Workspace Group Plc · LSE:WKP
Workspace — FY2021/22 Earnings Presentation
51 slides from Workspace's earnings presentation, Jun 8, 2022
Slide 1: Full Year Results 2021/22 Investor & Analyst Presentation
Full Year Results 2021/22 Investor & Analyst Presentation 8th June 2022
Slide 2: Agenda
Agenda 01 02 Overview McKay acquisition Graham Clemett Graham Clemett CEO CEO 03 04 Financial review Delivering on our growth plans Dave Benson Graham Clemett CFO CEO Mare Street Studios, Hackney 2 Workspace | Full Year Results 2021/22
Slide 3: Overview
Overview Graham Clemett, CEO Exmouth House, Farringdon 3 Workspace | Full Year Results 2021/22
Slide 4: Strong trading performance driven by customer demand
Overview Strong trading performance driven by customer demand • Occupancy recovering and pricing improving • High levels of customer demand across the portfolio • Significant growth opportunity, supported by scalable operating platform • Extensive refurbishment and redevelopment pipeline • Well plac
Slide 5: The Workspace model
Overview The Workspace model Flexible lease SME customer base Customer focused • 2 year term • 3,000+ customers • In-house service model • 6 month rolling break • Typical size 5-20 people • 85% customers agree/ strongly agree: “Workspace • Average stay 4+ years • Diverse by business sector and size
Slide 6: Customers by business sector
Overview Information, Communication & Technology Design Fashion Design Customers by business sector Technology Interior Design Software & Software Design Product Design Publishing Graphic Design IT Services Construction & Property Wholesale & Retail Property Management E-Commerce Construction Wholes
Slide 7: Distinctive buildings
Overview Distinctive buildings 7 Workspace | Full Year Results 2021/22
Slide 8: Customers' individual fit-out
Overview Customers’ individual fit-out 8 Workspace | Full Year Results 2021/22
Slide 9: Customer office use
Overview Customer office use Office utilisation¹ 80% 70% 60% SMEs’ top 5 benefits of working in an office2 50% 01 04 40% Maintain a better Create a sense of work-life divide belonging among team 30% 20% 02 05 Enjoy the atmosphere Better daily routine 10% and buzz and structure 0% 03 Better for innov
Slide 10: Operating highlights
Overview Operating highlights Average per month FY 21/22 FY 20/21 Mar 22 Mar 21 Enquiries 917 739 +24% Like-for-like occupancy 89.6% 81.8% +7.8%1 Viewings 598 328 +82% Like-for-like rent per sq. ft. £36.39 £36.25 +0.4% Lettings 127 96 +32% Like-for-like rent roll £92.9m £85.5m +8.7% Monthly enquirie
Slide 11: Financial highlights
Overview Financial highlights Mar 22 Mar 21 Mar 22 Mar 21 Net rental income £86.7m £81.5m +6% Property valuation £2,402m £2,324m +3%1 Trading profit after interest £46.9m £38.7m +21% EPRA NTA per share £9.88 £9.38 +5% Total dividend per share 21.5p 17.75p +21% Loan to value 23% 24% -1%2 Trading prof
Slide 12: McKay acquisition
McKay acquisition Graham Clemett, CEO 12 Workspace | Full Year Results 2021/22
Slide 13: McKay acquisition: Background
McKay acquisition Background Consideration Rationale for the acquisition • Recommended offer made 2 March 2022, • Opportunity to accelerate our growth sustainably transaction completed 6 May 2022 • Attractive London assets, scope to apply our • Company acquired for £258m, £2.82 flexible model, high
Slide 14: McKay acquisition: London Offices
McKay acquisition London Offices • 7 properties, 291,000 sq. ft. Portsoken House, Aldgate • Aldgate, Victoria, Shoreditch, Wimbledon, Richmond, • 50,000 sq. ft., occupancy 50% Croydon, Brentford • Rolling refurbishment underway • Roll-out flex leasing model Rent Roll • Reconfigure some floors for sm
