Workspace Group PLC Annual Report and Accounts 2022 ## Home to ## London’s ## Brightest ## Businesses Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ## Workspace is in an exciting growth market as ## our flexible offer is increasingly in demand in the ## post-Covid era. We believe we have a compelling ## investment case that will deliver attractive returns ## to shareholders over the long term. | 1 | LEADERSHIP IN LONDON’S FLEXIBLE | STRATEGY | | --- | --- | --- | | | OFFICEMARKET | We drive customer-led growth and | | | We have a long heritage and significant scale, | deliver operational excellence, whilst | | | with more than 3,000 customers across 57 | always being sustainable. | buildings in London. Strategy, Page 32 2 SIGNIFICANT GROWTH OPPORTUNITY Our flexible offer is increasingly relevant to a BUSINESS MODEL ### INVESTMENT wider range of businesses and locations in and Our expertise in urban regeneration in ### PROPOSITION around London. We deliver organic growth London, active asset management and through our extensive project pipeline and take customer experience drives capital advantage of acquisition opportunities that will appreciation and rental growth. deliver superior returns. Business Model, Page 14 3 A SUSTAINABLE APPROACH Our model is to repurpose distinctive buildings, BUSINESS REVIEW revitalise local areas and have a positive We have seen like-for-like occupancy environmental and social impact in the areas recover to pre-Covid levels, capturing weoperate. strong customer demand. Business Review, Page 67 4 STRONG FINANCIAL POSITION With a range of available options to refinance the balance sheet, we are well positioned to continue to deliver a unique combination of income and capital growth. 5 AN EXPERIENCED TEAM We have the right team to deliver our ambitious growth plans, with recent new hires adding to the wealth of existing experience and skills within the business. 01 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ### INSIDE THIS REPORT ## Our ## 04 93 ## OUR PURPOSE governance INTRODUCTION TO CORPORATE GOVERNANCE 93 Introduction to corporate governance ## Welcome 98 Chairman’s governance letter 100 Board leadership andcompany purpose ## to our Annual Report 116 Division of responsibilities 127 Composition, succession ## and Accounts 2022 and evaluation 143 Audit, risk and internalcontrol 162 Remuneration 191 Report of the Directors 195 Directors’ responsibility statement ABOUT THIS REPORT ## Strategic Financial ## 11 14 162 This report has been ## report CEO’S STATEMENT OUR BUSINESS MODEL statements REMUNERATION produced in landscape format to optimise the 00 Investment proposition 196 Independent auditor’s report reading experience online. | | | 01 Introduction | | 204 Consolidated income | | | --- | --- | --- | --- | --- | --- | | | | 09 Chairman’s statement | | | statement | | | | 11 Chief Executive | | 204 Consolidated statement | | | Look out for these | | | Officer’sstatement | | of comprehensive income | | throughout the report: | | 14 Our business model | | 205 Consolidated balance sheet | | | | | 23 Our stakeholders | | 206 Consolidated statement | | | | Reference to another | | | | ofchanges in equity | 28 Our response page in the report to market trends 206 Consolidated statement 32 Our strategy of cash flows Reference to further 34 Doing the Right Thing 207 Notes to the financial reading online | | 54 Our Key | | | | | statements | | --- | --- | --- | --- | --- | --- | --- | | Return to last | | performanceindicators | | | 230 Parent Company | | | viewed page | 59 Principal risks | | | | | balance sheet | | | | | We have a deep | 36 | | | | | | anduncertainties | | | 231 Parent Company statement | | | Return to | | | | SUSTAINABILITY | | of changes in equity | | | 67 Business review | | understanding | | | | contents page 76 Compliance statements 231 Notes to the Parent Company ### ofthe flexible financial statements ### market and what ADDITIONAL INFORMATION ### customers want. 234 Five-year performance 235 Property portfolio 236 Glossary of terms 237 Investor information 02 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ### HIGHLIGHTS 1 TRADING PROFIT AFTER INTEREST Park Hall, Dulwich ## Financials ## £46.9m 46.9 38.7 81.0 NET RENTAL INCOME PROPERTY VALUATION ## It has been a positive ## year for Workspace, ## with our focus on £86.7m £2.4bn ## recovery following ## thepandemic. 81.5 2,324 122.0 2, 574 The continued demand we have seen from SMEs for our flexible offer has translated into higher occupancy, higher 2 EPRA NTA PER SHARE utilisation of our business centres and improved pricing. We have ended the year in a strong position with positive momentum across all key indicators. ## £9.88 9.88 9.38 10.88 DIVIDEND PER SHARE ## 21.5p 1. Equivalent IFRS measure is profit before tax- 2022: £124.0m, 2021: £(235.7)m, 2020: £72.5m. 2. Equivalent IFRS measures are basic net assets per share- 2022: £9.94, 2021: £9.50, 2020: £11.07 and 17.75 diluted net assets per share- 2022: £9.89, 2021: | 2022 2022 2022 2022 2022 | £9.44, 2020: £10.99. | 21.5 | 86.7 | 2,402 | 36.16 | | --- | --- | --- | --- | --- | --- | | 2021 2021 2021 2021 2021 | | | | | | | 2020 2020 2020 2020 2020 | | | | | | 03 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack HIGHLIGHTS CONTINUED Brickfields, Hoxton ## Sustainability LIKE-FOR-LIKE OCCUPANCY NET ZERO CARBON BY ## Operational ## 89.6% 2030 GREEN FINANCING 81.6 ## £500m AVERAGE ENQUIRIES PER MONTH LIKE-FOR-LIKE RENT ROLL GROWTH RENEWABLE ELECTRICITY SOURCED ## 917 +8.7% ## 100% 739 -23.9 1,087 1.9 SCOPE 1 AND 2 EMISSIONS REDUCTION SINCE 2019/20 AVERAGE LETTINGS PER MONTH AVERAGE VIEWINGS PER MONTH ## 20% ## 127 598 DONATED TO SINGLE HOMELESS PROJECT 96 328 ## £100k | 2022 2022 2022 2022 2022 | 917 598 | 89.6 | 8.7 127 | 121 | 675 | | --- | --- | --- | --- | --- | --- | | 2021 2021 2021 2021 2021 | | | | | | | 2020 2020 2020 2020 2020 | | | 93.1 | | | 04 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ### OUR PURPOSE IN ACTION ## Our purpose is to ## give businesses the ## freedom to grow. ## We believe that in the right space, teams ## can achieve more. We create sustainable ## environments tailored to the needs of SMEs, ## offering space theycan personalise to reflect ## their own brand and culture. By doing this, ## we aim to achieve our vision of becoming ## home to London’s brightest businesses. Brickfields, Hoxton 05 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack OUR PURPOSE IN ACTION CONTINUED ## Repurposing ## iconic buildings ## The space MARE STREET STUDIOS Fully refurbished to create a BREEAM Excellent business centre with an EPC ‘B’ rating and a 20% reduction in carbon emissions. ## to grow Byrefurbishing the site, the carbon impact is significantly less than a traditional new build. The property includes 144 cycle bays and solar panels on the roof. ## sustainably PALL MALL DEPOSIT A former furniture depository, we refurbished this historic building tosignificantly upgrade the front of house for customers, including a new café, breakout space and meeting rooms, and added 13,000 sq. ft. ofspace across two new floors. LEROY HOUSE We are in the process of refurbishing Leroy House – designed to achieve 77% less embodied carbon than typical new-builds and 24% more ## 77% energy efficient than regulation. Wecan achieve this because we are less embodied carbon retaining the building’s structure, atLeroy House vs. using recycled construction materials a typical new build and natural ventilation, installing state-of-the-art solar panels, and replacing gas boilers with air-source heat pumps. ## 70K sq.ft. Read more, Page 69 added to our portfolio through projects completed during the year Mare Street Studios, Hackney 06 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack OUR PURPOSE IN ACTION CONTINUED ## Giving ## communities ## the space ## to thrive ## Investing in ## communities REGENERATION STORY IN BOW Our redevelopment of Lock Studios in Bow has transformed the site from low-quality light-industrial space into a vibrant mixed-use community. Read more, Page 53 DONATING SPACE This year, we have donated space atThe Record Hall to Sheltersuit, a ## 750+ company making waterproof jackets with detachable sleeping bags for customers reached the homeless. They use entirely through Workspace upcycled materials and the products wellbeing initiatives are made by former refugees who are then trained up to give them confidence to enter the labour market. 07 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack OUR PURPOSE IN ACTION CONTINUED ## Prioritising people: ## Our customers ## The right TRULY FLEXIBLE OFFER As well as flexible lease terms allowing customers to change their space requirements as their business evolves, we provide blank canvas ## space for spaces in inspiring buildings where companies can reflect their own identity and culture. ## customers ENCOURAGING COLLABORATION Utilisation of our centres has steadily increased with the removal of Covid-related restrictions and our centre teams have been welcoming customers back to their offices. With a renewed focus on collaboration, we are adding more breakout space and restarting our networking events to bring customers together when they’re in the office. MEETING CUSTOMER NEEDS Having grown significantly during the pandemic, we helped on-demand grocery delivery company Gorillas create the perfect delivery hub in Kennington Park. With very specific requirements, we created an ## 69% expansive ground floor space for Day-to-day utilisation thegroceries with direct road access ofcentres compared for their e-bikes and desk space for to pre-covid levels the operational team to work. ## 110 Meeting rooms across theportfolio Edinburgh House, Vauxhall 08 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack OUR PURPOSE IN ACTION CONTINUED ## Prioritising people: ## Our employees ## The space EMPLOYEE WELLBEING Workspace is passionate about employee wellbeing. Initiatives rolled out this year have included lunchtime running clubs, regular webinars on ## for every topics such as stress management, financial planning and immune health, and monthly themed social events organised by different teams. ## ambition DEVELOPING SKILLS AND CAREERS CASE STUDY Three years ago, Workspace’s finance team presented job opportunities for sixth formers at Darien’s school. Darien, pictured, took an interest in our finance department and subsequently spenta week on our work experience programme, working across a variety ## Workspace’s of different teams. Three years later, ## visitto our he approached Workspace and landed his first role as Accounts ## schoolopened Payable Clerk. Darien is due to start training for his Association of ## myeyes to career Charted Certified Accountants ## opportunities qualification next year. ## infinance. I’m A DYNAMIC CULTURE ## loving the role We believe that a culture articulated ## sofar – it’s been through a clear set of values creates a common feeling of identity and ## agreat start to direction, ultimately supporting our purpose and bringing our strategy ## myfinance career. to life. This year’s annual survey again showed our four company values continue to resonate with ouremployees. Darien Hidalgo Accounts Payable Clerk, Read more, Page 24 Workspace Kennington Park, Oval 09 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ### CHAIRMAN’S STATEMENT ## Amidst ongoing challenges, ## Workspace has had a great year, ## demonstrating a strong recovery ## following the pandemic. We are ## now well positioned to continue ## to grow the business anddeliver ## value for shareholders. ### Stephen Hubbard ### Chairman 10 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack CHAIRMAN’S STATEMENT CONTINUED | When I reflect on what has made a real | We have welcomed three new Non-Executive | | --- | --- | | difference in driving this performance, it is | Directors to the Board this year, with Duncan | | important to note the work we have done this | Owen joining in July 2021 and both Manju | ## Our brand is permeating | | year to build awareness and understanding of | Malhotra and Nick Mackenzie joining us in | | | --- | --- | --- | --- | | and Workspace is | our brand. We now have a clearer definition of | January 2022. We are already benefiting | £9.88 | | | our offer, which is distinctive in the market and | fromthe wealth of experience and expertise | | | perceived as an exciting, | | | EPRA NTA per share | | | well understood. Our flexible product is aimed | they bring across strategy, customer service | | | | at a vibrant, growing part of the economy | and real estate and look forward to the | | ## forward-looking company – SMEs – and we have the right space in the contribution they will make to the business. ## and the ideal home for right locations to meet their demands. There isstill work to do but our brand is permeating Once again, ESG has been a key agenda ## London’s brightest and Workspace is perceived as an exciting, itemfor the Board this year. We have enjoyed ## 89.6% forward-looking company and the ideal working with Sonal Jain, Workspace’s ## businesses. homefor London’s brightest businesses. newHead of Sustainability, to clarify our Like-for-like occupancy sustainability strategy and agree a stringent set With growth firmly at the centre of our of targets to deliver a positive environmental corporate strategy, this year we set our sights and social impact. Governance is key in making of the pandemic and their subsequent return on accretive acquisitions. The opportunity to sure we deliver on our ambitions, which is why to their offices. I’d like to thank all our It’s been another challenging year for purchase McKay Securities materialised during we have created a dedicated ESG Committee employees for their continued hard work businesses with the continued impact of the year and was a clear fit for our growth to oversee delivery. Our Remuneration andcommitment this year. Covid-19 felt for much of the year and the criteria. The portfolio we have since acquired Committee hashelped introduce a number of prolonged uncertainty that it brought. In offers significant opportunity: London office policies toensure that ESG is a crucial element Workspace has an exciting future ahead of addition, we have seen inflation grow across properties which complement our core of bonus schemes at all levels of the Company. it.This year, we have continued to grow the arange of different industries and market London portfolio; South-East offices which business in line with our clear investment volatility due to the ongoing war between allow us to geographically expand our offer Workspace has a unique ESG story. Our model strategy, recycling capital from the sale of Russia and Ukraine. into surrounding areas; and, finally, non-core is inherently sustainable as we focus on Fitzroy Street into two new acquisitions, assets which will allow us to recycle capital. repurposing buildings, revitalising local areas TheOld Dairy in Shoreditch and Busworks Against this backdrop, Workspace has This willenable us to manage our borrowing and driving positive change for local inIslington. Over time, as we reposition these performed extremely well. We have seen andprovide capital for us to continue to communities. I’m delighted we currently hold assets, they will be great additions to our robust demand for our distinctive offer and investin and develop our portfolio. the highest GRESB rating of five-star and a offer,with The Old Dairy complementing with the lifting of Covid restrictions in early double-A rating from MSCI, placing us in the ourexisting Shoreditch offer at The Frames 2022, our business centres are busier than We have had a full agenda at the Board this top tier of our peer group. Given our scale and Busworks becoming a flagship centre they’ve been in the last two years. year. Our focus has been on supporting the andposition as home to more than 3,000 forsmall businesses in North London. business and senior management team to businesses, the Board believes we can have This is reflected in our full year results, with steer Workspace through the recovery from asignificant impact on mitigating climate With occupancy at pre-Covid levels and net rental income up 6.4% to £86.7m, overall the pandemic. With two Non-Executive change risk as a business, encouraging our continued strong demand for our flexible offer, occupancy at 84.3% and like-for-like Directors retiring this year, substantial effort suppliers and customers to do the same, Workspace is in a fantastic position. Ourresults occupancy reaching 89.6% by the year end. has gone into rebuilding the Board with three andenhancing the social value we bring this year reflect this, but we expect to see the Despite the volatility in the market, property new appointments. On behalf of the Board tocommunities across London. full benefits of our recovery next year as we values have held up well and in recognition and whole Company, I’d like to express my integrate these acquisitions and drive rental ofour improving occupancy and pricing, our thanks to Chris Girling and Damon Russell. It is our people that will help us todeliver this growth across the portfolio. The Board isvery EPRA NTA per share was up 5.3% to £9.88. Both have served nine years on the Board and value and I see first-hand how dedicated they confident that we will generate strong returns we are grateful for the significant insight and are through the regular breakfast sessions I for shareholders over the medium term. support they have provided over that time. host for employees acrossthe portfolio. Once again, I have been thoroughly impressed at how teams have pulled together to support Stephen Hubbard our customers through the ongoing challenges Chairman 11 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ### CHIEF EXECUTIVE OFFICER’S STATEMENT ## This year we have achieved ## what we set out to do: ## bringcustomers back ## to our business centres ## and recover occupancy ## to pre-Covid levels. ### Graham Clemett ### Chief Executive Officer WATCH OUR WORKSPACE 2022 VIDEO https://www.workspace.co.uk/investors 12 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack CHIEF EXECUTIVE OFFICER’S STATEMENT CONTINUED | We have also seen a welcome increase in our | buildings to our flexible offer. A further third | | --- | --- | | property valuation this year, up by 3% on an | are South-East offices and business parks | | underlying basis to £2,402m, with our EPRA | which give us the opportunity over time to | ## Our focus is on future | | net tangible assets per share up by 5% to | roll-out our flexible offer in well-connected | | | --- | --- | --- | --- | | proofing our properties | £9.88. The improvement over the year was | feeder towns to London, although the majority | £46.9m | | | driven by yield movement with the equivalent | are currently well let and high income yielding. | | | for generations to come, | | | Trading profit after interest | | | yield on our like-for-like portfolio coming in | The remaining third is an industrial portfolio | | | | from 5.9% to 5.7%. Estimated rental values | which is again well let but offers limited | | ## breathing new life into | | were down by 1.9% in the year as a whole, | opportunity for us to add value and we are now | | | --- | --- | --- | --- | | older character buildings. | despite pricing and estimated rental values | considering its sale. Overall, with very limited | | | | improving in the second half of the year. | risk we see this as an attractive opportunity to | | | | | deliver significant value from integrating McKay | 21.5p | | | The changes to working practices that we have | onto the Workspace platform, scaling up our | | Total dividend per share been seeing for some time have accelerated in portfolio and its reach, and recycling the the post-Covid environment and I believe are proceeds from the sale of non-core assets. Our focus during the last financial year has here to stay. We benefit hugely from these been on putting the business back on an even changes; flexibility has become mainstream; Alongside these acquisitions we continue to of our business. We prioritise the satisfaction keel after the significant challenges that businesses have realised that the office must deliver attractive new and refurbished space and wellbeing of our employees and our Covid has posed. Our priorities have been to be a place for collaboration and creativity and from our project pipeline. Just south of the customers and work in partnership with them support our customers’ return to their offices demand is broadening out to a wider range of Olympic Park in Stratford, we opened Mirror to drive more sustainable behaviours across and rebuild occupancy towards our target locations in and around London. Employers are Works, our latest mixed-use redevelopment our sites. Over the coming year, we will be 90% level. Despite the ongoing difficulties of also aware of the growing importance of project, which is letting up well in an area rolling out a programme of engagement with operating through Covid-related restrictions creating a culture and environment their previously lacking in flexible office space. local schools and youth organisations to offer for much of the year, I am delighted with the employees want to be a part of and want to InWest London, we completed the major workshops and work experience placements progress the business has made and want to commute to, helping ensure they attract and refurbishment of Pall Mall Deposit, adding for disadvantaged young people with our thank all our teams across Workspace for retain the best talent. With all of this in mind 13,000 sq. ft. of space and significantly customers’ businesses to support the next their outstanding efforts. we are very much in growth mode, both upgrading the rest of the building, including the generation of entrepreneurs. organically from our extensive project pipeline front of house and café. We have more exciting In terms of performance, the strength of Looking ahead we are of course conscious of and from acquisitions. projects to come, with an extensive pipeline of customer demand for space and the the challenging economic environment in the projects delivering some 1.2 million sq. ft. of new improvement in occupancy we have achieved UK, with inflationary pressures to the fore and In terms of acquisitions, we purchased The Old and upgraded space over the next five years. are a testament to the attraction of our concerns over a potential recession. That said, Dairy in Shoreditch and Busworks in Islington | flexible offer and the quality of our space. | | | we have proved many times over the enduring | | --- | --- | --- | --- | | | during the year. Distinctive buildings in | While all our projects have different | | | Weaveraged over 900 enquiries a month and | | | appeal of our flexible offer and our ability to | | | locations where we see strong demand, they | characteristics and asset plans, there is a | | | completed on some 1,500 lettings over the | | | manage through these more challenging | | | are great additions to our portfolio. | common thread tying them together; the | | | year with a total value of £30m. We saw our | | | times. We have a distinctive flexible offer that | sustainability lens through which we operate | like-for-like occupancy level improve from | | | chimes with the market, a scalable operating | | --- | --- | --- | --- | | | More recently in May of this year we completed | our business. Our focus is on future proofing | | | 81.8% to 89.6% and made excellent progress in | | | platform, a great portfolio of properties with a | | | the acquisition of McKay Securities PLC, a | our properties for generations to come, often | | | letting up the space at our recently completed | | | rich pipeline of project activity and the | | | well-regarded commercial property company | breathing new life into older character | | | projects. This has delivered a 6% increase in | | | opportunity to add to this from selective | | | with a portfolio covering both London and the | buildings, ensuring they are climate resilient | | | net rental income and a 21% improvement in | | | acquisitions. With our like-for-like occupancy | | | South-East. The portfolio was valued at £495m | and will have a positive impact on their local | | | trading profit after interest to £46.9m. On the | | | now back at its target level, customer demand | | | at 31 March 2022 and we acquired the company | community and environment. By generating | | | back of these strong trading results and | | | strong and pricing improving we are well- | | | at a 14% discount to its net asset value. A third | hubs of economic activity we aim to create | | | confidence in the outlook the Board has | | | positioned to deliver superior returns to | | | of the portfolio by value are London properties | aflatter, fairer, more sustainable London. | | | recommended a final dividend of 14.5p per | | | shareholders over the coming years. | in good locations, with a number having high share, with the total dividend for the year up vacancy levels due to refurbishment activity Thisfocus on sustainability extends to our Graham Clemett 21% to 21.5p per share. giving us the opportunity to quickly adapt the engagement with people across all aspects Chief Executive Officer 13 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack CASE STUDY ## This is an opportunity ## to deliver significant ## value from integrating ## Acquisition of McKay ## McKay onto our ## platform, scaling up ## In March 2022, we announced a recommended offer our portfolio and its for McKay Securities PLC. The McKay shareholders ## approved the deal in April and, on 6 May 2022, the reach, and recycling acquisition completed. ## the proceeds from the McKay is a business we have followed for some ## sale of non-core assets. time, particularly due to the attraction ofthe London office assets. This property portfolio gives us the opportunity to accelerate our existing growth plans at an attractive price. Graham Clemett Chief Executive Officer There are three parts to the McKay opportunity: 1. A scale London portfolio of well located assets, where we can adopt our model in a cost-effective way, with an opportunity to quickly fill vacancy and drive rental growth – expanding our presence into areas such as Aldgate, Croydon and Wimbledon. 2. With demand broadening out across London and beyond, this deal allows us toconduct a low-risk selective deployment of our model into the South-East office market to meet the demand from SMEs for our distinctive flexible offer. 3. McKay’s portfolio of liquid industrial and logistics assets provides a capital recycling opportunity. This acquisition will enable Workspace to capture more of the strong demand we are seeing from SMEs for high-quality, flexible office space and weare confident it will deliver strong returns forshareholders. Portsoken House, Aldgate 14 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ### OUR BUSINESS MODEL KEY STRENGTHS CUSTOMER PROPOSITION We provide SMEs with blank canvas spaces on flexible terms within inspiring buildings in dynamic London locations. ## Home to Read more, Page 15 ## London’s UNIQUE PORTFOLIO We own a predominantly London-based portfolio of high-quality assets. We actively manage them to drive income and capital growth and expand our ## Brightest footprint through our extensive project pipeline. Read more, Page 16 DELIVERING OUR PURPOSE ## Businesses OPERATING PLATFORM Our proprietary and sophisticated in-house ## Giving businesses platform manages all interactions with customers. It is scalable and provides valuable data and ## thefreedom to grow. insight into SME demand and trends. ## Because we believe that Read more, Page 18 WHAT WE DO ## in the right space, teams We are the leading provider PRUDENT FINANCING ## of flexible office space in can achieve more. We prudently manage our balance sheet and are London, offering inspiring committed to maintaining strong credit metrics spaces to over 3,000 of with LTV below 30%. Our focus is on generating London’s brightest businesses. Through our sustainable business model, we sustainable, long-term income. aim to create a flatter, fairer, more sustainable London. We repurpose iconic buildings, invest Read more, Page 19 inrevitalising communities and prioritise the HOW WE DELIVER VALUE wellbeing of our customers and people. We drive capital appreciation TALENTED PEOPLE and rental growth from our We have a diverse, vibrant and inclusive culture. expertise in urban regeneration Our teams have a broad range of skills, experience in London, active asset and backgrounds and work together to deliver management and a focus excellent customer experience. oncustomer experience. Read more, Page 20 A SUSTAINABLE APPROACH Our aim is to create high-quality, energy-efficient buildings and to have a positive environmental and social impact on our employees, our customers, local businesses and communities. Read more, Page 21 15 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack OUR BUSINESS MODEL CONTINUED Michelle Desmond ## Q&A Centre Manager at Grand ## Customer Q Union, Pall Mall & Shaftesbury ## with a centre ### A ## manager ## proposition | A truly flexible offer | Enhancing the customer journey | Q | What do you find customers | | --- | --- | --- | --- | | As well as flexible lease terms that allow our | We have put significant effort this year into | | value most in your centres? | | customers to expand or contract in line with | refining and simplifying the customer journey | | | | their business needs, we offer blank canvas | and thereby improving the overall experience | A | Flexibility is of course key – a lot of our | | space that businesses can personalise and | for customers. Areas of focus have included | | SME customers are eager to grow and | | fit out to reflect their own brand identity | rolling out inclusive pricing and enhancing the | | expand but also want to know they can | | and culture. | process for new customers moving in and | | easily downsize if needed. The additional | | | existing customers moving within Workspace. | | amenities, like cycle storage and showers, | | The increase in remote working during Covid | We have also provided customer-first training | | are especially important at the moment. | | has forced companies to reflect on what they | to every employee, including Executive | | | | need from their office space and how their | Directors, to ensure customers are always front | | I’ve noticed that our customers really | | space will help them to attract and retain | of mind, no matter the employee’s role. | | value interacting with our centre teams | | talent. With inspiring architecture in fantastic | | | face to face. They like to talk about what | | locations and around 30% of our buildings | | | is going on with their business or how | | dedicated to attractive, well-designed | TOP PRIORITIES WHEN SELECTING | | they spent their weekend. It’s key in | | communal and breakout space, our business | OFFICE SPACE | | building lasting relationships. | centres play an important part in this. Space in which to bring teams together and collaborate Q Are you seeing customers use our ### 1. Value for money | has become more in demand than ever and our | | | space differently during the world | | --- | --- | --- | --- | | offer includes high-spec meeting rooms, secure | | | of hybrid working? | | cycle storage, showers and high-quality cafés. | Location2. | | | | | | A | They often come in three or four times | aweek. This is nothing new – most of ### Flexibility3. them had embraced hybrid working before the pandemic hit. Teams tend to ### Connectivity4. complete their admin from home on Mondays or Fridays, and they travel to the office in the middle of the week to ### Trusted landlord5. come together and collaborate. Our customers like to make the most of ### Quality of amenities6. the nooks and crannies of the building. They often take calls in our phone Workspace Survey of 300 SME decision makers, April 2022. booths and breakout space. 16 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack OUR BUSINESS MODEL CONTINUED Leo Shapland ## Q&A Head of Portfolio ## Q Unique Management ## with senior ### A ## management ## portfolio | Q | What is it about our buildings that has | We own a distinctive portfolio of freehold | Scaling the portfolio | | --- | --- | --- | --- | | | helped us capture customer demand? | assets across London. Our business centres | As well as growing organically, we also take | | | | are typically characterful, relatively low-rise, | advantage of opportunities to scale up | | A | Whilst our flexibility and range of appealing | large buildings of 30,000 sq. ft. or more. | through strategic acquisitions. This year we | | | locations are crucial, the visual appeal | Configuration of the buildings is important | made two individual asset acquisitions, The | | | of our characterful buildings – and the | and we prioritise those that carve up well for | Old Dairy in Shoreditch and Busworks in | | | vibrant communities of SMEs within them | our multi-let strategy. They are well located, | Islington, both unique properties where | | | – really help us stand out in the eyes of | close to major transport links and in vibrant | we can add value as we reposition them | | | our customers. | neighbourhoods. Many of them are iconic | over time. | destinations in their area, providing a focal | | In a competitive market, our customers | point for the local community. | In addition, after the year end, we completed | | --- | --- | --- | --- | | | know it is critical to offer space that is | | the acquisition of McKay Securities, with its | | | inspiring and attractive to their teams, and | Active asset management | portfolio of assets in London and the South- | | | make coming back into the office an | We actively manage the portfolio to drive | East. This accelerates our growth plans, | | | energising experience. | income and capital growth over the long term. | adding high-quality assets in London, an | | | | We target 90% occupancy on our like-for-like | opportunity to test our offer in the South-East | | Q | What growth potential do you see | properties and, as occupancy ramps up, we | office market and light industrial assets which | | | in our portfolio? | are able to increase pricing to deliver rental | we can recycle into investment in our core | | | | growth. We have an extensive pipeline of | business centre offer. We believe that by | | A | We have a fantastic pipeline of | | applying our proven operating model and | refurbishment and redevelopment projects to refurbishment and redevelopment asset management expertise we can add upgrade the assets, expand our footprint and projects within our existing portfolio – significant value to this portfolio over time. deliver rental uplifts, while also enhancing the allowing us to grow both the footprint value of our properties. of our business but also the rental levels we can achieve on our existing assets. The upgrades we deliver ensure our properties meet the ever-evolving needs of our We have excellent customer retention, customers, as well as allowing us to implement and our scale allows us to relocate the latest sustainability features, such as customers while we refurbish and improve secure cycle storage, solar panel systems, our assets. Our phased approach means smart metering and LED lighting. we can constantly enhance returns on our existing assets. Meanwhile, we have an exciting pipeline of acquisition opportunities to further expand our reach. 17 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack OUR BUSINESS MODEL CONTINUED UNIQUE PORTFOLIO CONTINUED ENFIELD OUR PORTFOLIO A scale portfolio of high quality, characterful buildings in dynamic locations spread BARNET across London. WALTHAM Workspace Group portfolio* 2022 2021 HARINGEY FOREST CBRE property REDBRIDGE valuation £2,402m £2,324m Number of locations 57 58 Lettable floorspace (million sq. ft.) 4.0 3.9 Number of lettable units 4,482 4,196 ISLINGTON Rent roll of occupied BRENT units £111.0m £103.9m HACKNEY CAMDEN Average rent per sq. ft. £33.26 £33.90 ISLINGTON SHOREDITCH Overall occupancy 84.3% 77.8% KING’S CROSS STRATFORD BETHNAL GREEN NEWHAM PADDINGTON OLD STREET TOWER HAMLETS FARRINGDON CITY OF EALING CITY OF LONDON WESTMINSTER LONDON WATER LOO BRIDGE CANARY HAMMERSMITH WHARF AND VICTORIA FULHAM EARLS COURT KENSINGTON AND HOUNSLOW CHELSEA KENNINGTON BATTE RSE A GREENWICH SOUTHWARK WANDSWORTH LAMBETH RICHMOND LEWISHAM UPON THAMES Like-for-like Refurbishments Mixed-use redevelopments Acquisition * Excluding McKay portfolio. 18 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack OUR BUSINESS MODEL CONTINUED Lucy Degale ## Q&A Legal Administration Manager ## Operating Q ## with senior ### A ## management ## platform Our proprietary, in-house marketing and Dealing with considerable levels of customer Q How has the new Leasing team structure operating platform enables us to manage a activity as we do requires a particularly improved the business? huge volume of customer activity ourselves, dynamic culture and in-house expertise and from enquiries and viewings through to ispart of what makes Workspace unique. A As a business we have been looking at lettings, facilities management, billing improving the customer journey and and renewals. reduced our touch points throughout the sales process. The strong relationships we have with our | customers and our direct interaction with | | This led to the creation of a separate | | --- | --- | --- | | them provides real-time market intelligence, | | team to deal with our leasing | | alongside regular surveys. This year, we have | | documentation, freeing up our sales | | enhanced our customer insight capabilities | 917 | and renewals teams to improve the | | and appointed a new survey partner. We aim | | quality of service for prospective | Average enquiries per month to introduce new customer touchpoint surveys and existing customers. in the year to 31 March 2022 to generate more regular feedback and gather views from a broader audience of customers. Q How has Workspace Inclusive Billing The data and insight we collect will help drive been received bycustomers? decision-making across the business and ensure our product is constantly adapted in A We ran a successful pilot for new line with customer needs. customers during the year, wrapping ## 598 energy, Wi-Fi costs and rent under one Average viewings per month single monthly payment. We received Our platform is scalable and means we can in the year to 31 March 2022 overwhelmingly positive feedback grow our portfolio without incurring significant operating cost growth. The fromcustomers about how quickly they acquisition of McKay is a good example of this could move in and the simplicity of our as we are confident that we will be able to license model. integrate both their London and South-East assets onto our platform and manage them Inclusive billing has added to our range ## £30m | more efficiently as a result. | | of flexible offerings and is proving | | --- | --- | --- | | | Total value of lettings completed | popular with a lot of our customers. | | This platform is a major competitive strength, | in the year to 31 March 2022 | | built over many years with significant historic data and insight on London’s SME market. 19 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack OUR BUSINESS MODEL CONTINUED Andrew Dodson ## Q&A Group Financial Controller ## Q Prudent ## with senior ### A ## management ## financing Q What have you learned about the Generating long-term, sustainable income business in the first year in the job? We prudently manage our balance sheet to drive the best returns for shareholders. The | A | Just how different Workspace is to most | balance sheet includes a mixture of bank debt, | | | --- | --- | --- | --- | | | traditional office REITs – especially | private placements and a corporate bond, with | £200m | | | regarding our flexible offer and focus | a broad spread of maturities, all unsecured. | | New ESG-linked revolving credit facility oncustomers. The sustainable nature of our business model | My role is always varied and a key part of | means that accessing green finance is a | | | --- | --- | --- | | that is managing the treasury function, | natural move for us. As well as the £300m | | | including building close relationships | Green Bond we raised last year, this year we | | | with financial institutions, monitoring | have put in a place £200m ESG-linked | 23% | | cash flows and covenant performance | revolving credit facility. | | Loan to value at 31 March 2022 – and recently refinancing our bank | facility with a £200m ESG-linked | In March 2022, we announced our | | --- | --- | | revolving credit facility in December | recommended offer to acquire McKay | | 2021. | Securities, an exciting opportunity to | accelerate our growth plans. We are financing Q How are you supporting the growth the acquisition, which completed in May 2022, ## £200m plans of the business? with a mix of cash and shares and have put in Acquisition facility in place to finance place a £200m 18-month acquisition facility. A It’s essential we have adequate debt McKay acquisition We are committed to maintaining our strong | facilities in place to allow us to take | credit metrics with LTV under 30% and will be | | --- | --- | | advantage of opportunities as they arise | actively managing our portfolio to recycle | | such as the recent acquisition of McKay. | capital where appropriate. | We also work closely with our investment and development teams to ensure all capital allocation decisions deliver an appropriate level of return as well as grow the business. Our overarching principle is to maintain a prudent capital structure to limit financial risk and retain the confidence of our shareholders. 20 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack OUR BUSINESS MODEL CONTINUED Ben Saunders ## Q&A Head of People ## Talented Q ## with senior ### A ## management ## people We have a unique and skilled team at These include lunchtime running clubs, regular Q What is Workspace doing to attract Workspace with a valuable mix of people with webinars on topics such as stress andretain a diverse range of talent? long-term experience in the Company and management, financial planning and immune newer members of the team bringing fresh health, and monthly themed social events A We pride ourselves on a strong culture ideas and expertise. We are driven by a organised by different teams. and set of values – and that has been diverse, vibrant and inclusive culture, as well invaluable in retaining our staff, many as a focus on customer service. of whom stay with us for a long time. OUR COMPANY VALUES As we have seen customers come back to our We’re now reinforcing that positive business centres following the pandemic, our culture in our recruitment policy and KNOW YOUR STUFF centre teams have worked hard to ensure the focusing on even greater inclusivity. For We like people who are serious about their environments are welcoming and to offer the example, rather than relying solely on subject; those who are open-minded, high standards of service businesses have recruitment agencies we are recruiting interested and ask questions. come to expect from Workspace. via social media and job boards to pull from a wider talent pool. This year, we SHOW WE CARE We are constantly looking for ways in which also trained all of our hiring managers We value great social skills and those to further upskill our teams and ensure all inunconscious bias. who instinctively build strong employees have access to training and relationships. We think hard about development opportunities. The next phase Q What are you doing to look after how to give back to our communities. of the customer-first training we rolled out this staffwellbeing? year will be a programme of job shadowing FIND A WAY across the business. This will see every A With effects of the pandemic well We look for those who are persistent member of staff, including the Executive team, documented, we saw it as a priority to and have the confidence to move things shadowing a colleague in a different role for ramp up our wellbeing offer. We have forward even when it is difficult. Flexibility half a day to provide new perspectives and helped reinforce our positive culture with and adaptability are key, but so are focus improve understanding of the various roles a programme offun activities – regular and determination. within the business. socials in the office, yoga sessions, running clubs and mental health BE A LITTLE BIT CRAZY Workspace is passionate about employee workshops. We’ve also introduced We depend on the creativity and wellbeing. This was highlighted as an area HealthShield, a portal to claim back imagination of all our people. We like of particular importance in last year’s annual day-to-day costs of looking after people who thrive on fresh thinking, survey and, as a result, we have invested yourself, and an app called Thrive, where who are motivated by possibility. in a number of new initiatives this year. employees can access techniques to manage their mental wellbeing. 21 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack OUR BUSINESS MODEL CONTINUED Sonal Jain ## Q&A Head of Sustainability ## Q A sustainable ## with senior ### A ## management ## approach Q Since joining last year, what has been Workspace has an inherently sustainable We are passionate about the satisfaction and your biggest achievement? business model. wellbeing of our employees to ensure they have what they need to thrive in their roles | A | COP26, hosted in the UK, this year | We repurpose iconic buildings throughout | and deliver operational excellence. | | --- | --- | --- | --- | | | placed welcome pressure on UK | London, breathing new life into them and | | | | businesses to show leadership on | investing to ensure they are climate resilient | | | | climate action. Fortunately, we were one | and future proofed for generations to come. | | | | of the first real estate businesses to set | Our model generates significantly less | | OUR QUARTERLY SURVEY OF SME an ambitious 2030 net zero target back embodied carbon than traditional new builds DECISION MAKERS 300 RESPONDENTS in 2019, aligning our emission reduction and we install the most efficient systems to trajectory to the 1.5°C pathway. I am reduce operational carbon as well. extremely proud of the progress we have made on reducing our emissions, We provide quality flexible space for SMEs in including creating a net zero projects our centres that become hubs of economic ## 85% brief, developing a clear net zero carbon activity, levelling up London’s working map as investment plan and on upskilling all our a result. We aim to be a positive social force in say sustainability is important to their business people on the topic. the boroughs in which we operate, bringing employment into emerging areas and Q What value is sustainability generating prosperity for local businesses, as well as for the business? working with our customers to provide employment-focused support to ## A Our sustainable refurbishment projects disadvantaged young people in London. 72% generate positive financial returns. This have net zero objectives is supported by the fact that our energy We prioritise people. This guides the way we cost savings are getting more material build relationships with our customers, now, and we are accessing green support the next generation of entrepreneurs financing on the back of our strong and look after our employees. We work closely sustainability credentials. For us, with customers to drive more sustainable however, the biggest value add is behaviours in our centres, including through ## 20% customer engagement and loyalty. We the foundation of several centre-specific selected an office provider based have received very positive feedback, environmental groups. on its strong sustainability credentials with nearly two thirds of customers saying they are satisfied that we are socially and environmentally responsible. 22 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack CASE STUDY ## London’s Brightest ## Businesses panel discussion After a hiatus on our customer events programme resulting from the pandemic, we ### Customers loved returned to in-person events with an insightful ### panel discussion at Salisbury House in March. hearing helpful ### business tips from The panel explored how SMEs have thrived ### fellow founders – and through the pandemic and featured two of our ### they welcomed the customers – Jamelia Donaldson, Founder of ### Treasure Tress and Freddie Garland, Founder return to in-person of Freddie’s Flowers – alongside Will Abbott, ### events, which meant our Chief Customer Officer. ### they could talk to the ### The discussion drew on the successes seen by panellists afterwards ### SMEs that have adapted rapidly during the and network. pandemic, highlighting the importance of rethinking channels to market, the need to consider innovative forms of business finance, and the benefits of building close and Stacy Lyden-Sauppe authentic relationships with customers. Events Manager The first in our new series of London’s Brightest Businesses events saw a turnout of more than 60 customers and received glowing feedback – with customers praising ## the advice and helpful business tips they 60 took from the event. Workspace customers attended the in-person event Our next panel discussion is focusing on how SMEs are helping create a more sustainable future. ## 1,000 Customers engaged with since we relaunched in- person events 23 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ### OUR STAKEHOLDERS Brickfields, Hoxton ## Our customers ## We understand that ## our stakeholders HOW WE ENGAGE SIGNIFICANT TOPICS RAISED ## arethe key to From the moment a prospective customer – Multiple points of contact during contacts Workspace, we start to build a the sales/renewals process relationship which is strengthened by our – Desire for smaller units ## oursuccess. Centre Managers once the customer has – Flexibility of space and leases moved in. They gather and address daily – Changing working patterns during feedback, monitoring how our customers’ thepandemic requirements continue to evolve. We also – Aversion to long commutes Our purpose – to give businesses carry out scheduled surveys regularly, – Proclivity for bicycle commutes thefreedom to grow – has created ensuring we are providing quality customer – Covid safety measures aculture that puts our stakeholders service and building management. This mix – Range of location choices, atthe heart of the business. Listening ofinformal and formal feedback also helps especially non-central toour customers, people, investors, inform our growth plans around, for – Super-fast, building-wide Wi-Fi partners and communities, both in instance, refurbishment and acquisitions. – Dog access to buildings person or by collecting real-time data, – Desire for more meeting rooms directly informs the way we make – Community events decisions on a day-to-day basis. HOW THE BOARD ENGAGED ACTIVITY IN THE YEAR – Reviewed and approved changes to the – New streamlined leasing process and team, way our Leasing team is structured to help improving the customer journey and identify service improvement areas reducing points of contact – Discussed plans to meet our net zero – Customer-first training for all Workspace teams carbon targets – Sustainability focus groups – Approved advertising campaigns – Broken many of our floorplans into smaller units to account for this demand – Delivered 70,000 sq. ft. of new and upgraded space – Kept centres open during lockdowns – Purchased 2 new properties – Introduced policy welcoming dogs into our space (and a corresponding social media | SECTION 172(1) STATEMENT | | campaign called ‘Dogs of Workspace’) | | --- | --- | --- | | Our Section 172(1) Statement sets out | – 12 new meeting rooms | | | how the Board has had regard to its | – Added bicycle storage | | | stakeholders and other section 172(1) | – Relaunched in-person events programme, | | | matters during the year. | | including London’s Brightest Businesses | panel discussion Section 172(1) Statement, Page 113 24 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack OUR STAKEHOLDERS CONTINUED ## Our people Our investors | HOW WE ENGAGE | | HOW WE ENGAGE | ACTIVITY IN THE YEAR | | | --- | --- | --- | --- | --- | | We prioritise the satisfaction and wellbeing of | | We maintain an active dialogue with | – Regular engagement with investors andsell- | | | our employees and embrace diversity as a core | 85% | shareholders through a rolling programme | | side analysts | | value. For the past two years, employee survey | | of investor roadshows around our financial | – Mix of virtual and in-person presentations | | of staff completed feedback has shown that teams strongly believe results and corporate activity, as well as – Participation in virtual investor conferences our employee in our culture and clear set of values. We monitor conferences and industry events. In addition, – Ad hoc investor calls and meetings engagement survey employee engagement and satisfaction through the CEO, CFO and investor relations team – Capital markets event on brand yearly employee surveys, while our Chairman have regular ad hoc meetings and calls andmarketing carries out quarterly engagement sessions with with existing and potential shareholders. – AGM held at Edinburgh House, Kennington staff – a confidential forum for candid feedback. A monthly investor relations report keeps Up-to-the-minute intranet articles and monthly the Executive team and Board up to date newsletters, called The Wrap, keep staff informed with significant investor developments of company news. We host regular town hall and ensures they are considered in their events, called The Wrap Live, to provide updates decision-making. and answer questions from staff. HOW THE BOARD ENGAGED SIGNIFICANT TOPICS RAISED HOW THE BOARD ENGAGED – Our Chairman, Stephen Hubbard, – Confidence in Workspace’s success – Proactively reached out to shareholders ## 264 hosted four employee engagement – Enjoyment in working at Workspace todiscuss the McKay acquisition sessions with a mix of centre and head – Values match our culture – Attended the AGM institutional office staff providing feedback – Teams stayed connected during the pandemic – Reviewed and discussed the monthly investors engaged – Held a panel discussion with Rosie – Rewards and recognition IRreports with during the year Shapland, Lesley-Ann Nash and Manju – Career progression and training – Approved results statements Malhotra for International Women’s Day – Flexible working – Approved payment of the interim – Reviewed and discussed our new hybrid – Leadership communications andfull-year dividend working policy – Desire for more company updates – Featured welcome interviews with – Collaboration three new Non-Executive Directors in The Wrap newsletter ACTIVITY IN THE YEAR SIGNIFICANT TOPICS RAISED – Six Wrap Live town hall events, featuring – Financial and trading performance speakers from across the business – Trajectory of our recovery following the pandemic – Awarded Workspace Winners awards and – Customer engagement and sentiment hosted celebratory dinner – Balance sheet management – Wellbeing added to Charity Committee remit – Acquisitions and disposals during the year – Wellbeing programme, including webinars, – Our sustainability approach support app and benefits – Environmental and social impact – Brand proposition and purpose training – Brand and marketing capability – Introduced hybrid working policy – Employee wellbeing – Rationale for McKay acquisition 25 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack OUR STAKEHOLDERS CONTINUED Refurbishment works ## Our partners ## & suppliers HOW WE ENGAGE SIGNIFICANT TOPICS RAISED We work closely with our partners and – Recycling and waste practices ## suppliers, aligning their values to our ethical – Sustainable café management ESG and sustainability standards, to ensure the – The London Living Wage Introduced ESG most productive relationship. This applies to – Urban regeneration requirements to our wide range of partners in Government, – Compliance with building regulations theprocurement local communities and building development. andcommunity plans process for all We also provide direct feedback from – Access for all user groups suppliers customers to suppliers, meaning they can – On-site social distancing constantly improve their products and services. | HOW THE BOARD ENGAGED | | ACTIVITY IN THE YEAR | | | --- | --- | --- | --- | | – Discussed updates on our commitment to | | – Introduced an ESG questionnaire to our | | | | bring all the Group’s third-party contractors | | most material suppliers to understand their | | | onto the Living Wage by April 2022 | | sustainability commitments | | – Reviewed and discussed updates on the | | – Questionnaire themes covered energy and | | | | Group’s key suppliers | | water consumption targets, climate risk | management, Living Wage, diversity and inclusion – Recycling roadshows – Ensured suppliers and partners working on Workspace premises pay the Real London Living Wage 26 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack OUR STAKEHOLDERS CONTINUED ## Our communities The environment | HOW WE ENGAGE | HOW WE ENGAGE | | --- | --- | | We are committed to supporting the local | There is a clear climate emergency and we | | communities in which we operate by always | recognise that our industry significantly | | putting people first. As well as bringing | contributes to the global carbon footprint, | | employment into emerging areas, we go | which is why we have committed to becoming | | outinto our local communities to offer | a net zero carbon business by 2030. Our focus | | employment-focused support to | on refurbishment – rather than demolishing | | disadvantaged young people. We support the | buildings – means we can reduce embodied | | next generation of entrepreneurs by offering | carbon of our buildings significantly. As a result, | | CV workshops, interview practice and work | Workspace buildings are 40–70% more efficient | | experience placements. | compared to standard new builds. Our Head | ofSustainability is an advisory to UN High LevelClimate Champions andhas set out an HOW THE BOARD ENGAGED ambitious programme for Workspace to – Our Chairman, Stephen Hubbard, ensurea timely transition to net zero carbon. ## 540 2030 took staff feedback on our community engagement and charity work during volunteering hours, Committed to HOW THE BOARD ENGAGED hisemployee breakfast sessions supporting a range become a net zero – Reviewed and approved the ESG-linked – Discussed updates on the work of the of SHP projects and carbon business revolving credit facility Group’s Charity, Wellbeing and Social local food banks by2030 – Received and discussed a presentation Committee from our Head of Sustainability on our sustainability strategy and net zero pathway | SIGNIFICANT TOPICS RAISED | | ACTIVITY IN THE YEAR | | SIGNIFICANT TOPICS RAISED | ACTIVITY IN THE YEAR | | | --- | --- | --- | --- | --- | --- | --- | | – How to advocate Single Homeless Project | | – Raised £100,000 for Single Homeless project | | – Delivering our net zero carbon commitment | – Procured 100% of electricity from | | | | to staff | – Carried out 540 volunteering hours | | – Reducing properties’ whole-life impact | | renewables | | – How to provide assistance to young, | | | supporting Single Homeless Project, | – Greater energy management for customers | – Agreed ESG-linked revolving credit facility | | | | disadvantaged people during lockdowns | | foodbanks and other causes | – Green finance | – Added 76 bicycle storage facilities to our | | | – Relaunch and generate interest in fundraising | | – Workspace Walk fundraiser, involving 70 staff | | – Creating energy-efficient buildings | | properties | | | activities after a year of lockdowns | – Launched a series of summer fundraising | | – Sustainable transport | – Reduced our scope 1 and 2 emissions | | | – Addressing local questions and concerns | | | activities for staff, including sky diving | – Training for staff | | by20% | | | around building projects | – Created internal video communications to help | | | – Designed forthcoming building Leroy House | | | | | | drum up support for Single Homeless Project | | | to achieve 77% less embodied carbon than | | | | – Hosted community consultation events for | | | | typical new builds | | | | | local residents and businesses around | | – Rolled out Optergy energy management | | | | | | development projects | | | platform across the majority of our portfolio | | | | – Ran food bank collections across our | | | – Achieved recycling rate of 75% | | | | | | properties, particularly around school holidays | | – Rolled out sustainability training for all staff | | | | | – Set up taskforce to relaunch the InspiresMe | | | – Installed 12 Electric Vehicle charging points | | work experience programme 27 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack CASE STUDY ## The Wrap Live The pandemic saw the introduction of frequent town hall updates broadcast virtually ### A key part of our to the entire business, including a chance for ### staff to ask questions anonymously. In 2022, company culture this popular format was transformed into an ### iscreating an open in-person series of events, with a live ### forum. The Wrap Live audience, while also continuing to virtually ### events put a face to stream the session. ### each team and allow The new iteration is called The Wrap Live, ### everyone across the echoing the monthly Wrap staff newsletter. ### company to ask Itprovides a platform for teams from across ### the whole of Workspace to shine a spotlight questions and ### on their roles and projects. shareideas. The first event was hosted at Edinburgh House and served as an introduction to our new Leasing team, bringing sales, renewals Duncan Pelham and legal admin under one umbrella, and Senior Corporate how it has been designed to enhance the Communication Manager customer experience. A variety of questions were asked in the room and online from those watching remotely. The next session is due to take place in early ## summer with the Development team outlining 81% our exciting net zero carbon refurbishment of the company logged in atLeroy House. and watched The Wrap Live Lucy Degale, our Legal Admin Manager, at The Wrap Live 28 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ### OUR RESPONSE TO MARKET TRENDS ## As the debate onthe role of the physical ## 1 ## With 35 years ## office continues, many companies have ## ofexperience, embraced hybrid working patterns ## wecontinue to map 36% of working adults continue to work from 1 home at least one day per week . At the same time, people are returning to offices in their ## ouroffer against key greatest numbers since the start of the pandemic, as mandates from employers and the easing of restrictions draw staff back into ## market trends and work – with London occupancy rates hitting 2 42% in March 2022 . Meanwhile, a third of employees working from home are worried ## evolving customer about the detrimental effects of solitary 3 working on mental health , further prompting ## requirements. a return to the office. WHAT THIS MEANS FOR WORKSPACE Hybrid working is nothing new for Workspace’s customers, many of whom already opted to work from the office three or four days a week pre pandemic. In 2022, we have seen this trend resume and utilisation of our space has returned to 69% of pre-Covid levels, as customers are keen to meet and collaborate in person. Our customer base largely comprises small businesses who understand the importance of building company culture and providing the best development and wellbeing for their employees. ## 86% of UK employees would like to continue working remotely at least once a week 1. Homeworking and spending during the pandemic, ONS, January 2022. 2. Freespace Report, March 2022. 3. Aetna International, Global Employee Health Study Data, November 2020. Dock & Bay, The Print Rooms 4. ‘Should We Ditch the Office’ survey, Hubble HQ, January 2022. 29 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack OUR RESPONSE TO MARKET TRENDS CONTINUED | | Economic uncertainty has been | | A competitive hiring market means | | --- | --- | --- | --- | | 2 | | 3 | | | | exacerbated by a range of ongoing | | employers must invest in their space | | | domestic and global issues | | tohelp with attraction and retention | | UK economic growth is expected to halve | | ‘The Great Resignation’ (where employees | | | | --- | --- | --- | --- | --- | | in2022 amid inflation, tax rises and global | | voluntarily resigned from their jobs en masse, | | | | | 5 | starting in 2021) has triggered record numbers | | | | shocks to the market | – compounded by | | | | | | | | 6 | 40% | | ongoing disruption caused by the pandemic | | of job vacancies | . This means companies | | | and the energy crisis. However, our London’s | | haveto work harder than ever to win over | | increase in | | Brightest Businesses research shows that the | | candidates and hold on to employees. At the | | number of job | | capital’s small business community has | | same time, employers are keen to get teams | | vacancies between | | remained resilient, many taking advantage | | back into the office so that they can | | November 2021 | 7 | of the opportunities presented by a shift | collaborate, bounce ideas off each other and | andJanuary 2022 | | --- | --- | --- | | in the market (for example, the acceleration | support and train new joiners. It is therefore | | | of e-commerce). | crucial for employers to provide an office | | environment that competes with people’s homes for comfort and convenience. | WHAT THIS MEANS FOR WORKSPACE | WHAT THIS MEANS FOR WORKSPACE | | --- | --- | | Workspace itself has a strong balance sheet | A key component to our offer is enabling | | and is well positioned to weather economic | businesses to personalise their space and | | volatility. Prompted by economic uncertainty | reflect their brand identity and culture – | | and shifting working patterns, we have | something we have seen customers | | experienced record demand as increasing | increasingly embrace over the past year. | | numbers of businesses seek out our distinctive | AtParma House, for example, our customer | | flexible offer. In a clear sign of our confidence, | Treasure Tress erected feature walls in their | | we accelerated our growth plans by | signature brand colours and created expansive | | completing our purchase of McKay Securities | communal breakouts, while Afrocenchix fitted | | PLC and its 31properties in May 2022 – in turn, | their space with separate ‘relaxation’ and | | strengthening our financial resilience. | silent ‘deep-working’ areas. | Ownership of our buildings means we havecomplete control over the customer experience and can continuously evolve ## 127 ourproduct. We directly interact with our average lettings per month in the customers and take the time to understand year ended March 2022 their expectations, as well as analysing data to understand how our buildings are used. This feedback informs improvement through our continuous pipeline of refurbishments and 5. World Economic Outlook Update, IMF, January 2022. redevelopments, adding in-demand amenities China Works, Vauxhall Kennington Park, Oval 6. Labour market overview, ONS, February 2022. such high-quality cafés, bike storage, roof 7. Labour market overview, ONS, February 2022. terraces and meeting rooms. 30 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack OUR RESPONSE TO MARKET TRENDS CONTINUED | | Demand for flexible space is spreading | | Net zero carbon commitments | | --- | --- | --- | --- | | 4 | | 5 | | | | across less established London areas and | | are now mainstream | ## beyond, as customers shun long commutes In a Hubble survey, 79% of respondents said The built environment contributes around 40% 9 | that the greatest benefit of working from | | of the UK’s total carbon footprint | . COP26 | | --- | --- | --- | --- | | | 8 | shone a welcome spotlight on the urgent need | | | home is avoiding the commute | . Businesses | | | ## 77% | are looking at ways to reduce their employees’ | for the building sector to drive its emissions | | | | --- | --- | --- | --- | | commute times, searching for locations | down, and subsequently the top 20% of the | | Our refurbishments | | beyond traditional central London office | world’s largest real estate firms made a net | | are up to 77% more | | destinations. At Workspace, we have seen a | zero commitment, encompassing more than | | energy efficient | | | | 10 | compared to | | marked increase in enquiries for space in | £1.2 trillion of assets under management | . | | | alllocations. | Meanwhile, a significant number of the UK’s | | standard new builds | SMEs also pledged to take part in the UN’s Race to Zero campaign, following COP26. | WHAT THIS MEANS FOR WORKSPACE | WHAT THIS MEANS FOR WORKSPACE | | --- | --- | | We have some 60 London locations spread | Our Head of Sustainability, Sonal Jain, is an | | across the capital: well-located, characterful | adviser for the UN’s Climate Champions built | | buildings that are destinations in their own | environment team and has set ambitious 2030 | | right. Throughout 2022 so far, we have seen | net zero targets for Workspace. | increasing levels of occupancy – reaching 89.6% in March. We are actively investing across our standing portfolio and have reduced our scope 1 and 2 | We also continue to invest in growing this | emissions by 20% since 2019/20. We procure | | --- | --- | | footprint and the range of options for existing | 100% of electricity from renewables and are | | and prospective customers, having purchased | leading with a net zero brief across our | | McKay Securities PLC in May 2022. With its | development activities. Our focus on | | extensive portfolio of properties, the | refurbishment – rather than demolishing | | acquisition expands our reach in the capital | buildings – means we are able to reduce | | and beyond – to a number of well-connected | embodied carbon of our buildings | | locations in the South-East such as Reading, | significantly, making our refurbishments up | | Woking and Redhill. | to77% more efficient compared to standard | new builds. ## 31 new properties added to our portfolio as part 8. Hubble HQ’s ‘Should We Ditch the Office’ survey, of the McKay acquisition January2022. inMay 2022 9. UK Green Building Council research, November 2021. Our advertising campaign on bus sides Workspace’s electric taxi 10. Race To Zero website, October 2021. 31 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack CASE STUDY ## Quell Tech Quell Tech, a start-up gamifying at-home workouts, joined the Workspace community ### Our team has atthe beginning of the pandemic in 2020. ### The idea of Quell’s VR platform is that players expanded really attach a harness-like controller to their torso ### quickly over the and arms to navigate the gaming world, ### pasttwo years. helping them punch and move around in the ### Workspace’s game. The workout can then be customised ### with resistance bands to increase the intensity flexibility has been of the exercise. ### aperfect fit for us, ### allowing us to take Quell calls itself “Peloton meets gaming” and ### charges a monthly fee to keep content fresh. bigger space as and ### when we need it. So far, the company has raised £2.4m over thecourse of two funding rounds. With interest in the budding company growing, they have continued to expand their team over Lorenzo Spreafico the past two years, increasing their space Quell’s COO and requirements at our Kennington Park building Co-Founder in Oval. Quell started with a small office in 2020 and has since tripled the size of its space, across two separate units. ## X3 Quell has tripled the size ofits space in two years Quell Tech, Kennington Park 32 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ### OUR STRATEGY ## Driving customer- ## led growth… ## Creating value Our vision is to be the home to London’s brightest businesses and our growth plans are dependent on the strong SME demand for our flexible offer and the customer experience ## forour customers, we deliver. Read more, Page 33 ## our shareholders, ## employees and ## …and delivering ## our communities. ## operational excellence… Our in-house platform means we have a uniquely scalable business. We actively manage our portfolio to deliver returns through like-for-like Our strategy is driven by our purpose growth, projects, acquisitions and disposals, KEY PERFORMANCE INDICATORS Our strategy is clear and directly while maintaining a prudent approach There are clear links between our KPIs linked to our purpose; to give to financing. and our strategy. Regular measurement businesses the freedom to grow. of our KPIs ensures we maintain Itprioritises our customers and the discipline in strategic decisions. experience we provide them to support Read more, Page 34 long-term advocacy and demand. Read more, Page 54 Our operational platform is a critical part of our strategy and gives us a unique competitive advantage, while our focus on sustainability future PRINCIPAL RISKS proofs our business. AND UNCERTAINTIES ## …whilst always Risk management is an integral part of The three pillars of our strategy set out ## all our activities. We focus on key risks being sustainable. on the right and on the following pages that could impact the achievement of keep us focused on creating long-term We view every aspect of our business through our strategic goals. value for all our stakeholders. a sustainability lens. Our aim is to create a climate-resilient portfolio, to continue to Read more, Page 59 prioritise and look after our people and to have a positive impact on our local communities. Read more, Page 35 33 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack OUR STRATEGY CONTINUED ## Driving customer- ## led growth... CEMENT OUR POSITION CONTINUALLY ENHANCE LEADING IN LONDON’S AS HOME TO LONDON’S CUSTOMER EXPERIENCE FLEXIBLE OFFICE MARKET BRIGHTEST BUSINESSES KEY PRIORITIES KEY PRIORITIES KEY PRIORITIES – Reinforce our differentiated customer – Continue to improve our flexible offer – Grow our portfolio of historic and proposition to capture demand and grow and service to retain customers and character properties in the right locations market share support occupancy – Raise our profile amongst target – Focus on customer service, with centre customers and stakeholders teams creating vibrant communities 2021/22 KEY ACHIEVEMENTS 2021/22 KEY ACHIEVEMENTS 2021/22 KEY ACHIEVEMENTS | – Launched brand campaign to raise | | – Mapped out the customer journey, | | – Launched brand new business centre, | | | --- | --- | --- | --- | --- | --- | | | awareness of our differentiated offer, | | highlighting areas for improvement | | Mirror Works in Stratford | | | including digital and out-of-home | – Customer-first training rolled out to every | | – Completed the refurbishments of Pall | | | | advertising | | Workspace employee through the year | | Mall Deposit and Barley Mow Centre in | | – Like-for-like occupancy improved to | | | | | West London | | | nearly 90% at the year end | | | – Acquired two new properties, The Old | | | – 11,000 enquiries and 7,000 viewings in | | | | | Dairy in Shoreditch and Busworks in | RELEVANT KPIS FINANCIAL PERFORMANCE the year Islington – £30m of lettings agreed ## 1, 5, 6 NON-FINANCIAL PERFORMANCE 2022/23 AIMS 2022/23 AIMS 2022/23 AIMS ## 1, 2, 3, 4, 5 | | – Continue to invest in our brand to | | – Refine the customer journey | | – Drive occupancy across our new | | | --- | --- | --- | --- | --- | --- | --- | | | | enhance our visibility and profile | – Ongoing improvement of cafés across | | | refurbishments and acquisitions | | Page 54 | – Expand our customer events programme | | | our portfolio, including our own in-house | – Integration of McKay | | coffee shops at a growing number of properties RELEVANT PRINCIPAL RISKS AND UNCERTAINTIES ## 1, 2, 3, 4, 7 Page 59 34 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack OUR STRATEGY CONTINUED ## …and delivering ## operational excellence… ACTIVE PORTFOLIO EFFICIENT, SCALABLE PRUDENT FINANCING AND MANAGEMENT OPERATING PLATFORM STRICT INVESTMENT CRITERIA KEY PRIORITIES KEY PRIORITIES KEY PRIORITIES – Continue to execute our rolling pipeline – In-house capability and expertise drives – Maintain strong balance sheet of refurbishment and redevelopment income growth – Strict focus on returns projects – Focus on innovation and technology – Disciplined approach to gearing – Maintain our deep knowledge of the – Ability to scale without significant cost London market to drive acquisition growth anddisposal decisions 2021/22 KEY ACHIEVEMENTS 2021/22 KEY ACHIEVEMENTS 2021/22 KEY ACHIEVEMENTS | – Initiated refurbishment of Leroy House | | – New Leasing team structure, streamlining | | – Refinancing the ESG-linked Revolving | | | --- | --- | --- | --- | --- | --- | | | inIslington | | the customer experience | | Credit Facility | | – Refurbished 70,000 sq. ft. of space | | – Completed trial of inclusive billing at | | – Putting in place an acquisition facility for | | | | across the portfolio, including Mirror | | 30properties, which was well received | | McKay | | | Works in Stratford, and The Light Bulb | | bycustomers | – Reporting on our allocation of assets | | RELEVANT KPIS and Pall Mall inWest London under our Green Finance Framework FINANCIAL PERFORMANCE – Sale of Fitzroy Street in Fitzrovia and ## 1, 2, 3, 4, 5, Highway Business Park in Limehouse ## 6, 7, 8, 9 2022/23 AIMS 2022/23 AIMS 2022/23 AIMS NON-FINANCIAL PERFORMANCE – Obtain planning consent for Havelock – Roll out inclusive billing across the – Restructure McKay debt Terrace in Battersea and Morie Street portfolio – Improve credit metrics ## 1, 2, 3, 4, 5 | | | Studios in Wandsworth | – Upgrade Wi-Fi across the portfolio to | | – Recycle capital to reduce gearing | | --- | --- | --- | --- | --- | --- | | | – Progress refurbishments pipeline, | | | enhance customer connectivity | | | Page 54 | | including Leroy House in Islington, | – Optimise digital marketing capability | | | Salisbury House in Moorgate, Kennington Park in Oval and Riverside in Wandsworth – Maximise value of McKay portfolio RELEVANT PRINCIPAL RISKS AND UNCERTAINTIES ## 1, 5, 7 Page 59 35 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack OUR STRATEGY CONTINUED ## …whilst always ## being sustainable. DELIVERING A CLIMATE- LOOKING AFTER SUPPORTING RESILIENT PORTFOLIO OUR PEOPLE OUR COMMUNITIES KEY PRIORITIES KEY PRIORITIES KEY PRIORITIES – Drive energy efficiency across the – Roll out sustainability training to all – Support our charity partner Single portfolio and reduce GHG emissions in employees Homeless Project (SHP) line with our net zero carbon pathway – Support career growth and professional – Offer employees three paid volunteering – Assess climate risk across the portfolio and development of employees days create strategy to mitigate material risk – Enhance the wellbeing of our employees – Refresh our InspiresMe community – Drive resource efficiency and improve and customers impact programme to support waste management across our portfolio – Become Living Wage compliant for employment skills in our buildings’ local – Achieve high environmental standards employees and contractors areas across all development and – Map sustainability risk across the supply – Create a social impact framework to refurbishment activities chain assess social value generated through – Enhance customer engagement on our business operations and portfolio sustainability 2021/22 KEY ACHIEVEMENTS 2021/22 KEY ACHIEVEMENTS 2021/22 KEY ACHIEVEMENTS RELEVANT KPIS – Achieved 5% reduction in scope 1 – 100% of staff trained on sustainability – £100K raised for SHP, reaching 550 FINANCIAL PERFORMANCE | | | emissions and 27% reduction in scope 2 | – 17 people sponsored for professional | | | beneficiaries | | --- | --- | --- | --- | --- | --- | --- | | 7, 8 | | emissions from a 2019/20 baseline | | accreditation courses, worth £65K | – 540 volunteering hours delivered | | | | – On track to achieve 40–70% reduction in | | – 48 wellbeing initiatives organised, | | – InspiresMe taskforce established to | | NON-FINANCIAL PERFORMANCE embodied carbon of current projects reaching over 900 people deliver the pilot in one of our centres – 3 projects delivered with BREEAM and – Achieved Living Wage accreditation – Social impact framework created and ## 6 | | | EPC A/B | – 2/3rd of customers agree we are a | | piloted on Lock Studios | | --- | --- | --- | --- | --- | --- | | | – 100% renewable electricity procured | | | socially & environmentally responsible | | | Pages 56 to 58 | – Achieved 75% recycling rate | | | business | | – Assessed climate risk across the portfolio and identified mitigation actions RELEVANT PRINCIPAL RISKS AND UNCERTAINTIES 2022/23 AIMS 2022/23 AIMS 2022/23 AIMS – Drive further improvement in energy – Enhance the wellbeing programme – Enhance the impact of our work with SHP ## 3, 7, 8, 9 efficiency across the portfolio – Focus on widening access to profession – Roll out InspiresMe across select centres – Decarbonise heat across the portfolio – Greater adoption of sustainability KPIs – Use social impact framework to monitor – Innovate to reduce embodied carbon across all teams’ objectives and enhance social value generated Pages 63 to 66 – Enhance biodiversity of development and – Encourage sustainability improvements Note: A full list of our sustainability refurbishment projects within the supply chain targets and performance is covered onpages 35 to 53 36 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ### SUSTAINABILITY ## As home to London’s brightest ## businesses, as custodians ## of some of the most iconic ## buildings in London and as ## a responsible employer, we ## fully believe that sustainability ## is crucial to the long-term ## success of Workspace. ### Sonal Jain ### Head of Sustainability 37 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack SUSTAINABILITY CONTINUED RATINGS & MEMBERSHIPS RATINGS ## Highlights ## 87 ## 5 Star 20% Real Estate Assessment Score | GRESB 5 Star score, | Scope 1 and 2 emissions | | | --- | --- | --- | | highest rating achievable | reduced by 20% since | | | | 2019/20 | 93 | Development Assessment Score ## A Public Disclosure Score ## 100% ## of employees trained on A- sustainability and supplier engagement leader ## GOLD EPRA Sustainability Best Practice Recommendations Award ## AA ## £100K 66% 28% MSCI ESG rating | raised for Single Homeless | of customers agree that | of portfolio rated EPC A/B | | --- | --- | --- | | Project, supporting 550 | Workspace is a socially and | | | young and vulnerable people | environmentally responsible | | ## Low Risk business Sustainalytics ESG Risk Rating ## 18 ## 3.0 buildings are BREEAM certified absolute rating out of 5 MEMBERSHIPS | 48 | 540 | £200m | £11.05 | | --- | --- | --- | --- | | wellbeing-related events | volunteering hours delivered | Completed a £200m | London Living Wage hourly | | organised, reaching over | by employees | revolving credit facility | rate paid to our employees | | 900 people | | agreement, linking the margin | and contractors | to our sustainability targets 38 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack SUSTAINABILITY CONTINUED ## Our approach GOVERNANCE The highest level of responsibility for our ## Delivering a climate- sustainability strategy lies with our Chief Executive Officer and together with the rest ## resilient portfolio of the Workspace Board, the group acts as a guardian of the strategy. In addition, an ESG Board Committee has been established ## We have a fully embedded 1 Page 40 to provide added focus and drive further integration across business decisions. The ## approach to sustainability, SDGs Board is supported by the Executive team ## covering both our portfolio in setting and driving our sustainability strategy. At an operational level, we have ## and all business-wide an environmental sustainability and a social sustainability committee, comprising senior ## strategic decisions. representatives from across the business departments. The two committees are responsible for operationalising the delivery of our strategy. Progress is reported to ## Looking after our people the Board and Executive team monthly. Through our three-pillar sustainability strategy – We also have a number of sustainability Delivering a climate-resilient portfolio, Looking after champions across the business who our people, Supporting our communities, we ensure Page 47 help mobilise ground-up support. we are continually improving our environmental and social impact, whilst adding value to all our ## 2 SDGs stakeholders. We have also mapped our strategy MATERIALITY against the UN Sustainable Development Goals (SDGs) to ensure our objectives and targets are Our sustainability strategy is driven by the key aligned with global ambitions(see page 39) environmental and social issues that are most material to the business. Each year we revisit our material issues to ensure we are capturing the themes that are most relevant to our business and our value chain. Focusing on our material issues also helps us prioritise efforts where we can have maximum impact. Whilst ## Supporting our communities energy, carbon and waste continue to be material for the business, we are also actively working towards improving our impact in a number of other areas such as urban greenery, Page 51 wellbeing, prosperous neighbourhoods, ## 3 employment and skills. SDGs 39 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack SUSTAINABILITY CONTINUED AFFORDABLE SUSTAINABLE CLIMATE GENDER QUALITY AND CLEAN CITIES AND ACTION EQUALITY EDUCATION ENERGY COMMUNITIES STAKEHOLDERS  STAKEHOLDERS  STAKEHOLDERS  STAKEHOLDERS  STAKEHOLDERS Our investment in on-site As custodian of some The delivery of our 2030 net Our people practices actively Through our InspiresMe ## Alignment renewable energy through ofLondon’s most iconic zero carbon commitment support gender equality, programme, we work the installation of roof- buildings, we work to reduce ensures we are decarbonising including the use of gender- alongside our customers ## to UN SDGs | | mounted solar panels across | the environmental impact of | our business swiftly and thus | neutral language in all our | toprovide inspiration, | | --- | --- | --- | --- | --- | --- | | Through our sustainability | our portfolio ensures we are | London’s built environment | playing our part in limiting | policies and recruitment | knowledge, support and | | strategy we are helping | generating clean power. We | and build resilience for the | global warming to1.5°C. | material. All our people have | experience to individuals | | address the following UN | also source 100% of our | long term. This is delivered | | been trained on unconscious | within our communities | | Sustainable Development | electricity from renewable | through sustainable design, | | bias and we strive to create | whoare most at risk of | | Goals (SDGs) | sources, through our REGO | construction and operations | | atruly inclusive work | NEET(Not in Education, | | | certified green contract. | of all our buildings. | | environment. We work | Employment or Training) | | | | | | hardto identify and address | andhelp them to reach | | | | | | gaps within existing | theirfull potential. | workplace policies, as well asoffering professional development opportunities toall our employees. KEY TO STAKEHOLDERS INDUSTRY, RESPONSIBLE DECENT WORK GOOD HEALTH REDUCED Our customers INNOVATION AND CONSUMPTION AND ECONOMIC AND WELL-BEING INEQUALITY Our people INFRASTRUCTURE AND PRODUCTION GROWTH Our investors Our partners and suppliers STAKEHOLDERS  STAKEHOLDERS  STAKEHOLDERS  STAKEHOLDERS  STAKEHOLDERS Our communities The environment | Through our investment | Through investment in | Provision of safe and healthy | We provide quality flexible | Our InspiresMe programme | | --- | --- | --- | --- | --- | | inclean technology and | energyefficient equipment | workplaces for our employees | space for SMEs across | aims to tackle youth | | materials we are reducing | and effective management, | and customers is paramount. | London. Our model also | unemployment and the | | ourenvironmental impact | we ensure our consumption | We do this by ensuring health | creates hubs of economic | ethnicity gap by building | | and also driving innovation | of energy is optimised. We | and wellbeing considerations | activity that benefit entire | relationships with schools | | inthe industry. | also work hard to reduce | are fully incorporated into | communities through | and youth organisations | | | waste in operations and | ourbuilding design. We also | employment-led regeneration | across London to offer work | | | construction, aiming to | run an extensive wellbeing | of the area. We are also | experience placements, | | | divert100% from landfill. | support programme | anaccredited Living Wage | career talks, CVworkshops | | | | forallour employees | Employer, ensuring that | and interview practices. | | | | andcustomers. | allour employees and | | contractors are paid at RealLondon Living Wage. 40 Workspace Group PLC Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents SUSTAINABILITY CONTINUED # Delivering a climate-resilient portfolio Climate change mitigation and resilience is a cornerstone of our sustainability strategy. Through minimising environmental impact and transitioning to net zero carbon by 2030, we are future proofing our business and building resilience for the long term. # Achieving a net zero carbon portfolio In 2019 we made a commitment to achieving net zero carbon by 2030. To ensure our net zero goal is robust and in line with a 1.5°C future, our emissions reduction trajectory is aligned with our approved Science-Based Targets® (SBT) and covers both our operational and embodied carbon emissions. PERFORMANCE → On Target Through ongoing investment in energy efficiency and decarbonisation of our portfolio, we have made significant progress on our net zero pathway. We have reduced our scope 1 emissions by 5% and scope 2 emissions by 27% in 2021/22, against our 2019/20 baseline. A significant proportion of our scope 3 emissions comes from the embodied carbon in our refurbishment and development activities. Our projects this year are estimated to be 40–70% less carbon intensive than industry benchmark on embodied carbon. A detailed breakdown of our Greenhouse Gas (GHG) emissions can be found on page 91. • Our Science Based Targets: - Reduce absolute scope 1 emissions 42% by 2030, from a 2020 base year - Reduce scope 3 emissions from capital goods 20% per square foot NLA by 2030, from a 2020 base year - Continue sourcing 100% renewable electricity through to 2030 OUR CARBON FOOTPRINT Our total carbon footprint in 2021/22 was 16,992 tonnes of CO₂e (equivalent of annual energy use of over 5,300 households in the UK). This comprises of emissions from business and value chain activities, in accordance with GHG protocol standard. Our scope 1 and 2 emissions, equating to 50% of total emissions, correspond to the operational emissions that we have full control over. We aim to go beyond our Science-Based Targets and fully eliminate those operational emissions by 2030, with no reliance on offsetting. For our scope 3 emissions, equating to 50% of our total emissions, a significant proportion is attributed to our refurbishment and development activities and therefore reducing embodied carbon of our buildings is a key priority for us. We will offset any residual scope 3 emissions to get to net zero by 2030. ![img-0.jpeg](img-0.jpeg) LOCATION-BASED SCOPE 1, 2, 3 GHG EMISSIONS (ICO) ![img-1.jpeg](img-1.jpeg) SCOPE 1 GHG EMISSIONS (ICOₑ) ![img-2.jpeg](img-2.jpeg) SCOPE 2 GHG EMISSIONS (ICOₑ) ![img-3.jpeg](img-3.jpeg) 41 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack SUSTAINABILITY CONTINUED DELIVERING A CLIMATE-RESILIENT PORTFOLIO CONTINUED OUR NET ZERO OBJECTIVE OBJECTIVE OBJECTIVE OBJECTIVE CARBON PATHWAY Energy reduction Heat decarbonisation Renewable procurement Embodied carbon Our decarbonisation Aim to achieve an energy intensity of Eliminate fossil fuel consumption Continue to source 100% Aim to achieve embodied carbon pathway is underpinned 2 2 90 kWhe/m NLA for whole building* renewableelectricity intensity of 600** kgCO 2 /m byfour workstreams, for our development and eachcomprising of interim refurbishment projects milestones that we have setto ensure we are tackling all the material sources of PERFORMANCE PERFORMANCE PERFORMANCE PERFORMANCE emissions and regularly tracking progress on our On Track On Track On Track On Track netzero journey. | | – The average energy intensity of the | | | – The average gas use intensity of the | | | – 100% of the portfolio’s electricity is | | – Whole-life carbon analysis | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | 2 | | | 2 | | | | | | | | | We expect to fully eliminate | | portfolio is 116 kWhe/m | NLA, 28% | | portfolio is 50 kWh/m | NLA, which | | procured from renewable sources | | | undertaken on all refurbishment | | | | our scope 1 and 2 emissions | | better than current UKGBC target | | | is 21% better than the Real Estate | | – We are engaging with customers | | | | and development projects, to | | | | and offset only residual | – 15 assets already meet 2030 UKGBC | | | | Environmental Benchmark (REEB) | | | who procure their own energy to | | | inform improvement opportunities | | | | scope 3 emissions by 2030 | | target, demonstrating high levels of | | | for typical UK offices | | | gain visibility of consumption and | | | in design and construction process | | | | (i.e. embodied carbon from | | energy performance | | – 27% of the portfolio uses district | | | | encourage renewable procurement | | – Significantly reduced embodied | | | | | our development activity). | – We have implemented over 30 | | | | heating or electric heat pumps | | – 13 sites have on-site solar panels, | | | | carbon intensity of Leroy House | | | | We will also continue to | | | | | | | | | | | | | 2 | | | | energy efficiency projects across | | – Partial upgrades of heating systems | | | | and we are implementing 208 kWp | | | refurbishment to 230 kgCO | 2 /m | | | verify our GHG emissions to | | the portfolio (c. £2m CAPEX), | | | to heat pumps have been | | | worth of additional solar panel | | | (77% better than current | | | | ensure our data is complete, | | | | | | | | | | | | 2 | | | | | including the installation of smart | | | completed across 62% of | | | capacity across three assets | | | benchmark of 1000 kgCO | 2 /m | ) | consistent and transparent. building management system, LED theportfolio – Achieved 64% reduction in GHG We will be creating an lighting, controls, and high emissions from capital goods offsetting strategy for the efficiency heat pumps persq. ft. NLA from a 2019/20 business to ensure we are – The energy efficiency upgrade baseyear investing in credible and programme has also ensured impactful projects that we are on track to meet the remove carbon from upcoming requirement to achieve theatmosphere. EPC A/B by 2030 (see page 44) – We are running engagement campaigns with our customers to collectively drive energy consumption down ** Recommended 2020 embodied carbon target | * Recommended 2030 energy intensity target for | | | | for net zero carbon buildings (source: London | | --- | --- | --- | --- | --- | | | net zero carbon buildings (source: UKGBC) | | | Energy Transformation Initiative) | | | | Screenworks Building: £1.6m invested | Customer environmental group | | | | | on heatpump installation across 5 floors | at Kennington Park | | 42 Workspace Group PLC Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents # SUSTAINABILITY CONTINUED # DELIVERING A CLIMATE-RESILIENT PORTFOLIO CONTINUED # OUR NET ZERO CARBON PATHWAY CONTINUED # Driving energy reduction across the portfolio Our net zero journey starts by focusing on energy reduction across the portfolio. Our investment in energy efficiency upgrades across the portfolio and our ongoing energy monitoring programme has meant the average energy intensity of our portfolio is currently at 116 kWhe/m² NLA. The graph on the right shows the energy intensity of all the buildings in the Workspace portfolio, demonstrating the high energy performance when compared to UKGBC Paris proof targets. All buildings except five, already meet the 2020 target and 15 buildings are already performing better than the 2030 target. We are hence prioritising energy efficiency improvements in the rest of the portfolio. # CURRENT PORTFOLIO SNAPSHOT* WHOLE BUILDING ENERGY INTENSITY (kWhe/m² NLA) ![img-4.jpeg](img-4.jpeg) # CASE STUDY BARLEY MOW ![img-5.jpeg](img-5.jpeg) Barley Mow has seen several energy efficiency improvements over the years, starting with the installation of a smart building system in 2016, which led to a 20% decrease in energy consumption in one year. Unit refurbishment work have been undertaken in phases since 2019 and included LED lighting upgrades, insulation and glazing enhancements as well as installation of heatpumps, leading to a further 33% decrease in energy consumption. Last year's refurbishment works covered 17 units (10,019 sq. ft.) as well as the common parts and to EPC upgrades from a rating to a B rating and are expected to yield further energy savings. 