## HOME TO LONDON’S BRIGHTEST BUSINESSES Workspace Group PLC Annual Report and Accounts 2023 01 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 WHAT WE DO ABOUT US ABOUT THIS REPORT This report has been produced in landscape format ### Workspace owns and manages five million We believe that our distinctive oer, proven to optimise the reading experience online. ### sq. ft. of business space across 76 core track record and ownership of an extensive, ### locations, home to thousands of London’s high-quality property footprint provide Go to www.workspace.co.uk/onlineannualreport2023 ### brightest businesses. a compelling investment case that will deliver ### sustainable long-term growth. 02 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information # CONTENTS # STRATEGIC REPORT 01 03 What drives performance 08 2023 highlights 10 Chair's statement 13 Chief Executive Officer's statement 14 Our purpose 15 Our stakeholders 26 Our market 32 Our strategy 38 Sustainability 59 Our key performance indicators 64 Our business model 69 Principal risks and uncertainties 77 Business review 87 Compliance statements ![img-0.jpeg](img-0.jpeg) # OUR GOVERNANCE 106 ![img-1.jpeg](img-1.jpeg) 106 Governance driving long-term success 108 Chair's introduction to Governance 113 Board leadership and company purpose 129 Division of responsibilities 141 Composition, succession and evaluation 159 Audit, risk and internal control 172 ESG Committee report 178 Remuneration 210 Report of the Directors 215 Directors' responsibility statement “ Our wellbeing programme has proved popular with both customers and employees Stacy Lyden-Sauppé Events Manager ![img-2.jpeg](img-2.jpeg) “ Strong customer demand allowed us to quickly recover pre-Covid levels of occupancy this year Graham Clemett CEO # FINANCIAL STATEMENTS 216 216 Independent auditor's report 224 Consolidated income statement 224 Consolidated statement of comprehensive income 225 Consolidated balance sheet 226 Consolidated statement of changes in equity 226 Consolidated statement of cash flows 227 Notes to the financial statements 251 Parent Company balance sheet 252 Parent Company statement of changes in equity 252 Notes to the Parent Company financial statements # LOOK OUT FOR THESE THROUGHOUT THE REPORT: 2 Reference to another page in the report 3 Reference to further reading online # ADDITIONAL INFORMATION 255 255 Five-year performance 256 Property portfolio 258 Glossary of terms 259 Investor information ![img-3.jpeg](img-3.jpeg) 03 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### WHAT DRIVES PERFORMANCE ## It all starts ## with the ## customer. ### Our purpose is to give businesses the freedom to grow. ### We believe that in the right space, teams can achieve ### more. That in environments tailored to their business, ### free from constraint and compromise, teams are best ### able to collaborate, build their culture and realise their ### potential together. ### We build long-term relationships with our customers to ### understand their evolving requirements and continually ### enhance the customer experience. Our target customers Pages 4 to 7 Mirror Works, Stratford 04 Financial Statements Additional InformationOur GovernanceStrategic ReportWorkspace Group PLC Annual Report and Accounts 2023 Our space is a hub of sisterhood, innovation, creativity. We want women to feel inspired when they enter. Treasure Tress was born out of my desire to create a service I needed myself: I was tired of paying ridiculous prices for curly haircare products I couldn’t find in the UK. We have built up a huge community of subscribers and we know what they like. It’s important that our space also represents the ethos, passion and energy of our brand. It was really important that our space felt like home. The building has a great community of business owners and brands who are all looking out for each other – we love finding ways to collaborate with our neighbours. Jamelia Donaldson Founder and CEO of Treasure Tress, Parma House, Wood Green Haircare product discovery box for women with naturally curly hair 05 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 You really are not limited by space or time at Workspace, which allows me to create some incredibly individual work. Workspace allows me to be myself, which is essential for my photography because of its focus on diversity and inclusivity. My priority is for the people who I am photographing to feel welcome and comfortable in the space, so that they too can be themselves. This allows me to capture the moment through the lens. It’s my space to do with what I want, so I tend to leave it bare so that I can dress it ad hoc for shoots. I love using the massive windows for natural light work. Another of my favourite things about the space is that it is 24/7 and I can come and go as I please. Paul Nicholas Dyke Founder of PND Photography, Lock Studios, Bow Headshot and portrait photographer for the entertainment industry 06 Our GovernanceStrategic ReportWorkspace Group PLC Financial Statements Additional Information Annual Report and Accounts 2023 It was really important to us that we approached our studio in the same way we build digital products: with inclusivity and sustainability in mind. Our meeting pods are made from recycled fabrics, our paint is eco-friendly and most of our furniture is second-hand – lots of it even comes from other oces in the building. We designed the space to accommodate all our team’s needs, including private meeting rooms, standing desks and a table for eating lunch together. And, of course, a comfy corner for our oce dogs! Sophie Aspden People Lead at Planes, Brickfields, Hoxton A digital product design and development studio 07 Workspace Group PLC Strategic Report Our Governance Additional InformationFinancial Statements Annual Report and Accounts 2023 We are kind of mavericks in the interior design world: we do things our own way. We don’t go for the open-plan style of working but prefer individual areas so we can work uninterrupted. The free space is really important to us – we need to have lots of floor space and be able to make a mess. Every Tuesday our team comes together and we throw all of our materials on the ground and look at the latest prints. We love bringing people in and feeling proud of the space – the building feels professional and impressive and we love all of the natural light from the skylights and large windows. We first took a studio with Workspace in 2018, and have upsized twice since, and plan to expand again soon. Workspace made it so easy to expand that it just made sense. Kierra Campbell Managing Director, Poodle & Blonde The Chocolate Factory, Wood Green Hand-designed luxury wallpaper and homewares 08 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information ## 2023 HIGHLIGHTS Despite the economic challenges, we have seen good momentum from rental growth, with high levels of occupancy from resilient customer demand from SMEs for our flexible offer. Our distinctive offer, proven operating platform and track record, alongside ownership of an extensive, high quality property footprint across London position us to capture more of the significant market opportunity ahead of us. London's SME community has remained resilient over the past few years Stephen Hubbard Chair ## FINANCIAL ![img-4.jpeg](img-4.jpeg) 1. A reconciliation of basic and diluted earnings to trading profit after interest is in note 8 to the financial statements. Equivalent IPRS measures is profit before tax - 2023: £137.53m, 2022: £124.0m, 2021: £1235.7m. 2. Equivalent IPRS measures are basic net assets per share - 2023: £9.54, 2022: £9.54, 2021: £9.50 and diluted net assets per share - 2023: £9.27, 2022: £9.89, 2021: £9.88. 09 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### OPERATIONAL SUSTAINABILITY AVERAGE ENQUIRIES PER MONTH AVERAGE LETTINGS PER MONTH NET ZERO CARBON BY RENEWABLE ELECTRICITY SOURCED ## 100% ## 798 109 2022 127 ## 2 LIKE-FOR-LIKE OCCUPANCY SCOPE 1 AND 2 EMISSIONS REDUCTION SINCE 2019/20 ## 29% ## 89.1% 2022 917 2022 89.6 ## 3 AVERAGE VIEWINGS PER MONTH LIKE-FOR-LIKE RENT ROLL GROWTH GREEN FINANCING DONATED TO SINGLE HOMELESS PROJECT ## 518 +7.1% £700m £110K | | 2022 | | | | | | 598 | 2022 | 8.7 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 2023 2023 2023 2023 2023 | | | | | 109 518 798 | 7.1 89.1 | | | | | 2021 2021 2021 2021 -23.9 | | 328 | 2021 | 96 739 | 81.6 | | | | | 10 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### CHAIR’S STATEMENT ## Workspace’s business model has truly ## been put to the test over the past three ## years. I’m pleased to say that we have ## emerged in an even stronger position. ### Stephen Hubbard ### Chair ## £60.7m TRADING PROFIT AFTER INTEREST ## 25.8p DIVIDEND PER SHARE 11 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 CHAIR’S STATEMENT CONTINUED benefits of taking space with us. The Your Space, Workspace’s targets in its goals to become Your Way campaign emphasised the blank net zero carbon by 2030. canvas space we oer to our customers, 50% ### It’s been a pleasure being part of whom use their space for more than just a We are confident that we are well ahead of ### of Workspace’s dynamic culture desk. The campaign shines a light on how our the curve thanks to Workspace’s inherently oer allows them to personalise and fit out their sustainable model. I have also seen first-hand space as they want – a component of our oer just how passionate our teams are throughout This year has seen market volatility persist: that clearly dierentiates us from the serviced the Company in delivering sustainable results. global growth has continued to slow amidst oce brands we have sometimes been conflated This enthusiasm and sense of responsibility is the ongoing conflict in Ukraine, and in the UK with. It’s great to see our brand work start to also echoed by our eco-conscious customers interest rates have risen to combat inflation. correct these historic misconceptions – and is something we actively instil throughout Workspace, however, remains in a strong although there is still work to be done. Workspace’s carefully selected partners and position and has produced robust results. supply chains. Duncan Owen will be appointed as Chair in July 2023. To read more about his appointment One of the many reasons Workspace has go to page 146. | While the UK has experienced little economic | | resonated with London’s small businesses is | The all-important social element of ESG has | | | --- | --- | --- | --- | --- | | growth this year, London, our core market, | | the level of choice we oer to increasingly | also been an area where Workspace has made | | | | 1 | | real progress. We relaunched our ‘InspiresMe’ | It has been a pleasure being a part of | | has continued to grow by more than 4% | , | discerning customers, who want a broad | | | | reflecting its enduring status as a global hub | | range of options in their search for space, | programme, oering career support to | Workspace’s upbeat, dynamic culture and | | for successful, innovative businesses. Indeed, | | location and community that’s right for them. | underprivileged young people, and we | working with all the diverse people who help | | London’s SME community has remained | | Last year, we added 20 core properties, | continued to develop our popular customer | deliver the Company’s success. I have been | | particularly resilient in the face of many | | totalling almost one million sq. ft. of new space, | and employee wellbeing programmes | lucky enough to get to know many of | | challenges over the past few years. | | to our portfolio, significantly expanding that | throughout the year. Earlier in the year, our | Workspace’s employees at my quarterly | | | | range of choice to customers. Our teams have | Capital Market’s Day shone a light on our | Chair engagement sessions and their | | Our distinctive flexible oer, the scalable | | done a fantastic job in integrating those new | environmental and social sustainability | honest feedback has helped drive a range | | operating platform, unique portfolio of | | buildings into Workspace, with a particular | strategy, demonstrating how sustainability | of improvements across the business. | | properties and robust balance sheet mean | | focus on making our new London properties, | is embedded throughout our business. The | | | we are well positioned to weather any further | | for example, Portsoken House, consistent with | event highlighted how Workspace’s strategy | One of the achievements I am most proud of | | challenging market conditions. This strong | | the quality Workspace look and feel. | of breathing new life into old buildings creates | has been building a strong, supportive Board | | position was illustrated by an excellent set of | | | local hubs of economic activity that help | who are a key part of the Workspace family. | | full-year results, with net rental income up | | A key component of our strategy in acquiring | flatten London’s working map and deliver | One of the Board’s focuses this year has of | | 34.5% to £116.6m, and our centres again full | | McKay was to dispose of the industrial | employment-led regeneration. | course been finding a Chair successor, and | | of vibrant small businesses. Across real estate | | properties within the portfolio. Following year | | I am absolutely delighted that the Board has | | markets globally, increasing interest rates | | end, I’m pleased that this has been | Having served nine years on the Board, I will be | appointed Duncan Owen, whose more than | | have resulted in yield expansion although | | substantially completed, along with material | stepping down as Chair at the upcoming AGM. | 30 years’ experience in the real estate sector | | in the case of Workspace this has been | | cost synergy savings well beyond our budget | I stepped into my role as Chair in July 2020, | will be an invaluable asset to Workspace. | | largely oset by our improved pricing, with | | and the successful novation of the Aviva debt, | just a few months after the start of the | | | EPRA NAV per share decreased by 6.2% to | | avoiding a £13m budgeted break cost. | pandemic, as Workspace’s business model | I am confident that I am handing over to Duncan | | £9.27. I have confidence that, in time, this | | | was truly put to the test. I’m pleased to say | with the Company and Board both in great | | strong performance will be reflected in our | | The Board has had another busy year, and | that three years later we have emerged in an | shape and I wish him every success in the role. | | share price. | | ESG has remained top of our agenda. Our | even stronger position. | I am certain Workspace will continue to thrive, | | | | sector has a vital role to play in mitigating | | driven by its strong sense of purpose, sustainable | | We continued to make real strides in | | climate change and we know that Governance | I am immensely grateful to everyone at | business model and customer-first ethos. | | dierentiating our brand from others in the | | is key in driving real impact – accountability | Workspace for helping to make my time on | | | market, significantly enhancing visibility of our | | should run through every level of the | the Board and as Chair so enjoyable. I am | Stephen Hubbard | | brand across London and highlighting the key | | Company. This is why our new ESG | especially thankful to the Executive team, | Chair | | | | Committee, comprising all eight members of | which has expanded over the last few years | | | 1. ONS, GDP first quarterly estimate, UK: | | the Board, is tasked with closely monitoring | into the strong team it is today. | | October to December 2022. 12 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### CHIEF EXECUTIVE OFFICER’S STATEMENT ## Our strong trading performance is ## testament to our truly flexible oer and ## a customer base of vibrant SMEs. ### Graham Clemett ### Chief Executive Ocer ## £116.6m NET RENTAL INCOME ## 89.1% LIKE-FOR-LIKE OCCUPANCY 13 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 CHIEF EXECUTIVE OFFICER’S STATEMENT CONTINUED | buildings are income earning, so we can | Overall we have delivered a strong trading | – Our focus is on creative and service-based | | --- | --- | --- | | selectively decide on the optimal timing for | performance in the year, with a 34% increase | SMEs, which we estimate represent some | | each project to ensure we can deliver as a | in net rental income, an increase of 17% on | 21% of the working population in London. | ### Our property portfolio | | minimum our benchmark returns. | an underlying basis, and a 29% increase in | These SMEs are in a very broad range of | | --- | --- | --- | --- | | continues to provide rich | | trading profit after interest. We maintained | business sectors and represent a dynamic | | | Our sustainability ambitions extend beyond | tight control over discretionary costs and | and exciting opportunity for us. We | ### opportunity to upgrade | | simply meeting environmental standards, and | while we saw an increase in interest costs | estimate Workspace is home to around 3% | | --- | --- | --- | --- | | and reposition buildings | we are proud of the regenerative impact of | from the McKay acquisition, we benefitted | of this fragmented market, so we still have | | | our business model. As we breathe new life | from the majority of our debt being at | plenty to go for. | | | into old buildings, we create hubs of economic | fixed rates. | – We have a well-recognised brand, a scalable | | We entered the year with good momentum | activity across the Capital, providing | | and technically advanced operating platform | | and strong levels of customer demand, and | significant employment and social benefits in | A resilient property valuation meant that | and an experienced and committed | | occupancy at our like-for-like properties back | what are often historically deprived areas. We | we saw a relatively small decline of 6% in our | in-house team that provides a high level of | | at pre-Covid levels of around 90%. The | hold our properties for the long term and our | net asset value per share to £9.27 over the | service and support to customers. On that | | resulting pricing tension has enabled us to | engagement with local communities is crucial | year. Outward yield movement was largely | note, I would like to thank everyone at | | deliver a 9.4% increase in rent per sq. ft. over | to our social sustainability agenda. During the | oset by the increases in rental price levels, | Workspace for their tremendous eorts | | the year, with many of our business centres | year, we started major refurbishment schemes | with an underlying fall of just 3.2% in the | through the year and congratulate them | | now back at, or ahead of, pricing levels last | at The Chocolate Factory in Wood Green, and | property valuation. | on the delivery of a great set of results. | | seen in 2019. Even with prices increasing our | The Biscuit Factory in Bermondsey. The | | – With the strong improvement in trading | | customers value our oer highly, and it was | scheme at Leroy House in Islington, which | Our strong trading performance is a | performance and confidence in the longer | | great to see 88% stay with us on renewal. | started in summer 2021, is now well | testament to our business model: | term prospects of the Company, the Board | | | progressed and we expect to complete this | – We have been championing flexibility in the | is recommending a final dividend of 17.4p | | We have also seen a good pace of occupancy | project in spring 2024. We also completed the | commercial real estate market for over 35 | per share, taking the full-year dividend to | | increase at recently completed projects. Most | sale of the residential component of our | years and it is great to see that it has now | 25.8p which is up 20% on last year. | | notably, we have seen occupancy at our | mixed-use redevelopment at Riverside, | become firmly mainstream. Of course, it | | | refurbished Mare Street property in Hackney | Wandsworth for £54m in March 2023, where | covers many dierent oers, but what | Lastly, I would like to thank our Chair Stephen | | move up 25% to 95% in the year, whilst Mirror | we obtained planning permission for 433 flats, | makes ours stand apart is the complete | Hubbard, who steps down at this year’s AGM | | Works, our new building in Stratford, saw | highlighting our opportunity to add value and | flexibility we give our customers – both in | having served as a Non-Executive Director for | | occupancy increase 58% to 81%. These | recycle capital. | terms of the leases we oer and the ability | nine years, the last three as Chair. He has been | | successes highlight both the quality of our | | to fit out their own space. We have always | a fantastic ambassador and champion of our | | buildings and the power of our marketing and | In May 2022 we acquired the previously | understood the merits of giving our | business. On behalf of everyone at Workspace, | | sales platform in attracting demand to a broad | publicly listed McKay Securities, adding good | customers lease flexibility, achieving strong | I would like to thank him for his contribution to | | range of locations and then converting this | quality assets across London and the South | retention by providing an unmatched | the business over the past nine years and wish | | demand into lettings. | East to our existing portfolio at a discount to | quality of service rather than tying them | him all the very best for the future. | | | book value. We completed the operational | into long leases. The other aspect of | | | Our extensive property portfolio across | integration of the McKay portfolio in November | flexibility, the ability for customers to fit out | Graham Clemett | | London continues to provide us with a rich | 2022, and continue to make progress in our | their space to suit their individual needs, is | Chief Executive Ocer | | opportunity to upgrade and reposition | plan to add significant value to the portfolio | sometimes overlooked. This freedom to | | | buildings to meet both the changing needs | by adapting the buildings to our multi-let | personalise their space and to create their | | | of our customers and higher environmental | strategy and rolling out our flexible lease oer. | own identity is incredibly important. In fact, | | | standards. This sustainable regeneration, at | The market environment has unfortunately | around half of our customers use their | | | the heart of our business model, drives uplifts | slowed the planned sale of identified non-core | space in a very dierent way to a traditional | | | in income and values producing very | assets (principally light industrial and logistics | oce occupier, meeting the needs of a | | | attractive returns. We currently have a | properties). We sold one asset for £7m in July | diverse range of businesses such as fashion | | | pipeline of refurbishment and redevelopment | 2022 and exchanged on the sale of a further | design, video production, etc. | | | projects that will deliver around 1.3m sq. ft. | five in May 2023 for £82m. | | | of new and upgraded space. Our existing 14 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### WE ARE WELL POSITIONED IN A GROWING MARKET OUR PURPOSE PUTS OUR STAKEHOLDERS AT THE HEART OF THE WAY WE DO BUSINESS OUR INVESTMENT PROPOSITION We know London SMEs | Our purpose is to give businesses the | | We deliver our purpose by actively | | | | --- | --- | --- | --- | --- | | | 1 | | 2 | No one knows London SMEs – and how | | freedom to grow | | listening to our stakeholders to | | | and where they want to work – better than understand what matters most… Workspace. Pioneers of flex We believe that in the right space, teams Our purpose has created a culture that puts We’ve been doing this for 35 years. can achieve more. We provide customers our stakeholders first. The conversations we We helped create the London flex market. with a blank canvas to create their own have with our customers, people, investors, unique space – liberating them to express partners and communities, both in person It’s a great time to be theleader their identity and culture in a space, building and by collecting real-time data, directly Our market is expanding, and we plan and location that is right for them. inform our day-to-day decisions, help us to to capture more of the significant market improve our oer and drive the growth of opportunity ahead of us. We work hard to continually enhance and the business. refine the customer experience, so that We’re a great neighbour customers have the freedom to focus on Our model is to repurpose distinctive growing their businesses. buildings, revitalise local areas and have a positive environmental social impact in the areas weoperate. How this drives our culture Stakeholder engagement Pages 21 and 22 Pages 15 to 25 We’re not done until our customers are Our quality, in-person service oers daily face-to-face access and creates close | …and put this at the heart of our | | …while giving customers the space to | | relationships with strongretention. | | --- | --- | --- | --- | --- | | | 3 | | 4 | | | strategy… | | grow sustainably | | | | Our strong sense of purpose places an | We know that our customers share the same | | --- | --- | | emphasis on delivering exceptional customer | values as us and prioritise sustainability. For | | service. Ownership of our buildings, an | them, it is important that their oce | | extensive portfolio, a continual pipeline of | provider is responsible; it is only by working | | upgrades ensures we provide an unparalleled | together that we can meet our 2030 net zero | | customer oer, cementing our position as | carbon target. | home to London’s brightest businesses. Our purpose driven strategy Sustainability Pages 32 to 35 Pages 36 to 58 15 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### OUR STAKEHOLDERS OUR STAKEHOLDERS STAKEHOLDER ENGAGEMENT We gather feedback and insight from all of ## Listening to our our stakeholders so that we understand what matters most. ## stakeholders so i r o n m e n t n v e O h e u T r c u s s t o i e t m i n e u r s m ## we make the OUR m o PURPOSE c r IS TO GIVE u BUSINESSES e l O p THE FREEDOM o O TO GROW. e u p & r r ## right decisions. s p u u a O p r p t n l i e e r s r s r s s t o ### Our purpose – to give businesses the freedom to grow – O u r i n v e ### has helped us create a culture that puts our stakeholders ### at the heart of the business. We listen both in person and ### by collecting real-time data, directly informing the way ### we make decisions. 1 Our customers Page 16 2 Our people Page 21 3 Our investors Page 23 Section 172(1) Statement Our Section 172(1) Statement sets out 4 Our partners and suppliers how the Board has had regard to its Page 23 stakeholders and other section 172(1) | matters during the year. | 5 Our communities | | | --- | --- | --- | | Page 125 | | Page 25 | | The Biscuit Factory, | 6 The environment | | | Bermondsey | | Page 25 | 16 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 OUR STAKEHOLDERS CONTINUED Significant topics raised ATTRACTING CUSTOMERS WITH OUR LATEST ADVERTISING CAMPAIGN – Range of location choices – central and ### Stakeholder: non-central ### Our customers – Strong performance of individual members of centre teams (over 800 formal ‘shout- outs’) How we engage – Social and environmental responsibility We maintain a continual dialogue with of Workspace businesses from the moment they make an – Satisfaction regarding Wi-Fi and enquiry. Once customers have moved in, our Connectivity Services centre teams foster close relationships with – Rent renewal process them. We also collect scheduled feedback – Breakout areas, meeting rooms and phone from our 4,000 customers twice in the year. booths Our Customer Insight Manager collates and – Frequency of events programmes evaluates this mix of informal and formal – Points of contact when taking a lease feedback, aiming to enhance our customer – Quality of cafés service and building management, and ultimately informing our growth strategy, Activity in the year such as our refurbishments and acquisition – Created a feedback box decisions. – Delivered over 400,000 sq. ft. of new and Listen to our latest upgraded space How the Board engaged customer advertising – Integrated McKay properties to our – Reviewed our brand and marketing campaign ## portfolio 62% campaigns – Rolled out Inclusive Billing to 37 buildings – Reviewed customer experience initiatives BRAND AWARENESS – Launched formal feedback box – Considered the results of the customer – Company-wide customer service training survey – Invested in Wi-Fi upgrade programme – Evaluated key monthly customer metrics – Added 10 new meeting rooms ## – Hosted 71 customer events with 2,500 #1 attendees, including four popular London’s FIRST CHOICE FOR SMEs Brightest Businesses panel discussions LOOKING TO MOVE OR EXPAND – Further simplified the customer journey, reducing number of steps involved in taking a lease and streamlined renewals process – Launched three new in-house Coee Bars Giandonato Rosa, Hospitality Manager, ## 84% oversees our Workspace Coee Bars OUR CUSTOMER SATISFACTION SCORE 17 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 OUR STAKEHOLDERS CONTINUED OUR CUSTOMERS CONTINUED RESPONDING TO THE NEEDS OF OUR CUSTOMERS Our quarterly brand-tracker survey asks 300 FLEXIBLE OFFER TYPE OF PROPERTY QUALITY OF SERVICE SOCIAL ENGAGEMENT London SME business leaders and decision makers what their priorities are when selecting a work space. We’ve analysed this data alongside our in-house customer survey results and identified 12 key priorities for SMEs. These are all areas for which we receive positive feedback from our customers. Of these 12, we have highlighted three key priority areas over the following pages: – Customisation, page 18 – Location, page 19 – Flexible leases, page 20 Flexible lease Location On-site support Networking and community environment Aordable Environmental credentials Wi-Fi/connectivity Events ## 100% OWNERSHIP OF OUR BUILDINGS PUTS US IN A UNIQUE POSITION WHEN Blank canvas Natural light/ventilation Comfort/amenities Local community RESPONDING TO CUSTOMER DEMAND 18 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 OUR STAKEHOLDERS CONTINUED OUR CUSTOMERS CONTINUED RESPONDING TO THE NEEDS OF OUR CUSTOMERS CONTINUED ### Ability to customise ## Q&A Luisa Milazzo, Centre Manager at Mare Street Studios and Brickfields What do our customers have in common? What customer feedback do you receive? They tend to have creative minds and are The business owners I speak with every day deeply passionate, especially the ones I see are very vocal about being able to brand in my East London buildings. They’re often their own space, and often say it is one of the architects, designers and video producers. reasons they chose Workspace. Those who put the time into making their space feel like Why is blank canvas space important? home, tend to stay with us for longer and They want to stamp their own brand on the continue to expand over the years. space. They also want to set it up in a way that works for how their team works – one How does Workspace help customers thing that’s become popular is for customers personalise their space? to create their own phone booths. It’s Firstly, we work with the customer to find important they can welcome clients and the right space in the right location. Next, showcase their space. we review the customers’ fit-out proposals, looking at all elements of the works, while Do you have any favourite fit-outs? also considering health and safety, building At Mare Street Studios, The Fellas podcasters regulations and sustainability. The customer have created a variety of colourful sets that then has free reign to create the space they serve as backdrops for recording their social like, either using one of our suggested media videos, and wellbeing company Sweet contractors or one of their own. Tees house massage and yoga studios as well as cinema rooms. When new customers are first shown around the buildings, I can see that they’re often inspired by these other fit-outs and start to picture what they can potentially do to their own space. ### Customers value blank ### canvas space they can ### make their own Luisa Milazzo Planes Studio built wooden phone booths Centre Manager at Mare Street Studios at their space in Brickfields, Hoxton and Brickfields 19 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 OUR STAKEHOLDERS CONTINUED OUR CUSTOMERS CONTINUED RESPONDING TO THE NEEDS OF OUR CUSTOMERS CONTINUED ### Location ### Our continually expanding ### portfolio of buildings is ### designed to oer the greatest ### spread of choice possible ## Q&A Charlie Fraser | Charlie Fraser, Head of Sales | | Head of Sales | | --- | --- | --- | | In your experience, what do customers | How do we cater to that desire for choice? | | | prioritise in their search for space? | We are always expanding and improving | | | I spend 90% of my time out with prospective | what we oer. Just this year, we added seven | | | customers on viewings. What I’ve seen is that | new high-quality buildings to our London | | | our oer appeals to such a diverse range of | portfolio from the purchase of McKay. This | | | businesses that they are often looking for | means our customers now have 63 London | | | something slightly dierent – and usually | buildings to choose from. | | very specific. Our pipeline of refurbishments will also For some customers, it’s important they have give customers even more options, creating, the right style of building and breakout space. for example, more meeting rooms, better For others, it’s about the right community of breakout areas, improved cafés and neighbours, or being close to transport links additional bike storage. We strategically or where they live. This means they need as select properties for refurbishment based much choice as possible. And, of course, on the areas where my sales team is seeing dierent buildings and areas each have their the most customer demand. own characteristics, and so we’ll often show them two or three buildings in an area. How do those new refurbishments aect pricing? They are beautifully designed and extremely popular – so this means we can lift pricing. For instance, our recent, relatively light-touch refurbishment at Metal Box Factory in London Bridge has seen a 30% increase in rents at the business centre. Exmouth House, Clerkenwell 20 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 OUR STAKEHOLDERS CONTINUED OUR CUSTOMERS CONTINUED RESPONDING TO THE NEEDS OF OUR CUSTOMERS CONTINUED ### Flexibility ### Customers need flexibility as ### they expand and contract Simon Webb Head of Leasing ## Q&A Simon Webb, Head of Leasing | What sort of leases do our customers want? | We are continually striving to improve | | --- | --- | | Our SME customers are ambitious and often | the customer journey. For example, the | | in a state of change, especially those with | introduction of a new inclusive, transparent | | their sights set on rapid growth. Our typical | billing structure, wrapping energy, Wi-Fi | | two-year leases with a six-month rolling break | costs and rent and service charge under a | | clause give our customers both certainty and | single monthly payment, has proved popular | | flexibility to scale up or down as they need to. | with customers. | | How do you and your Leasing team work | Next year, we also plan to launch a new online | | with customers? | customer checkout that will make the | | This year, we’ve worked closely with over | onboarding and moving process for our | | 500 customers to oer them flexibility, as | customers even smoother. | they chose to either expand into larger space, take additional space, or in some instances, contract into something smaller. Overall, it’s been a really strong year, with more than 380 expansions and 700 renewals. How are we developing our leasing oer? Our customers want to be free of unnecessary admin. The easier we make our leasing and expansion process, the freer our customers are to focus on the key task at hand: running their business. Chiswick Auctions in Barley Mow, a customer that has expanded this year 21 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 OUR STAKEHOLDERS CONTINUED Significant topics raised EVOLVING OUR VALUES – Communication from senior leaders ### Stakeholder: – Diversity and inclusion, especially around ### Our people recruitment Our values are central to our business and an internal competition and chose a simple, – Intra-company collaboration and guide how we should treat each other, our aspirational replacement – Make It Fun – a information sharing How we engage customers and our partners. reminder for us to be creative, spontaneous – Career development Employee feedback tells us that our strong and enjoy what we do. – Evolving our values culture and set of values are well received by In our 2022 employee survey, people told us – Recognition our people, though we know there are always they felt the name of our Be A Little Bit Crazy Our quarterly Workspace Winners awards – Social activities areas where we can improve. While we carry value didn’t feel like the right fit. We launched celebrate those who have lived these values. – Health and wellbeing out an annual survey, which saw an 86% response rate, we also gather feedback from Activity in the year a series of face-to-face and virtual events – Enhanced recruitment processes, throughout the year. Our quarterly Wrap Live encouraging more internal hires and greater town hall broadcasts provide a forum to hear diversity from teams across the business. This year we – Six Wrap Live town halls – mix of in-person introduced a bi-monthly Wrap on Tour, where and virtual events our leadership team visits clusters of buildings – Launched Wrap On Tour events to catch up with centre teams and gather – Increased frequency of Wrap newsletters informal feedback. and Sharepoint intranet articles to shine a spotlight on teams across the business How the Board engaged – Launched employee suggestions scheme – Reviewed and discussed our new – Increased frequency of internal recognition recruitment policies ‘shout-out’, via informal and formal – Reviewed our new company value ‘Make communications It Fun’ – Launched Diversity & Inclusion Networking – Our Chair hosted two employee engagement Group sessions with a mix of centre and head oce – Delivered Unconscious Bias and Harassment sta providing feedback training for all employees – Career Pathway programme for Relief Managers, Centre Coordinators and Assistant Centre Managers – New FM team restructure, creating clearer career structure and development opportunities – Charity, Wellbeing & Social Committee Know your stu Show we care Find a way Make it fun hosted frequent events, including the Tour We like people who We value great We look for those We depend on de Workspace, Christmas Family Day and are serious about social skills and who are persistent the imagination Carnival in the Car Park. their subject; those those who and have the and creativity of all who are open- instinctively build confidence to move our people. We like minded, interested strong things forward people who thrive and ask questions. relationships. We when it is dicult. on injecting think hard about Flexibility and enjoyment and how to give back to adaptability are key, colour into the our communities. but so are focus day-to-day. How our Board monitors culture and determination. Page 120 22 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 OUR STAKEHOLDERS CONTINUED OUR STAKEHOLDERS CONTINUED OUR PEOPLE CONTINUED OUR PEOPLE CONTINUED | | RESPONDING TO THE NEEDS OF OUR PEOPLE | | | | | | | 3. | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | 6. | 1. | | | | | | | | | 5. | 7. | 4. | | | | | 21. | | | | 2. | | | | Diversity and inclusion | 20. | | 18. | 12. | 9. | | | | | | 19. | | 15. | | 11. 10. | 8. | | | | | | 17. | | 14. | | | | | Our people value diversity | | | | | 13. | | | | 16. ### and inclusion in the workplace Claire Dracup Director of People & Culture ## Q&A Claire Dracup, Director of People & Culture Why is diversity important at Workspace? The data itself showed that we are more Our success depends on our people. Having diverse than the national average, which we that breadth of experience and perspective are extremely proud of. However, we know helps us attract and retain talent and there are areas where we can improve. improves our decision making, customer focus and employee satisfaction. How do we plan to improve diversity? Our Recruitment Manager is ensuring all Why has it become a priority now? internal and external candidates have the It has always been a priority but we wanted same opportunities. Pulling from a mix of to further strengthen our diversity and social media, job boards and agencies, we inclusivity. It was great to see this reinforced have widened our external recruitment pool by our annual employee survey, with people to boost diversity and attract the best telling us that they are invested in the candidates. diversity of our Company. We have also launched a new internal | What steps have we taken to better | Diversity & Inclusion Networking Group. The | | --- | --- | | understand our diversity? | feedback for the first two sessions has been | | In response to the survey, we launched a | really positive – people have welcomed a | | project to gather data from our sta to start | forum to discuss their personal challenges | | benchmarking our diversity. I was delighted | in a safe space. Read more on page 149. | to see our sta so engaged on the topic, with more than 90% completing our request for data. The annual sta ‘Workspace Walk’ 23 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 OUR STAKEHOLDERS CONTINUED Leroy House, Islington ### Stakeholder: Stakeholder: ### Our investors Our partners and suppliers How we engage How we engage – We regularly engage with existing and – We work with a broad range of long-term prospective shareholders through an active partners and have a strong track record of investor relations programme around our refurbishments and redevelopments where financial results and corporate activity. The strong relationships with local government, Board reviews a detailed bi-monthly investor communities and contractors are integral. relations report which includes notable These relationships are based on stringent views expressed by shareholders as well as ethical and sustainability standards. We wider market participants, alongside share always provide direct feedback to suppliers register movements, broader sector and so that they can improve their products peer news and progress on various investor and services. relations initiatives. How the Board engaged How the Board engaged – Approved modern slavery statement – Approved the sale of the residential – Reviewed new supplier code of conduct component of Riverside Business Centre – Approved the appointment of Duncan Significant topics raised Owen as Chair – Creating sustainable buildings – Attended the AGM – Compliance with building regulations and – Reviewed and discussed the monthly neighbourhood plans IR reports – Access for all user groups – Approved results statements – Urban regeneration – Approved payment of the interim and – Recycling and waste practices full-year dividend – London Living Wage Significant topics raised Activity in the year – Financial and trading performance – Introduced a new supplier code of conduct – Our future financing options – Ensured suppliers and partners working – Growth strategies on Workspace premises pay Real London – Sale of McKay assets Living Wage – Our sustainability approach – Encouraged supply chain to use – Brand and marketing capability environmentally friendly products – Promoted recycling and sustainable waste Activity in the year practices – 150 investor meetings (in-person and virtual) – 19 sell-side analyst and buy-side investor site tours ## – Six real estate conferences attended 100% globally CONSTRUCTION & FACILITIES PARTNERS – Sustainability Capital Markets Day PAID REAL LONDON LIVING WAGE – AGM 24 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 OUR STAKEHOLDERS CONTINUED OUR INVESTORS CONTINUED | RESPONDING TO THE NEEDS OF OUR INVESTORS | | | | | | | 3. | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | 6. | 1. | | | | | | | | 5. | 7. | 4. | | | | 21. | | | | 2. | | | Transparency | 20. | | 18. | 12. | 9. | | | | | 19. | | 15. | | 11. 10. | 8. | | | | | 17. | | 14. | | | | 13. 16. ## Q&A Paul Hewlett, Director of Strategy & Corporate Development How have we helped the investor How have we been engaging with the community better understand our business? investor community? This year we’ve focused on more clearly We have had a busy year engaging more articulating Workspace’s equity story to the regularly with analysts and investors, wider market. In particular, we’ve made great increasing our attendance at conferences, progress in highlighting the importance of hosting more site tours and meeting and our unique customer proposition, outlining speaking to more decision makers across how our scale portfolio and ownership the market. provides our customers with the only flexible space and lease option for London’s SMEs. What did the Capital Markets Day focus on? We hosted a very well-received sustainability We also set out how our sustainable buildings market update early in our financial year, help drive income growth whilst also highlighting our inherently sustainable positively influencing capital values over the business model and how we are well ahead longer term. of the curve with our net zero pathway, EPC upgrade plans and social impact strategy. How have we brought this story to life? A panel discussion with leaders from across Our communications have been enhanced Workspace demonstrated how sustainability by new materials designed specifically for is embedded within our business. investor engagement, which include photography showing our vast range of properties and how our customers use their space. ### Our investors value ### transparency and clear ### communication Capital Markets Day, Paul Hewlett Exmouth House, Director of Strategy & Corporate Clerkenwell Development 25 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 OUR STAKEHOLDERS CONTINUED | Stakeholder: | Stakeholder: | | --- | --- | | Our communities | The environment | | How we engage | How we engage | | – A key element of our strategy is creating | – We recognise that there is a climate | | a flatter, fairer London. By providing | emergency which requires drastic action | | high-quality, aordable space, we bring | from our industry. We have committed to | | employment into the local areas and help | becoming net zero carbon by 2030 and our | | create community hubs. We strongly believe | focus on refurbishing buildings means we | | in giving something back to the communities | can significantly reduce embodied carbon. | | where we have a presence, which is why we | Our in-house operating platform ensures | | oer employment-focused support to | we have access to live data on operational | | disadvantaged young people. | energy usage. Engaging directly with | customers to enhance the sustainability How the Board engaged of our buildings ultimately drives higher – Reviewed updates from our Social, Charity satisfaction scores and retention. & Wellbeing Committee – Our Chair discussed social sustainability How the Board engaged initiatives at his employee engagement – Reviewed and approved updates to our net sessions zero strategy from our Head of Sustainability – ESG Committee is chaired by six Non- Significant topics raised Executive Directors – Identifying community partners, such as local churches, schools, village halls, for our Significant topics raised InspiresMe work experience programme – Energy management for customers – Fund raising opportunities for our charity – Natural light and ventilation partner, Single Homeless Project – Solar panels – Employment inequality – Sustainable transport – Measuring and monitoring air pollution and Activity in the year energy consumption – Re-launched InspiresMe programme, | including work experience for local students | Activity in the year | | --- | --- | | at The Chocolate Factory, Kennington Park, | – Reduced scope 1 and 2 emissions by 11% | | Mare Street Studios, Brickfields and Cargo | across like-for-like portfolio | | Works centres | – Recycling rate of 79% | | – Assessed social value contribution (see | – Optergy energy management platform | | page 56) | rolled out to a further seven buildings | | – Hosted consultation events with local | – Electric Vehicle charging points used | | residents and businesses around | 3,000 times | development projects – Raised £110,000 for Single Homeless Project ## £110K [Building Name, Building Location] The Tour De Workspace fundraiser RAISED FOR SHP 26 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### OUR MARKET ## A clearly ## dierentiated ## customer oer ## in a growth ## market. ### Our target market comprises 138,000 London SMEs with ### more than one employee. With some 4,000 customers, ### we currently let space to 3% of this market. 