Workspace Group Plc · LSE:WKP
Workspace — H1 2022/23 Earnings Presentation
58 slides from Workspace's earnings presentation, Nov 15, 2022
Slide 1: Half Year Results 2022/23 Investor & Analyst Presentation
Half Year Results 2022/23 Investor & Analyst Presentation 15th November 2022 WORKSPACE”
Slide 2: Agenda
Agenda 01 02 Overview Financial review Graham Clemett Dave Benson CEO CFO 03 04 Operational performance Outlook Leo Shapland Graham Clemett Head of Portfolio Management CEO Kennington Park, Oval 2 Workspace | Half Year Results 2022/23
Slide 3: Clerkenwell Workshops
Clerkenwell Workshops 3 Workspace | Half Year Results 2022/23
Slide 4: Overview: Strong financial performance driven by resilient customer demand
Overview Strong financial performance driven by resilient customer demand Strong first half Lead indicators Property valuation Robust financing McKay acquisition trading result positive stable Trading profit Up 33.5% Occupancy 89.6% ERV per sq. ft. Up 7.5% Loan to value 33% Integration complete afte
Slide 5: Customer demand – resilience over time
Overview Customer demand – resilience over time Enquiries per month 1,500 1,500 • Our target market is established SMEs, 1,000 1,000 typically 5-20+ people in size, across a 500 500 diverse range of business sectors 0 0 • We provide a flexible offer that has 07 07 08 08 09 09 10 10 11 11 12 12 13 13
Slide 6: Customer space – an integral part of their business
Overview Customer space – an integral part of their business • We provide our customers with a blank canvas • They want choice and control over how they use their space to create their own identity • The way they use their space reflects the diverse range of business sectors they are in • Over half
Slide 7: Customer location – geographical spread of SMEs
Overview Customer location – geographical spread of SMEs • Our previous research has highlighted that there is a broad spread of SMEs across London* 17% 15% East Central 17% North 26% South West 25% • We see our market opportunity continuing to be across the whole of London including well- connected
Slide 8: Record Hall
Record Hall 8 Workspace | Half Year Results 2022/23
Slide 9: Income statement
Financial review Income statement £m Sep 22 Sep 21 Change Net rental income 56.1 41.0 +37% Administrative expenses (11.4) (8.7) +31% Net finance costs (15.6) (10.5) +49% Trading profit after interest 29.1 21.8 +33% Change in fair value of investment properties 8.1 (14.9) Gain/(loss) on sale of inves
Slide 10: Net rental income
Financial review Net rental income £m Sep 22 Sep 21 Change Underlying rental income 55.9 47.2 +18% Unrecovered service charges (1.7) (2.2) -23% Empty rates and other non-recoverable costs (4.8) (4.9) -2% Services, fees, commissions and sundry income (0.4) - Underlying net rental income 49.0 40.1 +22
Slide 11: Managing costs
Financial review Managing costs • People costs Service charge costs - ~75% of admin costs, ~25% of service charge costs - Inflationary increase of 3%, higher in junior roles 10% Staff costs - London Living Wage employer 5% 25% Utilities • Utilities 10% Cleaning Maintenance - ~20% of service charge c
Slide 12: Balance sheet
Financial review Balance sheet £m Sep 22 Mar 22 Investment property valuation 2,863 2,402 Net debt (937) (558) Other (49) (44) Net assets 1,877 1,800 EPRA NTA per share £9.74 £9.88 £10.50 EPRA NTA per share movement £10.40 £10.30 £10.20 £10.10 0.05 0.15 £10.00 £9.90 9.88 -0.15 £9.80 9.74 £9.70 -0.19
Slide 13: Valuation summary
Financial review Valuation summary Underlying Valuation at movement in £m 30 Sep 2022 H1 22/23 Major movements ERV per sq. ft. up 7.5% to £45.41 132 Like-for-like 1,891 15 Equivalent yield increased from 5.6% to 5.9% (117) Capital value of £692 per sq. ft. Parkhall 1 Completed projects 250 (1) Wenlo
Slide 14: Valuation – McKay portfolio
Financial review Valuation – McKay portfolio Change Sep 22 Sep 22 Purchase since Mar 22 Mar 22 Valuation Equivalent cost acquisition1 Valuation Equivalent £m yield £m £m £m yield London offices 162 6.2% 147 +13 161 6.1% South East offices 134 7.9% 125 +8 137 7.6% South East industrials 140 4.8% 147
Slide 15: Valuation – like-for-like portfolio sensitivities
Financial review Valuation – like-for-like portfolio sensitivities ERV per sq. ft. EPRA NTA per share (£) -10% -5% £45.41 +5% +10% -100bps 10.57 11.16 11.74 12.35 12.93 Equivalent Yield -50bps 9.57 10.10 10.64 11.18 11.74 5.9% 8.77 9.26 9.74 10.23 10.71 +50bps 8.06 8.52 8.96 9.42 9.89 +100bps 7.47 7
