination of the property valuation.

12. Investments
(a) Investment in joint ventures
The Group’s investment in joint ventures represents:

Key unobservable inputs:

Property category

Like-for-like
Completed projects
Refurbishments
Redevelopments
Acquisitions
Head leases

Total

1 = Income capitalisation method.
2 = Residual value method.

ERVs – per sq. ft.

Equivalent yields

Range

£12–£80
£26–£60
£19–£75
£13–£40
£20–£72

Weighted
average

Range

Weighted
average

£40
£48
£44
£23
£60

4.8%–7.4%
5.1%–6.9%
5.0%–6.8%
5.1%–7.1%
4.3%–6.6%

6.5%
5.8%
5.8%
6.1%
5.6%

Valuation
£m

Valuation
technique

1,112
290
308
180
383
16

2,289

1
1
2
2
1
n/a

Balance at 1 April
Capital distributions received*
Payment of loans to joint ventures
Share of gains
Income distributions received*
Disposal of joint ventures (note 3(b))
Realisation of profits on sale of properties out of joint ventures (note 3(a))

Balance at 31 March

2018
£m

0.3
–
0.1
–
(0.3)
–
–

0.1

2017
£m

22.3
(2.7)
–
0.1
(0.6)
(18.9)
0.1

0.3

* Capital distributions are from proceeds on disposal of investment properties. Income distributions are from trading profits.

The Group had one joint venture during the year, Generate Studio Limited, which is engaged in the design and project management of office fit
outs and workplace consultancy both for Group properties and third parties. The Group sold its share in Generate Studio Limited in March 2018.
A dividend was paid to Workspace of £0.3m, of which £0.1m is being repaid by Generate Studio Limited to Workspace over the next financial year.

Generate Studio Limited

Whitebox Creative Limited

Partner

Established

February 2014

Ownership

50%

Measurement
method

Equity

(b) Other investments
The Group holds the following investment:

10% of share capital of The Excell Group plc

2018
£m

3.2

2017
£m

3.1

Key unobservable inputs for redevelopments at planning stage and refurbishment is a Developer’s profit. The range is 13%–20% with a weighted
average of 18%.

Costs to complete is a key unobservable input for redevelopments at planning stage with a range of £186–£273 per sq. ft. and a weighted
average of £203 per sq. ft.

Costs to complete are not considered to be a significant unobservable input for refurbishments due to the high percentage that is already fixed.

Sensitivity analysis:
A +/- 10% movement in ERVs or a +/- 25 basis points movement in yields would result in the following increase/decrease in the valuation.

£m

Like-for-like
Completed projects (refurbishments)
Refurbishments
Redevelopments
Acquisitions

11. Property, plant and equipment

Cost or valuation

1 April 2016
Additions during the year
Disposals during the year

Balance at 31 March 2017
Additions during the year

Balance at 31 March 2018

Accumulated depreciation
1 April 2016
Charge for the year
Disposals during the year

Balance at 31 March 2017
Charge for the year

Balance at 31 March 2018

Net book amount at 31 March 2018

Net book amount at 31 March 2017

+/- 10% in ERVs

+/- 25 bps in yields

+111/-111
+29/-29
+44/-44
+13/-13
+38/-38

-42/+45
-12/+13
-13/+23
-5/+6
-16/+18

Equipment
and fixtures
£m

5.1
1.8
(0.8)

6.1
1.1

7.2

3.1
0.9
(0.8)

3.2
1.1

4.3

2.9

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163 Workspace Group PLC Annual Report and Accounts 2018

Notes to the financial statements
continued

13. Trade and other receivables

Non-current trade and other receivables

Prepayments, other receivables and accrued income
Deferred consideration on sale of investment properties (see below)

Deferred consideration on sale of investment properties:
Balance at 1 April
Cash received
Additions
Less: classified as current
Change in fair value

Balance at 31 March

2018
£m

–
–

–

2018
£m

4.3
(2.4)
4.7
(7.0)
0.4

–

2017
£m

3.0
4.3

7.3

2017
£m

7.0
(1.7)
–
–
(1.0)

4.3

The deferred consideration arising on the sale of investment properties relates to cash and overage. The conditional value of the portion of
thweceivable that relates to overage is held at fair value through profit and loss. It has been fair valued by CBRE Limited using appropriate
discount rates, and will be revalued on a regular basis. This is a Level 3 valuation of a financial asset, as defined by IFRS 13. The change in fair
value recorded in the Consolidated income statement, including both current and non-current elements, was a profit of £0.4m (31 March 2017:
£0.5m loss) (note 3(c)).