1 ### This target market continues to expand each year . As the ### demand for flexibility grows, we see significant long-term ### opportunity to increase our market share. 1. BEIS Business Population Estimates 2022. Brickfields, Hoxton 27 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 OUR MARKET CONTINUED OUR MARKET A GROWTH MARKET OUR DISTINCTIVE FLEXIBLE OFFER NUMBER OF LONDON SMES (1-249 EMPLOYEES) (000’s) ### THE WORKSPACE OFFER Traditional oer High flexibilityLow flexibility Large floor plates 210 Unfurnished 190 170 150 | USE OF SPACE | | | | 2010 2012 2013 20142011 2015 2016 2017 2018 2019 2021 | 2020 | | --- | --- | --- | --- | --- | --- | | | Turn-key oer | Serviced oer | Trends aecting our market | | | | | Large floor plates | Oces/co-working | We have helped pioneer the flexible work space market for more than 35 years, and we continually | | | | | Fully fitted | Fully furnished | evolve our oer to respond to changing market trends and customer requirements. Our unique | | | in-house operating platform means we directly interact with our customers on a daily basis, giving us rich, live data on how customers’ expectations are changing. Low flexibility High flexibility LEASE Attracting a diverse customer portfolio Our customers are owners and managers of Trends ambitious SMEs, often creators, makers or | | 12 | 1 | | | | --- | --- | --- | --- | --- | | | | | innovators from a diverse range of sectors. | 1. SMEs have remained resilient in the | | | | | Expressing their business’ individuality and | face of mounting economic | | | | | personality is essential to them. | pressures | | 11 | | | | Page 28 | 10 1. Information, Communication & Technology 14% 2. SMEs and their employees are more 2 2 selective than ever 9 2. Wholesale & Retail 14% ## 4,000+ Page 29 3. Professional, Technical & Consultancy Services 13% 270 CUSTOMERS ACROSS 1 4. Arts, Entertainment & Recreation 11% 8 A BROAD RANGE 3. Net zero carbon targets are now a OF SECTORS 5. Marketing 7% 250 3 4 priority to both landlords and 6. Financial Services 6% customers 230 7 7. Construction & Property 5% Page 30 3 8. Design 5% 6 9. Not For Profit 4% 4. London remains a global hub for 10. Administrative & Support Services 4% businesses and an increasingly 5 11. Travel, Hospitality & Leisure 3% 4 creative SME community 12. Other 14% Page 31 2022 28 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 OUR MARKET CONTINUED ### Market trend 1: ## 700+ ### SMEs have remained resilient ### in the face of mounting RENEWALS ### economic pressures While the London economy has outperformed ## 380 1 the UK as a whole , growth across the UK is expected to slow during the financial year EXPANSIONS 2 2022/23 . Rising energy costs and inflation have put pressure on consumers and businesses, exacerbated by strike action across rail and postal services. Despite these 3 conditions, SMEs remain optimistic . What this means for Workspace Despite the challenging market conditions, we have seen strong demand throughout the year, having completed 1,312 deals. Our diverse customers have demonstrated time and again that they are agile, innovative and resilient. We have a track record of successfully managing our business through economic cycles by dynamically adapting our space, oer and pricing. In challenging times, we can flex pricing to recover occupancy where needed. Outside of those challenging periods, we are able to drive pricing. Equally, our strong balance sheet, distinctive flexible oer and freehold ownership model means we are well positioned to weather any further market uncertainty. 1. ONS, GDP first quarterly estimate, UK: October to December 2022. Mirror Works, 2. OBR Economic outlook March 2023. Stratford 3. FSB UK Small Business Index Q1 2023. 29 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 OUR MARKET CONTINUED ### Market trend 2: ## 5 mins ### SMEs and their employees are ### more selective than ever AVERAGE WALK FROM A STATION TO OUR BUILDINGS The UK has seen demand for flexible space 1 rise 22% in just one year , with more choice and greater flexibility in how teams work. To attract and retain talent, business owners need to provide high-quality space that competes not just with other work space providers but with employees’ homes. What this means for Workspace Our scale, ownership model, customer service and truly flexible oer, developed over more than 35 years, set us apart from other providers in the market. Our centre teams build relationships with our customers and take the time to understand their expectations, informing improvements to our oer, buildings and the continuous pipeline of refurbishments and redevelopments. Crucially, we know that businesses value more than just flexible leases – they want control and the freedom to express their own identity, making a home for their business. Our distinctive oer allows them tailor their own space for their teams and how they work. The ability to personalise their space creates a significant draw for attracting and retaining talent. Our range of 76 buildings allows customers to choose a location, community and building that feels right to them, and they have the capability to easily scale up or down, or move elsewhere in our portfolio. Our ongoing investment in our brand and advertising campaigns continue to highlight these benefits and clearly position Workspace in the market. Leather Market, London Bridge 1. UK Flex Market Review, Instant Oce, July 2022. 30 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 OUR MARKET CONTINUED ### Market trend 3: ## 20% ### Addressing climate change ### is a priority to both landlords OF SMEs CHOOSE THEIR OFFICE BASED ### and customers ON SUSTAINABILITY CREDENTIALS The built environment has improved its energy 1 eciency by 27% over the past 10 years . While newly constructed buildings are more energy ecient, it is estimated that 80% of buildings in 2050 will already have been built 1 by now . The impact of these buildings is therefore far greater than new builds, and so the industry must prioritise decarbonising existing buildings. Despite rising energy prices, public support for pursuing net zero carbon emission remains high. Our quarterly brand tracker survey of London SME decision makers saw 85% say sustainability is important to their business while more than 20% choose an oce provider based on sustainability credentials. What this means for Workspace Workspace’s model is inherently sustainable: we repurpose and preserve old buildings. For instance, at our Leroy House refurbishment, we will achieve this by retaining the building’s structure, using recycled construction materials and natural ventilation, installing state-of-the-art solar panels, and replacing gas boilers with air-source heat pumps. We keep our operational energy intensity 2 across the portfolio, 129 kWhe/m well below 2 the industry benchmark, 160 kWhe/m , and have reduced our scope 1 and 2 by 29% since 2019. For example, at new schemes we optimise glazing ratios to balance solar gains, reduce heat losses and maximise daylight levels. Leroy House, Islington 1. UKGBC Whole Life Carbon Roadmap, 2022. 31 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 OUR MARKET CONTINUED ### Market trend 4: ## 50% ### London remains a global ### hub for businesses, with an OF OUR CUSTOMERS USE OUR SPACE FOR ### increasingly broad range MORE THAN JUST DESK- ### of SME sectors BASED WORKING London ranks first among top global cities for entrepreneurial success thanks to its supportive ecosystem for early-stage 1 businesses . The capital generates an eclectic, thriving assortment of SMEs, with a keen focus on creation and innovation. This year, Workspace has seen strong demand from a diverse range of sectors, with the likes of fashion and digital video production prevalent alongside tech and digital sectors. What this means for Workspace We have a deep, long-term knowledge of London and we are well positioned as the ideal home to the capital’s diverse SME population. The blank canvas space we oer means we can cater to the eclectic uses of space they require. This is reflected in the fact that 50% of our customers use their space for more than just desk-based working – for example, video production, photography, fashion showrooms, AI and VR production, architecture, food production, clothing storage, and more. The scope and scale of our properties oers a wide range of choice to London’s diverse, selective SMEs, enabling them to find the right space and community for their business. Westbourne Studios, Ladbroke Grove 1. Oberlo’s Top Cities For Entrepreneurial Success, 2021. 32 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### OUR STRATEGY OUR STRATEGY ## Driven by our e D l r i b v i a n i n g t a c s u u s s v r i o n m e n t t e n O o g h e u m T r c i n u s e e e s t o r t i m - b i e l ## purpose and n r e s u s y m d OUR a m g o PURPOSE w c r l r IS TO GIVE o a u O BUSINESSES e l w t p s THE FREEDOM o t l e h i O TO GROW. h u p & r r w s p u u a O ## understanding p r t p n l i e e r r s s a r s s t o n O u r i n v e e d c d n e e l l l v i e c e x e n i r l a o g n o i t a r e p ## what our Driving customer-led growth Our vision is to be the home to London’s brightest businesses and our growth plans ## stakeholders are dependent on the strong SME demand for our flexible oer and the customer experience we deliver. Page 33 Delivering operational excellence ## want. Our in-house platform means we have a uniquely scalable business. We actively manage our portfolio to deliver returns ### Our strategy creates value for our through like-for-like growth, projects, acquisitions and disposals, while maintaining ### customers, people and communities. a prudent approach to financing. Page 34 Being sustainable | Key performance indicators | | We view every aspect of our business through | | --- | --- | --- | | There are clear links between our KPIs and | Principal risks and uncertainties | a sustainability lens. Our aim is to create a | | our strategy. Regular measurement of our | Risk management is an integral part of all | climate-resilient portfolio, to continue to | | KPIs ensures we maintain discipline in | our activities. We focus on key risks that could | prioritise and look after our people and to have | | strategic decisions. | impact the achievement of our strategic goals. | a positive impact on our local communities. | | Page 59 | Page 69 | Page 35 | 33 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 OUR STRATEGY CONTINUED Relevant KPIs London’s Brightest Businesses events for customers ### Strategic pillar: Financial performance: We hosted four of our London’s ### Driving customer-led growth Brightest Businesses panel events ## 1, 5, 6 throughout the year, boasting an average turnout of 100 customers. CEMENT OUR POSITION AS HOME CONTINUALLY ENHANCE LEADING IN LONDON’S FLEXIBLE Non-financial performance: TO LONDON’S BRIGHTEST CUSTOMER EXPERIENCE OFFICE MARKET The first event of the year saw TV ## BUSINESSES 1, 2 personality Ben Fogle moderate Key priorities Key priorities Key priorities a discussion on how innovative Relevant principal risks SMEs are helping make everyday – Reinforce our dierentiated – Continue to improve our flexible – Grow our portfolio of historic and and uncertainties lives more sustainable. Our Head customer proposition to capture oer and service to retain character properties in the right demand and grow market share customers and support occupancy locations of Sustainability, Sonal was joined ## 1, 2 – Raise our profile amongst target – Focus on customer service, with on the panel by Workspace customers and stakeholders centre teams creating vibrant customers, Decent Packaging, Market trends communities a compostable packing supplier, and Buzzbike, a bicycle share ## 1, 2, 4 scheme, as well as sustainability 2022/23 key achievements 2022/23 key achievements 2022/23 key achievements consultant Anthesis. – Continued to evolve brand – Continued to improve the customer – Completed latest refurbishments marketing to raise awareness of our journey, including enhancements to phases of Pall Mall Deposit and Events later in the year covered dierentiated oer, including digital the renewal processes and Barley Mow Centre in West topics including wellbeing and and out-of-home advertising communications London, and Metal Box Factory building a brand in a social world, – 1,312 deals, almost at pre-Covid – Created 10 new meeting rooms, in London Bridge moderated respectively by Love levels fitted with state-of-the-art video – Integration of 20 London and Island’s Dr Alex George and – 1,070 customer renewals and conferencing South East assets following the customer and influencer Grace expansions – Improved cafés across the portfolio, McKay acquisition Beverley. – Significantly expanded our including three new Workspace customer events programme coee bars Glowing feedback has highlighted – Delivered 71 customer events, with how customers value the insight 2,500 attendees and tips they can take away from the sessions and apply to their | 2023/24 aims | 2023/24 aims | 2023/24 aims | own businesses. | | --- | --- | --- | --- | | – Continue to invest in our brand to | – Continue to enhance the customer | – Drive occupancy across our new | | | enhance our visibility and profile | journey, including a new online | refurbishments and acquisitions | | | – Grow our community across social | customer portal | – Ongoing roll out of Workspace’s | | | media | – Ongoing improvement to cafés | visual branding to our core new | | buildings ## 4 PANEL EVENTS 34 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 OUR STRATEGY CONTINUED Wi-Fi upgrades Relevant KPIs We have invested to significantly ### Strategic pillar: improve Wi-Fi connectivity Financial performance: ### Delivering operational excellence across 23 sites this year, which ## means our customers are now 1, 5, 6 able to connect to superfast | | | ACTIVE PORTFOLIO MANAGEMENT EFFICIENT, SCALABLE OPERATING | | PRUDENT FINANCING AND STRICT | | --- | --- | --- | --- | --- | | internet via the latest Wi-Fi 6 | Non-financial performance: | | | | | | | | PLATFORM | INVESTMENT CRITERIA | technology. ## 1, 2 Key priorities Key priorities Key priorities The new service provides four – Continue to execute our rolling – In-house capability and expertise – Maintain strong balance sheet times the capacity of the usual Relevant principal risks pipeline of refurbishment and drives income growth – Strict focus on returns network, allowing customers and uncertainties redevelopment projects – Focus on innovation, technology – Disciplined approach to gearing seamless connectivity even in the – Proactively identify opportunities and customer experience ## 1, 2 more densely populated parts of to acquire – Ability to scale without significant our buildings, such as the café – Selectively recycle capital through cost growth Market trends and breakout areas. disposals ## 1, 2, 4 We are starting to explore 5G 2022/23 key achievements 2022/23 key achievements 2022/23 key achievements in-building solutions, which will – Upgraded over 400,000 sq. ft. – Expanded our new Customer – Refinanced the ESG-linked give customers more choice in of space across the portfolio, Experience team, dedicated to Revolving Credit Facility how they like to work, opting for including Metal Box Factory in reviewing and improving the – Put in place acquisition facility either Wi-Fi or mobile network London Bridge, Barley Mow in customer service for McKay throughout our buildings. Chiswick and Park Hall in Dulwich – Integrated Asset Management, – Reported on our allocation of – Sold Riverside Business Centre Development, FM and Sustainability assets under our Green Finance in Wandsworth teams to drive strategic, Framework – Sold Strawberry Hill Medical Centre operational, design and in Newbury and Great Brighams sustainability improvements Mead in Reading – Rolled out inclusive billing across majority of portfolio | 2023/24 aims | 2023/24 aims | 2023/24 aims | | --- | --- | --- | | – Obtain planning consent for | – Continue to upgrade Wi-Fi across | – Improve credit metrics | | Havelock Terrace in Battersea | the portfolio to enhance customer | – Recycle capital to reduce gearing | | and Shaftesbury Centre in | connectivity | | | Ladbroke Grove | – Optimise digital marketing capability | | – Complete Leroy House in Islington – Progress refurbishments pipeline, including Buswork in Islington, Salisbury House in Moorgate, Kennington Park in Oval ## 23 LOCATIONS WHERE WE DOUBLED WI-FI SPEEDS 35 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 OUR STRATEGY CONTINUED Relevant KPIs How our approach to sustainability enhances ### Strategic pillar: Financial performance: customer engagement ### Being sustainable Sustainability is important to our ## 1, 5, 6 customers. They are performance-driven and care DELIVERING A CLIMATE- LOOKING AFTER OUR PEOPLE SUPPORTING OUR COMMUNITIES Non-financial performance: about a range of issues, such as RESILIENT PORTFOLIO how much energy we use in our | | | | 1, 2 | buildings and how we manage | | --- | --- | --- | --- | --- | | Key priorities | Key priorities | Key priorities | | | | – Reduce energy consumption across | – Support and enhance the wellbeing | – Enhance the impact of our work | | our waste. They also share our | | | | | Relevant principal risks | passion for supporting local | | the portfolio and reduce greenhouse | of our employees and customers | with Single Homeless Project (SHP) | | | | | | | and uncertainties | communities and driving local | | gas emissions in line with our net | – Improve diversity across all levels | – Roll out our local skills and | | | | zero carbon pathway | of business and embed inclusive | employment programme, | | economic and social impact | ## 1, 2 – Reduce waste generation across behaviours into our culture InspiresMe, in partnership with through our business operations. the portfolio – Support professional development our customers Market trends – Achieve high environmental and career progression of our – Create a social impact framework Our approach to engaging with standards across all development people to monitor and enhance social customers on sustainability helps ## 1, 2, 4 and refurbishment activities value generated build long-term customer relationships, resulting in higher customer satisfaction scores, 2022/23 key achievements 2022/23 key achievements 2022/23 key achievements engagement and retention. – 5% reduction in average energy – 57 wellbeing events hosted, – 620 employee hours dedicated intensity across the portfolio benefitting 1,600 customers to volunteering for SHP This year’s ESG Advocacy Score – 27% reduction in greenhouse gas – Voluntarily paid Living Wage across – 180 students benefitted from is at 71%, an increase of 5% year emissions from gas consumption the portfolio, including suppliers our InspiresMe programme on year, reflecting our increased – 12% increase in spaces with A/B – 17 food bank collections focus on ESG across the business EPC ratings – Created our social value and alignment with customer – 100% renewable electricity procured framework and targets interests. We have seen that there – £110k raised for SHP is a strong correlation between – Delivered a £600k equivalent ESG score and overall Customer of social value Advocacy scores. | 2023/24 aims | 2023/24 aims | 2023/24 aims | | --- | --- | --- | | – Drive further improvement in energy | – Improve diversity and inclusion | – Scale up InspiresMe in partnership | | eciency | across the business | with our customers | | – Further decarbonise heat | – Champion responsible and inclusive | – Roll out a place-based community | | – Enhance greenery and biodiversity | recruitment | impact programme across each | | credentials | – Evolve our wellbeing oering in | of our centres | | – Gain better visibility of water | response to employee needs | – Evolve our SHP partnership | consumption ## 71% ESG CUSTOMER ADVOCACY SCORE 36 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### SUSTAINABILITY ## Sustainability is inherent to ## Workspace and informs everything ## we do. Our environmental and social ## achievements this year demonstrate ## our performance-driven mindset ## and undeterred commitment to ## maximising stakeholder value. ### Sonal Jain ### Head of Sustainability 37 Workspace Group PLC Annual Report and Accounts 2021 Strategic Report Our Governance Financial Statements Additional Information SUSTAINABILITY CONTINUED # Highlights ![img-5.jpeg](img-5.jpeg) 1,600 CUSTOMERS BENEFITTED FROM OUR WELLBEING OFFERING 120 SUSTAINABILITY EVENTS DELIVERED 70 ELECTRONIC DEVICES DONATED TO LOCAL CHARITY PARTNER ![img-6.jpeg](img-6.jpeg) # RATINGS AND MEMBERSHIPS # Ratings 81 Real Estate Assessment Score 96 Development Assessment Score A Public Disclosure Score A- GOLD EPRA Sustainability Best Practice Recommendations Award AA MSCI ESG rating Low Risk Sustainalytics ESG Risk Rating Membership # Membership GBC BRP 12% OF THE TOTAL PORTFOLIO'S FLOOR AREA WAS UPGRADED TO EPC A/B 71% CUSTOMER ESG ADVOCACY SCORE ![img-7.jpeg](img-7.jpeg) £600k SOCIAL VALUE GENERATED ![img-8.jpeg](img-8.jpeg) 38 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 SUSTAINABILITY CONTINUED OUR THREE-PILLAR SUSTAINABILITY STRATEGY ### Our approach | We have embedded sustainability throughout | Governance | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | DELIVERING A | | LOOKING AFTER | | SUPPORTING OUR | | | our business, driving how we design and | The highest level of responsibility for our | | 1 | | 2 | | 3 | | | | CLIMATE-RESILIENT | | OUR PEOPLE | | COMMUNITIES | | | operate our buildings and informing every | sustainability strategy lies with our Chief | | | | | | | PORTFOLIO strategic decision we take. Executive Ocer, and together with the rest of the Workspace Board, the group acts as a | Our three-pillar sustainability strategy – | guardian of the strategy. In addition, an ESG | | | | | --- | --- | --- | --- | --- | | (1) Delivering a Climate-Resilient Portfolio, | Board Committee (refer to page 172) has | | | | | (2) Looking After Our People, (3) Supporting | been established to bolster our sustainability | | | | | Our Communities – allows us to continually | governance and drive further integration across | | | | | improve our environmental and social impact, | business decisions. The Board is supported | | | | | whilst adding value to all our stakeholders. We | by the Executive Committee in setting and | | | | | have also mapped our strategy against the UN | delivering our sustainability strategy. | | | | | | | Future proofing our | Looking after our people | Creating lasting value for | Sustainable Development Goals (SDGs) to business by minimising our through our focus on our communities through ensure our objectives and targets are aligned At an operational level, we have committees environmental impact and wellbeing, responsible employment-led with global ambitions. dedicated to both environmental sustainability transitioning to net zero business practices, skills regeneration and and social sustainability, comprising senior carbon by 2030. and employment. meaningful partnerships With a view to enhance the transparency of representatives from across the business. with local community our reporting and adding to our existing groups and charities. | annual publication of the EPRA report, we are | The two committees are responsible for | | | | | --- | --- | --- | --- | --- | | now reporting on our environmental and | operationalising the delivery of our strategy. | | | | | social performance in accordance with the | Progress is reported to the Board and Executive | Relevant SDGs | Relevant SDGs | Relevant SDGs | | Global Reporting Initiative (GRI) 2021 and in | Committee monthly. We also have a number | | | | | line with the Sustainability Accounting | of sustainability champions across the business | | | | | Standards Board (SASB) guidelines (learn | who help mobilise ground-up support. | | | | more in the Environmental Performance section of our investor website). This year our sta Read more Read more Read more took on the Three Pages 41 to 49 Pages 50 to 53 Pages 54 to 57 Peaks Challenge 39 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 SUSTAINABILITY CONTINUED OUR MATERIALITY MATRIX – KEY SUSTAINABILITY ISSUES ### Defining what matters most Materiality assessment Our materiality assessment helps us understand the issues that matter most to | our internal and external stakeholders. | | | Energy and | | --- | --- | --- | --- | | We identified and assessed a number of | | | carbon management | | environmental, social and governance issues | | | Pages 41–49 | | | Very significant | Waste | | to refine our approach. Page 44 Sustainable Stakeholder engagement building design Health and safety Pages 43, 46 We consulted with our internal and external Page 90 stakeholders, including customers and employees through our bi-annual surveys Stakeholder Ethics and Conduct and ongoing interactions with our suppliers engagement Pages 90–91 Climate change to confirm our material issues, as shown on Page 25 adaptation the matrix. Page 45 Regulatory Nature and compliance | Our response | biodiversity | | | | --- | --- | --- | --- | | | | Skills and | Page 75 | | Our sustainability strategy covers all issues | Page 45 | | | employment identified as material to our business. Pages 51, 57 | Subsequent sections in the report highlight | | Diversity and | | --- | --- | --- | | how we are positively impacting these issues. | Sustainable and | inclusion | | | responsible | Page 52 | procurement Wellbeing Page 43 Pages 51, 53 | | Charitable | | Risk | | --- | --- | --- | --- | | The process we followed: | giving | | management | | | Pages 54–56 | Human rights and | Pages 69, 171, | Water Step 1 Identify key stakeholders fair pay 92–105 Page 45 List material issues Page 51 Local social and Step 2 Consult stakeholders economic impact – Social Sustainability IMPORTANCE TO EXTERNAL STAKEHOLDERS Sustainable Page 56 Committee transport Page 45 – Environmental Sustainability Committee – Employees – Customers – Suppliers Step 3 Analyse consultation outputs – Importance to stakeholders – Significance of impacts Significant – Ability of the business Significant IMPACT ON WORKSPACE Very significant to influence GRI reference Step 4 Prioritise issues and refine Environmental issue Social issue Refer to the sustainability performance section our strategy Governance issue on our investor website 40 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 SUSTAINABILITY CONTINUED ### Alignment to UN SDGs The aim of our sustainability strategy is to maximise value for all our stakeholders – our people, our customers, our suppliers, our investors and the environment. Our strategy is also aligned with several of the UN Sustainable Development Goals (SDGs) AFFORDABLE SUSTAINABLE CITIES CLIMATE ACTION GENDER EQUALITY QUALITY EDUCATION AND CLEAN ENERGY AND COMMUNITIES Relevant stakeholders: Relevant stakeholders: Relevant stakeholders: Relevant stakeholders: Relevant stakeholders: CUSTOMERS CUSTOMERS CUSTOMERS PEOPLE CUSTOMERS PARTNERS AND SUPPLIERS COMMUNITIES PEOPLE COMMUNITIES PEOPLE THE ENVIRONMENT INVESTORS COMMUNITIES PARTNERS AND SUPPLIERS THE ENVIRONMENT | We invest in on-site renewable | As custodian of some ofLondon’s | The delivery of our 2030 net zero | Our people practices actively | Through our InspiresMe | | --- | --- | --- | --- | --- | | energy by installing roof-mounted | most iconic buildings, we work to | carbon commitment ensures we are | support gender equality, including | programme, we work alongside our | | solar panels across our portfolio, | reduce the environmental impact | decarbonising our business swiftly | the use of gender-neutral language | customers toprovide inspiration, | | ensuring we generate clean power. | of London’s built environment and | and thus playing our part in limiting | in all our policies and recruitment | knowledge, support and experience | | We also source 100% of our | build resilience for the long term. | global warming to 1.5°C. | material. All our people have been | to individuals within our communities | | electricity from renewable sources, | This is delivered through sustainable | | trained on unconscious bias and | who are most at risk of NEET | | through our REGO certified green | design, construction and the way | | we strive to create a truly inclusive | (Not in Education, Employment | | contract. | we operate all of our buildings. | | work environment. We work hard | or Training) and help them to reach | | | | | to identify and address gaps within | their full potential. | existing workplace policies, as well as oering professional development opportunities to all our employees. INDUSTRY, INNOVATION RESPONSIBLE GOOD HEALTH DECENT WORK AND REDUCED INEQUALITY AND INFRASTRUCTURE CONSUMPTION AND WELL-BEING ECONOMIC GROWTH AND PRODUCTION Relevant stakeholders: Relevant stakeholders: Relevant stakeholders: Relevant stakeholders: Relevant stakeholders: PARTNERS AND SUPPLIERS PARTNERS AND SUPPLIERS CUSTOMERS CUSTOMERS CUSTOMERS THE ENVIRONMENT THE ENVIRONMENT PEOPLE PEOPLE PEOPLE INVESTORS COMMUNITIES PARTNERS AND SUPPLIERS COMMUNITIES | By investing inclean technology | Investment in energyecient | Provision of safe and healthy | We provide quality flexible space | Our InspiresMe programme aims | | --- | --- | --- | --- | --- | | and materials we are reducing | equipment and eective | workplaces for our employees and | for SMEs across London. Our model | to tackle youth unemployment and | | ourenvironmental impact while | management ensures our energy | customers is paramount. We do this | also creates hubs of economic | the ethnicity gap by building | | driving innovation in the industry. | consumption is optimised. We also | by ensuring health and wellbeing | activity that benefit entire | relationships with schools and youth | | | work hard to reduce waste in | considerations are fully | communities through employment- | organisations across London to | | | operations and construction, aiming | incorporated into our building | led regeneration of the area. We are | oer work experience placements, | | | to divert 100% from landfill. | design. We also run an extensive | also an accredited Living Wage | career talks, CV workshops and | | | | wellbeing support programme for | Employer, ensuring that all our | interview practices. | | | | all our employees and customers. | employees and contractors are paid | | at Real London Living Wage. 41 Workspace Group PLC Annual Report on the 1st March 2022 SUSTAINABILITY PORTFOLIO # Strategic pillar: # Delivering a climate resilient portfolio In 2019, we made a commitment to delivering a net zero carbon portfolio by 2030, covering all scopes of carbon. We also signed the Better Buildings Partnership's (BBP) Climate Commitment and published our net zero pathway, quantifying our emissions and outlining our decarbonisation trajectory for both our operational and embodied carbon. To make sure this goal is robust and in line with a 1.5°C future, we have aligned our emissions reduction trajectory with approved Science-based Targets (SBT), requiring: - 42% reduction in scope 1 emissions by 2030, from a 2019/20 base year - 20% reduction per square foot of Net Lettable Area (NLA) in scope 3 emissions from capital goods by 2030, from a 2019/20 base year - Sourcing of 100% renewable electricity through to 2030 29% SCOPE 1 AND 2 REDUCTION IN LIKE-FOR-LIKE PORTFOLIO SINCE 2019/20 # Like-for-like performance # (Workspace portfolio excluding major projects) Investment in energy efficiency and decarbonisation of our portfolio has driven significant progress on our net zero carbon pathway. For our like-for-like Workspace portfolio, we reduced our scope 1 emissions by 32% and our scope 2 emissions by 28% in 2022/23 against our 2019/20 baseline. Going forward, we aim to go beyond our SBTs and eliminate our operational emissions as much as we can across the entire portfolio, with minimal reliance on carbon offsetting. A significant proportion of our scope 3 emissions is attributed to our refurbishment and development activities. This means reducing the embodied carbon of our development projects is a priority for us. Our refurbishments are on average designed to achieve a 60%-70% reduction in embodied carbon when compared to current industry benchmarks of 1,000 kgCO₂/m³. # Whole portfolio performance # (Workspace portfolio + McKay) Following the acquisition of McKay Securities, we have integrated emissions from the acquired properties into our greenhouse gas reporting this year. The absolute emissions reported for the 2022/23 period are therefore not comparable to the emissions covering the 2019/20 baseline period or previous years, as those only covered emissions from the historic Workspace portfolio. A detailed breakdown of our absolute greenhouse gas emissions can be found on page 101. Relevant UN SDGs ![img-9.jpeg](img-9.jpeg) # Enhancing accountability This year, we have made great progress in increasing the efficiency of our energy high-mortality through an area of responsibility for future climate change. We also have a strong commitment to achieve the best results for our company. The best avoided our facilities and goals to better understand energy in the region and countries with the most significant impact on our global climate. To further drive action, we have embodied a clear, solid carbon target, and a clear, clear's objectives. This decision is effective effort and a determined collaboration of the stakeholders based on existing research is common. The best energy and carbon performance are ![img-10.jpeg](img-10.jpeg) 42 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 SUSTAINABILITY CONTINUED DELIVERING A CLIMATE RESILIENT PORTFOLIO CONTINUED OUR GREENHOUSE GAS EMISSIONS As a signatory to BBP’s Climate Commitment WORKSPACE PORTFOLIO MCKAY PORTFOLIO and Science Based Targets initiative, we disclose progress against our net zero pathway annually. We have reported our absolute LOCATION BASED SCOPE 1, 2, 3 GHG EMISSIONS (tCO e) LOCATION BASED SCOPE 1, 2, 3 GHG EMISSIONS (tCO e) 2 2 greenhouse gas emissions in line with the GHG Protocol Guidelines. Our scope 1 and 2 categories encompass emissions where we have operational control and therefore include tenant consumption where we procure gas, electricity or heat on their behalf. Although our electricity is REGO-backed, we report scope 2 emissions using a location-based methodology. | Scope 1 | 2,358 | Scope 1 | 830 | | --- | --- | --- | --- | | Scope 2 | 5,142 | Scope 2 | 1,295 | | Scope 3 | 6,614 | Scope 3 | 9,998 | SCOPE 1 GHG EMISSIONS (tCO 2 e) WHOLE PORTFOLIO | 2021/22 | | 3,221 | | | | --- | --- | --- | --- | --- | | | | | LOCATION BASED SCOPE 1, 2, 3 GHG EMISSIONS (tCO | 2 e) | | 2020/21 | 2,877 | | | | ### We strive to reduce the SCOPE 2 GHG EMISSIONS (tCO 2 e) ### carbon intensity of our 2021/22 5,229 ### portfolio by phasing out gas 2020/21 4,719 ### heating and implementing ### energy eciency measures Scope 1 3,188 Scope 2 6,437 Ariane Ephraim Scope 3 16,612 2022/23 2022/23 Sustainability Manager 2,358 5,142 2019/20 (baseline) 2019/20 (baseline) 7,144 3,451 43 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 SUSTAINABILITY CONTINUED DELIVERING A CLIMATE RESILIENT PORTFOLIO CONTINUED ESG TARGETS | | Relevant | Relevant | | | | --- | --- | --- | --- | --- | | Target | material issue | UN SDG Status Performance commentary | | | | Reduce energy | Energy & carbon | | | Like-for-like Workspace portfolio | | intensity by 5% | management | | | We achieved a 5% reduction in average energy intensity across the portfolio, compared to last year. This was mainly driven by | | | | | Achieved | significant reduction in gas use across the portfolio, which oset a 3.6% increase in electricity consumption due to higher | operational activity across our sites. We invested over £8m this year on various energy eciency initiatives across the portfolio, including LED lighting, presence detection sensors, smart building management systems, secondary glazing and heat pumps. We also ran extensive customer engagement campaigns to reduce whole building energy consumption including our successful participation to the CUBE UK energy savings competition. Whole portfolio Our portfolio is inherently energy ecient when compared to industry benchmarks. The average energy intensity across our 2 combined portfolio is 129 kWhe/m /year, which is 19% better than current UK Green Building Council energy performance target for net zero carbon buildings. Reduce scope 1 Energy & carbon Like-for-like Workspace portfolio emissions by 5% management We achieved a significant reduction of 27% in gas related emissions across the portfolio. This was primarily driven by roll out of across the portfolio Achieved smart Building Energy Management Systems across a number of buildings, optimisation of temperature set points and timing controls and implementation of over 70 HVAC upgrade projects. Currently over 30% of our portfolio is fossil fuel free (all electric or served by district heating). | All new developments | Energy & carbon | | Like-for-like Workspace portfolio | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | and refurbishments | management | | We continue to implement our sustainable development framework across all major constructions and refurbishments. This | | | | | | | | | | designed to be net | | Achieved | framework ensures all our projects meet the net zero carbon brief. We also undertake whole-life carbon analysis at key design | | | | | | | | | | zero carbon, aiming | Responsible | | stages to help us further reduce embodied carbon by optimising design and material choices. Estimated embodied carbon of | | | | | | | | | | | | | | | | | | | 2 | | 2 | | to achieve embodied | procurement | | our current projects at Leroy House, Havelock Terrace, Riverside and Chocolate Factory is 230 kgCO | | | | | 2 /m | , 504 kgCO | 2 /m | , | | | | | | | 2 | | 2 | | | | | | carbon of less than | | | 469 kgCO | 2 /m | and 291 kgCO | 2 /m | respectively. Overall, we achieved a 51% reduction in greenhouse gas emissions from capital | | | | | 2 | 500 kgCO | 2 /m | | | goods per sq. ft. from a 2019/20 base year. | | --- | --- | --- | --- | --- | | Increase renewable | | Sustainable | | Like-for-like Workspace portfolio | | energy supply and | | procurement | | 12 sites are equipped with solar panels and generated 191,629 kWh of green electricity in the past year, equivalent to the annual | | source 100% | | | Achieved | electricity usage of 64 typical UK households. Three additional solar projects are currently being implemented, amounting to | | renewable electricity | | | | an annual generation capacity of 78,543 kWh once installed. We also continue to source 100% renewable electricity from our | utility provider (REGO-backed). Whole portfolio 14 sites have solar panel installations. 44 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 SUSTAINABILITY CONTINUED DELIVERING A CLIMATE RESILIENT PORTFOLIO CONTINUED ESG TARGETS CONTINUED | | Relevant | Relevant | | | | --- | --- | --- | --- | --- | | Target | material issue | UN SDG Status Performance commentary | | | | Increase the % of EPC | Energy & carbon | | | Like-for-like Workspace portfolio | | A and B rated areas in | management | | | This year we upgraded 620k sq. ft. of our portfolio to A/B rated energy performance certificates (EPC) by installing high | | the portfolio by 10% | | | Achieved | eciency lighting and HVAC systems. Overall we increased A/B rated areas by 15%, bringing 43% of our portfolio holding to | an A or B EPC rating. Whole portfolio Following the energy eciency upgrades, over 43% of our core portfolio is rated EPC A/B. | All development | Energy & carbon | | Like-for-like Workspace portfolio | | --- | --- | --- | --- | | projects to be | management | | A total of 20 buildings are BREEAM certified in our portfolio. No new projects were completed this year. All projects in the | | BREEAM Excellent | | Not | pipeline are being designed to achieve an ‘Excellent’ BREEAM certification and A rated EPC (B for refurbishments). | | and EPC A (B for | | applicable | | refurbishments) Achieve recycling rate Waste and Like-for-like Workspace portfolio of >76%, divert 100% recycling We achieved an average recycling rate of 79% across the portfolio. A total of 2,825 tons of waste was generated across the waste from landfill Achieved portfolio, comprising of 68% post consumer waste, 21% general waste, 6% food and 5% bottom ash. and remove single use plastics from cafés Our approach to sustainable waste management Sustainable management of waste is both a priority for us and our customers. To ensure our people follow the right behaviours on waste management we ran 16 awareness events in 2022/23 and continued to advocate correct recycling via signage, posters and email communications, resulting in a significant increase in our recycling rate across our centres to 79%. We have also teamed up with FareShare, a charity redistributing surplus food from the UK’s top food companies to charities and community groups. For every food waste collection, a meal is donated via FareShare to those most in need. So far 1,300 meals have been donated. 45 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 SUSTAINABILITY CONTINUED DELIVERING A CLIMATE RESILIENT PORTFOLIO CONTINUED ESG TARGETS CONTINUED Relevant Relevant Target material issue UN SDG Status Performance commentary Benchmark water Water Like-for-like Workspace portfolio consumption and Our average water consumption intensity (where we have visibility) across the historic portfolio is within GRESB standard drive reduction in use Roll practice. We will continue to roll out water meters across the sites where we don’t have visibility with a view to accurately forward benchmarking our portfolio water consumption. Increase greenery and Nature and Like-for-like Workspace portfolio biodiversity across the biodiversity We have reviewed industry guidance and developed a biodiversity policy setting out our approach to nature and biodiversity. portfolio, targeting at Achieved We will be updating the document in line with TNFD guidance this coming year. Driven by our sustainable development least 15% improvement framework, we will significantly enhance Biodiversity Net Gain (BNG) across our two development projects – Havelock Terrace in biodiversity net gain (100% BNG) and Shaftesbury (74% BNG). on development projects Refine climate risk Climate change Whole portfolio assessment and create adaptation and We have reassessed our core portfolio’s exposure to physical climate risk using latest climate models and used probabilistic adaptation plans for resilience Achieved models to assess value at risk to business. We have also reviewed transition risk to business taking into account the acquisition assets exposed to of the McKay portfolio. Find more detail in our TCFD section along with an explanation of our mitigation strategy on page 92. hazards | Enhance green travel | Sustainable | | Whole portfolio | | | --- | --- | --- | --- | --- | | infrastructure across | transport | | We have a total of 32 EV charging points across the portfolio, which were utilised over 3,000 times in the past year, saving | | | the portfolio | | Achieved | 23 tCO | e. We have also upgraded site facilities to encourage green transport and have installed an additional 25 showers and | 2 50 cycling racks across the portfolio. 46 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 SUSTAINABILITY CONTINUED DELIVERING A CLIMATE RESILIENT PORTFOLIO CONTINUED CASE STUDY ### Redeveloping Chocolate Factory in Wood Green ### The redevelopment of | Like many of Workspace’s | The current design is estimated | | | | | --- | --- | --- | --- | --- | | | | | 2 | Chocolate Factory is a perfect | | buildings, Chocolate Factory has | to emit 291 kCO | 2 /m | in embodied | | | a long and rich history. Whilst it | carbon, a significant reduction | | | example of how preserving the | | is now home to 40 customers, | from the defacto option which | | | | ### heritage of a building goes with activities ranging from entailed the demolition of an old ### luxury wallpaper designers to water tower, an industrial-era hand in hand with enhancing streetwear brands and artists, enclosed bridge and low-rise ### its environmental performance the site was a sweets storage buildings. All of these manufacturing facility towards building elements will now be Bryony Gerega the end of the 19th century. repurposed into meeting spaces Head of Development and site amenities. Operational | Chocolate Factory is now one of | energy and carbon reduction is | | --- | --- | | Workspace’s main redevelopment | also central to the project’s | | projects, and will upgrade 38,000 | design, which will include high | | sq. ft. of business space. Careful | performing windows and internal | | design considerations led us to | insulation, as well as decarbonised | | preserve most of the old | heating through the installation | | structure and give a second life | of heat pumps. | to unique features such as the THE CHOCOLATE FACTORY IN NUMBERS historic façade, exposed bricks The project is part of the wider and ironwork. mixed-use regeneration scheme at this location, including 230 ## These design choices both residential units and 72 aordable 38,000 sq. ft. preserve the site’s heritage but housing units with a new public OF REFURBISHED SPACE also drastically reduce the square and significant project’s carbon emissions. landscaping improvements. ## Excellent TARGETING BREEAM EXCELLENT RATING ### 2 ## 291 kgCO e/m NLA ### 2 EMBODIED CARBON (71% LESS THAN INDUSTRY BENCHMARKS) ## 39% Bryony Gerega EXPECTED IMPROVEMENT ON Head of Development PART L ENERGY STANDARDS FOR The Chocolate Factory, REFURBISHED SPACE Wood Green 47 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 SUSTAINABILITY CONTINUED DELIVERING A CLIMATE RESILIENT PORTFOLIO CONTINUED DRIVING ENERGY REDUCTION ACROSS THE PORTFOLIO Driving energy reduction is a key priority APRIL 2022 TO MARCH 2023 ENERGY USE INTENSITY (kWhe/m 2 NLA) for the business and we have invested over £8m this year in ecient lighting, presence- detection sensors, smart Building Energy Electricity intensity (kWhe/m 2 ) 2025 UKGBC NZC target (kWhe/m 2 NLA) Management Systems and heat pumps to | | | 2030 UKGBC NZC target (kWhe/m | 2 NLA) | | --- | --- | --- | --- | | | remove reliance on gas boilers. We have | | 2 | | | | 2035 UKGBC NZC target (kWhe/m | NLA) | | 300 | closely monitored each property’s energy | | | performance and optimised temperature controls and timers. As a result, we have decreased our portfolio energy intensity by 250 5% across the like-for-like Workspace portfolio. Taking into account the acquisition, the average energy intensity of our core portfolio 2 is 129 kWhe/m . This represents a 7.5% increase from last year’s average energy intensity due to high energy consumption associated with some of the properties we have recently acquired. We have also 200 witnessed increased occupational activity across our centres compared to the last two years of the pandemic, which has also contributed to an increase in electricity use 150 in customer occupied areas. Following integration of the McKay portfolio, we are creating a targeted energy reduction programme for the high consuming buildings which will be rolled out this coming year. We expect to see a significant drop in the energy 100 intensity profile of these properties as a result. The graph shows the energy intensity of all properties in the oce portfolio. All buildings but 15 meet the 2020 UKGBC energy performance target for net zero carbon 50 buildings (depicted by yellow line) and 30 buildings already meet 2030 target (depicted by blue line). 