43 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack SUSTAINABILITY CONTINUED ## 77% reduction from current embodied carbon benchmark for offices CASE STUDY ## Leroy House ## 24% Net zero carbon considerations are at the heart of the design of this refurbishment more energy efficient ### Wherever possible, project, aiming to achieve a BREEAM than current regulation ### Excellentcertification. we retain existing ### structures and Leroy House is designed to achieve 230 kg ### repurpose our 2 CO 2 upfront carbon per m GIA, 77% better ### buildings. This saves than current benchmark. Key measures are: ### – retaining the current structure and leaving carbon and preserves ceilings exposed ### character whilst – using steel and concrete with high ### providing modern recycledcontent ### – opting for natural ventilation, thus limiting spaces. Leroy House ### the amount of plant is a great example of ### the benefits of our The project will enable significant operational ### approach in action. carbon emissions savings, including a projected 24% reduction in regulated energy consumption over Part L. Key measures are: – replacement of gas boilers with heat pumps Kahroon Tanvir, – 380 kW solar panel installation Senior Project Manager – double glazing – high efficiency LED lighting and absence detection sensors Wellbeing enhancing features were also prioritised throughout: – large windows that open to ensure good levels of natural daylight and ventilation 2 – 50m of green roof to promote local biodiversity – 98 cycle racks, 10 showers and a wet room to encourage green modes of transportation and active lifestyles Leroy House, Islington 44 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack SUSTAINABILITY CONTINUED DELIVERING A CLIMATE-RESILIENT PORTFOLIO CONTINUED INVESTMENT PLAN: ENERGY EPC BREAKDOWN BY AREA CASE STUDY PERFORMANCE CERTIFICATE (EPC) EPC UPGRADES Below are examples of how we are upgrading EPC across Focusing on the energy our portfolio, unit by unit. efficiency of our existing portfolio is key to helping us achieve net zero carbon. We welcome the Government’s plan PORTFOLIO NET ZERO TRANSITION TARGET 2030 The Old Dairy, to increase the requirement CURRENT PORTFOLIO Shoreditch for all commercial buildings SNAPSHOT + EPC UPGRADES SNAPSHOT to achieve EPC B by 2030. EPC C to B 4,000 sq. ft. project Our long term investment in energy efficiency upgrades has – LED lighting meant our portfolio is in good shape, with nearly two thirds of the portfolio by area being EPC ### A/B and C. For the remaining £12,000 A/B 28% A/B 100% portfolio, the delivery of our net C 37% zero pathway workstreams will D 28% bring EPCs to a minimum of B, E 7% ensuring by 2030 our portfolio is net zero carbon and EPC A/B. Metal Box Factory, Based on the projects we have Southwark already delivered, we estimate the total investment needed to ## Total cost of EPC upgrades EPC D to B upgrade our portfolio to EPC A/B 3,000 sq. ft. project by 2030 will be c. £35–47m (c. £5m a year). However, the actual – LED Lighting ## additional investment needed £35–47m (c. £5m p.a) – Secondary glazing each year will be lower as part of this expenditure is covered by our ongoing maintenance capex. ### £76,000 45 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack SUSTAINABILITY CONTINUED DELIVERING A CLIMATE- ## Driving environmental impact RESILIENT PORTFOLIO CONTINUED CASE STUDY OBJECTIVE OBJECTIVE OBJECTIVE IMPLEMENTING THE SUSTAINABLE Create a sustainable development framework Achieve EPC A and BREEAM Excellent Assess climate risk across the portfolio and DEVELOPMENT FRAMEWORK: setting minimum environmental, social, for all major developments (EPC B create a strategy to mitigate material risk RIVERSIDE BUILDING IN WANDSWORTH biodiversity and wellbeing targets for all forrefurbishments) major projects PERFORMANCE PERFORMANCE PERFORMANCE Achieved Achieved Achieved | A comprehensive sustainable development | Over 30% of our portfolio (18 buildings) now | We continued to use the TCFD framework to | | --- | --- | --- | | framework was created, taking into account all | have a BREEAM rating and 28% of our | build on our understanding of climate risk and | | the material sustainability issues that we need | portfolio by floor area have A or B rated EPCs. | opportunities. We conducted an in-depth | | to address through our development and | This year we delivered Mirror Works and the | analysis of physical and transition risk across | | refurbishment activities. To support the | second phase of Light Bulb which both | the business using multiple climate scenarios. | | implementation of our net zero carbon | achieved a BREEAM Excellent rating and EPC | Refer to page 81 for full disclosure on our | | commitment, the framework is designed to | A. Our partial refurbishment of Pall Mall | climate risk assessment and mitigation | | guide the project team across all stages of | achieved BREEAM Very Good (due to | strategy, in line with TCFD guidelines. | | design and construction, setting minimum and | constraints with a pre-existing heating system) | | | stretch targets across a number of themes | and mix of EPC A/B. On all our major projects | | | such as energy, carbon, waste, circular | we also achieved a Considerate Constructor | | | economy, health and wellbeing, biodiversity, | score of 38, diverted over 95% of construction | | | climate resilience and social value. | waste from landfill and sourced over 95% of | | This redevelopment is timber from FSC. ## 40% aiming to achieve an A rated EPC, an “Excellent” less BREEAM certification, a embodied 2-Star Fitwel rating carbon than whilst generating no industry 2 more than 600kCO 2 /m standard in embodied carbon and operating at a 90 kWhe/ 2 m energy intensity. ## 90 2 kWhe/m energy intensity Mirror Works redevelopment, BREEAM Excellent, EPC A 46 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack SUSTAINABILITY CONTINUED DELIVERING A CLIMATE-RESILIENT PORTFOLIO CONTINUED ## Looking forward | OBJECTIVE | OBJECTIVE | OBJECTIVE | As a business, we take our environmental | | --- | --- | --- | --- | | Divert 100% of waste from landfill and | Conduct a biodiversity audit of the portfolio | Enhance green travel infrastructure across | impact seriously and playing our part to | | achieve a recycling rate of greater than 76% | to inform improvement opportunities | the portfolio | limit global warming to 1.5°C is an absolute | priority for us. We are proud of the PERFORMANCE PERFORMANCE PERFORMANCE progress we have already made on our net zero pathway and our focus will continue Rolled over Achieved Achieved to be on rapid decarbonisation of our portfolio. This includes the roll out of heat Through our partnerships with our waste 11 of our sites already have green roofs To ensure we support our customers to pumps, EPC and energy efficiency contractors, we were able to successfully and on-site greenery, where applicable. switch to greener modes of transport, we are upgrades of our customer units and divert 100% of waste from landfill. We were Tofurther increase provision of on-site continually upgrading the facilities across the optimising embodied carbon in our current | also able to increase the recycling rate across | greeninfrastructure, we conducted audits | portfolio. In the past year, we installed 76 | development projects. In parallel, we are | | --- | --- | --- | --- | | the portfolio, achieving a yearly average of | ofKennington Park and Vox Studios. | additional cycling racks and 15 showers. We | also working on building resilience within | | 75%, missing our target only by a slight margin | Recommendations from the site visits are | also installed 12 electric vehicle charging | our portfolio to mitigate climate hazards | | due to ongoing challenges with the pandemic. | being considered for implementation. | points across three of our centres (Leather | due to changing temperatures. | | To improve our waste performance, we have | | Market, Parkhall and Westbourne Studios). | | | initiated a targeted programme of waste | We have also set an ambition of exceeding | | Our focus is also going to be on adding | | audits and customer engagement campaigns | 10% biodiversity net gain across all our major | | more greenery and enhancing biodiversity | | to increase recycling awareness. We have also | development and refurbishment projects. | | across the portfolio, as there are multiple | benefits including climate adaptation, initiated an audit of all our cafés to eliminate customer wellbeing, air quality and single-use plastic being used in our portfolio. portfolio attractiveness. Green roof at Edinburgh HouseRecycling awareness event at Parkhall, Newly installed electric vehicle charging Dulwich points at Leather Market 47 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack SUSTAINABILITY CONTINUED ## 2 OBJECTIVE OBJECTIVE CASE STUDY ## Looking after Roll out mandatory sustainability training to Enhance professional development training CAREER PROGRESSION all employees to equip them with the curriculum to support employee attraction ## our people relevant skills and knowledge and retention PERFORMANCE PERFORMANCE Achieved Achieved | Supporting our employees, customers | We rolled out bespoke sustainability | We have redesigned the appraisal process | | --- | --- | --- | | and suppliers is a key priority. Through | trainingto all our employees. The objective | toinclude personal development plans | | our focus on wellbeing, upskilling, | ofthe training was to raise awareness on | whichare then supported by line managers. | | engagement, fairness and creating a | sustainability issues, provide an update | This year we sponsored 17 employees to | | culture which is diverse and inclusive, | onWorkspace’s strategy and increase | undertake professional accreditations and | | weare supporting our people to | engagement and participation on our | higher education courses (worth £65,040). | | achievetheir best. | sustainability initiatives. Atotal of 247 hours | We also rolled out a number of bespoke | | | ofsustainability training was delivered, | training courses to support our employees | | | reaching all employees. Further, 17 employees | with their skill building, including 540 hours | | | also completed the leading sustainability | ofcustomer-first training, 54 hours of people | | | training offered by BBP. | management training and 92 hours of | conflictresolution training. “ Undertaking a Masters ## 17 inSecurity and Risk Management allows me employees todevelop my academic sponsored for ### I really enjoyed the sustainability knowledge on this topic higher ### training and came away from it whilst strengthening my education ## witha better understanding of 933 professional skills and courses and abilities. I am confident this ### Workspace’s strategy. On a personal hours of training accreditations will help advance my career ### level, I am now mindful of checking to the next level.” ### labels, being less wasteful and ### limiting my meat consumption. Darren Baker, Head of Security and RiskManagement Simone Edwards Receptionist at Kennington Park 48 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack SUSTAINABILITY CONTINUED LOOKING AFTER OUR PEOPLE CONTINUED OBJECTIVE OBJECTIVE OBJECTIVE Implement a new recruitment policy to Ensure all employees have a sustainability Establish a wellbeing committee to ensure we provide equal opportunities objective and formalise a link between supportour people with their mental for all and embed a culture of diversity and remuneration and sustainability for the andphysical health inclusion by rolling out unconscious bias Executive team and harassment awareness training to all employees PERFORMANCE PERFORMANCE PERFORMANCE Rolled over Achieved Achieved | We have hired a recruitment manager who | Annual sustainability objectives have been | A wellbeing committee was established and | | --- | --- | --- | | isin the process of launching the new | setfor each employee. These objectives | delivered 13 employee wellbeing initiatives | | recruitment policy to ensure we provide equal | aretailored to each employee’s role and | throughout the year. These included raising | | opportunities to all. We will be rolling out | responsibilities. For a number of sustainability | awareness about the Health Shield benefit | | inclusive recruitment training to all the line | critical roles, the sustainability objective was | package, as well as seminars on mental and | | managers with the launch of the policy. | directly linked to bonus remuneration. In | physical health, financial wellbeing, and stress | | Wehave also piloted harassment awareness | addition, all of Workspace’s executive team | management. There has been a high uptake | | training, which will be rolled out to all | members have a responsibility to drive | inHealth Shield utilisation, with a total of | ### Health Shield has been employees along with the continual roll-out progress on our environmental and social £11,034 claimed. ### extremely valuable and | ofunconscious bias training. | targets, the performance of which is reviewed | | | | --- | --- | --- | --- | | | by the Board Remuneration Committee. | We also held 35 wellbeing initiatives across | shows the importance | | | | our centres which were very well received by | Workspace places on the | our customers. These included a range of ### wellbeing of its people. activities such as yoga classes, puppy therapy ### I was able to use the scheme ### As we seek to reinforce the sessions, terrarium building and partnerships ### to purchase my prescription with local gyms. ### importance of sustainability, the ### glasses and the claim ### Remuneration Committee has ### process was seamless. ### introduced additional ESG targets ### which now equate to 24% of ### Executive Directors’ salaries. Emily Perriss, Social Media Manager ## 900 Lesley-Ann Nash people supported through Chair of the Board Remuneration Committee our wellbeing programme 49 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack SUSTAINABILITY CONTINUED CASE STUDY ## Paws in Work Catering for our customers’ wellbeing needs is one of our ### Paws in Work top priorities. ### is a real asset This is why we are committed to ### to the Workspace bringing best-in-class wellbeing ### community, and events to our centres. From ### thisexperience was puppy therapy to yoga sessions ### and mental health awareness areal tonic. workshops, our events have received tremendously positive feedback, including requests formany more. Workspace customer Scientific studies have shown thepositive effect of interacting with a pet on decreasing stress indicators such as blood pressure and cortisol levels. We have definitely witnessed the positive effect onour customers, who attended our event with Paws in Work. This was a great opportunity ## 400 for customers to take a break customers attended the event from their desks and calm their minds by playing with puppies whilst meeting some of their office neighbours. We organised five events with ## 5 star Paws in Work which were fully booked within 24 hours, and Oustanding feedback reached 400 customers, leaving received 126 reviews, all 5-star rated. 50 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack SUSTAINABILITY CONTINUED LOOKING AFTER OUR PEOPLE CONTINUED ## Looking forward | OBJECTIVE | OBJECTIVE | OBJECTIVE | Our wellbeing programme has been one of | | --- | --- | --- | --- | | Engage stakeholders on sustainability | Become London Living Wage compliant | Map supply chain risk by screening all | the most impactful initiatives this year, | | initiatives and gather feedback on priorities | byApril 2022 for employees and relevant | approved suppliers and contractors for their | with over 900 employees and customers | | | contractors | environmental credentials | having benefited from our support. Based | on the excellent feedback we have PERFORMANCE PERFORMANCE PERFORMANCE received, we will continue to enhance our wellbeing provision, including a regular Achieved Achieved Achieved programme of events across the portfolio, driving uptake of our health benefit plan Engaging with our customers on sustainability All Workspace employees were already paid We rolled out a sustainability questionnaire to and supporting employees with financial is crucial to successful delivery of our more than the London Living Wage and we our key suppliers, targeting our top 50 wellbeing training. We are also initiatives. Throughout the year, we maintained have now increased the wages of our sub- partners by spend. The information collected incorporating best practice health and | an open line of communication with our | contractors in line with London Living Wage | is being used to understand the sustainability | wellbeing guidance (from WELL and | | --- | --- | --- | --- | | customers through an enhanced social media | thresholds (184 staff, covering services such as | credentials of our supply chain and inform | Fitwel) in all our current projects. | | coverage strategy, an extensive sustainability | security and cleaning). | targeted engagement initiatives on topics | | | events programme across the portfolio (48 in | | such as environmental management and | Ensuring we have a diverse and inclusive | | total), integrating sustainability messaging in | | reporting, emissions reduction and social | business is also a key priority for us. We | | our customer newsletter and conducting | | impact. We have also mandated all our | will continue to gather data on diversity | | several one-to-one sustainability interviews | | suppliers to align with the Living Wage rate | metrics to benchmark our performance | | with our customers. Sustainability feedback is | | and where relevant, we encourage our | and train our people on unconscious bias | and harassment awareness. We are also also gathered through our annual survey, suppliers to offer local employment or working towards making our recruitment which showed that over two thirds of our apprenticeships opportunities to fulfil the practices more inclusive and focusing on customers agree with our approach to requirements of Workspace contracts. widening access to our profession. sustainability. We have also initiated four sustainability groups, working in partnership Our newly launched supplier code of conduct with our customers, to drive environmental sets minimum sustainability requirements for &social performance of our buildings. all our suppliers to adhere to. ### It is clear that sustainability It is a privilege to have the ### isimportant to Workspace opportunity to work on Workspace ### and we have been encouraged buildings. The learning has been ### to be sustainable from the immense and I am enjoying the ### moment we moved in. diverse nature of work. London Living Wage compliant for our people and sub-contractors Workspace customer Apprentice at 360 Engineering, AC specialists 51 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack SUSTAINABILITY CONTINUED ## 3 OBJECTIVE OBJECTIVE CASE STUDY ## Supporting our Support our charity partner Single Homeless Give employees up to three paid volunteering OUR PARTNERSHIP WITH SINGLE Project and other local charities through days per annum and provide more HOMELESS PROJECT ## communities fundraising and lettings in kind programme opportunities for our employees to volunteer PERFORMANCE PERFORMANCE Achieved Achieved | Through our focus on employment-led | We donated a total of £100,000 to Single | 540 volunteering hours delivered, supporting | | --- | --- | --- | | regeneration of London and supporting | Homeless Project (SHP) this year, supporting | causes such as food banks, gardening at SHP, | | local economic growth, we are focused | over 550 young and vulnerable people. Our | Christmas decorating for SHP, Workspace | | on creating lasting value for the | support ensured all the beneficiaries of SHP | Charity Walk, Royal Parks Half marathon, | | communities in which we operate. | were offered Christmas dinner, over 100 | Hackney Half marathon, Triathlon and JP | | | support sessions were delivered and | Morgan Run. | emergency support for 50 young people was offered. We also funded the role of a Youth Opportunities Coordinator. This allowed for a dedicated support worker across the boroughs of Lewisham and Greenwich to engage with young people every day and help motivate them to make the most of their lives. “ Workspace have shown Focusing on activities, workshops, education, ## 550 100% commitment in ## and conversations they were able to develop 540 working to tackle youth vulnerable their skills and build confidence. volunteering hours homelessness. They have young people allowed the funding of a supported We also continued to roll out our lettings in youth opportunities kind programme to social enterprises and coordinator, who works | charities, supporting their rents to a value | | with our young people | | --- | --- | --- | | of£92,352. | 100 | across south London to | | | Christmas | offer them group and | | | gifts | one-to-one work support | | | purchased for | throughout the year.” | young people Chris Greenfield Corporate Partnership Manager, SHP 52 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack SUSTAINABILITY CONTINUED SUPPORTING OUR COMMUNITIES ## Looking forward CONTINUED CASE STUDY OBJECTIVE OBJECTIVE Our focus for the year is on rolling out our WESTBOURNE STUDIOS SCHOOL Scale up our InspiresMe community impact Create a social impact framework to assess InspiresMe programme across a number ENGAGEMENT programme, working alongside our and enhance the social value generated by of our centres. In partnership with our customers, to support individuals who our business activities and portfolio customers, we believe we can make a real are at most risk of NEET (Not in Education, impact in supporting skill development Employment or Training) to help them reach and employment in local areas where their full potential we operate. PERFORMANCE PERFORMANCE We have also created a robust social impact framework with measurable KPIs Rolled over Achieved that cover the entire building life cycle. We will be implementing social value We have refreshed our InspiresMe strategy A social impact framework has been created objectives and associated KPIs across which focuses on developing skills and to document our approach to social impact, all our current projects and working employment opportunities in the areas we focusing on four key themes: Wellbeing, Local with our design teams and contractors operate. The programme is designed to be Environmental Stewardship, Employment and to track progress. delivered in collaboration with our customers, Skills and Prosperous Neighbourhoods. We offering CV workshops, skill building, have identified a number of actions across the After a very successful year with Single mentoring sessions and work placements to building life cycle and business operations that Homeless Project, our charity partner, We’ve helped build a great relationship pupils of local schools and youth group will support the delivery of this framework. We we are working with them on further ## 51 between a local school members. We successfully piloted the also piloted the framework on Lock Studios to enhancing our impact through more active Students and our customers, who programme in Westbourne Studios and plan assess the impact of our projects. This engagement and pro-bono opportunities. reached | | were able to offer work | to extend it across four more centres in the | framework will now be applied across all our | | --- | --- | --- | --- | | | experience opportunities, | coming year. | current projects so we can build in social | | | enabling students to | | impact considerations right from the start of | | 4.4 | discover the real | | | the design process. score out working world. of 5 given by students on We are now growing our workshop programme to arrange activities work placements for the students with our customers and continue rolling out CV and interview workshops. 53 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack SUSTAINABILITY CONTINUED ## 500 New employment opportunities created in the area CASE STUDY ## Maximising social ## impact: Lock Studios ## £3m Our redevelopment of Lock Studios in Bow is an example of how we are maximising social invested in healthcare and ### The development has impact through employment led regeneration education provision ### of London. The borough of Tower Hamlets is completely changed one of London’s most deprived areas, and our ### the look and feel of redevelopment has transformed the site from ### the area. Where a low-quality industrial space into a vibrant ### people previously mixed-use community. The impact includes: ## 20K sq. ft. ### – Over 500 employment opportunities avoided the car park, of green and planted space created on site ### the open square has – Significant increase in footfall ### provided a safe and and local spend ### – Greater utilisation of site via local residents welcome place for ### due to needs-based amenities on site (six local residents to retail units and a café) ### socialise. – Greater perception of safety, increased community cohesion and enhanced wellbeing thanks to the green space provision Local resident andretailer – £3m invested in the borough to enhance local education and healthcare provision Employment-led regeneration of London is at the core of our business strategy, providing our customers with access to high-quality working space whilst creating prosperous neighbourhoods. Lock Studios, Bow 54 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ### OUR KEY PERFORMANCE INDICATORS 1. NET RENTAL INCOME 2. TRADING PROFIT AFTER INTEREST 3. EPRA NTA PER SHARE ## Financial ## performance LINK TO STRATEGY LINK TO STRATEGY LINK TO STRATEGY WHY THIS IS IMPORTANT TO WORKSPACE WHY THIS IS IMPORTANT TO WORKSPACE WHY THIS IS IMPORTANT TO WORKSPACE Net rental income is the rental income Trading profit after interest is net rental EPRA NTA per share is a definition of net receivable after payment of direct property income, less administrative expenses and tangible assets as set out by the European expenses, including service charge costs and finance costs but excluding exceptional Public Real Estate Association. It represents other direct unrecoverable property expenses. finance costs. It is a key measure for net assets minus any intangible assets and It is important to Workspace because it Workspace and determines dividend growth, financial derivatives and excluding deferred measures our operating performance. It is a and so the returns we provide to our taxation relating to valuation movements and key driver of trading profit, which in turn shareholders. It measures the underlying derivatives, divided by the number of shares in determines dividend growth. performance of the business. The Executive issue. It is important to Workspace as it Directors are incentivised on trading profit provides stakeholders with information on our after interest. net asset value. It is a key external measure for property companies and is used to benchmark against share price. | KEY TO STRATEGIC LINKS | MOVEMENT IN 2021/22 MOVEMENT IN 2021/22 MOVEMENT IN 2021/22 | | | | --- | --- | --- | --- | | | Net rental income increased by 6.4% (£5.2m) | Trading profit after interest increased by 21% | Our EPRA NTA per share increased by 5.3% | | | to £86.7m. In 2020/21 net rental income was | (£8.2m) to £46.9m. The main driver was the | (£0.50) to £9.88. The main drivers were the | DRIVING CUSTOMER-LED | GROWTH | significantly reduced by covid-related | £5.2m growth in net rental income. | increase in the valuation of our portfolio and | | --- | --- | --- | --- | | | discounts given to our customers, which were | | the trading profit in the year. | | A FOUNDATION OF | not repeated in the current year. In 2021/22 as | | | OPERATIONAL customers returned to centres, service charge EXCELLENCE costs returned to normal levels and a lower average occupancy across the year meant BEING SUSTAINABLE void costs increased. ## £86.7m £46.9m £9.88 | | | | | 81.5 | | 38.7 | | 9.38 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 2022 2022 2022 | 46.9 | 86.7 | 9.88 | | 122.0 | | 81.0 | | 10.88 | | 2021 2021 2021 | | | | | | | | | | | 2020 2020 2020 | | | | | | | | | | 55 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack OUR KEY PERFORMANCE INDICATORS CONTINUED FINANCIAL 4. DIVIDEND PER SHARE 5. LIKE-FOR-LIKE RENT ROLL GROWTH 6. LIKE-FOR-LIKE OCCUPANCY PERFORMANCE CONTINUED LINK TO STRATEGY LINK TO STRATEGY LINK TO STRATEGY WHY THIS IS IMPORTANT TO WORKSPACE WHY THIS IS IMPORTANT TO WORKSPACE WHY THIS IS IMPORTANT TO WORKSPACE This is the dividend payment per share in Like-for-like properties are those with Like-for-like occupancy is the area of let space issue. Dividend per share is a key measure of stabilised occupancy, excluding recent within the like-for-like portfolio divided by the the returns we are providing to our investors. acquisitions and buildings impacted by net lettable area of the like-for-like portfolio. It It is important to Workspace because we aim significant refurbishment or redevelopment is important as it gives us vital information on to provide good returns for our shareholders, activity. Rent roll is the current annualised net the performance of our core properties. It and also to work within our REIT requirements rent receivable for occupied units at the date drives pricing and operational decisions and for income distribution. of reporting. Monitoring rent roll growth on can be a measure of customer demand for the the like-for-like portfolio is an important space. Again, this is monitored on a weekly measure of the underlying performance of the basis in management meetings and it is also a business and a key driver of future net rental key performance indicator in our monthly income. We monitor the like-for-like rent roll Board reporting. on a weekly basis in management meetings and it is also a key performance indicator in our monthly Board reporting. | KEY TO STRATEGIC LINKS | MOVEMENT IN 2021/22 MOVEMENT IN 2021/22 MOVEMENT IN 2021/22 | | | | --- | --- | --- | --- | | | The increase of 21% (3.75p) in dividend per | The like-for-like rent roll has increased by 8.7% | Like-for-like occupancy increased by 7.8% to | | | share was due to improved trading profit in | (£7.4m) in the year driven by a recovery in | 89.6%, recovering to pre-covid levels. | DRIVING CUSTOMER-LED GROWTH the year and positive outlook. like-for-like occupancy from 81.8% to 89.6%. A FOUNDATION OF OPERATIONAL EXCELLENCE BEING SUSTAINABLE ## 21.5p +8.7% 89.6% | | | | | 17.75 | | -23.9 | | 81.6 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 2022 2022 2022 | 21.5 | 89.6 | 8.7 | | 36.16 | | 1.9 | | 93 .1 | | 2021 2021 2021 | | | | | | | | | | | 2020 2020 2020 | | | | | | | | | | 56 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack OUR KEY PERFORMANCE INDICATORS CONTINUED FINANCIAL 7. PROPERTY VALUATION 8. TOTAL PROPERTY RETURN 9. TOTAL SHAREHOLDER RETURN PERFORMANCE CONTINUED LINK TO STRATEGY LINK TO STRATEGY LINK TO STRATEGY WHY THIS IS IMPORTANT TO WORKSPACE WHY THIS IS IMPORTANT TO WORKSPACE WHY THIS IS IMPORTANT TO WORKSPACE Our properties are critical to our business and Total Property Return is the return for the year Total Shareholder Return is the return the valuation demonstrates the value we are combining the valuation movement on our obtained by a shareholder, calculated by delivering to our shareholders and a measure portfolio and the income achieved in the year. combining both share price movements and of how well we are managing our buildings This figure is produced by MSCI, an dividend receipts. This is important to and driving rental income. The property independent Investment Property Databank Workspace because it shows the value that portfolio is independently valued, currently by (‘IPD’), and is compared to a benchmark our shareholders receive from investing in CBRE. We aim to enhance the value of our group so that we can see how we are Workspace shares. We aim to create maximum properties through active asset management, performing relative to similar companies. Total value for our shareholders, and as such this including refurbishment and redevelopment Property Return, and performance against the measure forms part of the performance schemes. The movement in property benchmark, form part of the bonus objectives criteria within our LTIP schemes. valuationis a key driver in our EPRA NTA for the Executive Directors and LTIPs for all pershare measure. people in schemes. | KEY TO STRATEGIC LINKS | MOVEMENT IN 2021/22 MOVEMENT IN 2021/22 MOVEMENT IN 2021/22 | | | | --- | --- | --- | --- | | | There was an underlying increase of 3.0% | Improved capital and income returns in the | Total Shareholder Return has decreased due | | | (£69m) in our property valuation, taking the | year have resulted in an improved Total | to a reduction in the share price over the year, | DRIVING CUSTOMER-LED | GROWTH | valuation to £2,402m. This was mainly driven | Property Return, and we marginally | offset by dividends paid in the year. | | --- | --- | --- | --- | | | by improved yields across the portfolio. See | outperformed the IPD benchmark. This was | | | A FOUNDATION OF | Property Valuation section of the Business | mainly driven by the increase in the property | | OPERATIONAL Review on pages 71 and 72 for more detail. valuation in the year. EXCELLENCE BEING SUSTAINABLE ## £2,402m 6.49% -12.3% | | | | | 2,324 | | -5.86 | | | 8.6 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 2022 2022 2022 | -12.3% | 2,402 | 6.49 | | 2, 574 | | 4.48 | -18.7 | | | 2021 2021 2021 | | | | | | | | | | | 2020 2020 2020 | | | | | | | | | | 57 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack OUR KEY PERFORMANCE INDICATORS CONTINUED 1. CUSTOMER ENQUIRIES 2. VIEWINGS 3. OFFER LETTERS ## Non-financial ## performance LINK TO STRATEGY LINK TO STRATEGY LINK TO STRATEGY WHY THIS IS IMPORTANT TO WORKSPACE WHY THIS IS IMPORTANT TO WORKSPACE WHY THIS IS IMPORTANT TO WORKSPACE Customer enquiries represent the number of This is the number of viewings of individual Once they have completed a viewing, if enquiries we receive for our space. Enquiries units by new or existing customers looking for theyare interested in the space, prospective come through our website, via brokers, via new or additional space. Viewings are customers can request an offer letter phone, from walk-ins or existing customers important because they provide an containing pricing information and lease looking to expand, contract or move locations. opportunity to get customers into our centres terms. Tracking the number of offer letters Measuring enquiries helps us to assess the to see first hand the quality of our space, and isimportant as it allows us to assess the customer demand for our product. Our to drive lettings. It is important to monitor the success of our viewings and the demand internal marketing platform generates conversion of enquiries to viewings and then forour product. enquiries, and by increasing marketing activity of viewings to offer letters. we can drive enquiries, for example around the launch of a new building. | KEY TO STRATEGIC LINKS | MOVEMENT IN 2021/22 MOVEMENT IN 2021/22 MOVEMENT IN 2021/22 | | | | --- | --- | --- | --- | | | Customer enquiries increased significantly as | As with enquiries, viewings recovered | The number of offer letters also increased in | | | Covid restrictions eased, with average monthly | significantly from the previous year which was | the year as we saw an increase in customer | DRIVING CUSTOMER-LED | GROWTH | enquiries up 24% to 917 per month. Number | heavily impacted by Covid restrictions. | demand, increasing by 30% to an average of | | --- | --- | --- | --- | | | ofenquiries are nearing pre-Covid levels, with | Average monthly viewings were up 82% to | 322 per month. | | A FOUNDATION OF | an average of 957 monthly enquiries in the | 598 per month. | | OPERATIONAL final quarter. EXCELLENCE BEING SUSTAINABLE ## 917 598 322 | | | | 739 | | 328 | | 247 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 2022 2022 2022 | 322 | 917 598 | | 1,087 | | 675 | | 449 | | 2021 2021 2021 | | | | | | | | | | 2020 2020 2020 | | | | | | | | | 58 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack OUR KEY PERFORMANCE INDICATORS CONTINUED NON-FINANCIAL 4. LETTINGS 5. RENEWALS 6. EMPLOYEE VOLUNTEERING DAYS PERFORMANCE CONTINUED LINK TO STRATEGY LINK TO STRATEGY LINK TO STRATEGY WHY THIS IS IMPORTANT TO WORKSPACE WHY THIS IS IMPORTANT TO WORKSPACE WHY THIS IS IMPORTANT TO WORKSPACE This is the number of lettings that we This is the number of lease renewals we sign This is the number of days that our employees complete. It is a key measure for Workspace with existing customers per month. These spent volunteering or fundraising for our because lettings drive our net rental income areimportant as they demonstrate how sticky selected charities. Supporting our and therefore trading profit. Lettings set the our customers are, track customer retention communities is a key part of our sustainability tone for estimated rental values, and so and allow us to capture reversion within strategy and it is important for our employees impact our property valuation too. ourportfolio. to get involved. | KEY TO STRATEGIC LINKS | MOVEMENT IN 2021/22 MOVEMENT IN 2021/22 MOVEMENT IN 2021/22 | | | | --- | --- | --- | --- | | | We saw lettings increase by 32% to an average | The average number of renewals per month | The number of volunteering days increased | | | of 127 per month following increased customer | increased from 13 in the prior year to 15. | significantly from 10 to 68. As there were | DRIVING CUSTOMER-LED GROWTH demand in the year. This drove increases in However, in the prior year it was necessary to fewer Covid-restrictions during the year, there rent roll and occupancy. proactively work to retain customers ahead of were more opportunities for volunteering A FOUNDATION OF their lease end dates due to the pressures of andwe actively encouraged our employees OPERATIONAL the Covid pandemic. If we include these toget involved. EXCELLENCE retentions, the monthly average decreased from 63 to 34 in the current year. BEING SUSTAINABLE ## 127 15 68 | | | | | 96 | | 13 | | 10 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 2022 2022 2022 | 15 | 68 | 127 | | 121 | | 41 | | 121 | | 2021 2021 2021 | | | | | | | | | | | 2020 2020 2020 | | | | | | | | | | 59 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ### PRINCIPAL RISK AND UNCERTAINTIES ## Risk management is an integral part Continued response to Covid-19 The ongoing Covid-19 pandemic and the resulting macroeconomic ## of all our activities. Our culture drives uncertainty had a reduced impact on Workspace and its customers throughout the year. ## us to consider the risks and opportunities ## of any new business decision. We focus on key risks which could impact The Group’s Risk Management framework theachievement of our strategic goals and EMPLOYEES PROPERTIES isnow well established, with the Audit and therefore on the performance of our business. The health and safety of our employees Our buildings remained open throughout the Risk Committees continuing to work together Risks are considered at every level of the remains a top priority. For the majority of the year as increasing numbers of customers during the year to embed it in the business. business, including when approving corporate year our staff were able to work safely in our returned to their offices. transactions, property acquisitions and offices, although during the Government’s Following the Board effectiveness review disposals and whenever undertaking lockdown measures in December 2021, our We continued to provide a safe and hygienic which focused on the attributes of a high- refurbishment and redevelopment projects. employees were asked to work from home, environment for our customers to work in, performing Board, it was agreed that the Risk with technology already in place to allow including enhanced security and changes to Committee should be disbanded and many We have created a positive culture within them to do so. cleaning specifications, such as increasing ofits responsibilities would be subsumed Workspace which encourages open daytime services. intothe Audit Committee with the rest communication and engagement. This enables assumed by Main Board. staff from all areas of the business to feel CUSTOMERS FINANCIAL POSITION freeto raise risks or opportunities, no matter The Audit Committee is supported by Throughout the year we have seen an increasing Despite the reducing level of uncertainty, the how small, to their managers and teams. theExecutive Committee and the Risk proportion of our customers returning to Group continued to implement cost-saving Thisculture means that information is Management Group, comprising senior theiroffices. measures and control capital expenditure to communicated across the business clearly. managers from across the business. The Board protect its strong financial position. Wemake every effort to engage staff with will retain overall responsibility for the Group’s Our centre staff were working in our business Management regularly reviewed performance risk-related issues, particularly those which are risk management, particularly in respect of centres throughout the year, maintaining regular reports and forecasts to understand the new and emerging so that we are managing principal risks, including those relating to contact with our customers to keep them impact on cash flows and control covenants. our lower-level risks as well as the more valuation, development and real estate. abreast of actions being taken to ensure the strategic ones. safety of our sites and to answer any queries. The Group met all loan covenants throughout Further details of the framework can be found the year and signed a £200m RCF in on page 160. December 2021 which further strengthened its | REGULATION | financial position. As at 31 March 2022, the | | --- | --- | | Workspace has kept up to date with | Group had cash and undrawn credit facilities | | Government guidelines and sought advice | of £442m along with substantial headroom on | | where necessary. The majority of Covid | its financial covenants. | regulations stopped as of 24 March 2022. 60 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack PRINCIPAL RISK AND UNCERTAINTIES CONTINUED ## Climate Ongoing impact ## change risk of Brexit Workspace recognises that climate change The Risk Committee and the Board have will have an impact on our business. Our continued to consider the potential impacts properties are at risk from physical climate- that Brexit may have on the business related issues including changes in throughout the year. temperature extremes leading to increased cooling and heating loads, changes in Workspace operates solely in London with precipitation leading to flash flooding, and nointernational activities. The main risks to physical damage to buildings from extreme the Group are the impact on the UK economy weather events, which in turn can lead to and Workspace customers. greater stresses on our properties. Our key mitigation activities in relation to As a business we are also at risk from the Brexit are: transition to a net zero economy in the form of – Modelling and stress testing our business increasing regulation, changes in customer plans and viability throughout the year demand and increasing cost of raw materials. – Reviewing and monitoring loan covenants and borrowing levels We are actively managing our climate change – Review of any key contracts which may risk and have put in place mitigation measures beimpacted by Brexit for the most material impacts. Following the – Consideration of the potential impact on recommendation ofthe Task Force on employees, and communication with staff Climate-related Financial Disclosures (TCFD) asand when applicable framework, we have also stress tested our – Liaising with our advisors on any potential portfolio against plausible warming scenarios. changes to regulation which may arise Our full TCFD report can be found on page 81. We continue, as always, to track our customer | Further, we have made a commitment to | demand, pricing and vacations levels on a | | --- | --- | | become a net zero carbon business by 2030, | weekly basis. Our current level of borrowings | | ensuring we are actively mitigating our | and financial covenant headroom also helps | | transition risk from climate change. Details | tomaintain a strong position following the | | ofour net zero pathway can be found on | transition period. | pages40 to 41. We also maintain an Environmental, Social and Governance (ESG) risk register which captures all ESG risks to the business and is managed by the Head of Sustainability. Kennington Park, Oval 61 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack PRINCIPAL RISK AND UNCERTAINTIES CONTINUED ## Changes to POSSIBLE ## principal risks NEW RISKS There have been no new principal risks in the period. ## 4 KEY PRINCIPAL RISKS 1. Customer demand page 62 ## 1 2. Financing page 62 ## 3. Valuation page 63 5 ## 3 4. Acquisition pricing page 63 5. Customer payment default page 64 6. Cyber security page 64 LIKELIHOOD 7. Resourcing page 65 ## 7 8. Third-party relationships page 66 9. Regulatory page 66 No change Increased from last year Decreased since last year ## 8 ## 6 2 ## 9 UNLIKELY SEVERE IMPACT 62 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack PRINCIPAL RISK AND UNCERTAINTIES CONTINUED KEY TO DRIVING …AND DELIVERING …WHILST CUSTOMER- OPERATIONAL ALWAYS BEING STRATEGIC LINKS LEDGROWTH EXCELLENCE… SUSTAINABLE. ## Customer demand Financing ## 1 2 PRINCIPAL RISK IMPACT PRINCIPAL RISK IMPACT Opportunities for growth could be missed There may be a reduction in the availability without a clear branding strategy to meet the oflong-term financing due to a prolonged Severe Severe changing demands of flexible working models. economic recession, which may result in an Whilst the uncertainty from the Covid inability to grow the business and impact pandemic has significantly reduced, there are Workspace’s ability to deliver services PROBABILITY (POST-MITIGATION) PROBABILITY (POST-MITIGATION) other macroeconomic factors including the tocustomers. war in Ukraine, current levels of inflation and predicted interest rate rises that could also Possible Unlikely RISK IMPACT impact potential customers. – Inability to fund business plans and invest CHANGE FROM LAST YEAR innew opportunities CHANGE FROM LAST YEAR RISK IMPACT Decreased due to removal of all Covid – Increased interest costs Decreased following refinancing of RCF, – Fall in occupancy levels at our properties restrictions, however this may be impacted by – Negative reputational impact amongst however this may be mitigated by interest other economic factors including the war in rate rises – Reduction in rent roll lenders and in the investment community Ukraine, inflation and interest rate rises – Reduction in property valuation MITIGATION RISK APPETITE RISK APPETITE MITIGATION – We regularly review funding requirements – Broad mix of buildings across London with for business plans and we have a wide range Low different office experiences at various price of options to fund our forthcoming plans. Medium | | points to match customer requirements | | | | We also prepare a five-year business plan | | | | --- | --- | --- | --- | --- | --- | --- | --- | | – Pipeline of refurbishment and redevelopments | | | | | which is reviewed and updated annually. | | | | | | LINK TO STRATEGY | | | | LINK TO STRATEGY | | | | to further enhance the portfolio | | | | Further detail is provided in the viability | | | | – Weekly meeting to track enquiries, viewings | | | | | statement on page 76 | | | | | and lettings to closely track customer trends | | | – We have a broad range of funding | | | | | | and amend pricing as demand changes | | | | relationships in place and regularly review | | | | – Centre staff maintain ongoing relationships | | | | | our refinancing strategy. We also maintain a | | | | | | | Page 32 | | | | Page 32 | | | with our customers to understand their | | | | specific interest rate profile via use of fixed | | | | | requirements and implement change to | | | | rates on our loan facilities so that our | | | | | meet their needs | | | | interest payment profile is stable. Loan | | | | | | RELEVANT KPIS | | | | RELEVANT KPIS | | | – Business plans are stress tested to assess | | | | | covenants are monitored and reported to | | | | | | FINANCIAL PERFORMANCE | | | | FINANCIAL PERFORMANCE | | | | the sensitivity of forecasts to reduced levels | | | | the Board on a monthly basis and we | | | | | of demand and implement contingency | | | | undertake detailed cash flow monitoring | | | | | | 1, 2, 5, 6, 8 | | | | 2, 4, 9 | | | | measures | | | | and forecasting | | | | – Continued a brand campaign to raise | | NON-FINANCIAL PERFORMANCE | | – During the year we refinanced our revolving | | | | | | awareness of our differentiated brand offer | | | | credit facility, extending the maturity for a | | | ## 1, 2, 3, 4, 5 with digital and out-of-home advertising further three years, providing the Group with adequate funds for future plans Pages 54 to 58 Pages 54 to 56 63 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack PRINCIPAL RISK AND UNCERTAINTIES CONTINUED KEY TO DRIVING …AND DELIVERING …WHILST CUSTOMER- OPERATIONAL ALWAYS BEING STRATEGIC LINKS LEDGROWTH EXCELLENCE… SUSTAINABLE. ## Valuation Acquisition pricing ## 3 4 PRINCIPAL RISK IMPACT PRINCIPAL RISK IMPACT The macroeconomic uncertainty could have an Inadequate appraisal and due diligence of a impact on asset valuations, leading to a new acquisition could lead to paying above High High devaluation that misaligns with Workspace market price leading to a negative impact on investment. This may result in a reduction in valuation and rental income targets. return on investment and negative impact on PROBABILITY (POST-MITIGATION) PROBABILITY (POST-MITIGATION) covenant testing. RISK IMPACT – Negative impact on valuation Possible Possible RISK IMPACT – Impact on overall shareholder return – Financing covenants linked to loan to value (LTV) ratio CHANGE FROM LAST YEAR CHANGE FROM LAST YEAR MITIGATION – Impact on share price Decreased due to removal of all Covid Increased due to the acquisition ofMcKay – We have an acquisition strategy determining restrictions, however this may be impacted Securities PLC key criteria such as location, size and byother economic factors including the war MITIGATION in Ukraine, inflation and interest rate rises potential for growth. These criteria are – Market-related valuation risk is largely based on the many years of knowledge and dependent on independent, external factors. understanding of our market and customer RISK APPETITE RISK APPETITE We maintain a conservative LTV ratio which demand can withstand a severe decline in property – A detailed appraisal is prepared for each Medium values without covenant breaches acquisition and is presented to the Medium | – We monitor changes in sentiment in the | | | | | Investment Committee for challenge and | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | London real estate market, yields and | | | | discussion prior to authorisation by the | | | | | | LINK TO STRATEGY | | | | LINK TO STRATEGY | | | | pricing to track possible changes in | | | | Board. The acquisition is then subject to | | | | | valuation. CBRE, a leading full-service real | | | | thorough due diligence prior to completion | | | | | estate services and investment organisation, | | | – Workspace will only make acquisitions that | | | | | | provides twice-yearly valuations of all our | | | | are expected to yield a good return and will | | | | | properties | | | | not knowingly overpay for an asset | | | | | | | Page 32 | | | | Page 32 | – Alternative use opportunities, including mixed-use developments, are actively pursued across the portfolio | RELEVANT KPIS | RELEVANT KPIS | | --- | --- | | FINANCIAL PERFORMANCE | FINANCIAL PERFORMANCE | | 3, 5, 7, 8, 9 | 7, 8, 9 | Pages 54 to 56 Page 56 64 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack PRINCIPAL RISK AND UNCERTAINTIES CONTINUED KEY TO DRIVING …AND DELIVERING …WHILST CUSTOMER- OPERATIONAL ALWAYS BEING STRATEGIC LINKS LEDGROWTH EXCELLENCE… SUSTAINABLE. ## Customer payment default Cyber security ## 5 6 | PRINCIPAL RISK | IMPACT | PRINCIPAL RISK | IMPACT | | --- | --- | --- | --- | | There is a reducing impact from Covid-19 on | | A cyber attack could lead to a loss of access | | | the economy with less customers defaulting | | to Workspace systems or a network disruption | | | | High | | High | | on their rental payments. However, there | | for a prolonged period of time. This could | | | remains a risk of continued economic | | damage Workspace’s reputation and inhibit | | | downturn given the broader geopolitical | | our ability to run the business. | | | | PROBABILITY (POST-MITIGATION) | | PROBABILITY (POST-MITIGATION) | climate, inflation and interest rate rises. Thiscould result in further pressure on rent RISK IMPACT collection figures with a prolonged period Possible Unlikely – Inability to process new leases and invoice ofcompanies failing leading to a decline in customers occupancy and increase in office vacancies. CHANGE FROM LAST YEAR – Reputational damage CHANGE FROM LAST YEAR Decreased due to removal of Covid restrictions – Increased operational costs No change RISK IMPACT and moratorium on debt collection – Negative cash flow and increasing interest MITIGATION costs – Cyber security risk is managed using a – Breach of financial covenants RISK APPETITE RISK APPETITE mitigation framework comprising network security, IT security policies and third-party MITIGATION risk assessments. Controls are regularly Low Low | – Rent collections improved during the year, | | | | | reviewed and updated and include | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | but were still impacted as a result of the | | | | technology such as next generation | | | | | moratorium put in place by the Government. | | | | firewalls, multi-layered access control, | | | | | | LINK TO STRATEGY | | | | LINK TO STRATEGY | | | | This has now been partially removed, | | | | through to people solutions such as user | | | | | improving our ability to enforce payment | | | | awareness training and mock-phishing | | | | – The reduced impact continues to be | | | | | emails | | | | | mitigated by strong credit control processes | | | – Assurance of the framework’s performance | | | | | | in place and an experienced team of credit | | | | is gained through an independent maturity | | | | | | | Page 32 | | | | Page 32 | | | controllers, able to make quick decisions | | | | assessment, penetration testing and | | | | | and negotiate with customers for payment. | | | | network vulnerability testing, all performed | | | | | In addition, we hold a three-month deposit | | | | annually | | | | | | RELEVANT KPIS | | | | RELEVANT KPIS | | for the majority of customers FINANCIAL PERFORMANCE FINANCIAL PERFORMANCE – Centre staff maintain relationships with customers and can identify early signs of ## 1, 2, 4, 8, 9 2, 4, 8, 9 potential issues NON-FINANCIAL PERFORMANCE ## 4, 5 Pages 54 to 56 Pages 54 to 58 65 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack PRINCIPAL RISK AND UNCERTAINTIES CONTINUED KEY TO DRIVING …AND DELIVERING …WHILST CUSTOMER- OPERATIONAL ALWAYS BEING STRATEGIC LINKS LEDGROWTH EXCELLENCE… SUSTAINABLE. ## Resourcing ## 7 PRINCIPAL RISK IMPACT Ineffective succession planning, recruitment and people management could lead to limited High resourcing levels and a shortage of suitably skilled individuals to be able to achieve Workspace objectives and grow the business. PROBABILITY (POST-MITIGATION) A failure to have in place adequate resourcing may also result in stretch of existing management and a decline in efficiency. Low RISK IMPACT CHANGE FROM LAST YEAR – Increased costs from high staff turnover Increased due to impact of inflation and – Delay to growth plans current job market – Reputational damage MITIGATION RISK APPETITE – We have a robust recruitment process to COMPANY VALUES attract new joiners and established interview Medium We have a strong internal culture which and evaluation processes with a view to encourages independent thought and ensuring a good fit with the required skill initiative which is articulated in our four set and our valued corporate culture LINK TO STRATEGY key values: – Various incentive schemes align employee objectives with the strategic objectives of the Group to motivate employees to work Know your stuff inthe best interests of the Group and its Show we care stakeholders. This is supported by a robust Page 32 appraisal and review process for all Find a way employees Be a little bit crazy – Our HR and Support Services teams run RELEVANT KPIS adetailed training and development FINANCIAL PERFORMANCE programme designed to ensure employees A new programme is being introduced are supported and encouraged to progress toidentify and develop people with talent ## 1, 2, 4, 5, 6, 8, 9 with learning and study opportunities. to ensure there is a pipeline of employees TheHR function was strengthened this year NON-FINANCIAL PERFORMANCE with the potential to take on leadership by the newly created appointment of a roles. ## 1, 2, 3, 4, 5, 6 Recruitment Manager who will coordinate all activities to attract talented employees Talented people, see page 20 Pages 54 to 58 Fuel Tank, Greenwich 66 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack PRINCIPAL RISK AND UNCERTAINTIES CONTINUED KEY TO DRIVING …AND DELIVERING …WHILST CUSTOMER- OPERATIONAL ALWAYS BEING STRATEGIC LINKS LEDGROWTH EXCELLENCE… SUSTAINABLE. ## Third-party relationships Regulatory ## 8 9 PRINCIPAL RISK IMPACT PRINCIPAL RISK IMPACT Poor performance from one of Workspace’s A failure to keep up to date and plan for key contractors or third party-partners could changing regulations in key areas such as High Medium result in an interruption to, or reduction in health and safety or sustainability could lead quality of, our service offering to customers or to fines or reputational damage. could lead to significant disruptions and PROBABILITY (POST-MITIGATION) PROBABILITY (POST-MITIGATION) delays in any refurbishment or redevelopment RISK IMPACT projects. – Increased costs Low Low – Reputational damage RISK IMPACT – Decline in customer confidence CHANGE FROM LAST YEAR CHANGE FROM LAST YEAR MITIGATION – Increased project or operational costs No change No change – Health and safety is one of our primary – Fall in customer demand concerns, with strong leadership promoting a culture of awareness throughout the | MITIGATION | | | | | business. We have well-developed policies | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | RISK APPETITE | | | | RISK APPETITE | | | – Workspace has in place a robust tender and | | | | | and procedures in place to help ensure that | | | | | selection process for key contractors and | | | | any workers, employees or visitors on site | | | | | partners. Contracts contain service level | Low | | | comply with strict safety guidelines and we | Low | | | | agreements which are monitored regularly | | | | work with well-respected suppliers who | | | | | and actions are taken in the case of | | | | share our high quality standards in health | | | | | underperformance | | | | and safety | | | | | | LINK TO STRATEGY | | | | LINK TO STRATEGY | | | – For key services, Workspace maintains | | | | – Health and safety management systems are | | | | | | relationships with alternative providers so | | | | reviewed and updated in line with changing | | | | | that other solutions would be available if the | | | | regulation and regular audits are undertaken | | | | | main contractor or third party was unable to | | | | to identify any potential improvements | | | | | continue providing their services. Processes | | | – Sustainability requirements have an | | | | | | | | Page 32 | | | | Page 32 | | | are in place for identifying key suppliers and | | | | increasing importance for the Group and it | | | | | understanding any specific risks that require | | | | is a responsibility we take seriously. We have | | | | | further mitigation | | | | committed to a carbon zero target of 2030 | | | | | | RELEVANT KPIS | | | | RELEVANT KPIS | | | – During the year, a decision was taken to | | | | | and we are implementing the TCFD | | | | | | FINANCIAL PERFORMANCE | | | | FINANCIAL PERFORMANCE | | | | become London Living Wage compliant for | | | | recommendations. Refer to pages 87 to 89 | | | | | all contractors from April 2022 | | | | for further details of our approach to | | | | | | 1, 2, 4, 5, 6, 8, 9 | | | | 1, 2, 4, 5, 6, 8, 9 | | climate change risk management NON-FINANCIAL PERFORMANCE NON-FINANCIAL PERFORMANCE ## 4, 5 4, 5 Pages 54 to 58 Pages 54 to 58 67 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ### BUSINESS REVIEW ## At a glance ## £111.0m Total rent roll ## £46.9m Trading profit after interest ## £2.4bn Property valuation ## 89.6% Like-for-like occupancy PROPERTIES FEATURED IN THE BUSINESSREVIEW: Pall Mall Deposit, Ladbroke Grove Completed refurbishment Mirror Works, Stratford Completed mixed-use redevelopment Leroy House, Islington Refurbishment Underway Mirror Works, Stratford 68 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack BUSINESS REVIEW CONTINUED The total estimated rental value (ERV) of the portfolio, comprising the ERV of the like-for- like portfolio, and those properties currently undergoing refurbishment or redevelopment (but only including properties at the design stage at their current rent roll and occupancy) is £149.9m. Like-for-like Portfolio The like-for-like portfolio represents 84% of the total rent roll as at 31 March 2022. It comprises 39 properties with stabilised occupancy, excluding buildings impacted by significant refurbishment or redevelopment activity or contracted for sale. The like-for-like rent roll has increased by 8.7% (£7.4m) in the year to 31 March 2022 to £92.9m driven by a recovery in occupancy to pre-Covid levels, increasing from 81.8% to CUSTOMER ACTIVITY RENT ROLL 89.6%. After a decrease in like-for-like pricing Customer demand for space within our Total rent roll, representing the total of 2.3% in the first quarter, we have seen business centres is back at pre-Covid levels annualised net rental income at a given date, pricing growth in each subsequent quarter, with a strong level of conversion of enquiries was up 6.8% to £111.0m at 31 March 2022, resulting in like-for like pricing increasing by to viewings and lettings, and momentum withoverall occupancy increasing from 77.8% 0.4% (£0.14 per sq. ft.) over the year to £36.39 continuing into the first quarter of the new to 84.3%. per sq. ft. financial year. Total Rent Roll £m If all the like-for-like properties were at 90% Utilisation of business centres by our At 31 March 2021 103.9 occupancy at the CBRE estimated rental customers has increased throughout the year, Like-for-like portfolio 7.4 Completed projects 2.5 values, the rent roll would be £106.2m, £13.3m reaching around 69% of pre-Covid levels in the Projects underway and design stage 0.2 higher than the actual cash rent roll at week ending 01 April 2022 and peaking at 73% Acquisitions 3.8 31 March 2022. mid-week. Disposals/other (6.8) At 31 March 2022 111.0 Quarter Ended | | | | Monthly Average | | | | | | | | Like-for-like 31 Mar 22 31 Dec 21 30 Sep 21 30 Jun 21 | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Q4 | Q3 | Q2 | | | Q1 | FY | | FY | | FY | Occupancy 89.6% 86.6% 85.6% 82.9% | | | | 21/22 | 21/22 | 21/22 | | 21/22 | | 21/22 | 20/21 | | 19/20 | | | 1 | | | | | | | | | | | | | | Occupancy Change | | 3.0% 1.0% 2.7% 1.1% | Enquiries 957 831 935 947 917 739 1,087 Viewings 634 513 629 615 598 328 675 Rent per sq. ft. £36.39 £35.92 £35.50 £35.41 Lettings 127 117 138 125 127 96 121 Rent per sq. ft. change 1.3% 1.2% 0.3% (2.3)% Rent Roll £92.9m £89.3m £87.3m £84.6m Rent Roll change 4.0% 2.3% 3.2% (1.1)% 1. Absolute change. 69 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack BUSINESS REVIEW CONTINUED | Completed Projects | September 2021, and have seen good demand | | --- | --- | | There are eight projects in the completed | for space, with occupancy increasing from | | projects category. Rent roll in this category | 50.7% to 75.6% over the year. | has increased by 61% (£2.5m) in the year to | £6.6m. This movement has been driven by | This category also contains buildings launched | | --- | --- | | significant improvements in occupancy, with | more recently including, Mirror Works, | | properties we launched both during the Covid | Stratford, a new business centre and an | | pandemic and more recently letting up well. | additional 17,000 sq. ft. of new space at The | | Occupancy across completed projects has | Light Bulb, Wandsworth, both of which | | increased to 69.2% from 55.2% in March 2021. | launched in the second half and are letting up | well. Particularly pleasing is the letting up of Mare | Street Studios, Hackney, which was launched | If the buildings in this category were all at | | --- | --- | | in June 2020, and is now 70.1% let (up from | 90% occupancy at the CBRE estimated rental | | 5.6% at March 2021), with rent roll increasing | values at 31 March 2022, the rent roll would be | | by £0.8m. | £10.7m, an uplift of £4.1m. | A further £0.5m was added to rent roll at Pall Mall Deposit, Ladbroke Grove, where we completed an extensive refurbishment in | Projects Underway – Refurbishments | Projects at Design Stage | | --- | --- | | We are currently underway on four | These are properties where we are planning a | | refurbishment projects that will deliver | refurbishment or redevelopment that has not | | 195,000 sq. ft. of new and upgraded space. As | yet commenced. The rent roll at these | | at 31 March 2022, rent roll was £3.5m, down | properties at 31 March 2022 was £4.2m, an | | £0.1m in the year. | uplift of £0.3m in the year. | | In January 2022 we commenced the | Acquisitions | | refurbishment of Leroy House, where we will | In September 2021, we completed the | | upgrade, extend and reconfigure the whole | acquisition of The Old Dairy in Shoreditch | | building, adding 12,000 sq. ft. of net lettable | for£43.4m. In November 2021 we completed | | space. Our sustainability goals are at the heart | the acquisition of Busworks in Islington for | | of the design, which aims to achieve a | £45.0m. The rent roll across these two sites at | | BREEAM excellent certification. The project | 31 March 2022 was £3.8m. | has been designed to achieve significantly less | embodied carbon than a typical new build | Assuming 90% occupancy at the CBRE | | --- | --- | | (estimated at a 77% reduction) by retaining | estimated rental values at 31 March 2022, the | | the existing structure, opting for natural | rent roll at these two properties would be | | ventilation and using materials with a high | £5.8m, an uplift of £2.0m. | recycled content. Assuming 90% occupancy at the CBRE estimated rental values at 31 March 2022, the rent roll at these four buildings once they are completed would be £8.4m, an uplift of £4.9m. 70 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack BUSINESS REVIEW CONTINUED | PROFIT PERFORMANCE | | | | | The reduction in rental income of £14.7m has | In addition, although we hold rent deposits for | The increase in the property revaluation was | | --- | --- | --- | --- | --- | --- | --- | --- | | Trading profit after interest for the year is up | | | | | been driven by the fall of 11.7% in like-for-like | the majority of our customers, the extension | £68.7m compared to a decrease of £257.7m in | | 21.2% (£8.2m) on the prior year to £46.9m. | | | | | occupancy together with a reduction of 12.9% | of Government restrictions on rent collection | the prior year. | | | | | | | in rent per sq. ft. during 2020/2021, combined | has impeded efforts to collect rent from a | | | | 31 March | | 31 March | | with the impact of the disposal of Fitzroy | number of our customers which resulted in a | The gain on sale of investment properties of | | £m | | 2022 | | 2021 | Street which was vacant from June 2021. This | significant charge of £4.2m for expected | £7.8m reflected the disposal of Highway in | | | | | | | resulted in a lower opening total rent roll of | credit losses in the prior year. Although the | March 2022 for £24m and Fitzroy Street in | Net rental income 86.7 81.5 | Administrative expenses | £103.9m at 31 March 2021 compared to | restrictions still remained in place until | September 2021 for £92m. | | --- | --- | --- | --- | | – underlying (17.7) (16.5) | £132.8m at 31 March 2020. | 31 March 2022, rent collection has continued | | | Administrative expenses | | to improve, with a reduction in the charge to | Exceptional finance costs in the prior financial | | – share based costs (1.6) (2.5) | Our focus on cost control during Covid | £1.5m in the current financial year. | year related to the refinancing of £100m and | | Net finance costs (20.5) (23.8) | lockdown periods enabled us to reduce | | £84m of private placement notes due in 2030 | | Trading profit after | unrecovered service charges in the year to | Administrative expenses increased by 1.6% | which were repaid early in April 2021 after | | interest 46.9 38.7 | 31 March 2021. With customers returning to | (£0.3m) to £19.3m with an underlying increase | notice was given in March 2021. | | | our centres in increasing numbers over the | of 7%, reflecting an average pay rise of 2%, | | 1. These relate to both cash and equity settled costs. course of the year to 31 March 2022, and with increased recruitment and other staff costs Adjusted underlying earnings per share, based the impact of increased energy prices, service and continued investment in technology. This on EPRA earnings adjusted for non-trading Net rental income was up 6.4% (£5.2m) in charge costs have returned to more normal was largely offset by a reduced charge for items and calculated on a diluted share basis, total to £86.7m, as detailed below: | | | | | | levels. This, combined with lower average | share-based costs due to lower vesting | was up 21.1% to 25.8p. | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | occupancy compared to the prior year, has | assumptions. | | | | 31 March | | 31 March | | resulted in an increase of £2.1m in unrecovered | | | | £m | | 2022 | | 2021 | service charge costs in this financial year. | Net finance costs decreased by 13.9% (£3.3m) | | | Rental income 100.3 115.0 | | | | | | in the year, reflecting a decrease in the | | | Unrecovered service | | | | | The lower average occupancy has also | average interest rate from 3.8% to 3.1%, | | | charges (4.2) (2.1) | | | | | resulted in an increase in empty rates which, | following the pre-payment of £148.5m of 5.6% | | Empty rates and other combined with increased marketing and Private Placement loan notes in April 2021. non-recoverable costs (10.5) (7.0) customer acquisition costs has resulted in Services, fees, non-recoverable costs increasing by £3.5m to Profit before tax was £124.0m compared to a commissions and sundry £10.5m. Increased customer activity has also loss before tax of £235.7m in the prior year. income 0.7 (0.7) resulted in net income from services, fees, | Underlying net rental | commissions and sundry income increasing | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | | 31 March | | 31 March | | | income 86.3 105.2 | to£0.7m. | £m | | 2022 | | 2021 | Rent discounts and Trading profit after waivers 0.3 (19.9) Net rental income in the prior year was interest 46.9 38.7 Expected credit losses (1.5) (4.2) significantly reduced by rent discounts and Change in fair value of Acquisitions 1.3 – waivers given to customers, predominantly in investment properties 68.7 (257.7) Disposals 0.3 0.4 respect of the first quarter when we offered a Gain/(loss) on sale of Net rental income 86.7 81.5 50% discount to our business centre investment properties 7.8 (0.1) customers. These one-off discounts and Exceptional finance costs – (16.4) Other items 0.6 (0.2) waivers have not been repeated in the current financial year. Profit/(loss) before tax 124.0 (235.7) Adjusted underlying earnings per share 25.8p 21.3p 71 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack BUSINESS REVIEW CONTINUED DIVIDEND PROPERTY VALUATION Like-for-like Our dividend policy is based on trading profit At 31 March 2022, our property portfolio was Refurbishments | | | after interest, taking into account our | independently valued by CBRE at £2,402m, an | | --- | --- | --- | --- | | Mixed-use redevelopments | ENFIELD | | | | | | investment and acquisition plans and the | underlying increase of 3.0% (£69m) in the | Acquisition | | distribution requirements that we have as a | year. The main movements in the valuation | | | --- | --- | --- | --- | | | REIT, with our aim being to ensure the dividend | over the year are set out below: | | | | per share is covered at least 1.2 times by | | £m | | BARNET | adjusted underlying earnings per share. | Valuation at 31 March 2021 2,324 | | Revaluation surplus 69 HARINGEY WALTHAM Capital expenditure 28 In line with our policy, the Board is FOREST Capital receipts (1) recommending a final dividend of 14.5p per Acquisitions 90 share, taking the full year dividend to 21.5p Disposals (108) (2021: 17.75p). The final dividend will be paid on Valuation at 31 March 2022 2,402 REDBRIDGE 05 August 2022 to shareholders on the register at 08 July 2022. The dividend will be paid as a There was an underlying revaluation increase Property Income Distribution and fully meets ISLINGTON of 3.6% (£84m) in the second half of the year the REIT distribution requirement for the year compared to a decrease of 0.7% (£15m) in the to 31 March 2022. HACKNEY first half. A summary of the full year valuation CAMDEN ISLINGTON and revaluation movement by property type is SHOREDITCH set out below: BRENT KING’S CROSS STRATFORD BETHNAL GREEN NEWHAM PADDINGTON Revaluation increase/(decrease) OLD STREET Valuation TOWER HAMLETS 31 March FARRINGDON CITY OF £m 2022 Full year H2 H1 CITY OF LONDON WESTMINSTER Like-for-like Properties 1,897 63 74 (11) | | | | | LONDON | | Completed Projects 186 8 9 (1) | | --- | --- | --- | --- | --- | --- | --- | | | | | WATER LOO | BRIDGE | | | | | | | | | CANARY | Refurbishments 161 (4) (2) (2) | | EALING | | | | | WHARF | | | | AND | VICTORIA | | | | Redevelopments 70 5 6 (1) | EARLS COURT Acquisitions 88 (3) (3) – KENSINGTON AND Total 2,402 69 84 (15) HAMMERSMITH CHELSEA KENNINGTON FULHAM HOUNSLOW BATTER S E A SOUTHWARK GREENWICH WANDSWORTH LAMBETH LEWISHAM RICHMOND UPON THAMES 72 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack BUSINESS REVIEW CONTINUED | Like-for-like Properties | Completed Projects | Current Refurbishments and Redevelopments | mixed-use redevelopment scheme at | | --- | --- | --- | --- | | There was a 3.4% (£63m) underlying increase | There was an underlying increase of 4.5% | There was an underlying reduction of 2.4% | Riverside, Wandsworth. | | in the valuation of like-for-like properties to | (£8m) in the value of the eight completed | (£4m) in the value of our current | | | £1,897m. This was driven by yield movement, | projects to £186m. The overall valuation | refurbishments to £161m and an increase of | REFURBISHMENT ACTIVITY | | with the equivalent yield of the like-for-like | metrics for completed projects are set | 7.7% (£5m) in the value of our current | A summary of the status of the refurbishment | | portfolio coming in from 5.9% to 5.7%. This | outbelow: | redevelopments to £70m. | pipeline at 31 March 2022 is set out below. | was partly offset by a 1.9% decrease in ERV | per sq. ft. reflecting price reductions we have | 31 March | | Within the refurbishment category there was | In May 2021, we received planning permission | | --- | --- | --- | --- | --- | | seen on lettings and renewals completed | | 2022 | an underlying reduction of £4m at Leroy | for the re-designation of land use for a major | | during the first half of the year. ERV per sq. ft. | | | House, where we have now obtained vacant | scheme at Kennington Park. The existing | ERV per sq. ft. £28.04 | deceased by 3.1% in the first half, but following | Rent per sq. ft. £22.49 | possession ahead of our refurbishment project | 91,000 sq. ft. of low-grade space situated to | | --- | --- | --- | --- | | improved pricing in the second half, it | Equivalent Yield 5.8% | and have begun incurring construction costs. | the south and east of the Kennington Park | | increased by 1.2%. | Net Initial Yield 3.2% | | campus will be replaced with 169,000 sq. ft. | Capital Value per sq. ft. £437 The most significant movement in the of high specification office space. 