Current trade and other receivables

Trade receivables
Less provision for impairment of receivables

Trade receivables – net
Prepayments, other receivables and accrued income
Deferred consideration on sale of investment properties

2018
£m

3.8
(0.6)

3.2
12.2
7.0

22.4

2017
£m

3.5
(0.3)

3.2
14.2
7.8

25.2

Receivables at fair value:
Included within deferred consideration (both current and non-current) on sale of investment properties is £0.9m (2017: £9.4m) of overage
which is held at fair value through profit and loss. In the current year, as the amounts receivable are due within the following 12 months it has
been classified as 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

14. Cash and cash equivalents

Cash at bank and in hand
Restricted cash – tenants’ deposit deeds

2018
£m

0.3
0.5
(0.2)

0.6

2018
£m

13.9
4.1

18.0

2017
£m

0.4
0.2
(0.3)

0.3

2017
£m

2.7
3.8

6.5

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
Deferred income – rent and service charges

2018
£m

6.0
4.4
–
4.1
24.0
28.5
8.5

75.5

2017
£m

4.6
2.0
0.3
3.8
18.0
20.2
3.3

52.2

There is no material difference between the above amounts and their fair values due to the short-term nature of the payables.

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165 Workspace Group PLC Annual Report and Accounts 2018

Notes to the financial statements
continued

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)
3.07% Senior Notes (unsecured)
3.19% Senior Notes (unsecured)
Finance lease obligations

2018
£m

113.9
57.2
71.5
83.8
9.0
79.7
119.6
16.1

2017
£m

28.4
57.1
80.1
83.8
9.0
–
–
7.1

550.8

265.5

In June 2017, the Group exercised the options to extend the maturity of our revolver bank facility by a year to 2022 and increase the quantum
of the facility from £150m to £250m.

In August 2017, we completed the placing of £200m of Private Placement Notes.

(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

2018
£m

2017
£m

550.8

265.5

(16.1)
3.4
(7.1)

531.0
(13.9)

517.1

(7.1)
2.3
(15.7)

245.0
(2.7)

242.3

At 31 March 2018 the Group had £134m (2017: £120m) of undrawn bank facilities, a £2m overdraft facility (2017: £4m) and £13.9m of unrestricted
cash (2017: £2.7m).

Net debt represents borrowing facilities drawn, less cash at bank and in hand. It excludes impacts of foreign exchange differences as these are
fixed via swaps, finance leases and any cost of raising finance as they have no future cash flows.

Repayable between one year and two years
Repayable between two years and three years
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

2018
£m

57.5
9.0
–
116.0
348.5

531.0
(3.4)
7.1

534.7

16.1

550.8

2017
£m

–
57.5
9.0
30.0
148.5

245.0
(2.3)
15.7

258.4

7.1

265.5

(d) Interest rate and repayment profile

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
3.07% Senior Notes
3.19% Senior Notes
Revolver loan
6% Retail Bond

64.5
84.0
9.0
80.0
120.0
116.0
57.5

531.0

5.6%
5.53%
LIBOR+3.5%
3.07%
3.19%
LIBOR+1.65%
6.0%

Half yearly
Half yearly
Half yearly
Half yearly
Half yearly
Monthly
Half yearly

June 2023
June 2023
June 2020
August 2025
August 2027
June 2022
October 2019

(e) Derivative financial instruments
The following derivative financial instruments are held:

Cash flow hedge – cross currency swaps

Amount

$100m/£64.5m

Rate payable
(%)

5.66%

Term/expiry

June 2023

The Group has cross currency swaps 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 cross currency swaps the Group has created a synthetic Sterling fixed rate liability totalling
£64.5m. These swaps have 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
Finance lease obligations

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 (overage)
Other investments

2018
Book value
£m

2018
Fair value
£m

2017
Book value
£m

2017
Fair value
£m

113.9
57.2
363.6
16.1

550.8

116.0
60.2
379.4
16.1

571.7

28.4
57.1
172.9
7.1

265.5

(2.5)

0.9
3.2

4.1

0.9
3.2

4.1

(12.1)

9.4
3.1

12.5

28.4
61.7
172.9
7.1

270.1

(12.1)

9.4
3.1

12.5

In accordance with IFRS 13 disclosure is required for financial instruments that are carried or disclosed in the financial statements at fair
value. The fair values of all the Group’s financial derivatives, bank loans and Private Placement Notes, have been determined by reference to
market prices and discounted expected cash flows at prevailing interest rates and are Level 2 valuations. The fair value of the Retail Bond has
been established from the quoted market price at 31 March 2018 and is thus a Level 1 valuation. 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.

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167 Workspace Group PLC Annual Report and Accounts 2018

Notes to the financial statements
continued

16. Borrowings continued
(g) Financial instruments by category

Assets

a) Assets at value through profit or loss
Deferred consideration (overage)
Other investments

b) Loans and receivables
Cash and cash equivalents
Trade and other receivables excluding prepayments1

Total

Liabilities

Other financial liabilities at amortised cost
Borrowings (excluding finance leases)
Finance lease liabilities
Trade and other payables excluding non-financial liabilities2

2018
£m

0.9
3.2

4.1

18.0
15.1

33.1

37.2

2018
£m

2017
£m

9.4
3.1

12.5

6.5
9.6

16.1

28.6

2017
£m

534.7
16.1
63.0

613.8

258.4
7.1
46.6

312.1

Trade and other receivables exclude prepayments of £6.4m (2017: £6.4m) and non-cash deferred consideration of £0.9m (2017: £9.4m).

1.
2. Trade and other payables exclude other tax and social security of £4.4m (2017: £2.0m), corporation tax of £Nil (2017: £0.3m) and deferred income of £8.5m (2017: £3.3m).