0 PROPERTIES 48 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 SUSTAINABILITY CONTINUED DELIVERING A CLIMATE RESILIENT PORTFOLIO CONTINUED CASE STUDY ### Significantly reduced energy intensity at Edinburgh House ### At every building I manage, One of our flagship buildings in responding to seasonality and ### I always look for the small | South London, Edinburgh House, | building occupancy patterns. | | | --- | --- | --- | | formerly a 1960s housing block, | | operational improvements that | | was redeveloped in 2019 into a | These measures drove an 11% | | ### will make a dierence in bright and open business centre, reduction in energy intensity ### home to 78 businesses. across the building. reducing energy consumption. ### Every kWh saved helps us to Whilst it achieved a BREEAM This is a great example of how ### Very Good certification and a eective operational energy stay on track with our B rated Energy Performance reduction initiatives can be. ### sustainability targets Certificate, it showed an Whilst significant retrofit unusually high energy intensity investments are sometimes Domenico Pallucci at the start of 2022. essential, cost-free operational Facilities Manager optimisations on pre-existing As a result, our Facilities equipment can also prove to be Management team amended very powerful energy savers. the heating and cooling controls strategy and operational schedules so as to precisely meet occupants’ needs and avoid superfluous out-of-hours energy consumption. For instance, the building’s chiller and boilers are respectively isolated in winter and summer months and are only operating when necessary, EDINBURGH HOUSE IN NUMBERS ## 11% REDUCTION IN ENERGY INTENSITY SINCE THE START OF THE YEAR. ## 34% Domenico Pallucci Facilities Manager REDUCTION IN GAS CONSUMPTION IN Edinburgh House, 2022/23 VERSUS 2021/22. Vauxhall 49 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 SUSTAINABILITY CONTINUED DELIVERING A CLIMATE RESILIENT PORTFOLIO CONTINUED EPC R ATINGS Whilst our portfolio is already compliant with EPC SCHEDULE WORKSPACE PORTFOLIO CASE STUDY the current Minimum Energy Eciency ### Standards (MEES) regulation, requiring all EPC upgrades units to hold a valid EPC with a minimum rating of E, the UK Government is planning to increase requirements to a minimum rating of B by 2030. We are working towards an annual increase of A/B rated space of 10% to 2030. A 14% B 29% This year, following an investment of over £8m C 31% in HVAC equipment, lighting upgrades and D 23% insulation works across 41 properties, we have E 3% increased the proportion of A/B rated spaces | from 28% to 43%. | EPC SCHEDULE McKAY PORTFOLIO | | | | --- | --- | --- | --- | | | | Print Rooms | Leather Market | | | | EPC C to B | EPC C to B | Based on the projects we have already 21,000 sq. ft. project 2,800 sq. ft. project delivered, we estimate the total investment | needed to upgrade our portfolio to EPC A/B | | Phasing out our buildings’ reliance on gas | A small but ambitious project, the | | --- | --- | --- | --- | | by 2030 will be c.£45-60m (c.£7-8m each | | boilers is core to our decarbonisation strategy. | refurbishment of the third floor in the Lafone | | year). However, the actual additional | | | House building at Leather Market is a great | | investment needed each year will be lower | | At Print Rooms, our teams removed the gas | example of energy eciency improvements. | | as part of this expenditure is covered by | | fired heating system and installed a Variable | Our team entirely removed the gas heating | | our ongoing maintenance capex. | A 16% | Refrigerant Flow (VRF) system using heat | system to install heat pumps. LED lighting | | | B 29% | pumps to provide decarbonised heating and | was also installed along with presence | | | C 22% | cooling to the building. | detection sensors. | D 26% LED lights were also installed across the Operational optimisation is as important E 7% building in order to further reduce electricity as ecient equipment. Our teams have EPC SCHEDULE WHOLE PORTFOLIO demand. therefore enhanced the metering infrastructure and added new automatic meters as part of Building Energy Management System installation. ## 43% A/B RATED PROPERTIES A 15% B 28% ## £8m C 28% D 25% INVESTED IN 2022/23 E 4% IN EPC UPGRADES 50 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 SUSTAINABILITY CONTINUED Relevant UN SDGs Listening to our people Whilst we gather employee ### Strategic pillar: 2 feedback via an annual ### Looking after our people survey, our People Team have also launched an employee suggestion scheme to As an employer of 280 people, client of over Diversity encourage feedback and 800 suppliers and oce space provider for Our diversity is our strength and the first step idea sharing all year long. over 4,000 customers, we have a responsibility to improving on diversity is to measure it. to create a culture that fosters fairness, 90% of our employee base provided personal To keep delivering the best to wellbeing, inclusion and diversity, and to diversity data, and we have now published our customers, we keep our support people to perform at their best. our first gender pay gap report. As part of ear to the ground and collect our ongoing eorts, we continued to roll out formal feedback twice a year. Our culture our unconscious bias and anti-harassment This helps us evolve our oer Change starts at home. Whilst our employees training and have launched an employee to best meet our customer believe in our commitment to sustainability support network. Building on our equal needs. We have also and our core values, our business is opportunities hiring policy, we are introduced a customer committed to delivering continuous implementing inclusive recruitment practices feedback policy to ensure improvement and fostering a cohesive (such as anonymised CVs) and utilising our customers have a direct culture, where everyone feels valued and alternative hiring channels to widen access to line to communicate with us. knows how they can contribute to the profession. A breakdown of the number of Through this policy, we aim Company’s goals. Initiatives such as town hall directors, senior managers and all employees to cater to customer needs meetings and regular business unit updates, by gender is set out on pages 151 and 152. in a timely and consistent Executive Committee site visits, internal manner. shadowing days, employee suggestion Wellbeing scheme and employee support networks are Workspace strive to provide spaces where all contributing to a positive company culture. people can thrive and enjoy coming to work. This applies both to our customers and our employees. From oering outstanding physical and mental health benefits to our sta, to delivering a bespoke programme of wellbeing themed events to our customers (ranging from puppy therapy to financial wellbeing and mindfulness awareness), we go above and beyond to support the wellbeing of our people. ## 80% WORKSPACE INCLUSIVITY SCORE ## 1,600 ## 69% CUSTOMERS BENEFITTED FROM FAVOURABLE WELLBEING INITIATIVES ENGAGEMENT SCORE 51 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 SUSTAINABILITY CONTINUED LOOKING AFTER OUR PEOPLE CONTINUED ESG TARGETS Relevant Relevant Target material issue UN SDG Status Performance commentary Support and enhance Wellbeing A total of 23 employee wellbeing events and initiatives were delivered, reaching a total of 600 attendees. Over 160 employees the wellbeing of our utilised our wellbeing cash back programme, with total claims value of c.£28k. We received an average employee wellbeing employees and Achieved score of 79%, based on our annual employee survey. A number of wellbeing questions were included in the survey to gain a customers holistic understanding of employee expectations. These included questions on satisfaction with our wellbeing oering, work load management, stress management and managerial support. A total of 57 customer wellbeing events were hosted centrally (including 50 wellbeing events and seven sessions on financial wellbeing), benefitting over 1,600 customers. All events received very positive feedback with average score 4.9/5 star score. In addition, the centre teams partnered with local gyms and businesses to host a further 37 wellbeing focused initiatives. Based on insights from our mid-year customer survey, customers who attended wellbeing events were 15% more likely to be brand promoters. Improve diversity Diversity and A key initiative for us this year was to better understand the diversity of our existing employees. Over 90% of our employees across all levels of inclusion provided personal data which enabled us to benchmark our performance. We also published our first gender pay gap report business and embed Achieved and created an action plan to address the gap. We continued to roll out unconscious bias and harassment training to a total inclusive behaviours of 105 employees. Throughout the year we celebrated dierent cultures and launched our first employee network to support into our culture people with caring responsibilities. We were pleased to receive an inclusivity score of 80% in our recent employee survey. Champion compliance Human rights Workspace are an accredited Living Wage employer and both our employees and contractors are paid at London Living Wage with living wage and and fair pay levels. This year we ensured new contractors that were onboarded as part of the McKay acquisition were also paid the living modern slavery across Achieved wage. To drive compliance, Workspace’s new supplier code of conduct is mandated across all contracts and formally included the supply chain in our supplier on-boarding procedure. We also worked with a third party to conduct a modern slavery audit of our cleaning supplier. Support professional Skills and We supported over 17 employees to complete accredited training, including 10 employees who were sponsored for our newly development and employment launched Leadership and Management programme. In total we delivered 363 hours of professional training to our employees career progression of Achieved (women – 232 hours and men – 131 hours), including over 100 hours of Chartered Institute of Personal and Development our people coaching and people skills training. Widen access to Skills and As part of our new recruitment policy, we are implementing a number of inclusive recruitment practices (such as hiring profession and drive employment, managers training, anonymised CVs and utilising alternate recruitment channels). We also engaged with our charity partner local employment Diversity and Achieved Single Homeless Project (SHP) and supported the successful hiring of one of their clients with our cleaning contractor. This within our operations Inclusion previously unemployed person is now permanently employed on our portfolio as a member of the cleaning team. We and across our supply continued our engagement with SHP and delivered a successful employability workshop to support their clients with chain employability skills. Throughout the year we continued our engagement with our suppliers on employment related opportunities. We are pleased to see that a total of 23 apprentices are employed as part of our supply chain contracts. 52 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 SUSTAINABILITY CONTINUED LOOKING AFTER OUR PEOPLE CONTINUED CASE STUDY ### Creating a diverse and inclusive business | We are very proud of our | – We published our first gender | | | | --- | --- | --- | --- | | business values and welcoming | pay gap report (see investor | 31% | 24% | | culture. We strongly believe that | website). | | | | | | FIRST GENERATION | ENGLISH NOT AS | | the success of our business | – We implemented inclusive | | | | | | OF THEIR FAMILY | A FIRST LANGUAGE | | depends on our people and are | recruitment practices including | | | TO GO TO committed to providing a anonymised CVs and hiring UNIVERSITY working environment which is manager training. inclusive of all cultures, where ## 23% everyone feels welcome, and We are always striving to do NATIONALITY ## in which we celebrate dierent better and build on current 11% OTHER THAN experiences and perspectives. initiatives. To start monitoring 50+ YEARS OF AGE BRITISH our diversity performance and | We have launched a series of | set a diversity and inclusivity | | | | --- | --- | --- | --- | | initiatives to support diversity | improvement plan, it was | | | | and inclusion: | important to get a deeper | | | | | | 30% | 30% | | – All our employees have | understanding of the diversity of | | | | | | UNDER 30 YEARS | IDENTIFY AS BAME | | completed unconscious bias | our workforce. This year, for the | | | OF AGE training and we are rolling out first time, we collected additional anti-harassment training. data from our employees to – Our first diversity network better understand our diversity. ## 6.5% called ‘Supporting Others’ was Although this was entirely ## 28% launched, providing a safe voluntary, we achieved a 90% IDENTIFY AS LGBTQ WITH CARING space for colleagues to response rate which is a RESPONSIBILITIES | support each other and share | testament to our employees’ | | | --- | --- | --- | | their experience on balancing | desire to support a strategy | | | work and caring | towards more diversity and | 57% | | responsibilities. | inclusion within the business. | IDENTIFY | AS FEMALE Satpreet Dhariwal ### We celebrate dierent Senior HR Manager ### experiences and perspectives 53 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 SUSTAINABILITY CONTINUED LOOKING AFTER OUR PEOPLE CONTINUED CASE STUDY CASE STUDY ### Our approach to Our approach to ### employee wellbeing customer wellbeing Creating an environment that ### fosters wellbeing is in our DNA. ### We are proud of the stellar ### reviews our customers give ### following each wellbeing event Stacy Lyden-Sauppé Events Manager | We prioritise the health and wellbeing of our | Building on last year’s success, we have | | --- | --- | | employees. We are proud to oer a wide | continued to deliver a series of wellbeing | | range of benefits, including Health Shield, | events for our customers. Our puppy therapy | | which subsidises wellbeing treatments. Over | events were once again extremely popular. | | 160 employees utilised Health Shield, with a | We have also diversified our oer to include | | total claims value of c.£28k. | more hands-on wellbeing sessions, which we | call ‘wellbeing’, including pottery workshops We continue to oer seminars on mental and and terrarium building, that have been physical health, financial wellbeing, and shown to significantly reduce stress. stress management. A total of 23 employee wellbeing events and initiatives were On average, our ‘wellbeing’ events received delivered, reaching a total of 600 attendees. 5/5 star ratings from participants. EMPLOYEE WELLBEING IN NUMBERS CUSTOMER WELLBEING IN NUMBERS | 79% | 5/5 | | --- | --- | | EMPLOYEES AGREE THAT WORKSPACE | POST EVENT STAR RATING AWARDED | | CARES ABOUT THEIR WELLBEING | BY PARTICIPANTS | | 23 | 57 | | --- | --- | | WELLBEING EVENTS ATTENDED BY | CUSTOMER WELLBEING EVENTS | | 600 EMPLOYEES | REACHING 1,600 PEOPLE | 54 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 SUSTAINABILITY CONTINUED Relevant UN SDGs Driving positive social impact ### Strategic pillar: | | 3 | As a major provider of oce | | --- | --- | --- | | Supporting our | | space to over 4,000 of | | communities | | London’s brightest | businesses, Workspace is in a unique position to address Social impact is inherent to Workspace’s some of the most pressing business model. We support employment- social issues in the capital. led regeneration of London by investing in some of the most deprived areas of the Thanks to our provision of capital, enabling employment opportunities high quality work space in all for local people and boosting local spend. parts of London, we support local employment We have a strong culture of charitable giving opportunities for many SMEs. and volunteering. Working closely with our We also support independent charity partner Single Homeless Project, we businesses and enhance local have made significant impact in alleviating economic activity through homelessness across London. our operations and customer footfall. In London, we manage over 60 sites across 15 boroughs. Through our centre teams, we In London, homelessness has aim to build meaningful relationships with increased by 47% in the past local communities and charities. We work 10 years, and the proportion closely with our customers to implement 1 of NEET young people aged engagement initiatives that support the 16-17 has reached 3.4%. local communities. This is why we are committed to using our centres as hubs for driving positive social impact amongst local communities, through a focus on skills and education and homelessness prevention. 1. Not in education, employment or training. ## £ 600K SOCIAL VALUE GENERATED ## 180 ## 620 BENEFICIARIES OF SKILLS Joe raised £985 for SHP as AND EMPLOYMENT VOLUNTEERING HOURS part of a skydiving challenge PROGRAMME 55 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 SUSTAINABILITY CONTINUED SUPPORTING OUR COMMUNITIES CONTINUED ESG TARGETS Relevant Relevant Target material issue UN SDG Status Performance commentary Roll out our Skills and We successfully launched InspiresMe across five centres. These included Kennington Park, Brickfields, Mare Street, Cargo community skills employment Works and Chocolate Factory. Over 160 students benefitted through our CV workshops and career sessions and 20 students and employment Achieved were hosted for work placements. A total of 12 customers participated in the InspiresMe programme. The responses from programme school partners and customers were extremely positive with 100% of the schools who took part agreeing they were keen to | InspiresMe across | Local social and | | continue with this initiative next year. | | --- | --- | --- | --- | | five centres | economic impact | | | | Works in partnership | Skills and | | We raised over £110,000 for SHP, including providing funding for a full-time employability coordinator. A number of our | | with SHP to prevent | employment | | employees supported SHP throughout the year and delivered over 620 volunteering hours. This year we also hosted an | | homelessness in | | Achieved | employability workshop for SHP clients where we ran a daylong session on business and IT skills. | | London | Charitable giving | | | Support local food Local social and We ran 38 community engagement initiatives across our centres in partnership with local charities, including 17 food bank banks and charities economic impact collections which were hugely popular with our customers. We also partnered with local charity, Community TechAid, and across our centres Achieved supported them with the donation of over 70 pieces of electronic equipment. Overall, we contributed £162k through our to drive greater Charitable giving lettings in kind programme, providing free space and meeting rooms to local charities. community impact Assess and enhance Local social and We have created a social value framework that helps us align our activities to issues that are most material to the business. social value generated economic impact The framework also enables us to adopt a stakeholder value approach, ensuring we positively impact our employees, our across our portfolio Achieved customers, our suppliers and our local communities. Charitable giving To help us baseline our current performance, we worked with Social Value Portal to assess our social value contribution. In total Wellbeing we generated over £600k of direct social value across our material issues – wellbeing, responsible business practices, local community and charity partnerships, employment and skills and customer stewardship. We also worked with our suppliers and Skills and customers to drive additional social value (i.e. our indirect impact) worth £280k, mainly through our outreach on employment employment and skills. We plan to further enhance our social value in the coming year by setting actionable goals under each of the material issues. Diversity and Inclusion ### We really enjoyed participating in InspiresMe Human rights ### and fair pay and spending time to pass on knowledge. ### It was great to see how it had benefitted the ### students by the end of the week Customer at Kennington Park 56 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 SUSTAINABILITY CONTINUED SUPPORTING OUR COMMUNITIES CONTINUED SOCIAL VALUE WE HAVE CREATED SOCIAL VALUE CREATED – £604,747 This is the first year we have worked with WORKSPACE – SOCIAL VALUE FY 22/23 Social Value Portal to quantify the social 4 value we create. The National TOMs 1 STRATEGIC FOCUS Framework has been used to calculate the financial value associated with each of our 3 initiatives, which is deemed ‘additional’ to LOOKING AFTER OUR PEOPLE SUPPORTING OUR COMMUNITIES business as usual. The table provides a breakdown of various initiatives and social value created by our direct business activities. IMPACT BENEFICIARIES Separately, we have also calculated the 1. Responsible and Inclusive Practices £206,608 indirect value generated through our Employees Customers CommunitySuppliers Charity 2. Charity and Community Support £188,447 collaboration with our suppliers and customers. 3. Wellbeing £1 07,828 4. Innovation – Customer Stewardship £88,476 IMPACT THEMES 5. Skills and Employment – Direct £13,388 Responsible and Employment Charity and Wellbeing Inclusive practices and skills community support WORKSPACE – SOCIAL VALUE FY 22/23 Area Social Value Created Wellbeing – £65.8k invested to deliver wellbeing events for customers (including event manager’s time) – £16.5k invested to deliver wellbeing campaigns for sta (including Charity, Wellbeing and Social Committee members’ time) – £25.5k delivered through all employees having access to a comprehensive wellbeing programme (Thrive, Health Shield, etc.) Responsible and Inclusive Practices – 33 employees received the unconscious bias training and 175 employees received the harassment training (£64.9k social value delivered) – 24 employees benefitted from funding for further studies (£0.5k social value delivered) – £1.2m spent with non-profit organisations as suppliers (£141k social value delivered) Charity and Community Support – 45 hours of skilled volunteering (SHP employability workshop, procurement training) – £4.5k social value delivered – 624 hours of unskilled volunteering – £10.6k social value delivered – 693 hours of CMs’ time spent to support the local community (foodbanks, fundraisers) – £11.7k social value delivered – £161.6k in-kind contributions (lettings, business rates, room bookings, electronic equipment, SHP donation) Innovation – Customer Stewardship – £88.5k invested to deliver four London’s Brightest Businesses breakfasts and seven master classes (including event manager’s time) Skills and Employment – Direct – 10 weeks of InspiresMe work placement supported by Workspace (£1.9k social value delivered) – 676 sta hours invested in delivering InspiresMe (£11.4K social value delivered) Skills and Employment – Indirect – £211k social value delivered through key suppliers hiring of homeless, NEET, ex-oenders and people with disabilities 5 – 261 weeks of apprenticeships delivered by our key suppliers (£65.7k social value delivered) – 10 weeks of InspiresMe work placements with customers (£1.9k social value generated) Picture caption 2 57 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 SUSTAINABILITY CONTINUED SUPPORTING OUR COMMUNITIES CONTINUED CASE STUDY CASE STUDY ### SHP employability workshop InspiresMe | In October 2022, we were delighted to | InspiresMe is Workspace’s community | | --- | --- | | support the hiring of one of Single Homeless | outreach programme, focused on skills and | | Project’s (SHP) clients by our cleaning | employment. The aim of the programme is | | contractor, Olivers Mill. We hope this success | to work alongside our customers to provide | | story is the first of many, and we are | inspiration, knowledge, support and | | continuing to focus several of our SHP | experience to individuals within our | | volunteering opportunities around | communities who are most at risk of NEET | | employability skills. | (Not in Education, Employment or Training) | and to help them to reach their full potential. In November 2022, 11 Workspace employees took part in an employability workshop with As a provider of oce space to a diverse SHP clients. The aim of the session was to range of SMEs, we are in a unique position to help SHP clients with creation of CVs and broker a partnership between local schools interview skills. and our customers in order to improve the employability skills of underprivileged young Building from a positive initial feedback from Londoners. The programme gives our INSPIRESME IN NUMBERS | SHP clients, our charity committee are | | | | customers the opportunity to deliver CV | | --- | --- | --- | --- | --- | | looking to organise more employability | | | | workshops, interview training sessions, | | workshops in the coming year. | | | | participate in career fairs and host work | | | 4.3/5 | 4.3/5 | 100% | | experience placements throughout the year. SATISFACTION SCORE SATISFACTION SCORE CUSTOMER ENGAGEMENT FROM STUDENTS FROM SCHOOLS SCORE In the last year we launched InspiresMe across five centres in various London Boroughs – 180 secondary school students benefitted from the programme and 12 customers participated. 58 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 SUSTAINABILITY CONTINUED SUPPORTING OUR COMMUNITIES CONTINUED ### Looking ahead Q: What are your plans for the coming year? Our inherently sustainable business model gives us an advantageous position in the industry, whether it’s our lower energy use intensity, lean embodied carbon refurbishments and the positive socio- economic impact we generate through our focus on employment led regeneration. However, we realise we need to continue to deliver high performance in order to maintain our market leadership position. To this end, we will continue to roll out an accelerated programme of refurbishment and ensure our portfolio is decarbonised and future proofed ahead of the 2030 deadline. Energy and carbon management continues to ## Q&A be our top priority and we will be focusing our eort to further reduce our energy intensity. Sonal Jain Head of Sustainability With the launch of our social impact framework | Q: What has been your biggest achievement? | focused on social issues that are material to | | | --- | --- | --- | | I am incredibly proud of the progress we have | the business, we have set ourselves a number | | | made this year. We have reduced our total | of actionable targets that will help us deliver | | | greenhouse gas emissions by 16% across our | enhanced social value in the coming year. | | | like-for-like portfolio, upgraded over 12% of our | This includes a key focus for us to champion | | | portfolio to EPC A/B, boosted our customer | skills and employment across our value chain. | | | ESG advocacy score and delivered significant | | As a team, we always think | | social value through our wellbeing and skills | We are fortunate to be Home to London’s | | ### twice when it comes to energy, and employment programme. However, for Brightest Businesses, many of them are in the ### all our electricals have automatic me personally the biggest highlight was green economy sector themselves. We realise ### collective ownership of our sustainability our duty of care towards our customers, standby mode, our oce lights agenda. Right at the start of the year we set ensuring they have a productive and ### are always turned o when the a number of business-wide sustainability sustainable workspace. We ran a successful ### targets, which were then translated into customer engagement programme this year unit is not in use, and we open individual objectives. Each of our teams have and plan to further enhance it. In addition, ### our windows before the aircon worked with undeterred determination to we will actively explore collaboration ### achieve these targets. I am so pleased by the opportunity with our customers to jointly gets considered way each Workspace employee has embraced deliver on sustainability programmes across a sustainability mindset. the portfolio. Owen O’Neill, founder at Uni Compare, winner of the energy savings competition at Frames 59 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### OUR KEY PERFORMANCE INDICATORS ### Financial performance 1. NET RENTAL INCOME 2. TRADING PROFIT AFTER INTEREST 3. EPRA NTA PER SHARE Link to strategy Link to strategy Link to strategy Driving Delivering Being Driving Delivering Being Driving Delivering Being customer-led operational sustainable customer-led operational sustainable customer-led operational sustainable growth excellence growth excellence growth excellence 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 receivable after Trading profit after interest is net rental income, less EPRA NTA per share is a definition of net tangible assets as payment of direct property expenses, including service charge administrative expenses and finance costs but excluding set out by the European Public Real Estate Association. It costs and other direct unrecoverable property expenses. It is exceptional finance costs. It is a key measure for Workspace represents net assets minus any intangible assets and financial important to Workspace because it measures our operating and determines dividend growth, and so the returns we derivatives and excluding deferred taxation relating to performance. It is a key driver of trading profit, which in turn provide to our shareholders. It measures the underlying valuation movements and derivatives, divided by the number determines dividend growth. performance of the business. The Executive Directors are of shares in issue. It is important to Workspace as it provides incentivised on trading profit after interest. stakeholders with information on our net asset value. It is a key external measure for property companies and is used to benchmark against share price. Movement in 2022/23 Movement in 2022/23 Movement in 2022/23 Net Rental Income increased by 34.5% (£29.9m) to £116.6m. Trading profit after interest increased by 29% (£13.8m) to Our EPRA NTA per share decreased by 6.2% (£0.61) to £9.27. Underlying net rental income was up 17.4% (£14.6m), reflecting £60.7m. The main driver was the £29.9m growth in net rental This was driven by the underlying decrease in the valuation of the strong increase in rent per sq. ft. achieved in the year, higher income. Total administrative expenses increased by £2.2m to our portfolio, dividends paid and share issue, oset by trading average occupancy resulting in a reduction in empty rates, £21.5m which includes £2.1m in respect of the McKay business profit in the year. other non-recoverable costs and unrecovered service charge. acquired in the year and a £0.2m reduction in share based The net impact of acquisitions and disposals in the current and costs, leaving a £0.3m underlying increase in administration prior years was a £15.2m increase in net rental income. costs. Net finance costs increased to £34.4m in the year, reflecting the increased level of debt following the McKay acquisition and the increase in SONIA during the period. ## £116.6m £60.7m £9.27 | | 2022 | | | 86.7 | | | 2022 | 46.9 | 2022 | 9.88 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 2023 2023 2023 | | | | | 9.27 | 116.6 60.7 | | | | | | 2021 2021 2021 | | 38.7 | 81.5 | | 9.38 | | | | | | 60 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 OUR KEY PERFORMANCE INDICATORS CONTINUED ### Financial performance continued 4. DIVIDEND PER SHARE 5. LIKE-FOR-LIKE RENT ROLL GROWTH 6. LIKE-FOR-LIKE OCCUPANCY Link to strategy Link to strategy Link to strategy Driving Delivering Being Driving Delivering Being Driving Delivering Being customer-led operational sustainable customer-led operational sustainable customer-led operational sustainable growth excellence growth excellence growth excellence 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 issue. Dividend per Like-for-like properties are those with stabilised occupancy, Like-for-like occupancy is the area of let space within the share is a key measure of the returns we are providing to our excluding recent acquisitions and buildings impacted by like-for-like portfolio divided by the net lettable area of the investors. It is important to Workspace because we aim to significant refurbishment or redevelopment activity. Rent roll is like-for-like portfolio. It is important as it gives us vital provide good returns for our shareholders, and also to work the current annualised net rent receivable for occupied units at information on the performance of our core properties. It within our REIT requirements for income distribution. the date of reporting. Monitoring rent roll growth on the drives pricing and operational decisions and can be a measure like-for-like portfolio is an important measure of the underlying of customer demand for the space. Again, this is monitored on performance of the business and a key driver of future net a weekly basis in management meetings and it is also a key rental income. We monitor the like-for-like rent roll on a weekly performance indicator in our monthly Board reporting. basis in management meetings and it is also a key performance indicator in our monthly Board reporting. Movement in 2022/23 Movement in 2022/23 Movement in 2022/23 The increase of 20% (4.3p) in dividend per share was due The like-for-like rent roll has increased by 7.1% (£6.5m) in the year, Like-for-like occupancy stable at 89.1%. to the increased trading profit in the year. driven by a 9.4% uplift in rent per sq. ft. from £37.12 to £40.61. ## 25.8p +7.1% 89.1% | | 2022 | | | | 21.5 | | 2022 | 8.7 | 2022 | 89.6 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 2023 2023 2023 | | | | | 7.1 | 25.8 89.1 | | | | | | 2021 -23.9 2021 | | 17.75 | 2021 | 81.6 | | | | | | | 61 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 OUR KEY PERFORMANCE INDICATORS CONTINUED ### Financial performance continued 7. PROPERTY VALUATION 8. TOTAL PROPERTY RETURN 9. TOTAL SHAREHOLDER RETURN Link to strategy Link to strategy Link to strategy Driving Being Driving Delivering Being Driving Delivering Being customer-led sustainable customer-led operational sustainable customer-led operational sustainable growth growth excellence growth excellence 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 the valuation Total Property Return is the return for the year combining the Total Shareholder Return is the return obtained by a demonstrates the value we are delivering to our shareholders valuation movement on our portfolio and the income achieved shareholder, calculated by combining both share price and a measure of how well we are managing our buildings and in the year. This figure is produced by MSCI, an independent movements and dividend receipts. This is important to driving rental income. The property portfolio is independently Investment Property Databank (‘IPD’), and is compared to a Workspace because it shows the value that our shareholders valued, currently by CBRE. We aim to enhance the value of benchmark group so that we can see how we are performing receive from investing in Workspace shares. We aim to create our properties through active asset management, including relative to similar companies. Total Property Return, and maximum value for our shareholders, and as such this measure refurbishment and redevelopment schemes. The movement performance against the benchmark, form part of the bonus forms part of the performance criteria within our LTIP schemes. in property valuation is a key driver in our EPRA NTA per objectives for the Executive Directors and LTIPs for all people share measure. in schemes. Movement in 2022/23 Movement in 2022/23 Movement in 2022/23 There was an underlying reduction of 3.2% (£91m) in our The decrease in total returns in the year was driven by Total Shareholder Return has decreased due to a reduction in property valuation, taking the valuation to £2,741m. This was the decrease in the property valuation, although income the share price over the year, oset by dividends paid in the year. mainly driven by an outward shift in valuation yields oset by returns increased, we have significantly out performed increases in estimated rental values. See Property Valuation the IPD benchmark demonstrating the resilience of section of the Business Review on page 81 for more detail. our property portfolio. ## £2,741m 1.10% -34.0% | | 2022 | | | | 2,402 | | 2022 | 6.49 | -12.3 | 2022 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 2023 2023 -34.0 | | | 1.10 | 2023 | 2,741 | | | | | | | 2021 -5.86 2021 | | 2021 | | 2,324 | | 8.6 | | | | | 62 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 OUR KEY PERFORMANCE INDICATORS CONTINUED ### Non-financial performance 1. CUSTOMER ENQUIRIES 2. VIEWINGS 3. OFFER LETTERS Link to strategy Link to strategy Link to strategy Driving Delivering Being Driving Delivering Being Driving Delivering Being customer-led operational sustainable customer-led operational sustainable customer-led operational sustainable growth excellence growth excellence growth excellence Why this is important to Workspace Why this is important to Workspace Why this is important to Workspace Customer enquiries represent the number of enquiries we This is the number of viewings of individual units by new Once they have completed a viewing, if they are interested in receive for our space. Enquiries come through our website, via or existing customers looking for new or additional space. the space, prospective customers can request an oer letter brokers, via phone, from walk-ins or existing customers looking Viewings are important because they provide an opportunity containing pricing information and lease terms. Tracking the to expand, contract or move locations. Measuring enquiries to get customers into our centres to see first-hand the quality number of oer letters is important as it allows us to assess helps us to assess the customer demand for our product. Our of our space, and to drive lettings. It is important to monitor the success of our viewings and the demand for our product. internal marketing platform generates enquiries, and by the conversion of enquiries to viewings and then of viewings increasing marketing activity we can drive enquiries, for to oer letters. example around the launch of a new building. Movement in 2022/23 Movement in 2022/23 Movement in 2022/23 There was an average of 798 monthly enquiries over the year, There was an average of 518 monthly viewings over the year, On average 315 oer letters were issued each month in the with an average of 932 monthly enquiries in the final quarter. with a good conversion rate from enquiry to viewing and, year, which represents 61% of viewings. as with enquiries, a strong final quarter. ## 798 518 315 | | 2022 | | | | | | 917 | 2022 | 598 | 2022 | 322 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 2023 2023 2023 | | | | | 798 518 | 315 | | | | | | | 2021 2021 2021 | | 328 | 247 | 739 | | | | | | | | 63 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 OUR KEY PERFORMANCE INDICATORS CONTINUED ### Non-financial performance continued 4. LETTINGS 5. RENEWALS 6. EMPLOYEE VOLUNTEERING DAYS Link to strategy Link to strategy Link to strategy Driving Delivering Being Driving Delivering Being Being customer-led operational sustainable customer-led operational sustainable sustainable growth excellence growth excellence 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 complete. It is a key This is the number of lease renewals we sign with existing This is the number of days that our employees spent measure for Workspace because lettings drive our net rental customers per month. These are important as they volunteering or fundraising for our selected charities. income and therefore trading profit. Lettings set the tone demonstrate how sticky our customers are, track customer Supporting our communities is a key part of our sustainability for estimated rental values, and so impact our property retention and allow us to capture reversion within our portfolio. strategy and it is important for our employees to get involved. valuation too. Movement in 2022/23 Movement in 2022/23 Movement in 2022/23 We saw a good level of lettings, reflecting customer demand The average number of renewals per month increased from The number of volunteering days increased significantly from in the year. This, alongside strong renewal activity, drove rental 15 in the prior year to 61. This helped drive the uplift in rent roll 68 to 78. We worked closely with our charity partner Single pricing growth in the year. in the year. Homeless Project. For example, we delivered a range of employability sessions, support for local foodbanks and upgrades to hostel accommodation. ## 109 61 78 | | 2022 | | | | | 127 | 2022 | 15 | 2022 | 68 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 2023 2023 2023 | | | | 109 | 78 61 | | | | | | | 2021 2021 2021 | 10 | 13 | 96 | | | | | | | | 64 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### OUR BUSINESS MODEL OUR SIX KEY STRENGTHS 1 Unique portfolio Owning and actively manage a ## Six key predominantly London-based portfolio of high-quality assets. Page 65 2 Customer proposition Providing SMEs with blank canvas spaces ## strengths help in dynamic London locations. Page 65 3 Talented people Our teams have the right skills and experience to deliver an excellent ## deliver our customer experience. Page 65 4 A sustainable approach Creating high-quality, energy-ecient buildings that have a positive environmental and social impact. ## purpose and Page 66 5 Prudent financing Managing our balance sheet and focusing on generating sustainable, long-term income. ## stakeholder Page 66 6 Operating platform Managing all interactions with customers through our proprietary platform. Page 66 ## value ### Our sustainable business model creates a flatter, fairer, THE VALUE WE CREATE ### more sustainable London. Our business model is inherently Customer value | sustainable: we invest across the capital, breathing new life | Page 67 | | --- | --- | | into old buildings and creating hubs of economic activity | Broader value creation | | that help flatten London’s working map. | Page 68 | Metal Box, Southwark 65 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 OUR BUSINESS MODEL CONTINUED UNIQUE PORTFOLIO TALENTED PEOPLE CUSTOMER PROPOSITION ### How we deliver long-term ### stakeholder value Built up over more than 35 Our employees are the drivers We provide companies with years, we own a predominantly of our success. We have a blank canvas space on flexible Customer value London-based portfolio of vibrant, diverse and inclusive terms within inspiring buildings Our purpose is to give businesses the freedom high-quality assets. Generally culture, underpinned by a clear in dynamic London locations. to grow. Owning our buildings means we are distinctive, low-rise buildings of purpose and set of values, which We cater to customers who are able to oer customers real freedom – to 30,000 sq. ft. or more, they are continue to score well amongst creative, passionate owners of personalise and flex their space as required. well located around major our sta in annual surveys. SMEs, and being able to express Because we believe that in the right space, transport hubs and vibrant their individuality and teams can achieve more. neighbourhoods, and are often Our dynamic culture helps personality is part and parcel landmarks in their areas. attract and retain people who of their business. Broader value creation align with these values and have We repurpose iconic buildings, invest in We actively manage the a broad range of skills, We continually enhance and revitalising communities and prioritise the portfolio to generate value over experience and backgrounds. In refine the customer experience: wellbeing of our customers and people. the long term. We target 90% 2022/23, we introduced a range this year we rolled out inclusive occupancy on our like-for-like of initiatives to directly address pricing, created a smoother Shareholder value properties and, as occupancy employee feedback to improve customer journey and upgraded We drive capital appreciation and rental growth rises, we can enhance pricing. communications, collaboration, the quality of space across over from our expertise in urban regeneration in diversity and wellbeing. For 400,000 sq. ft. of our portfolio. London and active asset management. | Our ownership model gives us | example, we launched informal | We dedicate around 30% of | | --- | --- | --- | | the flexibility to enhance the | face-to-face engagement | our buildings to attractive | | quality of space and implement | sessions between our | well-designed communal space, | | the latest sustainability features. | Leadership team and small | including meeting rooms, | | We achieve this through our | groups of centre sta, where | showers, cycle storage and cafés. | | refurbishment and | they can provide direct feedback. | | | redevelopment pipeline, | | Our ongoing brand campaign, | | expanding our footprint and | We are always looking for ways | refreshed on a quarterly basis, | | driving rental uplift. We also | to upskill our teams, having | clearly articulates our oer | | continue to grow our pipeline | rolled out customer-first training | and highlights our position as | | through strategic acquisitions, | across the business this year. | home to London’s brightest | | drawing on our deep knowledge | We are starting to trial a | businesses, with brand | | of the London property market to | Government-sponsored Career | awareness at 62%. | | help accelerate our growth plans. | Pathway programme to help | | junior centre sta develop their careers. ## 400k+ Record Hall, SQ. FT. OF NEW AND Hatton Garden UPGRADED SPACE 66 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 OUR BUSINESS MODEL CONTINUED PRUDENT FINANCINGA SUSTAINABLE APPROACH OPERATING PLATFORM Through our inherently We are focused on generating Our proprietary, in-house sustainable business model sustainable, long-term income, marketing operating platform we create a flatter, fairer, more which we reinvest in enhancing enables us to manage a huge sustainable London. the portfolio and return to volume of customer activity shareholders as dividends. in-house, from enquiries and We repurpose historic buildings, viewings through to lettings, breathing new life into them and We prudently manage our facilities management, billing future proofing them for balance sheet and maintain low and renewals. Direct generations to come. This results levels of gearing. The balance relationships with our customers in significantly lower embodied sheet includes a mixture of bank means we can work with them carbon, while also installing the debt, private placements and to enhance the sustainability most ecient systems to reduce loans and a corporate bond. of our buildings. operational carbon. Most of our debt is long-term, unsecured and bears interest at These ongoing interactions, We play a key role in the fixed rates. We are committed as well as our regular surveys employment-led regeneration to maintaining conservative provide real-time market of areas across London: our leverage, which