31 March 31 March redevelopment category was an increase of The major movements within this category 2022 2021 Change £5m at Garratt Lane, which forms part of our included increases of £3.8m at Parkhall, ERV per sq. ft. £41.42 £42.23 -1.9% reflecting an increase in ERV following our Rent per sq. ft. £36.39 £36.25 0.4% recently completed refurbishment project, and Equivalent Yield 5.7% 5.9% -0.2% Capex Capex to Upgraded and new an increase of £1.9m at Wenlock Studios, Refurbishment project pipeline Number spent spend space (sq. ft.) Net Initial Yield 4.2% 4.2% – Capital Value where occupancy has improved significantly Underway 4 £9m £46m 195,000 per sq. ft. £666 £633 +5.2% over the year. Design stage 3 £2m £116m 298,000 Design stage (without planning) 5 £0m £221m 429,000 1. Absolute change. 73 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack BUSINESS REVIEW CONTINUED | REDEVELOPMENT ACTIVITY | EPC AND NET ZERO | PROPERTY ACQUISITIONS AND DISPOSALS | In March 2022, we simultaneously exchanged | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | Many of our properties are in areas where there | Improving the energy efficiency of our portfolio | In September 2021 we acquired The Old Dairy, | and completed on the disposal of Highway | | | | | | is strong demand for mixed-use | is key in helping us to achieve our target of | Shoreditch for £43.4m. It provides 57,000 sq. | Business Park in Limehouse, for £23.7m for its | | | | | | redevelopment. Our model is to use our | being a net zero carbon business by 2030. The | ft. of net lettable space adjacent to our existing | share of the sale, a significant premium to the | | | | | | expertise, knowledge and local relationships to | energy efficiency upgrades we deliver as part | business centre, The Frames. We will reposition | 30 September 2021 valuation of £11.6m. | | | | | | obtain a mixed-use planning consent and then | of our planned refurbishment and | the property over time to our distinctive, | | | | | | | typically agree terms with a residential | redevelopment programme means that a | flexible model, which will strengthen our | CASH FLOW | | | | | | developer to undertake the redevelopment and | significant proportion of our portfolio will be | presence and broaden our offering in this | The Group generates strong operating cash | | | | | | construction at no cost and limited risk to | upgraded to EPC A and B ratings by 2030. | exciting and dynamic area of London. | flow in line with trading profit. A summary of | | | | | | Workspace. We receive back a combination of | Excluding these upgrades, we estimate the | | cash flows in the year are set out below. | | | | | | cash, new commercial space and overage, in | additional investment needed to upgrade the | In November 2021 we acquired Busworks, | | | | | | | return for the sale of the residential scheme to | remaining portfolio (excluding McKay) to EPC | Islington for £45.0m. The former Victorian bus | There is a reconciliation of net debt in note | | | | | | the developer. | A and B ratings by 2030 will be some £35–47m, | factory provides 103,000 sq. ft. of net lettable | 16(b) to the financial statements. | | | | | |  | with a further £15–20m required to achieve full | space across two conjoined warehouse | | | | | | | A summary of the status of the redevelopment | net-zero. Part of this expenditure will be | buildings on 1.6 acres just north of King’s Cross, | Rent collection for the year was robust, | | | | | | pipeline at 31 March 2022 is set out below. | included within our routine maintenance capital | an attractive area for SMEs. We plan to | despite the Government restrictions on rent | | | | | | | expenditure, and we estimate the incremental | upgrade the building and reposition the | collection measures which have been in place. | | | | | | There are now four schemes at the design | investment will be c.£5m per year. | offering towards our distinctive, flexible model, | Overall, 98% of rent due has been collected to | | | | | | stage that have obtained mixed-use | | creating a flagship centre in North London. | date, including 97% of rent due for the fourth | | | | | | planningconsents. | The McKay portfolio we have recently acquired | | quarter of 2021/22. | | | | | | | is well positioned with 40% of the portfolio | In September 2021, we disposed of 13–17 Fitzroy | | | | | | | In February 2022, we completed a land-swap | (excluding non-core assets) already EPC A and | Street in Fitzrovia, for a total of £92m, a loss on | | | | | | | and a surrender of our long leasehold interest | B rated. We estimate the total investment | disposal of £3.5m. | | | | | | | on part of the Chocolate Factory site to the | needed to upgrade all these properties to EPC | | | | | | | | freeholder, Haringey Council. This allows | A and B by 2030 will be some £11–13m or c.£2m | | | | | | | | Haringey and Workspace to deliver their share | per year. | | | 31 March | | 31 March | | | of the consented scheme and unlocks the | | £m | | | 2022 | | 2021 | | residential element of Workspace’s ownership | | Net cash from operations after interest 58 39 | | | | | | | for redevelopment. As part of the deal we | | Dividends paid (43) (46) | | | | | | | transferred ownership of Mallard Place to | | Purchase of Investment Properties (88) – | | | | | | | Haringey Council. | | Capital expenditure (31) (26) | | | | | | Property disposals and cash receipts 122 11 Other (11) (2) Net movement 7 (24) No. of Residential New commercial Opening debt (net of cash) (565) (541) Redevelopment project pipeline properties units space (sq. ft.) Closing debt (net of cash) (558) (565) Design stage 4 969 228,000 74 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack BUSINESS REVIEW CONTINUED | | MCKAY ACQUISITION | The table below shows the proforma | FINANCING | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | We completed the acquisition of McKay | combined group based on the results for the | As at 31 March 2022, the Group had £42.3m of | | | | | | | | Securities PLC on 6 May 2022 for a total | year to 31 March 2022, adjusted for the | cash and £400.0m of undrawn facilities: | | | | | | | | consideration of £265.7m, comprising £191.1m | disposal of Great Brighams Mead, Reading | | | | | | | | 23% | | | | Drawn | | Facility | | | | | in cash and 10.5m Workspace shares, and | which was held for sale at 31 March 2022 with | | | | | | | | | | | | amount | | amount | | | | | £7.5m transaction costs, representing a 14% | the sale completing on 4 May 2022, reduced | | | | | | | | Loan to value as at 31 March 2022 | | | | | £m | | £m Maturity | | | | discount to NTA acquired (after seller’s | administration expenses which includes the | | | | | | | | | | | Private placement | | | | | 2025– | | | transaction costs) of £310.3m. | departure of McKay executive team and | | | | | | | | | | | notes 300.0 300.0 | | | | | 2029 | | NET ASSETS | | increased finance costs and net debt | | | | | | | Green Bond 300.0 300.0 2028 | | The acquisition comprises 31 assets, with | reflecting the cash consideration paid | | | --- | --- | --- | --- | | Net assets increased in the year by £80m to | | | Revolving credit | | | a value as at 31 March 2022 of £495m. A | forMcKay. | | | £1,800m. EPRA net tangible assets (NTA) per | | | facility – 200.0 2024 | third of the portfolio (by value) are London | share at 31 March 2022 was up 5.3% (£0.50) | | | | Acquisition facility – 200.0 2023 | | --- | --- | --- | --- | --- | | | | office buildings, which lend themselves well | The total rent roll of the portfolio at 31 March | | | to£9.88: | | | | Total 600.0 1,000.0 | | | EPRA | to our model and are in areas which are | 2022, excluding Great Brighams Mead, was | | | | NTA per | complementary to our existing portfolio. | £23.6m. Assuming 90% occupancy at the | | In December 2021, we agreed a new £200m share A further third of the portfolio are quality estimated rental values at 31 March 2022, the ESG-linked revolving credit facility (“RCF”) £ office buildings in the South-East, which rent roll at these properties would be £27.6m, replacing the Group’s previous revolving At 31 March 2021 9.38 are well let but provide a good opportunity an uplift of £4.0m. creditfacility. The facility has an initial term Adjusted trading profit after interest 0.26 to selectively test demand for our offering ofthree years, with the potential to extend by Property valuation surplus 0.38 and expand our total addressable market. Workspace will be disposing of non-core a further two years and to increase the facility Profit on disposal of investment The remaining third of the portfolio are assets which are likely to include the light amount to a maximum of £300m, subject to property 0.04 South-East light industrial assets. industrial portfolio. Any such asset disposals Dividends paid (0.25) lender consent. would result in a reduction in net debt, but Other 0.07 would not be expected to have a material At 31 March 2022 9.88 In March 2022, we agreed a new £200m impact on trading profit after interest, with acquisition facility with a term of 18 months to any reduction in net rental income being The calculation of EPRA NTA per share is set fund the acquisition of McKay. broadly offset by reduced finance costs. out in note 9 of the financial statements. All facilities are provided on an unsecured TOTAL ACCOUNTING RETURN £m Workspace McKay Adjustments Combined basis with an average maturity of 4.2 years, or The total accounting return for the year was 4.9 years excluding the acquisition facility 12 Months to 31 March 2022: 8.0% compared to (11.5)% in the year ended (31 March 2021: 4.8 years). Net rental income 86.7 20.4 (2.2) 104.9 | March 2021. The total accounting return | Administrative expenses (19.3) (6.4) 3.2 (22.5) | | | --- | --- | --- | | comprises the growth in absolute EPRA net | Net finance costs (20.5) (6.2) (5.9) (32.6) | At 31 March 2022, the average interest cost of | | tangible assets per share plus dividends paid | | our fixed rate private placement notes and | Trading profit after interest 46.9 7.8 (4.9) 49.8 in the year as a percentage of the opening Green Bond was 3.1%. Our revolving credit No. shares (m) 182.0 91.4 192.5 EPRA net tangible assets per share. The bank facility is provided at a margin of 1.65% Adjusted underlying EPS 25.8p 8.5p 25.9p calculation of total accounting return is set over SONIA with a margin adjustment outin note 9 of the financial statements. depending on performance against a number At 31 March 2022: of ESG-related metrics. Investment property valuation 2,402 495 (19) 2,878 Net debt (558) (170) (186) (914) At 31 March 2022, loan to value (LTV) was 23% Other (44) (15) 7 (52) (31 March 2021: 24%) and interest cover, based Net assets 1,800 310 (198) 1,912 on net rental income and interest paid, was 4.8 EPRA NTA per share £9.88 £3.39 £9.93 times (31 March 2021: 3.8), providing good LTV 23% 34% 32% headroom on all facility covenants. 75 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack BUSINESS REVIEW CONTINUED | In addition to the facilities noted above, with | where the majority of the cost is passed on to | KEY PROPERTY STATISTICS | | | | | | --- | --- | --- | --- | --- | --- | --- | | the acquisition of McKay in May 2022, the | our customers, we have been able to limit the | | | Half Year ended | | | | Group has inherited a £180m revolving credit | impact by hedging our energy costs for three | | 31 Mar | 30 Sep | 31 Mar | 30 Sep | | | | | 2022 | 2021 | 2021 | 2020 | | facility maturing in April 2024 and a £65m | years from October 2021. We will also benefit | | | | | | | term loan from Aviva due May 2030. Both | from a reduction in void costs due to | Workspace Group Portfolio | | | | | | facilities are secured and contain change of | increased occupancy levels. Staff costs are the | CBRE property valuation £2,402m £2,271m £2,324m £2,450m | | | | | Number of locations 57 58 58 58 control prepayment provisions however there most significant driver of our administration Lettable floorspace (million sq. ft.) 4.0 3.9 3.9 3.9 is significant overlap between our existing costs and, whilst we have limited inflationary Number of lettable units 4,482 4,234 4,196 4,147 relationship banks and the McKay lending salary increases to 3%, we are seeing higher Rent roll of occupied units £111.0m £102.1m £103.9m £118.2m banks, who have already consented to the increases in more junior roles across the Average rent per sq. ft. £33.26 £32.28 £33.90 £37.15 | change of control. Including the McKay | Group. | Overall occupancy 84.3% 81.2% 77.8% 81.1% | | --- | --- | --- | | facilities, on a proforma basis, the enlarged | | Like-for-like number of properties 39 39 38 38 | | Group would have cash and available facilities | The results for the year will also benefit from | Like-for-like lettable floor space (million sq. ft.) 2.8 2.9 2.8 2.8 | | of £331m, with the combined facilities having | the ownership of McKay for 11 months of the | Like-for-like rent roll growth 6.4% 2.1% (13.9)% (11.6)% | Like-for-like rent per sq. ft. growth 2.5% (2.1)% (9.9)% (3.3)% an average maturity of 4.1 years and an year. Rental income from the McKay portfolio Like-for-like occupancy movement 4.0% 3.8% (3.9)% (7.8)% average effective interest rate of 3.2%. will be reduced by the sale of non-core assets but the impact on net rental income will be 1. The like-for-like category has been restated in the current financial year for the following: FINANCIAL OUTLOOK FOR 2022/2023 broadly offset by reduced interest costs. – The transfer in of Brickfields and Rainbow Industrial Estate (part) from the completed projects category Underlying administrative costs of the McKay – The transfer out of Leroy House to the refurbishment projects category Over the last year we have seen a good 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 recovery from the impact of the Covid-19 business will be reduced by around £3m per financial year. pandemic driven by strong levels of annum which includes the departure of the 3. Overall rent per sq. ft. and occupancy statistics include the lettable area at like-for-like properties and all refurbishment and customer demand. Rental income in McKay executive team, with one-off synergy redevelopment projects, including those projects recently completed and also properties where we are in the process of 2022/23 will be underpinned by the full realisation costs expected to be around £3m. obtaining vacant possession. year benefit of the growth in like-for-like | rent roll in 2021/22 of 8.7%. Our opening | Whilst our core debt bears interest at fixed- | The Strategic Report on pages 1 to 98 was approved by the Board of Directors on 7 June 2022 | | --- | --- | --- | | like-for-like rent roll of £92.9m is over 5% | rates, the majority of the McKay debt, as well | andsigned on its behalf by: | | ahead of the average like-for-like rent roll | as the acquisition facility used to finance the | | | last year. As occupancy recovered to pre- | cash consideration for McKay, bears interest at | | | Covid levels, we were able to selectively | a margin over SONIA, and is therefore subject | | | start increasing pricing with average rent | to changes in market interest rates. Given | | | per sq. ft. up 2.5% in the second half of | recent and expected increases in interest rates, | | Graham Clemett Dave Benson last year. The extent to which this pricing we therefore anticipate a slight increase in our Chief Executive Officer Chief Financial Officer momentum continues will, in part, depend average cost of borrowing to around 3.2%. on the impact of any economic downturn on our customers, although our pricing We expect capital expenditure to double to still remains well below pre-Covid levels. around £50m in 2022/23 as we progress with planned projects, including at Leroy House. Rental income will be boosted by a full year’s contribution from Busworks and The Old Dairy We expect to complete the sale of the which were acquired part way through last residential element of our planned year and by the letting up of recently developments at Riverside, Wandsworth and completed projects, including Mirror Works the Chocolate Factory, Wood Green during and Pall Mall Deposit. this financial year. With these sales and the disposal of non-core assets from the McKay The current high levels of inflation will impact portfolio our LTV will reduce to below 30%. both our service charge and administrative costs. In relation to service charge costs, 76 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ### COMPLIANCE STATEMENTS ## Going Viability ## concern statement | The Group’s activities, strategy and | Assessment of prospects | The scenarios modelled include a severe but | | Assessment of time period | | | --- | --- | --- | --- | --- | --- | | performance are explained in the Strategic | The Group assesses its prospects primarily | realistically possible downside scenario based | | The Board has selected a review period of five | | | Report on pages 2 to 92. | through the annual Strategic Review process | on the following key assumptions: | | years for the following reasons: | | | | which involves a debate of the Group’s | – A stalling of the UK economy, with low | | a) The Group’s strategic review covers a | | | Further detail on the financial performance | strategy and business model, consideration of | | levels of GDP growth and inflationary | | five-year period | | and financial position of the Group is provided | the Group’s principal risks and a review of the | | pressure, resulting in a reduction in | b) Our current project pipeline spans five | | | in the financial statements on pages 204 | Group’s five-year plan. Particular attention is | | customer demand over the next two years, | | years, covering the time for the currently | | to230. | given to existing refurbishment and | | compared to current levels | | planned major refurbishments and | | | redevelopment commitments, long-term | – Like-for-like occupancy reduces by c.5% to | | | redevelopments to progress from initiation | | The Directors, have conducted an extensive | financing arrangements, compliance with | | 85% over the next two years, with | | to completion | | review of the appropriateness of adopting the | financing and REIT covenants and existing | | associated increase in void costs and | c) The average period to maturity of the | | | going concern basis. More details can be | macroeconomic factors. | | downward pressure on pricing of new | | Group’s committed facilities is 4.2 years | | found on page 207. Following this review and | | | lettings, and thereafter a gradual recovery | | | | having made appropriate enquiries, the | The most recent strategy day was held in | | to c.90% by 31 March 2027 | Although financial performance is assessed | | | Directors have a reasonable expectation that | September 2021 and the Board reviewed the | – New lettings at below the average price per | | over a period of five years, the strategy and | | | the Group and the Company have adequate | business plan for the five years to 31 March | | sq. ft. of vacating customers resulting in an | business model are considered with the | | | resources and sufficient headroom on the | 2026. The Board also reviewed the five year | | overall reduction in average rent per sq. ft. | longer-term success of the Group in mind. The | | | Group’s bank loan facilities to continue in | plan in March 2022 in the context of the | | until like-for-like occupancy levels return to | Directors believe they have no reason to | | | operational existence. For this reason, the | McKay acquisition. | | c.90% | expect a significant adverse change in the | | | Directors believe that it is appropriate to | | – Increase in counterparty risk, with bad debt | | Group’s viability immediately following the | | | continue to adopt the Going Concern basis in | Whilst the impact of Covid-19 on the Group | | significantly higher than pre-pandemic levels | end of the five-year assessment period. | | | preparing the Group’s accounts. | has reduced in the last 12 months, the war in | – Higher levels of cost inflation | | | | | | Ukraine, current high levels of inflation and | – Higher interest rate environment resulting in | | Assessment of viability | | | | potential higher interest rate environment | | an increase in the cost of variable rate | The Board has considered the key risks and | | | | means there is an increased risk of an | | borrowings and refinancing costs | mitigating factors that could impact the | | | | economic downturn. | – Pipeline redevelopment sales delayed and at | | Group, details of which can be found on pages | | | | | | reduced sales values | 59 to 66. Those risks that could have an | | | | In addition, the acquisition of McKay in May | – Requirement to prepay the McKay | | impact on the ongoing success of the Group’s | | | | 2022 has increased Group net debt, with | | borrowings in July 2022, on the assumption | strategy, particularly in light of the current | | | | proforma LTV above 30%. | | that terms are not agreed to retain the | geopolitical situation, were identified and the | | | | | | facilities | resilience of the Group to the impact of these | | | | Consideration has been given to a number of | | | risks in severe, yet plausible downside | | | | downside scenarios covering the period to | The Group’s activities, strategy and | | scenarios has been evaluated. | | | | 31 March 2027. | performance are explained in the Strategic | | | | Report on pages 2 to 92, including a description of the Group’s strategy and business model on pages 32 to 35 and 14 to 21. 77 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack COMPLIANCE STATEMENTS CONTINUED VIABILITY STATEMENT CONTINUED Sensitivity analyses have been prepared to understand the impact of the Risk sensitivity analyses Conclusion identified risks on solvency and liquidity. The specific risks which were evaluated The Group benefits from a largely freehold The sensitivity and stress analyses outlined are shown in the following table. property portfolio and a flexible business above indicate that the Group would have model that allows the business to adapt to adequate means to maintain headroom in its RISK SENSITIVITY ANALYSES changing requirements of its customer base. facilities and covenants to continue operations This, coupled with a strong balance sheet, for the period under review. On this basis, the SPECIFIC RISK RISK CATEGORY SENSITIVITY ANALYSIS | | | | | means the Company can withstand a | Directors have a reasonable expectation that | | --- | --- | --- | --- | --- | --- | | Demand for space falls | – Customer | | At the point in the severe scenario | significant downturn in the economy | the Group will be able to continue in operation | | dramatically impacting | | demand | modelled where ICR is at its lowest, | anddemand. | and meet its liabilities as they fall due over the | | occupancy and pricing | – Valuation | | net rental income would need to | | five-year period stated above. | | levels, or customer | | | reduce by 29% compared to the | In the scenarios tested, the most significant | | | defaults increase | | | year to 31 March 2022 (pro-forma | impact on the viability of the Group would be | | | leadingto a breach | | | including McKay). This represents | to liquidity headroom resulting from an inability | | | ofloan covenants. | | | a33% reduction from the net rental | to refinance both existing Workspace and | | | | | | income included in the severe | McKay facilities. To mitigate this risk, the Group | | | | | | scenario modelled. | regularly reviews funding requirements and | | maintains a close relationship with existing and potential funding partners to facilitate the Property values are – Valuation At the point in the severe scenario continuing availability of debt finance. adversely impacted by modelled that LTV is at its highest, the uncertainty in the the property valuation would need The maturity of debt facilities is spread over a economy leading to a to fall by 50% compared to the number of years to avoid a concentration of risk breach of covenants. valuation as at 31 March 2022. in one period and gearing is relatively low with LTV of 23% as at 31 March 2022. Although the Changes in the – Financing The Group’s £200m Acquisition McKay acquisition will lead to higher LTV in the economicand Facility expires in September 2023. short term the Group is committed to regulatoryUK Under the scenario modelled, the maintaining this below 30% in the medium term. environment impact Group would need to either theavailability and refinance this facility (in part) when There are a number of mitigating factors that pricing ofdebt. it expires orimplement other were not considered in the scenarios tested mitigating strategies, such as asset but which could be actioned: sales, to ensure full repayment of – Disposal of assets this facility. Further the Group’s – Cancellation or significant reduction in £200m RCF facility expires in dividend December 2024. Again, under the – Reduction in refurbishment programme scenario modelled, the Group would need to either refinance this facility when it expires or implement other mitigating strategies to ensure full repayment. 78 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack COMPLIANCE STATEMENTS CONTINUED ## Non-financial ## information statement The table below, and the information it refers to, sets out our position on non-financial reporting requirements in accordance with Sections 414CA and 414CB of the Companies Act 2006 as well as other key compliance areas. The time periods for reporting on the matters set out below have been informed by applicable law and prevailing market practice, taking into account the Group’s particular circumstances and the nature of its business. The description of our business model can be found on pages 14 to 21 and the description of our non-financial key performance indicators can be found on pages 57 to 58. RELATED PRINCIPAL RISKS POLICIES AND DUE DILIGENCE OUTCOMES OF POLICIES AND IMPACTS OF ACTIVITIES (PAGES 59 TO 66) ENVIRONMENTAL – Our Sustainability strategy sets out our commitment to operating responsibly in all our – See pages 38 to 53 for details of our See pages 87 to 89 for MATTERS dealings with our stakeholders. This is supported by an Environmental Policy and a Climate commitment to environmental matters, details of how we manage Change Policy which sets out our objectives and commitment to a co-ordinated approach including our net zero carbon pathway. climate change risk in to improving the overall environmental performance of our portfolio Our TCFD disclosure can be found on ourbusiness – Our net zero carbon pathway sets out our roadmap to becoming a net zero carbon page 81 and our green finance business by 2030 framework, along with the allocation – We disclose our climate-related risks and opportunities management processes in line with report, is on our website the TCFD recommendations | SOCIAL MATTERS – Our Sustainability strategy sets out our approach to supporting our employees, customers | | | – See pages 47 to 53 for details on how | | Social matters are not | | --- | --- | --- | --- | --- | --- | | | | and suppliers | | we are focusing on social matters, | deemed to be a principal risk | | | – Our social impact programme demonstrates our commitment to supporting communities in | | | including our real Living Wage | for the Group; however, we | | | | need across London | | commitment, our social impact | are continuing to focus on | | | – We pay our direct employees London Living Wage and in April 2022 we also brought all | | | programme and the community and | social matters through our | | | | third-party contractors onto the Living Wage | | charity projects we have supported | Sustainability strategy | | | | | | during the year | (seepages 47 to 53 for | moredetails) EMPLOYEES – Our Code of Conduct sets out the standards of behaviour expected of Group employees – See pages 24 and 47 to 48 for details of Risk 7 – Resourcing and stakeholders on behalf of the Board and demonstrates the Group’s commitment to how we looked after our employees maintaining the highest standard of ethical conduct and behaviour in our business practice during the year, including how we – We are committed to diversity and inclusion at all levels of our business. See pages 48, 176 listened to them during the year, our and 193 for more details on our Equal Opportunities Policy health and wellbeing initiatives – The Group’s Health & Safety Committee meets twice per year. The Board receives regular (including the launch of Thrive and reports and reviews our health & safety processes at least annually, and the Executive Health Shield), our diversity and Committee receives monthly reports. See pages 193 to 194 for more details on our health inclusion initiatives and our training and and safety policies and procedures development initiatives – In recognition of the importance of work life balance, in July 2021 we introduced a Hybrid – Employees receive induction training Working Policy. See page 28 for more details on our Hybrid Working Policy and regular reminders on the Code of Conduct 79 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack COMPLIANCE STATEMENTS CONTINUED NON-FINANCIAL INFORMATION STATEMENT CONTINUED RELATED PRINCIPAL RISKS POLICIES AND DUE DILIGENCE OUTCOMES OF POLICIES AND IMPACTS OF ACTIVITIES (PAGES 59 TO 66) HUMAN RIGHTS AND – Our Anti-Slavery Policy reflects our commitment to upholding human rights and eliminating – We take a zero-tolerance approach to Risk 7 – Resourcing MODERN SLAVERY all forms of forced, slave, bonded or involuntary labour both within our business and our modern slavery and other breaches of Risk 9 – Regulatory supply chain. All new employees are given training on our Anti-Slavery Policy during fundamental human rights inductions and our Employee Code of Conduct reinforces the message that we expect all – No incidences of human rights abuse or our staff to work with us to uphold our commitment to preventing modern slavery in our modern slavery have been identified business and supply chains (2021: Nil) – This year we published a Supplier Code of Conduct on our website, which sets out our expectations of our suppliers, including in respect of modern slavery and human rights. All new suppliers are expected to read and abide by the Supplier Code of Conduct – We care about, respect and support internationally proclaimed human rights. We consider the risk of modern slavery and human trafficking to be very low in our business, however, we regularly monitor and review our risk profile and emerging regulatory guidance and will take any necessary actions to improve and strengthen our practices – Our modern slavery statement is published on our website annually and is available at https://www.workspace.co.uk/investors/sustainability/our-policies Our modern slavery statement sets out the steps the Group has taken and is taking to help prevent slavery and human trafficking in our business and supply chains ANTI-BRIBERY – Our Anti-Bribery and Corruption Policy, which is reviewed by the Board annually, sets out – It is our policy to conduct all of our Risk 9 – Regulatory AND CORRUPTION the responsibilities and expectations of our employees for the prevention, detection and business in an honest and ethical reporting of bribery and other forms of corruption. The Policy also contains our Gifts and manner. We take a zero-tolerance Hospitality Policy, which requires employees to seek approval whenever offered or offering approach to bribery and corruption and a gift or hospitality valued over £20 (whether they are accepted or refused) are committed to implementing and – We make suppliers aware of our zero-tolerance approach to bribery and undertake due enforcing effective systems to counter diligence on suppliers to confirm that they are themselves committed to the prevention of bribery bribery and corruption – All staff receive training on the Anti- – Our Code of Conduct further reinforces these messages Bribery and Corruption Policy, including the Gifts and Hospitality Policy, as part of their induction and regular reminders are sent to all staff. In 2022 we introduced additional annual staff refresher training videos – No incidences of bribery or corruption have been identified (2021: Nil) 80 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack COMPLIANCE STATEMENTS CONTINUED NON-FINANCIAL INFORMATION STATEMENT CONTINUED RELATED PRINCIPAL RISKS POLICIES AND DUE DILIGENCE OUTCOMES OF POLICIES AND IMPACTS OF ACTIVITIES (PAGES 59 TO 66) POLITICAL AND – Our policy is not to make any political donations. We only make charitable donations that are – The Group did not make any political Risk 9 – Regulatory CHARITABLE legal and ethical, and made with the prior approval of the Company Secretary donations during the year (2021: Nil) DONATIONS DATA PRIVACY – We take our obligations under the retained EU law version of the General Data Protection – The Board continues to place high value Risk 9 – Regulatory Regulation (UK GDPR), the Data Protection Act 2018 and other applicable data privacy on data privacy, and privacy is legislation very seriously. We monitor guidance and practice in this area and continue to embedded throughout the organisation. embed data privacy into the heart of the business Regular reports are provided to the – We have a Data Protection Policy, as well as ancillary policies in specific areas (including Executive Committee and the Board security, data breaches, subject rights, appointment of data processors and data privacy – Staff are aware of their duties in relation impact assessments). We continue to monitor compliance with our policies and procedures to data privacy. Mandatory data and to review and update them where appropriate to reflect developing guidance protection training is provided to all andpractice staff at induction and on an annual basis, and we also provide more tailored, role-specific training to staff where appropriate – Data privacy is a key consideration whenever new projects are contemplated or changes to existing arrangements are proposed CONFLICTS – In accordance with HR policies and the Code of Conduct, employees are required to notify – Should a Director become aware that Risk 9 – Regulatory OF INTEREST the Company of any conflict of interest. The Board is also subject to these policies and is they, or their connected parties, have an regularly reminded of their duty to notify us of any interest in an existing or proposed interest in an existing or proposed transaction with the Group transaction with the Group, they are – All conflicts are recorded on a central register and we have procedures in place for required to notify the Board in writing or managing conflicts of interest verbally at the next Board meeting – During the year, no Director had any beneficial interest in any contract significant to the Group’s business, other than a contract of employment (2021: Nil) WHISTLEBLOWING – We have a Whistleblowing Policy which provides employees with information on how they – During the year under review, we did Risk 7 – Resourcing can report, anonymously if they wish, any concerns about impropriety or wrongdoing not receive any whistleblowing Risk 9 – Regulatory within the business messages (2021: Nil) – Employees have access to an independent telephone line for anonymous reporting of concerns – The Whistleblowing Policy is reviewed annually, and the Board receives updates from the Company Secretary on the operation of the whistleblowing system 81 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack COMPLIANCE STATEMENTS CONTINUED ## TCFD TCFD This year we have further evolved our ## Workspace considers climate understanding of material climate risks and opportunities, and their potential impact using ## change as a risk and a material a number of climate change scenarios. This assessment has provided us with an indepth ## issue. In line with the ‘Task Force view of the levels of risks across the portfolio ## on Climate-related Financial and helped us test the resilience of our strategy. We also have a more robust ## Disclosures’ (TCFD) understanding of the opportunities to Workspace, arising from the transition to a low ## recommendations, since 2019 carbon economy. We have used the findings of this assessment to update our approach to ## Workspace has provided risk management, implement a strategy to mitigate material risks and maximise the ## information to stakeholders opportunity. Aligned to this is our 2030 net zero carbon commitment, which ensures we ## on its climate related risks are closely managing our transition risks and building resilience within the business. ## and opportunities, in turn The following section includes our ## helping them to make comprehensive TCFD disclosures, including details on climate change scenarios and how ## informed decisions. they may affect our business in the short and long term. The information presented in this section pertains to Workspaces portfolio only and we will be including the McKay portfolio in our TCFD report next year. 1 Governance page 82 2 Strategy page 83 3 Risk management page 87 4 Metrics and Targets page 90 Solar panels at Metal Box, Borough 82 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED ## 1 Governance The role of the Board Management responsibility Our Chief Executive Officer has the highest The day-to-day management of climate level of responsibility for climate related risks related issues is managed by our Sustainability ## Board of Directors and opportunities and together with the rest of Committee. The Sustainability Committee theWorkspace Board, ensures we are ischaired by our Head of Sustainability and effectively incorporating climate related is made up of cross functional members considerations in business strategy and who head up various business departments, decision making. The Workspace Board such as development, asset management, receives a detailed update on our sustainability facilities management, investment and and climate related goals at least twice a year, support functions. The committee includes from the Executive Committee and the Head anumber of Executive Committee members, ofSustainability. During the year, the Board which ensures senior level ownership and ESG COMMITTEE AUDIT COMMITTEE considered the following climate related issues: oversight of implementation plans and delivery ofournet zero target, associated also streamlines communication to the investment plan, compliance with changes to wider Executive team and the Board. The Minimum Energy Efficiency Standard (MEES) Sustainability Committee meets monthly and and our ESG linked financing. is responsible for setting and operationalising our sustainability and climate related Going forwards, the newly established Board objectives, and hence is well positioned to ESG Committee will allow for even greater manage, report, communicate and inform EXECUTIVE COMMITTEE focus and oversight of climate-related risk our approach on climate related issues. andopportunities. We have also linked | sustainability and climate-related performance | We have embedded climate change | | --- | --- | | measures to the Executive Directors’ | considerations across the business, ensuring | | remuneration, accounting for 24% of their | there is clear oversight and accountability | | bonus weighting. See page 181 for further | at each level – at Board level, at Executive | | details. | level and at operational delivery level. | Further, all employees have sustainability This year the Board reviewed the principal risk related targets linked to their remuneration, SUSTAINABILITY COMMITTEE RISK MANAGEMENT GROUP register twice and through the Executive ensuring each of us are playing our part Committee achieved oversight of our in transitioning to a net zero business and operational risks, which include our climate building resilience for the long term. change risks. This information is provided to the Executive Committee via the Risk Management Group, comprising senior members from different parts of the business. The Risk Management Group meets monthly and is responsible for monitoring and implementing the Board’s risk management activities, including climate risk. 83 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED ## 2 Strategy | Climate change risk and opportunity | The 4°C warming scenario assumes that | Our assessment looked at two impact areas: | | --- | --- | --- | | As a responsible business, we consider climate | the markets, governments and society will | | | related risks and opportunities across all | continue business as usual with increasing | Risks related to the physical impacts of climate e.g. direct damage to property | | our portfolio and business wide activities. | adoption of energy and resource intensive | or supply chain disruption | | We have identified several physical and | lifestyles and abundant exploitation of | | | transition risks arising from climate change | fossil fuels. There will be limited action | | | and are committed to actively managing | taken to mitigate climate change in this | ACUTE CLIMATE RISKS CHRONIC CLIMATE RISKS | | these risks. Due to the nature of our business | scenario and hence as a result in the period | | Winter storm Heat stress model, Workspace are also in a position to after 2030, the physical effects of climate Tornado Precipitation capture several opportunities arising from change will begin to intensify rapidly. River flood Drought the transition to a low carbon economy. | | The 1.5°C warming scenario assumes | Flash flood Fire weather | | --- | --- | --- | | We have worked with Willis Tower Watson | proactive and sustained action to reduce | Coastal flood Sea level rise | | to identify and assess the impact of climate | carbon emissions over the next 30 years to | Hailstorm | | related risks through quantitative and | build a low carbon economy, in the form of | | Lightning | qualitative scenario analysis, considering | stringent Government policies on stricter | | --- | --- | | short term (to 2025), medium term (2025– | energy efficiency building codes and carbon | | 2030) and long term (to 2050 and beyond) | taxes. There will also likely be significant | | time horizons. Our analysis is based on two | public and private sector investment in low | Risks and opportunities related to the transition to a lower-carbon economy | pre-defined climate scenarios – a 4°C global | emissions technologies to help the global | | | | --- | --- | --- | --- | | temperature rise scenario in line with the | economy achieve net zero goals by 2050. | | | | Intergovernmental Panel on Climate Change | Overall, this scenario would result in higher | | | | | | POLICY AND LEGAL RISKS/ | – Pricing of GHG emissions | | (IPCC) Representative Concentration Pathway | transition risk in the short and medium turn. | | | | | | OPPORTUNITIES | – MEES requirements (EPC B by 2030) | | (RCP 8.5) and a 1.5°C global temperature | Given the warming over pre-industrial levels | | | – Climate Change litigation rise scenario in line with RCP 2.6. is going to be limited, the extent of physical – Enhanced emissions reporting obligations risk will only be slightly higher than it is today. – Increasingly stringent planning requirements TECHNOLOGY RISKS/ – Substitution of existing technology to lower emissions OPPORTUNITIES options MARKET RISKS/ – Change in customer demands OPPORTUNITIES – Increased cost of raw materials – Increased cost and availability of electricity – Cost of capital – Emissions offset REPUTATION RISKS/ – Investment risk OPPORTUNITIES – Employee risk 84 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED STRATEGY CONTINUED To assess the physical risks, the team at Willis rating criteria (Details of our ERM framework Tower Watson conducted an asset by asset and criteria can be found on page 87). exposure analysis for a range of climate risks at the present day, as well as for future Our analysis showed that all of London years under the selected scenarios. Data and the South East could be exposed to a used for the analysis includes state of the art mix of acute and chronic climate risks such models and databases within the insurance as flooding, windstorm, drought and heat industry (WTW Global Peril Diagnostic, stress, thereby affecting our properties as MunichRe hazard database, SwissRe CatNet), well. Heat stress will also result in increased climate models, published research and operational costs associated with higher information from IPCC. The assessment was cooling demand, although this increased further supplemented with local information cost would be significantly offset with and data that we hold on the assets. lower heating costs due to warmer winters. Overall, the analysis showed that the To assess the transition risks, we conducted impact of chronic risks would become more scenario analysis using the guidance issued evident in the long term while some impact by TCFD. The scenario used for the analysis from acute risks could be felt today. aligns with projections to keep global warming | below 1.5°C above pre-industrial temperatures | On transition risk, the impact is evident | | --- | --- | | and it was constructed based on a variety | even now, and could be significant under | | of sources including RCP 2.6 scenario from | the 1.5°C warming scenario due to stringent | | IPCC, International Energy Agency (IEA) | policy requirements, increasing customer | | and the Network for Greening the Financial | expectations and expected raw materials price | | System (NGFS). NGFS has also been used as | increases. However, through our sustainable | | a primary source for carbon price estimates. | business model we hold an advantage over | our peers and have committed to an early | Potential transition risks to Workspace were | net zero target (2030), thereby minimising | | --- | --- | | identified and articulated using academic | our risk. We are also well positioned to | | research and discussions with Workspace | capture the transition opportunities, such as | | teams (as shown in table on page 83). | operational cost efficiencies, lower cost of | | Risks were assessed in terms of impact and | capital and changing customer demands. | | probability via a series of subject matter | The table below shows the summary of | | expert interviews with Workspace teams (such | our risks and opportunities across the | | as finance, investment, technology, legal, | various time horizons and considering | | development, HR and leasing). Where the risk | the two warming scenarios. | criteria allowed for quantification, financial impacts were estimated using assumptions and likelihood assessed and aligned to our Enterprise Risk Management (ERM) risk The Leather Market, Bermondsey 85 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED STRATEGY CONTINUED SHORT TERM (TO 2025) MEDIUM TERM (2025-2030) LONG TERM (TO 2050+) Moderate transition risk resulting from: Slight increase in transition risk resulting from: Limited Transition risk in the long term, assuming the UK – MEES requirements for all commercial buildings to be – Continued MEES requirements economy has already transitioned to a low carbon world EPC B by 2030, requiring investment in energy – Increase in planning requirements, resulting in higher efficiency upgrades across the portfolio upfront investment in energy efficiency or offsetting – Changing customer demands on sustainability, requiring – Increased costs of raw materials swift adaptation of our older buildings to meet high – Increased costs associated with offsetting of scope 3 sustainability standards emissions Limited Transition opportunity in the long term, Transition opportunity arising from: Transition opportunity continues to exist due to assuming the UK economy has already transitioned to a – Operational cost savings and efficiencies from upgraded operational cost savings, customer expectations and low carbon world EPCs and implementation of low carbon technologies access to green finance – Enhanced customer attractiveness due to our ability to meet their expectations on sustainability across many of our new and refurbished buildings 1.5 °C SCENARIO – Access to green finance Smaller manageable changes in physical risks, in terms of No significant changes to current physical risks: No significant changes to current physical risks, other slightly warmer winter and drier summers, in addition to – Existing moderate exposure to windstorm than the already existing moderate exposure to windstorm the already existing moderate exposure to windstorm, – Flood risk exposure at two buildings (unrelated to changing temperature), flood risk at two flood risk at two buildings and localised flash flooding – Moderate risk from localised flash flooding across a buildings and localised flash flooding across a handful of across a handful of buildings handful of buildings buildings Transition risk non existent in this scenario, in the Transition risk non existent in this scenario, in the Failure to transition resulting in increase in physical risks: shortterm mediumterm – Continued moderate exposure to windstorm, flood risk at two buildings and localised flash flooding across a No significant changes to current physical risks, other No significant changes to current physical risks, other handful of buildings than the already existing moderate exposure to windstorm than the already existing moderate exposure to – Increased drought risk across all buildings (unrelated to changing temperature), flood risk at two windstorm, flood risk at two buildings and localised flash – Increased heat stress across all buildings, resulting in buildings and localised flash flooding across a handful of flooding across a handful of buildings increased electricity consumption for cooling by an buildings average of 1-6% at 2050s and potentially larger in the decade beyond. We also expect our heating demand to drop by 15-25% on average 4°C SCENARIO 86 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED STRATEGY CONTINUED | Strategy and financial planning | Asset management: Our flexible business | Resilience of strategy | | --- | --- | --- | | Our sustainability strategy has a key focus on | model allows us to implement a rolling | The climate scenario assessment undertaken | | climate change mitigation and adaptation, | programme of light refurbishments across the | has revealed that our overall exposure to | | ensuring we are minimising the environmental | existing portfolio, to ensure we continue to | climate related risks is fairly limited (see table | | impact of our portfolio and building resilience | improve the energy and carbon performance | on page 85). The geographic concentration | | for the long term. We are delivering on this | of all our buildings and remain compliant with | of our portfolio in London means we are | | ambition by embedding climate considerations | legislation. Our flood risk assessment has | generally well protected from acute hazards | | across the property lifecycle: Development, | also helped us prioritise adequate defences | such as river floods and irreversible sea level | | Investment and Asset Management. | and mitigation plans for exposed assets. | rise. Our transition risks are lower as well | because of our sustainable business model, | Development: As a business, our primary | Climate considerations also inform our | whereby our carbon and energy intensity is | | --- | --- | --- | | focus is on repurposing old buildings to | business financial planning. We have | lower compared to the industry average. Our | | higher standards and hence inherently our | created a comprehensive investment plan to | focus on repurposing our older buildings to | | activity is less carbon intensive than some | transition our portfolio to net zero carbon | meet high sustainability and performance | | of our peers. However, we continue to focus | and upgrade EPC to A and B (see page 44) | standards ensures we are building in resilience | | on further minimising our environmental and | and this has enabled us to forward plan | to climate factors across the portfolio. Our | | carbon impact, ensuring what we build is fit | investments on interventions such as energy | robust operational platform and onsite | | for the future. Our sustainable development | efficiency technology, decarbonising heat, | management control, allows us to proactively | | brief requires all our development and | onsite renewables and sustainable materials | manage environmental performance of our | | refurbishment projects to meet high energy | and construction practices. Considering our | assets and optimise emissions in use. | | and carbon specifications, thereby minimising | long term approach, we favour directing | | | our exposure to risks such as MEES, stringent | climate related investment on our portfolio, | Given our long term approach, coupled | | planning requirements, raw material costs | as opposed to offsetting. To ensure we have | with our flexible lease model which allows | | and increased customer demands. We also | access to capital at competitive rate, we | us to invest across our portfolio in a timely | | ensure that we test our design brief against | have also linked our financing to climate | manner and actively address climate risks, | | physical risks such as heat stress and flooding. | related criteria (£300m Green Bond and | we are confident that our strategy is resilient | | | £200m ESG-linked revolving credit facility). | against plausible climate scenarios. Further, | | Investment: We conduct sustainability due | | our pathway to become net zero carbon | | diligence prior to acquisition to assess climate | | by 2030 (see page 44), ensures we are | | related risks associated with the building and | | aligning our business to a 1.5°C warming | | forward plan the investment and interventions | | scenario and mitigating any potential risks. | required to mitigate any material risks. 87 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED ## 3 Risk management Enterprise risk management framework Identifying and assessing risk Risk management continues to be an Overall, we identify risks across two key integral part of all our activities. Risks areas: Principal Business (Strategic) risks and and opportunities are considered in every Operational risks. Climate related risks have business decision we make. We specifically been factored in both these categories. focus on key risks which could impact on the achievement of our strategic goals and The low, medium, high risk severity score is therefore on the performance of our business. determined using the following calculation: Impact x Probability, which provides a | We have an established Risk Management | weighted impact scoring, The impact is | | --- | --- | | Framework in place to help us capture, | determined on a scale from 1 (low) to | | document and manage risks facing our | 3 (severe) based on revenue, property | | business. With the integration of the Board | valuation, health & safety and reputational | | Risk Committee with the Board Audit | consequences. Probability is determined | | Committee, going forwards, the Board Audit | on a scale from 1 (unlikely) to 4 (almost | | Committee along with the full Board will have | certain), considering the likelihood of the | | overall responsibility for risk management. See | risk materialising within a five-year period. | our Risk Management Framework on page 160. The scenario analysis conducted with Willis Our aim is to manage each of our risks and Tower Watson helped us assess the level mitigate them so that they fall within the risk of exposure to climate risk and determine appetite level we are prepared to tolerate its financial materiality using a structured for each risk area. Risk appetite reflects the template to capture any impact to profit and overall level of risk acceptable with regards loss and impact to balance sheet. Depending to our principal business risks. The Board is on the extent of planned mitigation measures responsible for deciding the amount of risk it in place, as already captured in our net zero is willing to take. High risk, after considering pathway and existing business processes, the controls we have in place to mitigate risks, we were able to narrow down the key risks is not generally tolerated. We work towards a which had a level of residual impact that medium to low risk profile, ensuring that we we will continue to manage effectively. have mitigating actions in place to bring each These are captured in the table below along risk down to within the agreed risk appetite. with current mitigation strategy for the two climate scenarios we have assessed. Our Risk Management Framework is underpinned by close working relationships between the Executive Directors, senior management and other employees, whichenhances our ability to efficiently capture, communicate and action any Pill Box, Bethnal Green riskissuesidentified. 88 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED RISK MANAGEMENT CONTINUED RISK EVALUATION OF RESIDUAL RISK MITIGATION STR ATEGY ### TRANSITION RISKS AND OPPORTUNITIES – 1.5°C WARMING SCENARIO POLICY AND LEGAL – EPC – 37% of Workspace portfolio is rated C and 35% is rated D and E. Additional – Additional 30% of the portfolio will be upgraded as part of development and RATING REQUIREMENTS investment of £35–47m will be required to meet EPC A/B across the refurbishment pipeline in the next 5 years portfolio by 2030 (c. £5m annually) – For the rest of the buildings/units below EPC A and B, process is in place to – However, taking into account the annual maintenance capex for ongoing ensure EPC is upgraded as units become vacant refurbishments throughout the year, the actual additional investment – A rolling programme of EPC and Net Zero audits are being undertaken to required will be much lower than £5m a year identify asset level upgrade plans – Opportunity: There will be an opportunity arising from higher operational – Detailed investment plan is created for annual budgeting purposes savings due to upgraded environmental performance – Central register created to track EPC compliance status monthly POLICY AND LEGAL – – Workspace is currently able to meet London Plan requirement of 35% – By implementing our net zero design brief, we are able to achieve 45% INCREASINGLY STRINGENT emissions reduction over Part L. Most of our schemes achieve c. 45% savings reduction at minimal incremental cost PLANNING REQUIREMENTS – If the requirements were to get more stringent in future (say 50% reduction or – Continual tracking of planning requirements to inform our design brief inclusion of offsetting for upfront carbon at planning stage), we would need to – Strategy in place to minimise whole life carbon through responsible design design buildings differently, which could raise project costs and material choices MARKET – CHANGE IN – Based on a recent survey, nearly 20% of our customers factor in – Our net zero pathway ensures we continue to enhance our portfolio to meet CUSTOMER DEMANDS sustainability as one of the top criteria in their choice of office space changing customer demands – By 2030, our portfolio will be net zero carbon, ensuring we are well placed – Through continual collection of customer preferences and data, we intend to to meet changing customer expectations and capture more market share by proactively manage customer expectations being ahead of the peers – Improved communications with customers on our sustainability efforts – In the interim, there is some risk to our older properties which are not in the further strengthen customer satisfaction top tier of energy/carbon performance and are awaiting upgrades – Opportunity: There will also be an opportunity from increased customer demands (i.e. successful lettings, high occupancy) for our newly refurbished or developed buildings that meet high sustainability standards MARKET – INCREASED – We expect the costs of carbon intensive raw materials (such as cement, – Our focus on repurposing limits our exposure to raw materials and associated COST OF RAW MATERIALS steel) will increase in the future cost increased – Depending on our build activity in a year and percentage of cost passed on – Continued efforts to explore new materials and technologies will help further by suppliers, we estimate the additional cost of raw materials to increase by reduce embodied carbon of our developments around £1m annually (excluding inflationary increases) MARKET – EMISSIONS – Our baseline emissions footprint is around 34,000 tonnes of CO 2 . Our net zero – Continue to drive progress on our net zero pathway to achieve zero scope 1 OFFSET pathway will deliver on zero scope 1 and 2 emissions by 2030. We will however and 2 emissions have residual scope 3 emissions that will be offset to achieve net zero carbon – Continued efforts to explore new materials and technologies to reduce – Applying UCL projected cost of carbon at $50 per tonne*, this could cost us embodied carbon of our developments and hence limit offsetting needed for upto £400K annually (assuming worst case scenario for scope 3 reduction). scope 3 emissions *Source: https://www.ucl.ac.uk/news/2021/jun/ten-fold-increase-carbon-offset-cost-predicted 89 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED RISK MANAGEMENT CONTINUED RISK EVALUATION OF RESIDUAL RISK MITIGATION STR ATEGY ### PHYSICAL RISKS – 1.5°C WARMING SCENARIO WINDSTORM – Most of our buildings could be exposed to a medium risk of windstorm and – Business continuity and emergency response planning measures in place to missile impact from flying debris. The risk profile will likely remain within the minimise potential impact in case of storm warnings current levels of variability, with changing temperatures – Protection against portable and not secured items in building vicinity is being incorporated RIVER FLOOD – Flood defences provide an adequate level of protection however there are – Comprehensive flood risk management plans created for exposed assets some local areas at risk which exposes 2 of our buildings. The impacts could – Business continuity and emergency response planning measures put in place be water ingress, damage in lower floor and some level of interruption to the in case of flooding business. The risk profile does not significantly change with time or – Flood mitigation measures being incorporated in design of new projects changing temperatures – Insurance protection in place in case of physical damage or interruption LOCALISED FLASH – Whilst the precipitation stress due to heavy rainfall is likely to stay the same, – Comprehensive flash flood risk assessment being undertaken across the portfolio FLOODING a handful of our buildings could be exposed to localised flash flooding due – Business continuity and emergency response planning measures put in place to local terrain features which could cause water ingress and damage in to minimise impact in case of high precipitation warning lower floors. The risk profile is not likely to change with time or changing – Regular drainage survey being undertaken across select buildings to ensure temperatures sufficient water attenuation on site – Flood mitigation measures being incorporated in design of new projects, including blue roofs and rain water harvesting systems ### PHYSICAL RISKS – 4°C WARMING SCENARIO* DROUGHT – Under this climate scenario, London and South East of the UK could be – We are incorporating grey water reuse and recycling systems and installing exposed to drought stress, affecting all our properties. Whilst our water water efficient fittings across our buildings consumption is not material, this would result in slightly increased utility – Our landscaping has been designed to bear warmer climates in mind costs HEAT STRESS – In this scenario, by end of the century, London and South East of the UK – A rolling programme of air conditioning is being implemented across the could be exposed to medium level of exposure to heat stress resulting in the portfolio to ensure customers are comfortable in high temperatures number of heatwave days increase with over 20 days per year, thereby – Additional measures such as outdoor greenery and shade being incorporated affecting all our properties. On average, there will be an increase in our to provide ‘refuges’ in hotter weather conditions cooling demand (1–6%). The scenario will also result in milder winters, which – Review of current heating and cooling usage being undertaken to ensure we would in turn reduce our heating demand by 15–25% on average. In the short continue to optimise consumption, in response to outdoor temperatures term, heat stress will not be a significant issue despite slight increase in heatwave days * Note: Under the 4°C warming scenario – windstorm, flood risk and flash flood risk will exist as well, and potentially could edge further. However, the risk profile will not change significantly in the short-term. The mitigation strategy listed above will continue to be effective. 90 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED ## 4 Metrics and Targets | Metrics used to assess climate related risks | | Scope 1, Scope 2 and Scop3 GHG emissions | Targets used to manage climate related | | | --- | --- | --- | --- | --- | | and opportunities | | and related risks | risks and opportunities | | | To understand our climate related impact and | | Carbon emissions represent one of our largest | To reduce our carbon emissions, we | | | performance we report on a wide range of | | environmental impacts and we are actively | continue to focus on designing low- | | | consumption and intensity metrics relating | | working to reduce our sources of carbon | carbon buildings and implementing | | | to energy, carbon, waste and water, such as: | | where possible (see our net zero carbon | energy efficiency initiatives throughout | | | – Total energy consumption (page 91) | | pathway on page 41). Significant contributors | the portfolio, whilst actively engaging | | | – Total electricity consumption, including | | to our operational carbon emissions are the | with both our site staff and customers. | | | | proportion generated from renewables | electricity and gas consumed within our | | | | | (page 91) | buildings: by improving the energy efficiency | Our main target is to deliver a net zero carbon | | | – Proportion of electricity sourced from | | of our buildings we aim to reduce our overall | business by 2030. This is underpinned by | | | | renewable sources (page 41) | carbon footprint. Following an in-depth | the following emissions reduction targets: | | | – Total fuel consumed on site (page 91) | | analysis of our Scope 3 emissions, we now | – Reduce scope 1 and 2 emissions to zero by | | | – Building emissions intensity by floor area | | have a much better understanding of the | | 2030 (Note: this supersedes our previous | | | (page 91) | emissions associated with our development | | science-based targets, requiring only 42% | | – Total emissions from water consumption | | and refurbishment activities which make | | reduction in scope 1 emissions) | | – Total emissions from waste, waste recycled | | up the majority of our Scope 3 emissions. | – Decarbonise heating from our portfolio | | | | and diverted from landfill | Refer to page 91 for our Scope 1, 2 and 3 | | by2030 | | – EPC split of the portfolio by floor area | | greenhouse gas emissions data and year on | – Source 100% energy from renewable | | | | page44) | year changes (calculated using GHG protocol). | | sources | | – Number of buildings with sustainability | | | – Undertake whole life carbon assessment of | | | | certification (page 37) | | | all development and refurbishment projects | | – Number of energy efficiency projects | | | – Reduce scope 3 emissions from capital | | | | implemented and associated capital | | | goods by 20% per square foot of net | | | expenditure (pages 41 and 92) | | | lettable area by 2030, from a 2020 | | – Number of buildings exposed to flooding | | | | baseyear | (page 85) 91 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED METRICS AND TARGETS CONTINUED GREENHOUSE GAS (‘GHG’) EMISSIONS AND ENERGY USE DATA FOR STREAMLINED ENERGY & CARBON REPORTING (SECR) 2021/22 vs. | | | | | | 2019/20 | | 2021/22 | 2019/20 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Source of emissions | | | Baseline Year | | Reporting Year | | % change | | GHG/SECR | Scope 1 (Direct) 3,451 3,288 -5% | | | | | | | | | | Gas (tCO | 2 e) 2,620 2,371 -9% | | | | | | | | Emissions | Fugitive Emissions (tCO | | 2 e) 828 916 11% | | | | | | | | Vehicle Emissions (tCO | | 2 e) 3 0.54 -82% | | | | | | Scope 2 (Energy Indirect) 7,124 5,168 -27% | Electricity (location based) tCO | 2 e 7,021 5,069 -28% | | | --- | --- | --- | | Electricity (market based) tCO | 2 e 0 0 0% | | | Purchased Heat (location based) tCO | | 2 e 103* 99 -3% | Total Scope 1 &2 (Location Based) 10,575 8,456 -20% Energy Consumption used to calculate above emissions (kWh) 42,311,964 37,403,021 -12% Intensity Ratio: Net Lettable Area tCO 2 e/sq. ft. 0.003 0.002 -21% Intensity Ratio: Gross Internal Area tCO 2 e/sq. ft. 0.002 0.001 -20% Scope 3 (Other Indirect) 23,358 8,535 -63% | Purchased Electricity Transmission & Distribution (tCO | | | | | | 2 e) 596 449 -25% | | --- | --- | --- | --- | --- | --- | --- | | Customer Direct Energy (tCO | | | | 2 e) 3,265 1,765 -46% | | | | Water Supply (tCO | 2 e) 91 29 -68% | | | | | | | Water Treatment (tCO | | 2 e) 187 53 -72% | | | | | | Waste Management (tCO | | | 2 e) 82 59 -28% | | | | | Heat – Transmission & Distribution (tCO | | | | | 2 e) 7 5.2 -26% | | Embodied carbon in development projects 11,294** 4,094 -64% Purchased goods and services 7,678 1,951 -75% Employee Commuting 84 130 55% Business Travel 74 0 -100% Total Scope 1, 2 & 3 33,933 16,992 -50% Energy Consumption (KWh) 53,632,791 45,005,836 -16% Total gas use – whole building (kWh) 14,248,087 12,945,753 -9% Total electricity – whole building (kWh) 38,801,849 31,480,001 -19% Total purchased heat – whole building (kWh) 582,855 580,082 0% Total energy consumption – whole building (kWh) 53,632,791 45,005,836 -16% Self generated renewable electricity (kWh) 129,533 160,976 24% * Due to an increase in data availability and accuracy, purchased heat emissions for the baseline year has been amended from 130 tCO 2 to 103 tCO 2 . ** Whilst there is no standardised carbon emission factor for calculating embodied carbon emissions from buildings, recent industry publications along with our assessment of whole life carbon ofcurrent Workspace projects have led to a re-baselining of our 2019/20 embodied carbon emissions, using the following factors: – 1000 kgCO /m 2 for new developments. This factor refers to the non-domestic baseline embodied carbon figure on page 54 of the following document, published by the London Energy 2 Transformation Initiative: https://www.leti.london/_files/ugd/252d09_3b0f2acf2bb24c019f5ed9173fc5d9f4.pdf | – 500 kgCO | | /m | 2 for major refurbishments. A third party whole life carbon analysis of our current Leroy House project evaluated the project’s embodied carbon intensity at 231 kgCO | | | /m | 2 . | | --- | --- | --- | --- | --- | --- | --- | --- | | | | 2 | | | | 2 | | | | Weare taking a conservative approach and assuming that our historic major refurbishment projects have been at least twice more carbon intensive, hence the 500 kgCO | | | /m | 2 factor. | | | 2 – 250 kgCO /m 2 for minor refurbishments: The assumption here is that lighter refurbishment works would be less carbon intensive than major refurbishment works. This is because carbon 2 intensive structural works such as façade, cladding and glazing, are not in scope in case of minor refurbishments. 92 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED METRICS AND TARGETS CONTINUED Performance activity. There has also been a change in the METHODOLOGIES Our operational emissions have decreased number of customers and downstream leased In order to satisfy the requirements, we report both absolute emissions significantly this year. Whilst some of this assets procuring their own energy directly from andemissions as an intensity ratio, this is based on net lettable and reduction is attributed to partial lock downs suppliers. The emissions associated with waste occupiedarea. | | | last year, the main reason for reduction is our | management have decreased by 28% compared | | --- | --- | --- | --- | | | | energy monitoring programme and our | to the previous year due to the increase in | | | | investment in energy efficiency across a | recycling rate and reduction in total waste | | | | number of buildings. | generation across the portfolio. | | REPORTING PERIOD | REGULATORY | | | | | | Our scope 1 emissions have decreased by 5% | Energy Efficiency Action Taken during | | 1 April 2021 – 31 March 2022. | Part 7 of The Companies Act 2006 | | | | | | compared to 2019/20. The real driver for this | 2021/22: | (Strategic Report and Directors’ change was the reduction in our gas emissions We have proactively identified and delivered a Report) Regulations 2013. | | | due to better controls strategy and | range of energy efficiency projects across our | | --- | --- | --- | --- | | | | replacement of old gas boilers with high | portfolio (c. 30 upgrade projects across the | | | | efficiency heatpumps in a number of our | portfolio last year), such as LED and PIR lighting | | BOUNDARY | VERIFICATION | | | | | | buildings. However, our fugitive emissions | upgrades, installation of double glazing and a | | Operational control, UK only. | Verified to the international standard | | | | | | have increased slightly due to improved data | rolling programme of high efficiency heat | | Scope 1 and 2 emissions include | ISO 14064-3:2019 Specification. | | | | | | availability this year. | pumps. We have also benefited from improved | | tenant consumption where we | Limited level of assurance, based | | | | procure gas, electricity or heat on | upon a 5% materiality threshold. The | | data management and customer engagement | | | | Our scope 2 emissions (location based) have | initiatives across a number of our buildings. | | their behalf. | full assurance statement can be | | | decreased by 27% compared to the baseline found on the website. year. This is due to a number of factors, We have continued to roll out our Building including investment in energy efficiency Energy Management System (BEMS), Optergy, REPORTING STANDARDS OTHER upgrades of our buildings, decrease in the which is a smart metering technology that has World Resources Institute/World When reporting totals, the location- carbon dioxide emission factor for UK enabled real-time energy monitoring at the Business Council for Sustainable based emissions are used. electricity generation, and partial lockdown building level right down to individual plant Development Greenhouse Gas periods during last year. Note: Our market- equipment. The data provided by the BEMS is Protocol: A Corporate Accounting All market-based emissions are based electricity figure is zero because all of used by our in-house Facility Management and Reporting Standard, Revised backed by Renewable Energy the electricity we purchase is now on a teams to improve energy management Edition (the GHG Protocol). Guarantees of Origin (REGOs). renewable energy contract backed by practices and reduce GHG emissions. The World Resources Institute/World Renewable Energy Guarantees of Origin Optergy portal is now live at a number of our Business Council for Sustainable (REGOs). sites and enables us to log in to view and Development Greenhouse Gas monitor our energy consumption profiles, Protocol: Corporate Value Chain Overall, this has also led both intensity ratios down to the unit level. (Scope 3). to reduce since the baseline year. Our scope 3 emissions have decreased due to data quality improvements, particularly in calculating the embodied carbon associated with our development and refurbishment 93 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ### INTRODUCTION TO CORPORATE GOVERNANCE ## Good governance is ## fundamental to creating ## andmaintaining an effective ## sustainable business. We are ## confident that we have the ## right governance structure, ## adistinct culture and a ## clearly defined purpose. ### Stephen Hubbard ### Chairman QUICK LINKS Introduction to corporate governance page 93 Chairman’s governance letter page 98 Board leadership and company purpose page 100 Division of responsibilities page 116 Composition, succession and evaluation page 127 Audit, risk and internal control page 143 Remuneration page 162 Report of the Directors page 191 Statement of Directors’ responsibilities page 195 94 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack INTRODUCTION TO CORPORATE GOVERNANCE CONTINUEDINTRODUCTION TO CORPORATE GOVERNANCE CONTINUED ## Key governance | 139 | 131 | | --- | --- | | WHAT MAKES A | APPOINTMENT OF | | HIGH-PERFORMING BOARD | NON-EXECUTIVE DIRECTORS | ## activities Board effectiveness review Appointment of Duncan focused on what makes Owen, Manju Malhotra ahigh-performing Board and Nick Mackenzie as new Non-Executive Directors LOOK OUT FOR THESE THROUGHOUT THE REPORT: ## 140 REVIEW OF COMMITTEE Reference to another STRUCTURE page in the report Establishment of a Board Reference to further | reading online | ESG Committee | | | | --- | --- | --- | --- | | Return to last | | Duncan Owen | | | viewed page | | | Page 104 | Return to contents page | 98 | 98 | | | --- | --- | --- | | CHAIR OF THE | CHAIR OF THE | | | AUDIT COMMITTEE | REMUNERATION COMMITTEE | | | Appointment of | Appointment of | | | Rosie Shapland as Senior | Lesley-Ann Nash as Chairof | | | Independent Director and | the Remuneration Committee | | | Chair of the Audit Committee | | Manju Malhotra | Page 104 ### Our diverse Board ### has continued its ### focus on strong ### governance in its ### activities this year. Nick Mackenzie Page 105 95 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack INTRODUCTION TO CORPORATE GOVERNANCE CONTINUED ## How we comply ## with the UK Corporate ## Governance Code 2018 | ABOUT THIS REPORT | COMPLIANCE STATEMENT | | --- | --- | | The Governance section has | The Board confirms that, | | been structured around the | forthe year ended 31 March | | Code Principles (A to R). | 2022, we have complied with | all of the provisions of the UK Corporate Governance Code 2018 other than Provision 32of the Code regarding the appointment of Lesley-Ann Nash as Chair of the Remuneration Committee. Anexplanation of this can befound on page 98. The application of the Code’s Principles is evidenced throughout the Annual Report and the table overleaf shows how the Governance section has beenstructured around theCode Principles (A to R). Further information on the Code can be found on the Financial Reporting Council’s website at www.frc.org.uk. Kennington Park, Oval 96 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack INTRODUCTION TO CORPORATE GOVERNANCE CONTINUED HOW WE COMPLY WITH THE UK CORPORATE GOVERNANCE CODE 2018 CONTINUED | Board leadership | Page | Division of | Page | | --- | --- | --- | --- | | and company purpose | | responsibilities | | | | 100 | | 116 | | PRINCIPLE A | Page 102 | PRINCIPLE F | Page 117 | | --- | --- | --- | --- | | A successful company is led by an effective and | Our Board | The chair leads the board and is responsible for | Board roles and responsibilities | | entrepreneurial board, whose role is to promote | | itsoverall effectiveness in directing the company. | | | | Page 131 | | Page 98 | | the long-term sustainable success of the company, | Board succession and appointment of | They should demonstrate objective judgement | Chairman’s governance letter | | generating value for shareholders and contributing | new Non-Executive Directors | throughout their tenure and promote a culture | | Page 139 | to wider society. | | ofopenness and debate. In addition, the chair | | | --- | --- | --- | --- | | | Page 139 | | Board evaluation | | | Board evaluation | facilitates constructive board relations and the | | effective contribution of all non-executive directors, and ensures that directors receive PRINCIPLE B Page 4 accurate, timely and clear information. The board should establish the company’s purpose, Our purpose in action values and strategy, and satisfy itself that these Page 32 and its culture are aligned. All directors must act PRINCIPLE G Page 117 Our strategy with integrity, lead by example and promote the The board should include an appropriate Board roles and responsibilities Page 36 | desired culture. | | combination of executive and non-executive (and, | | | --- | --- | --- | --- | | | Sustainability | | Page 120 | | | | in particular, independent non-executive) directors, | Non-Executive Directors | such that no one individual or small group of Page 122 PRINCIPLE C Page 14 individuals dominates the board’s decision making. The relationship between the Board The board should ensure that the necessary Our business model There should be a clear division of responsibilities and Executive Committee resources are in place for the company to meet its between the leadership of the board and the Page 119 objectives and measure performance against them. Our Governance framework executive leadership of the company’s business. The board should also establish a framework of Page 155 prudent and effective controls, which enable risk Risk Committee Report PRINCIPLE H Page 117 tobe assessed and managed. Page 59 Non-executive directors should have sufficient time Board roles and responsibilities Principal risks and uncertainties to meet their board responsibilities. They should Page 120 provide constructive challenge, strategic guidance, Non-Executive Directors offer specialist advice and hold management PRINCIPLE D Pages 23 and 107 toaccount. In order for the company to meet its responsibilities Our stakeholders to shareholders and stakeholders, the board should Page 113 ensure effective engagement with, and encourage Section 172(1) statement PRINCIPLE I Page 119 participation from, these parties. The board, supported by the company secretary, Our Governance framework should ensure that it has the policies, processes, Page 125 information, time and resources it needs in order Information flow to the Board PRINCIPLE E Page 4 tofunction effectively and efficiently. The board should ensure that workforce policies Our purpose in action and practices are consistent with the company’s Page 36 values and support its long-term sustainable Sustainability success. The workforce should be able to raise Page 80 anymatters of concern. Whistleblowing Policy 97 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack INTRODUCTION TO CORPORATE GOVERNANCE CONTINUED HOW WE COMPLY WITH THE UK CORPORATE GOVERNANCE CODE 2018 CONTINUED | Composition, | Page | Audit, risk and | Page | Remuneration | Page | | --- | --- | --- | --- | --- | --- | | succession | | internal control | | | | | | 127 | | 143 | | 162 | ## and evaluation | PRINCIPLE J | Page 131 | PRINCIPLE M | Page 143 | PRINCIPLE P | Page 164 | | --- | --- | --- | --- | --- | --- | | Appointments to the board | Board succession and | The board should establish | Audit Committee Report | Remuneration policies and | Remuneration Committee | | should be subject to a formal, | appointment of new | formal and transparent policies | | practices should be designed to | Chair letter | Non-Executive Directors | rigorous and transparent | | and procedures to ensure the | support strategy and promote | Page 166 | | --- | --- | --- | --- | --- | | procedure, and an effective | Page 136 | independence and effectiveness | long-term sustainable success. | Remuneration ataglance | | succession plan should be | Inclusion and diversity | of internal and external audit | Executive remuneration | | Page 171 maintained by the board and functions and satisfy itself on shouldbe aligned to company Our remuneration policy senior management. Both the integrity of financial and purpose and values, and be appointments and succession narrative statements. clearly linked to the successful plans should be based on merit delivery of the company’s and objective criteria and, within long-term strategy. this context, should promote diversity ofgender, social and ethnic backgrounds, cognitive and personal strengths. | PRINCIPLE K | Page 134 | PRINCIPLE N | Page 151 | PRINCIPLE Q | Page 164 | | --- | --- | --- | --- | --- | --- | | The board and its committees | Board composition | The board should present a fair, | Fair, balanced and | A formal and transparent | Remuneration Committee | | should have a combination of | | balanced and understandable | understandable | procedure for developing policy | Chair letter | assessment | skills, experience and knowledge. | assessment of the company’s | on executive remuneration | Page 171 | | --- | --- | --- | --- | | Consideration should be given | position and prospects. | anddetermining director | Our remuneration policy | | tothe length of service of | | andsenior management | | | theboard as a whole and | | remuneration should be | | | membership regularly refreshed. | | established. No director should | | be involved in deciding their own remuneration outcome. | PRINCIPLE L | Page 139 | PRINCIPLE O | Page 119 | PRINCIPLE R | Page 164 | | --- | --- | --- | --- | --- | --- | | Annual evaluation of the board | Board evaluation | The board should establish | Our governance | Directors should exercise | Remuneration Committee | | should consider its composition, | | procedures to manage risk, | framework | independent judgement and | Chair letter | | diversity and how effectively | | oversee the internal control | Page 155 | discretion when authorising | Page 176 | | members work together to | | framework, and determine | Risk Committee Report | remuneration outcomes, | Our approach to fairness | | achieve objectives. Individual | | thenature and extent of the | | takingaccount of company | and wider workforce | Page 59 considerations evaluation should demonstrate principal risks the company Principal risks and andindividual performance, whether each director continues iswilling to take in order to uncertainties and wider circumstances. to contribute effectively. achieve its long-term strategic objectives. 