(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

2018
£m

1.0
3.9
95.3

100.2
(84.1)

16.1

2017
£m

0.5
1.8
48.3

50.6
(43.5)

7.1

(i) Changes in liabilities from financing activities

Deferred tax assets

Balance at 1 April
Changes from financing cash flows:
Proceeds from bank borrowings and Private Placement Notes
Repayment of bank borrowings
Finance costs for new/amended borrowing facilities
Settlement of derivative financial instruments

Total changes from cash flows
Changes in fair value of derivative financial instruments
Foreign exchange differences
Amortisation of issue costs of borrowing
New finance leases
Interest payable/(receivable)
Interest paid/(received)

Total other changes

Balance at 31 March 2018

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.

Bank loans
and
borrowings
£m

Finance
lease
liabilities
£m

Derivatives
used for
hedging-
assets
£m

258.4

7.1

(12.1)

580.0
(294.0)
(1.9)
–

284.1
–
(8.5)
0.7
–
18.5
(18.5)

0.7

534.7

–
–
–
–

–
–
–
–
9.0
0.9
(0.9)

9.0

16.1

–
–
–
0.1

0.1
9.5
–
–
–
(0.6)
0.6

–

2.5

The policies for managing each of these risks and the principal effects of these policies on the results for the year are summarised below:

(a) Market risk
Market risk is the risk that changes in market conditions will affect the Group’s interest rates. Borrowings at variable rates expose the Group to
cash flow interest rate risk. Borrowings at fixed rates expose the Group to fair value interest rate risk.

The Group finances its operations through a mixture of retained profits and borrowings. The Group borrows at both fixed and floating rates of
interest and then uses interest rate and cross currency swaps and caps to generate the desired interest and risk profile. The Group has entered
into a cross currency swap to ensure the US Dollar liability streams generated from the US Dollar private placement notes are fully hedged into
Sterling for the life of the transaction. At 31 March 2018 77% (2017: 84%) 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 by £0.6m (2017: £0.2m).

Interest cover covenants in relation to Group borrowings range between 1.5x and 2.0x and the Group targets a minimum cover of 2.0x. As at
31 March 2018 interest cover was 5.1x. Interest cover is calculated as net rental income divided by finance costs.

(b) Credit risk
The Group’s main financial assets are cash and cash equivalents, deposits with banks and financial institutions and trade and other receivables.

Credit risk is the risk of financial loss if a tenant or a counterparty to a financial instrument fails to meet its contractual obligations. The Group’s
exposure to this risk principally relates to the receivables from tenants, deferred consideration on the sale of investment property and cash and
cash equivalent balances held with counterparties.

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 3,000 tenants over 66 properties. The largest 10 single tenants generate less than 10%
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 £28.1m (2017: £21.8m). The Group monitors aged debt balances and
any potential bad debts every week, the information being reported to the Executive Committee every month as part of the performance
monitoring process. The Group’s debtor recovery is consistently high and as such is deemed a low risk area.

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168 Workspace Group PLC Annual Report and Accounts 2018

169 Workspace Group PLC Annual Report and Accounts 2018

Notes to the financial statements
continued

17. Financial risk management objectives and policy continued
(b) Credit risk continued
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)

2018
£m

13.9
3.2
7.0
–

24.1

2017
£m

6.5
3.2
7.8
4.3

21.8

(c) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.

The Group’s approach to managing liquidity is to ensure it will always have sufficient funds to meet obligations as they fall due. This is performed
via a variety of methods including daily cash flow review and forecasting, monthly monitoring of the maturity profile of debt and the regular
revision of borrowing facilities in relation to the Group’s requirements and strategy. The Board reviews compliance with loan covenants which
include agreed interest cover and loan to value ratios, alongside review of available headroom on loan facilities.

To ensure it can effectively manage its liquidity risk, the Group has an overdraft facility of £2m (2017: £4m) and a revolving loan facility of
£250m (2017: £150m). At 31 March 2018 headroom excluding overdraft and cash was £134m (31 March 2017: £120m).

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 2018

Financial liabilities
Bank loans
6% Retail Bond
Private Placement Notes
Finance lease liabilities
Trade and other payables†

31 March 2017

Financial liabilities
Bank loans
6% Retail Bond
Private Placement Notes
Finance lease liabilities
Trade and other payables†

Carrying*
amount
£m

116.0
57.5
357.5
16.1
62.6

609.7

Carrying*
amount
£m

30.0
57.5
157.5
7.1
46.6

298.7

Due
within
1 year
£m

Due
between
1 and
2 years
£m

Due
between
2 and
3 years
£m

Due
3 years
and
beyond
£m

Total
contracted
cash flows
£m

2.5
3.5
14.9
1.0
62.6

84.5

Due
within
1 year
£m

0.6
3.5
8.7
0.5
46.6

59.9

2.5
59.4
14.9
1.0
–

77.8

2.5
–
23.7
1.0
–

27.2

118.9
–
400.6
97.2
–

126.4
66.4
454.1
100.2
62.6

616.7

809.7

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

0.6
3.5
8.7
0.5
–

13.3

0.6
59.4
8.7
0.5
–

69.2

30.8
–
183.6
49.1
–

32.6
66.4
209.7
50.6
46.6

263.5

405.9

† Trade and other payables exclude other tax and social security of £4.4m (2017: £2.0m), corporation tax of £nil (2017: £0.3m) and deferred income of £8.5m (2017: £3.3m).
* Excludes unamortised borrowing costs.