Slide 15: McKay acquisition: South-East Offices
McKay acquisition South-East Offices Town centre offices Business parks • 6 properties, 181,000 sq. ft. • 6 properties, 265,000 sq. ft. • Reading (2), Woking, Windsor, Leatherhead, Staines • Maidenhead, Crawley, Bracknell, Redhill, Newbury, Fleet Rent Roll Rent Roll £4.1m £6.0m Occupancy Occupancy 8
Slide 16: McKay acquisition: Non-core properties
McKay acquisition Non-core properties South-East industrials Other properties • 9 properties, 562,000 sq. ft. • 5 multi-let light industrials Great Brighams Mead, Reading • 4 logistics warehouses (one vacant) • Residential development site sold for £19m, in line with Rent Roll book value £5.3m • Com
Slide 17: McKay acquisition: Plan of action
McKay acquisition Plan of action Activity Target Roll-out Workspace flexible Increase occupancy level to 90%+ offer across London properties Sale of industrial portfolio Complete sale of properties and other non-core properties by December 2022 Integration of McKay team Integration complete by Decem
Slide 18: Financial Review
Financial Review Dave Benson, CFO Kennington Park, Oval 18 Workspace | Full Year Results 2021/22
Slide 19: Income statement
Financial review Income statement £m Mar 22 Mar 21 Change Net rental income 86.7 81.5 +6% Administrative expenses (19.3) (19.0) +2% Net finance costs (20.5) (23.8) -14% Trading profit after interest 46.9 38.7 +21% Change in fair value of investment properties 68.7 (257.7) Gain/(loss) on sale of inve
Slide 20: Net rental income
Financial review Net rental income £m Mar 22 Mar 21 Change Rental income 100.3 115.0 -13% Unrecovered service charges (4.2) (2.1) +100% Empty rates and other non-recoverable costs (10.5) (7.0) +50% Services, fees, commissions and sundry income 0.7 (0.7) Underlying net rental income 86.3 105.2 -18% R
Slide 21: Balance sheet
Financial review Balance sheet £m Mar 22 Mar 21 Change Investment property valuation 2,402 2,324 +3%1 Net debt (558) (565) -1% Other (44) (39) +13% Net assets 1,800 1,720 +5% EPRA NTA per share £9.88 £9.38 +5% 1 Underlying movement 21 Workspace | Full Year Results 2021/22
Slide 22: Valuation
Financial review Valuation Valuation Movement 31 Mar Major movements £m H1 H2 Full Year 2022 Equivalent yield reduced from 5.9% to 5.7% £99m Like-for-like 1,897 (11) 74 63 ERV per sq. ft. down 1.9% to £41.42 £(36)m Capital value of £666 per sq. ft. Parkhall £4m Completed projects 186 - 8 8 Wenlock S
Slide 23: Net debt and cash flow
Financial review Net debt and cash flow Mar-21 Mar-21 Cash from operations Dividend Acquisitions Disposals Capex Other Mar-22 Mar-22 -£460m -£480m -£500m 58 122 -£520m -£540m -31 -£560m -43 -558 -11 -565 -£580m -£600m -£620m -£640m -88 -£660m 23 Workspace | Full Year Results 2021/22
Slide 24: McKay transaction summary
Financial review McKay transaction summary £ per share £m1 Cash consideration 2.09 191.1 Equity consideration2 0.73 67.1 Total consideration 2.82 258.2 Transaction costs 0.08 7.5 Total cost 2.90 265.7 McKay NTA3 3.47 317.2 Transaction costs (0.08) (6.9) NTA acquired 3.39 310.3 1 Total number of McKa
Slide 25: Proforma combined business
Financial review Proforma combined business £m Workspace McKay Adjustments1 Combined 12 Months to 31 March 2022: Net rental income 86.7 20.4 (2.2) 104.9 Administrative expenses (19.3) (6.4) 3.2 (22.5) Net finance costs (20.5) (6.2) (5.9) (32.6) Trading profit after interest 46.9 7.8 (4.9) 49.8 No. s
Slide 26: Debt
Financial review Debt Pro-forma1 Mar 22 Mar 21 Net debt £914m £558m £565m Average interest cost (drawn debt) 3.2% 3.1% 3.8% Undrawn revolver facilities and cash £331m £442m £434m Marginal cost (undrawn facilities) over SONIA 1.5% 1.6% 1.5% Average period to maturity (total facilities) 4.1 years 4.2