98 Workspace Group PLC Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents # INTRODUCTION TO CORPORATE GOVERNANCE CONTINUED 7 June 2022 # Chairman's Governance Letter Our governance framework is fundamental to the way we operate and sets the tone and standards for our business. I am pleased to introduce our Corporate Governance Report for the year ended 31 March 2022. The Board remains committed to maintaining effective corporate governance and integrity, enabling us to deliver our strategy for the long-term benefit of our stakeholders. # Board and Committee changes During the year, we have continued to focus on Board succession to ensure that we have the appropriate balance of skills, experience and diversity in order to support the business. The Board has been further strengthened by the addition of three new Non-Executive Directors, Duncan Owen, Manju Malhotra and Nick Mackenzie, during the year. Each of our new Directors perform executive roles and are CEOs running businesses in the property, retail and hospitality sectors. They bring a fresh and complementary perspective to an existing Board of Directors, who already bring valuable expertise and knowledge, from diverse roles in property, finance and government. These appointments were the subject of a formal, rigorous and transparent process led by the Nominations Committee. More information on this and the induction programme for each of our new Directors can be found on page 133. Chris Girling retired from the Board in February 2022. I would like to thank Chris for his valued contribution to the Board over the last nine years and his considered chairmanship of the Audit Committee and the significant insight and support he provided as Senior Independent Director. Rosie Shapland was appointed as our Senior Independent Director in February 2022 and assumed the role of Chair of the Audit Committee after the AGM in July 2021. Lesley-Ann Nash formally joined the Remuneration Committee on 19 January 2021 and was subsequently appointed as Chair of the Remuneration Committee, with effect from 10 September 2021. While we note the Code requirement that remuneration committee chairs should have served on a remuneration committee for at least 12 months prior to their appointment, we have every confidence that Lesley-Ann has the capability to carry out the role. The Board was satisfied that, on appointment as Remuneration Committee Chair, Lesley-Ann had the skills and experience required for the role, based on her strong contribution over nine months as a member of the Remuneration Committee. Damon Russell will have served nine years on the Board in May 2022, and so will retire at our 2022 AGM. On behalf of the Board, I would like to thank Damon for his strong contribution to the business over the years. Suzi Williams stepped down from the Board in September 2021 and I would like to take this opportunity to thank Suzi for her contribution during her time on the Board. We have also reviewed our membership of our Board Committees. More information can be found on pages 119, 140 and 157. # Board performance and effectiveness During the year, the performance and effectiveness of the Board was reviewed as part of the annual Board evaluation process, supported by Fidelio. The Board decided to take a new approach to the 2022 Board evaluation with a particular focus on what it means to be a high-performing board and how the Board can add value to the Company. This approach was taken in order to leverage the momentum and potential of a relatively new Board, following the appointment of three new Non-Executive Directors in the financial year and two in the prior year. Building on Fidelio's work in 2021, this evaluation was designed to highlight meaningful insights as to how the Board can further enhance performance and effectiveness, allowing it to continue to be a high-performing Board. For more information on our Board evaluation see page 139. 99 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack INTRODUCTION TO CORPORATE GOVERNANCE CONTINUED Environmental, Social and Governance (ESG) I am pleased with the progress we have made on further developing our Our approach to sustainability goes above and beyond being a corporate governance, including evolving our Board and Committees and responsible business. We believe sustainability is fundamental to the engaging with our stakeholders, and we will continue our strong focus long-term success of our business, as evidenced by increasing customer ongovernance. expectations and the urgent need to future proof our business against theimpacts of climate change. Hence it is important that we proactively manage our environmental, social and governance risks and opportunities. We achieve this through our fully embedded approach to sustainability, across our corporate operations, portfolio-wide activities and, of course, as key pillars of our strategy and business model. Our Executive team Stephen Hubbard CHAIRMAN’S andall employees have clear ESG objectives linked to our targets. Non-Executive Chairman GOVERNANCE 7 June 2022 LETTER CONTINUED We made the commitment to be net zero carbon by 2030, two decades earlier than the UK Government’s net zero target. Despite the challenges ofthe pandemic and market volatility, we have continued to progress ournet zero pathway and made significant reductions in our emissions this year. We feel confident that, with our clear and robust pathway, We continue to attract, wewill meet our net zero targets whilst maximising shareholder returns. inspire and engage a talented and diverse We know that, as market leaders in our industry, as custodians of some workforce. We recognise ofthe most iconic buildings in London and as home to some of London’s thatour employees are brightest businesses, we need to be ambitious in driving our sustainability essential to the delivery of agenda forward. With this in mind, we have decided to establish a Board our strategy and we remain ESG Committee. Further details can be found on page 119. well positioned for further sustainable growth. Employee engagement In my role as Director responsible for employee engagement, I have continued to meet with employees, on a regular basis. Breakfast sessions are hosted in small groups across a variety of our business centres. Theseinclude a diverse group of people representing a cross-section ofthe Company. Ideas discussed are fed back to the Board and ultimately help inform improvements to the business. 100 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ### BOARD LEADERSHIP AND COMPANY PURPOSE ## Strong leadership from ## the Board enables the ## Executive Committee ## to focus on delivering ## the Group’s strategic ## objectives. ### Graham Clemett ### Chief Executive Officer QUICK LINKS Attendance at Board and Committee meetings page 101 Our Board page 102 Board and Committee membership page 105 101 Workspace Group PLC^{}[] Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents # BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED ## Membership and attendance at Board and Committee meetings The Board comprises the CEO, CFO and Non-Executive Directors and is chaired by Stephen Hubbard. Details of individual attendance at Board meetings held during the year are set out below. More information on the skills and experience of the Board members can be found on pages 102 to 105. | | BOARD | AUDIT | REMINERATION | RISK | NOMINATIONS | | --- | --- | --- | --- | --- | --- | | Stephen Hubbard | 12/12 | — | 8/8 | — | 6/6 | | Graham Clemett | 12/12 | — | — | — | — | | Dave Benson | 12/12 | — | — | — | — | | Damon Russell | 12/12 | 3/3 | — | 3/3 | 6/6 | | Rosie Shapland^{1} | 12/12 | 3/3 | 8/8 | 3/3 | 6/6 | | Lesley-Ann Nash^{2} | 12/12 | 3/3 | 8/8 | 3/3 | 6/6 | | Duncan Owen^{3} | 9/12 | 2/3 | — | — | 3/6 | | Manju Malhotra^{4} | 2/12 | 1/3 | — | — | 1/6 | | Nick Mackenzie^{4} | 2/12 | 1/3 | — | — | 1/6 | | Chris Girling^{5} | 11/12 | 2/3 | — | 3/3 | 5/6 | | Suzi Williams^{6} | 4/12 | 1/3 | 5/8 | — | 3/6 | 1. Rosie Shapland was appointed as Chair of the Audit Committee on 22 July 2021. 2. Lesley-Ann Nash was appointed as Chair of the Remuneration Committee on 10 September 2021. 3. Duncan Owen was appointed to the Board on 22 July 2021 and attended his first Board and Committee meetings in July 2021. 4. Manju Malhotra and Nick Mackenzie were appointed to the Board on 26 January 2022. Manju and Nick attended their first Board and Committee meetings in February 2022. 5. Chris Girling stepped down from the Board on 7 February 2022. 6. Suzi Williams stepped down from the Board on 10 September 2021. ## Key topics considered by the Board during the year # **BOARD APPOINTMENTS** Approved the appointment of three new Non-Executive Directors: Duncan Owen, Manju Malhotra and Nick Mackenzie (see page 131). # **ACQUISITIONS** Approved the recommended offer for McKay Securities PLC and the acquisitions of The Old Dairy and Busworks (see page 109). # **SUSTAINABILITY** Reviewed and affirmed the Company's sustainability strategy (see page 111). # **BOARD EFFECTIVENESS REVIEW** Participated in this year's Board effectiveness review, which saw each Board member completing an evaluation questionnaire which then formed the basis for a discussion on the qualities that make a high-performing Board (see page 139). # **WORKSPACE INCLUSIVE** Reviewed and approved the Group's new inclusive billing initiative, Workspace Inclusive (see page 115). # **STRATEGY** Held its strategy day in September 2021 where it considered a variety of topics, including sustainability ambitions, people and culture and operational priorities. 102 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED CHAIRMAN EXECUTIVE DIRECTORS ## Our Board ## Stephen Graham ## Hubbard Clemett INDEPENDENT CHIEF EXECUTIVE OFFICER NON-EXECUTIVE DIRECTOR Led by our Chairman, Stephen Hubbard, COMMITTEE MEMBERSHIP RELEVANT SKILLS COMMITTEE MEMBERSHIP RELEVANT SKILLS the Board provides the leadership AND BUSINESS EXPERIENCE AND BUSINESS EXPERIENCE of the Company and is collectively Stephen has many years’ Graham has detailed responsible and accountable to APPOINTED experience of operating APPOINTED knowledge of the Company’s shareholders for the Company’s Board: July 2014 within the property sector. He Board: July 2007 operations and extensive long-term success, strategy, values, Chairman: July 2020 was previously Chairman of CEO: September 2019 experience of the property culture, control and management. CBRE UK until he retired in sector gained through his Further information on the relevant | | CURRENT EXTERNAL | December 2019, having joined | CURRENT EXTERNAL | 15 years’ experience with | | --- | --- | --- | --- | --- | | skills and experience of each of the | APPOINTMENTS | | APPOINTMENTS | | | | | Richard Ellis in 1976 and held | | the Group, having joined | | Directors can be found on page 135. | Stephen is a member of | | Graham is currently | | | | | the position of Head of EMEA | | as CFO in 2007. Prior to | | | the advisory board of | and UK Capital Markets from | theSenior Independent | joining the Group, he was | | | Redevco, a pan-European | 1998 to 2012. He was also | Non-Executive Director | Finance Director for UK | | | property holding company. | previously Non-Executive | and Chairman of the | Corporate Banking at RBS | | | | Chairman of LXI REIT PLC. | Audit Committee at The | Group plc and before that | | | | He has an outstanding track | Restaurant Group PLC. | spent 8 years at Reuters | COMMITTEE MEMBERSHIP record in the investment Group plc, latterly as Group Audit Committee market and has advised on Financial Controller. Graham Remuneration Committee several landmark transactions has extensive experience in Risk Committee involving international leadership and management, capital. Stephen has a broad strong commercial, strategic Nominations Committee range of knowledge and and communication skills, Executive Committee experience at board level, extensive investor relations Investment Committee including leadership and experience and strong Disclosure Committee executive management, financial skills with significant Chair operation of public experience of financing companies, regeneration and and capital raising. He is development projects, as aChartered Accountant. well as strong financial skills. 103 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED OUR BOARD CONTINUED NON-EXECUTIVE DIRECTORSEXECUTIVE DIRECTORS CONTINUED ## Dave Rosie Damon ## Benson Shapland Russell CHIEF FINANCIAL OFFICER SENIOR INDEPENDENT INDEPENDENT NON-EXECUTIVE DIRECTOR AND NON-EXECUTIVE DIRECTOR CHAIR OF THE AUDIT COMMITTEE | COMMITTEE MEMBERSHIP | RELEVANT SKILLS | COMMITTEE MEMBERSHIP | | RELEVANT SKILLS | COMMITTEE MEMBERSHIP | RELEVANT SKILLS | | --- | --- | --- | --- | --- | --- | --- | | | AND BUSINESS EXPERIENCE | | | AND BUSINESS EXPERIENCE | | AND BUSINESS EXPERIENCE | | | Prior to joining Workspace, | | | Rosie is a Chartered | | Damon co-founded Telecom | | APPOINTED | Dave was the Corporate | APPOINTED | | Accountant and was | APPOINTED | Express, which was sold | | | Finance Director of | | 1 | previously an audit partner | | to AMV BBDO, part of the | | April 2020 | | November 2020 | | | May 2013 | | | | Whitbread PLC. He previously | | | at PwC. She has many years’ | | Omnicom Group. Damon | | | held senior finance roles at | | | experience of operating | | was also previously Non- | | CURRENT EXTERNAL | Kier Group plc and Keller | CURRENT EXTERNAL | | within the finance sector | CURRENT EXTERNAL | Executive Director of | | APPOINTMENTS | Group plc, having qualified | APPOINTMENTS | | as well as a broad range | APPOINTMENTS | iannounce before its merger | | Dave does not have | as a Chartered Accountant | Rosie is currently a Non- | | of public company Board | Damon holds advisory | with Legacy.com. He has | | any current external | with Deloitte. He has strong | Executive Director at | | experience, as well as | roles for a number of | over 35 years’ experience | | appointments. | financial skills, having gained | Foxtons Group plc, where | | experience of governance, | private companies in the | in the telecommunications | | | experience in a series of | she is Chair of their Audit | | risk management, investment | digital media, sport and | and telemarketing industry. | | | dynamic businesses as well | Committee and a member | | and corporate transactions | educational sectors. He is | He has extensive digital | | | as a good understanding | of their Remuneration and | | and strong financial skills. | currently Chairman of New | and media technology | | | of technology and its | Nomination Committees, | | | Telecom Express Group, a | experience, strong | | | commercial applications, | and PayPoint plc, where | | | media service provider, and | strategic and commercial | | | strong communication | she is Chair of their Audit | | | a Director of its The Dating | understanding, significant | | | and leadership skills. He | Committee and a member | | | Lab subsidiary, a business | experience in alliances, | | | has experience in strategy | of their Nomination and | | | that provides online dating | ventures and partnerships | | | development, infrastructure | Remuneration Committees. | | | services to some of the | and knowledge of service- | | | and development projects, | | | | world’s leading media brands. | related industry requirements | | | corporate transactions, | | | | In 2019 he jointly founded | and key client relationships. | | | acquisitions and integrations, | | | | Fan19, a global digital sports | | | | investor relations and | | | | fan engagement group. | | detailed knowledge of risk management and internal control systems. 1. Rosie was appointed Senior Independent Director in February 2022 and Chair of the Audit Committee in July 2021. 104 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED OUR BOARD CONTINUED NON-EXECUTIVE DIRECTORS CONTINUED ## Lesley-Ann Duncan Manju ## Nash Owen Malhotra INDEPENDENT NON-EXECUTIVE INDEPENDENT INDEPENDENT DIRECTOR AND CHAIR OF THE NON-EXECUTIVE DIRECTOR NON-EXECUTIVE DIRECTOR REMUNERATION COMMITTEE | COMMITTEE MEMBERSHIP | RELEVANT SKILLS | COMMITTEE MEMBERSHIP | RELEVANT SKILLS | COMMITTEE MEMBERSHIP | RELEVANT SKILLS | | --- | --- | --- | --- | --- | --- | | | AND BUSINESS EXPERIENCE | | AND BUSINESS EXPERIENCE | | AND BUSINESS EXPERIENCE | | | Lesley-Ann was previously | | Duncan has 30 years’ | | Manju joined Harvey Nichols | | APPOINTED | a Director in the Cabinet | APPOINTED | experience in the real estate | APPOINTED | in 1998 and progressed | | January 2021 | Office of HM Government | July 2021 | sector. He was previously the | January 2022 | through various roles, | | | and a Managing Director at | | CEO of Invista Real Estate | | including CFO and co-COO, | | | Morgan Stanley, as well as | | Investment Management | | before her appointment | | CURRENT EXTERNAL | having previously worked | CURRENT EXTERNAL | PLC and then Global Head | CURRENT EXTERNAL | as CEO. She has extensive | | APPOINTMENTS | at UBS and Midland Bank. | APPOINTMENTS | of Real Estate at Schroders | APPOINTMENTS | experience in customer-focus, | | Lesley-Ann is a Non- | She has deep global capital | Duncan is CEO of Immobel | plc before stepping down at | Manju is CEO at Harvey | developing a values-led | | Executive Director of St. | markets experience on | Capital Partners, which is | the end of 2020. He has a | Nichols, the luxury | culture, strategy, operations, | | James’s Place plc, where | both buy and sell sides, | a pan-European specialist | wealth of experience in the | department store, and a Non- | finance and technology. She | | she is a member of their | extensive knowledge | ‘Green’ real estate investor | real estate sector, including | Executive Director at London | is a Chartered Accountant. | | Risk and Remuneration | of central and local | in the office and residential | a deep understanding of the | & Partners, an international | | | Committees. She is also a | government and experience | sectors, and a Senior Advisor | central London office sector. | trade and investment | | | member of the Boards of | of policy development, | to Sellar. He is also on the | | agency for London. | | | Homes England and London | procurement and major | Board of Governors for | | | | | First. She has stepped | programme delivery and a | the Church Commissioners | | | | | down from the Board of | track record of promoting | and Chair of their Property | | | | | North London Hospice. | inclusion and diversity | Investment Committee. | | | | and delivering meaningful cultural change, as well as public company board experience. She also has deep financial fluency gained as a fellow of the Chartered Institute of Management Accountants (CIMA). 1. Lesley-Ann was appointed Chair of the Remuneration Committee in September 2021. 105 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED OUR BOARD CONTINUED OUR BOARD CONTINUED NON-EXECUTIVE DIRECTORS CONTINUED COMPANY SECRETARY BOARD AND COMMITTEE MEMBERSHIP AS AT 31 MARCH 2022 ## Nick NOMINATIONS AUDIT REMUNERATION RISK EXECUTIVE INVESTMENT DISCLOSURE BOARD COMMITTEE COMMITTEE COMMITTEE COMMITTEE COMMITTEE COMMITTEE COMMITTEE ## Mackenzie Chairman INDEPENDENT STEPHEN HUBBARD Non-Executive Chairman NON-EXECUTIVE DIRECTOR Executive Directors GRAHAM CLEMETT Chief Executive Officer DAVE BENSON Chief Executive Officer Non-Executive Directors COMMITTEE MEMBERSHIP RELEVANT SKILLS Carmelina Carfora ROSIE SHAPLAND AND BUSINESS EXPERIENCE Senior Independent Company Secretary Non-Executive Director Prior to joining Greene King, APPOINTED Nick spent 17 years at Merlin APPOINTED DAMON RUSSELL Non-Executive Director January 2022 Entertainments plc, most March 2010 recently as Managing Director LESLEY-ANN NASH of Midway Attractions, the Non-Executive Director CURRENT EXTERNAL largest division within the Carmelina is Secretary APPOINTMENTS DUNCAN OWEN group, having started his to the Board and its Non-Executive Director Nick is CEO at Greene King, career in pubs at Bass and Nominations, Remuneration the pub retailer and brewer. Allied. He was also previously MANJU MALHOTRA and Audit Committees, Non-Executive Director a Non-Executive Director monitoring compliance with at Daniel Thwaites PLC. He procedures and providing NICK MACKENZIE Non-Executive Director has significant expertise advice on governance in strategy, real estate and matters. At the direction Members of the Executive Committee business development of the Chairman, she is ANGUS BOAG and experience of public responsible for making Development Director company boards. sure the Board receives accurate, timely and relevant CLAIRE DRACUP Director of People and Culture information. She also co- ordinates the induction of WILL ABBOTT Chief Customer Officer new Board members and the provision of ongoing RICHARD SWAYNE training and development Investment Director of the Board. Carmelina’s PAUL HEWLETT other responsibilities include Director of Strategy & Corporate corporate governance, Development compliance with legislation CARMELINA CARFORA and the administration Company Secretary of share schemes. LEO SHAPLAND Head of Portfolio Management 106 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED ## Board activities 2021/22 ## 1 Strategy ANNUAL STRATEGIC REVIEW COVID-19 ## The Board considers a variety of matters STAKEHOLDERS STAKEHOLDERS ## and topics throughout the year. | The Board held its annual strategic review | Health and safety remained the highest | | --- | --- | | inSeptember 2021 to approve the five-year | priority of the Board throughout this year, as | | plan. External speakers and members of the | Covid-19 continued to impact UK businesses. | | Executive Committee joined the Board to | The Board was kept up to date with new | | stimulate discussion in a number of areas, | Covid-19-related legislation and guidance | | including the Group’s sustainability | affecting the Company at all times and has | | ambitions, people and culture and | been in regular dialogue with the Executive | | operational priorities. Following the strategy | Committee on the steps being taken to make | | day, several ideas and initiatives were | our business centres safe for our employees, | | developed for incorporation into the | customers and suppliers. Risk assessments | | business plan. | relating to the use of our head office and | business centres were regularly updated to Our strategy, Page 32 take into account changing law and guidance. Further information on the measures taken can be found on pages 59 and 194. The Board has also continued to monitor KEY TO STAKEHOLDERS ACTIVITIES the impact of Covid-19 and home working on our employees. Our staff have been kept Our customers up to date with our Covid-19 policies and Our people 1 Strategy page 106 procedures through central communications Our investors 2 Stakeholders page 107 and through their line managers and a hybrid Our partners and suppliers working policy was implemented to formalise Our communities 3 Purpose, values & culture page 109 some of the flexibility. More details on the The environment hybrid working policy can be found on 4 Operations page 109 page24. 5 Finance page 110 Health and safety activities, Pages 193 to 194 6 Reporting page 110 7 Risks page 110 8 Succession page 111 9 ESG page 111 10 Governance page 112 107 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED BOARD ACTIVITIES 2021/22 CONTINUED ## 2 Stakeholders INVESTOR ENGAGEMENT OUR INVESTOR RELATIONS CALENDAR OF EVENTS STAKEHOLDERS | | | | INVESTOR | INVESTOR | | --- | --- | --- | --- | --- | | We regularly seek the views of shareholders, | Our Annual Report is available to all shareholders. | 2021/22 EVENT | MEETINGS | TOURS | | and we have an active and constructive | We aim to make our Annual Report available to | | | | APRIL a universal audience. Shareholders can opt to UK investor conference dialogue with them. The Board reviews amonthly investor relations report which receive a hard copy in the post orPDF copies MAY Capital Markets Day on brand and marketing includes any notable views expressed by via email or from our website. Additionally, if a investors during engagement as well as shareholder holds their shares via a nominee Q4 Business Update recording movements in the shareholder account and encounters difficulty receiving our register. Our Investor Relations team manages Annual Report via their nominee provider, they JUNE Full-year results a comprehensive calendar of engagement, are welcome to contact the Company including formal announcements, conference Secretary to request a copy. Investor roadshow calls, roadshows, AGM and events, as well JULY AGM & Q1 Business Update asad hoc outreach contact with financial Our investor website is www.workspace.co.uk/ analysts, business media, investors, private investors. It contains our Annual Reports, half- AUGUST client fund managers, retail investors and and full-year results presentations and our equity sales teams to make sure that our financial and dividend calendar for the upcoming SEPTEMBER Half-year end | strategy and value creation are well understood | year. Our website also outlines our company | | | | --- | --- | --- | --- | | | strategy, business model, property portfolio and | OCTOBER | | | by both shareholders and influencers. | | | Q2 Business Update | has a detailed section covering our ESG activities. NOVEMBER During 2021/22, we engaged with 264 Half-year results institutional investors via virtual meetings If shareholders have any concerns, which the Investor roadshow orcalls. Investor meetings are attended by normal channels of communication to the CEO, various senior executives, including the CEO, CFO or Chairman have failed to resolve, or for DECEMBER CFO, Chairman and Executive Committee which contact is inappropriate, then our Senior members, as well as the Head of Investor Independent Director, Rosie Shapland, is JANUARY Q3 Business Update Relations and the Group Financial Controller. available to address them. Contact details for We regularly participate in industry and our Investor Relations team, Company Secretary UK investor conference property conferences globally. We hosted and Company Registrars are available on page FEBRUARY two virtual investor events. 237 of this report as well as on our website. MARCH Year end Our 2021 AGM was held on 22 July 2021 and all resolutions passed with over 90% of votes Investor meetings to discuss McKay offer in favour. Our 2022 AGM will be held on 21 July 2022 at Edinburgh House, 170 Kennington Lane, London SE11 5DP and we look forward to welcoming our shareholders there. 108 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED BOARD ACTIVITIES 2021/22 CONTINUED STAKEHOLDERS CONTINUED EMPLOYEE ENGAGEMENT BUSINESS RELATIONSHIP ENGAGEMENT STAKEHOLDERS STAKEHOLDERS The Board recognises the crucial importance Positive relationships with our customers, of our employees to the success of the suppliers and other business partners are Group. Throughout the year the Board meets essential to the Group’s ongoing success. and receives feedback from a wide range of Customer-facing teams provide daily employees across the business. The Board feedback from customers while views from and Executive Committee review and suppliers and partners are captured by approve key policies, practices and strategic dialogue with the relevant business team. decisions, making sure that they align to the These views from our customers, suppliers Group’s key values and purpose. During the and partners are collated and fed back to the year there were also five tours arranged for Board, and incorporated into decision making. our Non-Executive Directors to visit our Business relationship engagement, business centres and meet employees. Pages 23 and 25 Stephen Hubbard, our designated Non- COMMUNITY AND Executive Director for employee ENVIRONMENT ENGAGEMENT engagement, has continued to host quarterly breakfast engagement sessions as well as STAKEHOLDERS other formal and informal meetings with staff across our head office and business centres. The Board remains committed to reaching The CEO also provided regular updates our target of becoming a net zero carbon through town hall events where employees business by 2030. This year, the Board are encouraged to submit questions. approved our new ESG-linked RCF and affirmed the Company’s sustainability Employee engagement, strategy. AllnewBoard members receive an Page 24 induction on theGroup’s approach to sustainability. TheBoard reviews regular updates from oursustainability team, and this year topics included our sustainability strategy. The Board is also regularly updated on our community and social impact work and our fundraising activities for our charity partner, Single Homeless Project. Sustainability activities, Page 26 Community engagement, Page 26 Kennington Park, Oval 109 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED BOARD ACTIVITIES 2021/22 CONTINUED ## 3 Purpose, values and culture 4 Operations | PURPOSE | VALUES | ASSET MANAGEMENT | PORTFOLIO GROWTH | | --- | --- | --- | --- | | STAKEHOLDERS | STAKEHOLDERS | STAKEHOLDERS | STAKEHOLDERS | | Our purpose is to give businesses the | Our purpose informs our values: ‘know your | The Board receives regular updates on asset | The Board approved the Group’s | | freedom to grow. Our purpose provides | stuff’, ‘show we care’, ‘find a way’ and ‘be | management and leasing activities. This year, | recommended offer for McKay Securities PLC, | | theframework for making decisions and | alittle bit crazy’. The Board encourages all | the focus has continued to be on supporting | which was announced in March 2022 and | | engaging with our stakeholders. The Board | employees to live our values in their work | customers as they returned to our business | completed on 6 May 2022. Read more about | | sets the Group’s strategy and makes | forthe Group and especially in their dealings | centres and maintaining appropriate | our acquisition of McKay Securities PLC on | | decisions through the lens of our purpose. | with each other and our other stakeholders. | cleanliness and social distancing measures. | pages 13, 16, 74 and 114. | | | Graham Clemett, CEO, sits on the judgement | Read more about our engagement with | | | During the year under review, the Board | panel for our employee recognition | customers on page 23. | During the year the Board also approved | | hascontinued to monitor how our purpose | programme, Workspace Winners, where | | theacquisitions of The Old Dairy and | | is articulated and understood by our | employees are given awards and prizes for | The Board also discussed our new brand | Busworks, adding 57,000 and 104,000 sq. ft. | | customers, employees, investors and other | demonstrating one or more of our values. | and social media campaigns. In May 2021, | of net lettable space to the portfolio | | stakeholders, and how our values and culture | | our ‘Working from Workspace’ campaign | respectively. The Board also approved the | | are embedded throughout our business. | | was launched to coincide with the reduction | disposal of 13–17 Fitzroy Street and Highway, in | | This is achieved through regular engagement | | of restrictions and anticipated return to the | order to recycle capital into other projects and | | with our stakeholders, more information on | | office. This was followed in September 2021 | opportunities which we believe will generate | | which can be found on pages 23 to 26. The | | with a campaign focusing on ‘Space Matters’. | superior value for shareholders. Read more | | Board also approves the Group’s key policies | | | about our acquisitions this year on pages 16 | | and practices so that they underpin our | | | and 114. | purpose. The Executive Committee is | responsible for communicating these policies | | | The Board is also provided with regular updates | | --- | --- | --- | --- | | | Values, Page 20 | Brand campaigns, Page 33 | | | throughout our business. | | | on planned refurbishment and development | projects. This year, key development projects Purpose, Page 4 CULTURE have included Pall Mall Deposit and Leroy PORTFOLIO VALUATION House. Read more about these projects on | STAKEHOLDERS | STAKEHOLDERS | pages 5 and 69. | | --- | --- | --- | | Our values set the cultural tone for the Group. | The Board reviewed and approved the full | | | Our culture is one of integrity, transparency | and half-year valuations of the Group’s property | | | andopenness, where independent thought | portfolio in May and November 2021 | | | andtaking initiative are encouraged. The Board | respectively. | | recognises the importance of our culture to the business of the Group and sets the ‘tone from the top’ by demonstrating and encouraging values-driven behaviour. 110 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED BOARD ACTIVITIES 2021/22 CONTINUED ## 5 Finance 6 Reporting 7 Risks STRUCTURE, FORECASTS, BUDGETS FULL, HALF-YEAR AND TRADING PRINCIPAL RISKS STATEMENTS STAKEHOLDERS STAKEHOLDERS STAKEHOLDERS | The Board regularly reviews the Group’s | | The Board reviewed the Group’s principal | | --- | --- | --- | | financial structure and rolling forecasts. | The Board reviewed and approved | risks which could impact the | | The Board approved the Group’s 2021/22 | the full and half-year results and | implementation of the Group’s strategy. See | | budget in July 2021. | trading statements. | pages 59 to 66 for details of our principal | risks and uncertainties. GREEN REVOLVING CREDIT FACILITY VIABILITY AND GOING The Board requested updates from the CONCERN STATEMENTS STAKEHOLDERS Chairs of the Risk and Audit Committees on the key areas discussed by each STAKEHOLDERS | In December 2021, the Group entered its | | Committee. See pages 143 to 161 for | | --- | --- | --- | | first ESG-linked revolving credit facility | The Board conducted a review of the | details of the work performed by each | | (RCF). This followed the issue of our first | Company’s viability over the next five-year | Committee. | | green bond. | period and approved the viability statement | | and going concern statement. ESG-linked RCF, Page 74 Viability statement, Page 76 EMERGING RISKS Going concern statement, Page 76 DIVIDEND PAYMENTS STAKEHOLDERS The Board heard updates from the Chairs STAKEHOLDERS of the Risk and Audit Committees on | The Board recommended the payment | emerging risks which have been highlighted | | --- | --- | | ofthe final dividend paid to shareholders | and debated during meetings of those | | in August 2021 and approved the payment | Committees. | of the interim dividend paid to shareholders Principal risks and uncertainties, in February 2022. Page 59 Dividends, Page 71 Brickfields, Hoxton 111 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED BOARD ACTIVITIES 2021/22 CONTINUED ## 8 Succession 9 ESG | APPOINTMENT OF NEW NEDS | SUSTAINABILITY AGENDA | | --- | --- | | STAKEHOLDERS | STAKEHOLDERS | | During the year the Board approved the | In September 2021 and January 2022 the | | appointment of three new Non-Executive | Board discussed updates from the Group’s | | Directors, Duncan Owen, Manju Malhotra | new Head of Sustainability, Sonal Jain. This | | and Nick Mackenzie. | included presentations on our sustainability | strategy, governance and our science- Recruitment process, Page 131 based targets to transition to net zero Inductions, Page 133 carbon. Throughout the year the Board also requested updates from the sustainability team on the Group’s sustainability targets and activities. APPOINTMENT OF NEW EXECUTIVE COMMITTEE MEMBERS In December 2021 the Board also approved STAKEHOLDERS the Group’s new ESG-linked RCF. Sustainability, Page 36 During the year the Board approved theappointment of two new members ofthe Executive Committee, Paul Hewlett and Leo Shapland. Executive Committee, Page 123 Edinburgh House, Kennington 112 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED BOARD ACTIVITIES 2021/22 CONTINUED ## 10 Governance | BOARD EFFECTIVENESS REVIEW | REGULATORY AND LEGAL UPDATES | WORKFORCE POLICIES AND PRACTICES | | --- | --- | --- | | STAKEHOLDERS | STAKEHOLDERS | STAKEHOLDERS | | This year’s internal Board effectiveness | The Board discussed legal updates and | The Board reviews and approves all | | review focused on the question ‘what makes | advice from the Company’s legal advisers. | keypolicies and practices which could | | a high-performing Board’, facilitated by | | impact our employees and influence their | | Fidelio. Read more about this year’s internal | The Board also reviewed regular legal and | behaviours. Policies are reviewed to check | | Board effectiveness review on page 139. | governance updates from the Company | that they are aligned with the Group’s | | | Secretary. | purpose, culture and values. This includes | | The Board has also progressed the | | the Group’s Code of Conduct and its | | recommendations made following the | | additional policies relating to anti-bribery | | external Board evaluation conducted by | COMMITTEE MEMBERSHIP | and corruption, inside information and | | Fidelio last year. Read more about how the | AND TERMS OF REFERENCE | market abuse, modern slavery, conflicts | | recommendations from last year’s external | | ofinterest and data protection. Further | | evaluation have been progressed during | STAKEHOLDERS | information on the Group’s key compliance | | theyear on page 142. | | policies can be found on pages 78 to 80. | During the year the Board reviewed the | structure of its Committees. For more | The Board recognises that effective | | --- | --- | | information on changes to the Committee | andhonest communication is essential | | structure and membership see page 119. | tomaintain our business values, and we | encourage our employees to speak out | The Board also reviewed the schedule of | ifthey witness any wrongdoing. This is | | --- | --- | | matters reserved to the Board (see page 122) | reinforced in our whistleblowing procedures | | and the Terms of Reference applicable to | and in our Code of Conduct. See page 80 for | | each Committee. | further details on our Whistleblowing Policy. | All policies are available to employees and published on the Group’s intranet. All new employees are provided with training on ourpolicies at induction sessions and we provide annual refresher training to all staff in key areas. We also take the opportunity toremind employees of our policies and any changes made to them through our internal monthly publication, ‘The Workspace Wrap’. Brickfields, Hoxton 113 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED The Board has identified the Company’s key stakeholders How the Board considers ## Section 172(1) Statement to be its shareholders, employees, customers, Section 172(1) matters suppliers, debt financiers and local communities, The Board is fully aware of the need to The Board of Workspace Group PLC confirms that during and also considers the impact of operations on consider Section 172(1) when making the year it has acted in good faith to promote the long-term the environment to be of key importance. decisions. Some of the key methods used success of the Company (and its Group) for the benefit of by the Board to achieve this include: its shareholders, while having due regard to the matters set Further detail on stakeholder engagement and Section 172(1) – A Board strategy day is held each year out in Section 172(1) of the Companies Act 2006, being: matters can be found throughout our Annual Report: where the Board discusses long-term strategy (see page 126) – The Board regularly considers the Group’s RELEVANT DISCLOSURES PAGE purpose, values and policies related to business conduct (see pages 96 and 109) Our purpose page 4 – A stakeholder impact analysis, setting out ## A Our business model pages 14 to 21 the expected impacts of the proposed decision on different stakeholder groups Our strategy pages 32 to 35 and how any negative impacts might be ## A Dividend page 71 mitigated, is conducted and feeds into the The likely Board discussions when key strategic consequences Employee engagement pages 24 and 108 decisions are proposed of any decision in ## B – The Board and the Audit Committee Looking after our people pages 47 to 50 the long term oversee the Company’s risk management ## F B Diversity and inclusion pages 136 to 138 framework and the actions that are in place The need to act The interests to mitigate risk in the short, medium and Customer proposition page 15 fairly as between of the Company’s long term (see page 159) ## members of the employees C Customer and supplier pages 23 and 25 – The Board considers ESG matters in every Company engagement decision it makes and receives regular updates from the sustainability team (see Anti-bribery & corruption page 79 pages 111 and 122) and modern slavery – The Board considers stakeholder interests Supporting our communities pages 51 to 52 when determining the level of dividend – The Board directly engages with employees ## D Sustainability and TCFD pages 36 to 53 ## E C and investors, and receives feedback from and 81 to 92 | The desirability of the | The need to | | | the CEO and CFO on meetings with | | --- | --- | --- | --- | --- | | Company maintaining | | foster the Company’s | Net zero carbon pathway pages 41 to 42 | investors and analysts, and regular reports | | a reputation for high | | business relationships | | from the Executive Committee and external | Green financing page 74 | standards of business | | | with suppliers, | | | advisers on engagement with other | | --- | --- | --- | --- | --- | --- | --- | | | conduct | | customers and | | | stakeholders such as customers, suppliers | | | | D | | | Compliance policies pages 78 to 80 | | | | | | | others | | and the wider community (see pages 23 | The impact of | | E | Culture and values page 20 | | | | --- | --- | --- | --- | --- | | the Company’s | | | | to25) | | operations on the | | | – Stephen Hubbard, Chairman of the Board, | | Whistleblowing page 80 community and holds focus groups with employees in his the environment Internal controls page 159 role as the designated Non-Executive Director for employee engagement (see Shareholder engagement pages 24 and 107 page 176) ## F AGM page 194 114 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED SECTION 172(1) STATEMENT CONTINUED ## Key decisions Acquisition of McKay Securities ## 1 ## in 2021/22 and other acquisitions and disposals | Some of the key decisions considered by | On 2 March 2022, the Group announced its | In addition to this, during the year we | | --- | --- | --- | | the Board in 2021/22, and how the Board | recommended offer for McKay Securities | completed the sale of a property in Fitzrovia | | had regard to Section 172(1) matters when | PLC. In its discussions ahead of approving | and the sale of Highway Business Park. | | discussing them, are outlined below. | the offer, the Board considered that the | Whileit was identified that some stakeholders | | | acquisition would enable the Group to meet | might experience a negative impact from the | | The Board has also continued to have regard | more of the strong demand it is seeing | disposals, for example customers who would | | to Section 172(1) matters in its continued | from SME customers as well as providing | see a change of landlord or suppliers who | | response to Covid-19, including its efforts | opportunities for the Group’s employees and | might see a loss of revenue if the buyer did | | to support and provide a safe and hygienic | suppliers. The Board also concluded that | not retain their services, it was decided that | | environment for employees, customers, | the acquisition would have a positive impact | itwas the optimum time to sell and recycle | | suppliers and visitors. Read more about | on shareholders, being an opportunity to | the capital into other more attractive organic | | our response to Covid-19 on page 59. | accelerate our growth plans at an attractive | and acquisition opportunities which the Board | | | valuation and capital recycling opportunities | believes will, in the long term, generate further | | | to deliver strong returns for shareholders. | opportunities for customers and suppliers and | superior value for shareholders. During the year, we also completed the | acquisition of The Old Dairy in Shoreditch for | See page 13 for more details on the | | --- | --- | | £43.4m and the acquisition of Busworks, in | acquisition of McKay Securities PLC and other | | Islington, for £45m. In considering the impact | acquisitions and disposals during the year. | of these acquisitions on the Group’s stakeholders, the Board particularly noted thelong-term positive impacts on customers of strengthening our presence in Shoreditch and Islington, providing opportunities for customers, suppliers and employees along with potential long-term positive impacts onshareholders. These acquisitions are demonstrative of the Group’s sustainability commitment torepurpose and preserve historic buildings as part of its duty to have due regard to the impact of the Company’s operations on the community and the environment. Evergreen Studios, Richmond 115 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED SECTION 172(1) STATEMENT CONTINUED KEY DECISIONS IN 2021/22 ## Sustainability CONTINUED ## 3 As the business embarked on its post- In December 2021, the Board also approved pandemic recovery, the Board took a £200m revolving credit facility with ## Workspace ## 2 the decision to lead with even bolder the potential to alter the base margin by sustainability ambition and urgent action. In up to 4.5bps depending on the Group’s ## Inclusive | | September 2021, the Board made a strategic | performance against agreed ESG targets | | --- | --- | --- | | | senior appointment by recruiting Sonal Jain, | (scope 1 reductions, procuring green | | | an experienced net zero carbon leader, as the | electricity and paying the Living Wage). | | | Group’s new Head of Sustainability. During | Inmaking this decision, the Board carefully | | The Group has been rolling out its new | the strategy day in September 2021, the | considered the possible implications of | | inclusive billing package, Workspace Inclusive. | Board endorsed 20 stretching sustainability | not meeting the ESG targets set out in the | | Following feedback from a customer journey | commitments. These range from a number of | facility but concluded that the clear positive | | mapping project it was apparent there | portfolio-wide initiatives aimed at reducing | impacts likely to arise from reinforcement | | was demand for a more inclusive product | the Group’s environmental impact, relaunching | of the Group’s commitment to sustainability | | which would assist customers with unit | the social impact programme to support | weighed significantly in favour of approving | | comparisons, leading to quicker and more | local communities, ensuring all employees | the green revolving credit facility. See | | informed decisions. Previously, our customers | and third-party contractors are paid the | page 74 for further information on the | | on a standard lease would have service | London Living Wage and supporting the | ESG-linked revolving credit facility. | | charges and insurance included in their fee, | wellbeing of employees and customers (a | | | but energy and connectivity costs would be | full list of our sustainability commitments | | | billed separately. In making its decision to | is available on page 35). In making this | | | approve this package, the Board discussed | decision, the Board received detailed advice | | | the feedback it had received from customers | from the Group’s Head of Sustainability | | | and the positive impact this package would | and discussed in detail the impacts this | | | have on fostering the Group’s relationships | decision would have on all stakeholders. | | | with customers in the immediate and long | While many of these initiatives required | | | term. In addition to this, the Board considered | additional investment, the Board carefully | | | the long-term positive impacts on investors | considered the long-term value add to the | | | if the Group can attract and retain customers | business and its stakeholders in approving | | | with such offerings. As a result of this, a | the investment case for these commitments. | | refined inclusive package of bills, known as Workspace Inclusive, was designed to include service charges, buildings insurance, electricity and connectivity within a single rent payment for office units of 2,500 sq. ft. and below. A trial of ten pilot properties was undertaken in October and November 2021 and due to the success of the project it was decided to roll out the scheme to the rest of the portfolio. See page 18 for Leather Market, Bermondsey more information on Workspace Inclusive. 116 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ### DIVISION OF RESPONSIBILITIES ## We have a strong mix of ## experienced individuals ## on our Board who are ## not only able to offer an ## external perspective on the ## business but also provide ## constructive challenge. ### Carmelina Carfora ### Company Secretary QUICK LINKS Board roles and responsibilities page 117 Our governance framework page 119 How we govern page 120 117 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack DIVISION OF RESPONSIBILITIES CONTINUED ## Board roles and ## Non-Executive ## responsibilities The roles and responsibilities of the Chairman CHAIRMAN: SENIOR INDEPENDENT DIRECTOR: and Chief Executive Officer are separate, with STEPHEN HUBBARD ROSIE SHAPLAND a clear division of responsibilities between them. The Chairman is responsible for the – Leading the effective operation and governance of the Board – Being available and providing an alternative communication leadership of the Board, and the Chief – Setting agendas which support efficient and balanced channel for shareholders and other stakeholders, if required, Executive Officer manages and leads the decision-making and being available to meet with investors on request business. In addition, the role specifications – Ensuring that the Board plays a full and constructive part – Providing a sounding board for the Chairman described on the right set out the clear inthe development of the Group’s strategy and that there – If necessary, deputises for the Chairman in his absence division of responsibility between Executive issufficient time for boardroom discussion and counsels all Board colleagues and Non-Executive members of the Board. – Ensuring effective Board relationships and a culture that – Acts as an intermediary for Non-Executive Directors supports constructive debate when necessary – Facilitating the effective contribution of the Non-Executive – At least annually, leads a meeting of the Non-Executive Directors and monitoring that all Directors receive accurate, Directors without the Chairman present, to appraise the timely and clear information Chairman’s performance and address any other matters – Overseeing the annual Board evaluation and identifying which the Directors might wish to raise. The outcomes keyactions required ofthese discussions are then conveyed to the Chairman – With the Nominations Committee, monitoring that the Board remains appropriately balanced to deliver the INDEPENDENT NON-EXECUTIVE DIRECTORS: Group’s strategic objectives and to meet the requirements ROSIE SHAPLAND, DAMON RUSSELL, LESLEY-ANN NASH, of good corporate governance DUNCAN OWEN, MANJU MALHOTRA AND NICK MACKENZIE – Promoting effective engagement with the Group’s shareholders and other key stakeholders – Constructively challenging and assisting in the development – Leading initiatives to assess the culture across Workspace of strategy and ensuring that the Board sets the correct tone – Scrutinising, measuring and reviewing the performance – Reviewing, with the Board, diversity and inclusion initiatives of management – Promoting the highest standards of integrity The Chairman is not involved in an executive capacity with andcorporategovernance anyof the Group’s activities. – Reviewing the succession plans for the Board andkeymembers of senior management DESIGNATED NON-EXECUTIVE DIRECTOR FOR EMPLOYEE ENGAGEMENT: – Determining appropriate levels of remuneration STEPHEN HUBBARD for the senior executives – Reviewing the integrity of financial reporting and the – Representing the Board in discussions with employees systems of risk management and financial controls andcommunicating Board decisions on specific matters – Serving on or chairing various Committees of the Board – Developing, implementing and feeding back on employee engagement initiatives in conjunction with management – Communicating to employees the outcomes and developments made by the Board on specific matters 118 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack DIVISION OF RESPONSIBILITIES CONTINUED BOARD ROLES AND RESPONSIBILITIES CONTINUED ## Executive CHIEF EXECUTIVE OFFICER: CHIEF FINANCIAL OFFICER: COMPANY SECRETARY: GRAHAM CLEMETT DAVE BENSON CARMELINA CARFORA – Proposing and directing the delivery of strategy as agreed – Supports the CEO in developing the strategic direction – Secretary to the Board and its Committees by the Board through leadership of the Group’s Executive of the Group and works closely with the CEO and Board – Responsible for ensuring compliance with Board procedures Committee todevelop and implement the Group’s strategy and supporting the Chairman – Responsible for leading and managing the business and – Provides financial leadership to the Group and aligns the – Advising and keeping the Board updated on corporate accountable to the Board for the financial and operational Group’s business and financial strategy and management governance developments performance of the Group of the Company’s capital structure – Ensuring that the Board has high-quality information, – Leading the Group Executive Committee in the day-to-day – Responsible for financial planning and analysis, treasury adequate time and the appropriate resources running of the Group’s business in order to execute and tax – Considering Board effectiveness in conjunction with objectives successfully – Leads and monitors the effectiveness of the key finance theChairman – Regularly reviewing the Group’s organisational structure functions and appropriate development of the finance team – Facilitating the Directors’ induction programmes andrecommending changes as appropriate – Responsible for the IT function and co-ordinates and delivers andassisting with professional development – Setting overall policies for recruitment, management, IT projects to support the growth and strategic priorities – Providing advice, services and support to all Directors staffdevelopment and succession planning and providing ofthe Group as and when required updates to the Remuneration Committee – Responsible for organising the Annual General Meeting – Overseeing employee initiatives, diversity and inclusion, andemployee wellbeing – Together with the Chairman and CFO, representing theCompany to its customers, suppliers, shareholders andother stakeholders – Leading on the Group’s ESG strategy and the net zero carbon pathway – Corporate communications and the IR strategy 119 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack DIVISION OF RESPONSIBILITIES CONTINUED The role of the Board is to promote the long-term success of Workspace by setting a clear purpose and the Group’s ## Board of strategy for delivering the long-term value to our shareholders and other stakeholders. It sets the governance and values of the Group and has ultimate responsibility for its management, direction and performance. The effective ## Directors working relationship between the Board and the Executive Committee facilitates both support and challenge where required, with Board awareness enhanced through regular dialogue, including reporting from key individuals and the ## Our Governance provision of minutes from allBoard Committee and Executive Committee meetings. THE BOARD DELEGATES CERTAIN MATTERS TO ITS FOUR PRINCIPAL COMMITTEES ## framework Our governance framework supports the NOMINATIONS COMMITTEE AUDIT COMMITTEE REMUNERATION COMMITTEE development of good governance practices CHAIRED: MEMBERSHIP: CHAIRED: MEMBERSHIP: CHAIRED: MEMBERSHIP: across the Group. The Board has overall Stephen Independent Rosie Independent Lesley-Ann Independent responsibility for governance within the Group. ## Hubbard 7 Non-Executive Shapland 3 Non-Executive Nash 3 Non-Executive Directors Directors Directors The Board delegates certain of its | responsibilities to its Audit, Nominations | KEY RESPONSIBILITIES: | | KEY RESPONSIBILITIES: | | KEY RESPONSIBILITIES: | | | --- | --- | --- | --- | --- | --- | --- | | and Remuneration Committees. Further | – Reviews succession plans for the Board | | – Oversees the Group’s financial reporting | | – Determines the Remuneration Policy for | | | details of the work, composition, role and | | and its Committees and considers its | – Maintains and manages the relationship | | | Executive Board Directors and considers | | responsibilities of these Committees are | | structure, size, composition and diversity | | with the External Auditor, including | | whether there is a clear link between | | provided in separate reports on pages 143, 127 | – Supports the development of an inclusive | | | monitoring their performance and | | performance and remuneration | | and 162. Each of the Committees has Terms | | and diverse talent pipeline, and reviews | | reappointment | – Reviews workforce remuneration | | | of Reference which were reviewed by the | | supporting initiatives to increase diversity | – Reviews and monitors management of | | | andrelated policies | | Committees and the Board during the year. | – Monitors that the Board has the | | | risks other than those related to real | – Develops remuneration policies and | | | These are available on the Group’s website | | appropriate knowledge, skills and | | estate, development and valuation | | practices to support clarity, simplicity, | | at www.workspace.co.uk/investors/about-us/ | | experience to operate effectively | | | | transparency and alignment with culture | | governance/committee-terms-of-reference. | | anddeliver our strategy | | | | | | The performance of each of the Committees | – Recommends to the Board the | | | | | | | is assessed annually as part of the evaluation | | appointment of a Non-Executive Director | | | | | | process described later in this report. | | for employee engagement | | | | | Committee Report, Page 127 Committee Report, Page 143 Committee Report, Page 162 Further details on the work of the Risk Committee during the year can be found on pages 155 to 161. Following a review, ESG CHAIRED: MEMBERSHIP: KEY RESPONSIBILITIES: the Risk Committee has been disbanded COMMITTEE Duncan Directors – Oversees the Group’s ESG strategy and an ESG Committee established. ## Owen 9 – Monitors ESG risk and opportunities See page 157 for further details. The Board delegates all operational matters to the Executive Committee, except for EXECUTIVE KEY RESPONSIBILITIES: DISCLOSURE KEY RESPONSIBILITIES: matters specifically reserved to the Board. COMMITTEE The Executive Committee is responsible for COMMITTEE Identifies and controls inside information The schedule of matters reserved for the theexecution of the Company’s strategy and or information which could become inside Board is reviewed at least once a year the day-to-day management of the business. information and determines how and when and can be accessed on the Company thatinformation is disclosed in accordance website at www.workspace.co.uk/investors/ withapplicable legal and regulatory requirements. about-us/governance/committee-terms- of-reference. Further information on the KEY RESPONSIBILITIES: SUPPORTING The Terms of Reference of each Board Committee are available matters reserved and the relationship The Executive Committee operates a number COMMITTEES on the Company’s website at www.workspace.co.uk/investors/ between the Board and the Executive ofsupporting committees that provide oversight about-us/governance/committee-terms-of-reference Committee can be found on page 122. on key business activities and risks. 120 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack DIVISION OF RESPONSIBILITIES CONTINUED ## How we ## Non-Executive Directors ## govern The Non-Executive Directors have a broad mix The Nominations Committee oversees the Executive Directors may accept a non- Non-Executive Directors page 120 of business skills, knowledge and experience overall independence of Board membership executive role at another company with acquired across different business sectors. and the continuing independence of individual theapproval of the Board. Re-election and election This allows them to provide independent and Directors, with the Board deemed ofDirectors page 121 | | external perspectives to Board discussions. | independent in line with the recommendations | Graham Clemett is the Senior Independent | | --- | --- | --- | --- | | Relationship between the Board | | of the Code. Further details of this supporting | Non-Executive Director and Chairman of the | | and the Executive Committee page 122 | The Non-Executive Directors provide | evaluation can be found on page 139. | Audit Committee at The Restaurant Group PLC. | constructive challenge to the Executives, help Composition of the to develop proposals on strategy and monitor Time commitment and external appointments The Board is satisfied that each of the ExecutiveCommittee page 123 | | performance. | | The expected time commitment of the | Non-Executive Directors can devote sufficient | | --- | --- | --- | --- | --- | | Information flow to the Board page 125 | | | Chairman and Non-Executive Directors is | time to the Company’s business to discharge | | | Independence of Non-Executive Directors | | agreed and set out in writing in the letter of | their responsibilities effectively. They offer | | | During the year, the Board considered the | | appointment to the position, at which time the | strategic guidance to Board discussions and | | | independence of all the Non-Executive | | existing external demands on an individual’s | independent decision-making to their Board | | | Directors, save for the Chairman who was | | time are assessed to confirm their capacity to | and Committee duties (see the table on page | | | deemed independent by the Board at the | | take on the role. This was a key consideration | 101 for Board meeting attendance). | | | dateof his appointment. The Board has | | this year in the recommendation to appoint | | | | reconfirmed that our Non-Executive Directors | | Duncan Owen, Manju Malhotra and Nick | The Nominations Committee keeps under | | | remain independent from executive | | Mackenzie to the Board. Further appointments | review the tenure of all Directors, Board | | | management and free from any business | | which could impair the ability to meet these | diversity and the effectiveness of individual | | | orother relationship which could materially | | arrangements can only be accepted following | Directors. | | | interfere with the exercise of their | | approval of the Board. | | | | independent judgement. This is protected | | | The biographies of all of the members of | | | through a number of mechanisms including: | | When assessing additional directorships, | theBoard, outlining their experience, can | | | | | theBoard considers the number of public | befound on pages 102 to 105. | | | – Meetings between the Chairman and the | | directorships held by the individual already | | | | | Non-Executive Directors, individually and | and their expected time commitment for | | | | | collectively, without the Executive Directors | those roles (see biographies on pages 102 to | | | | | present. These are typically held before | 105). The Board takes into account guidance | | | | | each Board meeting and used to discuss | published by institutional investors and proxy | | | | | areas relevant to the operation of the Board | advisers as to the maximum number of public | | | | | and the Group in a more private setting. This | appointments which can be managed | | | | | year there were six of these meetings held | efficiently. | | – Separate and clearly defined roles for the Chairman, as head of the Board, and the Chief Executive Officer, as head of executive management, as set out on pages 117 to 118. 121 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack DIVISION OF RESPONSIBILITIES CONTINUED HOW WE GOVERN CONTINUED NON-EXECUTIVE ## Re-election and DIRECTORS CONTINUED ## election of Directors | Stephen Hubbard | In accordance with the Code, all the Directors | Rosie Shapland was appointed as Chair of the | | --- | --- | --- | | As in previous years, the independence of | will submit themselves for election or re- | Audit Committee following the AGM in July | | Stephen Hubbard was specifically considered | election at the AGM on 21 July 2022, except | 2021. Rosie was appointed as Senior | | during the year. Stephen was previously | for Damon Russell who will be stepping down | Independent Director in February 2022 on the | | Chairman of CBRE UK, who are the Group’s | from the Board as a Non-Executive Director | retirement of Chris Girling. | | external independent valuers. Stephen retired | and will not seek re-election. Following the | | | from CBRE UK in December 2019. | external Board evaluation review, detailed | Lesley-Ann Nash assumed the role of Chair of | | | onpage 140, and taking into account the | the Remuneration Committee in September | | Furthermore, while he remained as Chairman | Directors’ skills and experience (set out | 2021. | | of CBRE UK, he had no involvement in any | onpages 102 to 105), the Board believes that | | | discussions or decisions regarding the | the election and re-election of the Directors | Duncan Owen was appointed as Chair ofthe | | appointment of CBRE or the fees paid | isin the best interests of the Company. | newly formed ESG Board Committee. | tothem. | | The explanatory notes in the Notice of Meeting | Mr Clemett has a service contract and details | | --- | --- | --- | | The appointment of CBRE is by the Directors | for the AGM state the reasons why the Board | can be found on page 188. | | of the Company, acting through the Executives, | believes that the Directors proposed for | | | and any communication is entirely with them. | re-election at the AGM should be reappointed. | Mr Benson has a service contract and details | can be found on page 188. | The Board is satisfied and continues to | Duncan Owen will be seeking election as a | | | --- | --- | --- | | conclude that Stephen remains independent | Director following his appointment to the | None of the Non-Executive Directors have | | both in character and in judgement, including | Board on 22 July 2021 and Manju Malhotra | service contracts and are instead given letters | | in relation to his responsibilities as Chairman | andNick Mackenzie will be seeking election | of appointment. The appointments of Damon | | of the Company. | asDirectors following their appointments to | Russell, Rosie Shapland, Lesley-Ann Nash, | | | the Board on 26 January 2022. Duncan, Manju | Duncan Owen, Manju Malhotra and Nick | | In addition, in July 2020, Stephen stepped | and Nick are each submitting themselves for | Mackenzie may be terminated by either the | | down from the Audit Committee on his | election by shareholders at the AGM in July | Company or any one of them giving three | | appointment as Chairman of the Company. | 2022 as this will be the first AGM since they | months’ notice in writing. The appointment | | | were appointed as Directors. | ofStephen Hubbard may be terminated by | either him or the Group giving six months’ The Board is satisfied that Duncan, Manju notice in writing. andNick are independent in accordance with the Code and that there are no circumstances The terms and conditions of appointment which are likely to impair or could appear to ofNon-Executive Directors, including the impair their independence as Non-Executive expected time commitment, are available for Directors. The Nominations Committee of the inspection at the Company’s registered office. Group has considered their commitments and has concluded that they have sufficient time to meet their Board responsibilities. 122 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack DIVISION OF RESPONSIBILITIES CONTINUED HOW WE GOVERN CONTINUED MATTERS RESERVED FOR THE BOARD The Board has a formal schedule of matters reserved for its approval which includes: – review and approval of the Group’s strategy, business objectives and annual budgets – approval of the Group’s dividend policy and the payment ## The relationship and recommendation of interim and final dividends THE BOARD – approval of full-year and half-year results, including the ## between the The Board is responsible for review and approval of the going concern basis of contemplating market trends accounting and the viability assessment ## Board and the and their impact on our strategy, – health and safety performance across the Group assessing appropriate levels of risk – on the advice of the Nominations Committee, reviewing ## Executive Committee and setting the objectives for the succession plans for the Board and senior management team business, including the approach – review and approval of corporate transactions to ESG matters. It delegates – setting the Group’s purpose, values and standards The Board considers there to be an the delivery of the strategy to – approval of decisions likely to have a material impact on the appropriate balance between Executive the Executive Committee. Company or Group from any perspective, including, but not andNon-Executive Directors required limited to, financial, operational, strategic or reputational toleadthe business and safeguard the – responsible for setting the risk appetite and tolerance of interests of shareholders. theGroup As at 31 March 2022, the Board comprised theChairman, six 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. EXECUTIVE COMMITTEE ACTIVITIES IN 2021/22 – Developed the Group strategy and budget for approval Executive Committee – by the Board managing the business – Received updates on the Company’s sustainability strategy The Executive Committee, which is chaired – Monitored operational and financial results against plans byGraham Clemett, supports the Board and budgets byproviding executive management – Considered regulatory developments ofWorkspace within the strategy approved – Reviewed and approved capital expenditure within the bythe Board. authorities delegated by the Board EXECUTIVE COMMITTEE – Collectively responsible for the day-to-day running of the The Executive Committee is accountable to The Executive Committee is business the Board for implementation of the agreed responsible for managing the – Developed leadership skills and the future talent of the strategy. The Executive Committee monitors business, day-to-day operational business so that strong succession plans are inplaceas customer and market trends, assesses decisions and delivering the the Group develops theimplications and benefits of asset strategy set by the Board. – Analysed and reviewed initiatives of particular interest to management initiatives and oversees the theGroup and presented these to the Board as appropriate effectiveness of the governance framework. – Focused on the effectiveness of risk management and control procedures The Board delegates all operational matters – Reviewed, monitored and implemented the operational tothe Executive Committee except for the response to Covid-19 matters reserved for the Board. – Received regular feedback from centre staff and took responsibility for implementing suggestions for improvements 123 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack DIVISION OF RESPONSIBILITIES CONTINUED HOW WE GOVERN CONTINUED ## Composition of the ## Executive Committee ## Graham Dave Carmelina Will ## The Executive Committee is ## Clemett Benson Carfora Abbott ## responsible for the successful CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER COMPANY SECRETARY CHIEF CUSTOMER OFFICER ## implementation of the Company’s For full details of Graham’s For full details of Dave’s SPECIFIC RESPONSIBILITIES: SPECIFIC RESPONSIBILITIES: ## strategy and for the operational Company Secretary Customer engagement; responsibilities and experience responsibilities and experience to the Board and its marketing and brand ## performance of the Group. Committees. Advises on development Page 102 Page 103 legal, corporate governance, ## Itreviews the effectiveness of BACKGROUND AND regulatory and compliance; RELEVANT EXPERIENCE: ## ourgovernance, financial and manages share schemes Will joined the business and ensures compliance ## riskmanagement procedures on20 April 2020, bringing withBoard procedures a wide range of experience ## andensures that they are BACKGROUND AND from over 20 years in RELEVANT EXPERIENCE: marketing. Having started ## embedded within the Group. | Carmelina joined the | his career in advertising, Will | | --- | --- | | Company as Company | held a number of senior roles | | Secretary in March 2010. | across digital media, FMCG, | | She was previously | financial services and travel | Graham Clemett Company Secretary of sectors. Prior to Workspace, Chief Executive Officer Electrocomponents PLC. Will was Marketing Director UK & Ireland at Hiscox during a significant period of growth for the insurer, and most recently was Chief Marketing Officer ofNeilson Active Holidays. 124 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack DIVISION OF RESPONSIBILITIES CONTINUED HOW WE GOVERN CONTINUED COMPOSITION OF THE EXECUTIVE COMMITTEE CONTINUED ## Angus Claire Paul Leo Richard ## Boag Dracup Hewlett Shapland Swayne DEVELOPMENT DIRECTOR DIRECTOR OF PEOPLE AND CULTURE DIRECTOR OF STRATEGY & HEAD OF PORTFOLIO MANAGEMENT INVESTMENT DIRECTOR CORPORATE DEVELOPMENT SPECIFIC RESPONSIBILITIES: SPECIFIC RESPONSIBILITIES: SPECIFIC RESPONSIBILITIES: SPECIFIC RESPONSIBILITIES: SPECIFIC RESPONSIBILITIES: Planning consents; HR; training and staff Corporate strategic initiative Asset management of Investment strategy, redevelopment and development; internal culture; development and execution; the portfolio, including acquisitions anddisposals, refurbishment project business centre support; investor relations strategy lettings, lease renewals, and valuations management; building health and safety; monitoring property management BACKGROUND AND BACKGROUND AND maintenance; joint ventures; of customer service and management of the RELEVANT EXPERIENCE: RELEVANT EXPERIENCE: valuations; sustainability centre and facilities team BACKGROUND AND Paul joined Workspace Richard joined Workspace andenvironmental strategy | | RELEVANT EXPERIENCE: | as Director of Strategy & | BACKGROUND AND | in November 2014 as an | | --- | --- | --- | --- | --- | | BACKGROUND AND | Claire joined Workspace in | Corporate Development | RELEVANT EXPERIENCE: | Investment Manager. He | | RELEVANT EXPERIENCE: | 1995, initially as a Centre | in 2021. He was previously | Leo joined Workspace in | was promoted to Head of | | Angus joined the Group in | Manager before progressing | Executive Director of the | March 2022 from Aviva | Investment in October 2017 | | June 2007 as Development | to Portfolio Manager. In | UK investment Banking Real | Investors, where he was | and Investment Director in | | Director. He has experience | 2008 Claire became Head | Estate team at J.P. Morgan | Head of Real Estate Asset | April 2020. Prior to joining | | in property and construction | of Support Services and | Cazenove. Paul has over 20 | Management, responsible | Workspace, Richard qualified | | management and is | was responsible for facilities | years of Corporate Finance | for the strategy and financial | as a chartered surveyor | | responsible for adding | management, security, | advisory and Corporate | performance of a large | and worked for Cushman | | value to the Group’s | health and safety and | Broking experience, | diversified UK property | & Wakefield Investors and | | assets through planning | business centre support, | advising companies across | portfolio. Prior to that, Leo | LFF Real Estate Partners. | | consents, development and | which included recruitment, | the real estate sector on | spent ten years at Tishman | | | joint ventures. Angus also | training and improvements to | corporate strategy and a | Speyer, holding a number | | | manages all construction | service and quality control. | wide variety of transactions, | of roles in investment, | | | across the portfolio and | | most notably focused on | development and asset | | | has responsibility for the | | Mergers & Acquisitions and | management in the firm’s | | | sustainability programme. | | Equity Capital Markets. | London, San Francisco | | and Seattle offices. 125 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack DIVISION OF RESPONSIBILITIES CONTINUED HOW WE GOVERN CONTINUED ## Information flow to the Board Information and support to the Board The Chair of each Committee separately BOARD OF DIRECTORS The Board and its Committees are provided engages with Executive Committee members with comprehensive papers in a timely manner and other staff relevant to their roles, as well to allow members to be fully briefed on as meeting with relevant external advisers. matters to be discussed at their meetings. The Company Secretary and external advisers | | The Directors have access to the advice and | periodically update the Board on regulatory | | --- | --- | --- | | | services of the Company Secretary, Carmelina | changes. These have included the 2018 | | | Carfora. Her biography can be found on | Corporate Governance Code and developing | | 12 | page123. At the direction of the Chairman, | guidance and practice in data protection, | | | Carmelina is responsible for advising the | aswell as regulatory developments relating | Number of Board Board on matters of corporate governance toCovid-19. meetings in 2021/22 and compliance with Board procedures. The Board utilises an electronic Board In consultation with the Chairman, the papersystem which provides immediate and ChiefExecutive Officer and Chief Financial secure access to Board papers and materials. Officer, the Company Secretary manages Prior to each Board meeting, the Directors theprovision of information to the Board receive through this system the agenda and fortheirformal Board meetings and at other supporting papers permitting them to have ONE-TO-ONE MEETINGS BOARD PRESENTATIONS EMPLOYEE ENGAGEMENT appropriate times. the latest and relevant information in advance One-to-one meetings are Employees below Board The Chairman held several of the meeting. held between new Directors level are invited to present meetings with staff as part The Chief Executive Officer and the Chief and senior management to the Board on operational of his role as Non-Executive Financial Officer keep the Board fully aware, After each Board meeting, the Company as part of the induction topics. During the year Director responsible for on a timely basis, of business matters relating Secretary operates a comprehensive follow-up process. The CEO and ourInvestment Director employee engagement. The to the Group. They provide various updates procedure to enable actions to be completed CFO meet with senior gave an update on potential Company also conducted a tothe Board on many aspects of the business, as agreed by the Board. management individually acquisitions and our staff survey to understand ranging from trading performance, progress to discuss operations Development Director the challenges employees being made on our refurbishment and and performance, after updated the Board on the were facing during lockdown. redevelopment projects, the rationale for which, the CEO and/ key development projects Regular town hall events acquisitions and disposals and how these or CFO will report back beingundertaken by kept employees connected. arealigned to strategy. They also inform the to the Board on matters theGroup. Our Director of Thefeedback from there was Board on the discussions held with analysts, that require discussion. Strategy & Corporate then presented to the Board. investors and other stakeholders. Development gave several Board updates on our acquisition of McKay Securities PLC. There were also updates from our Head ofSustainability and Chief Customer Officer. 126 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack DIVISION OF RESPONSIBILITIES CONTINUED HOW WE GOVERN CONTINUED How the Board discharges its responsibilities Prior to each Board meeting, and periodically, Our Directors are invited to identify areas in INFORMATION FLOW TO The Board discharges its responsibilities which they would like additional information the Chairman meets the Non-Executive THE BOARD CONTINUED through an annual programme of Board and or training, following which the Company Directors without the Executive Directors Committee meetings which are scheduled present, and maintains regular contact with Secretary will arrange for the necessary throughout the year, with main meetings the Chief Executive Officer, Chief Financial resources to be put in place. The resulting timed around the Group’s financial calendar. Officer and other members of the sessions may be internally or externally Additional meetings are convened to consider management team. facilitated. an annual cycle of topics, including the annual | strategy day, key management and financial | If any Director has concerns about the running | This year the Directors have received updates | | | --- | --- | --- | --- | | updates, review of risk as well as the approval | of the Company or proposed action which | and presentations on the following areas: | | | of acquisitions and refurbishment | cannot be resolved, these concerns are | – The legal duties of a Director | | | programmes. In the year ended 31 March 2022, | recorded in the Board minutes. No such | | (andSection172 considerations) | | the Board met formally on 12 occasions, | concerns arose during the year under review. | – ESG commitments and net zero | | | including a strategy day in September 2021. | | | carbonpathway | | Supplementary meetings or conference calls | Despite the continued impact of Covid-19, the | – Compliance with the 2018 UK Corporate | | | are held between formal Board meetings | Board have continued with their normal cycle | | Governance Code | | asrequired. | of Board meetings and remained in regular | – Data protection compliance | | | | communication with each other and with | – Executive remuneration trends and best | | | The Board engaged with the Company’s | themanagement team. | | practice, including ESG in remuneration | | advisers during the year and there was | | – Inclusion and diversity | | | apresentation from the Company’s brokers | Training and development | – Conflicts of interest | | | inJuly 2021. The Group’s valuer, CBRE, | With the ever-changing environment in which | | | | presented to the Board in May 2021. TheCBRE | Workspace operates, it is important that the | | | | presentation covered the valuation of the | Board maintains a good working knowledge | | | | property portfolio and the wider market in | ofthe property industry and how the Group | | | | which the Company operates. | operates within its sector, as well as remaining | | | aware of recent and upcoming developments The Directors are expected to attend all in the wider legal and regulatory environment. meetings of the Board, the Committees on which they serve and the AGM, and to devote Directors attend external seminars and sufficient time to the Company’s affairs, to briefings in areas considered appropriate for enable them to fulfil their duties as Directors. their professional development. This training isdesigned to build upon the diverse range Should the Directors be unable to attend ofexperience that each Director brings to meetings, they would be provided with papers theBoard. The Company Secretary provides to allow them to make their views known to regular updates on legal, regulatory and the Chairman ahead of that meeting. corporate governance matters. As required, we invite external professional advisers toprovide training and updates on their specialist areas. Updates and training are not solely reserved for legislative developments but aim to cover a range of issues including, but not limited to, market trends, the economic and political environment, ESG, technology and social considerations. 