(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 2018 Group equity was £1,712.9m (2017: £1,578.5m) and Group net debt (debt less cash at bank and in hand) was £517.1m
(2017: £242.3m). Group gearing at 31 March 2018 was 30% (2017: 17%).

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. Loan to value at 31 March 2018 was 23%. This is calculated using the total CBRE investment property
valuation (as per note 10) and the current net debt (as per note 16b). Our target is to maintain loan to value below 30%. This may from
time-to-time be exceeded up to a maximum of 40% as steps are taken to reduce loan to value to below 30%.

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)/loss on disposal of investment properties
Loss on disposal of joint ventures
Other income
Other expenses
Net gain from change in fair value of investment property
Equity settled share based payments
Finance income
Finance costs
Exceptional finance costs
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

2018
£m

170.4
1.1
0.3
(26.6)
–
(0.6)
–
(82.5)
1.7
–
18.8
–
–

(7.9)
18.5

93.2

2018
£m

13.9
4.1

18.0

2017
£m

88.8
0.9
0.2
0.6
0.2
(2.1)
1.2
(39.5)
1.9
(0.1)
13.7
1.4
(0.1)

(2.2)
4.8

69.7

2017
£m

2.7
3.8

6.5

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170 Workspace Group PLC Annual Report and Accounts 2018

171 Workspace Group PLC Annual Report and Accounts 2018

Notes to the financial statements
continued

19. Share capital and share premium

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

2018
£m

163.8

2018
Number

163,199,045
606,546

163,806,591

2017
£m

163.2

2017
Number

162,404,600
794,445

163,199,045

22. Share based payments
The Group operates a number of share schemes:

(a) Long term equity incentive plan (‘LTIP’)
The LTIP scheme is a performance award scheme whereby shares are issued against Group performance measures which are assessed over
the three-year vesting period.

For the 2017 scheme these were:
– Relative TSR.
– Total Property Return compared to the IPD benchmark.

For the 2015 and 2016 schemes these were relative TSR, absolute TSR and relative NAV.

The shares are issued at nil consideration provided the performance conditions are met.

The Group issued 606,526 shares (2017: 794,445 shares) during the year to satisfy the exercise of share options with net proceeds of £0.5m
(2017: £0.2m).

Under the 2017 LTIP scheme 495,009 performance and matching shares were awarded in June 2017 to Directors and Senior Management
(2016 LTIP scheme: 479,057).

Balance at 1 April
Issue of shares

Balance at 31 March

20. Other reserves

Share Capital

Share Premium

2018
£m

163.2
0.6

163.8

2017
£m

162.4
0.8

163.2

2018
£m

135.4
(0.1)

135.3

2017
£m

135.9
(0.5)

135.4

Balance at 1 April 2016
Share based payments
Change in fair value of derivative financial instruments (cash flow hedge)

Balance at 31 March 2017

Share based payments
Change in fair value of derivative financial instruments (cash flow hedge)

Balance at 31 March 2018

12.1
1.9
–

14.0

1.7
–

15.7

Equity
settled
share based
payments
£m

Merger
reserve
£m

Hedging
reserve
£m

8.7
–
–

8.7

–
–

(1.8)
–
(2.2)

(4.0)

–
(1.0)

Total
£m

19.0
1.9
(2.2)

18.7

1.7
(1.0)

Details of the movements for the LTIP scheme during the year were as follows:

At 1 April 2016
Granted
Exercised
Lapsed

At 31 March 2017

Granted
Exercised
Lapsed

At 31 March 2018

LTIP

Number

1,722,815
479,057
(740,263)
(67,714)

1,393,895

473,947
(495,009)
(72,488)

1,300,345

For the 2014 LTIP Scheme, which vested in June 2017, the average closing share price at the date of exercise of shares exercised during the year
was £9.07 (2013: £6.85).

A binomial model was used to determine the fair value of the LTIP grant for the Absolute TSR and Relative TSR elements of the 2016 LTIP
scheme and Relative TSR for the 2017 scheme.

8.7

(5.0)

19.4

Assumptions used in the model were as follows:

21. Investment in own shares
The Company has an Employee Share Ownership Trust (‘ESOT’) and a trust for the Share Incentive Plan (‘SIP’). Shares are purchased in the
market for distribution at a later date in accordance with the terms of the various share schemes. The shares are held by independent trustees.
At 31 March 2018 the number of shares held by the ESOT totalled 75,226 (2017: 75,226).

The SIP is governed by HMRC rules (note 22). At 31 March 2018 the number of shares held for the SIP totalled 76,183 (2017: 43,048).