we expect to intelligence. This year we have buildings become hubs of reduce further through our introduced new customer economic activity, flattening disposals programme, and we touchpoint surveys to generate London’s working map and have significant headroom to more regular feedback. bringing prosperity into our financial covenants. emerging areas. We also oer Our platform is scalable which employment-focused support Our continuous programme means we can grow our portfolio to disadvantaged young people. of refurbishments and without incurring significant We prioritise the wellbeing of redevelopments drives rental operating cost growth, as shown our customers and people, and growth and enhances by our recent purchase of work closely with them to drive valuations. It is this combination McKay. This platform gives us more sustainable behaviours of income and capital value a major competitive strength in our centres. growth that makes Workspace and insight on the SME market. a compelling investment. Our Dealing with such high levels of ecient and scalable platform customer activity requires a enables us to grow the business dynamic culture and first-class over time without significantly in-house expertise. increasing operating costs. Metal Box, Southwark 67 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 OUR BUSINESS MODEL CONTINUED CREATING CUSTOMER VALUE FUEL TANK IN NUMBERS ### We love the fact we can easily ### mould the space ## 83% Kai Price CUSTOMER Co-founder & Director, Att Pynta ADVOCACY SCORE Location Fuel Tank, Deptford ## 15 MWh How have you made your space your own? ELECTRICITY SAVED As a Scandinavian homeware business, it was important for us to the make the space feel homely and cosy. We designed the space ourselves, wanting clients to see our space and envisage how their home could ## B look. We painted the walls, laid down herringbone floors, added soft furniture and EPC R ATING used rugs to create small living room set ups. Why did you choose this space? We needed a space large enough to show o our many products – everything from ## 95% vases and lamps to curtains and rugs. We liked the fact we could easily mould OCCUPANCY LEVEL the space and move things around when, for example, new ranges arrive. We also loved the way you can enter our showroom via three glass doors from the ground floor, which gives o an air of professionalism. Was the location important? Both my co-founder and I live locally in south east London and love being a stone’s throw from Greenwich Village and Deptford. It’s home to so many artists and creative types and felt like a perfect fit for us. Att Pynta at Fuel Tank, Deptford 68 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 OUR BUSINESS MODEL CONTINUED CREATING BROADER VALUE KENNINGTON PARK IN NUMBERS ### We know local businesses ### value Workspace’s contribution ## 85% ### to the local area CUSTOMER ADVOCACY SCORE Nicolas Baptise Founder of Bokit’la, French-Caribbean street-food vendor ## 91.1% OCCUPANCY LEVEL Location St Mary’s Churchyard, opposite Kennington Park business centre How have you seen Bokit’la grow in Oval? We’ve had a food stall in this area selling our ## 13 MWh French Caribbean food for 11 years. We’ve ELECTRICITY GENERATED built a great niche of customers who know BY SOLAR PANELS and love our food. We considered other London locations but we’ve decided to focus on Oval as it’s such a growing, vibrant area. Do you receive custom from Workspace’s centre? ## 945 Our new position, located between Oval ELECTRIC VEHICLE CHARGERS Station and Workspace’s Kennington Park business centre, means lots of people walk past our stall on the way to work – a fair amount of our week-day footfall comes from Workspace’s centre. We know other local businesses value the contribution the centre makes to the livelihood of the area. What is next for Oval? The Kennington Park centre has contributed to growing a small economy in Oval and I think it will now continue to become an even more vibrant area. We love sharing our cuisine and I am confident about Bokit’la’s growth within the area. Founder of Bokit’la French food kiosk, opposite Kennington Park 69 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### PRINCIPAL RISKS AND UNCERTAINTIES Risk management is an integral part of all The Board assesses and monitors the principal EMERGING RISKS CLIMATE CHANGE Workspace activities. Our culture drives us to risks of the business and considers how these consider the risks and opportunities of any risks could best be mitigated, where possible, Emerging risks are discussed monthly and Workspace recognises that climate change new business decision. We focus on key risks through a combination of internal controls and promptly escalated to the Board as required. is having, and will continue to have an which could impact the achievement of our risk management. The financial year has seen increasing impact on our business. Similar strategic goals and therefore on the a period of political uncertainty and Emerging risks considered during this year to other owners of real assets, our properties performance of our business. Risks are challenging macroeconomic conditions with included: employee recruitment and are at risk from physical climate-related considered at every level of the business high inflation and increasing interest rates. retention; the war in Ukraine; the issues including changes in temperature including when approving corporate macroeconomic environment including extremes leading to increased cooling and transactions, property acquisitions and Whilst the combination of these factors inflation, rising interest rates and potential heating loads, changes in precipitation disposals and whenever undertaking presents an increased risk of recession and impact on property valuations and operating leading to flash flooding, and physical refurbishment and redevelopment projects. potential adverse impact on property values performance; the acquisition and integration damage to buildings from extreme weather and construction costs, the key risks that of the McKay estate; political disruption events, which in turn can lead to greater We have created a positive culture within could aect the Group’s medium-term caused by instability within the UK stresses on our properties. Workspace which encourages open performance and the factors which mitigate government and ongoing industrial strikes communication and engagement. This enables these risks, have not materially changed from across the UK. It is now widely recognised that climate sta from all areas of the business to feel free those set out in the Group’s Annual Report change issues present a financial risk to the to raise risks or opportunities, no matter how and Accounts 2022. global economy. To improve transparency, small, to their managers and teams. This FINANCIAL POSITION the Task Force on Climate-related Financial culture means that information is communicated Workspace recognises that climate change Disclosures (TCFD) framework provides across the business well. We make every will have an impact on our business. Our During the year the Group continued to guidance to companies on how to improve eort to engage sta with risk-related issues, properties are at risk from physical climate control costs and manage capital reporting on climate-related financial risks particularly those which are new and emerging related issues and as a business, we are also at expenditure to protect its strong financial and opportunities. Workspace supports the so that we are managing our lower-level risks risk from the transition to a net zero economy position. Management regularly reviewed TCFD recommendations and is committed as well as the more strategic ones. in the form of increasing regulation and performance reports and forecasts to to implementing them. changes in customer demand. While we have understand the impact on cash flows and a portfolio that is well-positioned to withstand debt covenants. The TCFD framework includes risk the impact of climate change, we are actively management. A separate risk register for managing our climate change risk and have Following the acquisition of McKay Securities climate change-related risks is managed by put in place mitigation measures for the most in May 2022, the Group amended two the Head of Sustainability. Details of the risks material impacts. existing McKay facilities, a £65m loan from considered are provided on pages 96 to 99. Aviva and a £135m bank revolving credit facility(‘RCF’). This £135m McKay RCF and the Group’s existing £200m RCF were both EMPLOYEES extended by one year in December 2022 | further strengthening our financial position | The health, safety and well-being of our | | --- | --- | | and leaving no material debt maturities until | employees remain a top priority. For the | | June 2025. | majority of our employees, we are able to | oer a flexible working environment to As of 31 March 2023, the Group had cash enable a healthy work-life balance alongside and undrawn credit facilities of £148m along a competitive benefits package for all. with substantial headroom on its financial covenants and met all loan covenants throughout the year. Our risk management framework Pages 170 to 171 70 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED CHANGES TO PRINCIPAL RISKS CUSTOMER DEMAND 1 There have been two significant changes to the principal risks over the course of the last year, Principal risk Impact the disclosure of climate change as a separate principal risk (previously included in ‘Regulatory’) Opportunities for growth could be missed and the removal of specific references to Covid following full removal of Government restrictions. without a clear branding strategy to meet the Severe changing demands of flexible working models. Whilst the uncertainty from the Covid No change pandemic has significantly reduced there are Probability (post-mitigation) Increase other macroeconomic factors including the ProbableUnlikely 4 war in Ukraine, weak economic growth, Possible New risk current levels of inflation and interest rate rises that could also impact potential customers. Change from last year 1 Risk impact No change, however, this may be impacted 5 3 – Fall in occupancy levels at our properties by other ongoing economic factors including 10 – Reduction in rent roll the war in Ukraine, inflation and interest 7 – Reduction in property valuation rate rises Risk appetite Mitigation 2 – Broad mix of buildings across London with 6 dierent oce experiences at various price Medium 8 points to match customer requirements – Pipeline of refurbishment and Link to strategy redevelopments to further enhance the portfolio 9 – Weekly meeting to track enquiries, viewings and lettings to closely track customer trends PROBABILITY (POST-MITIGATION) and amend pricing as demand changes – Centre sta maintain ongoing relationships Driving Delivering Being with our customers to understand their customer-led operational sustainable requirements and implement change to growth excellence meet their needs – Business plans are stress tested to assess Relevant KPIs the sensitivity of forecasts to reduced levels of demand and implement contingency Financial Low Severe IMPACT measures ### 1, 2, 5, 6, 8 – Marketing campaigns maintain awareness of Workspace’s oer and content and KEY: PRINCIPAL RISKS Non-financial messaging are regularly reviewed to remain | 1. Customer demand Page 70 | 6. Cyber security Page 73 | | | | --- | --- | --- | --- | | | | relevant and appealing | 1, 2, 3, 4, 5 | | 2. Financing Page 71 | 7. Resourcing Page 74 | | | | 3. Valuation Page 71 | 8. Third-party relationships Page 75 | | | | 4. Acquisition pricing Page 72 | 9. Regulatory Page 75 | | | | 5. Customer payment default Page 73 | 10. Climate change Page 76 | | | 71 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED FINANCING VALUATION 2 3 Principal risk Impact Principal risk Impact There may be a reduction in the availability Macroeconomic uncertainty, increasing of long-term financing due to an economic costs or rising interest rates could have an Severe High recession, which may result in an inability to impact on asset valuations, whereby property grow the business and impact Workspace’s yields increase and valuations fall. This may ability to deliver services to customers. Probability (post-mitigation) result in a reduction in return on investment, Probability (post-mitigation) project viability and negative impact on Risk impact covenant testing. Unlikely Possible – Inability to fund business plans and invest in new opportunities Risk impact Change from last year Change from last year – Increased interest costs – Financing covenants linked to loan to value – Negative reputational impact amongst (‘LTV ’) ratio lenders and in the investment community No change – Impact on share price No change, with the risk impact from inflation and interest rate rises remaining elevated | Mitigation | | | | Mitigation | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | – We regularly review funding requirements | | | | – Market-related valuation risk is largely | | | | | for business plans, and we have a wide | | | | dependent on independent, external | | | | | | Risk appetite | | | | Risk appetite | | | | range of options to fund our forthcoming | | | | factors. We maintain a conservative | | | | | plans. We also prepare a five-year business | | | | LTV ratio which can withstand a severe | | | | | plan which is reviewed and updated | Low | | | decline in property values without | Medium | | | | annually. Further detail is provided in the | | | | covenant breaches | | | | | Viability Statement on page 87 | | | | – We monitor changes in sentiment in the | | | | | – We have a broad range of funding | Link to strategy | | | London real estate market, yields and | Link to strategy | | | | relationships in place and regularly review | | | | pricing to track possible changes in | | | | | our refinancing strategy. We also maintain | | | | valuation. CBRE, a leading full-service real | | | | | a specific interest rate profile via the use of | | | | estate services and investment organisation, | | | | | fixed rates on our loan facilities so that our | | | | provides twice yearly valuations of all | | | | | interest payment profile is stable | | | | our properties | | | | | | Driving | Delivering | Being | | Driving | Delivering | Being | | – Loan covenants are monitored and reported | customer-led | operational | sustainable | – Typically our building or unit refurbishment | customer-led | operational | sustainable | | to the Board on a monthly basis and we | growth | excellence | | projects are completed within short time | growth | excellence | | | undertake detailed cash flow monitoring | | | | frames, giving us good visibility on costs, | | | | | and forecasting | | | | expected rents and property values at | | | | | | Relevant KPIs | | | | Relevant KPIs | | | | – During the first six months of 2022/23 we | | | | completion. We continually assess the | | | | | refinanced the McKay RCF and Aviva loan | Financial | | | viability of our refurbishment and | Financial | | | | providing further certainty over our funding | | | | development projects for optimal timing | | | | | | 2, 4, 9 | | | | 3, 5, 7, 8, 9 | | | | position going forwards | | | | and cost management opportunities, and | | | | | – During the second half of the year we | | | | have flexibility on when to commence | | | | | extended the maturity of the McKay RCF | | | | development. Alternative use opportunities, | | | | | and the Group’s existing RCF by a further | | | | including mixed-use developments, are | | | | | year, providing the Group with adequate | | | | actively pursued across the portfolio | | | | funds for future plans 72 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED ACQUISITION PRICING 4 Principal risk Impact Inadequate appraisal and due diligence of a new acquisition could lead to paying above High market price leading to a negative impact on valuation and rental income targets. Probability (post-mitigation) Risk impact – Negative impact on valuation Possible – Impact on overall shareholder return Mitigation Change from last year – We have an acquisition strategy determining key criteria such as location, size and No change potential for growth. These criteria are based on the many years of knowledge and understanding of our market and customer demand Risk appetite – A detailed appraisal is prepared for each acquisition and is presented to the Investment Committee for challenge and Medium discussion prior to authorisation by the Board. The acquisition is then subject to thorough due diligence prior to completion, Link to strategy including capital expenditure and risks associated with ESG concerns – Workspace will only make acquisitions that are expected to yield a minimum return and will not knowingly overpay for an asset Driving Delivering Being – For all corporate acquisitions, we undertake customer-led operational sustainable appropriate property, financial and tax due growth excellence diligence including a review of ESG Relevant KPIs Financial ### 3, 7, 8, 9 Mirror Works, Stratford 73 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED CUSTOMER PAYMENT DEFAULT CYBER SECURITY 5 6 Principal risk Impact Principal risk Impact There remains a risk of an economic downturn A cyber attack could lead to a loss of access given the broader geopolitical climate, to Workspace systems or a network disruption High High inflation and interest rate rises. This could for a prolonged period of time. This could result in pressure on rent collection figures damage Workspace’s reputation and inhibit with a prolonged period of companies failing, Probability (post-mitigation) our ability to run the business. Probability (post-mitigation) leading to a decline in occupancy and an increase in oce vacancies. Risk impact Possible Possible – Inability to process new leases Risk impact and invoice customers Change from last year Change from last year – Negative cash flow and increasing – Reputational damage interest costs – Increased operational costs – Breach of financial covenants No change Probability increased due to the level and Mitigation sophistication of cyber-attacks increasing Mitigation – Cyber security risk is managed using a – Rent collections have improved following mitigation framework comprising network removal of Government restrictions on rent security, IT security policies and third-party Risk appetite Risk appetite collection introduced in response to Covid, risk assessments. Controls are regularly however the economic environment reviewed and updated and include technology remains challenging Low such as next-generation firewalls, multi Low – The risk continues to be mitigated by strong layered access control through to people credit control processes and an experienced solutions such as user awareness training team of credit controllers, able to make quick Link to strategy and mock-phishing emails Link to strategy decisions and negotiate with customers for – Assurance over the framework’s performance payment. In addition, we hold a three-month is gained through an independent maturity deposit for the majority of customers assessment, penetration testing and network – Centre sta maintain relationships with vulnerability testing, all performed annually customers and can identify early signs Driving Delivering Being Driving Delivering Being of potential issues customer-led operational sustainable customer-led operational sustainable growth excellence growth excellence | Relevant KPIs | Relevant KPIs | | --- | --- | | Financial | Financial | | 1, 2, 4, 8, 9 | 2, 4, 8, 9 | Non-financial ### 4, 5 74 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED RESOURCING COMPANY VALUES 7 We have a strong internal culture which encourages independent thought and initiative which Principal risk Impact is articulated in our four key values: Ineective 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) Inadequate resourcing may also result in management being spread too thinly and Low a decline in eectiveness. Change from last year Risk impact – Increased costs from high sta turnover – Delay in growth plans No Change – Reputational damage Mitigation – We have a robust recruitment process Risk appetite to attract new joiners and established interview and evaluation processes with a view to ensuring a good fit with the required Medium skill set and our corporate culture – Various incentive schemes align employee objectives with the strategic objectives of Link to strategy the Group to motivate employees to work in the best interests of the Group and its stakeholders. This is supported by a formal appraisal and review process for all employees Driving Delivering Being – Our HR and Support Services teams run customer-led operational sustainable a broad training and development growth excellence programme designed to ensure employees are supported and encouraged to progress Relevant KPIs with learning and study opportunities Financial ### 1, 2, 4, 5, 6, 8, 9 Mirror Works, Non-financial Stratford ### 1, 2, 3, 4, 5, 6 Know your stu Show we care Find a way Make it fun 75 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED 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 the health and safety could lead to fines or quality of our service oering to customers reputational damage. or could lead to significant disruptions Probability (post-mitigation) Probability (post-mitigation) and delays in any refurbishment or Risk impact redevelopment projects. – Increased costs Low Low – Reputational damage Risk impact Change from last year Mitigation Change from last year – Decline in customer confidence – Increase project or operational costs – Health and safety are one of our primary – Fall in customer demand No change concerns, with strong leadership promoting No change – Weaker cash flow a culture of awareness throughout the – Reputational damage business. We have well-developed policies and procedures in place to help ensure that | Mitigation | | | | any workers, employees or visitors on site | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | Risk appetite | | | | Risk appetite | | | | – Workspace has in place a robust tender and | | | | comply with strict safety guidelines and we | | | | | selection process for key contractors and | | | | work with well-respected suppliers who | | | | | partners. Contracts contain service level | Low | | | share our high-quality standards in health | Low | | | | agreements which are monitored regularly | | | | and safety | | | | | and actions are taken in the case of | | | | – Health and safety management systems are | | | | | underperformance | Link to strategy | | | reviewed and updated in line with changing | Link to strategy | | | | – For key services, Workspace maintains | | | | regulations and regular audits are | | | | | relationships with alternative providers so | | | | undertaken to identify any potential | | | | | that other solutions would be available if the | | | | improvements | | | | | main contractor or third party was unable to | | | | – Sustainability requirements have an | | | | | continue providing their services. Processes | | | | increasing importance for the Group | | | | | | Driving | Delivering | Being | | Driving | Delivering | Being | | are in place for identifying key suppliers and | customer-led | operational | sustainable | and it is a responsibility we take seriously. | customer-led | operational | sustainable | | understanding any specific risks that require | growth | excellence | | We have committed to a net zero Carbon | growth | excellence | | | further mitigation | | | | target of 2030 and we are implementing the | | | | | – Workspace is London Living Wage | | | | TCFD recommendations. We manage our | | | | | | Relevant KPIs | | | | Relevant KPIs | | | | compliant for all service providers since | | | | properties to ensure they are compliant with | | | | | April 2022 | Financial | | | or exceed the Minimum Energy Eciency | Financial | | | Standards (MEES) for EPCs | 1, 2, 4, 5, 6, 8, 9 | 2, 4, 9 | | --- | --- | | Non-financial | Non-financial | | 2, 4, 5 | 4, 5 | 76 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED CLIMATE CHANGE 10 Principal risk Mitigation Impact A failure to recognise that climate change The inherent risk from climate change presents a financial risk to our business is universal, with a high likelihood of risk High alongside changes to our customers’ materialising in the near future resulting in expectations could lead to a significant potentially significant impact on businesses impact on the business. in general. For Workspace, our risk is lower Probability (post-mitigation) when compared to many other real estate businesses, in particular our exposure to Risk impact Possible physical risk. However, transition risk is an – Loss of rent roll industry-wide risk and is impacting all real – Negative impact on value Change from last year estate businesses due to the significant – Reduced occupancy levels environmental impact associated with the – Reputational damage New Principal Risk sector. In response to this, Workspace has been proactively managing its risk exposure. Our mitigation strategy includes: – Annual assessment of our climate risk exposure, using climate modelling to inform Risk appetite our risk management plan – Ongoing review of control measures and their eectiveness by our Risk Management Low Group and Environmental Sustainability Committee Link to strategy – Active management of acute physical risks such as floods and storms across the portfolio through emergency preparedness, site maintenance surveys and business continuity planning – Delivery of an accelerated net zero and Driving Delivering Being EPC upgrade plan across the portfolio customer-led operational sustainable to manage transition risk growth excellence – Introduction of climate objectives linked with remuneration, to incentivise focused action Relevant KPIs – Long-term energy contracts in place to hedge price and availability risk Financial – Stretching carbon targets for our ### 2, 4, 5, 6, 8, 9 development projects to minimise reliance on raw materials and exposure to increasing Non-financial oset costs ### 1, 2, 4, 5 Brickfields, Hoxton 77 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### BUSINESS REVIEW ## £140.1m TOTAL RENT ROLL ## £60.7m TRADING PROFIT AFTER INTEREST ## £2.7bn PROPERTY VALUATION Brickfields, Hoxton 78 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 BUSINESS REVIEW CONTINUED | Customer activity | Alongside our new lettings, we have seen | Rent roll | | As occupancy levels have stabilised, we have | | --- | --- | --- | --- | --- | | We have seen resilient demand over the year | strong renewal activity in the year, with over | Total rent roll, representing the total | | been able to move pricing forward across our | | with an average of 109 lettings per month, | 700 customers renewing at a retention rate | annualised net rental income at a given date, | | like-for-like portfolio with rent per sq. ft. | | despite the extreme hot weather over the | of 88%. | was up 6.5% to £140.1m at 31 March 2023. | | increasing by 9.4% in the year to £40.61. | | summer and disruption caused by tube and | | | | Like-for-like occupancy was marginally down | | | | Rent Roll | £m | | | rail strikes. Good activity levels have | | | | by 0.4% to 89.1% in the year, with an overall | 1 | | At 31 March 2022 | 131.6 | | | --- | --- | --- | --- | | continued into the first quarter of 2023/24. | | | increase in like-for-like rent roll of 7.1% (£6.5m) | | | Like-for-like portfolio 6.5 | | to £97.7m. | Monthly average Completed projects 3.4 | Q4 | Q3 | | Q2 | | Q1 | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | Projects underway and design stage (1.2) | We have seen ERV per sq. ft. increase by 13.6% | | 22/23 | 22/23 | 22/23 | | 22/23 | | | | in the year and if all the like-for-like properties Enquiries 932 724 780 757 McKay – London 0.8 were at 90% occupancy at the CBRE estimated Viewings 589 479 495 508 McKay – South East 0.1 rental values at 31 March 2023, the rent roll Lettings 114 110 106 108 McKay – Non-core 0.7 would be £116.7m, £19.0m higher than the Disposals (1.8) actual rent roll at 31 March 2023. At 31 March 2023 140.1 Completed projects 1. Adjusted for McKay portfolio acquired in May 2022. There are ten projects in the completed projects category, with overall rent roll | The total Estimated Rental Value (ERV) of the | increasing by 36.5% (£3.4m) in the year to | | --- | --- | | portfolio, comprising the ERV of the like-for- | £12.8m, with rent per sq. ft. up 19.7% and | | like portfolio and those properties currently | occupancy up 10.3% to 80.2%. | undergoing refurbishment or redevelopment (but only including properties at the design If the buildings in this category were all at 90% stage at their current rent roll and occupancy) occupancy at the ERVs at 31 March 2023, the was £194.6m at 31 March 2023. rent roll would be £17.2m, an uplift of £4.4m. Like-for-like portfolio The like-for-like portfolio represents 70% of the total rent roll as at 31 March 2023. It comprises 38 properties with stabilised occupancy excluding recent acquisitions, buildings impacted by significant refurbishment or redevelopment activity or contracted for sale. Six months ended Like-for-like 31 Mar 23 30 Sep 22 31 Mar 22 Occupancy 89.1% 89.6% 89.5% Occupancy change (0.5%) 0.1% 3.8% Rent per sq. ft. £40.61 £38.59 £37.12 Rent per sq. ft. change 5.2% 4.0% 2.8% Rent roll £97.7m £94.5m £91.2m The Light Bulb, Wandsworth Rent roll change 3.4% 3.6% 6.4% 79 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 BUSINESS REVIEW CONTINUED We are progressing with the disposal of the Net rental income was up 34.5% (£29.9m) nine non-core light industrial and logistics to £116.6m. assets with the timing dependent on market 31 Mar 31 Mar conditions. Contracts have been exchanged 2023 2022 £m for the sale of five of these properties in May Underlying rental income 110.7 97.9 2023. Overall occupancy across these sites Unrecovered service at 31 March 2023 was 87.7% with a rent roll of charge costs (4.0) (4.4) £5.2m, an increase of £0.7m since acquisition. Empty rates and other Assuming 90% occupancy (or current non-recoverable costs (8.3) (10.4) occupancy if higher) at the ERVs at 31 March 2023, the rent roll at these buildings, would Services, fees, be £6.5m, an uplift of £1.7m. commissions and sundry income – 0.7 Disposals Underlying net In July 2022 we completed the sale of a rental income 98.4 83.8 medical centre in Newbury, which had rent roll 9 Greyfriars Road, ReadingBiscuit Factory, Bermondsey (CGI) Rent discounts of £0.2m, from the McKay portfolio for £7.2m and waivers – 0.3 (£1.1m ahead of the March 2022 valuation). Expected credit losses (1.1) (1.5) Projects underway – refurbishments McKay Securities Acquisitions 18.5 1.2 | We are currently underway on three | In May 2022, we completed the acquisition | In March 2023 we completed on the sale | | | --- | --- | --- | --- | | refurbishment projects that will deliver | of the McKay portfolio. As at 31 March 2023 | of the Riverside residential component in | Disposals 0.8 2.9 | | 210,000 sq. ft. of new and upgraded space. | the rent roll at these properties was £22.0m, | Wandsworth for £54m (in line with the | Net rental income 116.6 86.7 | | As at 31 March 2023, rent roll was £1.7m, | an underlying increase of £1.6m since | September 2022 valuation) and expect to | | | down £0.4m in the year. | acquisition. The integration is now complete | commence the construction of the new | | The £12.8m increase in underlying rental with all operational activity utilising the commercial buildings (comprising 153,000 sq. income to £110.7m reflects the strong increase Assuming 90% occupancy at the ERVs at Workspace platform. ft. of workshop and oce space), at our cost, in average rent per sq. ft. achieved over the 31 March 2023, the rent roll at these three on a phased basis in the second half of 2023. last year. buildings once they are completed would As at 31 March 2023 the rent roll at the seven be £7.8m, an uplift of £6.0m. London assets was £8.2m, an increase of Profit performance With energy costs hedged until October 2024 £0.8m since acquisition with occupancy at Trading profit after interest for the year was up and higher average occupancy levels compared Projects at design stage 72.6%. A number of these properties are being 29.4% (£13.8m) on the prior year to £60.7m. to the prior period there was a decrease of | These are properties where we are planning | refurbished, including sub-division to adapt to | | | | | | --- | --- | --- | --- | --- | --- | | | | | 31 Mar | 31 Mar | £0.4m in unrecovered service charge costs. | | a refurbishment or redevelopment that has | the Workspace multi-let model. We have seen | £m | 2023 | 2022 | | | not yet commenced. As at 31 March 2023 the | ERV per sq. ft. increase by 8% since acquisition | | | | | | | | Net rental income 116.6 86.7 | | | Higher average occupancy has also | | rent roll at these properties was £5.8m. | and assuming 90% occupancy at the ERVs at | | | | | | | | Administrative expenses | | | contributed to a reduction in empty rates | 31 March 2023, the rent roll at these seven – underlying (18.0) (17.7) with non-recoverable costs decreasing by buildings, would be £11.6m, an uplift of £3.4m. £2.1m to £8.3m. Net revenue from services, Administrative expenses fees, commissions and sundry income – acquisitions (2.1) – As at 31 March 2023 the rent roll of the decreased by £0.7m driven by the cost of South-East oce and business park portfolio, Administrative expenses our enhanced customer events programme. 1 comprising thirteen buildings, was £8.5m, – share based costs (1.4) (1.6) an increase of £0.1m since acquisition with Net finance costs (34.4) (20.5) Rent collection for the year has remained occupancy steady at 88.3%. Assuming 90% Trading profit after strong with 98% of rent collected to date with occupancy (or current occupancy if higher) at interest 60.7 46.9 the charge for expected credit losses reducing the ERVs at 31 March 2023 the rent roll would to £1.1m in the year. be £11.2m, an uplift of £2.7m. 1. These relate to both cash and equity settled costs. 80 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 BUSINESS REVIEW CONTINUED | Growth in net rental income included a £18.5m | The loss on sale of investment property of | | --- | --- | | contribution from recent acquisitions, primarily | £0.7m resulted from costs associated with | | the McKay portfolio acquired in May 2022. | the disposal of the residential scheme at | Riverside, Wandsworth and the profit on Underlying administrative expenses remained disposal of the medical centre at Newbury under tight control, increasing by £0.3m to from the McKay portfolio. £18.0m, which included inflationary pay rises | of 3% but with higher increases in more junior | Exceptional costs include one-o items relating | | --- | --- | | roles Administrative expenses also included | to the acquisition and integration of McKay, | | £2.1m in respect of the McKay business, | including the cost of buying-out the McKay | | with synergies realised ahead of original | pension scheme, and implementation of a new | | expectations. Share based costs decreased by | finance and property management system. | £0.2m to £1.4m driven by lower vesting levels and assumptions. Adjusted underlying earnings per share, based on EPRA earnings adjusted for non-trading Net finance costs increased by £13.9m to items and calculated on a diluted share basis, £34.4m in the year reflecting the increased was up 22.9% to 31.7p. level of debt following the McKay acquisition | and the increase in SONIA during the period. | Dividend | | --- | --- | | The average net debt balance over the year | Our dividend policy is based on trading | | was £281m higher than the prior year, whilst | profit after interest, taking into account our | | the average interest cost increased from 3.1% | investment and acquisition plans and the | | to 3.7%. | distribution requirements that we have as a | REIT, with our aim being to ensure the total Loss before tax was £37.5m compared to dividend per share in each financial year is a profit of £124.0m in the prior year. covered at least 1.2 times by adjusted underlying earnings per share. 31 Mar 31 Mar £m 2023 2022 With the strong improvement in trading Trading profit performance and confidence in the longer after interest 60.7 46.9 term prospects of the Company, the Board Change in fair value of is recommending a final dividend of 17.4p per investment properties (93.1) 68.7 share, taking the full year dividend to 25.8p (Loss)/gain on sale of (2022: 21.5p), to be paid on 4 August 2023 investment properties (0.7) 7.8 to shareholders on the register at 7 July 2023. Exceptional costs (4.3) – The dividend will be paid as a REIT Property Other items (0.1) 0.6 Income Distribution (PID) net of withholding tax where appropriate. (Loss)/profit before tax (37.5) 124.0 Adjusted underlying earnings per share 31.7p 25.8p The change in fair value of investment properties, including assets held for sale, was £93.1m compared to an increase of £68.7m in the prior year. Clerkenwell Workshops, Clerkenwell 81 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 BUSINESS REVIEW CONTINUED Property valuation Like-for-like properties At 31 March 2023, our property portfolio was ENFIELD There was a 0.3% (£6m) underlying decrease Like-for-like Refurbishments independently valued by CBRE at £2,741m, in the valuation of like-for-like properties to Mixed-use redevelopments | an underlying decrease of 3.2% (£91m) in the | £1,887m. This was driven by a 13.6% increase | Acquisition | | --- | --- | --- | | year. The main movements in the valuation | in the ERV per sq. ft. (£216m) reflecting the | | | are set out below: | pricing of recent lettings and renewals, oset | | | BARNET | by a 55bps outward shift in equivalent yield | | £m (£222m). This outward shift typically ranged Valuation at 31 March 2022 2,402 | | HARINGEY | from 25bps to 90bps depending upon location. | WALTHAM | | | | | --- | --- | --- | --- | --- | --- | --- | | Capital expenditure 56 | | | FOREST | | | | | | | | 31 Mar | 31 Mar | | REDBRIDGE | | Acquisitions 434 | | | 2023 | 2022 Change | | | | Disposals (60) | | ERV per sq. ft. £48.00 £42.23 13.6% | | | | | | Revaluation – H1 8 | | Rent per sq. ft. £40.61 £37.12 9.4% | | | | | | Revaluation – H2 (99) | | | | | 1 | | Equivalent Yield 6.2% 5.6% 0.6% Valuation at 31 March 2023 2,741 1 Net Initial Yield 4.7% 4.2% 0.5% ISLINGTON Capital Value BRENT There was an underlying revaluation decrease per sq. ft. £698 £679 2.8% HACKNEY of 3.5% (£99m) in the second half of the year CAMDEN compared to an increase of 0.3% (£8m) in the ISLINGTON 1. Absolute change. SHOREDITCH first half. A summary of the full year valuation KING’S and revaluation movement by property type CROSS STRATFORD BETHNAL is set out below: GREEN NEWHAM PADDINGTON Revaluation increase/(decrease) OLD Valuation STREET TOWER HAMLETS 31 Mar £m 2023 Full year H2 H1 FARRINGDON CITY OF EALING CITY OF LONDON Like-for-like properties 1,887 (6) (21) 15 WESTMINSTER Completed projects 265 12 12 – LONDON | | | | | | WATERLO O | BRIDGE | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | Refurbishments 172 (25) (14) (11) | | | | | CANARY | | HAMMERSMITH | | | | | | | WHARF | | | AND | Redevelopments 33 (17) (10) (7) | | VICTORIA | | | | | | FULHAM | | EARLS COURT | | | | | McKay – London 154 1 (11) 12 KENSINGTON AND HOUNSLOW McKay – South East 114 (13) (21) 8 CHELSEA KENNINGTON McKay – Non-core 116 (41) (34) (7) Sold – (2) – (2) Total 2,741 (91) (99) 8 BATTE R S E A GREENWICH SOUTHWARK WANDSWORTH LAMBETH RICHMOND LEWISHAM UPON THAMES 82 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 BUSINESS REVIEW CONTINUED | A 5% increase in ERV would increase the | McKay | Refurbishment activity | We are on-site at Leroy House, Islington where | | --- | --- | --- | --- | | valuation of like-for-like properties by | We completed the acquisition of McKay | A summary of the status of the refurbishment | we are delivering a refurbished and extended | | approximately £94m whilst a 50bps increase | Securities PLC on 6 May 2022 for a total | pipeline at 31 March 2023 is set out below: | 58,000 sq. ft. business centre which we | | in equivalent yield would decrease the | consideration of £267.6m, comprising £191.1m | | expect to complete in spring 2024. We have | | valuation by approximately £140m. | in cash and 10.5m Workspace shares, and | Our adaptive re-use of existing buildings for | recently commenced major upgrades and | | | £9.4m transaction costs, representing a 14% | refurbishments delivers up to 70% reduction | extensions at The Chocolate Factory, Wood | | Completed projects | discount to NTA acquired (after seller’s | in embodied carbon compared to new | Green and at The Biscuit Factory, Bermondsey. | | There was an underlying increase of 4.7% | transaction costs) of £310.5m. | build schemes. | | (£12m) in the value of the ten completed | | | | | Capex | Capex to | Upgraded and new | | | --- | --- | --- | --- | --- | --- | --- | --- | | projects to £265m. The overall valuation metrics | There was an underlying decrease of 12.1% | | | | | | | | | | Projects | Number | spent | spend | | space (sq. ft.) | | for completed projects are set out below: | (£53m) in the valuation of the McKay portfolio, | | | | | | | Underway 3 £14m £56m 210,000 compared to the acquisition cost. A summary 31 Mar Design stage 7 – £251m 438,000 2023 of the full year valuation and underlying movements for the McKay portfolio from Design stage (without planning) 7 – £382m 577,000 ERV per sq. ft. £34.36 acquisition is set out below: Rent per sq. ft. £28.70 Equivalent Equivalent Yield 6.5% | | | Valuation | | Change | | | Yield | | ERV | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Net Initial Yield 4.3% | £m | | (£m) | | (£m) | Movement | | Movement | | | Capital Value per sq. ft. £475 | London 154 1 +25bps +8% | | | | | | | | | South | Current refurbishments and redevelopments | East 114 (13) +80bps +5% | | --- | --- | | There was an underlying decrease of 12.7% | Non- | | (£25m) in the value of our current | core 116 (41) +235bps +6% | | refurbishments to £172m and a reduction | Total 384 (53) | of 34.0% (£17m) in the value of our current redevelopments to £33m. The valuation metrics for the McKay portfolio are set out below: The most significant movements in this category are a decrease of £8.4m at our light As at 31 March 2023 London South East Non-core industrial property Havelock Terrace, Battersea, No. properties 7 13 10 reflecting the outward movement in industrial ERV per sq. ft. £44.36 £26.67 £10.13 yields and a £8.1m decrease at Rainbow Rent per sq. ft. £38.80 £21.68 £10.59 Industrial Park, Raynes Park, reflecting the Equivalent Yield 6.9% 9.1% 6.4% outward movement in industrial yields and reduction in expected residential values. Net Initial Yield 4.3% 6.8% 4.3% Capital Value per sq. ft. £528 £257 £176 Chocolate Factory, Wood Green (CGI) Leroy House, Islington 83 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 BUSINESS REVIEW CONTINUED | Redevelopment activity | Sustainability | Cash Flow | for cash consideration of £201m (including | | | | --- | --- | --- | --- | --- | --- | | Many of our properties are in areas where there | We have an inherently green property | The Group generates strong operating cash | fees) and net debt acquired of £162m. | | | | is strong demand for mixed-use redevelopment. | portfolio with energy intensity already | in line with trading profit. A summary of cash | | | | | Our model is to use our expertise, knowledge | 19% lower than the industry best practice | flows are set out below: | Rent collection remains robust with 98% of | | | | and local relationships to obtain a mixed-use | standard. Further improving the energy | | rent due for the year collected to date. The | | | | planning consent and then typically to agree | eciency of our buildings is key in helping | There is a reconciliation of net debt in note 16(b) | majority of the amounts still outstanding are | | | | terms with a residential developer to undertake | us to achieve our target of being a net zero | to the financial statements. | covered by rent deposits or by the provision | | | | the redevelopment and construction at no cost | carbon business by 2030. The Workspace | | for doubtful debts. | | | | and limited risk to Workspace. We receive back | portfolio is currently 43% EPC A and B rated, | The overall increase of £344m in net debt | | | | | a combination of cash, new commercial space | an increase of 12% in the year, and we are on | reflects the acquisition of McKay in May 2022 | | | | | | | | | 31 Mar | 31 Mar | | and overage in return for the sale of the | track to upgrade the remainder of our portfolio | | | | | | | | £m | | 2023 | 2022 | | residential scheme to the developer. | to these categories by 2030. We are also | | | | | 1 Net cash from operations after interest 70 58 targeting a reduction in Scope 1 gas emissions | A summary of the status of the redevelopment | | | | | | | by a minimum of 5% each year, whilst continuing | Dividends paid (44) (43) | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | pipeline at 31 March 2023 is set out below: | | | | | | | to procure 100% renewable electricity (REGO | Capital expenditure (60) (31) | | | | | | | | | backed). In the year we also achieved a 5% | Purchase of investment properties (201) (88) | | | | No. of | Residential | | New commercial | | | | | | properties | | | units | | space (sq. ft.) | reduction in operational energy intensity and | | Net debt acquired (162) – a 27% reduction in gas use. Design Property disposals and cash receipts 49 122 stage 3 539 77,000 Other 4 (11) Net movement (344) 7 The three schemes at design stage at The Opening debt (net of cash) (558) (565) Chocolate Factory, Wood Green, Poplar and Closing debt (net of cash) (902) (558) Rainbow, Raynes Park all have planning consent. 