127 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ### COMPOSITION, SUCCESSION AND EVALUATION ## Our people are at the heart ## of our culture. Our priority ## is to attract and develop ## talent while providing an ## environment in which all ## ouremployees can thrive. ### Stephen Hubbard ### Chairman of the Nominations Committee QUICK LINKS Membership and attendance at Nominations Committee meetings page 128 Chairman’s letter page 129 The role of the Nominations Committee page 130 128 Workspace Group PLC^{}[] Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents # COMPOSITION, SUCCESSION AND EVALUATION CONTINUED ## Membership and attendance at Nominations Committee meetings The Committee comprises the Non-Executive Directors and is chaired by Stephen Hubbard. Details of individual attendance at the meetings held during the year are set out below. More information on the skills and experience of all Committee members can be found on pages 102 to 105. | | NUMBER SINCE | MEETINGS ATTENDED | | --- | --- | --- | | Stephen Hubbard (Chair) | 2014 | 6/6 | | Damon Russell | 2013 | 6/6 | | Rosie Shapland | 2020 | 6/6 | | Lesley-Ann Nash | 2021 | 6/6 | | Duncan Owen^{1} | 2021 | 3/6 | | Manju Malhotra^{2} | 2022 | 1/6 | | Nick Mackenzie^{3} | 2022 | 1/6 | | Chris Girling^{4} | 2013 | 5/6 | | Suzi Williams^{5} | 2020 | 3/6 | 1. Duncan Owen was appointed as a Non-Executive Director on 22 July 2021. 2. Manju Malhotra was appointed as a Non-Executive Director on 26 January 2022. 3. Nick Mackenzie was appointed as a Non-Executive Director on 26 January 2022. 4. Chris Girling retired from the Board on 7 February 2022. 5. Suzi Williams stepped down as a Non-Executive Director of the Company on 10 September 2021. ## Key topics considered by the Committee during the year | **EXECUTIVE COMMITTEE SUCCESSION** | Oversaw succession planning for the Executive Committee. During the year, Paul Hewlett, Director of Strategy and Corporate Development, and Leo Shapland, Head of Portfolio Management, joined the Company in November 2021 and March 2022 respectively. | | --- | --- | | **BOARD SUCCESSION** | Considered the composition of the Board and the succession of Non-Executive Directors and the skills, knowledge, experience, diversity and attributes required of future Non-Executive Directors. In considering Board succession, the Committee takes into account the length of tenure of the Non-Executive Directors and the importance of refreshing Board membership. | | **APPOINTMENTS TO THE BOARD** | Led the appointment process for three new Non-Executive Directors. | | **MEMBERSHIP OF THE BOARD COMMITTEES** | Reviewed membership of the Board Committees. During the year, Lesley-Ann Nash and Rosie Shapland assumed the role of Chair for the Remuneration and Audit Committees respectively. In addition, an ESG Board Committee was established to provide a higher level of focus on sustainability. | | **BOARD EFFECTIVENESS REVIEW** | Oversaw the conduct of the Board effectiveness review, which was externally facilitated and focused on further developing a high-performing Board. | | **INCLUSION AND DIVERSITY POLICY** | Reviewed the Inclusion and Diversity Policy and considered the progress against Board diversity principles. | 129 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack COMPOSITION, SUCCESSION AND EVALUATION CONTINUED 7 June 2022 Board appointments are made on merit and aligned to the strategic objectives of the business. Workspace is confident that our new Directors were the strongest candidates for the positions with their skill sets and overall experience strongly fitting the candidate brief agreed by the Nominations Committee. Due to the robust policies and processes we have in place, including our choice of Board Search Advisor and our Inclusion and Diversity Policy, we are pleased that our Board has once again achieved 33% female membership as well as surpassing the requirements for ethnic diversity outlined in the Parker Review. This report highlights the role of the Nominations Committee and the work ithasundertaken during the year. Damon Russell intends to retire from the Board with effect from the end ## Nominations ofthe AGM in July 2022, having served on the Board for nine years. This year, the Committee continued with its focus on succession planning. Onbehalf of the Board, I would like to thank Damon for his service ## Committee The Nominations Committee and the Board are committed to making sure toWorkspace and for his valuable contribution to the Board’s work that, together, the Directors possess a mix of skills, experience, diversity overthe last nine years. ## Chairman’s and perspectives to support the long-term success of the Group as well asreflecting our culture and purpose. We are encouraged by our progress Looking forward, the Nominations Committee will continue to develop and ## Letter this year, including the appointment of three new Non-Executive Directors monitor succession plans both at Board and senior management level. The who bring considerable diversity of thought and experience to the Board. Board remains conscious of the recommendations proposed by the FCA and set out by the FTSE Women Leaders Review (formerly the Hampton- We welcomed Duncan Owen to the Board in July 2021. Manju Malhotra Alexander Review). Due to the appointment ofRosie Shapland as Senior The Nominations and Nick Mackenzie joined in January 2022. Duncan, Manju and Nick have Independent Director, we now have a woman ina senior Board position. Committeehas continued also undertaken an extensive induction programme, which included toplay a key role in meeting employees from across the business and visiting some of our supporting Workspace’s business centres. long-term sustainable success. A Board that has During the year we conducted a Board effectiveness review; more theright skills, diversity information on this can be found on page 140. Stephen Hubbard ofthought and experience Chairman of the Nominations Committee iskey in order to drive Workspace has had continuing support in building our Board from Fidelio 7 June 2022 anddeliver our strategy. Partners Board Development & Executive Search Ltd (‘Fidelio’), an independent external consultancy which was recently accredited by the FTSE Women Leaders Review (formerly the Hampton-Alexander Review) for the fifth year running for their contribution towards achieving gender balance on Boards and leadership teams. Fidelio’s commitment to identifying the most qualified and inclusive candidates for roles has resulted in strong and diverse shortlists for each of the three Board appointments Workspace made during the financial year. 130 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack COMPOSITION, SUCCESSION AND EVALUATION CONTINUED ## The role of the Nominations Committee ## The Nominations How the Nominations Committee ## Committee is responsible Committee operates responsibilities ## for monitoring that the ## Board, its Committees The Committee held six meetings, primarily to The Nominations Committee considers the structure, andWorkspace’s senior progress the appointment of our new Non-Executive size and composition of the Board, its Committees Directors. andmembers of the Executive Committee. The management have a good – The meetings are usually held immediately prior Nominations Committee also receives oversight from toor following a Board meeting, though the the Chief Executive Officer on the Company’s ## balance of skills, knowledge Committee also meets on other occasions leadership roles, which include the Executive onanadhoc basis, as required Committee members and their direct reports. The ## and experience, to lead – Only members of the Committee have the right Committee’s responsibilities include: toattend meetings. However, an invitation to attend – Leading the process for new Board appointments ## Workspace effectively both meetings is, on occasion, extended to the Chief and reviewing succession for Directors and senior Executive Officer, in order that the Committee management ## now and in the long term. canunderstand his views, particularly on key talent – Regularly reviewing the structure, size and within the business composition of the Board and its Committees – All Directors can, for the purpose of discharging – Facilitating an effectiveness review of the Board, their duties, obtain independent professional advice itsCommittees and Directors This is achieved through succession planning and talent at the Company’s expense. No Director had reason – Reviewing the time commitment expected from development, and an understanding of the changing to use this facility during the year theChairman and Non-Executive Directors competencies required to support the Group’s strategy, – Recommending the election and re-election purpose, vision, culture and values. The way in which byshareholders of the Directors, having due this issupported through the current Board composition regardto their performance and ability to continue issetouton page 135. to contribute to the Board, taking into consideration the skill, experience and knowledge required along The Committee also plays a key role in supporting inclusion with the need for progressive refreshing of the and diversity at Workspace, which at Board level involves Board reviewing and monitoring processes and initiatives in the Group, with employee engagement playing an important role. The Committee is also responsible for recommending candidates for the role of Non-Executive Director responsible for employee engagement. 131 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack COMPOSITION, SUCCESSION AND EVALUATION CONTINUED ## Nominations ## Board succession and appointment ## 1 ## Committee of new Non-Executive Directors ## activities | in 2021/22 | During the year, the Committee continued to | Key considerations for the search process | | In addition, there was a clear expectation that | | --- | --- | --- | --- | --- | | | fulfil its core responsibilities of reviewing the | The Nominations Committee discussed | | candidates would be able to devote sufficient | | | structure of the Board and its Committees, | theskills and experience required for new | | time to the role. | | | taking diversity into account when | members joining the Board. It was concluded | | | | | recommending new Board appointments | that the successful candidates would | | Our extensive search and selection process | | | andadhering to a formal appointment | collectively bring the following attributes: | | Fidelio, an independent external consultancy, | | | andinduction process. | – Deep property expertise and familiarity | | were engaged to conduct the selection | | | | | withtenant and occupier trends | processes. | | | Chris Girling retired from the Board in | – An understanding of the investment markets | | | | | February 2022 having served nine years | – Strong operational focus and ability | | Fidelio were asked to draw up detailed role | | | onthe Board. | | tocontribute to Workspace’s ambition | specifications. These were reviewed with | | | | | todevelop its customer-centric | theChairman who then engaged with | | | Damon Russell will have served nine years | | businessmodel | theNominations Committee. Final role | | | asaNon-Executive Director in May 2022 | – The ability to draw on long-term, relevant | | specifications were then approved. | | | andwill therefore retire following the | | experience of driving value for the customer | | ACTIVITIES | | | conclusion of the AGM in July 2022. | – Experience of working in service-focused | | Details of the recruitment process can be | | --- | --- | --- | --- | --- | --- | | | | | | industries, such as the hospitality sector | found on page 132. | | Board succession and | page 131 | The ongoing search for new Non-Executive | – An ability to constructively challenge | | | 1 | appointment of new | | Directors continued during the year in order | andsupport the management team | | --- | --- | --- | --- | | Non-Executive Directors | | tostrengthen our diversity of skills, knowledge | andtheBoard while maintaining a highly | | | | and personal experiences. As part of our | collaborative approach and collegiate style | | Performance of the | page 134 | | | 2 ongoing succession planning, a review of – Familiarity with the requirements of being Nominations Committee | | Board composition during the year resulted | | aBoard member of a listed company | | --- | --- | --- | --- | | 3 Board composition page 134 | in three new Non-Executive Directors joining | – A keen awareness of stakeholder interests | | | | the Board. Duncan Owen joined on 22 July | | and a strong interest in ESG and how | pages 136 4 Inclusion and diversity 2021, Manju Malhotra and Nick Mackenzie both itisshaping the work of the Board to 138 joined the Board on 26 January 2022. The andtheimpacts on the business 5 Board evaluation page 139 recruitment process is set out on page 132. – A good understanding of the parameters of being a Non-Executive Director and possess a strong capability to add value to the role – Understand the importance of diversity and inclusion agendas and the value this brings to an organisation – Excellent judgement, able to lead logical and evidence-based discussions 132 Workspace Group PLC Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents # COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2021/22 CONTINUED # BOARD SUCCESSION AND APPOINTMENT OF NEW NON-EXECUTIVE DIRECTORS CONTINUED # Considered candidates with relevant and diverse skills In follow-up discussions held between the Chairman and the Committee, they reflected upon the experience of the candidates and their specific skill sets. Duncan Owen, Manju Malhotra and Nick Mackenzie all currently perform executive roles and are CEOs running businesses in the property, retail and hospitality sectors. The Nominations Committee considered that given their existing executive roles they would bring a fresh and complementary perspective to an existing Board of Directors, who already bring valuable expertise and knowledge from diverse roles in property, finance and government. The biographies for the Board of Directors can be found on pages 102 to 105. # External search consultancy engaged by the Nominations Committee Fidelio was recently accredited by the FTSE Women Leaders Review (formerly the Hampton-Alexander Review) for the fifth year running for their contribution towards achieving gender balance on Boards and leadership teams. # NON-EXECUTIVE DIRECTOR RECRUITMENT PROCESS # KEY CONSIDERATIONS FOR THE SEARCH PROCESS The Nominations Committee discussed the skills and experience and time commitment required for new members joining the Board. # OUR EXTENSIVE SEARCH AND SELECTION PROCESS Fidelio, an independent external consultancy, were engaged to conduct the selection process. Fidelio were asked to draw up detailed role specifications. These were reviewed with the Chairman who then engaged with the Nominations Committee. Final role specifications were then approved. The Nominations Committee then agreed that the Chairman would conduct interviews with an initial long list of candidates presented. Following these interviews, the Chairman and Fidelio compiled a shortlist of at least three candidates for each role based on their level of experience, commercial focus and specific experience of the property sector. The shortlisted candidates were then further interviewed by members of the Nominations Committee and the Chief Executive Officer. # CONSIDERED CANDIDATES WITH MILITARY AND DIVERSE SKILLS In follow-up discussions held between the Chairman and the Committee, they reflected upon the experience of the candidates and their specific skill sets. After due consideration, the Committee recommended the appointment of Duncan Owen to the Board with effect from 22 July 2021 and the appointment of Manju Malhotra and Nick Mackenzie to the Board with effect from 26 January 2022. The biographies for Duncan, Manju and Nick can be found on pages 104 to 105. The Board development team of Fidelio facilitated a Board Evaluation, which was concluded in March 2022. Details of the external evaluation can be found on page 140. Fidelio have no other connection with the Company or the individual Director. # Time commitments The Directors have demonstrated a strong commitment to their roles on our Board and Committees. The Directors attended meetings of the Board and Committees scheduled in 2021/22 as well as additional ad hoc meetings. For further details of attendance at meetings see page 101. The Directors have also given careful consideration to their external time commitments to confirm that they are able to devote an appropriate amount of time to those roles on our Board and Committees. For each of the Directors, the Board considers that the time commitment that he or she is required to devote to those roles does not compromise their external roles at Workspace. The Nominations Committee reviews on an ongoing basis Directors' time commitments and confirmed that they were fully satisfied with the amount of time each Director devoted to the business. The Committee also recognises that there is value in the Non-Executive Directors being active on other Boards in an Executive or NED capacity. ![img-6.jpeg](img-6.jpeg) 133 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack COMPOSITION, SUCCESSION AND EVALUATION CONTINUED I have been impressed The onboarding process has The comprehensive NOMINATIONS COMMITTEE ACTIVITIES IN 2021/22 CONTINUED by the warm culture enabled me to gain broad onboarding process at and agile approach to andextensive insight into the Workspace has given me customers as well as how business and operating model avaluable insight into the knowledge. We also offer ongoing the competitive advantage as well as getting a feel for business including one-to- bespoke development for Directors of the operational platform the high-quality assets the one meetings with key ## Non-Executive and Committee Chairs. is clearly differentiated. business owns and operates. members of the team. ## It is the hospitality style By allowing me to spend time Itisclear that the strategic Directors’ induction Directors are encouraged to continue ofmanaging the portfolio out and about in the business purpose and unique market to meet with management after their ## that can drive significant it has been effective in proposition is well programmes induction on an ongoing basis to future value for providing an understanding understood throughout support them and pass on their shareholders. of the culture and quality theorganisation. All new Non-Executive and experience. ofthe management teams. ExecutiveDirectors joining the Boardundertake a formal and For the new Non-Executive Directors, personalised induction programme Duncan Owen, Manju Malhotra and Nick DUNCAN OWEN NICK MACKENZIE MANJU MALHOTRA which is designed to provide an Mackenzie, the induction programme Non-Executive Director Non-Executive Director Non-Executive Director understanding of the Company’s included the following elements: business, strategy, culture, – One-to-one meetings with the governance, management and Executive Directors and the itsstakeholders. This will cover Chairman, covering strategy, theoperation and activities of the operational and financial matters, Company, including site visits and people, the control environment, meeting members of the senior capital structure and funding management team, the Company’s – Briefings from the Company principal strategic risks, the role Secretary and the Head of ofthe Board, the decision-making Corporate Communications on legal matters reserved to the Board, and governance matters and shareholder the responsibilities of the Board relationships, which were followed Committees. This is tailored to take up by sessions with the Company into account a Director’s previous brokers and external advisers experience and responsibilities. – Briefings from senior executives and managers across our key The Company Secretary assists the business areas and operations, Chairman in designing and facilitating including strategy and corporate an induction programme for new development, marketing, asset Directors and their ongoing training. management, investment, brand development, ESG and technology Directors are also briefed on – Access to reference materials, theirroles and responsibilities as including key information on our adirector of a listed company. governance framework, recent ForNon-Executive Directors, specific financial data, investor relations and committee responsibilities relevant policies supporting our business totheir Committee membership are practices, including our share covered, to enable them to function dealing policies, conflicts of interest effectively as quickly as possible. procedure and Directors’ duties – Tours of properties within the In addition, Directors are offered portfolio with the relevant asset follow-up sessions in any areas in management teams were also which they want to increase their completed Kennington Park, Oval 134 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2021/22 CONTINUED | | Performance | | Board | | --- | --- | --- | --- | | 2 | | 3 | | | | of the Nominations | | composition | ## Committee | The performance of the Nominations | Reviewing the Board and Committee | As at 31 March 2022, the Board comprised | Stephen Hubbard was appointed as the | | --- | --- | --- | --- | | Committee was considered through an | composition | theChairman, two Executive Directors and | Non-Executive Director for employee | | externally facilitated evaluation process, | As part of the Board’s annual effectiveness | sixNon-Executive Directors. Further details | engagement in July 2020. Further details | | withafocus on the contribution to a high- | review, described on page 139, the Committee | onthe independence of the Directors and | canbe found on page 117. | | performing Board. | considers the composition of the Board and | their election and re-election can be found on | | | | its Committees in terms of balance of skills, | page 121 and on pages 3 to 4 of the 2022 | Furthermore, the respective skills of the | | From the responses provided, it was | experience, length of service and wider | Notice of Annual General Meeting. | Directors were found to complement one | | concluded that the Nominations Committee | diversity considerations. | | another, enhancing the overall operation | | was operating effectively. | | In accordance with the Code, with the | oftheBoard. | | | The Board and its Committees continue to | exception of Damon Russell, all the Directors | | | | have a strong mix of experienced individuals | will retire and offer themselves for election | Chairman’s evaluation for 2021/22 | | | on the Board who are not only able to offer | orre-election by shareholders at the 2022 | The Senior Independent Director chaired | | | anexternal perspective on the business, but | Annual General Meeting. Having served | ameeting of Executive and Non-Executive | | | also provide constructive challenge to review | asaNon-Executive Director for nine years in | Directors, without the Chairman present, to | | | the Group’s strategy. The Nominations | May 2022, Damon Russell will retire following | appraise the Chairman’s performance and to | | | Committee is satisfied that each Director | the conclusion of the AGM in July 2022. | address any other matters which the Directors | | | continues to make an effective contribution to | | might wish to raise. The outcome of these | | | the Board and to fulfil their duty to promote | The biographies of all members of the Board, | discussions were conveyed by the Senior | | | the success of the Company. | outlining the skills and experience they bring | Independent Director to the Chairman. | | | | to their roles, are set out on pages 102 to 105. | Itwasconcluded that the Chairman is highly | | | The Board has carefully considered the | | respected and is valued for his industry | | | guidance criteria regarding the composition | Both Damon Russell and Stephen Hubbard | knowledge and experience. The Board | | | ofthe Board under the UK Corporate | willhave been on the Board for more than | issatisfied that the Chairman continues | | | Governance Code. In the opinion of the | sixyears, so the Committee has undertaken | tobeeffective and shows a high level of | | | Board,the Chairman and all the Non-Executive | areview of their contribution to the Board. | commitment in discharging his responsibilities. | | | Directors bring independence of judgement | The Committee concluded that both Damon | | | | and character, a wealth of experience and | and Stephen are independent and continue | | | | knowledge and the appropriate balance of | tobring a range of relevant skills gained in | | | | skills. The Directors give sufficient time | diverse business environments. This enables | | | | toenable them to carry out effectively their | the Directors to bring the benefit of varying | | | | responsibilities and duties to the Board and | perspectives to Board debate. | | the Committees on which they sit. They are sufficiently independent of management and are free from any other circumstances or relationships that could interfere with the exercise of their judgement. 135 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2021/22 CONTINUED BOARD COMPOSITION CONTINUED BOARD TENURE AS AT 31 MARCH 2022 BOARD SKILLS AND EXPERIENCE AS AT 31 MARCH 2022 | | | Length of time | | Executive and | Property and | Corporate | Customer and | | --- | --- | --- | --- | --- | --- | --- | --- | | | Year joined 2007 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 | (to 31 March 2022) | | Leadership | Real Estate Financial | Governance | Marketing People ESG | | Executive Directors | | | Executive Directors | | | | | GRAHAM GRAHAM 2007 14 YEARS 8 MONTHS CLEMETT CLEMETT DAVE DAVE 2020 2 YEARS 0 MONTHS BENSON BENSON Non-Executive Directors Non-Executive Directors STEPHEN STEPHEN 2014 7 YEARS 8 MONTHS HUBBARD HUBBARD ROSIE ROSIE 2020 1 YEAR 4 MONTHS SHAPLAND SHAPLAND LESLEY-ANN LESLEY-ANN 2021 1 YEAR 2 MONTHS NASH NASH DAMON DAMON 2013 8 YEARS 10 MONTHS RUSSELL RUSSELL DUNCAN DUNCAN 2021 8 MONTHS OWEN OWEN MANJU MANJU 2022 2 MONTHS MALHOTRA MALHOTRA NICK NICK 2022 2 MONTHS MACKENZIE MACKENZIE 136 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2021/22 CONTINUED GENDER DIVERSITY GENDER DIVERSITY OF EXECUTIVE ## Inclusion OF THE BOARD COMMITTEE AND DIRECT REPORTS ## 4 AS AT 1 APRIL 2022 AS AT 1 APRIL 2022 ## and diversity This Inclusion and Diversity Policy applies This commitment to diversity and inclusion both to the Board and the wider business. isincorporated into all aspects of our Workspace’s purpose is to give businesses the recruitment and selection, training and freedom to grow. We know that a workforce development, and performance reviews made up of people with a wide range of andpromotion processes are all based solely backgrounds and experiences will contribute on individual merit and free from bias. to our long-term success and help to achieve our goals. We are committed to supporting We monitor and analyse employee gender diversity and to creating an inclusive culture andethnicity information and we actively that attracts the best individuals to our follow recommendations for improving Company. diversity. We consider this to be consistent with our policy that selection should be | We value diversity in all its richness and work | basedon the best person for the role. | | | | --- | --- | --- | --- | | | | Male 66.7% | Male 62% | | hard to create an environment where talented | Wearecommitted to using recruitment | | | | | | Female 33.3% | Female 38% | | people can thrive, without regard to gender, | processes, including advertisements and | | | | gender reassignment, race, ethnicity, age, | useof recruitment agencies, which allow a | | | | religious beliefs or absence of religion | diverse group of potential candidates to be | ETHNIC DIVERSITY | ETHNIC DIVERSITY OF EXECUTIVE | | orbelief, sexual orientation, marital and civil | identified both at Board and employee level. | OF THE BOARD | COMMITTEE AND DIRECT REPORTS | | partnership, disability, education or social | | AS AT 1 APRIL 2022 | AS AT 1 APRIL 2022 | | background. | As a business we recognise the importance | | | ofdeveloping an inclusive and diverse talent As part of that philosophy, we believe pipeline and we have, therefore, tasked our thatevery employee has the right to be business leaders and our Human Resources treated with respect and dignity throughout team with delivering a number of supporting their employment with us and not to be initiatives to increase diversity and build a discriminated against. We have a zero pipeline of talented employees and senior tolerance attitude to bullying, harassment managers. orvictimisation of any kind. White 77.8% White – English/Welsh/Scottish/ Minority ethnic 22.2% Northern Irish/British 85% White – Irish 4% White – Other 4% Asian/Asian British – Indian 7% 137 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2021/22 CONTINUED – supporting individuals with further studies GENDER DIVERSITY OF ALL EMPLOYEES ETHNIC DIVERSITY OF ALL EMPLOYEES INCLUSION AND DIVERSITY – identifying, during the annual appraisal AS AT 1 APRIL 2022 AS AT 1 APRIL 2022 CONTINUED process, employees who have strong potential for development at Workspace, and putting training and development plans in place forthem – sponsoring external learning and Our HR colleagues continue to work closely development as well as providing a group- with employees to identify and progress these wide internal training programme to offer initiatives, including: employees opportunities to learn and – offering flexible working options (including develop skills such as organisation, hybrid working) to support employees with peoplemanagement and managing family and/or caring commitments difficultsituations – organising unconscious bias training for all – ensuring that our recruitment agencies have employees as well as interview skills training a commitment and track record in diverse for members of the Executive Committee appointments and all hiring managers | – appointing a Recruitment Manager to | | Hampton-Alexander and Parker Reviews | | | | --- | --- | --- | --- | --- | | | oversee our entire recruitment activity | The Board’s gender and ethnicity balance | | | | | | | Female 155 | White 196 | | | andprocess | reflects the requirements that were set by the | | | | | | | Male 111 | White – English/Welsh/Scottish/ | | – providing guidance and support notes | | Hampton-Alexander and Parker Reviews. | | Northern Irish/British 146 | | | tohiring managers to promote fair and | | | White – Irish 5 | | | thorough processes | The Board remains focused on promoting | AGE DIVERSITY OF ALL EMPLOYEES | White – Other 45 | | – continuing to advertise new job vacancies | | broader diversity and creating an inclusive | AS AT 1 APRIL 2022 | Black 26 | | | internally to encourage internal applications | | | Black/African/Caribbean/ | culture in line with the recommendations Black British – Caribbean 13 – reviewing and auditing job descriptions ofboth the FTSE Women Leaders Review (the Black/African/Caribbean/ andperson specifications to confirm that successor to the Hampton-Alexander Review) Black British – African 9 inclusive language is being used consistently and the Parker Review. A diverse organisation Black/African/Caribbean/ | | and working with recruitment agencies to | benefits from differences in skills, industry | | Black British – Other 4 | | --- | --- | --- | --- | --- | | | make sure the same applies to any materials | experience, background, disability, race, | Asian 28 | | | | produced by them | gender, sexual orientation, religion and age, | Asian/Asian British – Indian 13 | | | – requiring, wherever possible, candidate | | aswell as culture and personality. | Asian/Asian British – Bangladeshi 4 | | | | shortlists for executive-level positions to | | Asian/Asian British – Pakistani 2 | | | | include an equal number of men and women | | Asian/Asian British – Other 9 | | Mixed 14 – introducing bi-monthly HR meetings with Mixed – White and Black Caribbean 4 Heads of Departments and senior managers Mixed – White and Black African 3 with a view to identifying opportunities for Mixed – White and Asian 1 development Mixed – Other 4 – continuing to promote progressive career Mixed/Multiple ethnic groups – Other 2 development through job rotation to Other ethnic group 1 20–29 69 broaden experiences and skills 30–39 113 40–49 48 50–59 24 60–69 10 70–79 2 138 Workspace Group PLC^{}[] Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents # **COMPOSITION, SUCCESSION AND EVALUATION CONTINUED**NOMINATIONS COMMITTEE ACTIVITIES IN 2021/22 CONTINUED # **INCLUSION AND DIVERSITY CONTINUED** # **Board diversity principles** We have a policy to promote diversity and inclusivity across the business, including on the Board, recognising that a group that is diverse in nature, irrespective of gender, ethnicity, skills, experience and background, is able to provide differing perspectives and challenge to debates and decisions. When recruiting new Board members, the Nominations Committee makes all decisions in consideration of this policy and the principles below. The principles have been agreed with the aim of increasing diversity within our Board and developing a pipeline of high potential diverse leaders and senior managers. # **BOARD DIVERSITY – PRINCIPLES AND PROGRESS** | PRINCIPLES | IMPLEMENTATION | PROGRESS AGAINST OBJECTIVES | | --- | --- | --- | | Ensure the Board comprises an appropriate balance of skills and brings a balance of diverse characteristics including in terms of gender, ethnicity, skills, experience and background in order to bring fresh perspectives and to enrich our business and contribute to our long-term success. | The diversity of the Board, in a number of respects, is continually reviewed by the Nominations Committee and is considered annually by the wider Board as part of the Board evaluation process to ensure the Board is continuing to enrich the business and contribute to its long-term success. | In March 2022, the Board attended a workshop hosted by Fidelio to consider the outcome of the 2022 Board evaluation process. An important part of the discussion related to the value of diversity, including cognitive diversity. No concerns were raised in connection with the diversity of the Board. In addition, as a result of the Nominations Committee's continual review of the cohesiveness of the Board, three new Non-Executive Directors were appointed during the year, bringing fresh perspectives to the Board and its Committees. 33% female representation on our Board as at 31 March 2022. 22% ethnic minority representation on our Board as at 31 March 2022. In line with the principles of the Parker Review, the Board actively seeks diverse candidates. The calibre of the candidates identified during the most recent recruitment exercise was outstanding and further details can be found on page 132. | | Ensure the recruitment process, including advertisements and use of recruitment agencies, allows for a diverse group of potential candidates to be identified. | The Board places importance on ensuring the recruitment process is fair and is based solely on individual merit. The Board instructs executive search firms to assist with sourcing the best candidates for the role. When instructing an executive search firm, the Board will explicitly request that a diverse mix of individuals are identified for the role. | During the year, the Nominations Committee engaged Fidelio to assist with the recruitment of three new Non-Executive Directors. Fidelio presented a diverse range of potential candidates for consideration. Following an extensive search and selection process, Board appointments were made during the year as follows: - 22 July 2021, Duncan Owen was appointed as a Non-Executive Director; and - 26 January 2022, both Manju Malhotra and Nick Mackenzie were appointed as Non-Executive Directors. In making these appointments, the Board considered this Board Diversity Policy and additional relevant guidance. | | The Board and Nominations Committee will only engage with executive search firms that have signed up to the Standard Voluntary Code of Conduct for Executive Search Firms. | The Board will continue to engage executive search firms that have signed up to the Standard Voluntary Code of Conduct. | During 2021/22, Fidelio were the only executive search firm engaged by the Board. Fidelio is accredited under the Hampton-Alexander Enhanced Code of Conduct and has signed up to the Standard Voluntary Code of Conduct in order to provide sufficient support to the Board in enhancing diversity. | | Board attention and focus is given to initiatives designed to develop a pipeline of talented, high potential employees and senior managers from a diverse range of backgrounds including in terms of gender, ethnicity, skills, experience and background. | The HR team has been tasked with delivering a number of supporting initiatives to support and progress this principle. | During the year, the HR team continued to work on a number of initiatives including unconscious bias training for all employees, appointing a Recruitment Manager to oversee recruitment and introducing bi-monthly meetings between HR, Heads of Department and senior managers to identify opportunities for development. See page 137 for more details. | 139 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2021/22 CONTINUED ## Board evaluation ## 5 Developing a high- ## performing Board In 2021/22, the performance and effectiveness of the Board was reviewed through an ## A high-performing externally facilitated evaluation process. This was conducted with support from Fidelio, who ## Board is characterised by also led the external evaluation process in 2021, both of which were led by Gillian ## particular characteristics. Karran-Cumberlege. The Board was keen to continue this work with Fidelio given their ## Composition and the need extensive Board evaluation and development ## for diversity remain key, experience, their focus on enhancing effectiveness and theBoard’s contribution ## together with the ability tovalue. Fidelio were an active contributor tothe BEIS consultation paper on Board ## tothink strategically Evaluation conducted by the UK Chartered ## whilst ensuring effective Governance Institute. ## engagement with the The Executive search team of Fidelio were, in2021, engaged to assist with the search ## Executive and the business. andidentification of three new Non-Executive Directors. | | This process was developed with a clear | Stephen Hubbard and | | --- | --- | --- | | They have no other connection with the | focuson the high-performing Board and how | Carmelina Carfora with | | Company or individual Directors. | the Board adds value. The evaluation enabled | GillianKarran-Cumberlege | | | the Board to reflect on its work in an engaged | and Kate Barclay of Fidelio | | In conducting this evaluation, the Board | and interactive workshop discussion which | | | wasconscious of ensuring that the process | resulted in clear recommendations. This | | | met the requirements of the Code and had | approach built clearly on the prior Board | | | aclear focus on enhancing the effectiveness | evaluation, the progress to date, and also | | | ofthe Board. Following Fidelio’s evaluation | contributed to the momentum and potential | | | in2021 and the ongoing Board refreshment, | of a relatively new Board. | | the Board decided to leverage this momentum and conduct a review that would lead to Fidelio worked with the Company to develop meaningful insights and enable the Board an innovative approach to the internal tomake further progress in enhancing evaluation which met the needs of the performance and its effectiveness. Codethrough the combination of a tailored questionnaire and a meeting of the Board todiscuss feedback from the questionnaire. 140 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2021/22 CONTINUED BOARD EVALUATION PROCESS KEY OUTCOMES The feedback from this year’s Board evaluation was positive and concluded that the Board worked well and the Committee structure continued to evolve. JANUARY 2022 FEBRUARY 2022 MARCH 2022 BOARD FOCUSED QUESTIONNAIRE MEETING WITH Specific development themes included: DISCUSSION ISSUED TO THE BOARD THE BOARD – Continued focus by the Board on A discussion was held by the Fidelio developed a tailored The Board then had the opportunity strategy and horizon scanning Board to consider key subject questionnaire, focused on Board to explore the findings during its – Review of the Board Committee structure areas for this external review. effectiveness and contribution meeting in March. and membership for the next phase of to value. Workspace’s development, including the formation ofan ESG Board Committee and the disbandment of the Risk Committee, with responsibilities to be integrated into the Board and Audit Committee’s remits – Continue to focus on effective workforce engagement – Continuous learning for Board members to enhance understanding of the Company and the business it operates in KEY QUESTIONS KEY FOCUS AREAS DISCUSSED IN MEETING – Review progress on inclusion and diversity and ESG both at Board level and throughout the business What is a high-performing Board, taking The questionnaire provided the opportunity The discussion was designed to debate the into account best practice, as well as for Board members to give valuable and definition of a high-performing Board and Following the recommendations from shareholder and stakeholder expectations? focused feedback on their view of best what steps the Workspace Board can take thisexternal review, an implementation practice and the attributes of a high- to fulfil this ambition. planand progress tracker will be developed How can the performance of the Board performing Board, as well as where the by Gillian Karran-Cumberlege and the bemeasured, including the value that the Workspace Board stands in thatcontext. The Board had an open discussion which Company Secretary and will be reviewed by Board contributes? facilitated debate, including around the Board. shareholder, stakeholder and governance Where does Workspace and its Board expectations and built agreement on members stand today? practical steps towards becoming a high-performing Board. What are the next steps for the Workspace Board to enhance performance and effectiveness? Does the Committee structure remain appropriate? 141 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack COMPOSITION, SUCCESSION ANDEVALUATION CONTINUED ## Openness and respect NOMINATIONS COMMITTEE ## for the skills and ACTIVITIES IN 2021/22 CONTINUED ## experience of others. ## Utilising individuals’ ## What is a high- ## specific skills so that ## performing Board? ## the value of the whole ## is greater than the sum At its meeting in March 2022, the Board ## of the parts. considered the attributes of a high-performing Board. The following themes were highlighted: – Board composition is key, in particular the need for diversity, including of background Stephen Hubbard and experience Chairman – A high-performing Board is collaborative with a focus on challenging but also supporting the Executive team. Board members will have a good understanding ofthe company’s purpose, values and culture and a commitment to setting the tone from the top. Not all Board members should come from the same sector but theyshould develop a firm grasp of the operating model – Board members will focus on strategy and bring a good understanding of the business and sector and the business will benefit from a clear external perspective – The quality of the Board dynamic is also significant for high performance, including an open culture and the ability to listen – Good engagement with the company together with an open and supportive relationship with the Executive team – A firm understanding for governance whichis characterised by strong Board andCommittee structures, as well as goodreporting Kennington Park, Oval 142 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2021/22 CONTINUED BOARD EVALUATION CONTINUED As part of our three-year external Board evaluation cycle, the Board and Committee evaluation process in 2021 was externally facilitated by Gillian Karran-Cumberlege of Fidelio. The feedback fromthis review was positive and concluded that the Board and its Committees continued to work well and that the Directors contribute effectively and demonstrate commitment to their roles. Thespecific development themes were agreed and these areas have been progressed within the period. Further details are provided below: PROGRESS AGAINST THE EXTERNAL BOARD EFFECTIVENESS REVIEW CONDUCTED IN 2021. ITEM DISCUSSED BY THE BOARD PROGRESS AGAINST PRINCIPLES STRATEGY Continue to develop its oversight The Board continues to consider the Group strategy at each Board meeting. An annual strategy day was held in September 2021 ofstrategy and its implementation. and this was attended by the Executive Committee. Actions from the strategy day were then circulated to the Board. ENGAGEMENT Create a clear framework for how Board During the year we initiated a programme of events outside of Board meetings at which members of the Board and Executive FRAMEWORK members and the Executives can engage Committee can build relationships on a more informal, social basis. New Non-Executive Directors also meet with the Executive beyond the formal Board meetings. team and other employees as part of their induction process. PEOPLE AND Continue to develop the Board’s oversight The CEO provides the Board with oversight of the broader people agenda, succession planning, development and changes in CULTURE of the broader people agenda, including staff across the business. This includes updates from employee surveys and town hall meetings. The Chairman updates the Board diversity and inclusion, succession on feedback received during the Chairman’s breakfast sessions with employees. planning, culture and people leadership To celebrate International Women’s Day, we hosted a panel discussion with Lesley-Ann Nash, Rosie Shapland and Manju Malhotra, and development. who shared their experiences and achievements over the years. The event was well attended by employees from across the business. The Board continues to review the Inclusion and Diversity Policy and progress made against the objectives. See page 138 for more details. ESG Continue to focus on ESG and how The Head of Sustainability presented to the Board twice during the year on the sustainability strategy, governance and our itisembedded into strategy. science-based targets to transition to net zero carbon. A commitment to acting sustainably is one of three pillars to our strategy, which demonstrates how deeply it is embedded andensures we consider sustainability in all business decisions. STAKEHOLDER Maintain a focus on stakeholder The Chief Executive Officer and Chief Financial Officer provided feedback to the Board following meetings with analysts ENGAGEMENT andshareholder engagement. andinvestors held around our results, as well as following the announcement of our offer for McKay Securities PLC. Just after the year end, a Capital Markets event was held on sustainability, outlining our approach and strategy. SUCCESSION Maintain a focus on succession We are pleased with our progress this year. We appointed Duncan Owen, Manju Malhotra and Nick Mackenzie as Non-Executive PLANNING OF THE planningand composition of the Directors. BOARD AND THE Board’sCommittees and ofthe Damon Russell will have served as a Non-Executive Director for nine years in May, so will be stepping down at the AGM in July 2022. EXECUTIVE ExecutiveCommittee. COMMITTEE We also welcomed two new members to the Executive Committee this year. Paul Hewlett, Director of Strategy & Corporate Development, and Leo Shapland, Head of Portfolio Management, joined in November 2021 and March 2022 respectively. BOARD LEARNING Review the approach to Board learning, The Board strategy day offers an opportunity for members of the Board to hear from internal and external speakers on developing a dynamic programme of avariety of topics, including market trends and developments as well as strategic planning across areas of the business. relevant subject areas that reflect We also commissioned a bespoke Board learning programme. strategic priorities orchallenges. 143 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ### AUDIT, RISK AND INTERNAL CONTROL ## Audit Committee Report ## The Audit Committee’s role ## is to oversee the integrity of ## theGroup’s financial reporting ## and fulfils a vital role in the ## Group’s governance framework. ### Rosie Shapland ### Chair of the Audit Committee QUICK LINKS Membership and attendance at Audit Committee meetings page 144 Key topics considered page 144 Chair’s letter page 145 Role of the Audit Committee page 147 External audit page 149 Significant audit matters page 150 Developing a robust Viability Statement page 153 144 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack AUDIT, RISK AND INTERNAL CONTROL CONTINUED AUDIT COMMITTEE REPORT CONTINUED ## Membership and attendance Key topics considered by the Committee during the year ## atAudit Committee meetings The Committee is made up entirely of Non-Executive Directors FINANCIAL AND – Reviewed the year-end financial statements including key judgements, estimates, and each Committee member has considerable commercial NARRATIVE assumptions and the going concern and viability statements knowledge and broad industry expertise. The Committee is REPORTING – Considered the content of the Annual Report and Accounts and advised the Board chaired by Rosie Shapland. Details of individual attendance at onwhether, taken as a whole, the Annual Report and Accounts were fair, balanced and the meetings held during the year are set out below. More understandable and whether they provided the necessary information for shareholders information on the skills and experience of all Committee to assess the Company’s position, performance, business model and strategy members can be found on pages 102 to 103. – Reviewed the adequacy of key financial controls and broader internal control systems MEMBER MEETINGS – Discussed the viability statement and going concern assumption with ourExternal SINCE ATTENDED Auditor 1 Rosie Shapland (Chair) 2020 3/3 – Reviewed a tax report and confirmation of compliance with REIT tax regime – Discussed the presentation of the portfolio valuation by the independent valuers 2 Chris Girling 2013 2/3 – Considered the interim financial results and half-year statements Lesley-Ann Nash 2021 3/3 – Reviewed and discussed a report from KPMG, summarising their findings arising fromthe half-year review of the results of the Company for the six months ended Damon Russell 2013 3/3 30 September 2021 3 Duncan Owen 2021 2/3 EXTERNAL AUDIT – Considered the External Auditor’s report on the 2020/21 audit 4 | Manju Malhotra | | 2022 1/3 | – Reviewed letters of representation issued to the External Auditor for the full-year and | | | --- | --- | --- | --- | --- | | | 4 | | | half-year results prior to their being agreed by the Board | | Nick Mackenzie | | 2022 1/3 | | | – Reviewed the independence of the External Auditor 5 Suzi Williams 2020 1/3 – Held a private meeting with the External Auditor – Considered the scope and cost of the external audit for the year ended 31 March 2022 1. In accordance with the UK Corporate Governance Code 2018, the Board considers – Reviewed the materiality threshold for the 2021/22 audit that Rosie Shapland has significant recent and relevant financial experience. – Considered the audit plan and strategy for the year ending 31 March 2022 2. Chris Girling stepped down as a Non-Executive Director of the Company – Monitored the ratio and level of audit to non-audit fees paid to the external auditor and on7February 2022. As Chairman and member of the Audit Committee, Chrisattended all meetings held prior to his departure. Chris stepped down agreed their remuneration for the year asChairman on 22 July 2021. 3. Duncan Owen joined the Board with effect from 22 July 2021. Duncan attended GOVERNANCE – Agreed the narrative of the Audit Committee Report his first Committee meeting on 11 November 2021. – Reviewed the corporate governance sections of the Annual Report 4. Manju Malhotra and Nick Mackenzie joined the Board with effect from 26January – Reviewed the requirement for an internal audit function 2022. They attended their first meeting on 23 March 2022. – Considered a paper from the Company Secretary on BEIS consultation 5. Suzi Williams stepped down as a Non-Executive Director of the Company on 10 September 2021. Suzi attended all meetings held prior to her departure. – Discussed assessment of the effectiveness of the Audit Committee – Approved the Committee timetable and planner which detailed the areas of focus for2021/22 – Examined the performance of the external auditors, their objectivity, effectiveness and independence, as well as the scope of the audit and annual audit plan – Approved changes to the Committee’s Terms of Reference – Discussed the approach for the externally facilitated Committee effectiveness review 145 Workspace Group PLC Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents # AUDIT, RISK AND INTERNAL CONTROL CONTINUED AUDIT COMMITTEE REPORT CONTINUED 7 June 2022 Dear Shareholder # Audit Committee Chair's Letter The Audit Committee plays a key role in promoting the maintenance of a strong and transparent control environment at Workspace. I am pleased to present my first Audit Committee Report to you as Chair for the year ended 31 March 2022, which provides an overview of the key activities and focus of the Committee during the year. Although this is my first report as Chair of the Audit Committee, I have been a member since my appointment to the Board in November 2020 and succeeded Chris Girling as Chair following the Annual General Meeting in July 2021. I would like to thank Chris for his considerable contribution to the work of the Committee during his nine-year tenure. The Committee has been pleased with the performance and commitment of the Workspace team, the independent valuers, and our External Auditor and how they have handled the residual disruption caused by the Covid-19 pandemic. # Review of material issues The Audit Committee has a key role in checking that the Group's narrative reporting gives a fair, balanced and understandable assessment of the Company's position and prospects and establishing that the financial statements provide a true and fair view of the Group's financial affairs. As part of this process, we considered the significant financial judgements made during the year, along with other key financial reporting issues. In this context, we considered the twice annual valuation of the investment portfolio, the valuation process and the key assumptions made by the valuers and their independence. Following our review, we are satisfied that the valuation process is robust, the assumptions and estimates used in the valuation are appropriate and that the valuers remain independent. Further details can be found on page 152. 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. We found no concerns arising from this review. A description of the main activities that the Committee considered during the year can be found on page 144. # Viability and going concern statements The Committee considered the going concern statement in the interim statements and Annual Report, and the viability statement in the Annual Report. This included reviewing the work undertaken by management, which considered plausible downside forecasts which factored in the Group's principal risks and certain uncertainties, and the appropriateness of the five-year viability assessment period. Following this review, we we satisfied that management had conducted robust viability and going concern assessments and recommended approval of the statements to the Board. See our viability and going concern statements on page 76. # 2022 Annual Report The External Auditor confirmed that it had found no material misstatements in the course of their work. After reviewing the reports from management, and following discussions with the External Auditor and valuers, the Committee is satisfied that: - The process used to determine the property valuation was satisfactory - The financial statements appropriately addressed the key judgements and key estimates - The Group has adopted appropriate accounting policies - Both the External Auditor and valuers remain independent and objective in their work The Board as a whole is responsible for assessing the Group's position, performance, business model and strategy. The Committee's role in this assessment is covered on page 151. For the year ended 31 March 2022, the Committee confirmed to the Board it was satisfied that the Annual Report and Accounts was fair, balanced and understandable. # Financial Reporting Council (FRC) review The Group received a letter from the Financial Reporting Council concerning its limited scope review of the Group's Annual Report and Accounts for the year ended 31 March 2021. In response to the letter we have made some minor amendments to this year's Annual Report and Accounts. The FRC review was based on the Annual Report and Accounts but provides no assurance that the Annual Report and Accounts are correct in all material respects and did not benefit from detailed knowledge of the business or an understanding of the underlying transactions entered into. It was conducted by staff of the FRC who have an understanding of the relevant legal and accounting framework, although the FRC accepts no liability for reliance on this letter by the company or any third party, including but not limited to investors and shareholders. 146 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack AUDIT, RISK AND INTERNAL CONTROL CONTINUED AUDIT COMMITTEE REPORT CONTINUED BEIS Consultation on Restoring Trust in Audit and Corporate Governance We do not have a formal internal audit function, a matter which is kept As a Committee, we follow closely all regulatory developments and are under review by the Audit Committee. However, during the year, the committed to responding appropriately to any regulation, guidance or Group appointed a Head of Security and Risk Management whose remit recommendations. In May 2021, the Committee received a briefing on the includes maintaining our risk management and control framework. BEIS Consultation ‘Restoring Trust in Audit and Corporate Governance’. We welcome the recommendations and responded to the consultation Climate Related Disclosures expressing broad support for the proposals to strengthen audit and The Board discussed the impact of climate change on the Group’s governance as well as some constructive suggestions on certain of the financial reporting and financial statements and considered the newly recommendations. We will continue to monitor developments in audit introduced requirement for companies to disclose, on a comply or reform and the impact of any other regulatory changes which may impact explain basis, against the recommendations of the Task Force On AUDIT auditing and reporting requirements in the future. Climate-related Financial Disclosures (TCFD). The Board received COMMITTEE updates on the Company’s progress against this requirement from CHAIR’S Committee effectiveness our Head of Sustainability. LETTER The Company undertook an externally facilitated Board effectiveness CONTINUED evaluation this year, which assessed our performance as a Committee. Iam European Single Electronic Format (ESEF) pleased that this concluded that we operate effectively and that theBoard We also considered the new requirement to prepare the Company’s takes assurance from the quality of our work. consolidated financial statements in digital form under the European Single Electronic Format regulatory standard. Following Board discussions on the structure of its Committees, the Committee shall, going forward, be formed of three members, including I hope that you find this report informative and can take assurance from Lesley-Ann Nash, Manju Malhotra and I. Other Non-Executive Directors will the work undertaken by the Committee during the year to deliver its remain welcome to attend should they wish to. key responsibilities. Risk, control and assurance The Audit and Risk Committees have continued to work together during the year and have fulfilled a vital role in the Group’s governance framework, providing valuable independent challenge and oversight. The Group has several processes in place to provide effective internal control, Rosie Shapland including self-certification of controls by risk owners, reviews of fraud, Chair of the Audit Committee anti-bribery and whistleblowing policies and a risk management 7 June 2022 framework under which controls and their effectiveness are managed and evaluated. Between the Risk Committee, Audit Committee and the full Board, we have reviewed the effectiveness of the Group’s risk management and internal control systems and no significant failings or weaknesses were identified. Following the Board effectiveness review which focused on the attributes of a high-performing Board, it was agreed that the Risk Committee should be disbanded and many of its responsibilities would be subsumed into the Audit Committee. This will include advising the Board on the Group’s risk appetite, tolerance and strategy. The Board will retain overall responsibility for the Group’s risk management, particularly as regards risks relating to valuation, development and real estate. 147 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack AUDIT, RISK AND INTERNAL CONTROL CONTINUED AUDIT COMMITTEE REPORT CONTINUED ## Role of the ## How the Committee operates ## Audit Committee The Audit Committee is composed solely of independent The Committee Chair also meets separately with the Non-Executive Directors, with a wide diversity of experience. ChiefFinancial Officer, Chief Executive Officer and members ## The Audit Committee reviews Rosie Shapland, asa Chartered Accountant with many years of of the Audit team at KPMG. These meetings inform the work senior financial experience, satisfies the requirement of having ofthe Committee by identifying key areas of focus and ## and monitors the integrity appropriate recent and relevant financial experience. emerging issues. ## of the Company’s financial Meetings of the Audit Committee coincide with key dates The Committee regularly invites the external audit lead inthe financial reporting and audit cycle. During the year, the partner,the Chairman of the Board, the Chief Executive ## reporting in advance of its Committee met on three occasions, in May and November 2021 Officer,the Chief Financial Officer and the Group Financial consideration by the Board. and in March 2022. We also met in May 2022 to review the Controller. Representatives from our external valuers, CBRE, 31 March 2022 Annual Report and Accounts and the findings of attend Board meetings twice per year to present the half- and ## TheCommittee oversees the the external auditor. full-year valuation reports. relationship with the External A forward plan of agenda items guides the business to Meetings of the Committee are held in advance of the Board be considered at each meeting and is regularly reviewed meetings to allow the Committee Chair to provide a report on ## Auditor in order to assess their and developed. This assists and facilitates the work of the the key matters discussed to the Board, and for the Board to Committee, enabling it to give thorough consideration to consider any recommendations made. ## effectiveness and to annually matters of particular importance to the Company. All of this, along with ongoing challenge, debate and ## assess their independence The Committee receives information in advance of its meetings engagement, allows the Committee to discharge its including information from management and detailed reports responsibilities effectively. ## andobjectivity. from the External Auditor including the audit report. The Committee meets privately with the External Auditor, at least annually, and liaises with Company management in considering areas for review. 148 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack AUDIT, RISK AND INTERNAL CONTROL CONTINUED AUDIT COMMITTEE REPORT CONTINUED ROLE OF THE AUDIT COMMITTEE ## Audit Committee responsibilities CONTINUED Financial reporting Financial risks – Review the year-end and interim financial statements and – Oversight and review of controls relating to financial risks monitor the reporting process. Information on significant and risks relating to finance IT systems ## During the year, the matters in relation to the financial statements that were – Review the operational effectiveness of key controls in place ## AuditCommittee has considered by the Committee can be found on page 152 to manage financial risk – Advise the Board on the Group’s viability and going concern ## continued to work with status including the assumptions included in plans, key risks More information on the Group’s internal controls and risk considered, andthe sensitivities tested. More information management process is available on pages 160 to 161 and the ## theRisk Committee, on the Committee’s assessment of the Group’s viability and work ofthe Risk Committee is available on pages 158 to 159. ## toreview the adequacy going concern status can be found on pages 76 and 77 – Review the content of the Annual Report and Accounts and Governance, best practice and development ## andeffectiveness of the advise the Board on whether, taken as a whole, they are fair, – Keeping up to date with developments regarding control balanced and understandable and provide the information environments (with advice from the External Auditor) ## Group’s risk management necessary for shareholders to assess performance, the – Keeping up to date on investor, shareholder and market and internal control. business model and strategy. The Group’s strategy and sentiment (with advice from the Company’s brokers) business model are explained on pages 32 to 35 and 14 to21 – Ensuring compliance with applicable accounting standards, respectively monitoring developments in accounting regulations as they – Review the appropriateness of accounting policies and affect the Group and reviewing the appropriateness of practices accounting policies and practices in place Rosie Shapland Chair of the Audit Committee External audit – Assess the work of the External Auditor and any significantfinancial judgements made by management. Moreinformation is available on pages 149 to 152 – Review and monitor the objectivity and independence of the External Auditor, including its policy governing the provision of non-audit services. Refer to page 149 for more information – Review and monitor the effectiveness of the external audit process and the ongoing relationship with the External Auditor. More information on our process of safeguarding auditor independence is available on page 149 149 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack AUDIT, RISK AND INTERNAL CONTROL CONTINUED AUDIT COMMITTEE REPORT CONTINUED | | Audit quality | | – Delivery and execution of the agreed | | KPMG LLP have confirmed to the Committee | | | --- | --- | --- | --- | --- | --- | --- | | External audit | An important part of the Committee’s work | | | external audit process for the 2020/21 | that: | | | | consists of overseeing the relationship with, | | | financial year | – The audit of the consolidated financial | | | | and performance of, the External Auditor, in | | – Efficiency and performance of the audit | | | statements is undertaken in accordance | | | particular with regards to the independence, | | | team as well as relevant and qualified | | with the UK firm’s internal policies and | | | quality, rigour and challenge of the external | | | specialists involved in the audit process and | | procedures | | | audit process. The Committee reviews the | | | that there is sufficient continuity of staff | – They have internal procedures in place to | | | Following a competitive tender process, | effectiveness of the audit throughout the year | | | during the audit process | | identify any aspects of non-audit work | | KPMG were appointed by shareholders as the | taking into account: | | – Communication and engagement between | | | which could compromise its role as auditor | | Workspace External Auditor for the financial | – the detailed audit strategy for the year | | | the senior management team, the Finance | | and to ensure the objectivity of their audit | | year ending 31 March 2018 and continue to | | andcoverage of any risks, scope, and level | | team, KPMG and the Committee. | | report | | beWorkspace’s External Auditor. | | of fees for the audit | – Increased contact with the audit team | | – They believe that, in their professional | | | | – the quality, knowledge and expertise | | | outside of the audit | | judgement, the safeguards they have in | | The current lead audit engagement partner, | | oftheengagement team | | | | place sufficiently guard against the threats | | Richard Kelly, is in the fifth year of his term | – insight around the key accounting andaudit | | The Committee discussed a summary of | | | to independence | | and will be required to rotate. A new lead | | judgements | thekey findings and results at its meeting | | – The total fees paid by the Group during | | | audit engagement partner, Bano Sheikh, | – the quality of reporting and discussions at | | inNovember 2021 and no significant concerns | | | theyear do not represent a material part | | has been appointed and will shadow Mr Kelly | | the Audit Committee meetings | were identified. | | | ofthe firm’s fee income | | on the external audit for year ending | – the outcome of the review of effectiveness | | | | – They consider that they have maintained | | | 31 March 2022. | | of the External Auditor and audit process | The Committee’s relationship with the | | | audit independence throughout the year | | | | discussed below | External Auditor is one of openness and | | | | | Audit and non-audit fees | | | professionalism, and the results of the review | | The Committee is satisfied that the External | | | Fees payable to the External Auditor for audit | Annually, the Committee will also assess | | were discussed with KPMG to monitor the | | Auditor is independent. | | | and non-audit services are set out in note 2 | the qualifications, expertise, resources | | continuing quality of audit services. | | | | | on page 212. This year, the non-audit services | and independence of the Group’s External | | | | The Audit Committee will continue to review | | | performed by KPMG included the review of | Auditor, as well as the effectiveness of the | | From its discussions during the year, the | | the effectiveness and independence of the | | | the Group’s half-year results and Green Bond | audit process through discussion with the | | challenges presented to the auditors and | | External Auditor each year. | | | use of proceeds assurance. | Chief Financial Officer and Group Financial | | a review of the reporting received, the | | | | | | Controller. The Chair of the Committee also | | Committee considers that the auditor provides | | The Group complies with the Competition | | | | meets with the KPMG partner. | | appropriate professional challenge and reports | | and Markets Authority Order 2014 relating to | | | | | | its findings in an open and direct manner. | | audit tendering and the provision of non-audit | | | | As part of the effectiveness review, a | | The Committee remains satisfied: | | services, and it is the Group’s intention to put | | | | questionnaire was issued, following the March | | – With the effectiveness of the external audit | | the audit out to tender at least every ten years. | | AUDIT AND NON-AUDIT FEES 2021 year end, to Committee members, as well and the interaction between the auditors The external audit was last tendered in 2017 as regular attendees of the Committee and and the Committee following which the External Auditor changed 2021/22 | | | | those involved in the external audit process. | – As to the External Auditor’s qualifications, | | from PricewaterhouseCoopers LLP (PwC) | | --- | --- | --- | --- | --- | --- | --- | | £0.34M | 55 | | | | | | | | | | Views were also sought from key members | | expertise and resources | toKPMG and there are no current plans to | | | | | ofthe Finance team and senior management | | | re-tender the services of the External Auditor. | | 2020/21 | | 240 | also involved in the external audit process. | Audit independence and objectivity | | | | | | | | Furthermore, as part of its deliberations, | | There are no contractual obligations which | £0.34M | | | Questions were posed around the: | | theCommittee reviews a report on the audit | restrict the Committee’s choice of external | | --- | --- | --- | --- | --- | --- | | | | – Effectiveness of the external audit process, | | firm’s own internal quality control procedures | auditor or which put in place a minimum | | 2019/20 | 209 | | | | | | | | | the quality and scope of the audit plan, | together with the policies and processes for | period for their tenure. | | £0.24M | | | advising, on a timely basis, about any new | maintaining independence and monitoring | | | | | | developments regarding risk management, | compliance with relevant requirements. | | corporate governance, financial accounting Audit and related risks Non-audit 280 31 96 150 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack AUDIT, RISK AND INTERNAL CONTROL CONTINUED AUDIT COMMITTEE REPORT CONTINUED NON-AUDIT SERVICES SELF-REVIEW – A SELF-REVIEW THREAT ## Safeguarding As required by the Code, the Audit Committee has a formal This is where, in providing a service, the external audit team policy governing the engagement of our External Auditor, could potentially evaluate the results of a previous service ## auditor KPMG, to supply non-audit services and to assess the provided by the external audit firm. threats of self-review, self-interest, advocacy, familiarity and – The Group does not use the External Auditor for any independence management. KPMG has discontinued the provision of all services which would involve self-review of their own work non-audit services (other than those closely related to the audit) to all FTSE 350 companies, meaning non-audit services will be confined to a more limited scope of work than that defined by the Audit Committee’s Terms of Reference. During the year, KPMG were asked to provide additional SELF-INTEREST – A SELF-INTEREST THREAT services in the form of assurance over the allocation of Where a financial or other interest (of an individual or the proceeds from the green bond. external audit firm) could inappropriately influence an individual’s judgement or behaviour. The Audit Committee specifically performs 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 MANAGEMENT – MANAGEMENT THREAT Officer, the Company Secretary and the Chair of the Audit This occurs when the audit firm performs non-audit services Committee. For larger assignments, in excess of £100,000, and management make judgements based on that work. this would involve a competitive tender process, unless – The Group does not use the External Auditor for any there are compelling commercial or timescale reasons to services which would be considered management use the External Auditor or another specific accountancy responsibility firm – The Committee shall review and recommend to the Boardthe Company’s formal policy on the provision of non-audit services by the auditor. Such policy shall specify the circumstances in which prior approval of non-audit FAMILIARITY – A FAMILIARITY THREAT services by the Committee is required and specify any This is where, due to a long or too close a relationship, internal processes that must be followed theExternal Auditor’s independence is affected. – It will not accept significant contingent fee arrangements – The Audit Committee prohibits the hiring of former with the External Auditor 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 Chair of the Audit Committee gives prior consent. Annually, the Audit Committee will be advised of any new hires that fall under ADVOCACY – AN ADVOCACY THREAT this policy. There have been no instances of this occurring This is where the external audit firm or its personnel todate promote an audit client’s position to the extent where – The Audit Committee monitors on an ongoing basis the External Auditor’s objectivity is compromised. the relationship with the External Auditor, to check its – The Group does not use the External Auditor continuing independence, objectivity and effectiveness inanadvocacy role byreviewing its tenure, quality and fees 151 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack AUDIT, RISK AND INTERNAL CONTROL CONTINUED AUDIT COMMITTEE REPORT CONTINUED ## Fair, balanced and THE FOLLOWING PROCESS WAS FOLLOWED BY THE COMMITTEE IN MAKING ITS ASSESSMENT ## understandable The Committee reviewed the Annual ## 1. Report at an early stage, and throughout the process, to enable ## reporting sufficient time for comment and review and to check overall balance and consistency. ## On behalf of the Board, the Committee 1. hasconsidered whether, in its opinion, this The Committee discussed a report ## AUDIT COMMITTEE 2. Annual Report and Accounts, taken as a from the CFO and Group Financial whole, is fair balanced and understandable REVIEW Controller covering the financial and whether it provides the information statements within the Annual Report necessary for shareholders to assess the and Accounts: Company’s position, performance, business – this highlighted the significant model and strategy. changes and areas of focus in the ## 2. financial statements and ## 5. REPORT FROM – commented on any new accounting RECOMMENDATION THE CFO AND standards in the period TO BOARD GROUP FINANCIAL CONTROLLER A fair balanced and understandable ## 3. assessment was prepared by the management team and circulated to the Audit Committee. This highlighted pre-conditions and factors which support the activities of the Audit Committee. The External Auditor presented the ## 4. ## 4. 3. results of its audit work to the Audit Committee. EXTERNAL FBU ASSESSMENT AUDIT REVIEW The Board approved the Committee’s ## 5. recommendation that the fair, balanced and understandable statement could be made, which can be found in the Directors’ Responsibility Statement onpage 195 of this report. 152 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack AUDIT, RISK AND INTERNAL CONTROL CONTINUED AUDIT COMMITTEE REPORT CONTINUED The Audit Committee considers all financial Given its significance, both management and ## Significant matters considered information published in the full and interim the Committee monitor the objectivity and financial statements and considers accounting independence of the valuers, and review the policies adopted by the Group, presentation methodology and outcomes of the valuation, ## by the Committee and disclosure of the financial information and, challenging the key assumptions and in particular, challenging the key judgements judgements. made by management in preparing the | | | financial statements. | A number of meetings are held between key | | | --- | --- | --- | --- | --- | | MATTER CONSIDERED: ACTION TAKEN BY THE COMMITTEE | | | management and CBRE ahead of the valuation | | | | | The Audit Committee pays particular attention | at which the inputs and methodology of | | | VALUATION OF THE | The valuation of the investment property portfolio is | to matters it considers to be important by virtue | the valuation are discussed. Key discussions | | | INVESTMENT PROPERTY | inherently subjective, requiring significant judgement. | of their impact on the Group’s results, or the | include: | | | PORTFOLIO | The outcome is significant for the Group in terms of its | level of complexity, judgement or estimation | – London commercial property market: | | | | investment decisions, results and remuneration, and is a | involved in their application on the consolidated | | current trends and circumstances expected | | | majorcomponent of Total Property Return, one of our KPIs. | financial statements. The main areas of focus | | to affect the market are discussed | | | | during the year are set out to the left. | – Comparable market evidence: recent | | | | Therefore, this matter is considered by both the Board and | | | transactions are considered and compared | | | Audit Committee. | In addition, the Audit Committee reviewed | | to assumptions made in valuing our | | | | anumber of other key matters which | | portfolio | | | The valuation is conducted externally by independent valuers, | have been considered by management | – Development projects: we provide CBRE | | | | CBRE, one of the world’s largest commercial real estate | and discussed with KPMG, including the | | with any updates to ongoing or future | | | services firms. | uncertainty relating to collection of trade | | schemes and discuss the assumptions CBRE | | | | receivables. Further information can be | | have made, particularly for more complex | | | CBRE presented the year-end valuation to the Audit | found in the section on principal risks and | | schemes where more significant levels | | | Committee, who reviewed the methodology and outcomes | uncertainties on pages 59to 66. | | ofjudgement are required | | | of the valuation, challenging the key assumptions and | | – Estimated rental values: the estimated | | | | judgements and gave particular focus to any alternative | | | rentalvalues proposed by CBRE are | Portfolio valuation procedures undertaken in light of Covid-19. They also discussed and reviewed, with management Our property portfolio is independently considered the objectivity and independence of the valuers. ensuring that these are in line with our valuedtwice annually by our external valuers, CBRE Limited. recent rental activity KPMG met with the valuers and presented their views on – Property information: we provide CBRE the valuation to the Committee, as well as an explanation withinformation on any changes to Our properties are critical to our business of how the valuation is audited. The Committee considered properties that may affect the valuation and the valuation demonstrates the value that it was satisfied that the methodology, assumptions and – Other inputs used by the valuers are that we are delivering to our shareholders. judgements used by the valuers were appropriate, and that reviewed and discussed It is a measure of how well we are managing the valuations were suitable for inclusion in the financial our buildings and driving rental income. statements. The valuation is presented to the Audit Furthermore, the valuation is a significant part of both our net asset value and Total Property Committee, who review the outcomes and Return, which are both key performance challenge the methodology and assumptions. indicators. 153 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack AUDIT, RISK AND INTERNAL CONTROL CONTINUED AUDIT COMMITTEE REPORT CONTINUED ## Developing arobust ## Viability Statement As part of the continued development THE PROCESS WE UNDERTOOK WAS AS FOLLOWS of the Group’s Viability Statement, existing processes were strengthened so that risks were identified, understood and reassessed over the period. The STAGE 1: STAGE 2: STAGE 3: STAGE 4: following factors were considered: RISK IDENTIFICATION RISK ASSESSMENT SCENARIO CONCLUSIONS – The Group’s current financial and SENSITIVITY ANALYSIS operational position and the current economic outlook – The Group’s cash flows, financing RESPONSIBILITY RESPONSIBILITY RESPONSIBILITY RESPONSIBILITY headroom and financial ratios THE BOARD – Reassessment of key risks and their potential impact on the business model AUDIT COMMITTEE EXECUTIVE COMMITTEE EXECUTIVE COMMITTEE EXECUTIVE COMMITTEE EXECUTIVE COMMITTEE RISK COMMITTEE 2 RISK COMMITTEE 2 SENIOR MANAGEMENT 1 SENIOR MANAGEMENT 1 SENIOR MANAGEMENT 1 SENIOR MANAGEMENT 1 EXTERNAL AUDITOR EXTERNAL AUDITOR OUR VIABILITY STATEMENT The strategic and operational For each risk, the following For those risks identified The Audit Committee risks were reviewed to were considered: as being severe enough to considered the findings from identify the principal risks to – Our risk appetite (the level impact the viability of the this analysis and presented it See page 76 viability over the period under of risk the Board is willing Group, sensitivity analysis was to the Board, which was given consideration. The risks that to take) performed to understand the the opportunity to question would impact solvency and – The controls in place potential impact on liquidity the process and findings. OUR GOING CONCERN liquidity, either individually tomitigate the risk and financial ratios. STATEMENT or in combination with other – The quantum of risk risks, were considered. See page 76 1. Heads of Department. 2. Read about the work of the Risk Committee on pages 155 to 161. 