Balance at 1 April
Shares purchased for the Trusts

Balance at 31 March

2018
£m

8.9
0.4

9.3

2017
£m

8.9
–

8.9

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

2017 LTIP

2016 LTIP

2015 LTIP

890p
Nil
3
1%
3%
29%
n/a
333p

828p
Nil
3
1%
2%
28%
316p
306p

914p
Nil
3
1%
2%
25%
305p
306p

The Total Property Return compared to the IPD benchmark is a non-market based condition and the intrinsic value is therefore the share price
at date of grant of 890 pence. At each balance sheet date, the Directors will assess the likelihood of meeting the conditions under this element
of the scheme. The impact of the revision to original estimates, if any, is recognised in the income statement with a corresponding adjustment
to equity. The assessment at year end was that up to 50% of the Total Return 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.

172 Workspace Group PLC Annual Report and Accounts 2018

173 Workspace Group PLC Annual Report and Accounts 2018

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Notes to the financial statements
continued

22. Share based payments continued
(b) Employee share option schemes
The Group operates a Save As You Earn (‘SAYE’) share option scheme. Grants under the SAYE scheme are normally exercisable after three
or five year’s saving. In accordance with UK practice, the majority of options under the SAYE schemes are granted at a price 20% below the
market price ruling at the date of grant.

Details of the movements for the SAYE schemes during the year were as follows:

Options outstanding

At 1 April 2016
Options granted
Options exercised
Options lapsed

At 31 March 2017

Options granted
Options exercised
Options lapsed

At 31 March 2018

SAYE

Number

267,693
190,167
(53,429)
(99,220)

305,211

89,488
(111,517)
(18,059)

265,123

Weighted
exercise
price

£4.95
£5.18
£3.65
£6.41

£4.85

£7.09
£2.37
£5.85

£5.82

The average closing share price at the date of exercise for the SAYE options exercised (for the three-year 2014 and the five-year 2012 schemes)
during the year was £8.84 (2017: £7.16).

The fair value has been calculated using the Black-Scholes model. Inputs to the model are summarised as follows:

(d) Year end summary
At 31 March 2018 in total there were 1,649,658 (2017: 1,733,960) share awards/options exercisable on the Company’s ordinary share capital.
These are analysed below:

Date of grant

LTIP

26 June 2015
26 June 2016
26 June 2017

SAYE

31 July 2013 – five year
25 July 2014 – three year
25 July 2014 – five year
25 July 2015 – three year
25 July 2015 – five year
20 July 2016 – three year
20 July 2016 – five year
26 July 2017 – three year
26 July 2017 – five year

SIP

18 September 2015
10 August 2017

Exercise
price

–
–
–

£3.47
£4.59
£4.59
£7.27
£7.27
£5.18
£5.18
£7.08
£7.08

–

Ordinary
shares
Number

374,545
459,860
473,947

8,644
1,960
392
11,996
247
157,941
347
82,834
762

32,635
43,548

Vested
and
exercisable

Exercisable between

–
–
–

–
1,960
–
–
–
–
–
–
–

–

26.06.2018
26.06.2019
26.06.2020

01.09.2018
01.09.2017
01.09.2019
01.09.2018
01.09.2020
01.09.2019
01.09.2021
01.09.2020
01.09.2022

–
–
–

01.03.2019
01.03.2018
01.03.2020
01.03.2019
01.03.2021
01.03.2020
01.03.2022
01.03.2021
01.03.2023

18.09.2018
10.08.2020

18.09.2020
10.08.2022

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

2018
SAYE
3 year

851p
709p
28%
3
1%
2%
25%

2018
SAYE
5 year

851p
709p
28%
5
1%
2%
25%

2017
SAYE
3 year

622p
518p
28%
3
1%
2%
25%

2017
SAYE
5 year

622p
518p
28%
5
1%
2%
25%

Total

1,649,658

1,960

The share awards/options outstanding at 31 March 2018 had a weighted average remaining contractual life of: LTIP – 1.2 years (2017: 1.2 years),
SAYE – 1.7 years (2017: 1.6 years), SIP – 1.6 years (2017: 0.8 years).

(e) Cash-settled share based payments
National Insurance payments due on the exercise of non-approved ESOS options and shares from the LTIP are considered cash-settled share
based payments.

The estimated fair value of the National Insurance cash-settled share based payments have been calculated using the 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.

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.

(f) Share based payment charges
The Group recognised a total charge in relation to share based payments as follows:

Fair values per share of these options were:

SAYE – three year
SAYE – five year

2018

2017

Grant date

Fair value of award

Grant date

Fair value of award

26 July 2017
26 July 2017

204p
225p

27 July 2016
27 July 2016

149p
164p

Equity settled share based payments
Cash-settled share based payments

2018
£m

1.7
0.6

2.3

2017
£m

1.9
0.4

2.3

The total liability at the end of the year in respect of cash-settled share based schemes was £0.8m (2017: £0.8m).

(c) Share incentive plan (‘SIP’)
All staff were granted £1,000 worth of shares in both March 2013 and September 2015 and £2,000 in August 2017. 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. 46,968 new shares were granted in the year (2017: nil). 12,179 (2017: 4,088) shares were exercised in the
year and 6,102 (2017: 3,930) shares lapsed.