1. Excludes £8.8m of VAT receipts relating to sale of Riverside included in ‘Other’. Poplar Business Centre, Poplar (CGI) The Frames, Shoreditch 84 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 BUSINESS REVIEW CONTINUED | Net assets | Total Accounting Return | Financing | All facilities, other than the Secured loan, | | --- | --- | --- | --- | | Net assets decreased in the year by £13m to | The total accounting return for the full year | As at 31 March 2023, the Group had £12m of | are provided on an unsecured basis with | | £1,787m. EPRA net tangible assets (NTA) per | was (3.8)% compared to 8.0% in the year | available cash and £136m of undrawn facilities: | an average drawn debt maturity of 4.1 years | | share at 31 March 2023 was down 6.2% (£0.61) | ended March 2022. The total accounting | | (31 March 2022: 4.2 years). | Drawn to £9.27: return comprises the growth in absolute EPRA amount Facility net tangible assets per share plus dividends £m £m Maturity At 31 March 2023, the eective interest rate EPRA NTA per share £ paid in the year as a percentage of the Private was 4.0% based on SONIA at 4.2%, with 73% opening EPRA net tangible assets per share. Placement 2025- of the net debt (£665m) at fixed rates. The At 31 March 2022 9.88 The calculation of total accounting return is Notes 300.0 300.0 2029 average interest cost of our fixed rate Adjusted trading profit after interest 0.31 set out in note 9 of the financial statements. borrowings was 2.9% and our floating-rate Green Bond 300.0 300.0 2028 Exceptional costs (0.02) bank facilities had an average margin of 1.78% Secured loan 65.0 65.0 2030 Property valuation deficit (0.48) over SONIA. A 1% increase in SONIA would 2023- Share issue (0.19) increase the eective interest rate by 0.3% Bank facilities 249.0 385.0 2025 (at current debt levels). Dividends paid (0.23) Total 914.0 1,050.0 At 31 March 2023 9.27 At 31 March 2023, loan to value (LTV) was The majority of the Group’s debt comprises 33% (31 March 2022: 23%) and interest cover, The calculation of EPRA NTA per share is set based on net rental income and interest paid long-term fixed-rate committed facilities out in note 9 of the financial statements. over the last 12 month period, was 3.8 times comprising a £300m green bond, £300m of private placement notes, and a £65m secured (31 March 2022: 4.8 times), providing good loan facility. headroom on all facility covenants. Shorter term liquidity and flexibility is provided by floating-rate bank facilities totalling £385m which were £249m drawn as at 31 March 2023. The bank facilities comprise £335m of sustainability-linked Revolving Credit Facilities (RCFs) and a £50m acquisition facility put in place for the acquisition of McKay. During the year, our RCF bank facility maturities were extended, with £135m now maturing in April 2025 and £200m in December 2025, with both facilities having the potential to extend by a further year. The £200m RCF also has the option to increase the facility amount by up to £100m, subject to lender consent. The Chocolate Factory, Wood Green 85 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 BUSINESS REVIEW CONTINUED | Financial outlook for 2023/24 | The proceeds from the recently announced | | --- | --- | | Over the last year we have seen stable | exchange for sale of five McKay non-core | | like-for-like occupancy and continued rental | assets for £82m will be used to repay our | | growth driven by good levels of customer | short-term floating rate debt which currently | | demand. Rental income in 2023/24 will be | has an eective interest rate of 6%. The | | underpinned by the 7.1% growth in like-for-like | disposal will result in a reduction in rent roll | | rent roll we have seen over the last year. We | of £3.6m, a reduction in net debt of £82m and | | continue to see good demand and expect to | a net reduction of around £5m per annum in | | see further pricing growth. Rental income | interest costs. On a proforma basis this sale | | growth will also be supported by the letting | reduces LTV by 2% to 31%, increases the | | up of recently completed projects and the | percentage of fixed-rate debt to 80% and | | letting up of refurbished and vacant space | reduces our average cost of debt to 3.8% and | | in the McKay portfolio. | extends the average maturity of drawn debt | to 4.4 years. We are progressing with the sale The current high levels of inflation will impact of the remaining non-core assets valued at on both our service charge and administrative £34m as at 31 March 2023. costs. In relation to service charge costs, where | the majority of the cost is passed on to our | We expect capital expenditure of around | | --- | --- | | customers, we have been able to limit the | £60m over the next year as we progress | | impact on customers by the hedging of our | with a range of planned asset management | | energy costs in October 2021. Sta costs are | projects, including the refurbishments of | | the most significant driver of our administrative | Leroy House, The Chocolate Factory and The | | expenses and, whilst we have limited | Biscuit Factory. This investment incorporates | | inflationary salary increases to 6% for sta | the spend of some £10m per annum to meet | | earning more than £50,000, we have given | our 2030 environmental commitments. | higher increases for those on lower salary levels. Barley Mow, Chiswick 86 Workspace Group PLC Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information # **BUSINESS REVIEW** CONTINUED # **Property statistics** | | Half Year ended | | | | | --- | --- | --- | --- | --- | | | 31 Mar 2023 | 30 Sep 2022 | 31 Mar 2022 | 30 Sep 2021 | | **Workspace portfolio** | | | | | | Property valuation | £2,741m | £2,863m | £2,402m | £2,271m | | Number of locations | 86 | 87 | 57 | 58 | | Leisable floorspace (million sq. ft.) | 5.2 | 5.4 | 4.0 | 3.9 | | Number of leitable units | 4,910 | 4,901 | 4,482 | 4,234 | | Rent roll of occupied units | £140.1m | £134.7m | £111.0m | £102.1m | | Average rent per sq. ft. | £32.86 | £30.03 | £33.26 | £32.28 | | Overall occupancy | 81.5% | 84.0% | 84.3% | 81.2% | | Like-for-like number of properties | 38 | 38 | 39 | 39 | | Like-for-like leitable floor space (million sq. ft.) | 2.7 | 2.7 | 2.8 | 2.9 | | Like-for-like rent roll growth | 3.4% | 3.6% | 6.4% | 2.1% | | Like-for-like rent per sq. ft. growth | 5.2% | 4.0% | 2.5% | (2.1%) | | Like-for-like occupancy movement | (0.5%) | 0.1% | 4.0% | 3.7% | 1. The like-for-like category has been restated in the current financial year for the following: - The transfer out of Riverside to the sold category. 2. Like-for-like statistics for prior years are not restated for the changes made to the like-for-like property portfolio in the current financial year. 3. Overall rent per sq. ft. and occupancy statistics includes the leitable area at like-for-like properties and all refurbishment and redevelopment projects, including those projects recently completed and also properties where we are in the process of obtaining vacant possession. The Strategic Report on pages 1 to 105 was approved by the Board of Directors on 6 June 2023 and signed on its behalf by: **Graham Clemett** Chief Executive Officer **Dave Benson** Chief Financial Officer ![img-11.jpeg](img-11.jpeg) 87 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### COMPLIANCE STATEMENTS GOING CONCERN VIABILITY STATEMENT | The Group’s activities, strategy and | Assessment of prospects | – New lettings at below the average price per | Assessment of viability | | --- | --- | --- | --- | | performance are explained in the Strategic | The Group assesses its prospects primarily | sq. ft. of vacating customers resulting in an | The Board has considered the key risks and | | Report on pages 1 to 105. | through the annual Strategic Review process | overall reduction in average rent per sq. ft. | mitigating factors that could impact the | | | which involves a debate of the Group’s | until like-for-like occupancy levels return | Group, details of which can be found on pages | | Further detail on the financial performance | strategy and business model, consideration | to c.90% | 69 to 76. Those risks that could have an | | and financial position of the Group is provided | of the Group’s principal risks and a review of | – Elevated levels of counterparty risk, with | impact on the ongoing success of the Group’s | | in the financial statements on pages 224 to 250. | the Group’s five-year plan. Particular attention | bad debt significantly higher than pre- | strategy, particularly in light of the current | | | is given to existing refurbishment and | pandemic levels | geopolitical situation, were identified and the | | The Directors have conducted an extensive | redevelopment commitments, long-term | – Continued elevated levels of cost inflation | resilience of the Group to the impact of these | | review of the appropriateness of adopting the | financing arrangements, compliance with | – Further increases in SONIA rates impacting | risks in severe, yet plausible downside | | going concern basis. More details can be | financing and REIT covenants and existing | the cost of variable rate borrowings | scenarios has been evaluated. | | found on page 227. Following this review and | macroeconomic factors. | – Estimated rental value reduction in-line with | | | having made appropriate enquiries, the | | the decline in average rent per sq. ft. and | Sensitivity analyses have been prepared to | | Directors have a reasonable expectation that | The most recent strategy day was held | outward movement in investment yields | understand the impact of the identified risks | | the Group and the Company have adequate | in October 2022 and the Board reviewed | resulting in a lower property valuation | on solvency and liquidity. The specific risks | | resources and sucient headroom on the | the business plan for the five years to | | which were evaluated are shown in the | | Group’s bank loan facilities to continue in | 31 March 2027. | The Group’s activities, strategy and | following table. | | operational existence. For this reason, the | | performance are explained in the Strategic | | | Directors believe that it is appropriate to | Macroeconomic and political issues, including | Report on pages 1 to 105, including a description | | | continue to adopt the Going Concern basis | the war in Ukraine, high levels of inflation and | of the Group’s strategy and business model on | | | in preparing the Group’s accounts. | increased interest rates continue to give rise | pages 32 to 35 and 64 to 68. | | to concerns around the UK economy meaning there is continuing risk of an economic Assessment of time period downturn. Consideration has been given The Board has selected a review period to a number of downside scenarios covering of five years for the following reasons: the period to 31 March 2028. a) The Group’s strategic review covers | The scenarios modelled include a severe | | a five-year period. | | --- | --- | --- | | but realistically possible downside scenario | b) Our current project pipeline spans five | | | based on the following key assumptions: | | years, covering the time for the currently | | – A stalling of the UK economy, with low | | planned major refurbishments and | | levels of GDP growth and inflationary | | redevelopments to progress from initiation | | pressure, resulting in a reduction in | | to completion. | | customer demand over the next two years, | c) The average period to maturity of the | | | compared to current levels | | Group’s committed facilities is 4.1 years. | – Like-for-like occupancy reduces by c.5% | to 85% over the next two years, with | Although financial performance is assessed | | --- | --- | | associated increase in void costs and | over a period of five years, the strategy and | | downward pressure on pricing of new | business model are considered with the | | lettings, and thereafter a gradual recovery | longer-term success of the Group in mind. | | to c.90% by 31 March 2028 | The Directors believe they have no reason | to expect a significant adverse change in the Group’s viability immediately following the end of the five-year assessment period. 88 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPLIANCE STATEMENTS CONTINUED RISK SENSITIVITY ANALYSES Specific risk Risk category Sensitivity analysis Demand for space falls dramatically – Customer demand At the point in the severe scenario modelled where ICR is at its lowest, net rental income would need to reduce impacting occupancy and pricing levels, – Valuation by 36% compared to the year to 31 March 2023. This represents a 30% reduction from the net rental income or customer defaults increase leading included in the severe scenario modelled. to a breach of loan covenants. Property values are adversely impacted – Valuation At the point in the severe scenario modelled that LTV is at its highest, the property valuation would need to fall by the uncertainty in the economy by 42% compared to the valuation as at 31 March 2023. leading to a breach of covenants. Changes in the economic UK – Financing At the point in the severe scenario modelled where ICR is at its lowest, SONIA rates would need to increase environment result in further increases by 760bps compared to 31 March 2023. in SONIA rates. Changes in the economic and regulatory – Financing £885m of the Group’s debt facilities expire within the viability period – see note 16 of the Financial Statements. UK environment impact the availability Under the scenario modelled, the Group would need to either refinance these facilities when they expire or and pricing of debt. implement other mitigating strategies to ensure full repayment. | Risk sensitivity analyses | In the scenarios tested, the most significant | The maturity of debt facilities is spread over | Conclusion | | --- | --- | --- | --- | | The Group benefits from a largely freehold | impact on the viability of the Group would | a number of years to avoid a concentration of | The sensitivity and stress analyses outlined | | property portfolio and a flexible business | be to liquidity headroom resulting from an | risk in one period and gearing is relatively low | above indicate that the Group would have | | model that allows the business to adapt | inability to refinance both existing debt | with LTV of 33% as at 31 March 2023. | adequate means to maintain headroom in its | | to changing requirements of its customer | facilities. To mitigate this risk, the Group | | facilities and covenants to continue operations | | base. This, coupled with a strong balance | regularly reviews funding requirements and | There are a number of mitigating factors that | for the period under review. Taking into | | sheet, means the Group can withstand | maintains a close relationship with existing | were not considered in the scenarios tested | account the Group’s position and principal | | a significant downturn in the economy | and potential funding partners to facilitate | but which could be actioned: | risks, the Board has assessed the prospects of | | and demand. | the continuing availability of debt finance. | – Additional asset disposals | the Group and has a reasonable expectation | | | | – Cancellation or significant reduction | that the Group will be able to continue in | | | | in dividend | operation and meet its liabilities as they fall | | | | – Reduction in refurbishment programme | due over the five-year period stated above. | 89 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 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 64 to 68 and the description of our non-financial key performance indicators can be found on pages 62 to 63. Related principal risks Policies and due diligence Outcomes of policies and impacts of activities (Pages 69 to 76) Climate and – Our Sustainability strategy sets out our commitment to operating – Our climate and environmental policies inform all Risk 10 – Climate change environmental responsibly in all our dealings with our stakeholders. This is supported our sustainability activities. See our Sustainability matters by an Environmental Policy and a Climate Change Policy which sets out report on pages 36 to 58 for details of our our objectives and our commitment to a co-ordinated approach to commitment to environmental matters, including improving the overall environmental performance of our portfolio our net zero carbon pathway – Our net zero carbon pathway sets out our roadmap to becoming a – See our ESG Committee Report on pages 172 to 177 net zero carbon business by 2030 and our sustainable development for further details on our policies and how they brief sets minimum requirements for our development and support the implementation of our ESG strategies refurbishment projects on energy, carbon, waste, water, materials, – Our TCFD disclosure can be found on pages 92 to 105 nature and wellbeing – Our green finance framework, along with the – We disclose our climate-related risks and opportunities, targets and allocation report, is on our website KPIs and management processes in line with the TCFD recommendations Social matters – Our Sustainability strategy sets out our approach to supporting our – See pages 50 to 58 for details on how we are Social matters are not deemed employees, customers and suppliers focusing on social matters, including our real Living to be a principal risk for the Group; – Our social impact programme demonstrates our commitment to Wage commitment, our social impact programme however, we are continuing to focus supporting communities in need across London and the community and charity projects we have on social matters through our – We pay our direct employees the London Living Wage and in April 2022 supported during the year Sustainability strategy (see pages we also brought all third-party contractors onto the Living Wage 50 to 58 for more details) Employees – Our Code of Conduct, approved by the Board, sets out the standards – See pages 21 and 50 to 53 for details of how Risk 7 – Resourcing of behaviour expected of Group employees and stakeholders on we looked after our employees during the year, behalf of the Board and demonstrates the Group’s commitment to including how we listened to them during the year, maintaining the highest standard of ethical conduct and behaviour our health and wellbeing initiatives, our diversity in our business practice and inclusion initiatives and our training and – We are committed to diversity and inclusion at all levels of our development initiatives business. See pages 22, 52 and 149 for more details on our Equal – Employees receive induction training and regular Opportunities and Dignity at Work Policy reminders on the Code of Conduct – The Group’s Health & Safety Committee meets twice per year. The Board receives regular reports and reviews our health and safety processes at least annually, and the Executive Committee receives monthly reports. See page 90 for more details on our health and safety policies and procedures – In July 2021, we introduced a Hybrid Working Policy in recognition of the importance of work-life balance 90 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPLIANCE STATEMENTS CONTINUED NON-FINANCIAL INFORMATION STATEMENT CONTINUED Related principal risks Policies and due diligence Outcomes of policies and impacts of activities (Pages 69 to 76) Health & safety – Our Health & Safety Policy lays out our commitment to the health and – Our Health & Safety Policy was formally reviewed Risk 9 – Regulatory safety of our employees, customers, visitors and others who may be by our Health & Safety Committee twice in the year aected by our activities and to fully comply with all health and safety to ensure it remains appropriate and up-to-date legislation applicable to our business, by implementing HSG65 – We have carried out a substantial amount of health – All our site sta and facilities managers, as well as some key head oce and safety training, including, IOSH Managing personnel, use a compliance monitoring tool which is a proven software Safely, NEBOSH Certificate and specific training system that enables us to monitor statutory compliance and routine around asbestos, water hygiene, fire safety and the maintenance across the entire portfolio Construction Design and Management Regulations – We train our employees so that they are competent and confident to – For the seventh consecutive year, there have been carry out their jobs in a safe and professional manner. Each new starter no contractor-related accidents or incidents that is given in-house induction training targeted to the health and safety have aected our customers responsibilities they will hold, with ongoing training provided via toolbox – We monitored and reviewed our health and safety talks and regular formal meetings with managers systems to promote continued compliance with – We undertake a series of formal internal health and safety audits every HSE standards and best practice year to review our controls and to ensure they are suitable and sucient to manage risk in the business. Evaluations of the results from these audits are used to facilitate individual site safety improvements and to identify areas where we can enhance our safety procedures across the portfolio – 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 Human rights – Our Anti-Slavery Policy reflects our commitment to upholding human – We take a zero-tolerance approach to modern Risk 7 – Resourcing and modern rights and eliminating all forms of forced, slave, bonded or involuntary slavery and other breaches of fundamental Risk 9 – Regulatory slavery labour both within our business and our supply chain. All new human rights employees are given training on our Anti-Slavery Policy during – All sta onboarding suppliers are aware of the inductions and our Employee Code of Conduct reinforces the message requirement for suppliers to abide by the Supplier that we expect all of our sta to work with us to uphold our commitment Code of Conduct to preventing modern slavery in our business and supply chains – During the year we completed a modern slavery – We publish a Supplier Code of Conduct on our website, which sets out audit of our cleaning contractor. For more details, our expectations of our suppliers, including in respect of modern slavery see page 51 and human rights. As part of our due diligence process, all new suppliers – No incidences of human rights abuse or modern are expected to read and to abide by the Supplier Code of Conduct slavery have been identified (2022: Nil) – We care about, respect and support internationally proclaimed human rights. We consider the risk of modern slavery and human tracking to be very low in our business, however, we regularly monitor and review our risk profile and emerging regulatory guidance and we will take any necessary actions to improve and to strengthen our practices – Our modern slavery statement is approved by the Board and published on our website annually and it 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 tracking in our business and supply chains 91 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPLIANCE STATEMENTS CONTINUED NON-FINANCIAL INFORMATION STATEMENT CONTINUED Related principal risks Policies and due diligence Outcomes of policies and impacts of activities (Pages 69 to 76) Anti-bribery – Our Anti-Bribery and Corruption Policy, which is reviewed by the Audit – It is our policy to conduct all of our business in Risk 9 – Regulatory and corruption Committee annually, sets out the responsibilities and expectations of an honest and ethical manner. We take a zero- our employees for the prevention, detection and reporting of bribery tolerance approach to bribery and corruption and other forms of corruption. The Policy also contains our Gifts and and we are committed to implementing and to Hospitality Policy, which requires employees to seek approval whenever enforcing eective systems to counter bribery oered or oering a gift or hospitality valued over £20 (whether they – All sta receive training on the Anti-Bribery are accepted or refused) and Corruption Policy, including the Gifts and – We make suppliers aware of our zero-tolerance approach to bribery Hospitality Policy, as part of their induction and we undertake due diligence on suppliers to confirm that they are and thereafter with annual refresher training committed to the prevention of bribery and corruption – No incidences of bribery or corruption have – Our Code of Conduct further reinforces these messages been identified (2022: Nil) Political and – Our policy is not to make any political donations. We only make – The Group did not make any political donations Risk 9 – Regulatory charitable charitable donations that are legal and ethical. Any charitable donations or incur any political expenditure during the year donations are made with the prior approval of the Company Secretary (2022: Nil) Data privacy – We take our obligations under the retained EU law version of the – The Board continues to place high value on data Risk 9 – Regulatory General Data Protection Regulation (UK GDPR), the Data Protection Act privacy, and privacy is embedded throughout the 2018 and other applicable data privacy legislation very seriously. We organisation. Regular reports are provided to the monitor guidance and practice in this area and continue to embed data Executive Committee and the Board privacy into the heart of the business – Sta are aware of their duties in relation to data – We have a Data Protection Policy, as well as ancillary policies in specific privacy. Mandatory data protection training is areas (including security, data breaches, subject rights, appointment provided to all sta at induction and on an annual of data processors and data privacy impact assessments). We continue basis. We also provide more tailored, role-specific to monitor compliance with our policies and procedures and to review training to sta where appropriate and update them where appropriate to reflect developing guidance – Data privacy is a key consideration whenever new and practice projects are contemplated or changes to existing arrangements are proposed Conflicts – In accordance with HR policies and the Code of Conduct, employees – Should a Director become aware that they, or their Risk 9 – Regulatory of interest are required to notify the Company of any conflicts of interest. The connected parties, have an interest in an existing Board is also subject to these policies and is regularly reminded of their or proposed transaction with the Group, they are duty to notify us of any interest in an existing or proposed transaction required to notify the Board in writing or verbally with the Group at the next Board meeting – All conflicts are recorded on a central register and we have procedures – During the year, no Director had any beneficial in place for managing conflicts of interest interest in any contract significant to the Group’s business, other than a contract of employment (2022: Nil) Whistleblowing – We have a Whistleblowing Policy which provides employees with – During the year under review, we did not receive Risk 7 – Resourcing information on how they can report, anonymously if they wish, any any whistleblowing messages (2022: Nil) Risk 9 – Regulatory concerns about impropriety or wrongdoing within the business – 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 92 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPLIANCE STATEMENTS CONTINUED TCFD pillar and Compliance recommendation Recommended disclosures status Progress to date 2023/24 objectives ### TCFD | | 1. Governance | – Describe the Board oversight of climate- | | – Board ESG Committee | – Board ESG Committee | | --- | --- | --- | --- | --- | --- | | | Disclose the | related risks and opportunities | | established to oversee | to continue monitoring | | Workspace considers climate change as a | organisation’s | | Achieved | climate-related risks, | climate-related risks and | | principal risk and a material issue. In line with | governance around | | | opportunities and goals | opportunities | – Describe management’s role in assessing the ‘Task Force on Climate-related Financial climate-related risks – Executive ownership of – Stretching carbon related and managing climate-related risks and | Disclosures’ (TCFD) recommendations, since | and opportunities | | | climate-related objectives, | goals to be included in | | --- | --- | --- | --- | --- | --- | | | | opportunities | Achieved | | | | 2019 Workspace has provided information to | | | | with performance linked | everyone’s objectives, | | stakeholders on its climate-related risks and | | | | to their remuneration | including senior management | | opportunities, in turn helping them to make | | | | | and linked to remuneration | informed decisions. 2. Strategy – Describe the climate-related risks and – In-depth assessment of – Analysis on exposure to Disclose the actual opportunities the organisation has identified climate-related risks and climate risk and resilience This year we have re-assessed our material and potential over the short, medium and long term Achieved opportunities undertaken of business strategy to be climate risks and opportunities, and their | | impacts of climate- | | | against 4°C and 1.5°C | re-assessed annually taking | | --- | --- | --- | --- | --- | --- | | potential impact using a number of climate | | – Describe the impact of climate-related risks | | | | | | related risks and | | | global temperature rise | into account any new | | change scenarios. This assessment has provided | | and opportunities on the organisation’s | | | | | | opportunities on | | | scenarios (page 95) | changes in drivers | | us with an in-depth view of the levels of risks | | businesses, strategy and financial planning | Achieved | | | | | the organisation’s | | | Disclosure on potential | | across the portfolio and helped us test the businesses, strategy – Describe the resilience of the organisation’s impact and resilience of resilience of our strategy. We also have a more and financial strategy, taking into consideration dierent strategy on page 96 robust understanding of the opportunities to climate-related scenarios, including a 2°C Achieved planning where Workspace, arising from the transition to a low such information or lower scenario carbon economy. We have used the findings is material of this assessment to update our approach to | risk management, implement a strategy to | 3. Risk | – Describe the organisation’s processes for | | – Risks identified using | – Climate risk is identified | | --- | --- | --- | --- | --- | --- | | mitigate material risks and maximise the | management | identifying and assessing climate-related | | climate models, academic | as a principal risk and will | | opportunity. Aligned to this is our 2030 net | Disclose how the | risks | Achieved | research and expert advise | continue to be assessed | | zero carbon commitment, which ensures we | organisation | | | – Based on probability and | as part of the overall risk | – Describe the organisation’s processes are closely managing our transition risks and identifies, assesses, impact scale, risk level management framework, for managing climate-related risks building resilience within the business. and manages assessed as low, moderate including periodic review Achieved climate-related risks or high. of eectiveness of controls The following section includes our – Describe processes for identifying, – Utilising enterprise risk comprehensive TCFD disclosures, including assessing, and managing climate-related management framework risks and integrating them into the Achieved details on climate change scenarios and to capture, document and how they may aect our business in the organisation’s overall risk management manage risks short and long term. As required by the 4. Metrics and – Disclose the metrics used by the – Annual publication of – Key metrics will be tracked Listing Rules (LR 9.8.6R), we confirm that targets organisation to assess climate-related risks energy consumption, on a monthly basis and this report is consistent with all of the TCFD Disclose the metrics and opportunities in line with its strategy Achieved renewable energy presented to Board recommendations and recommended and targets used to and risk management process generation and – Science-based carbon disclosures (four TCFD recommendations | | assess and manage | | procurement, carbon | emissions reduction targets | | --- | --- | --- | --- | --- | | and 11 recommended disclosures). | | – Disclose Scope 1, Scope 2, and if | | | | | relevant climate- | | emissions (from fuels, | to be updated to reflect | appropriate, Scope 3 greenhouse gas related risks and waste, water), recycling newly on-boarded properties (GHG) emissions and the related risks Achieved opportunities where rates, EPC split, voluntary such information is – Describe the targets used by the green certifications, material organisation to manage climate-related energy eciency projects, risks and opportunities and performance Achieved portfolio flood exposure against targets 93 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED GOVERNANCE STRATEGY 1 2 | The role of the Board | mitigation strategy and eectiveness of | | | | --- | --- | --- | --- | | | | Climate change risk and opportunity | The 4°C warming scenario assumes that | | Our Chief Executive Ocer has the highest | controls as part of the principal risk register | | | | | | As a responsible business, we consider | the markets, governments and society will | | level of responsibility for climate-related risks | review. This information is provided to the | | | | | | climate-related risks and opportunities across | continue business as usual with increasing | | and opportunities and together with the rest | Board and the Executive Committee via the | | | | | | our portfolio and business wide activities. | adoption of energy and resource intensive | | of the Workspace Board, ensures we maintain | Risk Management Group, comprising of senior | | | | | | We have identified the physical and transition | lifestyles and abundant exploitation of fossil | | close oversight of climate-related issues. | members from dierent parts of the business. | | | | | | risks arising from climate change and are | fuels. There will be limited action taken to | The Risk Management Group meets monthly | | | committed to actively managing these risks. | mitigate climate change in this scenario and | | --- | --- | --- | --- | | An ESG Committee comprising of six | and is responsible for monitoring and | | | | | | Due to the nature of our business model, | hence as a result in the period after 2030, the | | independent Non-Executive Directors, the | implementing risk management activities, | | | | | | Workspace is also in a position to capture | physical eects of climate change will begin | | Chief Executive Ocer and the Chief Financial | including climate risk. | | | | | | several opportunities arising from the | to intensify rapidly. | Ocer is set up to assist the Board in transition to a low carbon economy. incorporating climate-related considerations We have also linked sustainability and The 1.5°C warming scenario assumes | in business strategy and decision making. | climate-related performance measures to the | | | | --- | --- | --- | --- | | | | We have worked with Willis Tower Watson | proactive and sustained action to reduce | | Ultimately, ensuring the long-term sustainable | Executive Directors’ remuneration, accounting | | | | | | (WTW) to identify and assess the impact of | carbon emissions over the next 30 years to | | success of the business. The ESG Committee | for 24% of their bonus weighting. These | | | | | | climate-related risks through quantitative and | build a low-carbon economy, in the form of | | receives a detailed update on our | targets are also incorporated into wider team | | | | | | qualitative scenario analysis, considering | stringent Government policies on stricter | | sustainability and climate-related goals three | objectives. The Board received a monthly | | | | | | short-term (to 2025), medium-term (2025– | energy eciency building codes and carbon | | times a year, from members of the Executive | report tracking progress against these goals. | | | | | | 2030) and long-term (to 2050 and beyond) | taxes. There will also likely be significant | | Committee and the Head of Sustainability. | See page 204 for further details. | | | | | | time horizons. This short-term and medium- | public and private sector investment in low | The update from the Committee and any | | | term time horizons align with our portfolio | emissions technologies to help the global | | --- | --- | --- | --- | | associated recommendations are then put | Management responsibility | | | | | | strategy and financial planning. Our portfolio | economy achieve net zero goals by 2050. | | forward to the Board for consideration. | The Head of Portfolio Management is the | | | | | | strategy categorises projects that are live and | Overall, this scenario would result in higher | Executive owner of our climate strategy. He is | | | will be completed in the short term (1-2 years) | transition risk in the short and medium term. | | --- | --- | --- | --- | | During the year, the Board received updates | supported by the Head of Sustainability and | | | | | | and a medium-term development pipeline | Given the warming over pre-industrial levels | | from the ESG Committee three times and | members of the Sustainability Committee in | | | | | | that extends out to 2030. We accordingly do | is going to be limited, the extent of physical | | considered the following climate-related | the day-to-day management and delivery of | | | | | | our budgeting for short and medium term. | risk will only be slightly higher than it is today. | | issues: alignment of McKay properties with the | climate-related initiatives. The Sustainability | | | We are also working on a rapid 2030 net zero target, assessment of revised Committee is made up of cross-functional decarbonisation of the business over the budget to deliver on the commitment, members who head up various business medium term, as reflected in our 2030 net compliance with changes to Minimum Energy departments, such as development, asset zero target. Anything longer than 2030 is Eciency Standard (MEES) and eectiveness management, facilities management, considered long term given the regulatory of our climate-related policies. See page 172 investment and support functions. The and market uncertainty involved. The for further details of climate-related topics Committee includes a number of other assessment we have conducted is based on considered by the Board and its Committees Executive Committee members, which two pre-defined climate scenarios – a 4°C (including Audit and Remuneration ensures senior level ownership and oversight global temperature rise scenario in line with Committees). The Board also received a of implementation plans and also streamlines the Intergovernmental Panel on Climate technical briefing on three topics as part of communication to the wider Executive team Change (IPCC) Representative Concentration the ongoing upskilling drive, including climate and the Board. The Sustainability Committee Pathway (RCP 8.5) and a 1.5°C global risk assessment, renewable procurement and meets monthly and is responsible for setting temperature rise scenario in line with RCP 2.6. evolving sustainability reporting requirements. and operationalising our climate-related objectives, and hence is well positioned to Following detailed deliberation, the Board manage, report, communicate and inform made a decision to elevate climate risk as our approach on climate-related issues. a principal business risk and reviewed the 94 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED Our assessment considered all plausible climate-related risks and opportunities that are WTW conducted an asset by asset exposure Our analysis showed that all of London and applicable for real estate businesses. These are identified in the table below. The impact of analysis for a range of climate risks (as shown the South East could be exposed to a mix physical risks is mainly in the form of direct damage to property, business interruption or supply in the table) at the present day, as well as for of acute and chronic climate risks such as chain disruption. Impact of transition risks is mainly in the form of increased cost of business, future years under the selected scenarios. flooding, windstorm, drought and heat stress, property obsolescence or failure to meet customer expectations. Data used for the analysis includes state of thereby aecting our properties as well. The the art models and databases within the analysis showed that the chronic risk would RISKS RELATED TO THE PHYSICAL IMPACTS OF CLIMATE | | insurance industry (including WTW Global | become more evident in the long term, but the | | --- | --- | --- | | Acute Climate Risks Chronic Climate Risks | Peril Diagnostic, MunichRe hazard database, | impact level will still be low and manageable | | | SwissRe CatNet amongst others), climate | under 1.5°C scenario. The impact level is | Winter storm Heat stress models, published research and information deemed moderate under 4°C scenario, Tornado Precipitation from IPCC. The assessment was further arising from failure to transition. Acute risk, River flood Drought supplemented with local information and on the other hand, could be felt today. Using data that we hold on the assets. catastrophe models such as Property Flash flood Fire weather Quantified and KatRisk, we simulated Coastal flood Sea level rise To assess the transition risks, we conducted thousands of acute climate events to estimate scenario analysis using the guidance issued the level of impact in terms of property Hailstorm | | by TCFD. The scenario used for the analysis | damages and business interruption. Taking | | --- | --- | --- | | Lightning | aligns with projections to keep global | this probabilistics view and accounting for | | | warming below 1.5°C above pre-industrial | actual vulnerability of our locations have | | | temperatures and it was constructed based | further provided rigour to our risk level | | | on a variety of sources including RCP 2.6 | projections. Overall, we estimate the level | | | scenario from IPCC, International Energy | of impact from acute risks (such as flooding, | RISKS AND OPPORTUNITIES RELATED TO THE TRANSITION TO A LOWER-CARBON ECONOMY | | | Agency (IEA) and the Network for Greening | flash floods and wind storms) is low. | | --- | --- | --- | --- | | Policy and Legal Risks/Opportunities – Pricing of GHG emissions | | the Financial System (NGFS). NGFS has also | | | | – MEES requirements (EPC B by 2030) | been used as a primary source for carbon | On transition risk, the impact is evident | | | – Climate Change litigation | price estimates. Potential transition risks to | even now, and could be significant under | | | – Enhanced emissions reporting obligations | Workspace were identified and articulated | the 1.5°C warming scenario due to stringent | | | – Increasingly stringent planning | using academic research and discussions with | policy requirements, increasing customer | | | requirements | Workspace teams (as shown in the table). | expectations and expected raw materials | price increases. We have estimated the risk Technology Risks/Opportunities – Substitution of existing technology to lower All the identified risks were assessed in terms level to be moderate, considering impact emissions options | | | of impact and probability via a series of | in terms of increased cost, property | | --- | --- | --- | --- | | Market Risks/Opportunities – Change in customer demands | | subject matter expert interviews with | obsolescence and customer demand. | | | – Increased cost of raw materials | Workspace teams (such as finance, | However, through our sustainable business | | | – Increased cost and availability of electricity | investment, technology, legal, development, | model we hold an advantage over our peers | | | – Cost of capital | HR and leasing). Where the risk criteria | and have committed to a 2030 net zero | | | – Emissions oset | allowed for quantification, financial impacts | target (two decades earlier than UK’s | | | | were estimated using assumptions and | commitment in Climate Change Act 2008 | Reputation Risks/Opportunities – Investment risk likelihood assessed and aligned to our (2050 Target Amendment) Order 2019), – Employee risk | Enterprise Risk Management (ERM) risk | thereby minimising our risk. We are also | | --- | --- | | rating criteria (details of our ERM framework | we1ositioned to capture the transition | | can be found on page 97). This helped us | opportunities, such as operational cost | | narrow down the material risks and | eciencies, lower cost of capital and | | opportunities applicable to Workspace as | changing customer demands. | shown on page 95, along with risk levels. 