Slide 16: Net debt and cash flow
Financial review Net debt and cash flow Mar-22 Cash from operations Dividend Acquisitions Capex Other Sep-22 £0m -£100m -£200m -£300m -£400m -£500m 30 -558 -26 -£600m -£700m -£800m -£900m 5 -363 -25 -937 -£1000m 16 Workspace | Half Year Results 2022/23
Slide 17: Debt summary
Financial review Debt summary Sep 22 Mar 22 Floating rate bank facilities drawn £285m - • Substantial headroom under financial covenants Fixed rate borrowings £665m £600m - Net rental income can fall 56% Drawn debt £950m £600m - SONIA can increase 660 bps Undrawn bank facilities and cash £263m £442m
Slide 18: Debt facilities
Financial review Debt facilities Drawn Facility Average Debt facility maturity profile Amount Amount interest Maturity £400m 400 £m £m rate £350m 350 Fixed rate borrowings £300m 300 £250m 250 Private placements 300 300 3.3% 2025-2029 £200m 200 Green bond 300 300 2.3% 2028 £150m 150 Secured loan 65 6
Slide 19: Financial outlook 2022/23
Financial review Financial outlook 2022/23 • Continued pricing momentum, occupancy stable at target level • Contribution from letting up of completed projects and acquisitions • Underlying cost inflation, energy costs hedged • Targeted full year capex of c. £50m • De-levering through disposals progr
Slide 20: Brickfields
Brickfields 20 Workspace | Half Year Results 2022/23
Slide 21: Portfolio snapshot
Operational performance Portfolio snapshot Occupancy resilient Strong customer demand • Like-for-like occupancy stable • Customer demand for good quality, sustainable space continues • Positive leasing activity on completed projects • Enquiries steady, with strong lettings conversion Pricing momentu
Slide 22: Operating highlights
Operational performance Operating highlights Average per month H1 22/23 FY 21/22 Sep 22 Mar 22 Enquiries 769 917 -16% Like-for-like occupancy 89.6% 89.5% +0.1% Viewings 502 598 -16% Like-for-like rent per sq. ft. £38.59 £37.12 +4.0% Lettings - number 107 127 -16% Like-for-like rent roll £94.5m £91.2
Slide 23: Like-for-like portfolio
Operational performance Like-for-like portfolio Positive demand and activity during H1 Occupancy solid Rent per sq. ft. up 4.0% at 89.6% in H1 to £38.59 per sq. ft. Rent roll up 3.6% Strong renewal activity: (£3.3m) to £94.5m 178 customers renewed for £1.0m (14%) uplift The Leather Market 23 Workspa
Slide 24: Metal Box Factory, Southbank
Operational performance Like-for-like portfolio Metal Box Factory, Southbank • 107,000 sq. ft. business centre on Bankside • Completed upgrade to atrium, reception, cafe and arrival experience • Occupancy highly resilient – 94% at HY, >90% throughout H1 • Rolling refurbishment programme on customer
Slide 25: The Salisbury, Finsbury Circus
Operational performance Like-for-like portfolio The Salisbury, Finsbury Circus • 214,000 sq. ft. business centre in the heart of the City • Rolling upgrade programme to improve units, common parts and customer facilities • Occupancy at 84% and rising • Increased rents by up to 20% on upgraded units
Slide 26: Gray's Inn Road, Holborn
Operational performance Like-for-like portfolio Gray’s Inn Road, Holborn • 36,000 sq. ft. business centre in central London • Rolling upgrades to units and customer amenity to improve aesthetics and ESG • Occupancy up 11% to 92% • Quoting rents on upgraded units increased by up to 15% • Underlying v
Slide 27: The Light Box, Chiswick
Operational performance Like-for-like portfolio The Light Box, Chiswick • 78,000 sq. ft. business centre in West London with strong transport links • Extensive upgrade of units, common parts and arrival experience • Occupancy at 97.3%, >95% throughout H1 • Rent roll up 11% • Strong demand driving as
Slide 28: Completed projects
Operational performance Completed projects • Strong upward momentum from completed projects • Overall occupancy up 6.7% to 76.7% – evidencing customer demand for high quality, sustainable space • Increasing occupancy helps drive positive upward pricing momentum • Rent roll up 15.6% (£1.5m) to £10.8m
Slide 29: Recent acquisitions
Operational performance Recent acquisitions • Strong customer demand at McKay properties – 153,000 sq. ft. of letting activity since acquisition, worth £3.3m rent p.a. - London assets – 46,000 sq. ft. leasing activity in H1 equating to £1.6m rent p.a.; occupancy 65% with positive pipeline activity a
Slide 30: Completed projects & acquisitions