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174 Workspace Group PLC Annual Report and Accounts 2018

175 Workspace Group PLC Annual Report and Accounts 2018

Notes to the financial statements
continued

23. 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))

Balances with joint ventures at 31 March:
Amounts receivable from joint venture

2018
£m

–
(0.1)
–
–
0.3

2017
£m

2.7
–
0.4
(1.4)
0.6

0.1

–

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
Share based payments

24. 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

2018
£m

3.8
1.2

5.0

2017
£m

3.2
1.1

4.3

2018
£m

49.7

2017
£m

27.9

25. Subsidiary and other related undertakings
The Company’s subsidiary and other related undertakings at 31 March 2018, and up to the date of signing the financial statements, are
listed below.

Except where indicated otherwise, the Company owns 100% of the ordinary share capital of the following subsidiary undertakings incorporated
and operating in the UK, all of which are consolidated in the Group’s financial statements.

UK subsidiaries
The registered address of all UK subsidiaries is Canterbury Court, Kennington Park, 1-3 Brixton Road, London SW9 6DE.

Name

Workspace 12 Limited*
Workspace 13 Limited
Workspace 14 Limited
Workspace Glebe Limited
Glebe Three Limited*
LI Property Services Limited
Workspace Management Limited
Workspace 1 Limited*
Workspace 10 Limited
Workspace 11 Limited
Workspace 15 Limited
Workspace Holdings Limited
Anyspacedirect.co.uk Limited
Workspace Newco 1 Limited
Workspace Newco 2 Limited

100% of the ordinary share capital of these subsidiaries is held by other Group companies.

Non-UK subsidiaries

Name

Country of incorporation

Registered address

Workspace 16 (Jersey) Limited

Jersey

Workspace 17 (Jersey) Limited

Jersey

Workspace Salisbury Limited*

Jersey

Centro Property Limited*

Guernsey

Gaspé House, 66-72 The Esplanade,
St Helier, Jersey JE2 3QT
44 Esplanade, St Helier,
Jersey JE4 9WQ
44 Esplanade, St Helier,
Jersey JE4 9WQ
Martello Court, Admiral Park,
St Peter Port, Guernsey GY1 3HB

100% of the ordinary share capital of these subsidiaries is held by other Group companies.

Nature of business

Property Investment
Property Investment
Property Investment
Holding Company
Property Investment
Insurance Agents
Property Management
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Holding Company
Dormant

Nature of business

Investor in joint venture

Holding Company

Property Investment

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176 Workspace Group PLC Annual Report and Accounts 2018

177 Workspace Group PLC Annual Report and Accounts 2018

Notes to the financial statements
continued

26. 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 (2017: £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,
including Directors, in the scheme at the year end was 199 (2017: 177).

27. Operating leases
As a lessee, 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

2018
£m

0.1
0.1

0.2

2017
£m

0.1
0.1

0.2

As a lessor, 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 to six-month tenant break clause, however the recent property acquisitions in the financial year
have included customer leases which are much longer, with fewer break clauses. The future minimum non-cancellable rental receipts under
operating leases granted to tenants are shown below.

Land and buildings:

Within one year
Between two and five years
Beyond five years

28. Post balance sheet events

On 20 April 2018 the Group acquired Centro Buildings 1 & 2 in Camden for £76.5m.

2018
£m

69.1
49.0
24.8

142.9

2017
£m

41.2
6.4
1.5

49.1

Parent Company balance sheet
As at 31 March 2018

Fixed assets
Investments
Derivative financial instruments

Current assets
Debtors: amounts falling due within one year
Cash and cash equivalents

Total assets

Current liabilities
Creditors: amounts falling due within one year

Creditors: amounts falling due after more than one year
Borrowings

Total liabilities

Net assets

Capital and reserves
Share capital
Share premium
Investment in own shares
Other reserves
Retained earnings

Total shareholders’ equity

Notes

2018
£m

2017
£m

C
F

G
G
G
G

795.5
2.5

798.0

564.4
0.2

564.6

1,362.6

703.8
12.1

715.9

243.6
0.2

243.8

959.7

(140.1)

(100.1)

(534.7)

(258.4)

(674.8)

(358.5)

687.8

601.2

163.8
135.3
(9.3)
19.4
378.6

687.8

163.2
135.4
(8.9)
18.7
292.8

601.2

The notes on pages 181 to 183 form part of these financial statements.

The financial statements on pages 179 to 183 were approved by the Board of Directors on 5 June 2018 and signed on its behalf by:

J Hopkins
G Clemett
Directors
Workspace Group PLC
Registered number 2041612

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178 Workspace Group PLC Annual Report and Accounts 2018

179 Workspace Group PLC Annual Report and Accounts 2018

Parent Company statement of
changes in equity
For the year ended 31 March 2018

Notes to the Parent Company
financial statements

Balance at 31 March 2016

Profit for the year
Other comprehensive income for the year

Total comprehensive income

Transactions with owners:
Share issues
Dividends paid
Share based payments

Balance at 31 March 2017

Profit for the year
Other comprehensive income for the year

Total comprehensive income

Transactions with owners:
Share issues
Dividends paid
Own shares
Share based payments

Balance at 31 March 2018

The notes on pages 181 to 183 form part of these financial statements.