95 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED The table below shows the summary of material risks and opportunities, applicable to Workspace, across the various time horizons and considering the two warming scenarios. Short term (to 2025) Medium term (2025-2030) Long term (to 2050+) | 1.5°C scenario Moderate transition risk resulting from: | | Moderate transition risk resulting from: | Low transition risk in the long term, | | --- | --- | --- | --- | | | – MEES requirements for all commercial | – Continued MEES requirements | assuming the UK economy has already | | | buildings to be EPC B by 2030, requiring | – Increase in planning requirements, resulting | transitioned to a low carbon world | | | investment in energy eciency upgrades | in higher upfront investment in energy | | | | across the portfolio | eciency or osetting | | | | – Changing customer demands on | – Increased costs of raw materials | | | | sustainability, requiring swift adaptation | – Increased costs associated with osetting | | | | of our older buildings to meet high | of scope 3 emissions | | sustainability standards Transition opportunity arising from: Transition opportunity continues to exist Low transition opportunity in the long – Operational cost savings and eciencies due to operational cost savings, customer term, assuming the UK economy has from upgraded EPCs and implementation expectations and access to green finance already transitioned to a low carbon world of low carbon technologies – Enhanced customer attractiveness due to our ability to meet their expectations on sustainability across many of our new and refurbished buildings – Access to green finance | Low physical risk | Low physical risk with no significant changes | Low physical risk, mainly due to smaller | | --- | --- | --- | | – Existing exposure to windstorm across | to current risks profile, other than the already | manageable changes in chronic risks such | | the portfolio (unrelated to changing | existing exposure to windstorm and flood risk | as drought and heat stress. The main impact | | temperature). The impact in terms of | | from droughts is water scarcity and impact | | physical damage and business disruption | | on green areas. Heat stress can impact | | is low considering asset vulnerability | | running costs and customer wellbeing. On | | – Flood risk exposure at six buildings and risk | | acute risk, windstorm continues to pose risk | | of localised flash flooding due to heavy | | and eight properties become exposed to | | precipitation across 11 buildings. The impact | | flood risk. However, the impact in terms of | | in terms of physical damage and business | | physical damage and business disruption is | | disruption is low considering asset | | low considering asset vulnerability | vulnerability 4°C scenario Transition risk non-existent in this scenario, Transition risk non-existent in this scenario, Moderate physical risk arising from failure in the short term in the medium term to transition: – Continued exposure to windstorm, flood Low physical risk, due to already existing Low physical risk with no significant changes risk at nine buildings and localised flash exposure to windstorm (unrelated to changing to current risks profile, other than the already flooding across 11 buildings temperature), flood risk at six buildings and existing exposure to windstorm and flood risk – Increased drought risk across all buildings localised flash flooding across 11 buildings. – Increased heat stress across all buildings The impact in terms of physical damage and business disruption is low considering asset vulnerability 96 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED Strategy and financial planning Asset management: Our flexible business Resilience of strategy RISK MANAGEMENT | Our sustainability strategy has a key focus | model allows us to implement a rolling | The climate scenario assessment undertaken | 3 | | --- | --- | --- | --- | | on climate change mitigation and adaptation, | programme of 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 moderate, mainly | | Enterprise risk management framework impact of our portfolio and building resilience improve the energy and carbon performance arising from transition risk under 1.5°C Risk management continues to be an integral for the long term. We are delivering on this of all our buildings and remain compliant with scenario (see table on page 95). The part of all our activities. Risks and ambition by embedding climate considerations legislation. Our flood risk assessment has also geographic concentration of our portfolio opportunities are considered in every business across the property life cycle: Development, helped us prioritise adequate defences in London and low vulnerability of assets to decision we make. We specifically focus on Investment and Asset Management and the and mitigation plans for exposed assets. acute risks, such as windstorm and flooding, key risks which could impact on the services we deliver to our customers. means that the overall exposure to physical achievement of our strategic goals and Services to customer: Climate considerations climate risks is low. therefore on the performance of our business. Development: As a business, our primary are fully embedded in our operational platform, Our transition risks whilst ranked moderate, focus is on repurposing old buildings to ensuring our site teams are delivering are manageable because of our sustainable We have an established Risk Management higher standards and hence inherently our customer services sustainably. This includes business model, whereby our carbon and Framework in place to help us capture, activity is less carbon intensive than some of initiatives to manage whole building energy energy intensity is lower compared to the document and manage risks facing our our peers. However, we continue to focus on consumption, raising awareness with our industry average. Our focus on repurposing business. The Audit Committee along with the further minimising our environmental and customers to reduce carbon and manage our older buildings to meet high sustainability full Board have overall responsibility for risk carbon impact, ensuring what we build is fit waste sustainably. We are also actively and performance standards ensures we are management. See our Risk Management for the future. Our sustainable development upgrading our portfolio to be more sustainable, building in resilience to climate factors across Framework on page 171. brief requires all our development and in line with changing customer expectations. the portfolio. Our robust operational platform refurbishment projects to meet high energy and onsite management control, allows us Our aim is to manage each of our risks and and carbon specifications, thereby minimising Financial planning: Climate considerations to proactively manage environmental mitigate them so that they fall within the risk our exposure to risks such as MEES, stringent inform our business financial reporting and performance of our assets and mitigate both appetite level we are prepared to tolerate for planning requirements, raw material costs planning. The Board deem no material impact, physical and transition risks. each risk area. Risk appetite reflects the and increased customer demands. We also considering valuation of properties, going overall level of risk acceptable with regards ensure that we test our design brief against concern and viability of Group and the capital Given our long-term approach, coupled with to our principal business risks. The Board is physical risks such as heat stress and flooding. expenditure required. The Board have our flexible lease model which allows us to responsible for deciding the amount of risk it approved a comprehensive investment plan invest across our portfolio in a timely manner is willing to take. High risk, after considering Investment: Climate considerations inform to transition our portfolio to net zero carbon and actively address climate risks, we are the controls we have in place to mitigate risks, all our investment decisions, whether it’s and upgrade EPC to A and B (see page 49) confident that our strategy is resilient against is not generally tolerated. We work towards spending capex on building upgrade or and this has enabled us to forward plan plausible climate scenarios. Further, our a moderate to low risk profile, ensuring acquiring new properties. We conduct investments on interventions such as energy pathway to become net zero carbon by 2030 that we have mitigating actions in place to sustainability due diligence, taking into eciency technology, decarbonising heat, (see pages 41 and 42), ensures we are bring each risk down to within the agreed account a number of warming scenarios, onsite renewables and sustainable materials aligning our business to a 1.5°C warming risk appetite. prior to acquisition to assess climate-related and construction practices. To ensure we have scenario and mitigating any potential risks. risks associated with the building and forward access to capital at competitive rates, we have Our Risk Management Framework is plan the investment and interventions also linked our financing to climate-related underpinned by close working relationships required to mitigate any material risks. criteria (£300m Green Bond, £335m ESG- between the Executive Directors, senior linked revolving credit facility and a £65m management and other employees, which ### loan from Aviva). Our 2030 net zero carbon enhances our ability to eciently capture, communicate and action any risk issues ### pathway ensures we are identified. ### aligning our business to a ### 1.5°C warming scenario and ### mitigating any potential risks 97 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED Identifying and assessing risk Risk scoring matrix Likelihood scale Overall, we identify risks across two key areas: The following criteria should be used, considering the likelihood of the Principal Business (Strategic) risks and risk materialising within a five-year period. Operational risks. Climate-related risks have been factored in both these categories. Likelihood 4 4 – Almost certain >80% The low, moderate, high risk severity score is 3 – Likely 50 -79% determined using the following calculation: Impact x Impact x Probability, which provides 2 – Possible 21-49% 3 a weighted impact scoring. The impact is Almost certain 1 – Unlikely <20% determined on a scale from 1 (low) to 4 (severe) based on revenue, property valuation, health and safety and reputational consequences. Probability is determined on 2 a scale from 1 (unlikely) to 4 (almost certain), considering the likelihood of the risk LIKLIHOOD materialising within a five-year period. 1 The scenario analysis conducted with WTW Risk level: helped us assess the level of exposure to Low Moderate climate risk, its likelihood (taking into account Unlikely High both existing and emerging regulatory and 1 2 3 4 market risks), and determine its financial Low Severe IMPACT materiality using a structured template (see impact criteria on the right) to capture any impact on revenue, costs or property valuation. This allowed us to map our risk Impact criteria levels as low, moderate or high, using our risk Impact 1 – Low 2 – Medium 3 – High 4 – Severe scoring matrix. In our case, we observed no Revenue/Cash Revenue <£2m Revenue £2m-£15m Revenue 15m-£25m Revenue >£25m significant change in risk profile between Cash <£1m Cash £1m-£5m Cash £5m-£15m Cash >£15m various time horizons and hence the mitigation strategy is focused on short to Property valuation <2% unexpected 2-5% unexpected 5-10% unexpected >10% unexpected medium term actions, covering our response reduction reduction reduction reduction out to 2030, including delivery of our net zero Hazard/Health & Safety Minor injury/first aid Minor reportable injury/ Major reportable injury Large scale injuries carbon commitment. required RIDDOR report required Depending on the extent of planned Reputational Third-party Adverse local media Adverse national publicity Adverse sustained mitigation measures in place, as already communications with attention which could lead resulting in short-term national publicity resulting captured in our net zero pathway and existing no lasting impact on to a small number of damage to public and/or in loss of public and/or business processes, we were able to narrow reputation complaints and damage political confidence political confidence down the material risks which had a level of the brand locally residual impact (as listed on page 95) that we will continue to manage eectively. These are captured in the table opposite along with current mitigation strategy for the two climate scenarios we have assessed. 98 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED Risk Evaluation of residual risk Mitigation strategy Transition risks and opportunities in the short and medium term – 1.5°C warming scenario Policy and Legal – EPC – 28% of the Workspace portfolio is rated C and 29% is rated D and E. – Target set to upgrade a significant proportion portfolio to EPC A/B each year. rating requirements Additional investment of £45–60m will be required to meet EPC A/B across We successfully upgraded 12% of portfolio to EPC A/B this year. the portfolio by 2030 (c.£7-8m annually) – A rolling programme of EPC and net zero audits are being undertaken to – However, taking into account the annual maintenance capex for ongoing identify asset level upgrade plans and a process is in place to upgrade a unit refurbishments throughout the year, the actual additional investment once vacant required will be much lower than £5m – A detailed investment plan is created for annual budgeting purposes – Opportunity: There will be an opportunity arising from higher operational – Central register created to track EPC compliance status monthly savings due to upgraded environmental performance Policy and Legal – – Workspace is able to meet London Plan requirement of 35% emissions – By implementing our net zero design brief, we are able to achieve over 35% Increasingly stringent reduction over Part L reduction at minimal incremental cost planning requirements – If the requirements were to get more stringent in future (say 50% reduction – Continual tracking of planning requirements to inform our design brief or inclusion of osetting for upfront carbon at planning stage), we would – Strategy in place to minimise whole life carbon through responsible design need to design buildings dierently, 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 oce 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 meet changing customer expectations and capture more market share to proactively manage customer expectations by being ahead of our peers – Improved communications with customers on our sustainability eorts further – In the interim, there is some risk to our older properties which are not in the 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 cost – We expect the costs of carbon intensive raw materials (such as cement, – Our focus on repurposing limits our exposure to raw materials and associated of raw materials steel) will increase in the future cost increased – The resulting impact will depend on our build activity in a year and the – Continued eorts to explore new materials and technologies will help further percentage of cost passed on by suppliers reduce embodied carbon of our developments Market – emissions oset – Our current emissions footprint is around 26,000 tonnes of CO 2 . We expect – Continue to drive progress on our net zero pathway to eliminate scope 1 and 2 our net zero pathway to reduce our scope 1 and 2 emissions by at least 90% emissions with osetting for the residual emissions only – Continued eorts 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 osetting needed up to £700k annually (assuming worst case scenario for scope 3 reduction) for scope 3 emissions * Source: https://www.ucl.ac.uk/news/2021/jun/ten-fold-increase-carbon-oset-cost-predicted 99 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED Risk Evaluation of residual risk Mitigation strategy Physical risks in the short and medium term – 1.5°C warming scenario Windstorm – Most of our buildings could be exposed to risk of windstorm and missile – Business continuity and emergency response planning measures in place impact from flying debris. However, given the solid facade and relatively to minimise potential impact in case of storm warnings lower height of our buildings, we estimate level of impact in property – Protection against portable and not secured items in building vicinity is being damages and business interruption to be low (less than £1m, assuming worst incorporated case scenario). The risk profile will likely remain within the current levels of variability, with changing temperatures 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 six of our buildings (eight buildings – Business continuity and emergency response planning measures put in place become exposed by 2050). The impacts could be water ingress, damage in in case of flooding lower floor and some level of interruption to the business. Taking into – Flood mitigation measures being incorporated in design of new projects account our flood mitigation strategy and emergency preparedness plans, – Insurance protection in place in case of physical damage or interruption we estimate level of impact in property damages and business interruption to be low (less than £2m, assuming worst case scenario). The risk profile only moderately changes with time or changing temperatures Localised flash flooding – Whilst the precipitation stress due to heavy rainfall is likely to stay the same, – Comprehensive flash flood risk assessment being undertaken across the a handful of our buildings could be exposed to localised flash flooding due portfolio to local terrain features which could cause water ingress and damage in – Business continuity and emergency response planning measures put in place lower floors. A deeper dive of these buildings has revealed lower to minimise impact in case of high precipitation warning vulnerability to localised flash flooding and hence we estimate level of – Regular drainage survey being undertaken across select buildings to ensure impact in property damages and business interruption to be low (less than sucient water attenuation on site £1m, assuming worst case scenario). The risk profile is not likely to change – Flood mitigation measures being incorporated in design of new projects, with time or changing temperatures including blue roofs and rain water harvesting systems Physical risks in the long term – 4°C warming scenario* Drought – Under this climate scenario, London and the South East of the UK could – We are installing water ecient fittings across our buildings be exposed to drought stress, aecting all our properties in the long term. – Our landscaping has been designed to bear warmer climates in mind Whilst our water consumption is not material, this would result in slightly increased utility costs and impact on green areas. Heat stress – In this scenario, by the end of the century, London and the South East of the – A rolling programme of air conditioning is being implemented across UK could be exposed to medium level of exposure to heat stress resulting in the portfolio to ensure customers are comfortable in high temperatures the number of heatwave days increasing to 20 days per year, thereby – Additional measures such as outdoor greenery and shade being incorporated aecting all our properties. On average, there will be an increase in our to provide ‘refuges’ in hotter weather conditions cooling demand. The scenario will also result in milder winters, which would – Review of current heating and cooling usage being undertaken to ensure in turn reduce our heating demand on average. In the short term, heat stress we continue to optimise consumption, in response to outdoor temperatures 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. The mitigation strategy listed above will continue to be eective . 100 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED METRICS AND TARGETS 4 | Metrics used to assess climate-related risks | buildings and by improving the energy | | --- | --- | | and opportunities | eciency of our buildings and electrifying the | | To understand our climate-related impact and | heating systems we aim to reduce our overall | | performance we report on a wide range of | carbon footprint. Following an in-depth | | consumption and intensity metrics relating to | analysis of our scope 3 emissions, we now | | energy, carbon, waste and water, such as: | have a much better understanding of the | | – Total energy consumption (page 101) | emissions associated with our development | | – Total electricity consumption, including | and refurbishment activities which make up | | proportion generated from renewables | a significant portion of our scope 3 emissions. | | (page 101) | Refer to page 101 for our scope 1, 2 and 3 | | – Proportion of electricity sourced from | greenhouse gas emissions data and year on | | renewable sources (page 43) | year changes (calculated using GHG protocol). | – Total fuel consumed on site (page 101) | – Building emissions intensity by floor area | Targets used to manage climate-related risks | | --- | --- | | (page 101) | and opportunities | | – Total emissions from water consumption | To reduce our carbon emissions, we continue | | (page 101) | to focus on designing low-carbon buildings | | – Total emissions from waste, waste recycled | and implementing energy eciency initiatives | | and diverted from landfill (page 101) | throughout the portfolio, whilst actively | | – EPC split of the portfolio by floor area | engaging with both our site sta and customers. | page 49) | – Number of buildings with sustainability | Our main target is to deliver a net zero carbon | | --- | --- | | certification (page 44) | business by 2030 (see page 41 for the scope | | – Number of energy eciency projects | of our commitment). This is underpinned by | | implemented and associated capital | the following emissions reduction targets: | | expenditure (page 49) | – Reduce scope 1 and 2 emissions by at least | | – Number of buildings exposed to flooding | 90% by 2030 (Note: it’s our intention to go | | (page 95) | beyond our science-based targets, requiring | | – ESG metrics linked to remuneration and | only 42% reduction in scope 1 emissions) | | performance against these (page 204) | – Decarbonise heating from our portfolio | by 2030 | Pages 43 to 45 provide further detail on | – Source 100% energy from renewable sources | | --- | --- | | targets we have set against all climate-related | – Undertake whole life carbon assessment of | | metrics and progress made to date. | all development and refurbishment projects | – Reduce scope 3 emissions from capital Scope 1, 2, 3 GHG emissions and related risks goods by 20% per square foot of net lettable Carbon emissions represent one of our largest area by 2030, from a 2020 base year environmental impacts and we are actively working to reduce our sources of carbon where possible (see our net zero carbon pathway on page 41). Significant contributors to our operational carbon emissions are the Kennington Park, electricity and gas consumed within our Oval 101 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED GREENHOUSE GAS (‘GHG’) EMISSIONS AND ENERGY USE DATA FOR STREAMLINED ENERGY & CARBON REPORTING (SECR)* 2019/20 2022/23 2022/23 2022/23 vs 2021/22 2022/23 vs 2021/22 Source of emissions (baseline Year) 2021/22 LfL portfolio Whole portfolio % change LfL portfolio Scope 1 (Direct) 3,451 3,221 2,358 3,188 -1% -27% | Gas (tCO | 2 e) 2,620 2,305 1,684 2,336 +1% -27% | | | --- | --- | --- | | Fugitive Emissions (tCO | | 2 e) 828 916 674 852 -7% -26% | | Vehicle Emissions (tCO | | 2 e) 3 – – – – – | Scope 2 (Energy Indirect) 7,144 5,229 5,142 6,437 +23% -2% | Electricity (location based) (tCO | 2 e) 7,021 5,069 5,005 6,300 +24% -1% | | | --- | --- | --- | | Electricity (market based) (tCO | 2 e) – – – – – – | | | Purchased Heat (location based) (tCO | | 2 e) 123 160 137 137 -14% -14% | Total Scope 1 & 2 (location based) 10,595 8,450 7,500 9,625 +14% -11% Energy consumption used to calculate above emissions (kWh) 42,430,031 37,400,667 35,913,161 46,183,607 +23% -4% Intensity Ratio: Net Lettable Area tCO 2 e/sq. ft. 0.00181 0.00209 0.00194 0.00183 -13% -7% Intensity Ratio: Gross Internal Area tCO 2 e/sq. ft. 0.00177 0.00144 0.00140 0.00137 -5% -3% Scope 3 (Other Indirect) 21,264 8,398 6,614 16,612 +98% -21% | Purchased Electricity Transmission & Distribution (tCO | | | | | | | | 2 e) 596 449 458 576 +28% +2% | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Customer Direct Energy (tCO | | | | 2 e) 3,515 2,015 1,581 3,296 +64% -22% | | | | | | Water Supply (tCO | 2 e) 91 29 29 34 +16% 0% | | | | | | | | | Water Treatment (tCO | | 2 e) 187 53 53 61 +16% 0% | | | | | | | | Waste Management (tCO | | | 2 e) 82 59 55 64 +9% -6% | | | | | | | Heat – Transmission & Distribution (tCO | | | | | | 2 e) 6.5 8 7 7 -10% -10% | | | | Embodied carbon in development projects (tCO | | | | | | | 2 e) 8,982 1,642 4,430 5,744 +250% +170% | | | Purchased goods and services (tCO | | | | | 2 e) 7,647 4,013 not available 6,511 +62% N/A | | | | | Employee Commuting (tCO | | | | 2 e) 84 130 not available 288 +121% N/A | | | | | | Business Travel (tCO | 2 | e) 74 0.5 not available 31 +5,567% N/A | | | | | | | | Total Scope 1, 2 & 3 (tCO | | | 2 e) 31,860 16,848 14,114 26,238 +56% -16% | | | | | | Total gas use – whole building (kWh) 15,617,931 13,956,418 10,597,353 16,137,792 +16% -24% Total electricity use – whole building (kWh) 38,801,849 31,480,001 32,764,485 46,475,822 +48% +4% Total purchased heat – whole building (kWh) 700,922 939,261 805,247 805,247 -14% -14% Total energy consumption – whole building (kWh) 55,120,702 46,375,680 44,167,085 63,418,861 +37% -5% Self generated renewable electricity (kWh) 129,533 160,976 191,629 191,629 +19% +19% * Note: All figures reported relate to emissions and energy consumed in the United Kingdom. 102 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED Performance Energy eciency actions taken during REPORTING FRAMEWORK | | | In addition to our operational emissions, | 2022/23 | | --- | --- | --- | --- | | | | of which the boundaries are explained above, | We have proactively identified and delivered | | Reporting period: | Regulatory: | | | | | | we have voluntarily reported our like-for-like | a range of energy eciency projects across | | 1 April 2022 – 31 March 2023 | Part 7 of The Companies Act 2006 | | | | | | portfolio GHG performance, which excludes | our portfolio (invested £8m across 41 | | Reporting Frequency – Annual, aligned with | (Strategic Report and Directors’ Report) | | | | | | the 30 properties acquired from McKay | properties), such as LED and PIR lighting | | financial reporting | Regulations 2013. | | | | | | Securities in May 2022. We achieved a 27% | upgrades, installation of secondary glazing | | Boundary: | Reporting standards: | reduction in scope 1 emissions on this like-for- | and a rolling programme of high eciency | | Our GHG emissions have been prepared | World Resources Institute/World Business | like portfolio, which is a result of investment | heat pumps. We have also benefitted from | | using the ‘operational control’ approach, | Council for Sustainable Development | in high eciency heat pump installation | improved data management and customer | | in compliance with the Greenhouse Gas | Greenhouse Gas Protocol: A Corporate | across a number of properties and | engagement initiatives across a number of | | Protocol guidance. Scope 1 and 2 emissions | Accounting and Reporting Standard, Revised | optimisation of system controls and setpoints. | our buildings. | | include tenant consumption where we | Edition (the GHG Protocol). World Resources | We also rolled out a number of energy | | | procure gas, electricity or heat on their | Institute/World Business Council for | eciency upgrades across the portfolio such | We have continued to roll out our Building | | behalf. Where electricity is directly purchased | Sustainable Development Greenhouse Gas | as LED lighting, presence detection sensors, | Energy Management System (BEMS), Optergy, | | by our tenants (c.64% of NLA), we have | Protocol: Corporate Value Chain (scope 3). | smart BEMS and ran several energy awareness | which is a smart metering technology that has | | estimated usage and corresponding | | campaigns with customers. Due to these | enabled real-time energy monitoring at the | | emissions have been included under our | We have also aligned our reporting with: | measures our electricity consumption | building level right down to individual plant | | scope 3 reporting. Following the acquisition | – EPRA ‘Sustainability Best Practice | remained stable (scope 2 decreased slightly | equipment. The data provided by the BEMS | | of McKay Securities in May 2022, our | Recommendations’ (sBPR). Published | by 2%), despite significantly higher levels of | is used by our in-house Facility Management | | portfolio now comprises 86 properties | in the sustainability performance section | occupancy in our buildings compared to the | teams to improve energy management | | (whole portfolio), covering 5,300,000 sq. ft., | of our investor website | 2021/22 period where oce working patterns | practices and reduce GHG emissions. The | | representing a 1,400,000 sq. ft. increase from | – Sustainability Accounting Standards | were still impacted by the pandemic. | Optergy portal is now live at 28 sites and | | our previous reporting period. We have | Board (SASB) real estate metrics. | | enables us to view and monitor our energy | | reported environmental performance for | Pages 104 and 105 | Overall, Workspace procured energy | consumption profiles, down to the unit level. | | Workspace like-for-like portfolio and | – Global Reporting Initiative (GRI) 2021 | consumption reduced by 4% across the | | | Workspace whole portfolio (including McKay). | Standard. Published in the sustainability | like-for-like portfolio, thanks to granular | | | | performance section of our investor website | energy data analysis, continued roll out of | | | In cases where a property has been acquired | | smart BEMS and investment HVAC and | | | or sold during the reporting period, we report | | lighting upgrades. | | its greenhouse gas emissions up to the sale | date or from the acquisition date. We exclude | Following the acquisition of McKay Securities | | --- | --- | | properties from greenhouse gas reporting for | in May 2022, our portfolio has increased by | | the duration of any major refurbishment or | 1,400,000 sq. ft. which has resulted in a | | construction project. | sizeable increase in our GHG emissions. Hence | the numbers reported for the whole portfolio Verification: Other: are not comparable with the previous years. Accenture were appointed for independent When reporting totals, the location-based third-party verification of our carbon data. emissions are used. All market-based Our market-based electricity figure is zero The verification has been performed to the emissions are backed by Renewable Energy because all of the electricity we purchase is international standard ISO 14064-3:2019 Guarantees of Origin (REGOs). now on a renewable energy contract backed Specification. Limited level of assurance, by Renewable Energy Guarantees of Origin based upon a 5% materiality threshold. The Any questions about the reported (REGOs). full assurance statement can be found in the information, please contact: sustainability performance section of our info@workspace.co.uk investor website. Further, our social value data has been verified by Social Value Portal. 103 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPLIANCE STATEMENTS CONTINUED TCFD CONTINUED | Method for data collection | Fugitive emissions stem from the use of | Purchased goods and services relate to the | | --- | --- | --- | | We collect utility data across our operational | refrigerants and have been calculated based | upstream emissions from the business’ use | | portfolio from manual meters, automated | on refrigerant leak event schedules provided | of products and services. Emissions were | | meters and invoices, which are all collated on | by our air conditioning contractors. | calculated using a spend-based method, | | our energy reporting and billing platform. Our | | applying carbon factors from the EPA | | site teams are responsible for reading manual | Vehicle emissions are calculated from the | database. Where in previous years, we had | | meters and log consumption data onto our | expense schedule listing car mileage claims | only included our capital spend in emissions | | energy and billing management platform on | by employees using their personal vehicles | calculations, we are now also including | | a monthly basis. To remove reliance on manual | for business purposes. | operational spend, explaining the change in | | meter reading, we continuously look at | | 2019/20 and 2021/22 reported emissions | | upgrading to automatic meters, which are | Waste data is captured by our waste | figures. We intend to move towards an | | currently in place across the majority of our | contractor, who weighs recycled and general | activity-based method for our upstream | | main incomers. An in-house energy analyst | waste across the portfolio at each waste | emissions as more supply chain data becomes | | role was created to review the accuracy of | collection and provides us with a monthly | available. This will provide greater accuracy of | | energy reporting and to analyse monthly | tonnage report. | the purchased goods and services emissions. | performance trends and prioritise properties | for energy eciency improvements. | Embodied carbon in development projects | Business travel data includes journeys in our | | --- | --- | --- | | | relates to GHG emissions stemming from our | company cab and plane journeys used for | | Due to increased data availability and reliable | construction and refurbishment activities. | business travel for all direct employees. | | information on heating source types, a small | Since 2021, we systematically carry out | | | proportion of energy consumption previously | whole-life carbon analysis for all developments | Emissions from commuting include carbon | | reported under gas (scope 1) has now been | and major refurbishment projects, and | emissions from homeworking in addition to | | reported under heat (scope 2). | therefore have project specific embodied | oce commuting. Following our flexible | | | carbon data on our most recent projects. | working policy implementation, we assumed | | We estimate electricity consumption data | Whilst there is no standardised carbon | the Head Oce employees to be working in | | where tenants have their own utility supplier. | emission factor for calculating embodied | the oce three days a week and at home two | | Where this relates to units in a building | carbon emissions from buildings, embodied | days a week. All site employees are assumed | | where we otherwise have access to energy | carbon factors advised by our consultant’s | to be working on-site five days a week. | | consumption, we estimate ‘tenant direct’ | research team have allowed us to estimate | Assumption on modes of transportation used | | electricity usage based on the energy usage | embodied carbon emissions for projects | by commuters came from the Department of | | of the rest of the building, using a floor area | carried out prior to 2021, representative of | Transport statistics. | 2 pro rating method. Where this relates to a standard market practice (770 kgCO 2 e/m 2 single-let building, energy consumption is for oce construction, 480 kgCO 2 e/m for With the exception of embodied carbon and 2 estimated based on the average energy usage logistics construction, 196 kgCO 2 e/m for purchased goods and services, GHG emissions of the portfolio. Whilst our ‘tenant direct’ gas oce retrofits involving heat decarbonisation, were calculated using DEFRA (Department for 2 | consumption is very low, this year we have | 77kgCO | 2 e/m | for light oce retrofits). The | Environment, Food & Rural Aairs) 2022 factors. | | --- | --- | --- | --- | --- | | included estimations for gas consumption | 2019/20 and 2021/22 embodied carbon | | | | | where we have been made aware of tenants | calculations have been updated in line with | | | | | managed gas supplies, and added | these carbon factors. We have also restated | | | | | corresponding GHG emissions to the 2019/20 | the 2019/20 and 2021/22 embodied carbon | | | | | and 2021/22 reported GHG figures. GHG | figures to include light refurbishment projects. | | | | emissions calculated from ‘tenant direct’ electricity and gas consumption are included in our scope 3 reporting. 104 Workspace Group PLC^{}[] Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information # COMPLIANCE STATEMENTS CONTINUED # SASB SUSTAINABILITY ACCOUNTING STANDARD - REAL ESTATE METRICS | Topic | Accounting Metric | Code | Comment | | --- | --- | --- | --- | | **Energy Management** | Energy consumption data coverage as a percentage of total floor area, by property subsector | IF-RE-130a.1 | The energy consumption reported on page 101, falling within our scope 1 and 2 emissions, cover 36% for our portfolio's total nettable floor area and corresponds to the areas where Workspace have operational control. Energy data falling outside of our procurement control is estimated and corresponding carbon emissions are reported under scope 3 on page 101. Majority of this consumption is associated with the industrial assets in the portfolio which are on FRI lease. | | | (1) Total energy consumed by portfolio area with data coverage (2) percentage grid electricity (3) percentage renewable, by property subsector | IF-RE-130a.2 | (1) See 'Energy Consumption used to calculate above emissions (kWh)' on page 101. (2) 99% of electricity consumed was purchased from the grid, the rest was self-generated by on-site solar panels. (3) 100% of electricity procured was from certified renewable sources (REGO-backed). Additionally we have 12 sites that are equipped with solar panels. Refer to page 43 for more information on our renewable electricity procurement. | | | Like-for-like percentage change in energy consumption for the portfolio area with data coverage, by property subsector | IF-RE-130a.3 | Refer to Ele-LfL, Fuel-LfL and DH&C-LfL metrics in our EPRA report. | | | Percentage of eligible portfolio that (1) has an energy rating and (2) is certified to ENERGY STAR, by property subsector | IF-RE-130a.4 | Refer to Cert-Tot metric in our EPRA report. Energy Performance certificates (EPCs) and BREEAM certification have been used as the relevant UK alternative to ENERGY STAR. | | | Description of how building energy management considerations are integrated into property investment analysis and operational strategy | IF-RE-130a.5 | Energy management is identified as one of the key material issues for the business and underpins the delivery of our net zero carbon pathway. As a result, stretching energy reduction targets directly influence Executive remuneration. Refer to pages 43, 47, 49, 96 in this report for more information on our strategy and approach to energy management, along with impact delivered. | | **Water Management** | Water withdrawal data coverage as a percentage of (1) total floor area and (2) floor area in regions with High or Extremely High Baseline Water Stress, by property subsector | IF-RE-140a. | (1) Our water consumption data coverage amounts to 75% of our portfolio's floor area. (2) 100% of our office properties and 85% of our logistics properties are located in areas classified as under high water stress according to the World Resource Institute's (WRI) Water Risk Atlas tool. 15% of our logistics properties are located in a medium-high water stress zone. | | | (1) Total water withdrawn by portfolio area with data coverage and (2) percentage in regions with High or Extremely High Baseline Water Stress, by property subsector | IF-RE-140a.2 | (1) Refer to Water-Abs metric in our EPRA report. (2) 100% of our office properties and 82% of our logistics properties are located in areas classified as under high water stress according to the World Resource Institute's (WRI) Water Risk Atlas tool. 18% of our logistics properties are located in a medium-high water stress zone. | | | Like-for-like percentage change in water withdrawn for portfolio area with data coverage, by property subsector | IF-RE-140a.3 | Refer to Water-LfL metric in our EPRA report. | | | Description of water management risks and discussion of strategies and practices to mitigate those risks | IF-RE-140a.4 | We include emissions associated with water supply and water treatment in our scope 3 footprint and intend to address it as part of our net zero carbon pathway. Our climate risk assessment also indicated water stress as a key risk in the long term and we have put in place a mitigation strategy in the form of water efficient design brief and adaptive landscaping around our sites (page 99). We are also rolling out metering to gain better coverage of our water data. | 105 Workspace Group PLC^{}[] Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information # COMPLIANCE STATEMENTS CONTINUED # SASB SUSTAINABILITY ACCOUNTING STANDARD - REAL ESTATE METRICS | Topic | Accounting Metric | Code | Comment | | --- | --- | --- | --- | | **Management of Tenant Sustainability Impacts** | (1) Percentage of new leases that contain a cost recovery clause for resource efficiency related capital improvements (2) Associated leased floor area, by property subsector | IF-RE-410a.1 | Our new leases are inclusive of rent and all bills, including utilities. A responsible energy consumption clause has been included in those leases, which allows us to charge an excessive usage fee in instances of consistent high energy consuming behaviour. Those inclusive leases represented 46% of our total sales volume in 2022/23. | | | (1) Percentage of tenants that are separately metered or submetered for grid electricity consumption (2) Percentage of tenants that are separately metered or submetered for water withdrawals, by property subsector | IF-RE-410a.2 | (1) 63% of tenant spaces on the like-for-like Workspace portfolio (which represent 74% of the whole portfolio) are submetered for grid electricity consumption. Submetering coverage for the newly acquired McKay portfolio is yet to be confirmed. (2) Customers are billed for water usage on a floor area pro rating basis. A small number of tenants manage their own water meter (gyms and restaurant units) in addition to single-let properties' tenants. | | | Discussion of approach to measuring, incentivising, and improving sustainability impacts of tenants | IF-RE-410a.2 | Our operational platform allows us to maintain a close working relationship with our customers and collaborate on whole building initiatives. We have a multi-faceted customer engagement strategy on sustainability, whereby we send quarterly sustainability newsletters to tenants of each of our properties, share building-level sustainability performance data, and guidance on how to operate buildings sustainably. This year we delivered 120 sustainability-themed customer events ranging from energy savings awareness to and recycling and zero-waste workshops. | | **Climate Change Adaptation** | Area of properties located in 100-year flood zones, by property subsector | IF-RE-450a.1 | 1,356,640 sq. ft. lettable area of offices and 356,687 sq. ft. of industrial spaces are located in a 100-year flood zone according to the Environment Agency flood map. | | | Description of climate change risk exposure analysis, degree of systematic portfolio exposure, and strategies for mitigating risks | IF-RE-450a.2 | Refer to the TCFD section of this report on pages 92 to 100. | | Activity Metric | Code | Code | Comment | | Number of assets, by property subsector | IF-RE-000.A | | 74 offices 11 industrial assets 1 other (leisure) | | Leasable floor area, by property subsector | IF-RE-000.B | | 4,524,063 sq. ft. of offices 648,800 sq. ft. of industrial assets 98,255 of leisure assets | | Percentage of indirectly managed assets, by property subsector | IF-RE-000.C | | 0% of office space floor area is indirectly managed 71% of industrial floor area is indirectly managed | | Average occupancy rate, by property subsector | IF-RE-000.D | | 85% average occupancy rate across offices 87% average occupancy rate across industrial properties | 106 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### GOVERNANCE DRIVING LONG-TERM SUCCESS BOARD SKILLS AND EXPERIENCE BOARD DIVERSITY BOARD INDEPENDENCE We recognise that a group that is diverse in The Board and its Committees continue to have a strong mix of experienced individuals who nature, irrespective of gender, ethnicity, skills, are not only able to oer anexternal perspective on the business, but also provide constructive experience andbackground, is able to provide challenge to review the Group’s strategy. ## diering perspectives and challenge to 1 Executive Property Customer debates and decisions. | | | and | and Real | Corporate | | and | | NON-EXECUTIVE CHAIR | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Leadership | | Estate Financial | Governance | Marketing People ESG | | | | | Executive Directors | | | | | | | GENDER DIVERSITY OF THE BOARD | | | Graham | | | | | | | AS AT 31 MARCH 2023 | | Clemett ## 2 Dave EXECUTIVE DIRECTORS Benson Non-Executive Directors Stephen Hubbard ## 5 Rosie 3 Female 37.5% INDEPENDENT NON-EXECUTIVE Shapland 5 Male 62.5% DIRECTORS Lesley-Ann Nash Duncan ETHNIC DIVERSITY OF THE BOARD Owen AS AT 31 MARCH 2023 Manju Malhotra Nick Mackenzie LENGTH OF TENURE FOR THE BOARD 6 White 75% AS AT 31 MARCH 2023 2 Minority ethnic 25% ### Year joined 2007 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 A Board made up of people with Graham Clemett ### a wide range of backgrounds Dave Benson ### Stephen Hubbard and experiences, combined AGE DIVERSITY OF THE BOARD Rosie Shapland AS AT 31 MARCH 2023 ### with our culture of openness Lesley-Ann Nash ### Duncan Owen 50-59 and respect will contribute to Manju Malhotra ### our long-term success Nick Mackenzie 60-69 6 70-79 Stephen Hubbard 1 Chair 1 107 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 GOVERNANCE DRIVING LONG-TERM SUCCESS CONTINUED 2022/23 HIGHLIGHTS BOARD ACTIVITIES Our Our Our Our partners Our The More DIVIDEND PER SHARE customers people investors & suppliers communities environment information 2022–2023 1. Strategy Annual strategic review Page 118 Sustainability agenda Page 118 ## 25.8p | | | 2. Operations Asset management | | | Page 118 | | --- | --- | --- | --- | --- | --- | | 2022 | 21.5 | | | Portfolio valuation | Page 118 | | | | | | Portfolio growth | Page 119 | | | | 3. Purpose, | | Purpose | Page 119 | | BOARD MEETINGS | | | values and | | | | | | | | Values | Page 119 | | 2022–2023 | | | culture | | | | | | | | Culture | Page 119 | | | | 4. Stakeholders Investor engagement | | | Page 121 | ## 7 Employee engagement Page 122 Business relationship engagement Page 123 REMUNERATION POLICY REVIEW | 2022–2023 | | Community and environment engagement | Page 123 | | --- | --- | --- | --- | | | 5. Finance Structure, forecasts, budgets | | Page 123 | | 12 shareholders engaged | | Refinancing | Page 123 | | | | Dividend payments | Page 123 | | | 6. Reporting Full, half-year and trading statements | | Page 123 | SHAREHOLDER ENGAGEMENT 2022–2023 Viability and Going Concern statements Page 123 7. Risks Principal risks Page 123 institutional investors | 304 | engaged | | | | | | --- | --- | --- | --- | --- | --- | | | | | | Emerging risks | Page 123 | | 2022 | | 264 | 8. Succession Appointment of new Chair | | Page 124 | | | | | 9. Governance Board eectiveness review | | Page 124 | | | | | | Gender pay gap | Page 124 | RIVERSIDE DISPOSAL Regulatory and legal updates Page 124 2022–2023 Committee membership and terms of reference Page 124 Workforce policies and practices Page 124 ## £54m 2023 2023 25.8 304 2021 2021 17.75 292 108 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### CHAIR’S INTRODUCTION TO GOVERNANCE ## Our approach to corporate ## governance aims to preserve ## and strengthen stakeholder ## confidence in our business ## integrity and provide a working ## foundation of accountability. ### Stephen Hubbard ### Chair QUICK LINKS Chair’s introduction to governance Page 108 Board leadership and company purpose Page 113 Division of responsibilities Page 129 Composition, succession and evaluation Page 141 Audit, risk and internal control Page 159 ESG Committee report Page 172 Remuneration Page 178 Report of the Directors Page 212 Statement of Directors’ responsibilities Page 215 109 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 CHAIR’S INTRODUCTION TO GOVERNANCE CONTINUED Environmental, Social and Governance (ESG) Our People and Culture GOVERNANCE HIGHLIGHTS We recognise the importance that our Our people are essential to the delivery of stakeholders place on ESG, and our our strategic objectives and our continued ### We have fully embedded our commitment to delivering a climate-resilient success. It is vital that we provide a work portfolio, looking after our people and environment where everyone feels valued, CHAIR APPOINTED ### approach to sustainability, supporting our communities. This commitment motivated and able to thrive. We continue Duncan Owen, who joined the Board in July ### covering both our portfolio is led by our Board and lived by our people with our Board supported initiatives to 2021, to become the newly appointed Chair ### and business-wide strategic every day. support the wellbeing of our people and with eect from 6 July 2023 embrace diversity as a core value. For the past ### decisions Chair succession We have a fully embedded approach to two years, employee survey feedback has Page 146 sustainability, covering both our portfolio and shown that our teams strongly believe in our all business-wide strategic decisions. An ESG culture and clear set of values. We monitor BOARD EFFECTIVENESS Dear shareholder, Board Committee has been established to employee engagement and satisfaction Board and Committee eectiveness review This will be my last message as Chair as I will provide added focus and drive further through annual surveys. I have also carried out carried out by the Chair and Company be stepping down from the Board in July integration across business decisions. We in person engagement sessions with sta, a Secretary with the assistance of Fidelio | 2023. I have very much enjoyed being on the | receive regular monthly updates from around | forum in which candid feedback is provided. | | | --- | --- | --- | --- | | Workspace Board for the last nine years. | the business against our ambitions. For more | | Board evaluation | | When I took over as Chair three years ago, | details, see page 172. | This year, the Board has been particularly | Page 155 | | one of my objectives was to strengthen the | | mindful of the impact of the cost-of-living | | | Board and plan for my succession. In this | Stakeholder Engagement | crisis on our sta. Sta salaries were increased | | ESG COMMITTEE CREATED regard, I am delighted that this has been We recognise that stakeholder engagement is by at least 6% from 1 April 2023. Further Creation of the ESG Committee to help successful with Duncan Owen taking over critical to the long-term success of our business. details can be found on page 181. progress the Group’s ESG plans and further the Chair role. To read more about his We have continued with our practice of integrate ESG across the business appointment process see page 146. considering stakeholder voices in discussions Future Outlook and decision making, not only at Board level, The Board strongly believes that good REMUNERATION POLICY REVIEW Our Purpose but across the Company. For examples of how governance is a key part of the strength of Review of the Company’s Remuneration Our purpose – to give businesses the freedom we have done this, please see pages 15 to 25 our business and that by continually reviewing Policy, including engagement with to grow – runs through every part of our and 121 to 123. We support and encourage our and monitoring our existing practices we can shareholders | business, starting with our people and how | senior managers in their relationships with | ensure that our governance continues to | | | --- | --- | --- | --- | | they live our values, right up to how our Board | respective stakeholder groups. | evolve and is aligned to our business. | Remuneration Policy | | delivers good governance. Throughout the | | | Page 190 | | year, our people supported our purpose, | This strong sense of purpose has created a | I would like to take this opportunity to wish | | | ultimately driving greater long-term | culture that puts our stakeholders front and | the Board and all Workspace sta success | | RISK REVIEW sustainable success. During the year we centre. A large proportion of our decision for the future. Assessment of the Group’s principal and approved a new company value, which making is informed by listening to our emerging risks with particular reference to had been introduced following employee stakeholders, both at the Board level and climate change. feedback. For more details see page 21. across the Company. Principal risks and uncertainties Our Section 172(1) Statement, which can Page 69 Stephen Hubbard be found on page 125 demonstrates how the Non-Executive Chair Board’s engagement with stakeholders has 6 June 2023 aected decision making. 