Operational performance Completed projects & acquisitions Parkhall, Dulwich 160 Fleet St, City of London • 120,000 sq. ft. mixed-use business centre, workshop and • 43,000 sq. ft. business centre in Fleet St, City of London light industrial property in Dulwich • Rolling refurbishment programme – tar
Slide 31: Completed projects & acquisitions
Operational performance Completed projects & acquisitions Portsoken House, Aldgate Mare St, Hackney • 50,000 sq. ft. characterful building acquired as part of McKay • 55,000 sq. ft. extended and refurbished business centre portfolio, adding attractive offering to existing cluster with strong custome
Slide 32: Major refurbishment & redevelopment projects
Operational performance Major refurbishment & redevelopment projects 1.4m sq. ft. • On site with Leroy Havelock Terrace House – delivering 58,000 sq. ft. in 2024, projected £2.1m 250,000 stabilised income Kennington Park (Phase 2&3) • Timing of projects is East London Works 200,000 discretionary - a
Slide 33: Major refurbishment & redevelopment projects
Operational performance Major refurbishment & redevelopment projects • Medium term ability to drive income growth • Leroy House on site + commencement of up to 200,000 sq. ft. of strong viability projects in 2023 – delivering c.£11m income Leroy House (CGI) Biscuit Factory (CGI) Riverside (CGI) Choc
Slide 34: Value add through active asset management
Operational performance Value add through active asset management Deploying capital for strong risk- adjusted returns to grow income • Increased near term focus on smaller scale upgrades – unit refurbs and common parts improvements • Controllable inflation and good visibility on rental outcomes • Dr
Slide 35: Value add – more than just unit refurbishments
Operational performance Value add through active asset management – more than just unit refurbishments Clerkenwell Studios Barley Mow The Shepherds Building Exmouth House Gray’s Inn Road Parkhall 35 Workspace | Half Year Results 2022/23
Slide 36: Sustainability at Workspace – ESG and financial outcomes interlinked
Operational performance Sustainability at Workspace – ESG and financial outcomes interlinked Sustainable refurbishment: Sustainable retrofit: Unit upgrades: Vox Studios, Vauxhall Screenworks, Islington Parkhall, Dulwich • £8m investment to deliver 27,000 sq. ft. • 54,000 sq. ft. • 6,900 sq. ft. of r
Slide 37: Sustainability at Workspace – exceeding market and regulatory expectations
Operational performance Portfolio Snapshot - EPC Status By Area Sustainability at Workspace - exceeding market and G Being reassessed regulatory expectations E 0.2% 2% 6% 1.4m sq. ft. Refurbishment A/B 5 star 4 star pipeline 30% Development Standing D investment 24% A- supplier engagement leader To
Slide 38: Sustainability at Workspace – our USP
Operational performance Sustainability at Workspace – our USP 250 Energy intensity kWhe/m2 NLA 2020 UKGBC NZC Target (kWhe/m2 NLA) 200 2030 UKGBC NZC Target (kWhe/m2 NLA) 2050 UKGBC NZC Target (kWhe/m2 NLA) 150 100 50 0 Inherently green portfolio Adaptive re-use of buildings Employment-led regenerat
Slide 39: Portfolio outlook
Operational performance Portfolio outlook Occupancy resilient Strong customer demand • Strong letting activity to date in H2 • No signs of changing demand for good quality, sustainable space • Positive momentum and pipeline indicators • Our differentiator – flexibility and blank canvas a key driver
Slide 40: The Metal Box Factory
The Metal Box Factory 40 Workspace | Half Year Results 2022/23
Slide 41: Outlook: The opportunity
Outlook The opportunity We serve a resilient and We have a distinctive, We have an extensive We have an experienced diverse SME community sustainable and flexible offer portfolio of properties, with team and a well-established across London with a that meets our customers’ a continuing opportunity t
Slide 42: Future rent roll opportunity
Outlook Future rent roll opportunity £250m Reversionary uplift1 £200m 8 168 3 5 17 £150m 135 £100m £50m £m Sep-22 Like-for-like Completed Projects Recent Future pricing Existing pipeline Planned Future acquisition Future rent rent roll projects underway acquisitions growth opportunity disposals oppo
Slide 43: Our priorities
Outlook Our priorities • Provide great customer service / meet changing needs • Capture near term asset management opportunities • Drive occupancy and capture pricing growth • Phased delivery of our major project pipeline • Manage the cost challenges / mitigate as appropriate • Progress our planned