Share
capital
£m

162.4

Share
premium
£m

Investment
in own
shares
£m

135.9

(8.9)

–
–

–

0.8
–
–

–
–

–

(0.5)
–
–

–
–

–

–
–
–

163.2

135.4

(8.9)

–
–

–

0.6
–
–
–

–
–

–

(0.1)
–
–
–

163.8

135.3

–
–

–

–
–
(0.4)
–

(9.3)

Other
reserves
£m

Retained
earnings
£m

Total
Share-
holders’
equity
£m

19.0

–
(2.2)

(2.2)

–
–
1.9

18.7

–
(1.0)

(1.0)

–
–
–
1.7

310.9

619.3

9.7
–

9.7

(0.1)
(27.7)
–

292.8

123.6
–

123.6

–
(37.8)
–
–

9.7
(2.2)

7.5

0.2
(27.7)
1.9

601.2

123.6

(1.0)

122.6

0.5
(37.8)
–
1.7

19.4

378.6

687.8

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’.

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:

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 22 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.

a) The requirements of IAS 7 to provide a Statement of cash flows

and related notes for the year;

b) The requirements of IAS 1 to provide a statement of compliance

with IFRS;

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
page 152. Disclosure requirements are provided in note 16 to the
Consolidated financial statements.

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.

Significant Accounting Policies
i. Investments
Investments are carried in the Company’s balance sheet at cost
less impairment. Impairment reviews are performed by the Directors
when there has been an indication of potential impairment.

Impairment and reversal of impairment is taken to the profit and
loss account.

ii. Share based payment and investment in own shares
Incentives are provided to employees under share option schemes.
The Company has established an Employee Share Ownership Trust
(‘ESOT’) to satisfy part of its obligation to provide shares when Group
employees exercise their options. The Company provides funding to
the ESOT to purchase these shares.

The Company has also established an employee Share Incentive Plan
(‘SIP’) which is governed by HMRC rules.

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 152.

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 £123.6m (2017: £9.7m). £130.0m
dividends were received in the year from subsidiary undertakings
(2017: £23.1m).

Dividend payments are disclosed in note 7 to the Consolidated
financial statements.

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180 Workspace Group PLC Annual Report and Accounts 2018

181 Workspace Group PLC Annual Report and Accounts 2018

Notes to the Parent Company financial statements
continued

C. Investments

Cost
Balance at 31 March 2017
Additions in the year

Balance at 31 March 2018

Impairment
Balance at 31 March 2017 and 31 March 2018

Net book value at 31 March 2018

Net book value at 31 March 2017

Investment
in subsidiary
undertakings
£m

Other
investments
£m

838.1
91.7

929.8

1.2
–

1.2

Total
£m

839.3
91.7

931.0

134.3

1.2

135.5

795.5

703.8

–

795.5

703.8

Other investments represented 8% of the share capital of Mailstorage Ltd, a company incorporated in the UK. The Company wrote off this
investment during the prior year.

D. Debtors

Amounts falling due within one year

Amounts owed by Group undertakings
Corporation tax asset

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

Amounts owed to Group undertakings are unsecured and repayable on demand. Interest is paid to Group undertakings.

2018
£m

562.0
2.4

564.4

2017
£m

241.6
2.0

243.6

2018
£m

133.8
1.4
4.9

140.1

2017
£m

95.0
1.0
4.1

100.1

Interest rate

LIBOR+1.65%
5.6%
5.53%
LIBOR+3.5%
3.07%
3.19%
6.0%

Repayable

June 2022
June 2023
June 2023
June 2020
August 2025
August 2027
October 2019

F. Creditors: amounts falling due after more than one year

Borrowings and financial instruments

Bank loan
5.6% Senior US Dollar Notes 2023
5.53% Senior Notes 2023
Senior Floating Rate Notes 2020
3.07% Senior Notes
3.19% Senior Notes
6% Retail Bond

Total borrowings
Less cost of raising finance
Foreign exchange differences

Net borrowings

All the above borrowings are unsecured.

Maturity analysis of borrowings:

Repayable between one and two years
Repayable between two and three years
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

$100m/£64.5m

5.66% June 2023

Amount

Rate payable
(%)

Term/
expiry

2018
£m

116.0
64.5
84.0
9.0
80.0
120.0
57.5

531.0
(3.4)
7.1

534.7

2018
£m

57.5
9.0
–
116.0
348.5

531.0

2017
£m

30.0
64.5
84.0
9.0
–
–
57.5

245.0
(2.3)
15.7

258.4

2017
£m

–
57.5
9.0
30.0
148.5

245.0

2018
£m

2.5

2017
£m

12.1

G. Capital and reserves
Movements and notes applicable to share capital, share premium account, investment in own shares, other reserves and share based payment
reserve are shown in notes 19 to 22 on pages 172 to 175 and in the Statement of changes in equity.