154 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack AUDIT, RISK AND INTERNAL CONTROL CONTINUED AUDIT COMMITTEE REPORT CONTINUED | | Risk management and internal control | Key elements of the Group’s system of internal | | | | | --- | --- | --- | --- | --- | --- | | DEVELOPING AROBUST | During the year, the Board Risk Committee | financial controls include: | | WHISTLEBLOWING POLICY | | | VIABILITY STATEMENT | reviewed the effectiveness of risk | – A comprehensive system of financial | | | | | CONTINUED | management throughout the organisation, | | reporting | | See page 80 | | | itadvised the Board on risk appetite, tolerance | – An organisational and management Board | | | | | | and strategy, and provided recommendations | | structure with clearly defined levels of | | | | | to the Board on the Group’s approach torisk | | authority and division of responsibilities | | | | | management and the effectiveness of the | – An agreed and defined framework of risk, | | | | | | internal control environment (except for | | assurance and key performance indicators | | | | | financial controls). | | measuring performance | | | – A self-certification programme whereby | Further details of the work of the Risk | | control owners annually certify whether | | --- | --- | --- | | Committee can be found on page 158. | | controls are operating effectively | | The Audit Committee has reviewed the | During the year, the Audit Committee | | | Group’s system of financial controls during | continued to consider the effects of Covid-19, | | | theyear with no significant failings or | including managing the safety of customers, | | | weaknesses identified. However, any such | employees and other stakeholders in line with | | | system can only provide reasonable and not | Government guidelines. | | absolute assurance against any material misstatement or loss. Internal audit Due to its size, the Group does not have an | As noted in the Chair’s letter on page 146, | internal audit function, a matter reviewed | | --- | --- | | witheffect from April 2022 the Risk | by the Audit Committee during the year. | | Committee will be disbanded and certain | The Committee has advised the Board that, | | ofitsresponsibilities will be taken over | currently, it considers there to be no need for | | bytheAudit Committee. | an internal audit function. During the year, the | Group appointed a Head of Security and Risk Management whose responsibilities include maintenance of our risk management and control processes. To supplement reviews of risk management and internal control, a programme of operational, facilities management and health and safety reviews are undertaken across our properties by qualified senior head office personnel. Any significant findings willthen bereported to the Audit Committee. Further to this, all key controls are recorded on a central register and control owners are required to certify the effectiveness of controls for which they are responsible and provide details offurther actions to address any identified ineffectiveness. No significant issues were identified during the year. 155 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ### AUDIT, RISK AND INTERNAL CONTROL ## Risk Committee Report ## We have continued to ## embed our updated risk ## management framework ## and strengthen the Group’s ## risk management approach. ### Damon Russell ### Chair of the Risk Committee QUICK LINKS Membership and attendance at Risk Committee meetings page 156 Chairman’s Letter page 157 The role of the Risk Committee page 158 156 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack AUDIT, RISK AND INTERNAL CONTROL CONTINUED RISK COMMITTEE REPORT CONTINUED ## Membership and attendance Key topics considered by the Committee during the year ## at Risk Committee meetings The Committee comprises Non-Executive Directors and RISK APPETITE, – Reviewed the effectiveness of the Company’s control environment, including ischaired byDamonRussell. Details of individual attendance TOLERANCE AND a review of the Company’s process for self-certification of controls atthe meetings held during the year are set out below. STRATEGY – Reviewed and discussed summary reports on the Company’s operational Moreinformation on the skills and experience of all Committee risks members can be found on pages 102 to 105. – Reviewed and discussed an update from the Group’s Head of Technology on the Group’s business continuity plan and cyber security | | MEMBER | MEETINGS | | | | | --- | --- | --- | --- | --- | --- | | | | | INTERNAL | – Considered and discussed risks to the Group of the Covid-19 pandemic | | | | SINCE | ATTENDED | | | | | | | | CONTROLS AND RISK | | andthe actions the Group was taking in response. See page 59 for further | | Damon Russell 2020 3/3 | | | | | details of the Group’s response to Covid-19 during the year | MANAGEMENT SYSTEMS – Considered and discussed an update from the Group’s Investment Director Rosie Shapland 2020 3/3 on risks and controls relating to acquisitions of new properties, including | Lesley-Ann Nash 2021 3/3 | | | | risks relating to pricing of acquisitions | | --- | --- | --- | --- | --- | | | 1 | | – Considered and discussed an update from the Group’s Credit Manager | | | Chris Girling | | 2020 3/3 | | | onthe risk of payment default and the Group’s associated controls – Considered and discussed an update from the Group’s Director of People 1. Chris Girling stepped down from the Board on 7 February 2022. 2. The Company’s Head of Legal & Assistant Company Secretary acts as the &Culture and Head of People on risks and controls relating to people Secretary to the Committee and attends all meetings. andresourcing – Discussed at each meeting whether there were any significant new andemerging risks to be considered GOVERNANCE – Reviewed draft section of the 2021 Annual Report, including the 2021 principal risks and uncertainties section and the draft 2021 Risk Committee Report – Discussed the link between the Company’s principal risks and its viability – Reviewed the Group’s Anti-Bribery Policy and procedures. See page 79 forfurther details on the Company’s Anti-Bribery Policy – Reviewed the Committee’s Terms of Reference 157 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack AUDIT, RISK AND INTERNAL CONTROL CONTINUED RISK COMMITTEE REPORT CONTINUED 7 June 2022 Board Committee review The Committee’s effectiveness was subject to review as part of the internal Board evaluation conducted during March 2022. The review confirmed that the Committee has been operating effectively. Following this year’s Board evaluation and further Board discussions, the Board has decided to make some changes to the structure of its Committees. I am pleased to present our Risk Committee Report for the financial year The Risk Committee was formed in September 2020 as the Company ended 31 March 2022. began implementation of an updated risk management framework, and ## Risk the dedicated Risk Committee has served the Company well as it has This Risk Committee Report details the key activities and responsibilities progressed with embedding that framework. Now that implementation of ## Committee of the Committee during the year under review. This year, we have the framework has been significantly progressed, it is considered that the continued to embed our risk management framework and strengthen the responsibilities of the Risk Committee can be effectively dealt with by the ## Chairman’s Group’s approach to risk management. Audit Committee and directly by the Board. It has therefore been decided to integrate certain activities of the Risk Committee into the Audit ## Letter During the year, Chris Girling stepped down from the Board and, Committee with the Board retaining overall responsibility for risk consequently, from the Committee. I would like to take this opportunity to management, in particular for risks relating to valuation, real estate and thank Chris for his valuable contributions to the Committee during his development. These changes came into effect on 21 April 2022. membership. The Risk Committee has Updated risk management framework served the Company well as Principal risks Following the decision above, we have updated our risk management it has progressed with The Group’s principal risks were reviewed in March 2022. See pages 59 to framework. See page 160 for details of our updated framework. embedding its updated risk 66 for further details on the Group’s principal risks and uncertainties. management framework. I hope you find this report informative and can take comfort from the work undertaken by the Committee during the year. It has been a privilege Key risk activities to chair the Risk Committee through this important evolution in the During the year the Committee has conducted deep dives on certain of Company’s risk management. the Group’s principal risks and reviewed the effectiveness of the Group’s overall controls framework. Further information on the Committee and the Group’s risk management activities can be found throughout this report. As part of our continued strengthening of our risk management, during the year the Group appointed a Head of Security and Risk Management whose responsibilities include developing and maintaining our risk Damon Russell management and control framework, assessing existing and emerging Chairman of the Risk Committee risks and engaging with risk owners to build understanding of risk 7 June 2022 throughout the business and identify any gaps in controls. 158 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack AUDIT, RISK AND INTERNAL CONTROL CONTINUED RISK COMMITTEE REPORT CONTINUED ## The role of the ## How the Risk Committee ## Risk Committee Committee operates responsibilities During the year under review, the Committee met on three Risk appetite, tolerance and strategy occasions, in April 2021, July 2021 and September 2021. – Advise the Board on the Group’s overall risk appetite, tolerance ## The Risk Committee and strategy, and the principal and emerging risks the Company A forward plan of agenda items informs the business to is willing to take in order to achieve its long-term strategic ## oversees the effectiveness of beconsidered at each meeting and is regularly reviewed objectives. See page 156 for details of how the Committee has anddeveloped. This assists and facilitates the work of the considered risk appetite and strategy during the year ## risk management throughout Committee, enabling it to give thorough consideration to – Advise the Board on the likelihood and impact of principal the organisation, advises matters of particular importance to the Group. The Committee risks materialising, and the management and mitigation of receives information in advance of its meetings, including principal risks to reduce the likelihood of their incidence or the Board on risk appetite, information from management. The Committee may, at its their impact. See pages 59 to 66 for information on the discretion, invite other people to attend its meetings. Those Committee’s consideration of principal risks ## tolerance and strategy, and people and advisers listed in the table below attended meetings during the year at the request of the Committee Chairman. Internal controls and risk management processes ## provides recommendations – Review the adequacy and effectiveness of the Group’s overall ATTENDEE POSITION risk assessment processes that inform the Board’s decision- ## to the Board on the making, including the design, implementation and DAVE BENSON Chief Financial Officer effectiveness of those processes ## Group’sapproach to risk ANDY DODSON Group Financial Controller – Review the effectiveness of the Group’s internal controls VIVIENNE FRANKHAM Head of Finance (with the exception of the internal financial controls which ## management and the remain the responsibility of the Audit Committee) and risk RICHARD SWAYNE Investment Director management systems ## effectiveness of the internal CLAIRE DRACUP Director of People and Culture – Review whistleblowing arrangements whereby employees may, in confidence, raise concerns about possible ## control environment. BEN SAUNDERS Head of People improprieties in financial reporting or other matters, to TOM GRIFFIN Credit Manager receive assurance that there are proportionate and The Committee’s Terms of Reference are available on independent procedures in place. See page 80 for more www.workspace.co.uk/investors/about-us/governance/ CHRIS BOULTWOOD Head of Technology information on our Whistleblowing Policy committee-terms-of-reference and they will be updated, – Review the Group’s procedures for preventing and/or as required, to reflect any changes in best practice. Meetings of the Committee are held in advance of the Board detecting fraud meetings to allow the Committee Chairman to provide a report – Review the Group’s procedures for the prevention and of the key matters discussed, to the Board, and for the Board detection of bribery and monitor the reports generated by to consider any recommendations made. such procedures. See page 79 for more information on our Anti-Bribery Policy The Audit Committee remains responsible for oversight of financial risks and controls. All members of the Risk Committee Governance, best practice and development were also members of the Company’s Audit Committee, – Keeping up to date with external developments relating to enabling key information or recommendations to be easily control environments shared between the Committees. All of the above, along with – Keeping up to date with regulatory and legislative matters ongoing challenge, debate and engagement, allows the relevant to the Group Committee to discharge its responsibilities effectively. – Consider ESG matters in all decision making 159 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack AUDIT, RISK AND INTERNAL CONTROL CONTINUED RISK COMMITTEE REPORT CONTINUED THE ROLE OF THE RISK COMMITTEE CONTINUED The Group had the following key procedures and monitoring processes in place during the year to provide effective ## Risk management internalcontrol: – an ongoing process to identify, evaluate and manage risks, ## and internal controls including the self-certification of controls by risk owners, which is monitored and regularly reviewed by the Risk Management Group and executive team. Significant issues The Committee, on behalf of the Board, keeps under review the are presented to the Board and Risk Committee effectiveness of the Group’s risk management and internal – the Group’s key controls include appropriate segregation control systems through management updates and output ofduties that are embedded across the organisation from the Group’s Risk Management Group to ensure that – on behalf of the Board, the Risk Committee reviews fraud controls in place are effective. This framework is designed to and anti-bribery policies and procedures; annual anti-bribery manage rather than eliminate business risks and provide training is in place for all employees and there have been no reasonable assurance against material misstatement. reported instances of whistleblowing or bribery or corruption during the period under review The Board has defined its risk appetite for strategic and – the Group has in place a system for planning, reporting and operational risks. A standard methodology for risk assessment reviewing financial performance, including performance is applied across the Group to assist with monitoring inherent against strategy and its business plan and residual risk and comparing residual risk against target risk. – in April 2022, the Board formed an ESG Committee which As required by the Code, the Board, through the Risk reviews the Group’s environmental and social related risks Committee, has carried out a robust assessment of the – the Risk Committee reviews technology risks including IT principal and emerging risks facing the Group, including those systems and cyber risk, to ensure that the Group’s IT function that could threaten its business model, future performance, effectively implements preventative and detective controls to solvency or liquidity. This is more fully described in the monitor and mitigate risk Strategic Report on pages 59 to 66. – as in previous years, financial controls are monitored by the Audit Committee As set out on page 157, following a review of the Board’s Committees, it has been decided to integrate certain activities On the basis of the above processes and having regard to the of the RiskCommittee into the Audit Committee and directly ‘Guidance on Risk Management, Internal Control and Related by the Board. These changes came into effect in April 2022. Financial and Business Reporting’ issued by the FRC in September 2014, the Board, supported by the Risk and Audit Committees, has reviewed the effectiveness of the risk management and internal control systems. No significant control failings or weaknesses were identified during the period under review. The Directors confirm that the processes described above have been in place during the 2022 financial year and up to the date of approval of the Annual Report and Accounts. 160 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack AUDIT, RISK AND INTERNAL CONTROL CONTINUED RISK COMMITTEE REPORT CONTINUED ## Our updated risk – Sets the Group’s overall risk appetite, tolerance and strategy ## Board of – Oversees the Group’s principal risks, including property valuation, development and real estate risks – Receives advice and recommendations from the Audit Committee and Executive Committee ## management Directors ## framework AUDIT COMMITTEE Following this year’s Board evaluation, | with effect from 21 April 2022, the | – Oversees the risk management framework | | --- | --- | | activities of the Risk Committee will be | – Advises the Board on risk appetite, tolerance and strategy | | integrated into the Audit Committee, | – Oversees all risks except risks related to property valuation, development and real estate which are overseen by the Board | with the Board retaining overall responsibility for risk management, and in particular for risks relating to valuation, development and real estate. This updated risk management EXECUTIVE COMMITTEE framework reflects the new structure – Oversees and manages the Group’s day-to-day risk management procedures from 21 April 2022. – Reports to the Board and Audit Committee on the operation and effectiveness of controls RISK MANAGEMENT GROUP – Responsible for the implementation and embedding of risk management activities – Reviews and challenges the risk information provided by Risk Owners – Reports to the Executive Committee, although the Audit Committee has the power to request attendance or reports from the Risk Management Group directly if it is felt this is necessary RISK OWNERS – Each risk identified by the Group is assigned a Risk Owner – Risk Owners are responsible for monitoring, managing and reporting on their risks, as well as identifying any emerging risks 161 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack AUDIT, RISK AND INTERNAL CONTROL CONTINUED RISK COMMITTEE REPORT CONTINUED ## Our risk process INTERNAL AUDIT Due to its size, the Group does not have aninternal audit function, a matter which is kept under review by the Audit Committee. However, the Executive Committee mandates a programme of operational, facilities management and health and safety internal audits at its properties, carried out by | 1. RISK IDENTIFICATION | | 2. RISK ASSESSMENT | | | | | | | | qualified senior head office personnel on | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | – Risks are identified when projects are | | | – Each risk is assessed and scored according to the | | | | | | | arotational basis. Any significant findings | | | being considered or through being raised | | | potential impact and likelihood of it materialising | | | | | | arereported to the Audit Committee. | | | organically by members of staff | | | | – Each risk is given an Inherent Risk Score | | | | | | | – Identified risks are captured | | | | | | (pre-controls) and a Residual Risk Score | | | | | | | in Risk Registers | | | | | | (post-existing controls) | | | | | – A Risk Owner is assigned to | | | | | | | | – Each risk is also assigned a Target | | OUR PRINCIPAL RISKS | | | each risk and has responsibility | | | | | | | | Risk Score representing the | For information on the Group’s | | | for assessing and monitoring | | | | | | | | Group’s risk tolerance for that risk | principal risks | that risk Pages 59 to 66 ## 1 2 | 4. RISK MONITORING | | 3. RISK RESPONSE | | --- | --- | --- | | ANDREPORTING | | – Each Residual Risk Score | | – Risks are regularly | | is compared to its Target | | | monitored by the Risk | Risk Score | ## 34 Owners – If the Residual Risk Score is – Control owners regularly higher than the Target Risk certify that their controls Score, action is taken to reduce it continue to operate effectively towards the target – The Risk Management Group – Controls are assigned an owner oversees this activity and escalates who is responsible for monitoring significant changes and new risks to the whether the controls operate effectively Executive Committee, Audit Committee and/or Board as appropriate 162 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ### REMUNERATION ## We incentivise our people ## through remuneration aligned ## with our strategic priorities. As ## sustainability in respect of all ## of our stakeholders becomes ## more embedded in our purpose, ## business and strategy, our ## remuneration approach is ## evolving accordingly. ### Lesley-Ann Nash ### Chair of the Remuneration Committee QUICK LINKS Membership and attendance at Remuneration Committee meetings page 163 Chair’s letter page 164 Remuneration at a glance page 166 Our remuneration policy page 171 Annual report on remuneration page 175 163 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack REMUNERATION CONTINUED ## Membership and attendance Key topics considered by the Committee during the year ## atRemuneration Committee meetings COMMITTEE – Received an update on current executive pay environment The Committee consists of Non-Executive Directors and is GOVERNANCE – Considered the incentive operating guidelines for Executive Board Directors chaired by Lesley-Ann Nash. Details of individual attendance – Received the results of the internal performance evaluation of the atthe meetings held during the year are set out below. More Remuneration Committee information on the skills and experience of all Committee – Agreed updates to Committee Terms of Reference members can be found on pages 102 to 105. – Approved the Directors’ Remuneration Report – Reviewed the operation of the Remuneration Policy – Received an update on Investment Association principles and other investor body guidelines MEMBER MEETINGS SINCE ATTENDED Lesley-Ann Nash 2021 8/8 REMUNERATION – Received an update on TSR performance for 2019, 2020 and 2021 LTIP awards FRAMEWORK FOR – Review of wider workforce remuneration arrangements and employment Stephen Hubbard 2014 8/8 EMPLOYEES conditions throughout the Company to ensure that they support the Company’s purpose Rosie Shapland 2020 8/8 – Received an update from Stephen Hubbard, as the designated Non-Executive Suzi Williams, the previous Chair of the Committee, stepped down as a Non- Director for employee engagement, who, during the year, talked with a wide Executive Director on 10 September 2021 and attended 5 Meetings up to range of employees to listen to their views on a wide range of matters this point. including executive remuneration COMMITTEE – The external evaluation of the Board and its Committees was concluded in PERFORMANCE March 2022. Further details can be found on page 140. No significant issues EVALUATION were identified | | EXECUTIVE AND | – Shareholding guidelines for Executive Board Directors | | --- | --- | --- | | | SENIOR MANAGEMENT | – Executive Directors’ remuneration review | | | REMUNERATION | – Annual bonus outcomes for 2020/21 | | | FRAMEWORK | – Setting of performance metrics and targets for 2021/22 | | SUPPORT FOR THE COMMITTEE | | – Reviewed the vesting criteria for 2018 LTIP | – Proposed awards under the 2021 Long-Term Incentive Plan During the year, we sought external support from PwC and – Monitoring and assessing targets for 2021/22 internal support from the CEO, whose attendance at Committee meetings was by invitation from the Chair, 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 WORKSPACE’S KEY – Alignment with our strategy and purpose attended each meeting as Secretary to the Committee. No REMUNERATION – A focus on performance Director was present for any discussions that related directly PRINCIPLES – Transparency and simplicity for the benefit of all our stakeholders; and to their own remuneration. – Consistency of application 164 Workspace Group PLC Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents REMUNERATION CONTINUED # Remuneration Committee Chair's Letter We incentivise our people through our competitive remuneration package which is aligned with the experience of all of our stakeholders. 7 June 2022 Dear Shareholder On behalf of the Board, I am pleased to present our 2022 Remuneration Report, my first as Chair of the Remuneration Committee. The Committee exercises independent judgement to ensure that an easily understandable remuneration policy is aligned to our purpose which creates long term sustainable value for all our stakeholders. The report is split into: - Remuneration at a glance, including both our Executive pay and cascade of pay through the organisation - pages 166 to 170 - A summary of the key elements of the Remuneration Policy for Executive Directors approved by Shareholders at our 2020 AGM - pages 171 to 174 - Our Annual report on executive remuneration - pages 175 to 190 We were pleased that our Remuneration Policy was approved at the 2020 AGM with 99.5% of votes in favour and that our 2021 report received 98.9% of votes in favour. I believe this strong support reflects shareholder confidence in our balanced approach to executive remuneration. This year's report sets out how the Committee operated the approved Policy over 2021/22, in the context of business recovery and growth, as well as how we intend to operate it over 2022/23. This includes newly proposed measures in regard to the annual bonus with an increased focus on sustainability and the impact across all of our stakeholders. At all times the Committee was, and continues to be, guided by its key principles which are detailed on page 163. Business outcomes Workspace made strong progress against its strategic priorities and key performance indicators over 2021/22. The strength of the Company's recovery following the challenges of the prior year has been fuelled by continued strong demand for our unique and flexible offering, which has proved an increasingly attractive option for London businesses as ways of working have evolved in the wake of the pandemic. Customer activity, measured through enquiries, viewings and lettings have returned to pre-Covid levels, while like-for-like occupancy has also bounced back. Both rental income and customer utilisation of our centres continue to increase. Even with the work from home guidance still in place in December and January, Workspace saw strong customer demand as businesses looked beyond the short-term uncertainty to secure the right space for their businesses over the longer term. Remuneration outcomes in 2021/22 It is important that the experience of broader stakeholders is appropriately reflected in the remuneration outcomes of our Executive Directors. The incentive outcomes for 2021/22 reflect a healthy recovery and a step up in dividend. After very careful consideration, and taking into account all relevant factors as described and detailed throughout this annual report, the Committee took the following decisions in respect of remuneration for the Executive Directors: - Base Salary Executive Directors will receive a basic salary increase of 3%, which is in line with the level awarded to the wider workforce, and this will take effect on 1 April 2022. The Committee also agreed with recommendations made by the CEO to correct pay differentials in some parts of the Company. - Annual Bonus 2021/22 The focus of the Executive team over the past year has been to support our customers return to the office, seek to increase like-for-like occupancy back to 90% and drive trading profit growth. We are delighted that these targets have been achieved, reflecting the extraordinary leadership and achievements of the Workspace team. The year saw a significant increase in trading profit, up 21% to £46.9m, driven by an increase in net rental income to £86.7m. This has given us the flexibility to increase dividends per share by 21%. The formulaic outcome under the bonus was 83% of maximum, (99.6% of salary). The Remuneration Committee considered that the bonus outturn was fair and reasonable relative to the strong financial performance of the business. This equates to £501,984 for Graham Clemett and £345,412 for Dave Benson. Of the bonus award, 33% will be deferred in shares for three years under the Deferred Bonus Plan. - Vesting of 2019 Long Term Incentive Plan The LTIP award granted to Graham Clemett in 2019 was subject to performance conditions measured over the three financial years from 1 April 2019 to 31 March 2022. The vesting of 50% of this award was subject to Total Shareholder Return (TSR) performance relative to FTSE 350 real estate companies, with the remaining 50% subject to Total Property Return (TPR) versus IPD Benchmark. Having tested the performance conditions, none of the 2019 LTIP will vest ![img-7.jpeg](img-7.jpeg) 165 Workspace Group PLC Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents # REMUNERATION CONTINUED # REMUNERATION COMMITTEE CHAIR'S LETTER CONTINUED With occupancy recovering, customer demand strong and pricing improving we are well placed to motivate our Executive to drive our trading performance and capitalise on growth opportunities to deliver superior returns to shareholders. # Proposed implementation of policy for 2022/23 Workspace continues to evolve as a business and in this context the Committee reviews Workspace's approach to remuneration annually, both for the senior leadership team and for the wider organisation. Workspace continues to commit to ensuring the link between purpose and shareholder experience with executive remuneration, and we will utilise the policy renewal in 2023 to introduce appropriate changes to further enforce this. # - Annual Bonus 2022/23 Ahead of the policy renewal in 2023, we believe there is an opportunity to better align our annual bonus with our strategic priorities, particularly ensuring a greater focus on sustainability. Following careful consideration, we propose that for the 2022/23 annual bonus, the Total Property Return measure (which remains as a measure in our LTIP) be replaced with a range of sustainability objectives, and the Business Objectives be replaced with strategic financial and operational efficiency objectives. The profit and customer satisfaction metrics will be unchanged. The annual bonus will therefore be based on financial measures with maximum of 72% of salary (operating profit (60% of salary) and strategic financial measures (12% of salary)), sustainability at 24% of salary and operational efficiency objectives at 12% of salary. This is illustrated further on page 167. Targets for the annual bonus are set at the beginning of the year and will be disclosed in full at the end of the performance year. See pages 172 and 185 for further details. # - 2022 LTIP For our 2022 LTIP award, due to be granted in June, the Committee has decided it is appropriate to retain the same performance conditions at 50% Total Shareholder Return and 50% Total Property Return. As with previous awards, a performance underpin applies to this award which allows the committee to reduce vesting if performance is inconsistent with the overall performance of the business, individual performance or other considerations. The Remuneration Committee considered the level of award under the LTIP and determined that it was appropriate to grant awards of 200% of salary in line with our policy. The Committee may exercise discretion to adjust vesting levels of this award if there is a significant disparity between the vesting outcome and the underlying performance of the business including where there is any gain deemed to be "windfall". Further details of the LTIP that will be granted in June can be found on page 186. # Engagement The Committee is grateful for the feedback and support we receive from shareholders. We believe that regular engagement with our stakeholders is key to ensuring strong governance in line with our objectives. In line with this, as we approach the triennial review of our Remuneration Policy ahead of the 2023 AGM, we will continue to engage with our largest investors to ensure that our new Policy is fit for purpose, within the rapid evolving remuneration landscape. This will include further emphasis on the importance of ensuring our Sustainability agenda is appropriately reflected in our incentives. Whilst the introduction of a sustainability metric in our annual bonus is a step in the right direction, we aim to include a more in-depth review of the inclusion of environmental, social and governance related factors across all executive incentives as part of our 2023 policy review. Finally, I want to thank you for your ongoing support in the year and I hope you will join the Board in supporting our Directors' Remuneration Report at the upcoming 2022 AGM. Lesley-Ann Nash Chair of the Remuneration Committee 7 June 2022 ![img-8.jpeg](img-8.jpeg) 166 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack REMUNERATION CONTINUED THE FOLLOWING TABLE DEMONSTRATES HOW WORKSPACE’S APPROACH TO REMUNERATION OPERATES AT ALL LEVELS WITHIN THE COMPANY. RELEVANT EXECUTIVE OTHER SENIOR REST OF ELEMENTS OF PAY DETAILS COMMITTEE EMPLOYEES EMPLOYEES ## Remuneration Salaries are set to reflect market value of the role ## at a glance Base and aid recruitment and retention. ## salary Employees are eligible for a 2:1 match on ## Pension employee pension contributions of 3% or 5% ## Rewards at all levels ofsalary. All staff in the Company are eligible to participate in the Company’s annual bonus Employees receive a combination of benefits ## Benefits plan, all-employee share schemes, pension relevant for their role including life assurance scheme, life assurance arrangements and arrangements and medical insurance benefits. medical insurance benefits. All members of the Executive Committee and some senior staff are eligible to participate in Opportunities and performance conditions ## the Company’s LTIP. Executive Directors are Annual are tailored to reflect an individual’s role also required to adhere to the Company’s andresponsibilities. ## shareholding guidelines. bonus When making remuneration decisions for the Executive Directors, the Committee considers pay and employment conditions elsewhere in Employees are able to participate in SAYE and ## Share the Group. The Committee receives regular SIP, and Executive Directors are also required to updates from the Executive Directors on adhere to the Company’s shareholding guidelines. ## ownership employee feedback. The Committee This enables all employees to share in the long- alsomonitors bonus payout and share term success of the group and aligns them with awarddata. shareholder interests. Reinforces strong performance culture at more ## LTIP senior levels and delivery of long-term sector outperformance. NUMBER OF PEOPLE THIS APPLIES TO AS AT 31 MARCH 2022 ## 9 39 195 167 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack REMUNERATION CONTINUED LINK TO STRATEGY REMUNERATION AT A GLANCE CONTINUED ## Annual bonus 2021/22 The component measures provide a good balance of rewarding against the three pillars of our strategy ## How variable which are the foundations of Workspace’s future growth. ## pay aligns to our Some measures support ### 60% 24% 24% 12% some pillars more than ## strategic pillars others. We have amended the In executing our strategy we aim to measures for 2022/23, create value and positive outcomes TRADING PROFIT BUSINESS TOTAL PROPERTY CUSTOMER as we believe there is an for our shareholders and all other AFTER INTEREST OBJECTIVES RETURN (TPR) VERSUS SATISFACTION opportunity to better align IPD BENCHMARK stakeholders. We frequently our annual bonus with consider the performance measures our strategic priorities, MORE DIRECT ALIGNMENT WITH OUR STRATEGIC PRIORITIES we use for our incentives to check particularly ensuring a greater that they support the delivery of 2022/23 focus on sustainability. ourstrategy. Measures shown as % of salary DRIVING CUSTOMER-LED GROWTH A FOUNDATION OF OPERATIONAL ### EXCELLENCE 72% 24% 12% 12% BEING SUSTAINABLE TOTAL | | FINANCIAL OBJECTIVES (TRADING | SUSTAINABILITY OPERATIONAL | | CUSTOMER | | --- | --- | --- | --- | --- | | | PROFIT AFTER INTEREST (60%), | | EFFICIENCY | SATISFACTION | | 120% | STRATEGIC FINANCIAL (12%)) | | | | Our strategy, Page 32 LINK TO STRATEGY ## LTIP The balance of the two measures is well aligned to our strategy of driving income growth and enhancing shareholder value over the longer term. ## 50% 50% Measures shown as % of award | TOTAL | TOTAL SHAREHOLDER RETURN | | | TOTAL PROPERTY | | --- | --- | --- | --- | --- | | | | (TSR) RELATIVE TO FTSE | RETURN (TPR) VERSUS | | | | | 350 PROPERTY COMPANIES | | IPD BENCHMARK | ## 100% 168 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack REMUNERATION CONTINUED REMUNERATION AT A GLANCE CONTINUED ## Summary of Graham Clemett CHIEF EXECUTIVE OFFICER ## Executive Directors’ 2021/22 2020/21 ## total remuneration £000 £000 FIXED PAY BASE SALARY ### 504.0 494.0 The illustrations to the right set out a PENSION 1 ### 50.4 49.4 single figure for the total remuneration BENEFITS 2 received by each Executive Board ### 21.6 21.4 Director for the year ended 31 March TOTAL FIXE D ### 2022 and the prior year. 576.0 564.8 VARIABLE PAY ANNUAL BONUS 3 ### 502.0 195.1 LTIP ### 0 0 OTHER – SAYE, SIP ### 2.0 4.5 TOTAL VARIABLE ### 504.0 199.6 TOTAL ## 1,080.0 764.4 OF WHICH SHARE PRICE GROWTH £0 £0 ## Dave Benson CHIEF FINANCIAL OFFICER | | | | 2021/22 | 2020/21 | | --- | --- | --- | --- | --- | | 1. Pension: During 2021/22 each of Messrs Clemett | | | £000 | £000 | | | and Benson received a cash allowance in lieu of | FIXED PAY BASE SALARY | | | ### 346.8 340.0 pension contribution. 2. Benefits: Taxable value of benefits received in the PENSION 1 ### 30.8 18.0 year by Executive Directors includes a car allowance, private health insurance and death in 2 BENEFITS ### service cover. 0 0 3. Annual bonus: This is the total bonus earned in TOTAL FIXE D ### respect of performance during the relevant year. 377.6 358.0 For 2020/21 and 2021/22, the Committee set a VARIABLE PAY ANNUAL BONUS 3 ### minimum deferral requirement of 33% of the 345.4 134.3 bonus earned. For 2021/22, this deferral was LTIP equivalent to £165,654 for Mr Clemett and NIL NIL £113,985 for Mr Benson. OTHER – SAYE, SIP ### 2.0 7.5 TOTAL VARIABLE ### 347.4 141.8 TOTAL ## 725.0 499.8 OF WHICH SHARE PRICE GROWTH £0 £0 169 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack REMUNERATION CONTINUED REMUNERATION AT A GLANCE CONTINUED SUMMARY OF EXECUTIVE DIRECTORS’ SINGLE FIGURE ## Graham Clemett TOTAL REMUNERATION CONTINUED FOR 2021/22 CHIEF EXECUTIVE OFFICER £000 £1,080.0 FIXED COMPONENTS OF EXECUTIVE PAY VARIABLE COMPONENTS OF EXECUTIVE PAY BASE SALARY ANNUAL BONUS OUTCOMES UNDER THE 2021/22 ANNUAL BONUS £504,000 CEO | | THRESHOLD | | MAXIMUM | FORMULAIC OUTCOME | ACTUAL | | --- | --- | --- | --- | --- | --- | | MEASURE | (0% PAYABLE) | (100% PAYABLE) | | (% OF SALARY) | £000 | | TRADING PROFIT | £40.0M £45.0M | | | | | ### 60% / 60% 302.4 AFTER INTEREST TOTAL PROPERTY RETURN BENCHMARK BENCHMARK +2% ### 3.6% / 24% 18.1 PENSION CUSTOMER SATISFACTION 72% 80% ### 12% / 12% 60.5 £50,400 BUSINESS OBJECTIVES 0% MAX: 100% ### 24% / 24% 121.0 BONUS OUTTURN ### 99.6% / 120% ## 502.0 *Adjusted for the impact of acquisitions. LTIP OUTCOMES UNDER THE 2019 LTIP PERFORMANCE MEASURES OVER THE PERIOD 1 APRIL 2019 TO 31 MARCH 2022BENEFITS £21,614 | | THRESHOLD | | MAXIMUM | FORMULAIC OUTCOME | CEO | | --- | --- | --- | --- | --- | --- | | MEASURE | (20% PAYABLE) | (100% PAYABLE) | | (% OF AWARD) | ACTUAL | | TOTAL SHAREHOLDER RETURN (TSR) | MEDIAN UPPER QUARTILE | | | | | ### 0% / 50% £0 RELATIVE TO FTSE 350 PROPERTY OF WHICH SHARE PRICE: £Nil COMPANIES TOTAL PROPERTY RETURN (TPR) VERSUS MEDIAN UPPER QUARTILE ### 0% / 50% £0 IPD DIVIDEND EQUIVALENT: £Nil TOTAL ### 0% / 100% £0 ACTUAL: BENCHMARK +0.3% ACTUAL: 43RD PERCENTILE ACTUAL: 20TH PERCENTILE ACTUAL: £45.3M* ACTUAL: 86.4% ACTUAL: 100% 170 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack REMUNERATION CONTINUED REMUNERATION AT A GLANCE CONTINUED SUMMARY OF EXECUTIVE DIRECTORS’ SINGLE FIGURE ## Dave Benson TOTAL REMUNERATION CONTINUED FOR 2021/22 CHIEF FINANCIAL OFFICER £000 £725.0 FIXED COMPONENTS OF EXECUTIVE PAY VARIABLE COMPONENTS OF EXECUTIVE PAY BASE SALARY ANNUAL BONUS OUTCOMES UNDER THE 2021/22 ANNUAL BONUS £346,800 CFO | | THRESHOLD | | MAXIMUM | FORMULAIC OUTCOME | ACTUAL | | --- | --- | --- | --- | --- | --- | | MEASURE | (0% PAYABLE) | (100% PAYABLE) | | (% OF SALARY) | £000 | | TRADING PROFIT | £40.0M £45.0M | | | | | ### 60% / 60% 208.1 AFTER INTEREST TOTAL PROPERTY RETURN BENCHMARK BENCHMARK +2% ### 3.6% / 24% 12.5 PENSION CUSTOMER SATISFACTION 72% 80% ### 12% / 12% 41.6 £30,751 BUSINESS OBJECTIVES 0% MAX: 100% ### 24% / 24% 83.2 BONUS OUTTURN ### 99.6% / 120% ## 345.4 *Adjusted for the impact of acquisitions. BENEFITS LTIP OUTCOMES UNDER THE 2019 LTIP PERFORMANCE MEASURES Dave Benson was not employed at the time of the 2019 LTIP award £0 ACTUAL: BENCHMARK +0.3% ACTUAL: £45.3M* ACTUAL: 86.4% ACTUAL: 100% 171 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack REMUNERATION CONTINUED ## Remuneration policy table The table below describes the Policy in relation to the components of remuneration for Executive Board Directors. FIXED COMPONENTS OF EXECUTIVE PAY ## Our ## remuneration ## Base salary Pension Benefits ## policy To reflect market value of the role and an To provide market-competitive pensions. To provide market-competitive benefits. individual’s experience, performance and In this section we provide a summary of contribution. the key elements of the Remuneration Policy for Executive Directors approved OPERATION OPERATION OPERATION by shareholders at our 2020 AGM. Salaries are normally reviewed annually. Directors participate in a defined Benefits typically include car allowance, Inaddition, we have set out how the Salary levels take account of: contribution pension scheme or may private health insurance, and death in Policy was operated in 2021/22 (which – Role, performance and experience receive a cash allowance in lieu of pension service cover. Where appropriate, other was as intended) and how it is intended – Business performance and the external contribution. benefits may be offered, including, but to be operated in 2022/23. economic environment not limited to, allowances for relocation. – Salary levels for similar roles at relevant In addition, Directors are eligible to You can find the full Policy at comparators participate in all-employee share plans, www.workspace.co.uk. – Salary increases across the Group currently the SAYE and Share Incentive Plan. | OPPORTUNITY | OPPORTUNITY | OPPORTUNITY | | --- | --- | --- | | Increases are applied in line with the | Up to 10% of salary. | Benefits may vary by role and individual | | outcome of the review. There is no | | circumstance, and are reviewed periodically. | | prescribed maximum. | For individuals with less than a year’s | | | | service with Workspace, this will be 6% of | There is no overall maximum. | | Increases for Executive Board Directors will | salary. | | | typically be in line with those of the wider | | Include car allowance, private health | | workforce. | | insurance and other benefits. | | OPERATION IN THE YEAR ENDED 31 MARCH 2022 | | OPERATION IN THE YEAR ENDED 31 MARCH 2022 | | OPERATION IN THE YEAR ENDED 31 MARCH 2022 | | --- | --- | --- | --- | --- | | (2021/22) | | (2021/22) | | (2021/22) | | Graham Clemett | Dave Benson | Graham Clemett | Dave Benson | Includes car allowance, private health | | (CEO) | (CFO) | (CEO) | (CFO) | insurance and other benefits. | | £504,000 | £346,800 | 10% of salary | 10% of salary | | | OPERATION IN THE YEAR ENDING 31 MARCH 2023 | | OPERATION IN THE YEAR ENDING 31 MARCH 2023 | OPERATION IN THE YEAR ENDING 31 MARCH 2023 | | --- | --- | --- | --- | | (2022/23) | | (2022/23) | (2022/23) | | Graham Clemett | Dave Benson | No change. No change. | | | (CEO) | (CFO) | | | | £519,120 | £357,204 | | | | (effective from 1 April 2022) | (effective from 1 April 2022) | | | 172 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack REMUNERATION CONTINUED OUR REMUNERATION POLICY CONTINUED REMUNERATION POLICY TABLE CONTINUED VARIABLE COMPONENTS OF EXECUTIVE PAY ## 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. | OPERATION | PERFORMANCE METRICS | OPERATION IN THE YEAR ENDED 31 MARCH 2022 | OPERATION IN THE YEAR ENDING 31 MARCH 2023 | | --- | --- | --- | --- | | A portion of the annual bonus is deferred into | Performance is measured relative to financial, | (2021/22) | (2022/23) | | shares for a period of three years. | operational, strategic and individual objectives | | | | | | MAXIMUM OPPORTUNITY: | MAXIMUM OPPORTUNITY: | | The deferral is 33% of bonus earned. | in the year aligned with the Company’s | | | | | | Graham Clemett (CEO) | Graham Clemett (CEO) | strategic plan. Up to 120% of salary Up to 120% of salary Dividend equivalents may be accrued | | | Dave Benson (CFO) | Dave Benson (CFO) | | --- | --- | --- | --- | | on deferred shares. | Performance measures and weightings are | | | | | | Up to 120% of salary | Up to 120% of salary | reviewed each year to ensure they remain | The Committee may apply malus and | appropriate and reinforce the business strategy. | | | | | --- | --- | --- | --- | --- | | | | PERFORMANCE CONDITIONS AND WEIGHTINGS | PERFORMANCE CONDITIONS AND WEIGHTINGS | | | clawback in circumstances of gross | At least 60% of the total bonus will be based | (AS % OF SALARY) | (AS % OF SALARY) | | | misconduct, material misstatement of the | on financial measures. | – Trading profit (60%) | – Financial objectives (72%) (Trading profit | | | Group’s results, an error in calculation, serious | | – Total Property Return (TPR) (24%) | | (60%), Strategic financial (12%)) | | reputational damage, and corporate failure | Bonus awards are at the Committee’s | – Customer satisfaction (12%) | – Sustainability (24%) | | | up to the end of the deferral period. | discretion and the Committee will consider | – Business objectives (24%) | – Operational efficiency (12%) | | | | the Company’s performance in the round. | | – Customer satisfaction (12%) | | | | The Committee may override the formulaic | EXECUTIVE DIRECTORS AWARDED BONUSES OF: | | | | | bonus outcome within the limits of the plan | Graham Clemett (CEO): | See page 185 for more details | | | | where it believes the outcome is not reflective | 99.6% of salary | | | | | of performance, to ensure fairness to both | | The Committee is of the opinion that, given | | | | shareholders and participants. | Dave Benson (CFO): | the commercial sensitivity arising in relation | | | | | 99.6% of salary | to the detailed financial targets used for the | | annual bonus, discussing precise targets for Deferral of 33% of bonus earned. the annual bonus plan in advance would not be in shareholder interests. See page 179 for further details on outcomes. 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 payouts that should remain as shareholders under the annual bonus. 173 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack REMUNERATION CONTINUED OUR REMUNERATION POLICY CONTINUED REMUNERATION POLICY TABLE CONTINUED VARIABLE COMPONENTS OF EXECUTIVE PAY ## 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. | OPERATION | PERFORMANCE METRICS | OPERATION IN THE YEAR ENDED 31 MARCH 2022 | OPERATION IN THE YEAR ENDING 31 MARCH 2023 | | --- | --- | --- | --- | | The Committee may grant annual awards of | Awards will be based on a combination of | (2021/22) | (2022/23) | | Performance Shares which vest after three | financial, share price and strategic measures | | | | | | GRANT SIZES FOR: | GRANT SIZES FOR: | | years, subject to performance conditions. | aligned with the Company’s strategic plan. | | | | | | Graham Clemett (CEO) | Graham Clemett (CEO) | Vested shares are subject to a further two- | | | 200% of salary | 200% of salary | | --- | --- | --- | --- | | year holding period. The Committee has | A performance underpin will apply which allows | | | | | | Dave Benson (CFO) | Dave Benson (CFO) | | discretion to apply malus and clawback | the Committee to reduce vesting if performance | | | | | | 200% of salary | 200% of salary | | to awards (circumstances as listed in the | is inconsistent with the overall performance | | | | annual bonus column above) up to the end | of the business. The Committee may, in the | | | | | | PERFORMANCE CONDITIONS WERE: | No change to maximum LTIP opportunities | | of the holding period. Dividend equivalents | context of the underlying business strategy, use | | | | | | 50% Total Shareholder Return (TSR) relative | or the performance conditions. | | may be accrued on shares in respect of the | different measures and/or vary the weightings | | | to FTSE 350 property companies. performance and holding period. of the measures. The Committee would consult 50% Total Property Return (TPR) versus IPD. with major shareholders prior to making any significant changes. | OPPORTUNITY | The 2019 LTIP vested in the year at 0% | | --- | --- | | Normal maximum award of up to 200% of | of the award. See page 184 for further details | | salary per annum. An award of 300% of | on outcomes. | salary per annum may be made in exceptional circumstances. OPERATION CURRENT SHAREHOLDINGS 1 ## Shareholding Shareholding guideline for Executive Directors Graham Clemett (CEO) of 200% of salary. 258% of salary ## requirement Dave Benson (CFO) Post-cessation shareholding requirement of 55% of salary 200% of salary for two years post-departure. 1. Based on a share price of £8.3362 being the average share price over the year to 31 March 2022 and salaries of £504,000 In the event that a leaver has not met the and £346,800 for Graham Clemett and Dave Benson respectively. relevant shareholding requirement at the point of cessation of employment, they would be required to retain their full pre-cessation shareholding for the two-year period. 174 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack REMUNERATION CONTINUED OUR REMUNERATION POLICY CONTINUED ## Possible payouts Graham Clemett Dave Benson CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER ## under policy SINGLE FIGURE SCENARIO SINGLE FIGURE SCENARIO Based on our Remuneration Policy Base salary Salary as at 1 April 2022. Base salary Salary as at 1 April 2022. approved by shareholders in 2020, we set out to the right scenarios for the Pension Current contribution rate of 10% of salary. Pension Current contribution rate of 10% of salary. potential remuneration to be earned by Benefits As provided in the single figure table on page Benefits As provided in the single figure table on page our Executive Directors under the 168. 168. Policy for various performance | assumptions. | Annual bonus Minimum – no bonus payable; | | Annual bonus Minimum – no bonus payable; | | | --- | --- | --- | --- | --- | | | | On-target – 50% of maximum potential bonus; | | On-target – 50% of maximum potential bonus; | | A high proportion of the Executive | | Maximum – maximum potential bonus. | | Maximum – maximum potential bonus. | Board Directors’ packages are made up LTIP Minimum – no LTIP vesting; LTIP Minimum – no LTIP vesting; of shares, supporting the alignment of On-target – 20% of maximum (threshold On-target – 20% of maximum (threshold Executive pay with the interests of our vesting); vesting); shareholders. The increased value in Maximum – maximum LTIP vesting. Maximum – maximum LTIP vesting. remuneration from share price appreciation is beneficial for both Share price growth Impact of 50% share price appreciation over Share price growth Impact of 50% share price appreciation over Executive Directors and shareholders. three years (on the LTIP). three years (on the LTIP). £000 0 3,0002,5002,0001,5001,000500 £000 0 2,5002,0001,5001,000500 FIXED PAY FIXED PAY ON -TARG ET ON -TARG ET MAXIMUM MAXIMUM MAXIMUM WITH 50% SHARE MAXIMUM WITH 50% SHARE PRICE APPRECIATION PRICE APPRECIATION 175 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack REMUNERATION CONTINUED ## What we paid our Directors in 2021/22 ## Annual report TOTAL TARGET COMPENSATION COMPARED TO OUR PEERS OUR SHAREHOLDING REQUIREMENTS Chart A below shows the relative position of target total compensation Our Executive Directors are encouraged to hold a high number of on remuneration for our Executive Directors compared to our peers. When we set the shares in order to align their interests to those of the shareholders, and target total compensation for the Executive Directors, one of the factors to encourage a long-term view of the sustainable performance of the the Committee considers is the competitive market for our Executive Company. As such, our Directors are impacted by the share price over Directors, which we believe is the FTSE 250 and FTSE 350 Real Estate the year in the same way as our shareholders. Sector, and the size of the Company compared to these peers. The Committee has been pleased to report above target-performance Chart B below shows that, in the year, the CEO met his minimum against market benchmark has been achieved over recent years. shareholding requirements. The CFO joined in April 2020 and is building his shareholding. | CHART A (I) — GRAHAM CLEMETT | Positioning of total remuneration of the | CHART B | Owned outright or vested. | | --- | --- | --- | --- | | CHIEF EXECUTIVE OFFICER | Company relative to market benchmarks. | OUR SHAREHOLDING | Unvested and not subject to performance. | | | | REQUIREMENT HAS BEEN MET | Subject to performance. | | FTSE 350 | | CEO | | REAL ESTATE | FTSE 250 | | | | | CFO | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | BOTTOM | THIRD | SECOND | TOP | | | | | | QUARTILE | QUARTILE | QUARTILE | QUARTILE | % OF SALARY | 0% 100% 200% | 300% 400% 500% 800%600% 700% | MINIMUM SHAREHOLDING REQUIREMENT Based on a share price of £8.3362 being the average share price over the year to 31 March 2022 and salaries of £503,970 and £346,800 for Graham Clemett and Dave Benson respectively. CHART A (II) — DAVE BENSON Positioning of total remuneration of the OVERALL LINK TO REMUNERATION AND CHIEF FINANCIAL OFFICER Company relative to market benchmarks. EQUITY OF THE EXECUTIVE DIRECTORS Table A below sets out the single figure for 2021/22, the number of FTSE 350 REAL ESTATE 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 FTSE 250 price and closing price for the year. BOTTOM THIRD SECOND TOP TABLE A QUARTILE QUARTILE QUARTILE QUARTILE Graham Clemett Dave Benson 2021/22 single figure (£000) 1,080.0 725.0 Shares held at start of year 129,448 19,850 Shares held at end of year 135,311 20,085 1 Value of shares at start of year (£000) 1,035.6 158.8 2 Value of shares at end of year (£000) 926.9 137.6 Difference (£000) (108.7) (21.2) 1. Based on a closing share price on 31 March 2021 of £8.00. 2. Based on a closing share price on 31 March 2022 of £6.85. Source of data: Publicly available data in annual reports. 176 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED ## Our approach to fairness and The year-on-year change ## wider workforce considerations in our Directors’ remuneration When making remuneration decisions for the Share schemes The table below sets out the changes year-on- Table B below shows the percentage change Executive Board Directors, the Committee Share schemes are a long-established and year between our Director pay and average in Director remuneration, comprising salary, considers pay, policies and practices successful part of our total reward package, employee pay. As per our Policy, salary taxable benefits and annual bonus, and elsewhere in the Group. encouraging and supporting employee share increases applied to Executive Directors will comparable data for the average of employees ownership. In particular, all employees are typically be in line with those of the wider within the Company. The comparator group is We receive regular updates from the Executive invited to participate in the Company’s workforce. based on all employees (excluding the CEO, Board Directors, and we monitor bonus Savings Related Share Option Scheme and the CFO and Non-Executive Directors), normalised payout and share award data. Share Incentive Plan. for joiners and leavers during the year. The average number of people employed by the | In this section, we provide context to our | Equal opportunities | Company during the year was 246 (2021: 223). | | --- | --- | --- | | Executive Board Director remuneration by | Workspace is committed to an active Equal | All employees are eligible for consideration for | | explaining our employee policies and our | Opportunities Policy from recruitment and | an annual bonus. | | approach to fairness, as well as the ratio of | selection, through training and development | | TABLE B CEO pay to that of the wider workforce. and in performance reviews and promotion. 2022 2021 All decisions relating to employment practices Taxable Annual Taxable Annual Communication and engagement with are objective, free from bias and based solely Director Salary/fees benefits variable Salary/fees benefits variable employees upon work criteria and individual merit. We Executive Directors The Board is committed to an open dialogue consider the needs of all employees, Graham Clemett 2% 1% 157% 9% -15% -54% | with our employees over various decisions. | customers and the community. | | | --- | --- | --- | | Our Chairman, Stephen Hubbard, is our | | Dave Benson 2% n/a 157% n/a n/a n/a | | designated Non-Executive Director | We use everyone’s talents and abilities, and | Non-Executive Directors | | responsible for overseeing employee | we value diversity. The Company aims to make | | Stephen Hubbard 24% n/a – 198% n/a – | engagement. During the last financial year, | our promotion and recruitment practices fair | | 1 | | | --- | --- | --- | --- | --- | | | | Maria Moloney | | -73% n/a – -4% n/a – | | employees have been informed about | and objective. We encourage continuous | | | | 1 Chris Girling -15% n/a – 0% n/a – activities, performance and the Company’s development and training, as well as the Damon Russell 10% n/a – 10% n/a – response to Covid-19 through staff briefings provision of equal opportunities and career 1 | held by the CEO and other members of the | development for employees. Further details of | Suzi Williams | | -49% n/a – 5% n/a – | | --- | --- | --- | --- | --- | | Executive team. Mr Hubbard also held three | this are shown on pages 136 and 193. | | 3 | | | | | Rosie Shapland | | 194% n/a – n/a n/a – | | informal staff events during the year. | | | 3 | | | | | Lesley-Ann Nash | | 345% n/a – n/a n/a – | | Employees are kept informed about activities | Retirement benefits | | 2 | | | | | Duncan Owen | | n/a n/a – n/a n/a – | | and performance not only through these | The Company provides pension benefits for | | | | 2 Nick Mackenzie n/a n/a – n/a n/a – briefings but also by the circulation of the majority of its employees. The Company’s 2 | corporate announcements and other relevant | commitment to pension contributions, | Manju Malhotra | n/a n/a – n/a n/a – | | --- | --- | --- | --- | | information to all staff, supplemented by | consistent with last year, ranges from 6% to | All other employees 5% -24% 58% 5% -5% -5% | | | updates on the intranet. | 10% of an employee’s salary. The pension | | | 1. Maria Moloney, Suzi Williams and Chris Girling stepped down from the Board on 22 July 2021, 10 September 2021 and scheme is open to every employee in 7 February 2022 respectively, therefore the above information reflects their time in role. accordance with the new Government 2. Duncan Owen joined the Board as a Non-Executive Director on 22 July 2021 with both Nick Mackenzie and Manju Malhotra auto-enrolment rules. joining the Board as Non-Executive Directors on 26 January 2022. Therefore, their year-on-year change in remuneration cannot be stated. 3. Rosie Shapland and Lesley-Ann Nash joined the Board in November 2020 and January 2021 respectively, and therefore were paid a partial fee in the prior year. 177 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED CHART C ## Pay comparisons Chart C shows the single figure of remuneration for our CEO over time, and the pay of our average employee, each rebased to 2012. We have also included our TSR performance over this period. CEO single figure Workspace Group PLC TSR FTSE 250 Index 100 FTSE 350 Real Estate Supersector Index TABLE C CEO single figure of total remuneration £000 31 Mar 2013 31 Mar 2014 31 Mar 2015 31 Mar 2016 31 Mar 2017 31 Mar 2018 31 Mar 2019 31 Mar 2020 31 Mar 2021 31 Mar 2022 1 Graham Clemett – – – – – – – 1,349.9 764.4 1,080.0 2 Jamie Hopkins 960.3 966.9 3,533.1 2,262.7 2,205.6 1,674.2 1,728.2 490.9 – – Annual bonus payout Graham Clemett (% of maximum opportunity) – – – – – – – 77.96% 33% 83% 600 Jamie Hopkins (% of maximum opportunity) 100% 97.8% 97.2% 95.3% 100% 100% 95.8% – – – LTIP vesting Graham Clemett (% of maximum opportunity) – – – – – – – 87.24% 0% 0% 500 Jamie Hopkins (% of maximum opportunity) – – 100% 100% 88.7% 62.7% 50.7% 87.24% – – 3 to employee lower quartile – – – – – – 53x 47x 23x 32x Ratio of single total | 400 | remuneration figure shown | to employee median | | – 34x 128x 79x 72x 48x 33x 43x 15x 23x | | --- | --- | --- | --- | --- | | | to employees as a whole | | 3 | | | | | to employee upper quartile | | – – – – – – 23x 23x 11x 15x | 1. Mr Clemett assumed the role of Interim CEO on 1 June 2019 and was appointed CEO on 24 September 2019. 300 2. Mr Hopkins was appointed as an Executive Director on 12 March 2012 and stepped down from the Board on 31 May 2019. 3. See next page for details on calculation. 200 0 178 Workspace Group PLC Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents # REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED # PAY COMPARISONS CONTINUED Despite the fact that Workspace would not be required to disclose the ratio of CEO pay to workforce pay (given we do not meet the requirement regarding employee numbers), the Committee has chosen once again to disclose this ratio on a variety of bases, as shown at the bottom of table C above. For the 2019, 2020, 2021 and 2022 figures, this is based on the Companies (Miscellaneous Reporting) Regulations 2018. For the historic figures, this is based on our own methodology. In all cases, the entire UK workforce is included. Chart C demonstrates that there continues to be a strong correlation between our CEO pay and the Total Shareholder Return of the Company. This results from the CEO receiving a high proportion of his remuneration in shares and because the variable pay within his package is 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. Table C sets out the ratio of CEO pay (based on the single figure) to that of the workforce, for the last 10 years, at the bottom of the table. There is significant volatility in this ratio, caused by the following: - Our CEO pay was made up of a higher proportion of incentive pay than that of our employees, in line with shareholder expectations. This introduces a higher degree of variability in his pay each year versus that of our employees - Long-term incentives, which made up a significant proportion of our CEO's pay, are provided in shares, and their value on vesting, included in his single figure, reflects the movement in share price over the three years prior to vesting. This outcome can add significant volatility to the CEO's pay and this is reflected in the ratio 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. The 2019, 2020, 2021 and 2022 figures above were calculated based on the Companies (Miscellaneous Reporting) Regulations 2018. These regulations, which set out how to calculate the pay ratio, describe three methodologies that can be used to identify the employees whose pay sits at the lower quartile, upper quartile and median of the Company – these are named in the regulations as 'Options A, B or C'. In 2019 and 2020, Workspace used Option B, the gender pay data, to determine these individuals, and the ratio of their pay to the CEO is set out in table C above. For 2021 and 2022, Option A was used. # Single figure of Executive Directors (audited) The illustrations below set out a single figure for the total remuneration received by each Executive Board Director for the year ended 31 March 2022 and the prior year. | | GRAMAM CLEMETT, CEO | | DAVE BENSON, CFO | | | --- | --- | --- | --- | --- | | | 2021/22 £000 | 2020/21 £000 | 2021/22 £000 | 2020/21 £000 | | **Fixed pay** | | | | | | • Base salary | 504.0 | 494.0 | 346.8 | 34.8 | | • Pension^{1} | 50.4 | 49.4 | 30.8 | 1.0 | | • Benefits^{2} | 21.6 | 21.4 | 0 | 0 | | Total fixed | 576.0 | 564.8 | 377.6 | 35.8 | | **Variable pay** | | | | | | • Annual bonus^{3} | 502.0 | 195.1 | 345.4 | 13.5 | | • LTIP | 0 | 0 | – | – | | • Other – SAYE, SIP | 2.0 | 4.5 | 2.0 | – | | Total variable | 504.0 | 199.6 | 347.4 | 14.5 | | **Total** | 1,080.0 | 764.4 | 725.0 | 49.5 | | Of which share price growth | 0 | 0 | 0 | 0 | 1. Benson: During 2021/22 each of Messrs Clemett and Benson received a cash allowance in lieu of pension contribution. 2. Benefits: Variable value of benefits received in the year by Executive Directors includes a car allowance, private health insurance and death in service cover. 3. Annual bonus: This is the total bonus earned in respect of performance during the relevant year. For 2020/21 and 2021/22 Committee set a minimum deferral requirement of 33% of the bonus earned. For 2021/22, this deferral was equivalent to £165,654 for Mr Clemett and £113,985 for Mr Benson. 4. SIP awards granted in September 2021. See page 190 for details. ![img-9.jpeg](img-9.jpeg) 179 Workspace Group PLC Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents **REMUNERATION CONTINUED** **ANNUAL REPORT ON REMUNERATION CONTINUED** ## Annual bonus payout in respect of 2021/22 (audited) For 2021/22 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 business performance targets, and are calculated on a straight-line basis from 0% at threshold to 100% at maximum performance. Both Graham Clemett and Dave Benson are required to defer 33% of their bonus into Company shares for three years. The targets are set based on our 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 to the right. ### ANNUAL BONUS PAYOUT IN RESPECT OF 2021/22 | **MEASURE** | **ACHIEVED** | | --- | --- | | TRADING PROFIT | THRESHOLD (ON PAYABLE) | | AFTER INTEREST | 2,000,000 | | | MAXIMUM (100% PAYABLE) | | | ACTUAL: 2,45,3M | | **TOTAL PROPERTY RETURN** | **BENCHMARK** | | FROM PORTFOLIO VERSUS A DEFINED COMPARATOR-BENCHMARK COMBINED BY IFO | 2,00,000 | | | ACTUAL: BENCHMARK: +0.2% | | **CUSTOMER SATISFACTION** | 17% | | | 90% | | | ACTUAL: 80.4% | | **BUSINESS OBJECTIVES** | 0% | | | MAX: 100% | | | ACTUAL: 100% | | **TOTAL** | | | **OUTCOME (£000)** | | | **GRAMM (CUMET) (£0)** | | | **OUTCOME (£000)** | | | **DAVE BENSON, CFO** | | FORMULAE OUTCOME AND OPPORTUNITY AS A % OF SALARY 60% 60% 3.6% 24% 12% 12% 24% 24% 99.6% 120% **£502.0** **£165.6** TOTAL bonus of which is deferred bonus **£345.4** **£113.9** TOTAL bonus of which is deferred bonus 180 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED BUSINESS OBJECTIVES (% OF SALARY) ## Business objectives ## 2021/22 (audited) ## The Executive Directors’ business ## objectives focus on the delivery ## of the strategic priorities for the ## 24% ## business and the successful Opportunity ## management of risk. Based on a review of achievement against the business ## 24% objectives set out below, the Committee has awarded Graham Clemett and Dave Benson 24% of salary under this element. Outcome OBJECTIVES ## 1 2 3 4 5 Launch Roll-out of Progress the Continued Delivery of newbrand single-billing delivery of our upgrade and customer positioning lease product multi-year ESG expansion of our service andraise brand plans and property initiatives and corporate commitments portfolio profile Page 181 Page 181 Page 181 Page 182 Page 183 181 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED BUSINESS OBJECTIVES CONTINUED TARGET ACHIEVEMENT – Double awareness from 3% – 15% spontaneous brand awareness achieved in March 2022 as measured independently by Opinium (Market Research Agency) ## 1 to 6% in a year | LAUNCH NEW BRAND | – Double number of social | | – Followers successfully doubled to 40k by the end of Q4 based on combined Instagram, LinkedIn and Twitter accounts | | --- | --- | --- | --- | | POSITIONING AND | | media followers from 20k | | | RAISE BRAND AND | | to 40k in year | | CORPORATE PROFILE – Track through the year – Steady volume of coverage with consistently positive overall sentiment. Coverage showing positive or neutral sentiment up from 86% to 97% since November 2021 – Improved understanding of Workspace’s position and offer, with 61% of articles now using ‘flexible office provider’ descriptor, up from 40% in the period from June-November 2021, and more coverage in top tier titles TARGET ACHIEVEMENT – All processes and controls – All the internal appropriate processes and controls are now in place and are being used to deliver Workspace Inclusive offer ## 2 operating effectively – Controls in place with Wavenet (our comms provider) to ensure that the customer onboarding journey is seamless – CRM and ECS automations ensure a smooth onboarding process for our customers ROLL-OUT OF SINGLE-BILLING – Complete roll-out byApril – The project has successfully delivered Workspace Inclusive to the 30 in-scope buildings across the portfolio by April 2022 LEASE PRODUCT 2022 – The plan is to bring ten additional buildings onto Workspace Inclusive over the next 12 months once the upgrade of Wi-Fi within these buildings is complete TARGET ACHIEVEMENT – 4.2% reduction – Our total scope 1 and 2 emissions for 2021/22 are reduced by 20% compared to the base year of 2019/20 (comparison with 2020/21 is distorted by ## 3 inemissions over the year Covid impact). Annualised reduction of 10% in year PROGRESS – Methodology inplace – We appointed Verte to create a sustainable development framework THE DELIVERY OF OUR ESG PLANS – Apply methodology to – The framework is now being piloted on Riverside and Havelock to inform project brief and targets. It covers a wide range of issues, including AND COMMITMENTS new refurbishment energy, carbon, health and wellbeing, biodiversity, social impact, and management projects – Rolling delivery – 13 Employee Webinars delivered to Workspace employees ofrelevant webinars – 35 customer wellbeing events across the business centres – Workshops run forfive – Covid has made it impossible to access schools and colleges to run interview workshops separate schools/ – New InspiresMe programme has been developed and will be rolled out in 2022/23 colleges across London 182 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED BUSINESS OBJECTIVES CONTINUED TARGET ACHIEVEMENT – Successful completion to Projects delivered this year: ## 4 plan – Pall Mall refurbishment now completed – Mirror Works delivered CONTINUED UPGRADE – Light Bulb (phase 2) delivered AND EXPANSION OF – Sale of Highway completed OUR PROPERTY PORTFOLIO – Planning consents – Biscuit Factory Block J – Pre-commencement conditions discharged and development ready to commence achieved to plan – Chocolate Factory – Pre-commencement conditions discharged, and planning consent implemented. Development ready to commence – Leroy House – Pre-commencement conditions discharged, and planning consent implemented. Main contractor now on site – Successful completion of – Havelock Terrace – Successful pre-app for industrial/studio/business centre. Planning application being prepared pre-apps with – Morie Street – Successful pre-app with detailed negotiations ongoing localauthorities – Salisbury House – Successful pre-app for atrium and new conference centre – Shaftesbury Centre – Successful pre-app for new business centre – Poplar – Negotiations concluded to move Colt, allowing phases 2, and 3, (including return of new business centre) to be accelerated – Initial review of atleast – Initial review of £6.2bn of opportunities across London £5bn of opportunity in – Busworks and The Old Dairy acquired year – Target at least 20%of total – 36% of total opportunities sourced off market opportunities reviewed 183 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED BUSINESS OBJECTIVES CONTINUED TARGET ACHIEVEMENT – All customers contacted at – Planned content and themes for each phase of communication agreed and delivered ## 5 least every 45 days – Total of 9,400 new customer records have been added to CRM – The percentage of customers contacted by centre teams is now running at 98%, of total customers DELIVERY OF CUSTOMER SERVICE – Significantly reduce – Approval to move process reduced from 10 steps to 2 steps INITIATIVES number of steps inthe – Centre teams given training to ensure consistency of process for customers who move within Workspace approval tomove process – Simplify and tailor – A rent-free grace period has been introduced for internal moves. For units of 1,000 sq. ft. and under, the grace period is 7 days, units 1,000-2,000 processes to size sq. ft., the grace period is 14 days. For units 2,000+ they are treated on a case-by-case basis ofcustomer – Centre managers have a discretion to waive small dilapidation items that may be preventing them from closing a customer account – Licence to alter process streamlined with a quicker and simpler process for ‘light works’ and a more detailed process for ‘Extensive works’ – Wi-Fi available fromday – Wavenet now notified as soon as holding fee received to enable them tobegin conversations with the customer on their connectivity requirements one – Once a customer has signed their contract, Wavenet will ensure Wi-Fi will be readily available from day 1 – Centre managers’ responsibility on day 1 move-in now includes check-in with the customer to make sure Wi-Fi is available – Wavenet team visit customer within 2 weeks of move in to introduce themselves and discuss customer requirements – Streamlined process linked – Processes mapped and streamlined for onboarding journey, includes communications and touch points from both Workspace and Wavenet to new single billing – Automated communications from centre teams to customers to ensure consistency of messaging processes – Active training and – Collaborative training delivered to all centre manages and Wavenet engineers involvement of centre – Monthly catch-ups between Wavenet customer experience managers and Workspace centre teams teams to resolve faults – Improved Wavenet fault – Fault resolution within 4 hours improved from 70% to 90% over the year resolution statistics – Agreed tone of voice for both Workspace and Wavenet comms to remove jargon in discussions with customers – Proactive update process agreed for major incidents with centre teams now copied on all updates and notifications – Joint agreement for data to be shared to allow for centre team access to fault reporting system 184 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED | LTIP award vesting | LTIP awards made during | | --- | --- | | in respect of 2021/22 | the 2021/22 financial year | | (audited) | (audited) | The 2019 LTIP awards measured performance The 2020 LTIP awards are based on the same Under the current Policy conditional share awards under the LTIP are granted to a maximum of over the period 1 April 2019 to 31 March 2022. targets and weightings as the 2021 LTIP award 200% of salary. Awards under the 2021 LTIP are subject to the performance conditions detailed Details of the performance targets and shown below, in Table E, measured over the in Table E below measured over the period 1 April 2021 to 31 March 2024. achievement against them are set out below. period 1 April 2020 to 31 March 2023. TABLE E | On this basis, 0% of the 2019 LTIP will vest. | | | | | | | Total Property | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | Relative TSR | | | Return versus | | | | | vs. sector group | | 1 | London IPD index | | | | Director | (50% of the award) | | | | (50% of the award) | | 3 Threshold (20% vesting) Median Median 3 Maximum (100% vesting) Upper Quartile Upper Quartile 1. The comparator group for the 2021 LTIP cycle is the constituents of the FTSE 350 Real Estate Index excluding agencies. 2. For any shares to vest on absolute TSR, the Company’s TSR outcome must exceed the median TSR of the comparator group over the performance period. 3. There is straight-line vesting between the ‘Threshold’ and ‘Maximum’ performance levels. | | | | | FORMULAIC | The following awards were granted during the year under the 2021 LTIP: | | --- | --- | --- | --- | --- | --- | | | THRESHOLD | | MAXIMUM | OUTCOME | | | MEASURE | (20% PAYABLE) | (100% PAYABLE) ACTUAL | | (% OF AWARD) | | Performance Share award TOTAL SHAREHOLDER RETURN MEDIAN UPPER QUARTILE ### 20th 0%/50% (TSR) RELATIVE TO FTSE 350 | | | PERCENTILE | | | | | | Face value | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | PROPERTY COMPANIES | | | | | Market price at | | Number | | | | | | | Director Date of grant | date of award | 1 | of shares | £ % of salary | | TOTAL PROPERTY | UPPER QUARTILEMEDIAN | | | | | | | | | | | 43rd | 0%/50% | Graham Clemett 24 June 2021 £8.6117 117,043 1,007,939 200% | | | | | RETURN (TPR) VERSUS IPD PERCENTILE Dave Benson 24 June 2021 £8.6117 80,541 693,594 200% LTIP (% MAXIMUM) VESTING 1. The share price for calculating the levels of awards was £8.6117, the average mid-market closing price over the three dealing ### 0%/100% days 21, 22 and 23 June 2021, in accordance with the LTIP rules. CEO Deferred shares were granted (as conditional share awards) under the 2020/21 bonus of 7,629 NUMBER OF SHARES VESTING shares to Mr Clemett and 5,250 shares to Mr Benson on 28 June 2021 based on a share price of ### 0 (AUDITED) £8.375, the share price on date of grant (33% of bonus awarded). 185 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED ## How we will apply the Policy in 2022/23 While our Policy continues to be fit for purpose going forward, the only change for 2022/23 will be the annual bonus performance measures. See below for further details. BASE SALARY PENSIONS | The Executive Directors will be awarded | CEO | CFO | In line with the Policy set out in this report, the Executive Directors will receive a | | --- | --- | --- | --- | | a 3% salary increase in line with the | | | contribution to a defined contribution plan or a cash allowance in lieu of | | | £519,120 | £357, 204 | | | average applied to the wider workforce. | | | contribution of 10% of salary respectively. | Salaries will be as follows: ANNUAL BONUS EXAMPLES OF OPERATIONAL EFFICIENCY PERFORMANCE MEASURES AND LINK TO STRATEGY There is no change to the annual bonus maximum potential in 2022/23, and this will 1. Integration of McKay staff and processes continue to be 120% of salary. 2. Roll out of new finance system 3. New customer complaints policy | 33% of the total bonus paid will be deferred into | | andprocess | | | | | --- | --- | --- | --- | --- | --- | | shares for three years. Dividend equivalents may | 4. Continued roll-out of Workspace | | | | | | be accrued on deferred shares. | | Inclusiveoffer | | | | | Following careful consideration, we have decided | EXAMPLES OF STRATEGIC FINANCIAL OBJECTIVES | | | | | | that for the 2022/23 annual bonus, the Total | 1. Disposal of non-core assets | | | | | | Property Return measure (which remains as a | 2. Delivery of integration cost savings | | | | | | | | | 72% | 24% | 12% 12% | | measure in our LTIP) be replaced with a range of | | fromMcKay acquisition | | | | | sustainability objectives, and the business | 3. Complete debt refinancing post | | | | | | objectives be replaced with strategic financial and | | McKay acquisition | | | | | operational efficiency objectives. The profit and | 4. Continue to build Workspace brand profile | | | | | customer satisfaction metrics will be unchanged. FINANCIAL OBJECTIVES (TRADING SUSTAINABILITY OPERATIONAL CUSTOMER EXAMPLES OF SUSTAINABILITY OBJECTIVES PROFIT AFTER INTEREST (60%), EFFICIENCY SATISFACTION Whilst we believe that disclosing the exact 1. Progress our pathway to net zero carbon STRATEGIC FINANCIAL (12%)) performance conditions and targets for all by 2030 measures would not be in the best interests of 2. All lettable units to be A and B rated shareholders, we remain committed to best by 2030 | | | DRIVING CUSTOMER-LED | A FOUNDATION OF | | | --- | --- | --- | --- | --- | | practice disclosure. We therefore set out to the | | | | BEING SUSTAINABLE | | | 3. Improve customer advocacy of our | GROWTH | OPERATION EXCELLENCE | | right some examples of the objectives that the sustainability credentials Committee will consider in respect of evaluating 4. Launch our new InspireMe programme the strategic financial and operational efficiency to local schools, colleges and youth and sustainability objectives. Full disclosure on organisations the targets, performance achieved and resulting 5. Customer and well-being initiatives bonus payouts for 2022/23 will be provided in next year’s report. 186 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED HOW WE WILL APPLY THE POLICY IN 2022/23 CONTINUED LONG-TERM INCENTIVE PLAN (LTIP) Maximum award 200% of salary. The performance measures are such that 50% will be based on PERFORMANCE MEASURES AND LINK TO STRATEGY 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 | | Total Property | | | --- | --- | --- | --- | --- | | Estate Supersector | | | Return versus | | | | index excluding | | London-focused | | | | | agencies | | IPD index | ## 50% 50% Threshold (20% vesting) Median Median Maximum (100% vesting) Upper Quartile Upper Quartile A holding period of two years will apply to any vested shares under the LTIP. | | TOTAL SHAREHOLDER RETURN | | | TOTAL PROPERTY | | | --- | --- | --- | --- | --- | --- | | To allow any payouts to be fully reflective of underlying performance, the LTIP underpin allows | | (TSR) RELATIVE TO FTSE | RETURN (TPR) VERSUS IPD | | | | | | 350 PROPERTY COMPANIES | | | BENCHMARK | 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. DRIVING CUSTOMER-LED A FOUNDATION OF BEING SUSTAINABLE GROWTH OPERATION EXCELLENCE NON-EXECUTIVE DIRECTOR FEES 2022/23 fee 2021/22 fee % change 1 | The fees for Non-Executive Directors | Chairman | | £200,000 £188,000 6% | | --- | --- | --- | --- | | are reviewed and agreed annually. | | 2 | | | | NED base fee | | £55,000 £51,000 8% | Thefees, which are effective from Chair of Audit Committee fee £10,800 £10,800 0% 1 April 2022, are set out in the table Chair of Remuneration Committee fee £10,800 £10,800 0% tothe right. Chair of Risk Committee fee £10,800 £10,800 0% 3 Our Chairman and NED base fee have Senior Independent Director fee £10,800 £10,800 0% increased on the basis that there has 1. The increase in the Chairman fee is effective from 1 April 2022. been no increase since 2019 andreflects 2. The increase in the NED base fee is effective from 1 April 2022. alignment with market comparable 3. The Senior Independent Director fee was applied from 22 July 2021. levels. 187 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED ## Single figure for Non-Executive Directors (audited) Table F below sets out a single figure for the total remuneration received by each Non-Executive Director for the year ended 31 March 2022 and the prior year: TABLE F Stephen Hubbard Maria Moloney Chris Girling Damon Russell Duncan Owen Suzi Williams Rosie Shapland Lesley-Ann Nash Manju Malhotra Nick Mackenzie 2021/22 2020/21 2021/22 2020/21 2021/22 2020/21 2021/22 2020/21 2021/22 2020/21 2021/22 2020/21 2021/22 2020/21 2021/22 2020/21 2021/22 2020/21 2021/22 2020/21 Non-Executive Director £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 Base fee 188.0 151.9 16.1 51.0 49.5 51.0 51.0 51.0 35.4 – 22.7 51.0 51.0 19.9 51.0 12.8 9.3 – 9.3 – Additional fees – – – 8.3 3.2 10.8 10.8 5.0 – – 4.5 2.4 7.6 – 6.3 – – – – – Total 188.0 151.9 16.1 59.3 52.7 61.8 61.8 56.0 35.4 – 27.2 53.4 58.6 19.9 57.3 12.8 9.3 – 9.3 – 1. Expenses incurred by Non-Executive Directors represent the cost to the Group, being gross of taxation. In 2021/22, Chris Girling and Damon Russell were reimbursed for out-of-pocket expenses, incurred in attending meetings in connection with the discharge of their duties, of £741.34 and £775.35 respectively. 2. Additional fees were paid during the year to Non-Executive Directors serving as Chairs of the Remuneration, Audit and Risk Committees. An additional fee is also paid to the Senior Independent Director. ## Share ownership and share interests (audited) TABLE G TABLE H The shareholding guideline 31 March 31 March Owned Unvested and for Executive Directors is | | 2022 | 2021 | | outright | | not subject to | | | Subject to | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 200% of salary. The table to | | | | | 2 | | 3 | | | 4 | | | | | | Executive Director Type | or vested | | performance | | performance | | | Total | Chairman the right shows the interests Graham Clemett Shares 135,311 40,772 256,681 432,764 of the Directors and Stephen Hubbard 23,640 23,640 1 | | | | Market value options | NIL 3,389 NIL 3,389 | | --- | --- | --- | --- | --- | | connected persons in shares | Executive Directors | | | | | (owned outright or vested). | | Dave Benson Shares 20,085 5,250 176,630 201,965 | | | Graham Clemett 135,311 129,448 There have been no changes 1 Market value options NIL 5,649 NIL 5,649 Dave Benson 20,085 19,850 in the interests in the period Non-Executive Directors between 31 March 2022 and 1. Market value options include SAYE options outstanding and not yet matured as at 31 March 2022. The exercise price of these 7 June 2022. Damon Russell Nil Nil 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 | | Rosie Shapland Nil Nil | | 190 for further details. | | --- | --- | --- | --- | | Graham Clemett exceeds the | Lesley-Ann Nash Nil Nil | 2. The total shares owned outright or vested. | | | shareholding guidelines. See | | 3. This figure includes the deferred bonus shares awarded in 2019, 2020 and 2021 for Mr Clemett and the deferred bonus shares | | Nick Mackenzie Nil N /A awarded in 2021 for Mr Benson. page 175 for details. Dave Manju Malhotra Nil N /A 4. The interest in shares of 256,681 for Mr Clemett consists of LTIP awards made in 2020 and 2021. The interest in shares Benson, who joined the of176,630 for Mr Benson consists of LTIP awards made in 2020 and 2021, details of which can be found on page 189 in Duncan Owen 5,560 N /A | Company on 1 April 2020, | | | | | thisreport. | | --- | --- | --- | --- | --- | --- | | acquired 19,850 shares in | Past Directors | | | | | | September 2020. Mr Benson | | | 1 | | | | | Maria Moloney | | | See note 2,027 | | | was subsequently awarded | | 1 | | | | | | Suzi Williams | | | See note Nil | | | 235 ordinary shares under the | | 1 | | | | | | Chris Girling | | | See note Nil | | Workspace Group PLC Share Incentive Plan. 1. Maria Moloney, Suzi Williams and Chris Girling stepped down from the Board on 22 July 2021, 10 September 2021 and 7 February 2022 respectively. As at the date Table H on the far right shows of leaving, the number of shares held were 2,027 for Maria Moloney. Suzi Williams and Chris Girling did not hold any shares. the Executive Directors’ interest in shares. 