Slide 44: Workspace | Half Year Results 2022/23
44 Workspace | Half Year Results 2022/23
Slide 45: Brickfields
Brickfields 45 Workspace | Half Year Results 2022/23
Slide 46: The Workspace model
Appendix The Workspace model Flexible lease SME customer base Customer focused • 2 year term • 4,000+ customers • In-house service model • 6 month rolling break • Typical size 5-20+ people • 85% customers* agree/ • Average stay 5+ years • Diverse by business sector strongly agree: and size “Workspac
Slide 47: Customers by business sector
Appendix Customers by business sector Information, Information,Communication Communication&&Technology Technology 14% 15% Wholesale Wholesale&&Retail Retail Professional, Professional,Technical Technical&&Consultancy ConsultancyServices Services 3% Arts, Arts,Entertainment Entertainment&&Recreation
Slide 48: Major refurbishment projects (1 of 3)
Appendix Major refurbishment projects (1 of 3) Unaffected Estimated Estimated Actual area Upgraded area New space ERV rent at 90% Sep 22 At September 2022 Valuation cost Completion (sq. ft.) (sq. ft.) (sq. ft.) (average) occupancy rent roll Completed 160 Fleet Street £27m £2m Aug 2017 - 43,044 - £50
Slide 49: Major refurbishment projects (2 of 3)
Appendix Major refurbishment projects (2 of 3) Actual/ Unaffected Upgraded Estimated Estimated estimated Cost to Estimated area area New space ERV rent at 90% Sep 2022 At September 2022 Valuation cost complete completion (sq. ft.) (sq. ft.) (sq. ft.) (average) occupancy rent roll Underway Leroy Hous
Slide 50: Major refurbishment projects (3 of 3)
Appendix Major refurbishment projects (3 of 3) Estimated Estimated Upgraded area New space At September 2022 cost completion (sq. ft.) (sq. ft.) Design Stage (with planning consent) The Biscuit Factory (J block) £20m 24/25 83,8112 28.401 Riverside (commercial phase 1) £35m 25/26 - 64,208 Kennington
Slide 51: Mixed-use redevelopment projects (1 of 2)
Appendix Mixed-use redevelopment projects (1 of 2) New Estimated Cash Sep 2022 Commercial space Residential commercial Estimated rent at 90% Received / to At September 2022 Development partner Valuation rent roll completion units no. space (sq. ft.) ERV occupancy come Completed Lock Studios Peabody/
Slide 52: Mixed-use redevelopment projects (2 of 2)
Appendix Mixed-use redevelopment projects (2 of 2) Commercial Sep 2022 space estimated Residential New commercial space At September 2022 rent roll completion units no. (sq. ft.) Design Stage (with planning consent) The Chocolate Factory / Parma House1 £0.2m 25/26 93 10,000 Poplar Business Park (Pha
Slide 53: Recent acquisitions
Appendix Recent acquisitions Estimated Unaffected area Upgraded area New space At September 2022 cost Completion (sq. ft.) (sq. ft.) (sq. ft.) Design Stage Refurbishments (pre-application) Busworks - United House £22m 24/25 12,000 47,000 7,000 Busworks - Omnibus House £18m 26/27 - 45,000 - The Old D
Slide 54: Workspace locations
Appendix Workspace locations Like-for-like Refurbishments Redevelopments Recent acquisitions 54 Workspace | Half Year Results 2022/23
Slide 55: Property portfolio
Appendix Property portfolio Like-for-like Map ref Property name Net lettable Net rent Map ref Property name Net lettable Net rent area (sq. ft.) roll (£) area (sq. ft.) roll (£) 1 Archer Street Studios 14,984 878,094 20 Ink Rooms 22,235 1,323,176 2 Biscuit Factory (Cocoa Studios) 39,298 990,026 21 K
Slide 56: Property portfolio
Appendix Property portfolio Refurbishments Mixed-use redevelopments Map ref Property name Net lettable Net rent Map ref Property name Net lettable Net rent area (sq. ft.) roll (£) area (sq. ft.) roll (£) 39 Barley Mow Centre 77,995 1,694,519 49 Garratt Lane 43,000 0 3 Biscuit Factory (J Block) 83,81
Slide 57: Property portfolio
Appendix Property portfolio Recent acquisitions Map ref Property name Net lettable Net rent Map ref Property name Net lettable Net rent area (sq. ft.) roll (£) area (sq. ft.) roll (£) 56 Busworks 104,630 1,333,802 72 The Planets 0 0 57 The Old Dairy 56,983 2,146,714 73 Ancells Road 34,577 422,979 Mc
Slide 58: Disclaimer
Appendix Disclaimer This document is not audited and may include certain forward-looking statements relating to Workspace Group PLC (the “Company”), its plans and its current goals and expectations relating to future financial condition, performance and results. Any such statements are based on curr