Workspace Group plc Second Quarter Business Update

HIGHLIGHTS

• Good customer demand with 323 new lettings completed in the quarter, with a total rental value of £8.0m per annum
• Strong rental growth with like-for-like rent roll up 3.0% in the quarter, up 6.3% in the half year to £108.6m, and up 9.9% over the last year
• Improved pricing with like-for-like rent per sq. ft. up 3.3% in the quarter, the ninth consecutive quarterly increase, and 6.6% in the half year, to £42.98
• Like-for-like occupancy broadly stable at 88.7% (30 June 2023: 89.2%)
• Good progress on disposals of non-core assets, with £92.8m completed in the first half of the year, and a further £9.0m disposal exchanged in October
• Robust balance sheet with £133m of cash and undrawn facilities and proforma LTV of 32.6% (based on 31 March 2023 valuation)

Graham Clemett, Chief Executive Officer, Workspace Group PLC, commented:

"Our offer is tailored to the needs of bright, growing SMEs, the unsung heroes of the London economy. Our strong first half performance demonstrates that this focus sets us apart from others in the market.

Space requirements are undoubtedly changing, which is playing to our advantage. Our customers want a great working environment, in the right place, with true, all-round flexibility - not just a shorter lease - at good value. This is driving strong demand and with occupancy stable at around 90%, the resulting pricing tension enables us to continue to improve rents.

We have also made good progress in the planned disposal of non-core assets, enabling us to recycle capital efficiently, selectively investing in our programme of upgrades across the portfolio.

We enter the second half of the year in a strong position. Although mindful of the wider economic challenges, we are confident that we are well placed with a differentiated offer that resonates with London's SMEs."

Customer activity

We have seen good demand with 323 new lettings completed in the second quarter with a total rental value of £8.0m.

Like-for-like rent roll was up 3.0% in the quarter, 6.3% in the half year, to £108.6m and 9.9% over the last year (with a 3.4% increase in like-for-like rent roll reported in the six months to 31 March 2023). Like-for-like rent per sq. ft. increased by 3.3% in the second quarter and 6.6% in the half year, to £42.98. Like-for-like occupancy remained broadly stable, down by 0.5% in the quarter to 88.7%.

Quarter Ended

*Absolute change

**Restated for the reclassification of Westbourne Studios, which is now included in the like-for-like category

Portfolio activity

In June, we completed on the sale of five light industrial and logistics properties in Bracknell, Crawley, Poyle, Theale and Weybridge for £82.0m, in line with their March 2023 valuations.

In the second quarter, we completed on the sale of Columbia House, Farnborough for £7.3m and Ancells Road, Fleet for £3.5m, both in line with their March 2023 valuations.

In aggregate, these disposals have delivered £92.8m of proceeds in the first half of the year, at a net initial yield of 5.1%.

In October, we exchanged on the sale of an advertising tower adjacent to The Mille Building in Brentford for £9.0m in line with the March 2023 valuation, with completion expected by the end of the month.

Financing

Net debt increased by £33m in the quarter to £867m, following payment of the full year dividend. Cash and undrawn facilities were £133m as at 30 September 2023 with LTV at 32.6% on a proforma basis, based on the 31 March 2023 valuation. At 30 September 2023, our average cost of debt was 4.1%.

Half year results

Workspace will publish its half year results for the six months to 30 September 2023 on 21 November 2023. A presentation to analysts and investors will be held at 9.00 in our recently opened Eventspace, at our refurbished Salisbury House, 114 London Wall, EC2M 5QA.