Slide 27: Financial outlook 2022/23
Financial review Financial outlook 2022/23 • Rental income underpinned by opening rent roll • Contribution from acquisitions and letting up of completed projects • Pricing momentum with like-for-like occupancy at target level • Underlying cost inflation, energy costs hedged Add portrait building • C
Slide 28: Future rent roll opportunity
Financial review Future rent roll opportunity Reversionary uplift2 1 Not a profit forecast, for illustrative purposes only. 28 Workspace | Full Year Results 2021/22 1 McKay properties included at March 2022 rent roll, excluding Great Brighams Mead 2 Based on properties at 90% occupancy at estimated
Slide 29: Delivering on our growth plans
Delivering on our growth plans Graham Clemett, CEO View from Mirror Works, Stratford 29 Workspace | Full Year Results 2021/22
Slide 30: Acquisitions
Delivering on our growth plans Acquisitions Consideration: £43.4m C The Old Dairy, Shoreditch Busworks, Islington McKay portfolio • Consideration: £43m • Consideration: £45m • Consideration: £258m • Net lettable area: 57,000 sq. ft. • Net lettable area: 104,000 sq. ft. (net debt £170m) • Adjacent to
Slide 31: Capital recycling - disposals
Delivering on our growth plans Capital recycling - disposals Highway Industrial Estate, Limehouse 13-17 Fitzroy Street, Fitzrovia • Sold in March 2022 for £24m, a significant • Sold in September 2021 for £92m premium to book value • Useful source of income for the last four years • 20,000 sq. ft. li
Slide 32: Extensive project pipeline
Delivering on our growth plans Extensive project pipeline 1.2m sq. ft. 117,000 sq. ft. 98,000 sq. ft. 73,000 sq. ft. 273,000 sq. ft. 707,000 sq. ft. Havelock Terrace 250,000 The Biscuit Factory (J Block) Kennington Park 200,000 Riverside Sq. ft. 150,000 The Biscuit Factory (C Block) The Shaftesbury
Slide 33: Completed projects
Delivering on our growth plans Completed projects Pall Mall, Ladbroke Grove Mare Street, Hackney • Completed September 2021, cost £14m • Opened June 2020, cost £21m • Rooftop and 5 storey extension to former • Completed refurbishment of existing warehouse furniture depositary building together with
Slide 34: Project underway – Leroy House
Delivering on our growth plans Project underway – Leroy House • Located in Islington between • Will provide 58,000 sq. ft. of new Highbury and Dalston and refurbished office studios • Repositioning of an old, energy • 380 kW solar panel installation inefficient building into a characterful, amenity
Slide 35: Future projects
Delivering continued growth Future projects Havelock Terrace, Battersea Kennington Park Business Centre, Oval • 2 minute walk from new Battersea Power • Close to Oval tube station with good links Station tube station, within the Battersea to Battersea Power Station, City and West End Design & Techno
Slide 36: Our sustainability approach
Delivering on our growth plans Our sustainability approach 1. Delivering a climate 2. Supporting our 3. Looking after resilient portfolio communities our people Energy Carbon Waste Skills and Homelessness Wellbeing Fair wages employment and work Water Nature & Transport Prosperous Local environmenta
Slide 37: Achieving our net zero ambition by 2030
Delivering continued growth Achieving our net zero ambition by 2030 Existing Workspace portfolio McKay portfolio (exc. non-core) A/B C D E A/B C D E EPC breakdown by area EPC breakdown by area No EPC Held 7% 11% 5% 28% 40% 28% 4.0m sq. ft. 0.7m sq. ft. 26% 37% 18% Cost to upgrade C to A/B £5-7m Cost
Slide 38: Compelling, long-term sustainable investment case