110 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 CHAIR’S INTRODUCTION TO GOVERNANCE CONTINUED UK CORPORATE GOVERNANCE CODE 2018 Compliance statement Principles of the UK Corporate More Governance Code 2018 information The Board confirms that, for the year ended | 31 March 2023, we have complied with all of | Board leadership and | 111 | | --- | --- | --- | | the provisions of the UK Corporate | company purpose | | | Governance Code 2018 other than Provision | Division of responsibilities 111 | | 32 of the Code. Lesley-Ann Nash was Composition, succession 112 appointed as Chair of the Remuneration and evaluation Committee with eect from 10 September Audit, risk and internal control 112 2021 and on appointment had served nine Remuneration 112 months as a member of the Remuneration Committee. While we note the requirement of Provision 32 that remuneration committee chairs should have served on a remuneration committee for at least 12 months prior to their appointment, Lesley-Ann has now served on the Remuneration Committee for over two years and the Board continues to have every confidence that Lesley-Ann has the skills and experience to carry out the role. 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). Stephen Hubbard pictured with Further information on the Code can be Chair elect, Duncan Owen found on the Financial Reporting Council’s website at www.frc.org.uk. ### I am excited about taking up ### the position of Chair from July ### 2023. Workspace is in a great ### position and it’s an exciting ### time for everyone in the ### business Duncan Owen Chair elect About this report The Governance section has been structured Chair succession around the Code Principles (A to R). Page 146 111 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 HOW WE COMPLY WITH THE UK CORPORATE GOVERNANCE CODE 2018 CONTINUED BOARD LEADERSHIP AND COMPANY PURPOSE DIVISION OF RESPONSIBILITIES | Pages 113 to 128 | | Pages 129 to 140 | | | | --- | --- | --- | --- | --- | | Principle A | Our Board | Principle F | Board roles and | | | A successful company is led by an eective and | Page 114 | The chair leads the board and is responsible for | responsibilities | | | entrepreneurial board, whose role is to promote | | its overall eectiveness in directing the company. | | Page 130 | Chair succession the long-term sustainable success of the company, The chair should demonstrate objective judgement Page 146 Chair’s governance letter generating value for shareholders and contributing throughout their tenure and they should promote Page 109 | to wider society. | Board evaluation | | a culture of openness and debate. In addition, the | | | | --- | --- | --- | --- | --- | --- | | | | Page 155 | chair facilitates constructive board relations and the | Board evaluation | | | | | | eective contribution of all non-executive directors, | | Page 155 | and the chair ensures that directors receive accurate, Principle B Our purpose timely and clear information. The board should establish the company’s purpose, Page 14 values and strategy, and satisfy itself that these and its Our strategy Principle G Board roles and culture are aligned. All directors must act with integrity, Page 32 The board should include an appropriate combination responsibilities lead by example and promote the desired culture. of executive and non-executive (and, in particular, Page 130 Sustainability independent non-executive) directors, such that no Page 36 Non-Executive Directors one individual or small group of individuals dominates Page 133 the board’s decision making. There should be a clear | Principle C | Our business model | | | | | | --- | --- | --- | --- | --- | --- | | | | | division of responsibilities between the leadership of | The relationship between | | | The board should ensure that the necessary resources | | Page 64 | | | | | | | | the board and the executive leadership of the | | the Board and the | are in place for the company to meet its objectives and Our governance framework company’s business. Executive Committee measure performance against them. The board should Page 132 Page 135 also establish a framework of prudent and eective controls, which enable risk to be assessed and managed. Principal risks and Principle H Board roles and uncertainties Non-executive directors should have sucient time to responsibilities Page 69 meet their board responsibilities. They should provide Page 130 constructive challenge, strategic guidance, oer Principle D Our stakeholders Non-Executive Directors specialist advice and hold management to account. In order for the company to meet its responsibilities Pages 15 and 121 Page 133 to shareholders and stakeholders, the board should Section 172(1) statement ensure eective engagement with, and encourage Page 125 | participation from, these parties. | | Principle I | Our governance framework | | | --- | --- | --- | --- | --- | | | | The board, supported by the company secretary, | | Page 132 | | Principle E | Our purpose | should ensure that it has the policies, processes, | | | Information flow The board should ensure that workforce policies and Page 14 information, time and resources it needs in order to the Board practices are consistent with the company’s values and to function eectively and eciently. Sustainability Page 139 support its long-term sustainable success. The workforce Page 36 should be able to raise any matters of concern. Whistleblowing Policy Page 91 112 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 HOW WE COMPLY WITH THE UK CORPORATE GOVERNANCE CODE 2018 CONTINUED AUDIT, RISK AND INTERNAL CONTROLCOMPOSITION, SUCCESSION AND EVALUATION REMUNERATION | Pages 141 to 158 | | | Pages 159 to 171 | | | Pages 178 to 211 | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Principle J | Chair succession | | Principle M | Audit Committee | | Principle P | Remuneration | | | Appointments to the board | | Page 146 | The board should establish | | Report | Remuneration policies and | | Committee | | should be subject to a formal, | | | formal and transparent policies | | Page 159 | practices should be designed to | | Chair’s letter | Inclusion and rigorous and transparent and procedures to ensure support strategy and promote Page 181 diversity | procedure, and an eective | | the independence and the | long-term sustainable success. | | | --- | --- | --- | --- | --- | | | Page 148 | | | Remuneration | | succession plan should be | | eectiveness of internal and | Executive remuneration should be | | at a glance maintained by the board and external audit functions. The aligned to company purpose and Page 185 | by senior management. Both | | | | board should satisfy itself on | | | | | values, and be clearly linked to | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | appointments and succession | | | | the integrity of financial and | | | | | the successful delivery of the | Our remuneration | | | | | plans should be based on merit | | | | narrative statements. | | | | | company’s long-term strategy. | | | | policy | | and objective criteria and, within | | | | | | | | | | | | Page 190 | | | this context, should promote | | | | Principle N | Fair, balanced and | | | | | | | | | | diversity of gender, social and | | | | The board should present a fair, | | understandable | | | | | | | | | | | | | | | | | | Principle Q | | Remuneration | | | | ethnic backgrounds, cognitive | | | | balanced and understandable | | | assessment | | | | | | | | | | | | | | | | | A formal and transparent | | | Committee | | | and personal strengths. | | | | assessment of the company’s | | | | Page 167 | | | | | | | | | | | | | | | | procedure for developing policy | | Chair’s letter | | | | | | | | position and its prospects. | | | | | on executive remuneration and | | | Page 181 | | | Principle K | | | Board | | | | | | determining director and senior | | | | | | The board and its committees | composition | | | | | | | | | Our remuneration | | | | | | | | | Principle O | | Our governance | | | management remuneration | | | | | | should have a combination of | | Page 148 | | | | | | | | | | | policy | | | | | | The board should establish | | | framework | | should be established. No | | | | | | skills, experience and knowledge. | | | | | | | | | | | | Page 190 | | | | | | | procedures to manage risk, | | | | Page 132 | director should be involved in | | | | | | Consideration should be given to | | | | to oversee the internal control | | | | | deciding their own remuneration | | | | | Audit Committee the length of service of the board framework, and to determine outcome. Report as a whole and membership the nature and the extent of the Page 159 | regularly refreshed. | | | principal risks the company is | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | Principle R | Remuneration | | | | | | | willing to take in order to achieve | Principal risks and | | | Directors should exercise | | Committee | | | Principle L | Board evaluation | | its long-term strategic objectives. | | uncertainties | | independent judgement and | | Chair’s letter | | | Annual evaluation of the board | | Page 155 | | | | Page 69 | discretion when authorising | | | Page 181 | | should consider its composition, | | | | | | | remuneration outcomes, taking | | | | | diversity and how eectively | | | | | | | | Our approach | | | account of company and members work together to to fairness and individual performance, and achieve objectives. Individual wider workforce wider circumstances. evaluation should demonstrate considerations whether each director continues Page 198 to contribute eectively. 113 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### BOARD LEADERSHIP AND COMPANY PURPOSE ## The Board provides strong ## leadership and support to the ## Executive Committee as it delivers ## the Group’s strategic aims. ### Graham Clemett ### Chief Executive Ocer The Board comprises the CEO, the CFO and Non-Executive Directors and it 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 the experience of the Board members can be found on pages 115 to 116. Board Audit Remuneration Nominations ESG 4 Stephen Hubbard 7/7 – 6/6 3/3 2/2 4 Graham Clemett 7/7 – – – 2/2 4 Dave Benson 7/7 – – – 2/2 | | | | | 3 | | | | | 4 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Rosie Shapland 7/7 4/4 | | | | | 6/6 3/3 2/2 | | | | | | | | | | 3 | | | | | 4 | | Lesley-Ann Nash 7/7 4/4 | | | | | 6/6 3/3 2/2 | | | | | | | 1 | | | | | | 5 | | 4 | | Duncan Owen | | 7/7 – – 2/3 | | | | | | 2/2 | | | | | | | 3 | | | | | 4 | | Manju Malhotra 7/7 4/4 | | | | | | – 3/3 2/2 | | | | | | | | 6 | | | | | | 4 | | Nick Mackenzie 6/7 | | | | – – 3/3 2/2 | | | | | | 2 Damon Russell 3/3 – – 1/1 – 1. Duncan Owen was appointed as Chair of the ESG Committee on 21 April 2022. 2. Damon Russell stepped down from the Board with eect from the close of the Company’s AGM on 21 July 2022. 3. The Audit Committee meeting in January 2023 was a joint meeting with the ESG Committee. 4. The ESG Committee meeting in January 2023 was a joint meeting with the Audit Committee. 5. Duncan Owen did not attend the Nominations Committee meeting where his appointment as Chair was discussed. 6. Nick Mackenzie did not attend the September 2022 Board meeting due to pre-existing commitments. QUICK LINKS Our Board Page 114 Board and Committee membership Page 117 114 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED ### Our Board ### Led by our Chair, Stephen Hubbard, the Board 1 2 3 ### provides the leadership of the Company. The Board ### is collectively responsible and it is accountable to ### shareholders for the Company’s long-term success, ### strategy, values, culture, control and management. Stephen Hubbard Graham Clemett Dave Benson Non-Executive Chair Chief Executive Ocer Chief Financial Ocer 64 75 8 Rosie Shapland Lesley-Ann Nash Duncan Owen Manju Malhotra Nick Mackenzie Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director 115 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED OUR BOARD CONTINUED | CHAIR | | EXECUTIVE DIRECTOR | | EXECUTIVE DIRECTOR | | NON-EXECUTIVE DIRECTOR | | | --- | --- | --- | --- | --- | --- | --- | --- | | | 1 | | 2 | | 3 | | 4 | | STEPHEN HUBBARD | | GRAHAM CLEMETT | | DAVE BENSON | | ROSIE SHAPLAND | | | INDEPENDENT | | CHIEF EXECUTIVE OFFICER | | CHIEF FINANCIAL OFFICER | | SENIOR INDEPENDENT NON-EXECUTIVE | | | NON-EXECUTIVE DIRECTOR | | | | | | DIRECTOR | | | Committee membership | | Committee membership | | Committee membership | | Committee membership | | | REMUNERATION | | ESG | | ESG | | REMUNERATION | | | NOMINATIONS (CHAIR) | | EXECUTIVE (CHAIR) | | EXECUTIVE | | NOMINATIONS | | | ESG | | INVESTMENT (CHAIR) | | INVESTMENT | | AUDIT (CHAIR) | | | | | DISCLOSURE (CHAIR) | | DISCLOSURE | | ESG | | | Appointed | | Appointed | | Appointed | | Appointed | | 1 | Board: July 2014 | Board: July 2007 | April 2020 | November 2020 | | --- | --- | --- | --- | | Chair: July 2020 | CEO: September 2019 | | | | Current external appointments | Current external appointments | Current external appointments | Current external appointments | | Stephen is a member of the advisory board | Graham is the Senior | Dave does not have any current external | Rosie is a Non-Executive Director at Foxtons | | of Redevco, a pan-European property | Independent Non-Executive Director | appointments. | Group plc, where she is Senior Non-Executive | | holding company, and a Non-Executive | at The Restaurant Group PLC. | | Director, Chair of their Audit Committee, | | Director of AustralianSuper where he is their | | | and a member of their Remuneration, | | representative on the board of the BL/Aus | | | Nomination and ESG Committees and | | Super JV for Canada Water. | | | PayPoint plc, where she is Chair of their | Audit Committee and a member of their Nomination and Remuneration Committees. | Relevant skills, business experience | Relevant skills, business experience | Relevant skills, business experience | Relevant skills, business experience | | --- | --- | --- | --- | | and contribution | and contribution | and contribution | and contribution | | Stephen has many years’ experience of | Graham has detailed knowledge of the | Prior to joining Workspace, Dave was the | Rosie is a Chartered Accountant and was | | operating within the property sector. He was | Company’s operations and extensive | Corporate Finance Director of Whitbread | previously an audit partner at PwC. She has | | previously Chair of CBRE UK until he retired | experience of the property sector gained | PLC. He previously held senior finance roles | many years’ experience of operating within | | in December 2019, having joined Richard | through his fifteen years’ experience with the | at Kier Group plc and Keller Group plc, | the finance sector as well as a broad range | | Ellis in 1976 and held the position of Head of | Group, having joined as CFO in 2007. Prior to | having qualified as a Chartered Accountant | of public company board experience, in | | EMEA and UK Capital Markets from 1998 to | joining the Group, he was Finance Director | with Deloitte. He has strong financial skills, | addition to experience of governance, risk | | 2012. He was also previously Non-Executive | for UK Corporate Banking at RBS Group plc | having gained experience in a series of | management, investment and corporate | | Chair of LXI REIT PLC. He has an outstanding | and before that spent eight years at Reuters | dynamic businesses as well as a good | transactions and strong financial skills. | | track record in the investment market and | Group plc, latterly as Group Financial | understanding of technology and its | | | has advised on several landmark transactions | Controller. Graham has extensive experience | commercial applications plus strong | | | involving international capital. Stephen has | in leadership and management, strong | communication and leadership skills. He | | | a broad range of knowledge and experience | commercial, strategic and communication | has experience in strategy development, | | | at board level, including leadership and | skills, extensive investor relations experience | infrastructure and development projects, | | | executive management, operation of public | and strong financial skills with significant | corporate transactions, acquisitions and | | | companies, regeneration and development | experience of financing and capital raising. | integrations, investor relations and detailed | | | projects, as well as strong financial skills. | He is a Chartered Accountant. | 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. 116 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED OUR BOARD CONTINUED | NON-EXECUTIVE DIRECTOR | | NON-EXECUTIVE DIRECTOR | | NON-EXECUTIVE DIRECTOR | | NON-EXECUTIVE DIRECTOR | | | --- | --- | --- | --- | --- | --- | --- | --- | | | 5 | | 6 | | 7 | | 8 | | LESLEY-ANN NASH | | DUNCAN OWEN | | MANJU MALHOTRA | | NICK MACKENZIE | | | INDEPENDENT NON-EXECUTIVE DIRECTOR | | INDEPENDENT NON-EXECUTIVE DIRECTOR | | INDEPENDENT NON-EXECUTIVE DIRECTOR | | INDEPENDENT NON-EXECUTIVE DIRECTOR | | Committee membership Committee membership Committee membership Committee membership REMUNERATION (CHAIR) NOMINATIONS NOMINATIONS NOMINATIONS NOMINATIONS ESG (CHAIR) AUDIT ESG AUDIT ESG ESG | Appointed | | Appointed | | Appointed | Appointed | | --- | --- | --- | --- | --- | --- | | | 1 | | 1 | | | | January 2021 | | July 2021 | | January 2022 | January 2022 | Current external appointments Current external appointments Current external appointments Current external appointments Lesley-Ann is a Non-Executive Director of Duncan is the Chair of Sellar, the large scale Manju is CEO at Harvey Nichols, the luxury Nick is CEO at Greene King, the pub retailer St. James’s Place plc, where she is a member London oce developer of schemes such as department store, a Non-Executive Director and brewer. of their Risk and Remuneration Committees. the Shard and Paddington Square. at abrdn UK Smaller Companies Growth She is also a member of the boards of Trust plc and a Non-Executive Director at Homes England and London First. London & Partners, an international trade and investment agency for London. | Relevant skills, business experience | Relevant skills, business experience | Relevant skills, business experience | Relevant skills, business experience | | --- | --- | --- | --- | | and contribution | and contribution | and contribution | and contribution | | Lesley-Ann was previously a Director in | Duncan has over 30 years’ experience in | Manju joined Harvey Nichols in 1998 and | Prior to joining Greene King, Nick spent | | the Cabinet Oce of HM Government and | the real estate investment and development | progressed through various roles, including | 17 years at Merlin Entertainments plc, most | | a Managing Director at Morgan Stanley, as | sector. He has a deep understanding of the | CFO and co-COO, before her appointment | recently as Managing Director of Midway | | well as having previously worked at UBS and | central London Oce sector and listed capital | as CEO. She has extensive experience in | Attractions, the largest division within the | | Midland Bank. She has deep global capital | markets, including leadership of IPOs and | customer-focus, developing a values-led | group, having started his career in pubs at | | markets experience on both buy and sell | corporate acquisitions. He was previously a | culture, strategy, operations, finance and | Bass and Allied. He was also previously a | | sides, extensive knowledge of central and | director of LaSalle Investment Management, | technology. She is a Chartered Accountant. | Non-Executive Director at Daniel Thwaites | | local government and experience of policy | on the board of Insight Investment, CEO of | | PLC. He has significant expertise in strategy, | | development, procurement and major | Invista Real Estate Investment Management | | real estate and business development and | | programme delivery and a track record | plc, Global Head of Real Estate at Schroders | | experience of public company boards. Nick | | of promoting inclusion and diversity and | PLC, and then the CEO of Immobel Capital | | currently sits on the board of the BBPA and | | delivering meaningful cultural change, as | Partners until 31 March 2023. He was also | | is also an advisory board member of WiHTL. | | well as public company board experience. | previously a Governor of the board of the | | | | She also has deep financial fluency gained | Church Commissioners. He is a member of | | | | as a fellow of the Chartered Institute of | the Royal Institution of Chartered Surveyors, | | | | Management Accountants (CIMA). She was | sat on the policy committee of the BPF | | | | also previously on the board of North | (British Property Federation) for 14 years | | | | London Hospice. | and studied at INSEAD. | | | | 1. Lesley-Ann was appointed Chair of the Remuneration | 1. Duncan was appointed Chair of the ESG Committee | | | | Committee in September 2021. | in April 2022. | | | 117 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED OUR BOARD CONTINUED BOARD AND COMMITTEE MEMBERSHIP COMPANY SECRETARY AS AT 31 MARCH 2023 CARMELINA CARFORA Nominations Audit Remuneration ESG Executive Investment Disclosure Board Committee Committee Committee Committee Committee Committee Committee Chair Stephen Hubbard Non-Executive Chair Executive Directors Graham Clemett Chief Executive Ocer Dave Benson Chief Executive Ocer Non-Executive Directors Rosie Shapland Senior Independent Non-Executive Director Lesley-Ann Nash Non-Executive Director Appointed March 2010 Duncan Owen Non-Executive Director Manju Malhotra Carmelina is Secretary to the Board and Non-Executive Director its Nominations, Remuneration, Audit and ESG Committees, she monitors compliance Nick Mackenzie with procedures and provides advice on Non-Executive Director governance matters. At the direction of the Chair, she is responsible for making sure the Members of the Executive Committee Board receives accurate, timely and relevant Will Abbott information. She also co-ordinates the Chief Customer Ocer induction of new Board members and the Carmelina Carfora provision of ongoing training and Company Secretary development of the Board. Carmelina’s other responsibilities include corporate Claire Dracup governance, compliance with legislation Director of People and Culture and the administration of share schemes. Paul Hewlett Director of Strategy & Corporate Development Leo Shapland Head of Portfolio Management Richard Swayne Investment Director 118 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED STRATEGY OPERATIONS 1 2 ### Board activities 2022/23 1. Strategy Page 118 ANNUAL STRATEGIC REVIEW SUSTAINABILITY AGENDA ASSET MANAGEMENT 2. Operations Pages 118 to 119 | | | | Relevant stakeholders | Relevant stakeholders | Relevant stakeholders | | --- | --- | --- | --- | --- | --- | | 3. Purpose, values | | Pages 119 to 120 | CUSTOMERS | CUSTOMERS | CUSTOMERS | | | and culture | | PEOPLE | PEOPLE | INVESTORS | | | | | INVESTORS | INVESTORS | PARTNERS AND SUPPLIERS | | 4. Stakeholders Pages 121 to 123 | | | PARTNERS AND SUPPLIERS | PARTNERS AND SUPPLIERS | | | | | | COMMUNITIES | COMMUNITIES | | The Board receives regular updates on asset 5. Finance Page 123 ENVIRONMENT ENVIRONMENT management and leasing activities. This year, 6. Reporting Page 123 the focus has been on the integration of the The Board held its annual strategic review The Board established a Board ESG McKay portfolio, improving the overall 7. Risks Page 123 in September 2022 to approve the five-year Committee in April 2022 to provide a portfolio oering and improving the | | plan. External speakers and members of the | dedicated forum for discussion of ESG- | | | --- | --- | --- | --- | | 8. Succession Page 124 | | | customer experience, through targeted | | | Executive Committee joined the Board to | related matters. During the year, discussions | | customer surveys, the results of which are 9. Governance Page 124 stimulate discussion in a number of areas, included ESG strategy and governance, used to drive improvements in our customer including the Group’s sustainability ambitions, progress against our science-based targets processes. Read more about our engagement people and culture and operational priorities. to transition to net zero carbon and the with customers on pages 16 to 20 and 123. Following the strategy day, several ideas and addition of climate change as a principal initiatives were developed for incorporation risk to the Group. PORTFOLIO VALUATION into the business plan. Throughout the year the Board also Relevant stakeholders Our strategy requested updates from the sustainability INVESTORS Pages 32 to 35 team on the Group’s sustainability activities. The Board reviewed and approved the full Sustainability and half-year valuations of the Group’s Pages 36 to 58 property portfolio in May and November 2023 respectively. 119 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED BOARD ACTIVITIES 2022/23 CONTINUED 2. OPERATIONS CONTINUED PURPOSE, VALUES AND CULTURE 3 | PORTFOLIO GROWTH | PURPOSE | VALUES | CULTURE | | --- | --- | --- | --- | | Relevant stakeholders | Relevant stakeholders | Relevant stakeholders | Relevant stakeholders | | CUSTOMERS | CUSTOMERS | CUSTOMERS | CUSTOMERS | | PEOPLE | PEOPLE | PEOPLE | PEOPLE | | INVESTORS | INVESTORS | INVESTORS | INVESTORS | | PARTNERS AND SUPPLIERS | PARTNERS AND SUPPLIERS | PARTNERS AND SUPPLIERS | PARTNERS AND SUPPLIERS | | COMMUNITIES | COMMUNITIES | COMMUNITIES | COMMUNITIES | | ENVIRONMENT | ENVIRONMENT | ENVIRONMENT | ENVIRONMENT | | During the year the Board also approved | Our purpose is to give businesses the | Our purpose informs our values: ‘know your | Our culture is one of integrity, transparency | | the disposal of the residential component | freedom to grow. Our purpose provides | stu’, ‘show we care’, ‘find a way’ and ‘make | and openness, where independent thought | | of its Riverside mixed-use redevelopment | the framework for making decisions and for | it fun’. | and taking initiative are encouraged. The | | in Wandsworth for £54 million. Read more | engaging with our stakeholders. The Board | | Board recognises the importance of our | | on page 128. | sets the Group’s strategy and makes | The Board encourages all employees to live | culture to the business of the Group and sets | | | decisions through the lens of our purpose. | our values in their work for the Group and | the ‘tone from the top’ by demonstrating | | The Board is also provided with regular | | especially in their dealings with each other | and encouraging values-driven behaviour. | | updates on planned refurbishment and | The Board has continued to monitor how | and our other stakeholders. Graham Clemett, | This is underpinned by our compliance | | development projects. This year, key | our purpose is articulated and understood | CEO, sits on the judgement panel for our | policies and Code of Conduct, which are | | development projects have included | by our customers, employees, investors and | employee recognition programme, | reviewed by the Board annually. | | The Chocolate Factory and Leroy House. | other stakeholders, and how our values are | Workspace Winners, where employees are | | | Read more about these projects on | embedded throughout our business. This is | given awards and prizes for demonstrating | The Board is keen to recognise employees | | pages 30 and 46. | achieved through regular engagement with | one or more of our values. | who exemplify our culture. Our Workspace | | | our stakeholders, more information on which | | Winners scheme rewards sta who live our | | | can be found on pages 121 to 123. The Board | Our values | values throughout their role at Workspace. | | | also approves the Group’s key policies and | Page 21 | | | | practices so that they underpin our purpose. | | Spotlight on culture | | | The Executive Committee is responsible for | | Page 120 | communicating these policies throughout our business. 120 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED BOARD ACTIVITIES 2022/23 CONTINUED HOW OUR BOARD MONITORS CULTURE Chair breakfast sessions ‘Town hall’ events Site visits Annual employee survey Stephen Hubbard meets with sta in his role Our CEO, CFO and members of the Executive Members of the Board regularly visit our Seeks detailed feedback from sta in as Non-Executive Director for employee Committee lead ‘town hall’ events to provide business centres and engage with our centre a wider range of areas. Results from the engagement and reports back to the Board business updates to employees, with the sta during site visits survey are reviewed and discussed by the opportunity for sta to ask questions Board and progress on actions arising from the feedback is tracked Sta suggestion board This year we introduced an online sta The Board sets the ‘tone from the top’ HOW OUR suggestion board, allowing our employees to and uses a variety of tools to assess BOARD MONITORS share ideas and feedback for improvements and monitor the Group’s culture. CULTURE to our business | Diversity & inclusion | Remuneration | Whistleblowing reports | Informal feedback | | --- | --- | --- | --- | | The Board and the Nominations Committee | The Remuneration Committee reviews | Our Whistleblowing Policy, applicable to | Any significant informal sta feedback | | regularly monitor diversity at Workspace, | the Group’s employee pay structures and | all sta, encourages openness in reporting | is reported to the Board by the Executive | | including reviewing our first gender pay gap | their alignment with our purpose, values | misconduct. Any reports made would be | Committee | | report, published in March 2023 | and strategy | investigated and reported to the Board. | | No reports were made during the year | 86% | 74% | 2 | 12 | 6 | | --- | --- | --- | --- | --- | | RESPONSE RATE TO 2023 | FAVOURABLE ENGAGEMENT | CHAIR BREAKFAST SESSIONS | WORKSPACE WINNERS | TOWN HALL EVENTS | | EMPLOYEE SURVEY | SCORE FROM 2023 SURVEY | | | | 121 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED BOARD ACTIVITIES 2022/23 CONTINUED STAKEHOLDERS 4 | INVESTOR ENGAGEMENT | Financial Controller. Key investor engagement | INVESTOR RELATIONS CALENDAR OF EVENTS | | | | --- | --- | --- | --- | --- | | | during the year included the following: | | Investor | Investor | | Relevant stakeholders | – 150 investor meetings (in-person and virtual) | 2022/23 Events | Meetings | Tours | | INVESTORS | – 19 site tours | | | | April – Q4 Business update – 6 real estate conferences attended globally May – Capital Markets Day – Sustainability Capital Markets Day Market engagement – Annual General Meeting June – Full-year results We regularly engage with existing and – Investor roadshow prospective shareholders through an active In May 2022, we held a Capital Markets Day investor relations programme. The Board July – AGM & Q1 Business Update for investors and analysts focusing on our reviews a detailed bi-monthly investor ESG strategy. The event was hosted by our August relations report which includes notable views Head of Sustainability, CEO and CFO and expressed by shareholders as well as wider September – Global real estate conference included a live Q&A. It was attended by 22 market participants, alongside share register investors and analysts. October – Q2 Business Update movements, broader sector and peer news and progress on various investor relations November – Half-year results Our investor website is www.workspace.co. initiatives. – Investor roadshow uk/investors. It contains our Annual Reports, half and full-year results presentations and December – UK investor conference Our Investor Relations team manages a our financial and dividend calendar for the comprehensive calendar of engagements, January – Q3 Business Update upcoming year. Our website also outlines our including formal announcements, AGM, – UK investor conference company strategy, business model, property results presentations, results roadshows, portfolio and has a detailed section covering February ad hoc equity and debt investor meetings our ESG activities. (including institutional, private client and March – Year end retail investors), equity sales team meetings, – Global real estate conference Lesley-Ann Nash, as Chair of the conferences, financial analyst and investor Remuneration Committee, engaged with site tours, capital market days, business shareholders in respect of our proposed media, industry events, as well as ad hoc changes to our Remuneration Policy INVESTOR MEETINGS outreach contact with stakeholders to ensure this year. For further details see page 190. our strategy and value creation are well All Committee Chairs are available to engage Apr-22 17 understood by the market and wider with shareholders as appropriate. stakeholder community. See page 23 for May-22 8 details of the topics raised by investors. Jun-22 101 If shareholders have any concerns, which Jul-22 2 the normal channels of communication to the During 2022/2023 we engaged with 304 CEO, the CFO or the Chair have failed to Aug-22 2 institutional investors via one-to-one and resolve, or for which contact is inappropriate, Sep-22 2 group meetings; most in person, then our Senior Independent Director, Rosie Oct-22 0 supplemented by virtual meetings. Investor Shapland, is available to address them. meetings are attended by various senior Nov-22 106 Contact details for our Investor Relations executives, including the CEO, CFO, Chair Dec-22 33 team, Company Secretary and Company and Executive Committee members, as well Registrars can be found at the back of this Jan-23 9 as the Investor Relations Analyst and Group Report as well as on our website. Feb-23 6 Mar-23 18 122 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED BOARD ACTIVITIES 2022/23 CONTINUED 4. STAKEHOLDERS CONTINUED INVESTOR ENGAGEMENT CONTINUED Following shareholder engagement, since EMPLOYEE ENGAGEMENT 2019 we have sought approval for a resolution Relevant stakeholders authorising political donations up to £20,000 Relevant stakeholders INVESTORS in aggregate, which was a lower amount than PEOPLE we had sought in previous years. This year we are again proposing a resolution with an Annual Report and Website The Board recognises the crucial importance upper limit of £20,000 in aggregate. This Our Annual Report is available to all of our employees to the success of the resolution is proposed as a precaution to shareholders. Shareholders can opt to receive Group. Throughout the year the Board meets prevent the Company’s normal business a hard copy in the post or PDF copies via and receives feedback from a wide range of activities being inadvertently caught by email or from our website. Additionally, if a employees across the business, including the broad definitions used in the relevant shareholder holds their shares via a nominee reviewing results from our annual employee provisions of the Companies Act 2006. It account and that shareholder encounters survey. The Board and the Executive remains the policy of the Company not to diculty receiving our Annual Report via Committee review and approve key policies, make political donations or to incur political their nominee provider, they are welcome to practices and strategic decisions, making expenditure within the ordinary meaning of contact the Company Secretary to request sure that they reflect our culture and align those words and the Board has no intention a copy. to the Group’s key values and purpose. of using the authority for that purpose. Our investor website is www.workspace.co.uk/ Stephen Hubbard is our designated Non- In addition, and in line with the resolution investors. It contains our Annual Reports, Executive Director responsible for employee approved at last year’s AGM, the Directors half- and full-year results presentations and engagement, as the Board considers this are again proposing a single resolution our financial and dividend calendar for the the most eective method to ensure the disapplying pre-emption rights for the 2023 upcoming year. Our website also outlines our employee voice is heard at the very top of Annual General Meeting that would apply company strategy, business model, property the organisation. Stephen held two breakfast only in very limited circumstances. The portfolio and it has a detailed section sessions with sta during the year. See proposed disapplication resolution is limited covering our ESG activities. pages 21 and 139 for further details of the to allotments and/or sales: (i) in connection Chair breakfast sessions and topics raised. with pre-emptive oers and oers to holders AGM Stephen reports back to the Board after of equity securities other than ordinary Our 2022 AGM was held on 21 July 2022 and every session to ensure the feedback gained shares (if required by the rights of those all resolutions passed with over 90% of votes from our sta is eectively communicated securities or as the Directors otherwise in favour. Our 2023 AGM will be held at the to the Board as a whole. consider necessary); and (ii) in connection Company’s registered oce at Canterbury with the terms of any employees’ share Court, Kennington Park, 1-3 Brixton Road, Employees are also invited to town hall scheme for the time being operated by London SW9 6DE on Thursday 6 July 2023 sessions led by the CEO or other members the Company. | at 11.00am and we look forward to welcoming | of the Executive Committee. During the | | --- | --- | | our shareholders there. The Notice of | year there were site tours arranged for our | | Meeting, together with an explanation of | Non-Executive Directors to visit our business | | the business to be dealt with at the Meeting, | centres and to meet employees. | is included as a separate document sent to shareholders who have elected to receive Employee engagement hard copies of shareholder information and Pages 21 to 22 it is also available on the Company’s website. Chair’s breakfast, Brickfields, Hoxton 123 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED BOARD ACTIVITIES 2022/23 CONTINUED FINANCE REPORTING4. STAKEHOLDERS CONTINUED RISKS 765 BUSINESS RELATIONSHIP ENGAGEMENT STRUCTURE, FORECASTS, BUDGETS FULL, HALF-YEAR AND TRADING PRINCIPAL RISKS STATEMENTS Relevant stakeholders Relevant stakeholders Relevant stakeholders CUSTOMERS INVESTORS Relevant stakeholders CUSTOMERS PARTNERS AND SUPPLIERS INVESTORS PEOPLE INVESTORS The Board regularly reviews the Group’s PARTNERS AND SUPPLIERS Positive relationships with our customers, financial structure and rolling forecasts. The The Board reviewed and approved the full COMMUNITIES suppliers and other business partners are Board approved the Group’s 2022/23 budget. and half-year results and trading statements. ENVIRONMENT essential to the Group’s ongoing success. Customer-facing teams provide daily REFINANCING VIABILITY AND GOING CONCERN The Board reviewed the Group’s principal feedback from customers while views from STATEMENTS risks which could impact the implementation suppliers and partners are captured by Relevant stakeholders of the Group’s strategy. See pages 69 to 76 dialogue with the relevant business team. INVESTORS Relevant stakeholders for details of our principal risks and These views from our customers, suppliers INVESTORS uncertainties. and partners are collated and fed back to the The Board reviewed refinancing Board, and incorporated into decision making. arrangements related to two McKay loan The Board conducted a review of the The Board requested updates from the Chair facilities, and the extension of the McKay Company’s viability over the next five-year of the Audit Committee on the key areas of Business relationship engagement £135m RCF and the Group’s existing £200m period and it approved the viability risk discussed during the year. Pages 16 to 20 and 23 RCF. See page 34 for further details. statement and going concern statement. EMERGING RISKS COMMUNITY AND ENVIRONMENT DIVIDEND PAYMENTS Viability statement ENGAGEMENT Page 87 Relevant stakeholders Relevant stakeholders CUSTOMERS | | INVESTORS | Going concern statement | | | --- | --- | --- | --- | | Relevant stakeholders | | | PEOPLE | | COMMUNITIES | | Page 87 | INVESTORS | | ENVIRONMENT | The Board recommended the payment of | | | PARTNERS AND SUPPLIERS | | the final dividend paid to shareholders in | COMMUNITIES | | --- | --- | --- | | The Board remains committed to reaching | August 2022 and it approved the payment | ENVIRONMENT | | our target of becoming a net zero carbon | of the interim dividend paid to shareholders | | | business by 2030. All new Board members | in February 2023. | The Board heard updates from the Chair | | receive an induction on the Group’s | | of the Audit Committee on emerging risks | | approach to sustainability. This year, a | | which have been highlighted and debated | | Board-level ESG Committee was introduced, | | during meetings of the Committee. | providing a forum for the Board to dedicate discussion to our progress with our Principal risks and uncertainties sustainability objectives and to review Page 69 updates from our sustainability team. The Board is also regularly updated on our community and social impact work and our fundraising activities for our charity partner, Single Homeless Project. 124 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED BOARD ACTIVITIES 2022/23 CONTINUED GOVERNANCESUCCESSION 98 APPOINTMENT OF NEW CHAIR BOARD EFFECTIVENESS REVIEW REGULATORY AND LEGAL UPDATES WORKFORCE POLICIES AND PRACTICES Relevant stakeholders Relevant stakeholders Relevant stakeholders Relevant stakeholders CUSTOMERS CUSTOMERS INVESTORS PEOPLE PEOPLE PEOPLE INVESTORS INVESTORS The Board discussed legal updates and The Board reviews and approves all key PARTNERS AND SUPPLIERS PARTNERS AND SUPPLIERS advice from the Company’s legal advisers. policies and practices which could impact COMMUNITIES COMMUNITIES our employees and influence their ENVIRONMENT ENVIRONMENT The Board also reviewed regular legal and behaviours. Policies are reviewed to check During the year the Board approved the The Board has progressed the governance updates from the Company that they are aligned with the Group’s appointment of Duncan Owen to succeed recommendations made following the internal Secretary. purpose, culture and values. The Board Stephen Hubbard as Chair of the Board. Board eectiveness review facilitated by recognises that eective and honest COMMITTEE MEMBERSHIP AND TERMS communication is essential to maintain our Fidelio last year. Read more about how the Recruitment process OF REFERENCE business values, and we encourage our recommendations from last year’s external Page 146 evaluation have been progressed during employees to speak out if they witness any Relevant stakeholders wrongdoing. This stance is reinforced in our the year on pages 157 to 158. INVESTORS whistleblowing procedures and in our Code Internal Board eectiveness review of Conduct. Further information on the During the year, the Board reviewed the Pages 155 to 156 Group’s key compliance policies can be structure of its Committees. For more found on pages 89 to 91. information on changes to the Committee GENDER PAY GAP structure and membership see page 157. All policies are available to employees and Relevant stakeholders are published on the Group’s intranet. All The Board also reviewed the schedule of PEOPLE new employees are provided with training INVESTORS matters reserved to the Board (see page 135) on our policies at induction sessions and we and the terms of reference applicable to provide annual refresher training to all sta The Board reviewed and approved the each Committee. in key areas. Company’s first gender pay gap report, which was published on 30 March 2023 and can be found on our website at www.workspace. co.uk/investors/about-us/governance/ our-policies/gender-pay-gap-report-2023. 