188 Workspace Group PLC^{}[] Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents # **REMUNERATION CONTINUED** # **ANNUAL REPORT ON REMUNERATION CONTINUED** # **Additional information** # **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 Chair of the Audit Committee of The Restaurant Group PLC, effective 1 June 2016. Mr Clemett is paid an annual fee of £76,000. Mr Benson does not hold any external appointments. # **Relative importance of spend on pay** Chart D 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 2021 and 31 March 2022. EMPLOYEE REMUNERATION ![img-10.jpeg](img-10.jpeg) \* The estimated total dividend as reported in the financial statements for the year to 31 March 2022 was £40.6m. # **Payments for loss of office (audited)** None. # **Payments to past Directors (audited)** In June 2021, Jamie Hopkins received 17,423 shares, gross, pursuant to an award made under the Deferred Bonus Plan. These shares relate to the deferred element of his 2018 bonus, awarded whilst he was still a Director of the Company. Dividend equivalents at £15,259 (gross) were accrued and paid on the deferred shares. # **Service contracts of Directors serving in the year** Executive Directors are employed under contracts of employment with Workspace Group PLC. The principal terms of the Executive Directors' service contracts are as follows. | Executive Director | Position | Effective date of contract | Notice period | | | --- | --- | --- | --- | --- | | | | | From Company | From Director | | Graham Clemett | Chief Executive Officer | 31 July 2007 | 12 months | 12 months | | Dave Benson | Chief Financial Officer | 1 April 2020 | 12 months | 12 months | Graham Clemett joined the Company as CFO in July 2007 and was appointed as CEO on 24 September 2019. Mr Clemett served as Interim CEO and CFO from 31 May 2019 until September 2019. The Chairman and Non-Executive Directors have letters of appointment. Dates of the Directors' letters of appointment are set out below: | Name | Date of original appointment (date of reappointment) | Date of appointment/ last reappointment at AGM | Notice period | | --- | --- | --- | --- | | Stephen Hubbard | 16 July 2014 (23 January 2020) | 2021 | 6 months | | Damon Russell | 29 May 2013 (29 May 2022) | 2021 | 3 months | | Rosie Shapland | 6 November 2020 (n/a) | 2021 | 3 months | | Lesley-Ann Nash | 1 January 2021 (n/a) | 2021 | 3 months | | Duncan Owen | 22 July 2021 (n/a) | n/a | 3 months | | Manju Malhotra | 26 January 2022 (n/a) | n/a | 3 months | | Nick Mackenzie | 26 January 2022 (n/a) | n/a | 3 months | 1. Duncan Owen joined the Board as a Non-Executive Director on 22 July 2021, with both Nick Mackenzie and Manju Malhotra joining the Board as Non-Executive Directors on 26 January 2022. 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. 189 Workspace Group PLC Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents # **REMUNERATION CONTINUED** **ANNUAL REPORT ON REMUNERATION CONTINUED** # **ADDITIONAL INFORMATION CONTINUED** # **Committee advisers** During the year, PwC LLP acted as independent adviser to the Committee. PwC LLP was appointed by the Committee in 2018 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 during the year were £91,520 (based on hourly rates). With regards to other services provided by PwC during the financial year, PwC provided support to Workspaces IT team on business continuity procedures. # **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 2020/21 Annual Report on Remuneration at the 2021 AGM on 21 July 2021. The Committee views this level of shareholder support as a strong endorsement of the Company's Policy and its implementation. | | Percentage of votes cast | | Number of votes cast | | | | --- | --- | --- | --- | --- | --- | | | For and Discretion | Against | For and Discretion | Against | Withheld | | Policy Report (2020 AGM) | 99.54 | 0.46 | 116,307,019 | 539,870 | 1,666 | | Annual Report on Remuneration (2021 AGM) | 98.90 | 1.10 | 129,953,244 | 1,445,468 | 2,953 | 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 in respect of all-share plans (10% in any rolling ten-year period) and Executive share plans (5% in any rolling ten-year period) as at 31 March 2022 is detailed below. As of 31 March 2022, around 2.3% and 1.9% shares have been, or may be, issued to settle awards made in the previous ten 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** ![img-11.jpeg](img-11.jpeg) # **EXECUTIVE SHARE PLANS** ![img-12.jpeg](img-12.jpeg) # **Outstanding LTIP awards** Details of current awards outstanding to Graham Clemett and Dave Benson are detailed below. | Executive Director | At 1 April 2021 | | Lapsed during the year | | Vested during the year | | At 31 March 2022 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Performance^{1} | | Performance | | Performance | | Performance | | | **Graham Clemett** | | | | | | | | | | 22/06/2018 | 54,892 | | 54,892 | | - | | - | - | | 18/06/2019 | 71,814 | | - | | - | | 71,814 | - | | 18/06/2020 | 139,638 | | - | | - | | 139,638 | - | | 24/06/2021 | - | | - | | - | | 117,000 | - | | **Dave Benson** | | | | | | | | | | 18/06/2020 | 96,089 | | - | | - | | 96,089 | - | | 24/06/2021 | - | | - | | - | | 80,000 | - | 1. Awards will vest subject to the satisfaction of performance conditions detailed on page 184 over the three-year performance period. 2. LTIP awards made to the Executive Directors, in June 2019, 2022 and 2021 awards were in respect of 200% of salary based on a share price at date of award of £8,620,083, £7,076,787 and £8,611,177 respectively. The 2019 LTIP awards vested at 0%. ![img-13.jpeg](img-13.jpeg) 190 Workspace Group PLC^{}[] Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents # **REMUNERATION CONTINUED**ANNUAL REPORT ON REMUNERATION CONTINUED # **ADDITIONAL INFORMATION CONTINUED** # **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. | Executive Director | At 01/04/2021 | Granted during the year | Lapsed during the year | Vested in year | At 31/03/2022 | Exercise price | Normal exercise date | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | From | To | | Graham Clemett | 107 | - | - | - | 107 | | 18.09.18 | | | | 228 | - | - | - | 228 | | 30.08.20 | | | | 233 | - | - | - | 233 | | 05.09.22 | | | | - | 235 | - | - | 235 | | 29.09.24 | | | | 3,389 | | | | 3,389 | £5.31 | 01.09.23 | 01.03.24 | | Dave Benson | 5,649 | - | - | - | 5,649 | £5.31 | 01.09.25 | 01.03.26 | | | - | 235 | - | - | 235 | | 29.09.24 | | 1. Mr Clemett was granted awards under the Share Incentive Plan on 18 September 2015 (107); 30 August 2017 (228); 5 September 2019 (233); and 29 September 2021 (235). 2. Mr Benson was granted an award under the Share Incentive Plan on 29 September 2021 (235). There have been no changes in Directors' interests over options in the period between the balance sheet date and 7 June 2022. The Directors' Remuneration Report has been approved by the Board of Workspace Group PLC. By order of the Board **Lesley-Ann Nash** Chair of the Remuneration Committee 7 June 2022 191 Workspace Group PLC^{}[] Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents ## REPORT OF THE DIRECTORS ### The Directors present their report on the affairs of the Group together with the audited financial statements for the year ended 31 March 2022. The Directors present their report on the affairs of the Group together with the audited financial statements for the year ended 31 March 2022. 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 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 our Strategic Report on pages 1 to 92, and a description of the Group's business model on pages 67 to 75. It also includes our report on our sustainability programme, principal risks and uncertainties and the Statements on Going Concern, Viability and Section 172 matters which can be found on pages 76 to 77 and 113 to 115. The Corporate Governance Report and Chairman's Governance Report for the year ended 31 March 2022, on pages 93 to 190, are incorporated by reference into this Directors' Report. #### Post balance sheet events Details of post balance sheet events can be found on page 229. #### Principal activities and business review The Group is engaged in property investment and letting business space to businesses in London. As at 31 March 2022 the Company had twelve active subsidiaries, five of which are property investment companies owning properties in Greater London. The other seven companies are: Workspace Management Limited; LI Property Services Limited; Workspace 17 (Jersey) Limited; Centro Property Limited; Busworks Limited; Omnibus Workspace Limited and United Workspace Limited. A full list of the Company's subsidiaries and other related undertakings appears on pages 228 to 229. Significant events which occurred during the year are detailed in the Chairman's statement on pages 9 to 10, the Chief Executive Officer's Statement on pages 11 to 12 and the Business Review on pages 67 to 75. A description of the principal risks and uncertainties facing the Group can be found on pages 66 to 66. Details of the Group's health and safety policies can be found on page 193 and information on its environmental and community engagement activities can be found on pages 26 and 10. #### Profit and dividends The Group's profit after tax for the year attributable to shareholders amounted to £123.9m (2021: loss of £235.7m). An interim dividend of 7.0 pence was paid in February 2022 (2021: no interim dividend) and Board is proposing to recommend the payment of a final dividend of 14.5 pence (2021: 17.75 pence) per share to be paid on 5 August 2022 to shareholders whose names are on the Register of Members at the close of business on 8 July 2022. This makes a total dividend of 21.5 pence (2021: 17.75 pence) for the year. #### Going concern and viability The Going Concern and Viability Statements can be found on pages 76 to 77. The Group's activities, strategy and performance are explained in the Strategic Report on pages 92 to 92. Further details on the financial performance and financial position of the Group are provided in the financial statements on pages 204 to 229. #### Financial risk management The financial risk management objectives and policies of the Group are set out in note 18 to the financial statements and in the principal risks and uncertainties section of this report on pages 59 to 66. #### Disclosure of information to auditors The Directors who held office at the date of approval of this Report of the Directors confirm so far as they are each aware, there is no relevant information of which the Company's auditors unaware; and each Director has taken all the steps that they ought to have taken as Directors make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information. 192 Workspace Group PLC^{}[] Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents # REPORT OF THE DIRECTORS CONTINUED # **Information to be disclosed under LR9.8.4R** For the purpose of LR9.8.4CR, the information required to be disclosed by LR9.8.4R can be found in the Annual Report in the following locations and is hereby incorporated by reference into this Directors' Report: | Section | Topic | Location in the Annual Report | | --- | --- | --- | | 1 | Interest capitalised | Financial statements, page 215 note 10 | | 4 | Details of long-term incentive schemes | Remuneration Report, pages 169 to 170, 173 and 184 | There is no further information required to be disclosed under LR9.8.4R. # **Share capital and control** As at 31 March 2022, the Company's issued share capital comprised a single class of 181,125,259 ordinary shares of 61.00 each. Details of the Company's issued share capital are set out on page 225. Full details of share options and awards under the terms of the Company's share incentive plans can be found on pages 226 to 228. 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. # **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 2021 Annual General Meeting to make market purchases of its own ordinary shares. This authority will expire at the conclusion of the 2022 Annual General Meeting and a resolution will be proposed to renew this authority. No ordinary shares were purchased under this authority during the year. # **Substantial shareholdings in the Company** As at 31 March 2022, the following interests in voting rights over the issued share capital of the Company had been notified. | Shareholder | Number of shares | Percentage | | --- | --- | --- | | The London & Amsterdam Trust Company Limited | 53,491,771 | 29.5 | | BlackRock, Inc. | 25,966,106 | 14.3 | | Jupiter Asset Management Limited | 11,747,772 | 6.4 | | Cohen & Steers Inc. | 8,368,145 | 4.6 | | The Vanguard Group Inc. | 6,709,886 | 3.7 | As at 25 May 2022 the following interests in voting rights over the issued share capital of the Company had been notified. The issued share capital of the Company increased between 31 March 2022 and 25 May 2022 due to the issue of shares in relation to acquisition of McKay Securities PLC. | Shareholder | Number of shares | Percentage | | --- | --- | --- | | The London & Amsterdam Trust Company Limited | 53,491,771 | 27.5 | | BlackRock, Inc. | 25,760,454 | 13.4 | | Jupiter Asset Management Limited | 9,693,227 | 5.0 | | Cohen & Steers Inc. | 9,312,761 | 4.8 | | The Vanguard Group Inc. | 7,118,549 | 3.7 | # **Board of Directors** The names and biographical details of the Directors and details of the Board Committees of which they are members are set out on pages 102 to 105 and incorporated into this Report by reference. Changes to the Directors during the year and up to the date of this Report are set on page 101. At the date of this Report there are currently nine Directors on the Board of Workspace Group PLC. The Board may exercise all powers of the Company, subject to the Company's Articles of Association, the Companies Act 2006 and other applicable legislation. Changes to the Articles of Association must be approved by shareholders in accordance with Articles of Association themselves and applicable legislation in force at the relevant time. The Company's current Articles of Association require any new Directors to stand for election or re-election every three years following their election. However, in accordance with the Code and the Company's current practice, all continuing Directors will offer themselves for election or re-election (as applicable) at the AGM on 21 July 2022. 193 Workspace Group PLC^{}[] Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents # REPORT OF THE DIRECTORS CONTINUED Details of the Directors' interests in the shares of the Company and any awards granted to the Executive Directors under any of the Company's all-employee or Long-Term Incentive Plans are given in the Directors' Remuneration Report on page 187. The Service Agreements of the Executive Directors and the Letters of Appointment of Non-Executive Directors are also summarised in the Directors' Remuneration Report and are available for inspection at the Company's registered office. The appointment and replacement of Directors is governed by the Company's Articles of Association, the Code, the Companies Act 2006 and any related legislation. Unless otherwise determined by ordinary resolution of the Company, the Directors shall not be less than two or more than ten in number. The Board may appoint any person to be a Director so long as the total number of Directors does not exceed the limit prescribed in the Articles of Association. In addition to any power of removal conferred by the Companies Act 2006, the Company may by ordinary resolution remove any Director before the expiry of their period of office. # **Directors' indemnities** Under the Company's Articles of Association, to the extent permitted by the Companies Act 2006, the Company may, to the extent permitted by law, indemnify any Director, Secretary or other Officer of the Company against any liability and may also purchase and maintain insurance against such liability. The Board considers 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 under review and at the date of approval of the Directors' Report. Qualifying third party indemnity provisions (as defined by Section 234 of the Companies Act 2006) were in force during the period and remain in force in relation to certain losses and liabilities which the Directors may incur to third parties in the course of acting as Directors or employees of the Company or of any associated company. # **Change of control** There are a number of agreements (including the Group's borrowing facilities and other financial instruments, details of which can be found in note 16 to the financial statements) that could allow counterparties to terminate or alter those arrangements in the event of a change of control of the Company. # **Section 172(1) Statement** The Company's Section 172(1) Statement can be found on pages 113 to 115. # **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 briefs 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 as well as frequent site visits by Directors and Senior Managers. These briefings also serve as an informal forum for employees to ask questions about the Group. 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 Group's Savings Related Share Option Scheme. The Group 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 Group 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, and where diversity is valued. The Group remains supportive of the employment, career development and training of individuals without regard to gender, gender reassignment, race, ethnicity, age, religious beliefs or absence of religion or belief, sexual orientation, marital and civil partnership, disability, education or social background. The Group monitors these practices to ensure that they are fair and objective. Should an employee become disabled in the course of their employment, we aim to ensure that reasonable steps are taken to accommodate their disability by making reasonable adjustments to their existing employment. The Group provides retirement benefits for the majority of its employees as well as offering employees the option to obtain free, independent pension advice from our retained Financial Advisor. Details of the Group's pension arrangements are set out in note 27 on page 229. Further information on our employees and how we engage with them can be found on pages 47 to 50 and 108. # **Health and safety** We take the health and safety of our employees, customers, visitors and others who may be affected by our activities with the greatest seriousness and we fully comply with all health and safety legislation applicable to our business. In the year under review we monitored and reviewed our health and safety systems to promote continued compliance with HSE standards and best practice, and carried out portfolio-wide safety training with employees. This year we will continue to promote a healthy environment culture across our organisation and provide the necessary training for head office and site staff so that we remain competent in meeting our health and safety responsibilities. Annual formal health and safety audits are carried out every year to review our controls and ensure they are suitable and sufficient to manage risk in the business. 194 Workspace Group PLC^{}[] Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents # REPORT OF THE DIRECTORS CONTINUED We are also focusing on our employees' mental health as we feel it is essential to our overall wellbeing, and as important as physical health. We have already undertaken several mental health focused courses and have appointed a committee to look at how we can further assist employees. | **COVID-19** | During the year, we continued to take action to ensure that the wellbeing of our employees, customers and visitors to our buildings is our first priority as the country began to emerge from the Covid-19 pandemic. We continued to react to guidance from a variety of government and public health authorities and endeavoured to provide the most up-to-date guidance, support and advice to our employees. We are confident we had, and continue to have, the right policies and procedures in place to continue to serve our customers. | | --- | --- | | **TRAINING** | We train our employees so that they are competent and confident to carry out their jobs in a safe and professional manner. Our people lead by example, working on the principle that if they display high standards in the way they go about their business, then our customers and suppliers will follow suit. Each new starter is given in-house induction training targeted to the health and safety responsibilities they will hold, with ongoing training provided via toolbox talks and regular formal meetings with managers and members of the Health and Safety Committee. Although face-to-face training has continued to be impacted by Covid-19 restrictions in place at certain points of this year, we have carried out a substantial amount of health and safety training, including, IOSM Managing Safety, NEBOSH Certificate and specific training around asbestos, water hygiene, fire safety and the Construction Design and Management Regulations. | | **COMPLIANCE MANAGEMENT** | All our site staff and facilities managers, as well as some key head office personnel, use a compliance monitoring tool, E-Logbooks, which is a proven software system that enables us to monitor statutory compliance and routine maintenance across the entire portfolio. | | **INTERNAL HEALTH AND SAFETY AUDITS** | We are committed to continuous improvement and we undergo a series of formal internal health and safety audits every year. The number of audits per annum has increased this year with the intention to audit all sites at least every three years. Evaluations of the results from these audits are used to facilitate individual site safety improvements and identify areas where we can enhance our safety procedures across the portfolio. This includes any requirement for additional training, awareness or toolbox talks. | | **REDEVELOPMENT AND REFURBISHMENT PROJECTS AND CONTRACTOR SAFETY** | Redevelopment and refurbishment projects regularly take place across our portfolio, on both customer-occupied and vacant sites. We closely manage our contractors' activities and the associated risks to the health and safety of customers and visitors, particularly where building works are being carried out in close proximity to common parts and customer-occupied areas. For the sixth consecutive year, there have been no contractor-related accidents or incidents that have affected our customers. | # **Business conduct and compliance** See pages 78 to 80 for details of our key business conduct and compliance policies. # **Greenhouse gas emissions** See page 91 for details of our absolute emissions and emissions as an intensity ratio, which are incorporated by reference into this Directors' Report and fulfil the requirements of the Greenhouse Gas Emissions (Directors' Reports) Regulations 2013. # **2021 Annual General Meeting** See page 107 for details of our 2021 Annual General Meeting. # **2022 Annual General Meeting** The 36th Annual General Meeting of the Company will be held at the Company's business center at Edinburgh House, 170 Kennington Lane, London, SE11 5DP on Thursday 21 July 2022 at 11.00am. The Notice of Meeting, together with an explanation of the business to be dealt with by 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. Following nine years as a Non-Executive Director of Workspace, Damon Russell will step down with effect from the conclusion of the 2022 Annual General Meeting. Consequently, Damon will not be seeking re-election at the 2022 AGM. Under the rules of the Savings Related Share Option Scheme, a requirement exists to renew the term of the scheme every 10 years. Given that it was last tabled to shareholders in 2012, shareholders will be asked to approve the new Workspace Sharesave Plan 2022 at the AGM in July 2022. Following shareholder engagement, in 2019, 2020 and 2021 we sought approval for a resolution authorising political donations up to £20,000 in aggregate, which was a lower amount than we had sought in previous years. This year we are again proposing a resolution with an upper limit of £20,000 in aggregate. This resolution is proposed as a precaution to prevent the Company's normal business activities being inadvertently caught by the broad definitions used in the relevant provisions of the Companies Act 2006. It remains the policy of the Company not to make political donations or incur political expenditure within the ordinary meaning of those words and the Board has no intention of using the authority for that purpose. In addition, and in line with the resolution approved at last year's AGM, the Directors are again proposing a single resolution disapplying pre-emption rights for the 2022 Annual General Meeting that would apply only in very limited circumstances. The proposed disapplication resolution is limited to allotments and/or sales: (i) in connection with pre-emptive offers and offers to holders of equity securities other than ordinary shares (if required by the rights of the securities or as the Directors otherwise consider necessary); and (ii) in connection with the terms of any employees' share scheme for the time being operated by the Company. By Order of the Board **Carmelina Carfora** Company Secretary 7 June 2022 195 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ### STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT ### OF THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS 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 ## The Directors are responsible 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 ## for preparing the Annual Report 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 ## and the Group and Parent Company for taking such steps as are reasonably open to them to safeguard the assets of the Group and ## financial statements in accordance to prevent and detect fraud and other irregularities. with applicable law and regulations. 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 Company law requires the Directors to prepare Group and Parent Company financial statements information included on the Company’s website. Legislation in the UK governing the preparation for each financial year. Under that law they are required to prepare the Group financial and dissemination of financial statements may differ from legislation in other jurisdictions. statements in accordance with UK-adopted international accounting standards and applicable law and have elected to prepare the Parent Company financial statements in accordance with UK In accordance with Disclosure Guidance and Transparency Rule 4.1.14R, the financial statements accounting standards and applicable law, including FRS 101 Reduced Disclosure Framework. In will form part of the annual financial report prepared using the single electronic reporting format addition, the Group financial statements are required under the UK Disclosure and Transparency under the TD ESEF Regulation. The auditor’s report on these financial statements provides no Rules to be prepared in accordance with UK-adopted international accounting standards. assurance over the ESEF format. Under company law the Directors must not approve the financial statements unless they are Responsibility statement of the Directors in respect of the annual financial report satisfied that they give a true and fair view of the state of affairs of the Group and Parent We confirm that to the best of our knowledge: Company and of the Group’s profit or loss for that period. In preparing each of the Group and – The financial statements, prepared in accordance with the applicable set of accounting Parent Company financial statements, the Directors are required to: standards, give a true and fair view of the assets, liabilities, financial position and profit or loss – Select suitable accounting policies and then apply them consistently of the Company and the undertakings included in the consolidation taken as a whole – Make judgements and estimates that are reasonable, relevant and reliable – The Strategic Report includes a fair review of the development and performance of the – For the Group financial statements, state whether they have been prepared in accordance with business and the position of the issuer and the undertakings included in the consolidation UK-adopted international accounting standards taken as a whole, together with a description of the principal risks and uncertainties that – For the Parent Company financial statements, state whether applicable UK accounting theyface standards have been followed, subject to any material departures disclosed and explained in the Parent Company financial statements We consider the Annual Report and Accounts, taken as a whole, is fair, balanced and – Assess the Group and Parent Company’s ability to continue as a going concern, disclosing, as understandable and provides the information necessary for shareholders to assess the Group’s applicable, matters related to going concern position and performance, business model and strategy. – 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 Signed on behalf of the Board on 7 June 2022 by: Graham Clemett Chief Executive Officer Dave Benson Chief Financial Officer 196 Workspace Group PLC Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents # 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 2022 which comprise the Consolidated and Parent Company's Balance Sheets, the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Cash Flows, the Consolidated and Parent Company's Statement's of Changes in Equity, and the related notes, including the accounting policies on pages 207 to 211 for the Group and Note A for the Parent Company financial statements. # 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 2022 and of the Group's profit for the year then ended; - the Group financial statements have been properly prepared in accordance with UK-adopted international accounting standards; - 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. # 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 first appointed as auditor by the shareholders on 14 July 2017. The period of total uninterrupted engagement is for the 5 financial years ended 31 March 2022. 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:** | £24.5m (2021: £25.5m) | | --- | --- | | Group financial statements as a whole | 0.98% (2021: 0.98%) of total Group assets | | **Coverage** | 100% (2021: 100%) of total Group assets | | **Key audit matters** | vs 2 | | **Recurring risks** | **Group:** Valuation of Investment Property | | | **New: Parent:** Investment in Subsidiaries | # 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 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. 197 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WORKSPACE GROUP PLC CONTINUED 2. KEY AUDIT MATTERS: OUR ASSESSMENT OF RISKS OF MATERIAL MISSTATEMENT CONTINUED The risk Our response Valuation of investment Subjective valuation We performed the tests below rather than seeking to rely on any of the Group’s controls because property (Group) Investment properties (incorporating assets held for sale) is the largest the nature of the balance is such that we would expect to obtain audit evidence primarily through balance in the financial statements and is held at fair value in the Group’s the detailed procedures described. Investment Properties financial statements. (£2,366.7 million; Our procedures, assisted by our own property valuation specialist for first 3 procedures, 2021:£2,349.9 million) The portfolio is externally valued by a qualified independent valuer, CBRE. included: Assets Held for Sale Each property is unique and determining fair value requires significant Assessing valuer’s credentials: We assessed CBRE’s objectivity, professional qualifications and (£65.9 million; 2021: nil) judgement and estimation, in particular over the key assumptions of the experience through discussions with them, reviewing evidence of appropriate professional estimated rental value and the yield. The key assumptions will be impacted qualifications, reviewing terms of engagement letter and reading their valuation report. Refer to page 152 (Audit by a number of factors including location, quality and condition of the Committee Report), building and occupancy. Valuing investment properties either under Methodology choice: We critically assessed the methodology used by the valuer by using our own page 208 (accounting development or with development potential can be further complicated by property valuation specialist to assist us in assessing whether the valuation was performed in policy) and page 215 the need to assess the likelihood of planning consent, an allowance for accordance with the RICS Valuation Professional Standards ‘the Red Book’, IFRS and that the (financial disclosures). developer’s profit and forecast of construction costs. Whilst comparable valuation methodology adopted is appropriate by reference to acceptable valuation practice. market transactions can provide valuation evidence, the flexible office sector is still maturing and the unique nature of each property means that a key Benchmarking assumptions: We held discussions with CBRE to understand the assumptions factor in the property valuations are the assumptions made by the valuer. and methodologies used in valuing the investment properties and the market evidence used by them to support their assumptions. We understood Directors’ involvement in the valuation Furthermore, each property valuation includes source data provided by process to assess whether appropriate oversight has occurred. With the assistance of our own Directors and relied on as accurate by the external valuer, primarily the property valuation specialist, we held discussions with CBRE to understand movements in database of tenancy contracts. The relatively short average lease length in property values. For a sample of properties selected using various criteria including analysis of the Workspace Group’s portfolio and reduced market comparable the value of a property as well as correlation with movements in market rent, we evaluated and information for such flexible office space means the valuer is more reliant challenged the appropriateness of the key assumptions upon which these valuations were on tenancy data to support their market rent assumptions than may be based, including those relating to forecast market rents and yields, by making a comparison to the case in other property sectors. Therefore the valuation is more our own understanding of the market and to industry benchmarks. sensitive to the source data than may be the case for more mature sectors with longer leases. 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. The effect of these matters is that, as part of our risk assessment, we determined that the valuation of investment properties has a high degree For all properties, we assessed the capital expenditure by agreeing a sample of them to invoices. of estimation uncertainty, with a potential range of reasonable outcomes greater than our materiality for the financial statements as a whole, and For sample of development properties, we reviewed forecasted development costs to possibly many times that amount. supporting documentation, reviewed status of planning consent and agreed actual cost incurred to date. Disclosure quality The financial statements disclose the sensitivity estimated by the Group. Assessing transparency: Assessing whether the Group’s disclosures about the sensitivity of the The Directors’ assessment of the extent of the disclosure is based on an valuation of investment properties to changes in key assumptions adequately reflected the evaluation of the inherent risks to the valuation. related risks. The risk for our audit is whether or not those disclosures adequately address Our results the uncertainties within the valuation, and if so, whether those uncertainties – We found the valuation of investment properties to be acceptable. (2021: acceptable). are fundamental to the users’ understanding of the financial statements. 198 Workspace Group PLC^{}[] Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents # **INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF WORKSPACE GROUP PLC**CONTINUED # **2. KEY AUDIT MATTERS: OUR ASSESSMENT OF RISKS OF MATERIAL MISSTATEMENT CONTINUED** | | The risk | Our response | | --- | --- | --- | | **Recoverability of Parent Company's investment in subsidiaries** (£929.8 million; 2021: £928.5 million) *Refer to page 231 (accounting policy) and page 232 (financial disclosures).* | **Low risk, high value:** The carrying amount of the Parent Company's investments in subsidiaries represents 66.2% (2021: 59.7%) of the Company's total assets. Their recovery 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 will have the greatest effect on our overall Parent Company audit. | We performed the tests below rather than seeking to rely on any of the Company's controls because the nature of the balance is such that we would expect to obtain audit evidence primarily through the detailed procedures described. Our procedures included: - **Test of detail:** Comparing the carrying amount of 100% of investments representing 100% (2021: 99%) of the total investment balance with the relevant subsidiaries' draft balance shown to identify whether their net assets, being an approximation of their minimum recoverable amount, were in excess of their carrying amount and assessing whether those subsidiaries' profit-making. **Our results** - We found the Company's conclusion that there is no impairment of its investments in subsidiaries to be acceptable (2021: acceptable). | 199 Workspace Group PLC^{}[] Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents # INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF WORKSPACE GROUP PLCCONTINUED # **2. KEY AUDIT MATTERS: OUR ASSESSMENT OF RISKS OF MATERIAL MISSTATEMENT**CONTINUED We continue to perform procedures over revenue recognition. During the previous financial year the Group offered customers rental discounts and deferrals, the non-standard nature of which resulted in an increased inherent risk of error and therefore warranted additional audit focus. In the current year, no such discounts or deferrals were offered. Given that rental income does not contain a significant level of judgement we have not assessed revenue recognition as one of the most significant risks in our current year audit and, therefore, it is not separately identified in our report this year. Valuation of Derivatives is also no longer considered a Key Audit Matter as the Company do not hold any derivatives on the balance sheet as at end of the current year. We consider the recoverability of Parent Company investments in subsidiaries to be the other most significant area in the audit of Parent Company, therefore Valuation of Derivatives is removed as a Key audit matter. # **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 £24.5 million (2021: £25.5 million), determined with reference to a benchmark of total Group assets of which it represents 0.98% (2021: 0.98%). In addition, we applied materiality of £2.45 million (2021: £3.75 million) to certain components of trading profit after interest 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 £14.03 million (2021: £15.64 million), determined with reference to a benchmark of Company total assets, of which it represents 1% (2021: 1%). In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to a material amount across the financial statements as a whole. Performance materiality was set at 75% (2021: 75%) of materiality for the financial statements as a whole, which equates to £18.4m (2021: £19.1m) for the Group and £10.52m (2021: £11.73) for the Parent Company. We applied this percentage in our determination of performance materiality because we did not identify any factors indicating an elevated level of risk. We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £1.23 million (2021: £1.27 million) for the Group and exceeding £0.70 million (2021: £0.78 million) for the Parent Company; or £0.12 million (2021: £0.19 million) for misstatements relating to accounts to which the lower materiality was applied, 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 Group team performed the Parent Company audit. The audit was performed using the materiality levels set out above. The scope of the audit work performed was fully substantive as we did not rely upon the Group internal control over financial reporting. # **TOTAL GROUP ASSETS AND MATERIALITY** ![img-14.jpeg](img-14.jpeg) # **GROUP REVENUE** ![img-15.jpeg](img-15.jpeg) # **GROUP PROFIT BEFORE TAX** ![img-16.jpeg](img-16.jpeg) # **GROUP TOTAL ASSETS** ![img-17.jpeg](img-17.jpeg) 200 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WORKSPACE GROUP PLC CONTINUED 4. THE IMPACT OF CLIMATE CHANGE ON OUR AUDIT We considered whether these risks could plausibly affect the liquidity or availability of In planning our audit we have considered the potential impacts of climate change on the Group’s borrowings and debt refinancing in the going concern period by assessing the degree of business and its financial statements. Climate change impacts the Group in a number of ways: downside assumption that, individually and collectively, could result in a liquidity issue, taking through its own operations (including potential reputational risk associated with the Group’s into account the Group’s current and projected cash and facilities (a reverse stress test). delivery of its climate related initiatives), through its portfolio of investment properties and the greater emphasis on climate related narrative and disclosure in the Annual Report. The Group’s We considered the completeness and accuracy of the matters covered in the going concern main potential exposure to climate change in the financial statements is primarily through its disclosures and assessed whether they reflect the position of the Group’s financing and the risks investment properties as the key valuation assumptions and estimates may be impacted by associated with the Group‘s ability to continue as a going concern. climate risks. As part of our audit we have made enquiries of Directors and the Group’s Corporate Sustainability team to understand the extent of the potential impact of climate change Our conclusions based on this work: risk on the Group’s financial statements and the Group’s preparedness for this. We have – we consider that the Directors’ use of the going concern basis of accounting in the preparation performed a risk assessment of how the impact of climate change may affect the financial of the financial statements is appropriate; statements and our audit, in particular with respect to the valuation of investment properties. – we have not identified, and concur with the Directors’ assessment that there is not a material Given that these valuations are largely based on comparable market evidence we assessed that uncertainty related to events or conditions that, individually or collectively, may cast significant the impact of climate change was not a significant risk for our audit nor does it constitute a key doubt on the Group’s or Company’s ability to continue as a going concern for the going audit matter. We held discussions with our own climate change professionals to challenge our concern period; risk assessment. We have also read the Group’s disclosure of climate related information in the – we have nothing material to add or draw attention to in relation to the Directors’ statement in front half of the Annual Report as set out on pages 81 to 92, and considered consistency with the the basis of preparation note in the financial statements on the use of the going concern basis financial statements and our audit knowledge. We have not been engaged to provide assurance of accounting with no material uncertainties that may cast significant doubt over the Group over the accuracy of these disclosures. and Company’s use of that basis for the going concern period, and we found the going concern disclosure in basis of preparation note to be acceptable; and 5. GOING CONCERN – the related statement under the Listing Rules set out on page 192 is materially consistent with The Directors have prepared the financial statements on the going concern basis as they do not the financial statements and our audit knowledge. intend to liquidate the Group or the Company or to cease their operations, and as they have concluded that the Group’s and the Company’s financial position means that this is realistic. They However, as we cannot predict all future events or conditions and as subsequent events may have also concluded that there are no material uncertainties that could have cast significant result in outcomes that are inconsistent with judgements that were reasonable at the time they doubt over their ability to continue as a going concern for at least a year from the date of were made, the above conclusions are not a guarantee that the Group or the Company will approval of the financial statements (“the going concern period”). continue in operation. We used our knowledge of the Group, its industry, and the general economic environment to identify the inherent risks to its business model and analysed how those risks might affect the Group’s and Company’s financial resources or ability to continue operations over the going concern period. The risks that we considered most likely to adversely affect the Group’s and Company’s available financial resources over this period were: – A fall in customer demand as a result of economic downturn over the next two years, before a gradual recovery; – Reduction in the like for like occupancy over the period of March 2024, with a gradual recovery by March 2027; – New lettings continue to be below the average price per sq. ft. of vacating customers; – Continued higher levels of counterparty risk, with increased levels of bad debt; – Higher level of cost inflation have been modelled. 201 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WORKSPACE GROUP PLC CONTINUED 6. FRAUD AND BREACHES OF LAWS AND REGULATIONS – ABILITY TO DETECT Identifying and responding to risks of material misstatement due to non-compliance with laws Identifying and responding to risks of material misstatement due to fraud and regulations To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events We identified areas of laws and regulations that could reasonably be expected to have a material orconditions that could indicate an incentive or pressure to commit fraud or provide an effect on the financial statements from our general commercial and sector experience, through opportunity to commit fraud. Our risk assessment procedures included: discussion with the Directors and other management (as required by auditing standards), and – Enquiring of Directors and inspection of policy documentation as to the Group’s high-level discussed with the Directors and other management the policies and procedures regarding policies and procedures to prevent and detect fraud, including the Group’s channel for compliance with laws and regulations. “whistleblowing”, as well as whether they have knowledge of any actual, suspected or allegedfraud. We communicated identified laws and regulations throughout our team and remained alert to – Reading Board minutes, Executive Committee minutes and attending Group Audit any indications of non-compliance throughout the audit. Committeemeetings. – Considering remuneration incentive schemes and performance targets for management, The potential effect of these laws and regulations on the financial statements varies considerably. including total shareholder return, total property return, performance compared to IPD Firstly, the Group is subject to laws and regulations that directly affect the financial statements andgrowth in trading profit after interest targets for management remuneration. including financial reporting legislation (including related companies legislation), distributable profits legislation and taxation legislation (including conditions to maintain UK Real Estate We communicated identified fraud risks throughout the audit team and remained alert Investment Trust (“REIT”) status in accordance with the REIT regime) and we assessed the extent toanyindications of fraud throughout the audit. of compliance with these laws and regulations as part of our procedures on the related financial statement items. As required by auditing standards, and taking into account possible pressures to meet profittargets and our overall knowledge of the control environment, we perform procedures Secondly, the Group is subject to many other laws and regulations where the consequences of toaddress the risk of management override of controls, in particular the risk that Group non-compliance could have a material effect on amounts or disclosures in the financial management may be in a position to make inappropriate accounting entries and the risk statements, for instance through the imposition of fines or litigation. We identified the following ofbiasin accounting estimates and judgements such as significant assumptions used in the areas as those most likely to have such an effect: health and safety, environmental and valuation of investment properties, including estimated rental values and market based yields. sustainability legislation, and certain aspects of company legislation recognising the financial On this audit we do not believe there is a fraud risk related to revenue recognition because nature of the Group’s activities and its legal form. oftherelative simplicity of revenue streams. Auditing standards limit the required audit procedures to identify non compliance with these We also identified a fraud risk related to management’s potential manipulation of tenancy data laws and regulations to enquiry of the Directors and other management and inspection of when determining property valuations in response to possible pressures to meet profit targets. regulatory and legal correspondence, if any. Therefore if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach. We performed procedures including: We assessed the legality of the distributions made by the Company in the period based on – Assessing whether the judgements made in making accounting estimates are indicative comparing the dividends paid to the distributable reserves prior to each distribution, including ofapotential bias including assessing the source data used for purpose of valuations of consideration of interim accounts filed during the year. investment properties. Further details in respect of our procedures over source data in relationto the valuation of investment properties is set out in the key audit matter disclosure Context of the ability of the audit to detect fraud or breaches of law or regulation insection 2. Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have – Identifying journal entries and other adjustments to test based on risk criteria and comparing detected some material misstatements in the financial statements, even though we have properly the identified entries to supporting documentation. These included those posted by senior planned and performed our audit in accordance with auditing standards. For example, the finance management, those posted and approved by the same user and those posted to further removed non-compliance with laws and regulations is from the events and transactions unusual accounts. reflected in the financial statements, the less likely the inherently limited procedures required by – Assessing significant accounting estimates for bias. auditing standards would identify it. In addition, as with any audit, there remained a higher risk of non-detection of fraud, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non- compliance with all laws and regulations. 202 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WORKSPACE GROUP PLC CONTINUED 7. WE HAVE NOTHING TO REPORT ON THE OTHER INFORMATION IN THE ANNUAL REPORT Our work is limited to assessing these matters in the context of only the knowledge acquired The Directors are responsible for the other information presented in the Annual Report together during our financial statements audit. As we cannot predict all future events or conditions and as with the financial statements. Our opinion on the financial statements does not cover the other subsequent events may result in outcomes that are inconsistent with judgements that were information and, accordingly, we do not express an audit opinion or, except as explicitly stated reasonable at the time they were made, the absence of anything to report on these statements is below, any form of assurance conclusion thereon. not a guarantee as to the Group’s and Company’s longer-term viability. Our responsibility is to read the other information and, in doing so, consider whether, based on Corporate governance disclosures our financial statements audit work, the information therein is materially misstated or We are required to perform procedures to identify whether there is a material inconsistency inconsistent with the financial statements or our audit knowledge. Based solely on that work we between the Directors’ corporate governance disclosures and the financial statements and our have not identified material misstatements in the other information. audit knowledge. Strategic Report and Directors’ Report Based on those procedures, we have concluded that each of the following is materially Based solely on our work on the other information: consistent with the financial statements and our audit knowledge: – we have not identified material misstatements in the Strategic Report and the Directors’ Report; – the Directors’ statement that they consider that the Annual Report and financial statements – in our opinion the information given in those reports for the financial year is consistent with taken as a whole is fair, balanced and understandable, and provides the information necessary the financial statements; and for shareholders to assess the Group’s position and performance, business model and strategy; – in our opinion those reports have been prepared in accordance with the Companies Act 2006. – the section of the Annual Report describing the work of the Audit Committee, including the significant issues that the Audit Committee considered in relation to the financial statements, Directors’ Remuneration Report and how these issues were addressed; and In our opinion the part of the Directors’ Remuneration Report to be audited has been properly – the section of the Annual Report that describes the review of the effectiveness of the Group’s prepared in accordance with the Companies Act 2006. risk management and internal control systems. Disclosures of emerging and principal risks and longer-term viability We are required to review the part of the Corporate Governance Statement relating to the We are required to perform procedures to identify whether there is a material inconsistency Group’s compliance with the provisions of the UK Corporate Governance Code specified by the between the Directors’ disclosures in respect of emerging and principal risks and the viability Listing Rules for our review. statement, and the financial statements and our audit knowledge. We have nothing to report in this respect. Based on those procedures, we have nothing material to add or draw attention to in relation to: – the Directors’ confirmation within the viability statement page 76 that they have carried out a 8. WE HAVE NOTHING TO REPORT ON THE OTHER MATTERS ON WHICH WE ARE REQUIRED robust assessment of the emerging and principal risks facing the Group, including those that TO REPORT BY EXCEPTION would threaten its business model, future performance, solvency and liquidity; Under the Companies Act 2006, we are required to report to you if, in our opinion: – the Emerging and Principal Risks disclosures describing these risks and how emerging risks are – adequate accounting records have not been kept by the Parent Company, or returns adequate identified, and explaining how they are being managed and mitigated; and for our audit have not been received from branches not visited by us; or – the Directors’ explanation in the viability statement of how they have assessed the prospects – the Parent Company financial statements and the part of the Directors’ Remuneration Report of the Group, over what period they have done so and why they considered that period to be to be audited are not in agreement with the accounting records and returns; or appropriate, and their statement as to whether they have a reasonable expectation that the – certain disclosures of Directors’ remuneration specified by law are not made; or Group will be able to continue in operation and meet its liabilities as they fall due over the – we have not received all the information and explanations we require for our audit. period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions. We have nothing to report in these respects. We are also required to review the viability statement, set out on page 76 under the Listing Rules. Based on the above procedures, we have concluded that the above disclosures are materially consistent with the financial statements and our audit knowledge. 203 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WORKSPACE GROUP PLC CONTINUED 9. RESPECTIVE RESPONSIBILITIES Directors’ responsibilities As explained more fully in their statement set out on page 195, 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 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 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. 10. 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 7 June 2022 204 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ### CONSOLIDATED INCOME STATEMENT CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2022 FOR THE YEAR ENDED 31 MARCH 2022 | | | 2022 | 2021 | | 2022 | 2021 | | --- | --- | --- | --- | --- | --- | --- | | | Notes | £m | £m | | £m | £m | | Revenue 1 132.9 142.3 | | | | Profit/ (loss) for the financial year 123.9 (235.7) | | | 1 | Direct costs | 1 (46.2) (60.8) | Other comprehensive income: | | --- | --- | --- | | Net rental income 1 86.7 81.5 | | Items that may be classified subsequently to profit or loss: | | Administrative expenses 2 (19.3) (19.0) | | Fair value of investments recycled to retained earnings 2 .1 – | | Trading profit 6 7. 4 62.5 | | Cash flow hedge – transfer to income statement (0.3) 8.6 | Cash flow hedge – change in fair value – (9.8) Profit/ (loss) on disposal of investment Other comprehensive income/ (loss) in the year 1.8 (1.2) properties 3(a) 7. 8 (0. 1) Total comprehensive income/ (loss) for the year 125.7 (236.9) Other income 3(b) 0. 6 – The notes on pages 207 to 230 form part of these financial statements. Other expenses 3(c) – (0 .2) Change in fair value of investment properties 10 68.7 (257 .7) Operating profit/ (loss) 144.5 (19 5.5) Finance costs 4 (20.5) (23.8) Exceptional finance costs 4 – (16.4) Profit/ (loss) before tax 124. 0 (235. 7) Taxation 6 (0. 1) – Profit/ (loss) for the financial year after tax 123.9 (235.7) Basic earnings/ (loss) per share 8 68.5p (130.3)p Diluted earnings/ (loss) per share 8 68. 1p (130.3)p 1. Direct costs in 2022 includes impairment of receivables of £1.5m (2021: £4.2m). See note 1 for additional information. 205 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ### CONSOLIDATED BALANCE SHEET AS AT 31 MARCH 2022 | | | 2022 | 2021 | | | 2022 | 2021 | | --- | --- | --- | --- | --- | --- | --- | --- | | | Notes | £m | £m | | Notes | £m | £m | | Non-current assets | | | | Shareholders’ equity | | | | | Investment properties 10 2,366.7 2,349.9 | | | | Share capital 20 181. 1 181. 1 | | | | | Intangible assets 1.9 2.4 | | | | Share premium 20 295.5 295.5 | | | | | Property, plant and equipment 11 2.9 4.0 | | | | Investment in own shares 22 (9.9) (9.6) | | | | | Other investments 12 1 .7 7. 9 | | | | Other reserves 21 32.6 33. 1 | | | | | Derivative financial instruments 16(e) – 8 .7 | | | | Retained earnings 1,300.3 1,219.4 | | | | | Deferred tax 6 0.3 0. 4 | | | | Total shareholders’ equity 1,7 99.6 1,719.5 | | | | 2,37 3.5 2,373.3 The notes on pages 207 to 230 form part of these financial statements. Current assets The financial statements on pages 204 to 230 were approved and authorised for issue by the Trade and other receivables 13 23.5 29.3 Board of Directors on 07 June 2022 and signed on its behalf by: Assets held for sale 10 65.9 – Cash and cash equivalents 14 49.0 191.0 138.4 220.3 Total assets 2,511.9 2,593.6 Graham Clemett Dave Benson Director Director Current liabilities Trade and other payables 15 (85.8) (95. 0) Company registration number – 02041612 Borrowings 16(a) – (156.6) (85.8) (251.6) Non-current liabilities Borrowings 16(a) (595.5) (596.2) Lease obligations 17 (31.0) (26.3) (626.5) (622.5) Total liabilities (712.3) (87 4.1) Net assets 1,7 99.6 1,719.5 206 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ### CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 MARCH 2022 FOR THE YEAR ENDED 31 MARCH 2022 | | Attributable to owners of the Parent | | | | | | | | | 2022 | 2021 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | Total | | Notes | £m | £m | | | | Investment | | | | share- | | Cash flows from operating activities | | | | | Share | Share | | in own | Other | Retained | holders’ | | | | | | Cash generated from operations 19 80.5 62.4 | | | capital | | premium | | shares | | reserves | | earnings | | equity | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Notes | | £m | | £m | | £m | | £m | | £m | | £m | Interest paid (22.6) (23.4) | | Balance at 31 March 2020 1 80.7 295.4 (9.6) 32.2 1,499.3 1,998.0 | | | | | | | | | | | | | | Tax paid - (0.6) | | Loss for the financial year – – – – (235.7) (235.7) | | | | | | | | | | | | | | Net cash inflow from operating activities 5 7. 9 38.4 | Other comprehensive loss | for the year 21 – – – (1.2) – (1.2) | Cash flows from investing activities | | --- | --- | | Total comprehensive loss – – – (1.2) (235.7) (236.9) | Purchase of investment properties (88.4) – | | Transactions with owners: | Capital expenditure on investment properties (29.8) (23.6) | | Share issues 20 0. 4 0 .1 – (0.4) – 0.1 | Proceeds from disposal of investment properties | (netof sale costs) 117 .3 11.0 Dividends paid 7 – – – – (44.2) (44.2) Purchase of intangible assets (0 .5) (1.2) Share based payments 23 – – – 2.5 – 2.5 Purchase of property, plant and equipment (0.7) (1.2) Balance at 31 March 2021 181.1 295.5 (9.6) 33. 1 1,219.4 1,719.5 Other income (deferred consideration/ overage) 4.5 0 .1 Profit for the financial year – – – – 123.9 123.9 Proceeds from sale of investments 3(b)/ 12 6.8 – Other comprehensive Net cash inflow/ (outflow) from investing activities 9. 2 (14.9) income for the year – – – – 1.8 1.8 Total comprehensive | income – – – – 125.7 125.7 | Cash flows from financing activities | | --- | --- | | Transactions with owners: | Proceeds from issue of ordinary share capital 20 – 0 .1 | | Purchase of own shares 22 – – (0.3) – – (0.3) | Finance costs for new/ amended borrowing facilities (1.3) (2.0) | | Dividends paid 7 – – – – (44.8) (44.8) | Exceptional finance costs (16.4) – | Settlement of derivative financial instruments 0.7 – Share based payments 23 – – – 1.6 – 1.6 Repayment of bank borrowings and Private Recycled OCI to retained Placement Notes 16(h) (173.5) (217 .0) earnings 21 – – – (2. 1) – (2. 1) Draw down of bank borrowings 16(h) 25.0 54.0 Balance at 31 March 2022 181.1 295.5 (9.9) 32.6 1,300.3 1,799 .6 Green Bond proceeds – 299.5 The notes on pages 207 to 230 form part of these financial statements. Own shares purchase (net) (0.3) – Dividends paid 7 (43.3) (46.3) Net cash (outflow)/ inflow from financing activities (209. 1) 88.3 Net (decrease)/ increase in cash and cash equivalents (142.0) 111.8 Cash and cash equivalents at start of year 19 191.0 79.2 Cash and cash equivalents at end of year 19 49.0 191.0 The notes on pages 207 to 230 form part of these financial statements. 207 Workspace Group PLC^{}[] Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents ## NOTES TO THE FINANCIAL STATEMENTS 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. The registered number of the Company is 02041612. ### 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 and approved by the Directors on a going concern basis, in accordance with UK adopted international accounting standards. The Company has elected to prepare its Parent Company financial statements in accordance with FRS 101; these are presented on pages 230 to 233. In addition, the Group financial statements are required under the UK Disclosure and Transparency Rules 41.6, to be prepared in accordance with United Kingdom adopted international accounting standards. Whilst the impact of Covid-19 on the Group has reduced in the last 12 months, the war in Ukraine, current high levels of inflation and higher interest rate environment means there is an increased risk of an economic downturn. We have modelled a number of different scenarios considering a period of 12 months from the date of signing of these financial statements. These scenarios include a severe, but realistically possible, downside scenario which includes the following key assumptions: - - A stalling of the UK economy, with low levels of GDP growth and inflationary pressure, resulting in a reduction in customer demand over the next two years, compared to current levels. - - Like-for-like occupancy reduces by c.5% to 85% over the next two years, with associated increase in void costs and downward pressure on pricing of new lettings. - - New lettings at below the average price per sq. ft. of vacating customers resulting in a overall reduction in average rent per sq. ft. - - Increase in counterparty risk, with bad debt significantly higher than pre-pandemic levels. - - Higher levels of cost inflation. - - Higher interest rate environment resulting in an increase in the cost of variable rate borrowings. The Directors fully considered the principal risks of the Company and how they may impact the model. Further details of the principal risks can be found on pages 59 to 66. The appropriateness of the going concern basis is reliant on the continued availability of borrowings, sufficient liquidity and compliance with loan covenants. The Group's revolving credit facility was refinanced in December 2021 with a limit of £200m a term to December 2024 bringing the total longer-term debt facilities to £800m. In addition March 2022, a £200m "Acquisition Facility" was secured, in relation to the purchase of McKay Securities PLC, bringing total facilities to £1bn as at 31 March 2022. As at 31 March 2022, the Company had significant headroom with £442m of cash and undrawn facilities. On 6 May 2022 we completed the acquisition of McKay, with the consideration comprising a £191m cash payment and the issuance of new shares. Under the downside scenario whereby we assume that the McKay facilities are required to be prepaid in June 2022, the Group maintains sufficient headroom in its cash and loan facilities for the full period of assessment. The £200m Acquisition Facility expires in September 2023 and no other debt is due to be refinanced until December 2024. All outstanding borrowings require compliance with LTV and Interest Cover covenants. As at the tightest test date in the scenarios modelled, the Group could withstand a reduction in net rental income of 51% and a fall in the asset valuation of 56% compared to 31 March 2022 (pro-forma including McKay) before these covenants are breached, assuming no mitigating actions are taken. Consequently, the Directors are confident that the Group and Company will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of the financial statements and therefore have prepared the financial statements on a going concern basis. ### NEW ACCOUNTING STANDARDS, AMENDMENTS AND GUIDANCE a) During the year to 31 March 2022 the Group adopted the following accounting standards and guidance: | IFRS Standards | Amendments to References to the Conceptual Framework in IFRS Standards | | --- | --- | | IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 (amended) | Interest Rate Benchmark Reform – Phase 2 | | IFRS 16 (amended) | COVID-19 related rent concessions | There was no material impact from the adoption of these accounting standard amendments to the financial statements. 208 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2022 CONTINUED b) The following accounting standards and guidance are not yet effective but are not expected SIGNIFICANT ACCOUNTING POLICIES to have a significant impact on the Group’s financial statements or will result in changes to The significant accounting policies adopted in the preparation of these consolidated financial presentation and disclosure only. They have not been adopted early by the Group: statements are set out below. These policies have been consistently applied to all years presented unless stated otherwise. IFRS 17 Insurance Contracts IAS 1 (amended) Classification of Liabilities as Current or Non-Current Basis of consolidation The consolidated financial statements include the financial statements of the Company and all its IAS 1 and IFRS Practise Statement Disclosure of Accounting Policy subsidiary undertakings up to 31 March 2022. Subsidiaries are all entities (including structured 2 (amended) entities) over which the Group has control. The Group controls an entity when the Group is IAS 8 (amended) Definition of Accounting Estimate exposed to, or has rights to, variable returns from its involvement with the entity and has the IAS 37 (amended): Onerous Cost of Fulfilling a Contract ability to affect those returns through its power over the entity. Subsidiaries are fully Contracts consolidated from the date on which control is transferred to the Group until the date that Amendments to IAS 16 Property, Plant and Equipment – Proceeds before Intended control ceases. Use Amendments to IAS 12 Deferred Tax related to Assets and Liabilities arising from a Inter-company transactions, balances and unrealised gains from intra-group transactions are Single Transaction eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. IFRS Standards 2018-2020 Annual Improvements to IFRS Standards 2018-2020 IFRS 3 (amended) Reference to the Conceptual Framework Investment properties IAS 1 (amended) Presentation of Financial Statements and IFRS Practise Investment properties are those properties owned or leased by the Group that are held either to Statement 2 Making Materiality Judgements earn rental income or for capital appreciation, or both, and are not occupied by the Company or subsidiaries of the Group. SIGNIFICANT JUDGEMENTS, KEY ASSUMPTIONS AND ESTIMATES The preparation of financial statements in conformity with generally accepted accounting Investment property is measured initially at cost, including related transaction costs. After initial principles requires the use of estimates and judgements that affect the reported amounts of recognition investment property is held at fair value based on a valuation by an independent assets and liabilities at the balance sheet date and the reported amounts of revenues and professional external valuer at each reporting date. The valuation methods and key assumptions expenses during the reporting period. Although these estimates are based on management’s best applied are explained in note 10. Changes in fair value of investment property at each reporting knowledge of the amount, event or actions, actual results ultimately may differ from those date are recorded in the consolidated income statement. estimates. Investment properties acquired under leases are capitalised at the lease’s commencement at the The Group’s significant accounting policies are stated below. Not all of these accounting policies lower of the fair value of the leased property and the net present value of the minimum lease require management to make subjective or complex judgements. The following is intended to payments. The investment properties acquired under leases are subsequently carried at fair value provide an understanding of the significant judgements within the accounting policies that plus an adjustment for the carrying amount of the lease obligation. The corresponding rental management consider critical because of the assumptions or estimation involved in their obligations, net of finance charges, are included in current and non-current borrowings. Each application and their impact on the consolidated financial statements. 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 Investment property valuation consolidated income statement. 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 Properties are treated as acquired at the point the Group assumes the significant risks and values and market based yields. With regard to redevelopments and refurbishments, future rewards of ownership and are treated as disposed when these are transferred outside of the development costs and an appropriate discount rate are also used. In determining fair value the Group’s control. valuers make reference to market evidence and recent transaction prices for similar properties. 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. 209 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2022 CONTINUED Existing investment properties which undergo redevelopment and refurbishment for continued Acquisitions future use remain in investment property where the purpose of holding the property continues An acquisition is recognised when the risks and rewards of ownership have transferred. This is to meet the definition of investment property as defined above. Subsequent expenditure is usually on completion of the transaction. Asset acquisitions measures assets based on their cost, charged to the asset’s carrying amount only when it is probable that future economic benefits which is allocated to the property assets on a fair value basis, and includes directly related associated with the expenditure will flow to the Group, and the cost of each item can be reliably acquisition costs. Business combinations are accounted for using the acquisition method. Any measured. Certain internal staff costs directly attributable to capital/redevelopment projects are excess of the purchase consideration over the fair value of the net assets acquired is recognised capitalised. All other repairs and maintenance costs are charged to the consolidated income as goodwill, and reviewed annually for impairment. Any discount received or acquisition-related statement during the period in which they are incurred. costs are recognised in the consolidated income statement. Capitalised interest on refurbishment/redevelopment expenditure is added to the asset’s Intangible assets carrying amount. Borrowing costs capitalised are calculated by reference to the actual interest Intangible assets are stated at historical cost, less accumulated amortisation. Acquired computer rate payable on borrowings, or if financed out of general borrowings by reference to the average software licences and external costs of implementing or developing computer software rate payable on funding the assets employed by the Group and applied to the direct expenditure programs and websites are capitalised. These costs are amortised over their estimated useful on the property undergoing redevelopment. Interest is capitalised from the date of lives of five years on a straight-line basis. commencement of the redevelopment activity until the date when substantially all the activities Costs associated with maintaining computer software programs are recognised as an expense as necessary to prepare the asset for its intended use are complete. they fall due. Investment properties are recognised as ‘assets held for sale’ when it is considered highly Property, plant and equipment probable that sale completion will take place. This is assumed when the property has been Equipment and fixtures actively marketed for a buyer, supported by either a sale exchanging contract or agreeing terms Equipment and fixtures are stated at historical purchase cost less accumulated depreciation and with a buyer by the balance sheet date. In addition, its carrying amount is highly probable to be impairment. Historical cost includes the original purchase price of the asset and the costs recovered within one year. attributable to bringing the asset to its working condition for its intended use. Income from the sale of assets is recognised when the significant risks and returns have been Subsequent expenditure is charged to the asset’s carrying amount or recognised as a separate transferred to the buyer. In the case of sales of properties this is generally taken on completion asset only when it is probable that future economic benefits associated with the expenditure will of the contract. In the case of a part disposal agreement, the part of the asset being disposed flow to the Group and the cost of each item can be reliably measured. All other repairs and will be derecognised from investment property when completion is reached or when a lease maintenance costs are charged to the consolidated income statement during the period in which agreement is signed (i.e. when the risks and rewards of this part of the site transfer to the they are incurred. 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 income/expense. 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 ten years. Consideration can take the form of cash, new commercial buildings and a right to future overage The assets’ residual values and useful lives are reviewed and adjusted, if appropriate, at least at (generally being a share in the proceeds of any future sale of the residential development to be each financial year end. An asset’s carrying amount is written down immediately to its constructed by the developer). Revenue is recognised when all relevant criteria in IFRS 15 are recoverable amount if its carrying amount is greater than its estimated recoverable amount. met under the five-step model and recognised in the period they were earned. Other investments Consideration (including overage) is measured at the fair value of the consideration Investments in unlisted shares are accounted for under IFRS 9 at fair value, using a valuation received/receivable. multiple and financial information. Changes in fair value are shown in the consolidated statement of comprehensive income. 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 Trade and other receivables consolidated income statement in accordance with IAS 40. Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost less provision for impairment based on the expected credit loss, which uses a Overage is only recognised once an agreement has been signed with a residential developer. lifetime expected loss allowance for all trade receivables based on the individual occupier’s Overage represents a financial asset and is designated as a financial asset at fair value through circumstance. The amount of the provision is the difference between the asset’s carrying amount profit or loss upon initial recognition. The carrying value of overage is assessed at each period and the present value of estimated future cash flows. The provision is recorded in the end and changes in fair value are taken to other income/expense. consolidated income statement. 210 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2022 CONTINUED Deferred consideration on the disposal of investment properties is included within trade and values or cash flows of hedged items. The fair values of various derivative instruments used for other receivables. It is fair valued on recognition and at each year end with any movement taken hedging purposes are disclosed in note 16. Movements on the hedging reserve in other to other expense. comprehensive income are shown in note 21. Trade and other payables For cash flow hedges, the effective portion of changes in the fair value of derivatives that are Trade and other payables are initially recognised at fair value and subsequently held at amortised cost. designated and qualify as cash flow hedges is recognised in the consolidated statement of other comprehensive income. The gain or loss relating to the ineffective portion is recognised Cash and cash equivalents immediately in the consolidated income statement within other gains/(losses). Amounts Cash is represented by cash in hand, restricted cash in the form of tenants’ deposits and deposits accumulated in equity are reclassified to profit or loss in the periods when the hedged item held on call with banks and money market funds. Cash equivalents are highly liquid investments affects profit or loss (for example, to offset the currency movement on borrowings that are that mature in no more than three months from the date of acquisition and that are readily hedged at each period end). The gain or loss relating to the effective portion of swaps hedging convertible to known amounts of cash with insignificant risk of change in value. Bank overdrafts the currency of borrowings is recognised in the consolidated income statement. are included in current liabilities but within cash and cash equivalents for the purpose of the consolidated cash flow statement. Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of Borrowings new shares are shown in equity as a deduction, net of tax, from the proceeds. 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 Investment in own shares transaction costs) and the redemption value being recognised in the income statement over the The Group operates an Employee Share Ownership Trust (‘ESOT’) and a trust for the Share period of the borrowings, using the effective interest method, except for interest capitalised on Incentive Plan (‘SIP’). When the Group funds these trusts in order to purchase Company shares, redevelopments. the loan is deducted from shareholders’ equity as investment in own shares. Foreign currency translation Operating segments Foreign currency transactions are translated into Sterling using the exchange rates prevailing at Operating segments are reported in a manner consistent with the internal reporting provided to the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of the chief operating decision maker. The chief operating decision maker is the person or group such transactions and from the translation at year-end rates of monetary assets and liabilities that allocates resources to and assesses the performance of the operating segments of an entity. denominated in foreign currencies are recognised in the consolidated income statement, except The Group has determined that its chief operating decision maker is the Executive Committee of when deferred in other comprehensive income as qualifying cash flow hedges. the Company. As at 31 March 2022, the Group considers that it has only one operating segment, being a single portfolio of commercial property providing business accommodation for rent Derivative financial instruments and hedge accounting inLondon. 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 Revenue recognition byvaluation techniques based on market prices, estimated future cash flows and forward Revenue comprises rental income, service charges and other sums receivable from the Group’s interestrates. investment properties. Other sums comprise insurance charges as an agent (in line with IFRS 15), supplies of utilities, premia associated with surrender of tenancies, commissions, fees and other For financial derivatives (where hedge accounting is not applied) movements in fair value are sundry income. 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 All the Group’s properties are leased out under operating leases and are included in investment terminate the agreement at the balance sheet date, taking into account the current interest property in the consolidated balance sheet. In accordance with IFRS 16, rental income from expectations and current credit value adjustment of the counterparties. 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 Group applies hedge accounting for certain derivatives that are designated and effective as the period to which it relates. If the Group provides significant incentives to its customers the hedges of future cash flows (cash flow hedges). The Group documents at the inception of the incentives are recognised over the lease term on a straight-line basis. 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 Service charges and other sums receivable from tenants are recognised on an accruals basis by also documents its assessment, both at hedge inception and on an ongoing basis, of whether the reference to the stage of completion of the relevant service or transactions at the reporting date. derivatives that are used in hedging transactions are highly effective in offsetting changes in fair These services generally relate to a 12-month period. 