Other reserves:

Balance at 31 March 2016
Share based payments
Change in fair value of derivative financial instruments

Balance at 31 March 2017

Share based payments
Change in fair value of derivative financial instruments

Balance at 31 March 2018

Equity settled
share based
payments
£m

Merger
Reserve
£m

Hedging
Reserve
£m

8.7
–
–

8.7

–
–

(1.8)
–
(2.2)

(4.0)

–
(1.0)

Total
£m

19.0
1.9
(2.2)

18.7

1.7
(1.0)

8.7

(5.0)

19.4

12.1
1.9
–

14.0

1.7
–

15.7

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182 Workspace Group PLC Annual Report and Accounts 2018

183 Workspace Group PLC Annual Report and Accounts 2018

Five-year performance (unaudited)
2014–2018

Property portfolio 2018 (unaudited)

Rents receivable
Service charges and other income

Revenue
Trading profit before interest
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 debt

Net assets
Gearing
Loan to value

Basic NAV per share
EPRA NAV per share

* Excludes exceptional items.

Performance metrics (unaudited)

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)

EPRA Measures
EPRA Earnings per share
EPRA Net Asset Value per share
EPRA Cost Ratio

31 March
2018
£m

31 March
2017
£m

31 March
2016
£m

31 March
2015
£m

31 March
2014
£m

106.1
22.8

128.9
79.5
(18.8)

60.7
170.4
171.4
104.8p
27.39p
44.9

86.8
22.0

108.8
64.3
(13.6)

50.7
88.8
88.7
54.5p
21.07p
34.4

79.6
21.6

101.2
60.8
(16.9)

43.9
391.3
388.9
240.3p
15.05p
24.4

63.8
19.8

83.6
45.1
(18.5)

26.6
360.0
359.9
231.4p
12.04p
19.4

55.3
18.3

73.6
39.0
(18.5)

20.5
252.5
252.4
166.8p
10.63p
15.5

2,288.9
58.7
(517.1)

1,839.0
18.2
(242.3)

1,749.4
43.7
(275.5)

1,408.9
14.5
(277.1)

1,068.3
(8.4)
(333.8)

1,712.9
30%
23%

£10.47
£10.37

1,578.5
15%
13%

£9.68
£9.53

1,517.6
18%
16%

£9.35
£9.23

1,146.3
24%
24%

£7.12
£7.03

726.1
46%
46%

£4.99
£4.96

31 March
2018
£m

31 March
2017
£m

31 March
2016
£m

31 March
2015
£m

31 March
2014
£m

75
4.2
4,525
919

69
3.8
4,554
834

68
3.6
4,306
827

66
3.7
4,539
979

83
4.5
4,653
967
£112.9m £89.5m £78.2m £69.4m £58.3m
£24.32
£15.12
£36.05
85.8%
85.8%
85.5%
12,754
12,353
12,189
1,212
1,020
1,111

£18.79
88.7%
14,664
1,313

£28.41
87.0%
12,724
1,182

37.8p
£10.37
25%

30.2p
£9.53
28%

47.5p
£9.23
31%

18.9p
£7.03
34%

15.4p
£4.96
33%

Property name

Alexandra House
Angel House
Archer Street Studios
Barley Mow Centre
Belgravia Workshops
Bow Enterprise Park
Bow Office Exchange
Brickfields
Canalot Studios
Cannon Wharf
Cargo Works
Centro Buildings
China Works
Chiswick Studios
Clerkenwell Workshops
E1 Studios
East London Works
Easton Street
Edinburgh House
Exmouth House
Fitzroy Street
Fleet Street
Garratt Lane
Grand Union Studios
60 Gray’s Inn Road
12-13 Greville Street
14 Greville Street
Havelock Terrace
Highway Business Park
Kennington Park
Leroy House
Mallard Place
Mare Street Studios
Marshgate Business Centre
Metal Box Factory
Morie Street
Pall Mall Deposit
Parkhall Business Centre
Parma House
Peer House
Pill Box
Poplar Business Park
Q West
Quality Court
Rainbow Industrial Estate
Riverside
ScreenWorks
Spectrum House
The Biscuit Factory
The Biscuit Factory – Cocoa Studios
The Chocolate Factory (part)
The Chocolate Factory (part)
The Frames
The Fuel Tank
The Ivories
The Leather Market

Postcode

N22 7TR
EC1V 7LQ
W1D 7AZ
W4 4PH
N19 4NF
E3 3QY
E3 3QP
E2 8HD
W10 5BN
SE8 5EN
SE1 9PG
NW1 0DU
SE1 7SJ
W4 5PY
EC1R 0AT
E1 1DU
E1 1DU
WC1X 0DS
SE11 5DP
EC1R 0JH
W1T 4BQ
EC4A 2DQ
SW18 4LZ
W10 5AD
WC1X 8AQ
EC1N 8SB
EC1N 8SB
SW8 4AS
E1 9HR
SW9 6DE
N1 3QP
N22 6TS
E8 3QE
E15 2NH
SE1 0HS
SW18 1SL
W10 6BL
SE21 8EN
N22 6XF
WC1X 8LZ
E2 6GG
E14 9RL
TW8 0GP
WC2A 1HR
SW20 0JK
SW18 4UQ
N5 2EF
NW5 1LP
SE16 4DG
SE16 4DG
N22 6XJ
N22 6XJ
EC2A 4PS
SE8 3DX
N1 2HY
SE1 3ER