Delivering on our growth plans Compelling, long-term sustainable investment case Clear • Distinctive, flexible offer Growth • Extensive project pipeline strategy • Quality space in attractive locations opportunities • Disciplined acquisition strategy • Sustainable approach • Scalable in-house platfo
Slide 39: Q&A
Q&A 39 Workspace | Full Year Results 2021/22
Slide 40: Supplementary information
Supplementary information Kennington Park, Kennington 40 Workspace | Full Year Results 2021/22
Slide 41: Refurbishment projects (1 of 3)
Appendix Refurbishment projects (1 of 3) Unaffected Upgraded Estimated Estimated Actual area area New space ERV rent at 90% Mar 2022 At March 2022 Valuation cost Completion (sq. ft.) (sq. ft.) (sq. ft.) (average) occupancy rent roll Completed 160 Fleet Street £25m £2m Aug 2017 – 42,736 – £44 £1.7m £
Slide 42: Refurbishment projects (2 of 3)
Appendix Refurbishment projects (2 of 3) Actual/ Unaffected Upgraded Estimated Estimated estimated Cost to Estimated area area New space ERV rent at 90% Mar 2022 At March 2022 Valuation cost complete completion (sq. ft.) (sq. ft.) (sq. ft.) (average) occupancy rent roll Underway Westbourne Studios £
Slide 43: Refurbishment projects (3 of 3)
Appendix Refurbishment projects (3 of 3) Actual/ Cost to Estimated Unaffected area Upgraded area New space At March 2022 estimated cost complete completion (sq. ft.) (sq. ft.) (sq. ft.) Design Stage (with planning consent) The Biscuit Factory (C block) £7m £7m 23/24 – 14,517 – The Biscuit Factory (J
Slide 44: Mixed-use redevelopment projects (1 of 2)
Appendix Mixed-use redevelopment projects (1 of 2) New Estimated Mar 2022 Commercial space Residential commercial Estimated rent at 90% Cash At March 2022 Development partner Valuation rent roll completion units no. space (sq. ft.) ERV occupancy received Completed Lock Studios Peabody/Galliford Try
Slide 45: Mixed-use redevelopment projects (2 of 2)
Appendix Mixed-use redevelopment projects (2 of 2) Commercial Mar 2022 space estimated Residential New commercial space At March 2022 rent roll completion units no. (sq. ft.) Design Stage (with planning consent) The Chocolate Factory (2) / Parma House2 £0.3m 24/25 93 10,000 Riverside1 / Garratt Lane
Slide 46: Sustainability credentials
Appendix Sustainability credentials MSCI ESG rating GRESB 5 Star rating AA We procure 100% green electricity 87/100 Real Estate Assessment Score 93/100 Development Assessment Score CDP a- List FTSE4Good We are a London Living Wage employer Supplier and engagement leader Absolute rating: 3 out of 5 M
Slide 47: Lease profile
Appendix Lease profile Number of leases by lease length1 Rent roll by lease length1 6% 23% 17% 48% 77% 29% Two Years or Less Two to Five Years More than Five Years 1 At March 2022 by lease length signed initially 47 Workspace | Full Year Results 2021/22
Slide 48: Property portfolio
Appendix Property portfolio Like-for-like Refurbishments Redevelopments Acquisitions 48 Workspace | Full Year Results 2021/22
Slide 49: 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 15,847 840,235 21 Kennington Park 354,392 9,400,545 2 Biscuit Factory (Cocoa Studios) 39,298 873,2
Slide 50: 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 (£) 40 Barley Mow Centre 77,571 1,455,176 41 Chocolate Factory (part) 1 6 0 3 Biscuit Factory (Part)
Slide 51: Disclaimer
Appendix Disclaimer The information in this document may include forward-looking statements, which are based on current expectations and projections about future events. These statements can be identified by the fact that they do not relate strictly to historical or current facts. They use words suc