211 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2022 CONTINUED In 2020, following the outbreak of Covid-19, Workspace provided assistance to its customers in In order to retain REIT status, certain ongoing criteria must be maintained. The main criteria are the form of rent deferrals and rent discounts. Rent deferrals are recognised on a straight-line as follows: basis over the life of the lease. Rent discounts were provided to customers retrospectively and – At the start of each accounting period, the assets of the tax-exempt business must be at least after the rent had been invoiced. These discounts are considered to be a partial extinguishment 75% of the total value of the Group’s assets of the rent receivable and are treated as a derecognition of a financial asset in accordance with – At least 75% of the Group’s total profits must arise from the tax-exempt business IFRS 9 in the period to which they relate to. – At least 90% of the tax-exempt business earnings must be distributed Direct costs Dividend distributions Direct costs comprise service charges and other costs directly recoverable from tenants and Final dividend distributions to the Company’s shareholders are recognised as a liability in the non-recoverable costs directly attributable to investment properties and other revenue streams. Group’s financial statements in the period in which the dividends are approved, while interim dividends are recognised when paid. Exceptional items Exceptional items are those items that in the Directors’ view are required to be separately 1. ANALYSIS OF NET RENTAL INCOME AND SEGMENTAL INFORMATION disclosed by virtue of their size or incidence to enable a full understanding of the Group’s | financial performance. | | | | 2022 | | | | | | 2021 | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | Direct | | Net rental | | | | Direct | | Net rental | | | | Share based payments | | | | | 1 | | | | | | | | | | | | | Revenue | | costs | | income | | Revenue | | costs | | | income | | | The Group operates a number of share schemes under which the Group receives services from | | | £m | | £m | | £m | | £m | | £m | | | £m | | employees as consideration for equity instruments of the Group. | Rental income 104.3 (2.9) 101.4 118.0 (24.4) 93.6 | | | | | | | | | | | | | | Service charges 21.1 (25.9) (4.8) 20.3 (24.6) (4.3) The fair value of the employee services received in exchange for the grant of share awards and Empty rates and other non- options is recognised as an expense over the vesting period. recoverables – (10.6) (10.6) – (7.1) (7.1) Services, fees, commissions and Fair value is measured by the use of Black-Scholes and Binomial Option Pricing Models. The sundry income 7.5 (6.8) 0.7 4.0 (4.7) (0.7) 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. 132.9 (46.2) 86.7 142.3 (60.8) 81.5 1. There are no properties within the current or prior period that are non-rent producing. Pensions The Group operates a defined contribution pension scheme. Contributions are charged to the Included within direct costs for rental income and service charges in the period are amounts of consolidated income statement on an accruals basis. £nil (2021: £17.8m) and £nil (2021: £2.1m) respectively, relating to discounts provided to customers, accounted for in accordance with IFRS 9. Additionally, a charge of £1.5m (2021: £4.2m) for Taxation expected credit losses in respect of receivables from customers is recognised in direct costs of Current income tax is tax payable on the taxable income for the year and any prior year rental income in the period. adjustment, and is calculated using tax rates that are relevant to the financial year. All of the properties within the portfolio are geographically close to each other and have similar Deferred tax is provided in full on temporary differences between the tax base of an asset or economic features and risks. Management information utilised by the Executive Committee to liability and its carrying amount in the balance sheet. Deferred tax is determined using tax rates monitor and review performance is reviewed as one portfolio. As a result, for the year ended that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets 31 March 2022, management have determined that the Group operates a single operating are recognised when it is probable that taxable profits will be available against which the segment providing business accommodation for rent in London. 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. 212 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2022 CONTINUED | 2. OPERATING PROFIT/LOSS | | | 3(B). OTHER INCOME | | | | --- | --- | --- | --- | --- | --- | | The following items have been charged in arriving at operating profit/loss: | | | | 2022 | 2021 | | | | | | £m | £m | | | 2022 | 2021 | Sale of investment 0.6 – | | | | | £m | £m | | | | 0.6 – 1 Depreciation 1.8 2.0 1 Staff costs (including share based costs) (note 5) 19.6 20.1 The Group disposed of the investment in Lovespace Ltd, resulting in a gain of £0.6m in the year. Repairs and maintenance expenditure on investment properties 2.0 2.5 3(C). OTHER EXPENSES Trade receivables impairment (note 13) 1.5 3.5 2022 2021 Amortisation of intangibles 0.9 0.9 £m £m Audit fees payable to the Company’s Auditor 0.3 0.2 Change in fair value of deferred consideration – 0.2 1. Charged to direct costs and administrative expenses based on the underlying nature of the expenses. – 0.2 Auditor’s remuneration: services provided by the Company’s Auditor and 2022 2021 The value of deferred consideration (cash and overage) from the sale of investment properties itsassociates £000 £000 has been revalued by CBRE Limited at 31 March 2022 and 31 March 2021. This resulted in a Audit fees: reduction in the fair value of deferred consideration of £nil at 31 March 2022 (31 March 2021: £0.2m). The amounts receivable are included in the consolidated balance sheet under current Audit of Parent Company and consolidated financial statements 245 207 trade and other receivables (note 13). Audit of subsidiary financial statements 35 33 280 240 4. FINANCE COSTS Fees for other services: 2022 2021 1 Audit-related assurance services 55 96 £m £m Total fees payable to Auditor 335 336 Interest payable on bank loans and overdrafts (1.4) (3.1) Interest payable on other borrowings (16.7) (18.6) 1. Audit-related assurance services consist of £40k for half year review (2021: £36k); £nil for ICMA letter (2021: £60k); and £15k | | for Green Bond use of Proceeds Assurance (2021: £nil). | | | Amortisation of issue costs of borrowings (1.1) (0.9) | | --- | --- | --- | --- | --- | | | | 2022 | 2021 | Interest payable on leases (1.7) (1.6) | | | | £m | £m | Interest capitalised on property refurbishments (note 10) 0.4 0.4 | | Total administrative expenses are analysed below: | | | | Foreign exchange losses on financing activities – (8.6) | | Staff costs 10.7 11.3 | | | | Cash flow hedge – transfer from equity – 8.6 | | Cash-settled share based costs – 0.2 | | | | Finance costs (20.5) (23.8) | | Equity settled share based costs 1.6 2.3 | | | | Exceptional finance costs – (16.4) | | Other 7.0 5.2 | | | | Total finance costs (20.5) (40.2) | 19.3 19.0 In the prior year, the exceptional finance costs related to the refinancing of the $100m and £84m private placement notes due 2023 which were repaid early in April 2021. An irrevocable notice 3(A). PROFIT/ (LOSS) ON DISPOSAL OF INVESTMENT PROPERTIES for the repayment was given in March 2021. The costs included a £16.3m premium on redemption 2022 2021 and £0.1m of unamortised finance costs. £m £m Proceeds from sale of investment properties (net of sale costs) 117.3 11.0 All exceptional finance costs have been calculated in accordance with IFRS 9, re-estimating the Book value at time of sale (109.5) (11.1) cash flows based on the original effective interest rate with the adjustment beingtaken through Profit/ (loss) on disposal 7.8 (0.1) P&L. 213 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2022 CONTINUED | 5. EMPLOYEES AND DIRECTORS | | | Taxation chargeable in the year relates to income from non-REIT activities such as overage, | | --- | --- | --- | --- | | | 2022 | 2021 | meeting room income and utilities recharges. | | Staff costs for the Group during the year were: | £m | £m | | The tax on the Group’s profit for the year differs from the standard applicable corporation tax Wages and salaries 17.4 16.3 rate in the UK of 19% (2021: 19%). The differences are explained below: Social security costs 2.0 2.1 Other pension costs (note 27) 0.8 0.8 2022 2021 Cash-settled share based costs (note 23) – 0.2 £m £m Equity-settled share based costs (note 23) 1.6 2.3 Profit/ (loss) before taxation 124.0 (235.7) 21.8 21.7 Less costs capitalised (2.2) (1.6) Tax at standard rate of corporation tax in the UK of 19% 19.6 20.1 (2021:19%) 23.6 (44.8) Effects of: 2022 2021 REIT exempt income (11.3) (8.0) The monthly average number of people employed during the year was: Number Number Changes in fair value not subject to tax as a REIT (13.1) 49.0 Head office staff (including Directors) 124 121 Share based payment adjustments 0.4 (0.1) Estates and property management staff 125 118 Unrecognised losses carried forward 0.4 3.8 249 239 Other non-taxable expenses 0.1 0.1 The emoluments and pension benefits of the Directors are determined by the Remuneration Total taxation charge 0.1 – Committee of the Board and are set out in detail in the Directors’ Remuneration Report on pages162 to 190. These form part of the financial statements. 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 estimates that as the majority of Total Directors’ emoluments for the financial year were £2.3m (2021: £1.7m), comprising of £2.2m its future profits will be exempt from tax, future tax charges are likely to be low. (2021: £1.6m) of Directors’ remuneration, £nil (2021: £nil) gain on exercise of share options and £0.1m (2021: £0.1m) of cash contributions in lieu of pension in respect of two Directors (2021: two). An increase in the rate of corporation tax was enacted on 24 May 2021 and, from 1 April 2023, the corporation tax rate will increase to 25%. This will increase the Company’s future current tax 6. TAXATION charge accordingly. The deferred tax asset at the balance sheet date has been calculated at 19% (2021: 19%) expected to be utilised within 12 months. 2022 2021 £m £m The Group currently has an unrecognised asset in relation to tax losses from the non-REIT Current tax: business carried forward of £7.3m (2021: £5.6m) calculated at a corporation tax rate of 25% UK corporation tax – – (2021: 19%). Adjustments to tax in respect of previous periods – – – – | | | | 2022 | 2021 | | --- | --- | --- | --- | --- | | Deferred tax: | | | £m | £m | | On origination and reversal of temporary differences 0.1 – | | Deferred tax assets: | | | | | 0.1 – | – Deferred tax to be recovered within 12 months 0.4 0.5 | | | | Total taxation charge 0.1 – | | Deferred tax liabilities: | | | – Deferred tax liabilities to be recovered within 12 months (0.1) (0.1) Deferred tax assets (net) 0.3 0.4 214 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2022 CONTINUED 6. TAXATION CONTINUED The Directors are proposing a final dividend in respect of the financial year ended 31 March 2022 The movement in deferred tax assets and liabilities during the year, without taking into of 14.5 pence per ordinary share, which will absorb an estimated £27.9m of revenue reserves consideration the offsetting of balances within the same tax jurisdiction, is as follows: andcash. If approved by the shareholders at the AGM, it will be paid on 5 August 2022 to shareholders who are on the register of members on 8 July 2022. The dividend will be paid Other income asaREIT Property Income Distribution (‘PID’) net of withholding tax where appropriate. (overage receipts) Total Deferred tax liabilities £m £m 8. EARNINGS PER SHARE At 1 April 2020 0.2 0.2 | | | 2022 | 2021 | | --- | --- | --- | --- | | Credited to income statement (0.1) (0.1) | Earnings used for calculating earnings per share: | £m | £m | | At 31 March 2021 0.1 0.1 | Basic and diluted earnings 123.9 (235.7) | | | | Credited to income statement – – | Change in fair value of investment properties (68.7) 257.7 | | | | At 31 March 2022 0.1 0.1 | Exceptional finance costs – 16.4 | | | (Profit)/ loss on disposal of investment properties (7.8) 0.1 Expenses (share based EPRA earnings 47.4 38.5 payment) Tax losses Total Adjustment for non-trading items: Deferred tax assets £m £m £m Other (income)/ expenses (0.6) 0.2 At 1 April 2020 (0.6) (0.2) (0.8) Taxation 0.1 – Other movement – 0.2 0.2 Trading profit after interest 46.9 38.7 Charged to income statement 0.1 – 0.1 At 31 March 2021 (0.5) – (0.5) Earnings have been adjusted to derive an earnings per share measure as defined by the European Charged to income statement 0.1 – 0.1 Public Real Estate Association (‘EPRA’) and an adjusted underlying earnings per share measure. At 31 March 2022 (0.4) – (0.4) 2022 2021 Number of shares used for calculating earnings per share: Number Number 7. DIVIDENDS Weighted average number of shares (excluding own shares 2022 2021 held in trust) 180,983,916 180,839,945 Payment date Per share £m £m Dilution due to share option schemes 998,280 – For the year ended 31 March 2020: Weighted average number of shares for diluted earnings per Final dividend August 2020 24.49p – 44.2 share 181,982,196 180,839,945 For the year ended 31 March 2021: In pence: 2022 2021 Final dividend August 2021 17.75p 32.1 – Basic earnings/ (loss) per share 68.5p (130.3p) Diluted earnings/ (loss) per share 68.1p (130.3p) For the year ended 31 March 2022: EPRA earnings per share 26.2p 21.3p Interim dividend February 2022 7.0p 12.7 – 1 Adjusted underlying earnings per share 25.8p 21.3p 1. Adjusted underlying earnings per share is calculated by dividing trading profit after interest by the diluted weighted average Dividends for the year 44.8 44.2 number of shares of 181,982,196 (2021: 181,831,833). Timing difference on payment of withholding tax (1.5) 2.1 The diluted loss per share for the period to 31 March 2021 has been restricted to a loss of 130.3p per share, as the loss per share Dividends cash paid 43.3 46.3 cannot be reduced by dilution in accordance with IAS 33 Earnings per Share. 215 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2022 CONTINUED | 9. NET ASSETS PER SHARE AND TOTAL ACCOUNTING RETURN | | | Reconciliation to previously reported EPRA NAV | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 2022 | 2021 | | | March 2022 | | | | | March 2021 | | | | | Net assets used for calculating net assets per share: | £m | £m | | EPRA | | EPRA | | EPRA | EPRA | | EPRA | EPRA | | | Net assets at end of year (basic) 1,799.6 1,719.5 | | | | NRV | | NTA | | NDV | NRV | | NTA | NDV | | | | | | | £m | | | £m | £m | £m | | £m | | £m | Derivative financial instruments at fair value – (8.7) EPRA NAV 1,799.6 1,799.6 1,799.6 1,710.8 1,710.8 1,710.8 EPRA net assets 1,799.6 1,710.8 Include fair value of derivative financial instruments – – – – – 8.7 2022 2021 Number of shares used for calculating net assets per share: Number Number Exclude intangibles per IFRS balance sheet – (1.9) – – (2.4) – Shares in issue at year end 181,125,259 181,113,594 Excess of book value of debt over Less own shares held in trust at year end (162,113) (159,139) fair value/ (Excess of fair value of Dilution due to share option schemes 1,078,852 1,116,127 debt over book value) – – 13.0 – – (22.2) Number of shares for calculating diluted adjusted net assets Purchasers’ costs 163.3 – – 158.1 – – pershare 182,041,998 182,070,582 EPRA measure 1,962.9 1,797.7 1,812.6 1,868.9 1,708.4 1,697.3 2022 2021 Total accounting return EPRA net assets per share £9.89 £9.40 2022 2021 Basic net assets per share £9.94 £9.50 Total Accounting Return £ £ Diluted net assets per share £9.89 £9.44 Opening EPRA net tangible assets per share (A) 9.38 10.88 Closing EPRA net tangible assets per share 9.88 9.38 Net assets have been adjusted and calculated on a diluted basis to derive a net asset per share measure as defined by EPRA. Increase/ (decrease) in EPRA net tangible assets per share 0.50 (1.50) Ordinary dividends paid in the year 0.25 0.24 EPRA Net Asset Value Metrics Total return (B) 0.75 (1.26) EPRA published updated best practice reporting guidance in October 2019, which included three Total accounting return (B/A) 8.0% (11.5%) new Net Asset Valuation metrics; EPRA Net Reinstatement Value (NRV), EPRA Net Tangible | Assets (NTA) and EPRA Net Disposal Value (NDV). This new set of EPRA NAV metrics came into | | | | | | | | | | | | | The total accounting return for the year comprises the growth in absolute EPRA net tangible assets | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | full effect for accounting periods starting from 1 January 2020, presented below for comparison | | | | | | | | | | | | | per share plus dividends paid in the year as a percentage of the opening EPRA net tangible assets | | | | to the previous EPRA NAV metric. | | | | | | | | | | | | | per share. The total return for the year ended 31 March 2022 was 8.0% (31 March 2021: (11.5%)). | | | | | | | March 2022 | | | | | | March 2021 | | | | | | | | | EPRA | | | EPRA | | EPRA | | EPRA | | EPRA | | EPRA | 10. INVESTMENT PROPERTIES | | | | | NRV | | | | NTA | NDV | | NRV | | | NTA | NDV | | | | | | | | | | | | | | | | | | | 2022 | 2021 | | | | £m | | | £m | | £m | £m | | | £m | £m | | | | | | | | | | | | | | | | | | | £m | £m | IFRS Equity attributable to Balance at 1 April 2,349.9 2,586.3 shareholders 1,799.6 1,799.6 1,799.6 1,719.5 1,719.5 1,719.5 Purchase of investment properties 88.4 – Fair value of derivative financial Capital expenditure 30.0 22.8 instruments – – – (8.7) (8.7) – Change in value of lease obligations 4.7 (1.9) Intangibles per IFRS balance sheet – (1.9) – – (2.4) – Capitalised interest on refurbishments (note 4) 0.4 0.4 Excess of book value of debt over Disposals during the year (109.5) – fair value/ (Excess of fair value of debt over book value) – – 13.0 – – (22.2) Change in fair value of investment properties 68.7 (257.7) Purchasers’ costs 163.3 – – 158.1 – – Less: Classified as assets held for sale (65.9) – EPRA measure 1,962.9 1,797.7 1,812.6 1,868.9 1,708.4 1,697.3 Balance at 31 March 2,366.7 2,349.9 EPRA measure per share £10.78 £9.88 £9.96 £10.26 £9.38 £9.32 216 Workspace Group PLC^{}[] Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents ## NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2022 CONTINUED ### 10. INVESTMENT PROPERTIES CONTINUED Investment properties represent a single class of property, being business accommodation for rent in London. Capitalised interest is included at a rate of capitalisation of 3.0% (2021: 3.7%). The total amount of capitalised interest included in investment properties is £14.9m (2021: £14.5m). The change in fair value of investment properties is recognised in the consolidated income statement. Investment properties include buildings with a carrying amount of £315m (2021: £271m) held under leases with a carrying amount of £31.0m (2021: £26.3m). Investment property lease commitment details are shown in note 17. Two properties were reclassified as held for sale at year end and have been classified as current assets. One of these properties has exchanged for sale and the other has agreed terms with a buyer, both are likely to complete within the next 12 months. The value they have been transferred at is their year end valuation per CBRE less costs for sale. #### Valuation The Group's investment properties are held at fair value and were revalued at 31 March 2022 by the external valuer, CBRE Limited, a firm of independent qualified valuers in accordance with the Royal Institution of Chartered Surveyors Valuation – Global Standards at this balance sheet date. All the properties are revalued at period end regardless of the date of acquisition. 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 review appropriate assumptions have been applied. Meetings are held with the valuers to review and challenge the valuations, to confirm that they have considered all relevant information, and rigorous reviews are performed to check that valuations are sensible. In the prior year, they discussed the impact on the valuation of the Covid-19 rent reductions. They are satisfied with the valuer's conclusions. 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 and market comparatives whilst also considering the occupancy and timing of rent reviews at each property. Although occupancy and rent review timings are known, and there is market evidence for transaction prices for similar properties, there is still a significant element of estimation and judgement in estimating ERVs. 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 property 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: | | 2022 £m | 2021 £m | | --- | --- | --- | | Total per CBRE valuation report | 2,402.2 | 2,321.2 | | Deferred consideration on sale of property | (0.6) | (0.6) | | Head leases treated as leases under IFRS 16 | 31.0 | 27.0 | | Less: Reclassified as assets held for sale | (65.9) | (65.9) | | Total investment properties per balance sheet | 2,366.7 | 2,341.2 | 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. 217 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2022 CONTINUED | 10. INVESTMENT PROPERTIES CONTINUED | £m +/- 10% in ERVs +/- 25 bps in yields | | --- | --- | | Valuation continued | Like-for-like +186/-186 -82/+90 | | As noted in the significant judgements, key assumptions and estimates section, property | Completed projects +19/-19 -8/+9 | valuations are complex and involve data which is not publicly available and involves a degree of Refurbishments +17/-17 -8/+9 judgement. All the investment properties are classified as Level 3, due to the fact that one or Redevelopments +4/-4 -1/+1 more significant inputs to the valuation are not based on observable market data. If the degree Acquisitions +9/-9 -4/+4 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 following table summarises the valuation techniques and inputs used in the determination of the current or previous year. the property valuation at 31 March 2021. The following table summarises the valuation techniques and inputs used in the determination of Key unobservable inputs: the property valuation for 31 March 2022. ERVs – per sq. ft. Equivalent yields Key unobservable inputs: | | | | | | | | | Valuation | | Valuation | Weighted | Weighted | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | ERVs – per sq. ft. Equivalent yields | | | Property category | | £m | technique Range | average Range | average | | | Valuation | | Valuation | | Weighted | Weighted | Like-for-like 1,790.5 A £12-£68 £42 4.5%-7.4% 5.8% | | | | | | | Property category | | £m | technique Range | | average Range | average | | | | | | | Completed projects 180.7 A £19-£48 £31 4.5%-6.5% 5.7% Like-for-like 1,865.1 A £20-£66 £42 4.1%-7.3% 5.5% Refurbishments 255.7 A/B £20-£70 £36 3.85-6.6% 5.1% Completed projects 185.6 A £21-£44 £28 4.9%-6.4% 5.6% Redevelopments 96.7 A/B £14-£33 £20 3.9%-6.7% 5.3% Refurbishments 161.3 A/B £18-34 £25 3.6%-6.4% 5.3% Head leases 26.3 n/a – – – – Redevelopments 35.3 A/B £13-25 £16 4.5%-6.5% 6.0% Total 2,349.9 Acquisitions 88.4 A £33-£53 £40 4.9%-5.8% 5.4% Head leases 31.0 n/a – – – – A = Income capitalisation method. Total 2,366.7 B = Residual value method. A = Income capitalisation method. A key unobservable input for redevelopments at planning stage and refurbishments is B = Residual value method. developer’s profit. The range is 14%–19% with a weighted average of 16%. A key unobservable input for redevelopments at planning stage and refurbishments is Costs to complete is a key unobservable input for redevelopments at planning stage with a range developer’s profit. The range is 13%–19% with a weighted average of 14%. of £213–£242 per sq. ft. and a weighted average of £232 per sq. ft. Costs to complete is a key unobservable input for redevelopments at planning stage with a range Costs to complete are not considered to be a significant unobservable input for refurbishments of £213–£280 per sq. ft. and a weighted average of £250 per sq. ft. due to the high percentage of costs that are fixed. Costs to complete are not considered to be a significant unobservable input for refurbishments Sensitivity analysis: due to the high percentage of costs that are fixed. A +/- 10% movement in ERVs or a +/- 25 basis points movement in yields would result in the following increase/decrease in the valuation. Sensitivity analysis: A +/- 10% movement in ERVs or a +/- 25 basis points movement in yields would result in the £m +/- 10% in ERVs +/- 25 bps in yields following increase/decrease in the valuation. Like-for-like +179/–179 –74/+81 Completed projects +18/–18 –8/+8 Refurbishments +28/–28 –16/+17 Redevelopments +9/–7 –3/+5 218 Workspace Group PLC^{}[] Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents # **NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2022 CONTINUED** # **11. PROPERTY, PLANT AND EQUIPMENT** | Cost or valuation | Equipment and fixtures £m | | --- | --- | | 1 April 2020 | 11.0 | | Additions during the year | 1.2 | | Disposals during the year | (1.6) | | Balance at 31 March 2021 | 10.6 | | Additions during the year | 0.7 | | Disposals during the year | (1.8) | | **Balance at 31 March 2022** | **9.5** | | Accumulated depreciation | | | --- | --- | | 1 April 2020 | 6.2 | | Charge for the year | 2.0 | | Disposals during the year | (1.6) | | Balance at 31 March 2021 | 6.6 | | Charge for the year | 1.8 | | Disposals during the year | (1.8) | | **Balance at 31 March 2022** | **6.6** | | **Net book amount at 31 March 2022** | **2.9** | | --- | --- | | Net book amount at 31 March 2021 | 4.0 | # **12. OTHER INVESTMENTS** The Group holds the following investments: | | 2022 £m | 2021 £m | | --- | --- | --- | | 2.8% of share capital of Wavenet Limited (2021: 0%) | 1.7 | – | | 0% of share capital of Excell Holdings Limited (2021: 15%) | – | 7.9 | | | **1.7** | **7.9** | Within the year, Wavenet Limited purchased the entire share capital in Excell Holdings Limited. As a result, the Group received cash of £6.2m and acquired 2.8% of share capital in Wavenet Limited. In accordance with IFRS 9 the shares in Wavenet Limited have been valued at fair value, resulting in no movement in the financial year (2021: no movement in Excell Holdings Limited), recognised in the consolidated statement of comprehensive income. In addition, included within other income (note 3(b)) is £0.6m for the sale of investment in Lovespace Ltd which was previously written off. # **13. TRADE AND OTHER RECEIVABLES** | Current trade and other receivables | 2022 £m | 2021 £m | | --- | --- | --- | | Trade receivables | 11.9 | 11.9 | | Less provision for impairment of receivables | (5.2) | (5.2) | | Trade receivables – net | 6.7 | 6.7 | | Prepayments, other receivables and accrued income | 16.2 | 16.2 | | Deferred consideration on sale of investment properties | 0.6 | 0.6 | | | **23.5** | **23.5** | # **Receivables at fair value** Included within deferred consideration on sale of investment properties is £0.6m (2021: £0.6m) of overage which is held at fair value through profit and loss. In the current year, as the amount receivable are expected within the following 12 months they have been classified as current receivables. The deferred consideration arising on the sale of investment properties relates to cash and overage. The overage 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 £nil (31 March 2021: loss of £0.2m) (note 3(c)). | | 2022 £m | 2021 £m | | --- | --- | --- | | Deferred consideration on sale of investment properties: | | | | Balance at 1 April | 5.1 | 5.1 | | Cash received | (4.5) | (4.5) | | Change in fair value | – | (0.6) | | Balance at 31 March | 0.6 | 0.6 | # **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. 219 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2022 CONTINUED | 13. TRADE AND OTHER RECEIVABLES CONTINUED | | | 16. BORROWINGS | | | | --- | --- | --- | --- | --- | --- | | Movements on the provision for impairment of trade receivables are shown below: | | | (a) Balances | | | | | | | | 2022 | 2021 | | | 2022 | 2021 | | £m | £m | | | £m | £m | | | | Current Balance at 1 April 4.6 1.1 5.6% Senior US Dollar Notes 2023 (unsecured) – 72.6 Increase in provision for impairment of trade receivables 1.5 4.3 5.53% Senior Notes 2023 (unsecured) – 84.0 Receivables written off during the year (0.9) (0.8) Non-current Balance at 31 March 5.2 4.6 Bank loans (unsecured) (2.1) (0.8) 3.07% Senior Notes (unsecured) 79.9 79.8 14. CASH AND CASH EQUIVALENTS 3.19% Senior Notes (unsecured) 119.8 119.7 2022 2021 3.6% Senior Notes (unsecured) 99.8 99.8 £m £m Green Bond (unsecured) 298.1 297.7 Cash at bank and in hand 42.3 183.6 595.5 752.8 Restricted cash – tenants’ deposit deeds 6.7 7.4 49.0 191.0 In March 2021, the Group issued a Green Bond of £300m. At year end, the bank loan facilities were undrawn, there are unamortised finance costs of £2.1m (2021: £0.8m) included within Tenants’ deposit deeds represent returnable cash security deposits received from tenants and borrowings. are held in ring-fenced bank accounts in accordance with the terms of the individual lease contracts. (b) Net debt 2022 2021 15. TRADE AND OTHER PAYABLES £m £m 2022 2021 Borrowings per (a) above 595.5 752.8 £m £m Adjust for: Trade payables 13.2 10.4 Cost of raising finance 4.5 3.8 Other tax and social security payable 3.8 3.6 Foreign exchange differences – (8.1) Tenants’ deposit deeds (note 14) 6.7 7.4 600.0 748.5 Tenants’ deposits 26.5 20.7 Cash at bank and in hand (note 14) (42.3) (183.6) Accrued expenses 27.4 43.4 Net debt 557.7 564.9 Deferred income – rent and service charges 8.2 9.5 85.8 95.0 At 31 March 2022, the Group had £400m (2021: £250m) of undrawn bank facilities, a £2m overdraft facility (2021: £2m) and £42.3m of unrestricted cash (2021: £183.6m). There is no material difference between the above amounts and their fair values due to the short- term nature of the payables. 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, lease obligations and any cost of raising finance as they have no future cash flows. 220 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2022 CONTINUED 16. BORROWINGS CONTINUED (e) Derivative financial instruments (c) Maturity The Group had cross currency swaps to ensure the US Dollar liability streams generated from the US Dollar Notes were fully hedged into Sterling for the life of the transaction. Through entering 2022 2021 £m £m into cross currency swaps the Group created a synthetic Sterling fixed rate liability totalling £64.5m at 31 March 2021. Repayable within one year – 148.5 Repayable between three years and four years 80.0 – These swaps were designated as a cash flow hedge with changes in fair value dealt with in other Repayable between four years and five years 80.0 80.0 comprehensive income. The Group previously elected to continue applying hedge accounting as Repayable in five years or more 440.0 520.0 set out in IAS 39 to these swaps as permitted by IFRS 9. The cash flow hedge was terminated 600.0 748.5 during the year ended 31 March 2022 in line with the repayment of the US Dollar Notes in April Cost of raising finance (4.5) (3.8) 2021 and therefore there is nil notional amount at this date. Foreign exchange differences – 8.1 Hedge effectiveness is determined at the inception of the hedge relationship, and through 595.5 752.8 periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument. The critical terms of this hedging relationship (d) Interest rate and repayment profile perfectly matched at origination, so for the prospective assessment of effectiveness a qualitative assessment was performed. Quantitative retrospective effectiveness tests using the hypothetical Principal at derivative method are performed at each period end to determine the continuing effectiveness period end of the relationship. Sources of hedge ineffectiveness include credit risk or changes made to the £m Interest rate Interest payable Repayable critical terms of the hedged item or the hedged instrument. Current Bank overdraft due within The effects of the cash flow US Dollar swap hedging relationship is as follows: one year or on demand – Base+2.25% Variable On demand | | | | 2022 | 2021 | | --- | --- | --- | --- | --- | | Non-current | | Carrying amount of derivative (£m) – 8.7 | | | | Private Placement Notes: | | Change in fair value of designated hedging instrument (£m) – (9.8) | | | | | 3.07% Senior Notes 80.0 3.07% Half yearly August 2025 | Change in fair value of designated hedged item (£m) – 8.6 | | | | | 3.19% Senior Notes 120.0 3.19% Half yearly August 2027 | Notional amount (£m) – 64.5 | | | | | 3.6% Senior Notes 100.0 3.6% Half yearly January 2029 | Notional amount ($m) – 100 | | | 2 Bank Loan – SONIA + 1.65% Monthly December 2024 Rate payable (%) – 5.66% 1 Bank Loan – SONIA + 1.75% Monthly September 2023 Maturity – June 2023 Green Bond 300.0 2.25% Half yearly March 2028 Hedge ratio – 1:1 600.0 The cash flow hedge was terminated in line with the repayment of the US Dollar Notes. 1. This is an average over the life of the debt. This ranges from SONIA + 1.5% – 2.15% based on the remaining life of the loan. 2. There are 3 ESG linked metrics which can fluctuate the interest by up to 4.5 BPS. 221 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2022 CONTINUED 16. BORROWINGS CONTINUED (g) Financial instruments by category (f) Financial instruments and fair values | | 2022 | | 2022 | | 2021 | | 2021 | | 2022 | 2021 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Book value | | Fair value | | Book value | | Fair value | | Assets | £m | £m | | | £m | | £m | | £m | | £m | | | | a) Assets at fair value through profit or loss Financial liabilities held at amortised cost Deferred consideration (overage) 0.6 5.1 Bank loans (2.1) (2.1) (0.8) (0.8) 0.6 5.1 Private Placement Notes 299.5 301.8 455.9 478.1 b) Loans and receivables Lease obligations 31.0 31.0 26.3 26.3 Cash and cash equivalents 49.0 191.0 Green Bond 298.1 282.8 297.7 297.7 1 Trade and other receivables excluding prepayments 8.4 14.5 626.5 613.5 779.1 801.3 57.4 205.5 Financial assets at fair value through other c) Assets at value through other comprehensive income comprehensive income Cash flow hedge – derivatives used for hedging – 8.7 Derivative financial instruments: Other investments 1.9 7.9 Cash flow hedge – derivatives used for hedging – – 8.7 8.7 1.9 16.6 Other investments 1.7 1.7 7. 9 7.9 Total 59.9 227.2 1.7 1.7 16.6 16.6 | Financial assets at fair value through profit or loss | | | 2022 | 2021 | | --- | --- | --- | --- | --- | | Deferred consideration (overage) 0.6 0.6 5.1 5.1 | | Liabilities | £m | £m | | | 0.6 0.6 5.1 5.1 | Other financial liabilities at amortised cost | | | Borrowings 595.5 752.8 In accordance with IFRS 13 disclosure is required for financial instruments that are carried or Lease liabilities 31.0 26.3 disclosed in the financial statements at fair value. The fair values of all the Group’s financial 2 Trade and other payables excluding non-financial liabilities 73.8 81.9 derivatives, bank loans and Private Placement Notes, have been determined by reference to 700.3 861.0 market prices and discounted expected cash flows at prevailing interest rates and are Level 2 valuations. There have been no transfers between levels in the year. 1. Trade and other receivables exclude prepayments of £14.5m (2021: £9.7m) and non-cash deferred consideration of £0.6m (2021: £5.1m). The different levels of valuation hierarchy as defined by IFRS 13 are set out in note 10. 2. Trade and other payables exclude other tax and social security of £3.8m (2021: £3.6m), corporation tax of £nil (2021:£nil) and deferred income of £8.2m (2021: £9.5m). 222 Workspace Group PLC^{}[] Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents # **NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2022 CONTINUED** # **16. BORROWINGS CONTINUED** # **(h) Changes in liabilities from financing activities** | | Bank loans and borrowings £m | Lease liabilities £m | Derivatives used for hedging-accs £m | | --- | --- | --- | --- | | Balance at 1 April 2020 | 626.2 | 28.2 | 18.5 | | Changes from financing cash flows: | | | | | Proceeds from bank borrowings and Private Placement Notes | 54.0 | - | - | | Repayment of bank borrowings and Private Placement Notes | (217.0) | - | - | | Proceeds from Green Bond | 299.5 | - | - | | Total changes from cash flows | 136.5 | - | - | | Changes in fair value of derivative financial instruments | - | - | (9.8) | | Foreign exchange differences | (8.5) | - | - | | Amortisation of issue costs of borrowing | (1.4) | - | - | | Changes in leases | - | (1.9) | - | | Interest payable | 21.7 | 1.6 | - | | Interest paid | (21.7) | (1.6) | - | | Total other changes | (9.9) | (1.9) | (9.8) | | **Balance at 31 March 2021** | **752.8** | **26.3** | **8.7** | | | Bank loans and borrowings £m | Lease liabilities £m | Derivatives used for hedging-accs £m | | --- | --- | --- | --- | | Balance at 1 April 2021 | 752.8 | 26.3 | - | | Changes from financing cash flows: | | | | | Proceeds from bank borrowings | 25.0 | - | - | | Repayment of bank borrowings and Private Placement Notes | (173.5) | - | - | | Finance costs for new/amended borrowing facilities | (1.3) | - | - | | Repayment of derivatives | - | - | (1.3) | | Total changes from cash flows | (149.8) | - | (1.3) | | Changes in fair value of derivative financial instruments | - | - | - | | Foreign exchange differences | (8.6) | - | (8.6) | | Amortisation of issue costs of borrowing | 1.1 | - | - | | Changes in leases | - | 4.7 | - | | Interest payable | 18.8 | 1.7 | - | | Interest paid | (18.8) | (1.7) | - | | Total other changes | (7.5) | 4.7 | (7.5) | | **Balance at 31 March 2022** | **595.5** | **31.0** | **2.0** | # **17. LEASE OBLIGATIONS** Lease liabilities are in respect of leased investment property. Minimum lease payments under leases fall due as follows: | | 2022 £m | 2021 £m | | --- | --- | --- | | Within one year | 1.9 | 1.9 | | Between two and five years | 7.4 | 7.4 | | Between five and fifteen years | 18.6 | 18.6 | | Beyond fifteen years | 162.4 | 132.4 | | | 190.3 | 152.3 | | Future finance charges on leases | (159.3) | (133.3) | | Present value of lease liabilities | 31.0 | 2.0 | Following the adoption of IFRS 16, lease obligations are shown separately on the face of the balance sheet. The balance represents a non-current liability as the payment shown within one year of £1.7m (2021: £1.6m) is offset by future finance charges on leases of £1.7m (2021: £1.6m). All lease obligations are long leaseholds, therefore, the majority of the obligations fall beyond fifteen years. 223 Workspace Group PLC^{}[] Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents ## NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2022 CONTINUED ### 18. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICY The Group has identified exposure to the following financial risks: - Capital risk management The policies for managing each of these risks and the principal effects of these policies on the results for the year are summarised below: #### (a) Market risk Market risk is the risk that changes in market conditions will affect the Group's interest rates. Borrowings at variable rates expose the Group to cash flow interest rate risk. Borrowings at fixed rates expose the Group to fair value interest rate risk. The Group finances its operations through a mixture of retained profits and borrowings. The Group borrows at both fixed and floating rates of interest. At 31 March 2022 100% (2021: 100%) of Group borrowings were fixed. 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. As at year end all our drawn borrowings were at fixed interest rates; a reasonably possible interest rate movement of +/-0.5% would have increased or decreased net interest payable by £nil (2021: £nil). The interest cover covenant in relation to Group borrowings is a ratio of 2.0x and the Group targets a minimum cover of 2.5x. As at 31 March 2022 interest cover was 4.8x. Interest cover is calculated as net rental income divided by finance costs (excluding exceptional 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 4,482 lettable units at 57 properties with overall occupancy of 84.3%. The largest 10 single tenants generate around 13% 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. The tenant deposits held are £33.2m (2021: £28.1m). The Group monitors aged debt balances and 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 debt recovery is consistently high and as such is deemed a low risk area. In light of Covid-19 the Group's exposure to credit risk may be higher in the short term as customers deal with the unprecedented impact of the pandemic. 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: | | 2022 £m | 2021 £m | | --- | --- | --- | | Cash and cash equivalents (note 14) | 49.0 | 15.0 | | Trade receivables - current (note 13) | 6.7 | - | | Deferred consideration - current (note 13) | 0.6 | - | | | 56.3 | 20.0 | The Group's assessment of expected credit losses involves estimation given its forward-looking nature. This is not considered to be an area of significant judgement or estimation due to the balance of gross rent and other tenant receivables of £11.9m (2021: 16.0m). Assumptions used in the forward-looking assessment are continually reviewed to take into account likely rent deferrals. 224 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2022 CONTINUED 18. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICY CONTINUED Due Due Due Due between between 2 3 years Total (c) Liquidity risk Carrying 2 within 1 1and and and contracted Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they amount year 2years 3years beyond cash flows falldue. 31 March 2021 £m £m £m £m £m £m Financial liabilities The Group’s approach to managing liquidity is to target a minimum headroom on loan facilities Private Placement Notes 448.5 158.4 9.9 9.9 332.3 510.5 of £50m, so as to enable it to have sufficient funds to meet financial obligations as they fall due. Green Bond 300.0 6.8 6.8 6.8 326.1 346.5 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 Lease liabilities 26.3 1.6 1.6 1.6 151.8 156.6 in relation to the Group’s requirements and strategy. The Board reviews compliance with loan 1 Trade and other payables 81.9 81.9 – – – 81.9 covenants which include agreed interest cover and loan to value ratios, alongside review of 856.7 248.7 18.3 18.3 810.2 1,095.5 available headroom on loan facilities. 1. Trade and other payables exclude other tax and social security of £3.8m (2021: £3.6m), corporation tax of £nil (2021:£nil) and deferred income of £8.2m (2021: £9.5m). To manage its liquidity effectively, the Group has an overdraft facility of £2m (2021: £2m), a 2. Excludes unamortised borrowing costs. revolving loan facility of £200m (2021: £250m) and acquisition loan facility of £200m (2021: £nil). At 31 March 2022 headroom excluding overdraft and cash was £400m (31 March 2021: (d) Capital risk management £250m). 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. 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 Equity comprises issued share capital, reserves and retained earnings as disclosed in the sheet date. Contracted cash flows are based upon the loan balances and applicable interest rates consolidated statement of changes in equity. Debt comprises the Green Bond, revolving loan payable on these at each year end. facilities from banks, Private Placement Notes less cash at bank and in hand. Due Due Due At 31 March 2022 Group equity was £1,799.6m (2021: £1,719.5m) and Group net debt (debt less | | | | | | Due | between | | between 2 | | | 3 years | | | Total | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | 2 | | | | | | | | | | | | cash at bank and in hand) was £557.7m (2021: £564.9m). Group gearing at 31 March 2022 was | | | Carrying | | | within 1 | | | 1and | | | and | | and | contracted | | | | | amount | | | | year | 2years | | | 3years | | beyond | | cash flows | | 31% (2021:33%). | | 31 March 2022 | | £m | | | £m | | £m | | | £m | | £m | | £m | | | Financial liabilities | | | | | | | | | | | | | | | The Group’s borrowings are all unsecured. The loan to value covenant applicable to these | borrowings is 60% and compliance is being met comfortably. Loan to value at 31 March 2022 was Private Placement Notes 300.0 9.9 9.9 9.9 322.6 352.3 23%. This is calculated using the total CBRE investment property valuation (as per note 10) and Green Bond 300.0 6.8 6.8 6.8 319.5 339.9 the current net debt (as per note 16(b)). Our target is to maintain loan to value below 30%. This Lease liabilities 31.0 1.9 1.9 1.9 187.8 193.5 may from time-to-time be exceeded up to a maximum of 40% as steps are taken to reduce loan 1 Trade and other payables 73.8 73.8 – – – 73.8 to value to below 30%. 704.8 92.4 18.6 18.6 829.9 959.5 225 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2022 CONTINUED | 19. NOTES TO CASH FLOW STATEMENT | | | 20. SHARE CAPITAL AND SHARE PREMIUM | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | Reconciliation of profit for the year to cash generated from operations: | | | | | 2022 | | 2021 | | | | | | | £m | | £m | | | 2022 | 2021 | Issued: Fully paid ordinary shares of £1 each 181.1 181.1 | | | | | | | £m | £m | | | | | | | Profit/ (loss) before tax 124.0 (235.7) | | | | | 2022 | | 2021 | | | | | Movements in share capital were as follows: | Number | | Number | | Depreciation 1.8 2.0 Number of shares at 1 April 181,113,594 180,747,868 Amortisation of intangibles 0.9 0.9 Issue of shares 11,665 365,726 (Profit)/ loss on disposal of investment properties (7.8) 0.1 Number of shares at 31 March 181,125,259 181,113,594 Other (income)/ expenses (0.6) 0.2 Net (profit)/ loss from change in fair value of investment The Group issued 11,665 shares (2021: 365,726 shares) during the year to satisfy the exercise of property (68.7) 257.7 share options with net proceeds of £nil (2021: £0.1m). Equity-settled share based payments 1.6 2.5 Finance costs 20.5 23.8 Share capital Share premium 2022 2021 2022 2021 Exceptional finance costs – 16.4 £m £m £m £m Changes in working capital: Balance at 1 April 181.1 180.7 295.4 295.1 Decrease/ (increase) in trade and other receivables 1.4 (4.4) Issue of shares – 0.4 0.1 0.3 Increase/ (decrease) in trade and other payables 7.4 (1.1) Balance at 31 March 181.1 181.1 295.5 295.4 Cash generated from operations 80.5 62.4 For the purposes of the cash flow statement, cash and cash equivalents comprise the following: 2022 2021 £m £m Cash at bank and in hand 42.3 183.6 Restricted cash – tenants’ deposit deeds 6.7 7.4 49.0 191.0 226 Workspace Group PLC^{}[] Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents # **NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2022 CONTINUED** # **21. OTHER RESERVES** | | Other investment reserve £m | Equity-settled share based payments £m | Merger reserve £m | Hedging reserve £m | Total £m | | --- | --- | --- | --- | --- | --- | | Balance at 1 April 2020 | 2.1 | 20.2 | 8.7 | 1.2 | 32.2 | | Share based payments | - | 2.5 | - | - | 2.5 | | Issue of shares | - | (0.4) | - | - | (0.4) | | Change in fair value of derivative financial instruments (cash flow hedge) | - | - | - | (1.2) | (1.2) | | Balance at 31 March 2021 | 2.1 | 22.3 | 8.7 | - | 33.1 | | Share based payments | - | 1.6 | - | - | 1.6 | | Issue of shares | - | - | - | - | - | | Recycled to retained earnings | (2.1) | - | - | - | (2.1) | | **Balance at 31 March 2022** | **-** | **23.9** | **8.7** | **-** | **32.6** | The Group sold its investment in Excell Holdings Limited realising a gain recognised in previous periods which has been recycled to retained earnings. # **22. INVESTMENT IN OWN SHARES** The Company has an Employee Share Ownership Trust ('ESOT') and a trust for the Share Incentive Plan ('SIP'). Shares are purchased in the market for distribution at a later date in accordance with the terms of the various share schemes. The shares are held by independent trustees. At 31 March 2022 the number of shares held by the ESOT totalled 75,226 (2021: 75,226). The SIP is governed by HMRC rules (note 23). At 31 March 2022 the number of shares held for the SIP totalled 86,887 (2021: 83,913). | | 2022 £m | 2021 £m | | --- | --- | --- | | Balance at 1 April | 9.6 | 9.6 | | Shares purchased for the trusts | 0.3 | - | | Balance at 31 March | 9.9 | 9.6 | # **23. SHARE BASED PAYMENTS** The Group operates a number of share schemes: # **(a) Long Term 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. The performance measures are: - Total Property Return compared to the IPD benchmark The shares are issued at nil cost to the individuals provided the performance conditions are Under the 2021 LTIP scheme 495,474 performance shares were awarded in June 2021 and 25 in November 2021 to Directors and Senior Management (2020 LTIP scheme: 650,475). Details of the movements for the LTIP scheme during the year were as follows: | | LTIP Number | | --- | --- | | At 1 April 2020 | 1,219,2 | | Granted | 650,4 | | Exercised | (357,4) | | Lapsed | (146,1) | | At 31 March 2021 | 1,366,2 | | Granted | 521,2 | | Exercised | - | | Lapsed | (500,1) | | **At 31 March 2022** | **1,396,6** | The 2018 LTIP scheme was due to vest in June 2021 but did not, therefore, no shares were exercised during the year. The average closing share price at the date of exercise of shares exercised during the year was therefore Enil (2017 LTIP scheme: £5.85). A binomial model was used to determine the fair value of the LTIP grant for the Relative TSR element of the schemes. 227 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2022 CONTINUED 23. SHARE BASED PAYMENTS CONTINUED Details of the movements for the SAYE schemes during the year were as follows: Assumptions used in the model were as follows: SAYE November June 2021 Weighted exercise 2021 LTIP LTIP 2020 LTIP 2019 LTIP Options outstanding Number price Share price at grant 841p 842p 706p 862p At 1 April 2020 212,021 £7.21 | Exercise price Nil Nil Nil Nil | Options granted 339,896 £5.31 | | --- | --- | | Average expected life (years) 3 3 3 3 | Options exercised (8,298) £6.96 | | Risk-free rate 0.49% 0.16% 0.61% 0.52% | Options lapsed (179,770) £6.90 | | Average share price volatility 42.6% 39.5% 35% 21% | At 31 March 2021 363,849 £5.60 | | Correlation 47% 45% 46% 49% | Options granted 46,554 £6.70 | | TSR starting factor 1.14 1.11 0.65 0.92 | Options exercised (11,665) £7.44 | | Fair value per option – Relative TSR element 446p 475p 207p 322p | Options lapsed (71,357) £5.78 | At 31 March 2022 327,381 £5.65 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 842p for the 2021 LTIP Scheme The average closing share price at the date of exercise for the SAYE options exercised (for the in June and 841p for the 2021 LTIP Scheme in November. At each balance sheet date, the three-year 2018 and the five-year 2016 schemes) during the year was £8.69 (2021: £7.37). 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 The fair value has been calculated using the Black-Scholes model. Inputs to the model are with a corresponding adjustment to equity. The assessment at year end for the 2021 LTIP Scheme summarised as follows: was that 100% of the Total Property Return element will vest (LTIP 2020: 100%, LTIP 2019: 50%). 2022 2022 2021 2021 SAYE SAYE SAYE SAYE The expected Workspace share price volatility was determined by taking account of the daily 3year 5year 3year 5year share price movement over a three-year period. The respective FTSE 250 Real Estate share price Weighted average share price at grant 846p 846p 551p 551p volatility and correlations were also determined over the same period. The average expected Exercise price 670p 670p 531p 531p 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 Expected volatility 38% 35% 34% 33% historical experience. Average expected life (years) 3 5 3 5 Risk free rate 0% 0% 0% 0% The risk-free rate has been determined from market yield curves for government zero-coupon Expected dividend yield 2% 2% 7% 7% bonds with outstanding terms equal to the average expected term to exercise for each Possibility of ceasing employment before vesting 25% 25% 25% 25% relevantgrant. The expected life is the average expected period to exercise. The risk free rate of return is the (b) Employee share option schemes yield on zero-coupon UK Government bonds of a term consistent with the assumed option life. The Group operates a Save As You Earn (‘SAYE’) share option scheme. Grants under the SAYE The expected dividend yield is based on the present value of expected future dividend payments scheme are normally exercisable after three or five years’ saving. In accordance with UK practice, to expiry. the majority of options under the SAYE schemes are granted at a price 20% below the market price ruling at the date of grant. Fair values per share of these options were: 2022 2021 Grant date Fair value of award Grant date Fair value of award SAYE – three year 23 July 2021 261p 27 July 2020 78p SAYE – five year 23 July 2021 261p 27 July 2020 75p 228 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2022 CONTINUED 23. SHARE BASED PAYMENTS CONTINUED (e) Cash-settled share based payments (c) Share Incentive Plan (‘SIP’) National Insurance payments due on the exercise of non-approved ESOS options and shares All staff were granted £1,000 worth of shares in September 2015, £2,000 in August 2017, £2,000 from the LTIP are considered cash-settled share based payments. in September 2019 and £2,000 in September 2021. These shares are held in trust under an HMRC-approved SIP. The shares can be exercised following three years of employment but must The estimated fair value of the National Insurance cash-settled share based payments have been be held for a further two years in order to qualify for tax advantages. 52,170 shares were granted calculated using the share price at the balance sheet date. At each balance sheet date the Group in the year (2021: nil), 6,124 (2021: 12,113) shares were exercised in the year and 9,587 (2021: 3,951) revises its estimates of the number of options that are expected to vest. It recognises the impact shares lapsed. of the revision to original estimates, if any, in the income statement. (d) Year-end summary (f) Share based payment charges At 31 March 2022, in total there were 1,850,331 (2021: 1,814,054) share awards/options exercisable The Group recognised a total charge in relation to share based payments as follows: on the Company’s ordinary share capital. These are analysed below: | | | | 2022 | 2021 | | --- | --- | --- | --- | --- | | | Ordinary | | £m | £m | | Exercise | shares | Vested and | | | Equity-settled share based payments 1.6 2.3 Date of grant price Number exercisable Exercisable between Cash-settled share based payments – 0.2 LTIP 1.6 2.5 18 June 2019 – 324,544 – 18.06.2022 – 18 June 2020 – 559,261 – 18.06.2023 – The total liability at the end of the year in respect of cash-settled share based schemes was 18 June 2021 – 503,062 – 18.06.2024 – £0.4m (2021: £0.4m). SAYE 26 July 2017 – five year £7.08 – – 01.09.2022 01.03.2023 24. RELATED PARTY TRANSACTIONS Key management for the purposes of related party disclosure under IAS 24 are taken to be the 26 July 2018 – five year £8.60 174 – 01.09.2023 01.03.2024 Executive Board Directors, the non-Board Executive Directors and the Non-Executive Directors. 25 July 2019 – three year £7.02 29,852 – 01.09.2022 01.03.2023 Key management compensation is set out below: 25 July 2019 – five year £7.02 256 – 01.09.2024 01.03.2025 2022 2021 27 July 2020 – three year £5.31 210,469 – 01.09.2023 01.03.2024 Key management compensation: £m £m 27 July 2020 – five year £5.31 44,399 – 01.09.2025 01.03.2026 Short-term employee benefits 4.7 2.9 23 July 2021 – three year £6.70 40,979 – 01.09.2024 01.03.2025 Total 4.7 2.9 23 July 2021 – five year £6.70 1,252 – 01.09.2026 01.03.2027 | SIP | 25. CAPITAL COMMITMENTS | | | | --- | --- | --- | --- | | 18 September 2015 – 8,620 8,620 18.09.2018 – | At the year end the estimated amounts of contractual commitments for future capital | | | | 10 August 2017 – 30,324 30,324 10.08.2020 – | expenditure not provided for were: | | | | 5 September 2019 – 44,969 – 05.09.2022 – | | 2022 | 2021 | | | | £m | £m | 29 September 2021 – 52,170 – 29.09.2024 – Investment property construction 4.6 4.2 Total 1,850,331 38,944 For both current and prior period, there were no material obligations for the repair or maintenance of investment properties. All material contacts for enhancement are included in the The share awards/options outstanding at 31 March 2022 had a weighted average remaining capital commitments. contractual life of: LTIP – 1.3 years (2021: 1.5 years), SAYE – 1.4 years (2021: 2.6 years), SIP – 1.1 years (2021: 0.8 years). 229 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2022 CONTINUED | 26. SUBSIDIARY AND OTHER RELATED UNDERTAKINGS | Non-UK subsidiaries | | | --- | --- | --- | | The Company’s subsidiary and other related undertakings at 31 March 2022, and up to the date | | Country of | | | Name | incorporation Registered address Nature of business | of signing the financial statements, are listed below. | | Workspace 16 (Jersey) Limited Jersey Gaspé House, | | | | Non-trading | | | --- | --- | --- | --- | --- | --- | --- | | Except where indicated otherwise, the Company owns 100% of the ordinary share capital of the | | | | 66-72 TheEsplanade, StHelier, | | | | following subsidiary undertakings incorporated and operating in the UK, all of which are | | | | Jersey JE2 3QT | | | | consolidated in the Group’s financial statements. | Workspace 17 (Jersey) Limited Jersey 44 Esplanade, St Helier, Jersey | | | | | Holding | | | | | | JE4 9WQ | | Company | | UK subsidiaries | | 1 | | | | | | | Workspace Salisbury Limited | | Jersey 44 Esplanade, St Helier, Jersey | | | Property | The registered address of all UK subsidiaries is Canterbury Court, Kennington Park, 1-3 Brixton | | | | | JE4 9WQ | Investment | | --- | --- | --- | --- | --- | --- | | Road, London SW9 6DE. | | 1 | | | | | | Centro Property Limited | | Guernsey Martello Court, Admiral Park, | | Non-trading | StPeter Port, Guernsey GY1 3HB Name Nature of business Stamfordham Road (IOM) Isle of Man 33-37 Athol Street, Douglas, Isle Property Workspace 12 Limited Property Investment 1 Limited of Man, IM1 1LB Investment Workspace 13 Limited Property Investment 1. 100% of the ordinary share capital of these subsidiaries is held by other Group companies. Workspace 14 Limited Property Investment 1 Omnibus Workspace Limited Property Investment 27. PENSION COMMITMENTS 1 United Workspace Limited Property Investment The Group operates a defined contribution pension scheme. The assets of the scheme are held 1 Busworks Limited Holding Company separately from those of the Group in an independently administered fund. The pension cost Workspace Glebe Limited Non-trading charge for this scheme in the year was £0.8m (2021: £0.8m) representing contributions payable Glebe Three Limited Non-trading by the Group to the fund and is charged through operating profit. LI Property Services Limited Insurance Agents The Group’s commitment with regard to pension contributions, consistent with the prior year, Workspace Management Limited Property Management ranges from 6% to 16.5% of an employee’s salary. The pension scheme is open to every employee 1 Workspace 1 Limited Dormant in accordance with the Government auto-enrolment rules. The number of employees, including Workspace 10 Limited Dormant Directors, in the scheme at the year end was 238 (2021: 210). Workspace 11 Limited Dormant Workspace 15 Limited Dormant 28. LEASES The majority of the Group’s tenant leases are granted with a rolling three to six-month tenant Workspace Holdings Limited Non-trading break clause, although property acquisitions have included customer leases which are much Anyspacedirect.co.uk Limited Non-trading longer, with fewer break clauses. The future minimum non-cancellable rental receipts under Workspace Newco 1 Limited Dormant leases granted to tenants are shown below. Workspace Newco 2 Limited Dormant 2 | McKay Securities PLC | | Property Investment | | | 2022 | 2021 | | --- | --- | --- | --- | --- | --- | --- | | | 2 | | | Land and buildings: | £m | £m | | Baldwin House Limited | | | Non-trading | | | | Within one year 61.1 56.3 1. 100% of the ordinary share capital of this subsidiary is held by other Group companies. 1 Between two and five years 36.4 45.4 2. McKay Securities PLC and Baldwin House Limited were acquired on 6 May 2022. Beyond five years 13.3 24.3 110.8 126.0 1. For 2022 the future minimum non-cancellable rental receipts under leases granted to tenants are split 1-2 years: £15.9m; 2-3 years: £9.6m; 3-4 years: £6.5m; and 4-5 years: £4.4m. 230 Workspace Group PLC Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents # **NOTES TO THE FINANCIAL STATEMENTS** **FOR THE YEAR ENDED 31 MARCH 2022 CONTINUED** # **29. POST BALANCE SHEET EVENTS** On 6 May 2022 the Group completed on the acquisition of McKay Securities PLC for £258.1m, adding 31 properties to the portfolio across London and the South East with a value of £491.7m as valued by Knight Frank at 31 March 2022. The Group have considered the IFRS 3 framework and have concluded this is an asset acquisition for accounting purposes. # **PARENT COMPANY BALANCE SHEET** **AS AT 31 MARCH 2022** | | Notes | 2022 £m | 2021 £m | | --- | --- | --- | --- | | **Fixed assets** | | | | | Investments | C | 929.8 | 929.8 | | Derivative financial instruments | F | - | - | | | | 929.8 | 929.8 | | **Current assets** | | | | | Debtors: amounts falling due within one year | D | 439.1 | 549.1 | | Cash and cash equivalents | | 34.3 | 7.1 | | | | 473.4 | 615.4 | | **Total assets** | | **1,403.2** | **1,559.1** | | **Current liabilities** | | | | | Creditors: amounts falling due within one year | E | (168.9) | (118.9) | | Borrowings | F | - | (158.9) | | | | (168.9) | (268.9) | | **Creditors: amounts falling due after more than one year** | | | | | Borrowings | F | (595.5) | (595.5) | | **Total liabilities** | | **(764.4)** | **(868.9)** | | **Net assets** | | **638.8** | **688.8** | | **Capital and reserves** | | | | | Share capital | | 181.1 | 181.1 | | Share premium | | 295.6 | 295.6 | | Investment in own shares | | (9.9) | (9.9) | | Other reserves | G | 32.6 | 32.6 | | Retained earnings^{1} | | 139.4 | 139.4 | | **Total shareholders' equity** | | **638.8** | **688.8** | 1. Retained earnings for the Company include loss for the year of £7.5m (2021: £22.2m). The notes on pages 231 to 233 form part of these financial statements. The financial statements on pages 230 to 233 were approved by the Board of Directors on 7 June 2022 and signed on its behalf by: **Graham Clemett** Director **Dave Benson** Director Workspace Group PLC Registered number 02041612 231 Workspace Group PLC Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information Back Contents ## PARENT COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2022 | | Share capital £m | Share premium £m | Investment in own shares £m | Other reserves £m | Retained earnings £m | Total shareholders' equity £m | | --- | --- | --- | --- | --- | --- | --- | | **Balance at 31 March 2020** | 180.7 | 295.6 | (9.6) | 29.5 | 258.1 | 754.3 | | Loss for the year | - | - | - | - | (22.2) | (22.2) | | Other comprehensive loss for the year | - | - | - | (0.6) | - | (0.6) | | Total comprehensive loss | - | - | - | (0.6) | (22.2) | (22.8) | | Transactions with owners: | | | | | | | | Share issues | 0.4 | - | - | (0.4) | - | - | | Dividends paid | - | - | - | - | (44.2) | (44.2) | | Share based payments | - | - | - | 2.5 | - | 2.5 | | **Balance at 31 March 2021** | 181.1 | 295.6 | (9.6) | 31.0 | 191.7 | 689.8 | | Loss for the year | - | - | - | - | (7.5) | (7.5) | | Total comprehensive loss | - | - | - | - | (7.5) | (7.5) | | Transactions with owners: | | | | | | | | Dividends paid | - | - | - | - | (44.8) | (44.8) | | Own shares | - | - | (0.3) | - | - | (0.3) | | Share based payments | - | - | - | 1.6 | - | 1.6 | | **Balance at 31 March 2022** | 181.1 | 295.6 | (9.9) | 32.6 | 139.4 | 638.8 | The notes on pages 231 to 233 form part of these financial statements. ## NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS ### A. ACCOUNTING POLICIES These financial statements were prepared in accordance with Financial Reporting Standard 101, Reduced Disclosure Framework ('FRS 101'). #### Basis of accounting The financial statements are prepared and approved by the Directors on a going concern basis under the historical cost convention and in accordance with Financial Reporting Standard 101, Reduced Disclosure Framework ('FRS 101'). In preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements of international accounting standards in conformity with the requirements of the Companies Act 2006 ('UK Adopted IFRSs'), but makes amendments which are necessary in order to comply with the Companies Act 2006 and has set out below where the advantage of the FRS 101 disclosure exemptions has been taken. The financial statements are presented in Sterling. - 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. - 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 IFRSs that have been issued but are not 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 a party to the transaction is wholly owned by such a member. - f) The requirements of IFRS 7 on financial instruments disclosures. - 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 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. 232 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2022 CONTINUED A. ACCOUNTING POLICIES CONTINUED B. PROFIT FOR THE YEAR Significant accounting policies continued As permitted by the exemption in Section 408 of the Companies Act 2006, the profit and loss ii. Share based payment and investment in own shares account of the Company is not presented as part of these financial statements. The loss Incentives are provided to employees under share option schemes. The Company has established attributable to shareholders, before dividend payments, dealt with in the financial statements of an Employee Share Ownership Trust (‘ESOT’) to satisfy part of its obligation to provide shares the Company was £7.5m (2021: £22.2m). No dividends were received in the year from subsidiary when Group employees exercise their options. The Company provides funding to the ESOT to undertakings (2021: nil). purchase these shares. Dividend payments are disclosed in note 7 to the consolidated financial statements. The Company has also established an employee Share Incentive Plan (‘SIP’) which is governed by HMRC rules. C. INVESTMENTS Investment in subsidiary The Company itself has no employees. When the Company grants share options to Group undertakings employees as part of their remuneration, the expense of the share options is reflected in a £m subsidiary undertaking, Workspace Management Limited. The Company recognises this as an Cost investment in subsidiary undertakings with a corresponding increase to equity. Balance at 31 March 2021 1,062.8 The disclosure requirements for share based payments are met in note 23 of the Group Additions in the year 1.3 consolidated financial statements. Balance at 31 March 2022 1,064.1 iii. Borrowings Impairment Details of borrowings are described in note F to the Parent Company financial statements. Costs Balance at 31 March 2021 and 31 March 2022 134.3 associated with the raising of finance are capitalised, amortised over the life of the instrument and charged as part of interest costs. Net book value at 31 March 2022 929.8 iv. Derivative financial instruments and hedge accounting Net book value at 31 March 2021 928.5 The accounting policy for derivative financial instruments and hedge accounting are the same as those for the Group and are set out on page 210. Disclosure requirements are provided in note 16 | to the consolidated financial statements. | D. DEBTORS | | | | --- | --- | --- | --- | | | | 2022 | 2021 | | v. Foreign currency translation | Amounts falling due within one year | £m | £m | The accounting policy for foreign currency translation is the same as that for the Group and is Amounts owed by Group undertakings 438.0 542.1 set out on page 210. Corporation tax asset 1.1 0.1 439.1 542.2 Taxation Current income tax is tax payable on the taxable income for the year and any prior year Amounts owed by Group undertakings are unsecured and repayable on demand. Interest is adjustment, and is calculated using tax rates that are relevant to the financial year. charged to Group undertakings. Deferred tax is provided in full on temporary differences between the tax base of an asset or At the balance sheet date, there is no expectation of any material credit losses on accounts owed liability and its carrying amount in the balance sheet. Deferred tax is determined using tax rates by Group undertakings. that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised when it is probable that taxable profits will be available against which the deferred tax asset can be utilised. Dividend distributions Final dividend distributions to the Company’s shareholders are recognised as a liability in the Group’s financial statements in the period in which the dividends are approved, while interim dividends are recognised when paid. 233 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2022 CONTINUED | E. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR | | | | 2022 | 2021 | | --- | --- | --- | --- | --- | --- | | | | | Maturity analysis of borrowings: | £m | £m | | | 2022 | 2021 | Repayable within one year – 148.5 | | | | | £m | £m | | | | Repayable between three and four years 80.0 – Amounts owed to Group undertakings 165.0 90.0 Repayable between four and five years 80.0 80.0 Witholding tax 1.5 – Repayable in five years or more 440.0 520.0 Accruals and deferred income 2.4 20.8 600.0 748.5 168.9 110.8 The following derivative financial instruments are held: Amounts owed to Group undertakings are unsecured and repayable on demand. Interest is paid | to Group undertakings. | | | Rate | | | | --- | --- | --- | --- | --- | --- | | | | payable | | 2022 | 2021 | | | Amount | | (%) Term/expiry | £m | £m | F. BORROWINGS Cash flow hedge – cross currency swap $100m/£64.5m 5.66% June 2023 - 8.7 2022 2021 The cash flow hedge was terminated in line with the repayment of the US Dollar Notes. Borrowings and financial instruments Interest rate Repayable £m £m Creditors: amounts falling due within G. CAPITAL AND RESERVES oneyear Movements and notes applicable to share capital, share premium account, investment in own 5.6% Senior US Dollar Notes 2023 5.6% April 2021 – 64.5 shares, other reserves and share based payment reserve are shown in notes 20 to 23 on pages 5.53% Senior Notes 2023 5.53% April 2021 – 84.0 225 to 228 and in the statement of changes in equity. Creditors: amounts falling due after more Equity- than one year settled 2 | Bank Loan SONIA+1.65% | | December 2024 – – | | share | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | 1 | | | based | Merger | Hedging | | | Bank Loan SONIA+1.75% | | September 2023 – – | | | | | | | | | | payments | | reserve | reserve | Total | 3.07% Senior Notes 3.07% August 2025 80.0 80.0 Other reserves: £m £m £m £m 3.19% Senior Notes 3.19% August 2027 120.0 120.0 Balance at 31 March 2020 20.2 8.7 0.6 29.5 3.6% Senior Notes 3.6% January 2029 100.0 100.0 Share based payments 2.5 – – 2.5 Green Bond 2.25% March 2028 300.0 300.0 Issue of shares (0.4) – – (0.4) Total borrowings 600.0 748.5 Change in fair value of derivative financial instruments – – (0.6) (0.6) Less cost of raising finance (4.5) (3.8) Balance at 31 March 2021 22.3 8.7 – 31.0 Foreign exchange differences – 8.1 Share based payments 1.6 – – 1.6 Net borrowings 595.5 752.8 Balance at 31 March 2022 23.9 8.7 – 32.6 1. This is an average over the life of the debt. This ranges from SONIA + 1.5% – 2.15% based on the remaining life of the loan. 2. There are 3 ESG linked metrics which can fluctuate the interest by up to 4.5 BPS. All the above borrowings are unsecured. 234 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ### FIVE-YEAR PERFORMANCE (UNAUDITED) PERFORMANCE METRICS (UNAUDITED) 2018–2022 | | 31 March | | 31 March | | 31 March | | 31 March | | 31 March | | | 31 March | | 31 March | | 31 March | | 31 March | | 31 March | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | | | £m | | £m | | £m | | £m | | £m | | | £m | | £m | | £m | | £m | | £m | | Rents receivable 104.3 118.0 132.7 123.7 106.1 | | | | | | | | | | | Workspace Group: | | | | | | | | | | | | Service charges and other income 28.6 24.3 28.7 25.7 22.8 | | | | | | | | | | | Number of estates 57 58 59 64 66 | | | | | | | | | | | | Revenue 132.9 142.3 161.4 149.4 128.9 | | | | | | | | | | | Lettable floorspace (million sq. ft.) 4.0 3.9 3.9 3.9 3.7 | | | | | | | | | | | | Trading profit before interest 67.4 62.5 104.3 93.9 79.5 | | | | | | | | | | | Number of lettable units 4,482 4,196 4,009 4,796 4,539 | | | | | | | | | | | 1 Net interest payable (20.5) (23.8) (23.3) (21.5) (18.8) Average unit size (sq. ft.) 844 942 922 975 979 Trading profit after interest 46.9 38.7 81.0 72.4 60.7 Rent roll of occupied units £111.0m £103.9m £132.8m £127.5m £112.9m Profit/ (loss) before taxation 124.0 (235.7) 72.5 137.3 170.4 Overall rent per sq. ft. £33.26 £33.90 £39.18 £38.45 £36.05 Profit/ (loss) after taxation 123.9 (235.7) 72.1 137.3 171.4 Overall occupancy 84.3% 77.8% 87.0% 84.8% 85.5% Basic earnings/ (loss) per share 68.2p (130.3)p 40.0p 78.9p 104.8p Enquiries (number) 11,007 8,870 13,041 12,575 12,189 Dividends per share 21.5p 17.75p 36.16p 32.87p 27.39p Lettings (number) 1,520 1,146 1,454 1,238 1,111 Dividends (total) 40.6 32.1 65.4 59.3 44.9 EPRA Measures Investment properties 2,366.7 2,349.9 2,586.3 2,591.4 2,288.7 EPRA Earnings per share 26.2p 21.3p 44.5p 40.3p 37.8p Other assets less liabilities (9.4) (65.5) (47.1) (29.2) (58.9) EPRA Net Tangible Asset per share £9.88 £9.38 £10.88 £10.85 £10.36 Net debt (557.7) (564.9) (541.2) (580.2) (517.1) Net assets 1,799.6 1,719.5 1,998.0 1,982.0 1,712.9 Gearing 31% 33% 27% 29% 30% Loan to value 23% 24% 21% 22% 23% EPRA Net Tangible Assets (NTA) £9.88 £9.38 £10.88 £10.85 £10.36 1. Excludes exceptional items. 235 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ### PROPERTY PORTFOLIO 2022 (UNAUDITED) Lettable Net rent roll of Lettable Net rent roll of floor area occupied units floor area occupied units Property name Postcode Category sq. ft. £ Property name Postcode Category sq. ft. £ Archer Street Studios W1D 7AZ Like-for-like 15,847 840,235 Peer House WC1X 8LZ Like-for-like 10,222 196,371 Barley Mow Centre W4 4PH Refurbishment 77,571 1,455,176 Pill Box E2 6GG Like-for-like 50,409 1,009,452 Brickfields E2 8HD Like-for-like 56,755 2,051,526 Poplar Business Park E14 9RL Like-for-like 65,178 1,004,493 Busworks N7 9DP Acquisitions 103,109 1,512,795 Q West TW8 0GP Redevelopment 54,960 550,826 Canalot Studios W10 5BN Like-for-like 49,513 1,074,403 Rainbow Industrial Park (Part) SW20 0JK Like-for-like 21,180 404,801 Cannon Wharf SE8 5EN Like-for-like 32,619 571,145 Rainbow Industrial Park (Part) SW20 0JK Redevelopment 89,934 238,223 Cargo Works SE1 9PG Like-for-like 71,073 3,466,534 Riverside SW18 4UQ Like-for-like 81,929 1,476,662 Centro Buildings NW1 0DU Like-for-like 212,634 8,477,036 Salisbury House EC2M 5QQ Like-for-like 224,454 9,836,487 China Works SE1 7SJ Like-for-like 68,808 1,925,489 ScreenWorks N5 2EF Like-for-like 63,974 1,877,430 Chiswick Studios W4 5PY Like-for-like 14,254 405,552 The Biscuit Factory (Cocoa Studios) SE16 4DG Like-for-like 39,298 873,259 Chocolate Factory (part) N22 6XJ Redevelopment 64,116 755,459 The Biscuit Factory (Part) SE16 4DG Like-for-like 124,580 2,171,536 Chocolate Factory (part) N22 6XJ Refurbishment 0 0 The Biscuit Factory (Part) SE16 4DG Refurbishment 88,080 1,377,046 Clerkenwell Workshops EC1R 0AT Like-for-like 52,879 2,388,430 The Frames EC2A 4PS Like-for-like 52,271 2,611,550 E1 Studios E1 1DU Like-for-like 40,797 858,913 The Leather Market SE1 3ER Like-for-like 146,855 5,053,326 East London Works E1 1DU Like-for-like 38,333 810,341 The Light Box W4 5PY Like-for-like 78,489 1,777,301 Edinburgh House SE11 5DP Like-for-like 65,492 2,171,369 The Light Bulb (part) SW18 4GQ Like-for-like 52,699 1,136,925 Exmouth House EC1R 0JH Like-for-like 57,560 3,200,162 The Light Bulb (part) SW18 4WW Redevelopment 17,226 112,862 160 Fleet Street EC4A 2DQ Completed 42,736 1,089,500 The Old Dairy EC2A 4HT Acquisitions 56,982 2,251,708 Fuel Tank SE8 3DX Like-for-like 35,189 602,502 The Print Rooms SE1 0LH Like-for-like 46,064 1,861,751 Garratt Lane SW18 4LZ Redevelopment 43,000 797,580 The Record Hall EC1N 7RJ Like-for-like 56,015 2,656,609 338 Goswell Road EC1V 7LQ Like-for-like 41,490 1,675,912 The Shaftesbury Centre W10 6BN Like-for-like 12,627 274,672 Grand Union Studios W10 5AD Like-for-like 62,958 1,533,057 The Shepherds Building W14 0DA Like-for-like 136,085 4,947,467 60 Gray’s Inn Road WC1X 8AQ Like-for-like 36,138 1,484,580 Thurston Road SE13 7SH Redevelopment 0 0 Havelock Terrace SW8 4AS Refurbishment 58,164 1,121,311 Vox Studios SE11 5JH Like-for-like 106,943 3,775,357 Ink Rooms WC1X 0DS Like-for-like 22,235 1,320,295 Wenlock Studios N1 7EU Completed 30,939 737,830 Kennington Park SW9 6DE Like-for-like 354,392 9,400,545 Westbourne Studios W10 5JJ Refurbishment 57,135 1,316,967 Leroy House N1 3QP Refurbishment 46,803 4,061 Lock Studios E3 3YD Redevelopment 54,237 793,247 Mare Street Studios E8 3QE Completed 55,100 834,567 Metal Box Factory SE1 0HS Like-for-like 106,667 5,171,730 Mirror Works (formerly Marshgate) E15 2NH Redevelopment 39,964 212,932 Morie Street SW18 1SL Like-for-like 21,711 497,711 Pall Mall Deposit W10 6BL Refurbishment 60,360 1,015,641 Parkhall Business Centre SE21 8EN Completed 124,739 1,819,637 Parma House N22 6XF Redevelopment 34,983 153,941 236 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ### GLOSSARY OF TERMS | Earnings per share (‘EPS’) is the profit after | Equivalent yield is a weighted average of the | Like-for-like are those properties with stabilised | Rent roll is the annualised net rent of | | --- | --- | --- | --- | | taxation divided by the weighted average | initial yield and reversionary yield and | occupancy, excluding recent acquisitions and | occupied units for a property or portfolio of | | number of shares in issue during the period. | represents the return a property will produce | buildings impacted by significant refurbishment | properties at a reporting date. | | | based upon the timing of the occupancy of | or redevelopment activity. | | | Employee Share Ownership Trust (‘ESOT’) is | the property and timing of the income | | Reversionary yield is the anticipated yield, | | the trust created by the Group to hold shares | receivable. This is approximated by the | Loan to value (‘LTV’) is net debt divided by | which the initial yield will rise to once the rent | | pending exercise of employee share options. | reversionary yield multiplied by the Group | the current value of properties owned by the | reaches the estimated rental value. Itis | | | trend occupancy of90%. | Group as valued by CBRE. | calculated by dividing the ERV by thevaluation. | EPRA EPS is a definition of earnings per share | as set out by the European Public Real Estate | Estimated Rental Value (‘ERV’) or market rental | LMA is the Loan Market Association. | SONIA is the Sterling Overnight Interbank | | --- | --- | --- | --- | | Association (‘EPRA’). It is based on operating | value is the Group’s external valuers’ opinion as | | Average Rate, an important interest benchmark | | earnings where profit before tax is adjusted to | to the open market rent which, on the date of | MSCI IPD MSC Inc is a company that produces | administrated by the Bank of England. | | exclude the impact of any changes in property | valuation, could reasonably be expected to be | independent benchmarks of property returns | | | valuation, gains or losses on property | obtained on a new letting or rent review. | under the brand IPD. | Total Accounting Return is the growth in | | disposals and fair value movements. | | | absolute EPRA net asset per share plus | | | Exceptional items are significant items of | Net asset value per share (‘NAV’) is net assets | dividends paid in the year as a percentage of | | EPRA net asset value (‘EPRA NAV’) is a | income or expense that by virtue of their size, | divided by the number of shares at the period | the opening EPRA net asset value per share. | | definition of net asset value as set out by | incidence or nature are shown separately on | end. | | | EPRA. It is adjusted to include investment | the consolidated income statement to enable | | Total Property Return (‘TPR’) is a percentage | | properties at fair value and to exclude certain | a full understanding of the Group’s financial | Net debt is the amount drawn on bank and | measure calculated by MSCI IPD and defined | | items not expected to crystallise in a long- | performance. | other loan facilities, including overdrafts, less | in the MSCI Global Methodology for Real | | term investment property business model. | | cash deposits. This excludes any foreign | Estate Investment as the percentage of value | | | Gearing is the Group’s net debt as a | exchange movements. | change plus net income accrued relative to | | EPRA net reinstatement value (‘EPRA NRV’) | percentage of net assets. | | the capital employed. | | represents the value required to rebuild an | | Net rents are rents excluding any contracted | | | entity, assuming that no asset sales takes | Green Finance Framework is aligned with | increases and after deduction of inclusive | Total Shareholder Return (‘TSR’) is the | | place. Assets and liabilities that are not | ICMA’s Green Bond Principles (2018 edition) | service charge revenue. | growth in ordinary share price as quoted on | | expected to crystallise in normal | and LMA’s Green Loan Principles (2021 edition) | | the London Stock Exchange plus dividends | | circumstances, such as fair value movements | and addresses UN SDGs 7, 11, 12 and 13. The | Occupancy is the area of space let divided by | per share received for the year, expressed as a | | on derivatives and deferred tax on property | framework allows Workspace to issue a variety | the total net lettable area (excluding land used | percentage of the share price at the beginning | | valuation movements, are excluded. | of GDIs and sets out the principles for the use | for open storage) expressed as a percentage. | of the year. | and management of proceeds from GDIs. | EPRA net tangible assets (‘EPRA NTA’) | | Property Income Distribution (‘PID’) a | Trading profit after interest is net rental income, | | --- | --- | --- | --- | | focuses on a company’s tangible assets and | ICMA is the International Capital Market | dividend generally subject to withholding tax | less administrative expenses and finance costs | | assumes that entities buy and sell assets, | Association. | that a UK REIT is required to pay from its | (excluding exceptional finance costs). | | thereby crystallising certain levels of | | tax-exempted property rental business and | | | unavoidable deferred tax. | Initial yield is the net rents generated by a | which is taxable for UK resident shareholders | UN SDGs is UN Sustainable Development | | | property or by the portfolio as a whole | at their marginal tax rate | Goals which are addressed in the Green | | EPRA net disposal value (‘EPRA NDV’) | expressed as a percentage of its valuation. | | Finance Framework. | | represents the shareholders’ value under a | | REIT is a Real Estate Investment Trust as set | | | disposal scenario, where deferred tax, financial | Interest cover is the number of times net | out in the UK Finance Act 2006 Sections 106 | | | instruments and certain other adjustments are | interest payable is covered by net rental income. | and 107. REITs pay no corporation tax on profits | | | calculated to the full extent of their liability, | | derived from their property rental business. | | net of any resulting tax. Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2022 ContentsBack ### INVESTOR INFORMATION Registrar Company Secretary All general enquiries concerning ordinary Carmelina Carfora shares in Workspace Group PLC should be | addressed to: | The Company’s advisers include: | | --- | --- | | Computershare Investor Services PLC | Independent auditors | | The Pavilions | KPMG LLP | | Bridgwater Road | 15 Canada Square | | Bristol | London E14 5GL | BS13 8AE Telephone: +44 (0)370 707 1413 Solicitors Slaughter and May Alternatively, shareholders can contact 1 Bunhill Row Computershare online via their free Investor London EC1Y 8YY Centre facility. Shareholders have the ability to | set up or amend bank details for direct credit | Clearing bankers | | --- | --- | | of dividend payments, amend address details, | NatWest | | view payment history and access information | 250 Bishopsgate | | on the Company’s share price. For more | London EC2M 4AA | information or to register, please visit www.investorcentre.co.uk Joint stockbrokers JP Morgan Website 25 Bank Street The Company has an investor website which London E14 5JP holds, amongst other information, a copy of | the latest Annual Report and Accounts, a list | Stifel Nicolaus Europe Limited | | --- | --- | | of properties held by the Group and copies of | 150 Cheapside | | all press announcements. The site can be | London EC2V 6ET | found at www.workspace.co.uk/investors Registered office and headquarters Canterbury Court Kennington Park 1–3 Brixton Road London SW9 6DE FSC® certified paper Printed to the EMAS standard and its Environmental Registered number: 2041612 Management System certified to ISO 14001. Telephone: +44 (0)20 7138 3300 This publication has been manufactured using 100% offshore Facsimile: +44 (0)20 7247 0157 wind electricity sourced from UK wind. Web: www.workspace.co.uk 100% of the inks used are HP Indigo ElectroInk which Email: investor.relations@workspace.co.uk complies with RoHS legislation and meets the chemical requirements of the Nordic Ecolabel (Nordic Swan) for printing companies, 95% of press chemicals are recycled for further use and, on average 99% of any waste associated with this production will be recycled and the remaining 1% used to generate energy. This document is printed on paper made of material from well-managed, FSC®-certified forests and other controlled sources. ContentsBack Workspace Group PLC Canterbury Court Kennington Park 1–3 Brixton Road London SW9 6DE Telephone: +44 (0)20 7138 3300 Web: www.workspace.co.uk Email: investor.relations@workspace.co.uk If you require information regarding business space in London, call +44 (0)20 7369 2390 or visit: www.workspace.co.uk Front cover: Mare Street Studios, Hackney