125 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED The Board of Workspace Group PLC The Board has identified the Company’s key (‘the Board’) is required to act in good faith stakeholders to be its shareholders, employees, ### Section 172(1) statement | to promote the long-term success of the | customers, suppliers, debt financiers and local | | --- | --- | | Company (and its Group) for the benefit of | communities. The Board also considers the | | its shareholders, while having due regard to | impact of operations on the environment to | | the matters set out in Section 172(1) of the | be of key importance. | Companies Act 2006. ## A The likely consequences of any decision in the long term RELEVANT DISCLOSURES ## F B The need to act The interests The likely consequences of any The interests of the Company’s fairly as between of the Company’s A decision in the long term B employees members of the employees Company | Our purpose Page 14 | Employee engagement Pages 21 to 22 | | | --- | --- | --- | | Our business model Pages 64 to 68 | | and 122 | | Our strategy Pages 32 to 35 | Looking after our people Pages 50 to 53 | | | Dividend Page 80 | Diversity and inclusion Pages 148 to 154 | | The need to foster the Company’s The impact of the Company’s ## E C business relationships with suppliers, D operations on the community and ## C | | The desirability | | The need to foster the | | customers and others | | | | the environment | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | of the Company | | Company’s business | Customer proposition Page 65 | | | | | | | | | | | | | | | | Supporting our | | Pages 54 to 58 | | maintaining a reputation | | relationships with suppliers, | | | | | | | | | | | | | | Customer and supplier | | Pages 16 to 20, 23 | | communities | | | | | for high standards | | customers and others | | | | | | | | | | | | | engagement | | | and 123 | Sustainability Pages 36 to 58 | | | of business conduct Anti-bribery & corruption Page 91 TCFD Pages 92 to 103 and modern slavery ## D The desirability of the Company The need to act fairly as between The impact of E maintaining a reputation for high F members of the Company the Company’s operations standards of business conduct on the community and Compliance policies Pages 89 to 91 Shareholder engagement Pages 23 and 121 the environment Culture and values Page 21 AGM Page 122 Whistleblowing Page 91 Internal controls Page 170 126 Workspace Group PLC Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information # **BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED** **SECTION 172(1) STATEMENT CONTINUED** # **HOW THE BOARD CONSIDERS SECTION 172(1) MATTERS** # **BOARD INFORMATION** - All members of the Board are aware of the Board's responsibilities and their individual duties as Directors and the need to consider Section 172(1) factors is embedded in the Matters Reserved to the Board and Committee terms of reference - The Board receives regular updates from the sustainability team on ESG matters (see pages 118 and 172 to 177) - The Board directly engages with employees and investors, and it receives feedback from the CEO and CFO on meetings with investors and analysts (see pages 121 to 122) - The Board receives regular reports from the Executive Committee and external advisers on engagement with other stakeholders such as customers, suppliers and the wider community (see page 123) - Stephen Hubbard, Chair of the Board, holds focus groups with employees in his role as the designated Non-Executive Director for employee engagement (see page 122) - A stakeholder impact analysis, setting out the expected impacts of the proposed decision on different stakeholder groups and how any negative impacts might be mitigated, is conducted and that analysis feeds into the Board's discussions when key strategic decisions are proposed # **BOARD DISCUSSION AND DECISION MAKING** - Decision making is informed by the information received by the Board, with consideration given to Section 172(1) factors relevant to the decision at hand - Sustainability matters are considered in each decision the Board makes - A Board strategy day is held each year where the Board discusses long-term strategy (see page 118) - The Board regularly considers the Group's purpose, values and policies related to business conduct (see pages 119 to 120) - The Board and the Audit Committee oversee the Company's risk management framework and the actions that are in place to mitigate risk in the short, medium and long term (see page 171) - The Board considers stakeholder interests when determining the level of dividend # **MONITORING** - The Board monitors the short, medium and long-term impact of key decisions through regular updates from the Executive Committee - Feedback and engagement from stakeholder groups is collated and used to inform future decision making 127 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED INTEGRATION OF McKAY ### Key Board decisions in 2022/23 Some of the key decisions considered by Description Following completion of the acquisition of McKay in May 2022, the Board in 2022/23, and how the Board during the year the Board monitored the successful integration had regard to Section 172(1) matters when of the McKay business into the Group’s operations discussing them, are outlined to the right and on the following page. Relevant Section 172(1) A, B, C, D, E, F decision criteria Relevant stakeholders – Employees – Investors – Customers – Communities – Suppliers – Debt finance providers Decision-making process – The Board was aware that the integration of the McKay business into the Group would impact upon multiple stakeholder groups and be essential to delivering long-term value from the acquisition for all stakeholders – The Board requested regular reports from management on progress with the integration plan, focusing on aligning the McKay operations – Areas of focus included a review of security and health & safety policies and processes to ensure the safety of employees, customers, suppliers and visitors to McKay buildings, and integrating building, finance and customer data and processes into the Group’s systems to promote synergies – In particular, the Board considered progress with collation of A: The likely consequences of any decision information related to sustainability matters and the creation in the long term. of a net zero transition plan for the McKay portfolio – The Board reviewed updates on sta communications relating B: The interests of the Company’s employees. to the acquisition and the integration plan C: The need to foster the Company’s – The Board reviewed proposals for amendments to financing business relationships with suppliers, arrangements with lenders customers and others. D: The impact of the Company’s operations on the community and the environment. E: The desirability of the Company Values maintaining a reputation for high standards of business conduct. F: The need to act fairly as between Know Show Find members of the Company. your stu we care a way 128 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 BOARD LEADERSHIP AND COMPANY PURPOSE CONTINUED KEY BOARD DECISIONS IN 2022/23 CONTINUED DISPOSAL OF RIVERSIDE RESIDENTIAL SCHEMECUSTOMER EXPERIENCE CHAIR SUCCESSION | Description During 2022, the Board reviewed and | | Description The Board approved the disposal of the | | Description The Board approved the appointment of | | | --- | --- | --- | --- | --- | --- | | | considered updates on the progress of the | | residential component of the Group’s | | Duncan Owen to succeed Stephen Hubbard | | | Group’s customer experience project. The | | Riverside property | | as Chair of the Board with eect from the | | | project is focused on collating customer | | | | close of the Company’s AGM in 2023 | feedback and using that feedback to improve the experience of our customers | Relevant | | A, C, E | Relevant | | A, B, C, D, E, F | | Relevant | | A, B, C, D, E, F | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Section 172(1) | | | Section 172(1) | | | | Section 172(1) | | | | | decision | | | decision | | | | decision | | | | | criteria | | | criteria | | | | criteria | | | | | Relevant | – Customers | | Relevant | – Employees | | – Investors | Relevant | – Employees | | – Investors | | stakeholders | – Investors | | stakeholders | – Customers | | – Communities | stakeholders | – Customers | | – Communities | | | | | | – Suppliers | | | | – Suppliers | | | | Decision- | – The Board recognises that, as well as | | Decision- | – In March 2023, the Group completed | | | Decision- | – As Stephen Hubbard was approaching | | | | making | improving the experience of customers as | | making | the sale of the residential component | | | making | nine years’ tenure on the Board, the | | | | process | a stakeholder group, continually improving | | process | of the Group’s Riverside mixed-use | | | process | Nominations Committee had for some | | | | | the customer experience is vital to the | | | redevelopment in Wandsworth for | | | | time been considering succession planning | | | | | long-term success of the Group | | | £54 million | | | | – The Committee was conscious of the | | | | | – During the year, the Board reviewed | | | – The scheme is an example of the Group’s | | | | significance of the Chair’s role in leading | | | | | and discussed feedback collated from | | | mixed-use regeneration approach, and the | | | | the Group and the potential for the | | | | | customers and the proposed areas | | | Group will construct a new major business | | | | decision to impact on all the Group’s | | | | | of focus for improvements | | | centre providing 153,000 sq. ft. of net | | | | stakeholders | | | | | – The Board monitored progress on the | | | lettable space – creating employment | | | | – Duncan Owen’s appointment as Non- | | | | | areas of focus, which included the | | | opportunities and delivering on the | | | | Executive Director in July 2021 formed | | | | | introduction of a new complaints policy, | | | Group’s strategy of employment-led | | | | part of that succession planning, with the | | | | | changes to streamline the processes for | | | regeneration in the areas in which | | | | role specification being created with a | | | | | renewals, moving within Workspace and | | | it operates | | | | view to identifying candidates who could | | | | | licences to alter, and adjustments to the | | | – The new residential and commercial space | | | | be suitable for the Chair role when it | | | | | responsibilities of centre managers to free | | | will be built to the highest sustainability | | | | became vacant | | | | | up more time for them to focus on customers | | | standards and with significant landscaping | | | | – The Board formally approved Duncan’s | | | | | – The Board was updated on provision of | | | and public realm enhancements, benefitting | | | | appointment as Chair in February 2023, | | | | | ‘Customer First’ training to all sta, designed | | | residents and the local community | | | | on the recommendation of the | | | | | to support the above initiatives, underline | | | – Further information can be found on | | | | Nominations Committee | | | | | the importance of a positive customer | | | page 13 | | | | – Further information can be found on | | | | | experience and understand how sta can | | | | | | | page 146 | | | contribute within their individual roles Values Values Values Know Show Find Make Know Show Find Know Show Find your stu we care a way it fun your stu we care a way your stu we care a way 129 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### DIVISION OF RESPONSIBILITIES ## Our strong governance framework ## and clear delineation of Board ## roles enables the Chair and ## Non-Executive Directors to provide ## oversight and constructive challenge ## as the Executive Committee ## continues to deliver our strategy. ### Carmelina Carfora ### Company Secretary QUICK LINKS Board roles and responsibilities Page 130 Our governance framework Page 132 How we govern Page 133 130 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 DIVISION OF RESPONSIBILITIES CONTINUED NON-EXECUTIVE ### Board roles and responsibilities The roles and responsibilities of the Chair and CHAIR: DESIGNATED NON-EXECUTIVE DIRECTOR FOR INDEPENDENT NON-EXECUTIVE DIRECTORS: STEPHEN HUBBARD EMPLOYEE ENGAGEMENT: ROSIE SHAPLAND, LESLEY-ANN NASH, the Chief Executive Ocer are separate, with Leading the eective operation and STEPHEN HUBBARD DUNCAN OWEN, MANJU MALHOTRA a clear division of responsibilities between governance of the Board – Representing the Board in discussions with AND NICK MACKENZIE them. The Chair is responsible for the – Setting agendas which support ecient employees and communicating Board – Constructively challenging and assisting leadership of the Board, and the Chief Executive and balanced decision making decisions on specific matters in the development of strategy Ocer manages and leads the business. – Ensuring that the Board plays a full and – Developing, implementing and feeding – Scrutinising, measuring and reviewing constructive part in the development of back on employee engagement initiatives the performance of the Executive Our governance framework can be found the Group’s strategy and making sure that in conjunction with management Directors and senior management against on page 132. In addition, the role specifications there is sucient time for boardroom – Communicating to employees the agreed performance objectives described on the right set out the clear discussion outcomes and the developments made – Promoting the highest standards of division of responsibility between Executive – Ensuring eective Board relationships by the Board on specific matters integrity and corporate governance and Non-Executive members of the Board. and fostering a culture that supports – Reviewing the succession plans for the SENIOR INDEPENDENT DIRECTOR: constructive debate Board and key members of senior ROSIE SHAPLAND – Facilitating the eective contribution management – Being available and providing an of the Non-Executive Directors and – Determining appropriate levels of alternative communication channel for monitoring that all Directors receive remuneration for the senior executives shareholders and other stakeholders, if accurate, timely and clear information – Reviewing the integrity of financial required, and being available to meet with – Overseeing the annual Board evaluation reporting and the systems of risk investors on request and identifying key actions required management and financial controls – Providing a sounding board for the Chair – With the Nominations Committee, – Serving on or chairing various Committees – If necessary, deputises for the Chair in his monitoring that the Board remains of the Board absence and counsels all Board colleagues appropriately balanced to deliver the – Acts as an intermediary for Non-Executive Group’s strategic objectives and ensuring Directors when necessary that the Nominations Committee meets – At least annually, leads a meeting of the the requirements of good corporate Non-Executive Directors without the governance Chair present, to appraise the Chair’s – Promoting eective engagement with performance and to address any other the Group’s shareholders and other matters which the Directors might wish to key stakeholders raise. The outcomes of these discussions – Leading initiatives to assess the culture are then conveyed to the Chair across Workspace and ensuring that the Board sets the correct tone – Reviewing, with the Board, diversity and inclusion initiatives The Chair is not involved in an executive capacity with any of the Group’s activities. 131 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 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 of – Secretary to the Board and to the Board’s Committees by the Board through leadership of the Group’s Executive the Group and works closely with the CEO and the Board – Responsible for ensuring compliance with Board Committee to develop and implement the Group’s strategy procedures and for supporting the Chair – 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 the Board’s eectiveness in conjunction with objectives successfully – Leads and monitors the eectiveness of the key finance the Chair – Regularly reviewing the Group’s organisational structure functions and facilitates the appropriate development – Facilitating the Directors’ induction programmes and and recommending changes as appropriate of the finance team assisting with their professional development – Setting overall policies for recruitment, management, – Responsible for the IT function and co-ordinates and – Providing advice, services and support to all Directors sta development and succession planning and providing delivers IT projects to support the growth and strategic as and when required updates to the Remuneration Committee priorities of the Group – Responsible for organising the Annual General Meeting – Overseeing employee initiatives, diversity and inclusion, and employee wellbeing – Together with the Chair and the CFO, representing the Company to its customers, suppliers, shareholders and other stakeholders – Leading on the Group’s sustainability strategy and the Group’s net zero carbon pathway – Corporate communications and the IR strategy 132 Workspace Group PLC Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information # DIVISION OF RESPONSIBILITIES CONTINUED # Our governance framework Our governance framework supports the development of good governance practices across the Group. The Board has overall responsibility for governance within the Group. The Board delegates certain of its responsibilities to its Nominations, Remuneration, Audit and ESG Committees. Further details of the work, composition, role and responsibilities of these Committees are provided in separate reports on pages 141, 159, 172 and 178. Each of the Committees has terms of reference which were reviewed by the Committees and the Board during the year. The performance of each of the Committees is assessed annually as part of the evaluation process described later in this report. The Board delegates all operational matters to the Executive Committee, except for matters specifically reserved to the Board. The schedule of matters reserved for the Board is reviewed at least once a year and can be accessed on the Company website at www.workspace.co.uk/investors/about-us/governance/committee-terms-of-reference. Further information on the matters reserved and the relationship between the Board and the Executive Committee can be found on page 135. The terms of reference of each Board Committee are available on the Company's website at www.workspace.co.uk/investors/about-us/governance/committee-terms-of-reference. # BOARD OF DIRECTORS The role of the Board is to promote the long-term success of Workspace by setting a clear purpose and the Group's strategy for delivering the long-term value to our shareholders and other stakeholders. The Board delegates certain matters to its four principal committees. # NOMINATIONS COMMITTEE Ordered by Stephen Huskand # Membership Independent Non-Executive Directors # Key responsibilities: - Reviews succession plans for the Board and its Committees and considers its structure, size, composition and diversity - Supports the development of an inclusive and diverse talent pipeline, and reviews supporting initiatives to increase diversity - Monitors that the Board has the appropriate knowledge, skills and experience to operate effectively and deliver our strategy - Recommends to the Board the appointment of a Non-Executive Director for employee engagement Independent Committee Pages 141 to 158 # AUDIT COMMITTEE Ordered by Rosie Shopland # Membership Independent Non-Executive Directors # Key responsibilities: - Oversees the Group's financial reporting - Maintains and manages the relationship with the External Auditor, including monitoring their performance and reappointment - Reviews and monitors management of risks other than those related to real estate, development and valuation Audit Committee Pages 159 to 171 # REMUNERATION COMMITTEE Ordered by Lenny-Ann Neun # Membership Independent Non-Executive Directors # Key responsibilities: - Determines the Remuneration Policy for Executive Board Directors and considers whether there is a clear link between performance and remuneration - Considers senior management remuneration presented by the CEO - Reviews workforce remuneration and related policies - Reviews remuneration policies and practices to ensure they support clarity, simplicity, transparency and alignment with culture Independent Committee Pages 178 to 211 # ESG COMMITTEE Ordered by Graham Owen # Membership Directors # Key responsibilities: - Oversees the Group's ESG strategy - Monitors ESG risk and opportunities - Sets ESG objectives and monitors progress against the objectives - Ensures reporting of ESG issues is in line with market best practice ESG Committee Pages 172 to 177 # EXECUTIVE COMMITTEE The Executive Committee is responsible for the execution of the Company's strategy and the day-to-day management of the business. # DISCLOSURE COMMITTEE Identifies and controls inside information or information which could become inside information and determines how and when that information is disclosed in accordance with applicable legal and regulatory requirements. # SUPPORTING COMMITTEES The Executive Committee operates a number of supporting committees that provide oversight on key business activities and risk. 133 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 DIVISION OF RESPONSIBILITIES CONTINUED NON-EXECUTIVE DIRECTORS ### How we govern | Non-Executive Directors Page 133 | | The Non-Executive Directors have a broad mix | The Nominations Committee oversees the | | --- | --- | --- | --- | | | | of business skills, knowledge and experience | independence of the individual Non-Executive | | Re-election and election | Page 134 | | | | | | acquired across dierent business sectors. | Directors all of whom are deemed to be | of Directors | | | This combination enables them to provide | independent in line with the recommendations | | --- | --- | --- | --- | | Relationship between the | Page 135 | independent and external perspectives to | of the Code. Further details of this supporting | | Board and the Executive | | Board discussions. | evaluation can be found on page 148. | Committee | | | The Non-Executive Directors provide | Time commitment and external appointments | | --- | --- | --- | --- | | Composition of the Executive | Page 136 | | | | | | constructive challenge to the Executives. The | The expected time commitment of the Chair | Committee | | Non-Executive Directors also help to develop | and the Non-Executive Directors is agreed | | --- | --- | --- | | Information flow to the Board Page 139 | proposals on strategy and they monitor | and set out in writing in the letter of | | | performance. | appointment to the position, at which time the | existing external demands on an individual’s Independence of Non-Executive Directors time are assessed to confirm that individual’s During the year, the Board considered the capacity to take on the role. Further independence of all of the Non-Executive appointments which could impair the ability Directors, save for the Chair who was deemed to meet these arrangements can only be independent by the Board at the date of his accepted following approval of the Board. appointment. The Board has reconfirmed | that the Non-Executive Directors remain | When assessing additional directorships, | | --- | --- | | independent from executive management and | the Board considers the number of public | | that the Non-Executive Directors are free from | directorships held by the individual already | | any business or other relationship which could | and their expected time commitment for those | | materially interfere with the exercise of their | roles (see biographies on pages 115 to 116). | | independent judgement. This independence | The Board considers guidance published | | is protected by a number of mechanisms | by institutional investors and proxy advisers | | including: | as to the maximum number of public | | – Meetings between the Chair and the | appointments which can be managed both | | Non-Executive Directors, individually and | eectively and eciently. | ## 100% collectively, without the Executive Directors being present. These meetings are typically NON-EXECUTIVE DIRECTOR Executive Directors may accept a non- held before each Board meeting and they INDEPENDENCE executive role at another company with the are used to discuss areas relevant to the approval of the Board. Graham Clemett is the operation of the Board and the Group in Senior Independent Non-Executive Director at a more private setting. This year, seven The Restaurant Group PLC. of these meetings were held | – Separate and clearly defined roles for the | | The Board is satisfied that each of the | | --- | --- | --- | | Chair, as head of the Board, and the Chief | Board succession | Non-Executive Directors can devote sucient | | Executive Ocer, as head of executive | Pages 146 to 147 | time to the Company’s business to discharge | | management, as set out on pages 130 to 131 | | their responsibilities eectively. The Non- | | | Board skills and experience | Executive Directors oer strategic guidance | | | The biographies of all of the members of | to Board discussions and they provide | | | the Board, outlining their experience, can | independent decisions to their respective | be found on pages 115 to 116 134 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 DIVISION OF RESPONSIBILITIES CONTINUED HOW WE GOVERN CONTINUED NON-EXECUTIVE DIRECTORS CONTINUED RE-ELECTION OF DIRECTORS | Board and Committee duties (see the table | In accordance with the Code, all of the | The explanatory notes in the Notice of Meeting | None of the Non-Executive Directors have | | --- | --- | --- | --- | | on page 113 for Board meeting attendance). | Directors will submit themselves for re-election | for the AGM state the reasons why the Board | service contracts. Rather, the Non-Executive | | | at the AGM on 6 July 2023, except for | believes that the Directors proposed for | Directors are given letters of appointment. | | The biographies of all of the members of the | Stephen Hubbard who will be stepping down | re-election at the AGM should be reappointed. | The appointments of Rosie Shapland, Lesley- | | Board, outlining their experience and external | from the Board and as Chair and who will not | | Ann Nash, Duncan Owen, Manju Malhotra and | | appointments, can be found on pages 115 to 116. | seek re-election. Following the Board | Duncan Owen was appointed as Chair of | Nick Mackenzie may be terminated by either | | | evaluation review, detailed on page 155, and | the newly formed ESG Board Committee | the Company, or any one of them, giving three | | Stephen Hubbard | taking into account the Directors’ skills and | in April 2022. | months’ notice in writing. The appointment of | | As in previous years, the independence of | experience (set out on pages 115 to 116), the | | Stephen Hubbard may be terminated by either | | Stephen Hubbard was specifically considered | Board believes that the re-election of the | Mr Clemett and Mr Benson each have service | him or the Group giving six months’ notice | | during the year. Stephen was previously Chair | Directors is in the best interests of the | contracts, details of which can be found on | in writing. With eect from his appointment | | of CBRE UK, who are the Group’s external | Company. The Nominations Committee of | page 209. | as Chair, which will take eect at the close | | independent valuers. Stephen retired from | the Group has considered their commitments | | of the Company’s AGM on 6 July 2023, the | | CBRE UK in December 2019. | and it has concluded that the Non-Executive | | appointment of Duncan Owen may be | | | Directors have sucient time to meet their | | terminated by either him or the Group giving | | Furthermore, while he remained as Chair | Board responsibilities. | | six months’ notice in writing. | of CBRE UK, he had no involvement in any discussions or decisions regarding the The terms and conditions of appointment appointment of CBRE or the fees paid to them. of Non-Executive Directors, including the expected time commitment, are available for The appointment of CBRE is by the Directors inspection at the Company’s registered oce. of the Company, acting through the Executives, and any communication with CBRE is entirely with them. The Board is satisfied and it continues to conclude that Stephen remains independent both in character and in judgement, including in relation to his responsibilities as Chair of the Company. In July 2020, Stephen stepped down from the Audit Committee on his appointment as Chair of the Company. 135 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 DIVISION OF RESPONSIBILITIES CONTINUED HOW WE GOVERN CONTINUED ### The relationship between the BOARD OF DIRECTORS ### Board and the Executive The Board is responsible for contemplating market trends and their Key responsibilities: ### Committee impact on our strategy, assessing appropriate levels of risk and setting – review and approval of the Group’s strategy, business objectives the objectives for the business, including the approach to ESG and annual budgets The Board considers there to be an matters. The Board delegates the delivery of the strategy to the – approval of the Group’s dividend policy and the payment and appropriate balance between Executive and Executive Committee. recommendation of interim and final dividends Non-Executive Directors required to lead the – approval of full-year and half-year results, including the review business and safeguard the interests of and approval of the going concern basis of accounting and the shareholders. viability assessment – health and safety performance across the Group As at 31 March 2023, the Board comprised the – on the advice of the Nominations Committee, reviewing succession Chair, five Non-Executive Directors (all of plans for the Board and the senior management team whom are independent) and two Executive – review and approval of corporate transactions Directors. This composition meets the – setting the Group’s purpose, values and standards The Board comprises eight people: the – approval of decisions likely to have a material impact on the requirement of the Code for at least half the ### 8 Chair, five Non-Executive Directors and Company or Group from any perspective, including, but not limited Board, excluding the Chair, to be independent two Executive Directors to, financial, operational, strategic or reputational Non-Executive Directors. – setting the risk appetite and tolerance of the Group The Board delegates all operational matters to the Executive Committee except for the matters reserved to the Board. Executive Committee – managing the THE EXECUTIVE COMMITTEE business The Executive Committee, which is chaired The Executive Committee is responsible for managing the business, Key responsibilities: by Graham Clemett, supports the Board making day-to-day operational decisions and delivering the strategy Develop the Group strategy and budget for approval by the Board by providing executive management of set by the Board. Receive regular feedback from centre sta and take responsibility Workspace within the strategy approved for implementing suggestions for improvements by the Board. Collectively responsible for the day-to-day running of the business Analyse and review initiatives of particular interest to the Group The Executive Committee is accountable to and present these to the Board as appropriate the Board for implementation of the agreed Monitor operational and financial results against plans and budgets strategy. The Executive Committee monitors Review and approve capital expenditure within the authorities customer and market trends, assesses the delegated by the Board implications and benefits of asset Develop leadership skills and the future talent of the business so management initiatives and oversees the that strong succession plans are in place as the Group develops eectiveness of the governance framework. Receive updates on the Company’s sustainability strategy Consider regulatory developments Driving customer-led growth Focus on the eectiveness of risk management and control Delivering operational excellence procedures Being sustainable Our strategy Pages 32 to 35 136 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 DIVISION OF RESPONSIBILITIES CONTINUED HOW WE GOVERN CONTINUED ### Composition of the Executive Committee ### The Executive Committee is collectively 1 2 3 ### responsible for day-to-day operations and ### performance and successful implementation ### of the Company’s strategy. ### Graham Clemett ### Chief Executive Ocer Graham Clemett Dave Benson Carmelina Carfora Chief Executive Ocer Chief Financial Ocer Company Secretary 64 75 8 Will Abbott Claire Dracup Paul Hewlett Leo Shapland Richard Swayne Chief Customer Ocer Director of People & Culture Director of Strategy & Corporate Head of Portfolio Management Investment Director Development 137 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 DIVISION OF RESPONSIBILITIES CONTINUED HOW WE GOVERN CONTINUED EXECUTIVE DIRECTOR WILL ABBOTT CLAIRE DRACUP PAUL HEWLETT LEO SHAPLAND RICHARD SWAYNE 1 CHIEF CUSTOMER OFFICER 4 DIRECTOR OF PEOPLE 5 DIRECTOR OF STRATEGY & 6 HEAD OF PORTFOLIO 7 INVESTMENT DIRECTOR 8 GRAHAM CLEMETT & CULTURE CORPORATE DEVELOPMENT MANAGEMENT CHIEF EXECUTIVE OFFICER Specific responsibilities: Specific responsibilities: Specific responsibilities: Specific responsibilities: Specific responsibilities: EXECUTIVE DIRECTOR Marketing, brand HR; training and sta Corporate strategic Asset management, Investment strategy, 2 | DAVE BENSON | | development and customer | development; management | initiative development and | development and | acquisitions and disposals, | | --- | --- | --- | --- | --- | --- | --- | | CHIEF FINANCIAL OFFICER | | engagement. | of the head oce, personal | execution; investor relations | operational performance | and valuations. | | | | | assistants and admin teams; | strategy. | of the portfolio including | | | | | | internal culture; business | | lettings, lease renewals, | | | CARMELINA | | | centre support including | | property management, | | | | 3 | | management of the relief | | management of the centre | | CARFORA COMPANY SECRETARY team; health and safety; and facilities team and monitoring of customer ESG matters. service; Chair of the Social For full details of Graham’s, Sustainability Committee Dave’s and Carmelina’s and responsible for delivery responsibilities and of all social sustainability experience, go to pages initiatives. 115 to 117. | Background and | Background and | Background and | Background and | Background and | | --- | --- | --- | --- | --- | | relevant experience: | relevant experience: | relevant experience: | relevant experience: | relevant experience: | | Will joined Workspace | Claire joined Workspace | Paul joined Workspace | Leo joined Workspace | Richard joined Workspace | | in 2020, having spent over | in 1995, initially as a Centre | as Director of Strategy & | in March 2022 from Aviva | in November 2014 as an | | 20 years in marketing roles | Manager before progressing | Corporate Development in | Investors, where he was | Investment Manager. He | | across a diverse range of | to Portfolio Manager. In | 2021. He was previously | Head of UK Real Estate | was promoted to Head of | | businesses. After beginning | 2008, Claire became Head | Executive Director of the | Asset Management, | Investment in October 2017 | | his career in advertising, | of Support Services and she | UK investment Banking Real | responsible for the strategy | and to Investment Director | | Will worked in digital media, | was responsible for facilities | Estate team at J.P. Morgan | and financial performance | in April 2020. Prior to | | FMCG, financial services | management, security, | Cazenove. Paul has over 20 | of a large, diversified | joining Workspace, Richard | | and travel sectors. Prior | health and safety and | years of Corporate Finance | national property portfolio. | qualified as a chartered | | to Workspace, Will was | business centre support, | advisory and Corporate | Prior to that, Leo spent ten | surveyor and he worked | | Marketing Director at Hiscox | which included recruitment, | Broking experience, | years at Tishman Speyer, | for Cushman & Wakefield | | during a significant period | training and improvements to | advising companies across | holding a number of roles | Investors and LFF Real | | of growth for the insurer, | service and quality control. | the real estate sector on | in investment, development | Estate Partners. | | and more recently was Chief | | corporate strategy and a | and asset management in | | | Marketing Ocer of Neilson | | wide variety of transactions, | the firm’s London, San | | | Active Holidays. | | most notably focused on | Francisco and Seattle oces. | | Mergers & Acquisitions and Equity Capital Markets. 138 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 DIVISION OF RESPONSIBILITIES CONTINUED HOW WE GOVERN CONTINUED THE RIGHT SKILLS AND EXPERIENCE TO DRIVE LONG-TERM SUCCESS Executive and Property and Corporate Customer and Leadership Real Estate Financial Governance Marketing People ESG Executive Directors Graham Clemett Dave Benson Executive Committee members Carmelina Carfora Will Abbott Claire Dracup Paul Hewlett Leo Shapland Richard Swayne THE RIGHT BALANCE TO DRIVE LONG-TERM SUCCESS GENDER DIVERSITY OF EXECUTIVE COMMITTEE 1 AND DIRECT REPORTS ETHNIC DIVERSITY OF EXECUTIVE COMMITTEE 2 AND DIRECT REPORTS AS AT 31 MARCH 2023 AS AT 31 MARCH 2023 | Female | 10 | Asian/Asian British – Indian | 2 | | --- | --- | --- | --- | | Male | 15 | Black/African/Caribbean/Black British – Other | 1 | | | | White – Other | 1 | | | | White – English/Welsh/Scottish/Northern Irish/British | 21 | | 1. We consider the Executive Committee to be ‘senior | 2. We consider the Executive Committee to be ‘senior | | --- | --- | | management’ as defined by the UK Corporate | management’ as defined by the UK Corporate | | Governance Code 2018. | Governance Code 2018. | 139 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 DIVISION OF RESPONSIBILITIES CONTINUED HOW WE GOVERN CONTINUED Q: How do you ensure the employee voice is heard in the boardroom? ### Information flow to the Board This is my third year as the designated Non-Executive Director for employee engagement and our breakfast sessions this ## Q&A year, were each attended by an eclectic mix | | Stephen Hubbard | of centre and head oce sta. These sessions | | --- | --- | --- | | | Non-Executive Director for employee | provide a vital link between our employees | | 7 | | and the Board and have proved a great | engagement Board meetings in 2022/23 opportunity to hear feedback directly from employees and get an insight into our culture. I’ve really enjoyed seeing Workspace’s dynamic culture and values in action. Following the breakfast sessions, I report to the Board on the discussions held and the key themes SCHEDULED BOARD INPUTS 2022/2023 raised. As a Board we also receive regular updates on our sta and their feedback from One-to-one meetings Board presentations Employee engagement the Executive Committee, including the results One-to-one meetings are Employees below Board The Chair held several of our annual sta survey. held between new Directors level are invited to present meetings with sta as part and senior management to the Board on operational of his role as Non-Executive Q: What were the key themes raised this year? as part of the induction topics. During the year, our Director responsible for It was great to gain insight on our day-to-day process. The CEO and the Director of Strategy & employee engagement and operations and the many ideas and areas for CFO meet with senior Corporate Development our annual employee survey improvement shared by our sta. The issues management individually gave several Board updates also collected feedback raised ranged from how to continue to improve to discuss operations and on our integration of McKay from sta during the year. customer experience, communications and performance, after which, and our Head of Portfolio the impact of energy prices on our customers. the CEO and/or the CFO Management updated the Further details on these I was pleased to hear overwhelming positive will report back to the Board on the key and the Group’s other feedback on our initiatives to promote our Board on matters that development projects being employee engagement culture and collaboration across the business, require discussion. undertaken by the Group. initiatives during the year including our inaugural employee shadowing There were also updates can be found on pages 21, days, town hall events and training facilities. from our Head of 122 and 139. See page 21 for further details. | Sustainability and Chief | | 2 | | | --- | --- | --- | --- | | Customer Ocer. | Feedback from these | | | | | | BREAKFAST SESSIONS HELD | Q: What does the Board want to focus on | initiatives was then in the next year? presented to the Board. We plan to continue building on the Group’s open and transparent culture, and focus on how we can support our sta in their roles at the Group. We are also continuing our focus on diversity and inclusion, with a number of new initiatives planned to further our AD HOC BOARD INPUTS IN 2022/23 commitment in this area. I look forward to hearing feedback from sta on those new Presentations External speaker on Updates from initiatives. from brokers broader market trends legal advisers 140 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 DIVISION OF RESPONSIBILITIES CONTINUED HOW WE GOVERN CONTINUED | Information and support to the Board | After each Board meeting, the Company | The Directors are expected to attend all | Directors attend external seminars and | | --- | --- | --- | --- | | The Board and its Committees are provided | Secretary operates a comprehensive follow- | meetings of the Board, the Committees on | briefings in areas considered appropriate | | with comprehensive papers in a timely | up procedure to enable actions to be | which they serve and the AGM, and to devote | for their own professional development. This | | manner to enable members to be fully briefed | completed as agreed by the Board. | sucient time to the Group’s aairs, to enable | training is designed to build upon the diverse | | on matters to be discussed at their meetings. | | them to fulfil their duties as Directors. | range of experience that each Director brings | | | The Directors have access to the advice of | | to the Board. The Company Secretary | | In consultation with the Chair, the CEO and | the Company Secretary, Carmelina Carfora. | Should the Directors be unable to attend | provides regular updates on legal, regulatory | | CFO, the Company Secretary manages the | Her biography can be found on page 117. | meetings, they would be provided with papers | and corporate governance matters. As | | provision of information to the Board for | At the direction of the Chair, Carmelina is | to allow them to make their views known to | required, Workspace invites external | | their formal Board meetings and at other | responsible for advising the Board on matters | the Chair ahead of that meeting. | professional advisers to provide training and | | appropriate times. | of corporate governance and compliance with | | updates on their specialist areas. Updates | | | Board procedures. | Prior to each Board meeting, and periodically, | and training are not solely reserved for | | The CEO and CFO keep the Board appraised | | the Chair meets the Non-Executive Directors | legislative developments but they aim to | | of business matters relating to the Group on | How the Board discharges its responsibilities | without the Executive Directors present, | cover a range of issues including, but not | | a timely basis. They provide various updates | The Board discharges its responsibilities | and maintains regular contact with the CEO, | limited to, market trends, the economic and | | to the Board on many aspects of the | through an annual programme of Board and | CFO and with other members of the | political environment, ESG, technology and | | business, ranging from trading performance, | Committee meetings which are scheduled | management team. | social considerations. | | progress being made on our refurbishment | throughout the year, with main meetings | | | | and redevelopment projects, the rationale for | timed around the Group’s financial calendar. | If any Director has concerns about the running | The Directors are invited to identify areas in | | acquisitions and disposals and how these are | Additional meetings are convened to consider | of the Group or proposed action which cannot | which they would like additional information | | aligned to strategy. The CEO and CFO also | an annual cycle of topics, including the annual | be resolved, these concerns are recorded in | or training, following which the Company | | inform the Board on the discussions held with | strategy day, key management and financial | the Board minutes. No such concerns arose | Secretary will arrange for the necessary | | analysts, investors and other stakeholders. | updates, review of risk as well as the approval | during the year under review. | resources to be put in place. The resulting | | | of acquisitions and refurbishment | | sessions may be internally or externally | | The Chair of each Committee separately | programmes. In the year ended 31 March | Training and development | facilitated. | | engages with Executive Committee members | 2023, the Board met formally on seven | With the ever-changing environment in which | | | and other sta relevant to their roles, as well | occasions, including a strategy day in | Workspace operates, it is important that the | This year, the Directors have received updates | | as meeting with relevant external advisers. | September 2022. Supplementary meetings | Board maintains a good working knowledge | and presentations on the following areas: | | | or conference calls are held between formal | of the property industry and how the Group | – Governance and regulatory developments | | The Company Secretary and external advisers | Board meetings as required. | operates within its sector, as well as remaining | – ESG commitments and net zero carbon | | periodically update the Board on regulatory | | aware of recent and upcoming developments | pathway | | changes. This year, these have included the | The Board engaged with the Group’s advisers | in the wider legal and regulatory environment. | – Data protection compliance | | introduction of the Register of Overseas | during the year and there was a presentation | | – Executive remuneration trends and best | | Entities, recent FCA enforcement decisions | from the Group’s brokers and PR advisers in | | practice, including ESG in remuneration | | and updates in corporate governance | September 2022. The Group’s valuer, CBRE, | | – Inclusion and diversity | | guidance. | presented to the Board in May 2022 and | | – Conflicts of interest | | | November 2022. The CBRE presentation | | – Market updates | | The Board utilises an electronic Board paper | covered the valuation of the property | | | | system which provides immediate and secure | portfolio and the wider market in which the | | | | access to Board papers and materials. Prior | Group operates. Knight Frank, the Group’s | | | | to each Board meeting, the Directors receive | former valuer for the McKay portfolio of | | | | the agenda and supporting papers through | properties, presented to the Board in | | | | this system meaning that they have the latest | November 2022. | | | and the most relevant information in advance of the meeting. 141 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### COMPOSITION, SUCCESSION AND EVALUATION ## The Nominations Committee is ## responsible for monitoring that ## the Board, its Committees and ## Workspace’s senior management ## have a good balance of skills and ## experience, to lead Workspace ## eectively both now and in the ## longer term. ### Stephen Hubbard ### Chair of the Nominations Committee QUICK LINKS Membership and attendance Page 142 at Nominations Committee meetings Chair’s letter Page 143 The role of the Nominations Committee Page 145 142 Workspace Group PLC^{}[] Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information # 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 115 to 116. | | Member since | Meetings attended | | --- | --- | --- | | Stephen Hubbard (Chair) | 2014 | 3/3 | | Rosie Shapland | 2020 | 3/3 | | Lesley-Ann Nash | 2021 | 3/3 | | Duncan Owen^{2} | 2021 | 2/3 | | Manju Malhotra | 2022 | 3/3 | | Nick Mackenzie | 2022 | 3/3 | | Damon Russell | 2013 | 1/1 | 1. Damon Russell retired from the Board on 21 July 2022. 2. Duncan Owen did not attend the January Nominations Committee. # KEY TOPICS CONSIDERED BY THE COMMITTEE DURING THE YEAR # **Board Composition** Considered the composition of the Board to ensure that the Board has the right balance of skills, knowledge, experience, diversity and attributes required of existing and any future Non-Executive Directors. # **Chair Succession** Rosie Shapland, Senior Independent Director, led the appointment process for a successor to Stephen Hubbard, who will be stepping down from the Board in July 2023. # **Membership of the Board Committees** Implemented new Board Committee structure. An ESG Board Committee was established to provide a higher level of focus and visibility on sustainability at Board level and involved all members. # **Board Effectiveness Review** Oversaw the annual Board effectiveness review, which tracked the development of key aspects of governance and provided the opportunity for the Board to consider in depth its contribution to strategy and horizon scanning. # **Diversity and Inclusion Policy** Reviewed the Diversity and Inclusion Policy and considered the progress against Board diversity and inclusion principles. 143 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPOSITION, SUCCESSION AND EVALUATION CONTINUED Dear shareholder, The Committee plays a key role in supporting ### Nominations Committee the Board within the Governance Framework ### Chair’s letter On behalf of the Board, I am pleased to present in reviewing the composition of the Board the report of the Nominations Committee. and its Committees. During the year, the Committee oversaw the evaluation of the | This year, a key focus for the Committee | Board as well as progress on the | | --- | --- | | was to identify my successor as Chair. | implementation of recommendations from | | On 28 February 2023 we were pleased to | previous evaluations. This includes assessing | | announce the appointment of Duncan Owen | whether the balance of skills, diversity, | | as my successor. More information on the | experience, knowledge and independence | | appointment process is highlighted in Rosie | on the Board is appropriate to enable it to | Stephen Hubbard Shapland’s letter, which can be found on operate eectively. Read more on page 155. Chair of the Nominations Committee page 144. Rosie, as Senior Independent | Non-Executive Director led the Chair | The Board remains focused on promoting | | --- | --- | | recruitment process. Duncan will assume | broader diversity and creating an inclusive | | the role following the conclusion of the | culture. See pages 148 to 154 for details on | | AGM on 6 July 2023. | the Board’s activities on diversity this year. | ### The Nominations Committee has ### continued to play a key role in I am delighted the Board has identified an Looking forward, the Nominations Committee excellent successor. Duncan, who joined the will continue to develop and monitor ### supporting Workspace’s long- Board in 2021, has over 30 years’ experience succession plans both at Board and senior ### term sustainable success and in the real estate sector. He has served as the management level. CEO of both public and private companies ### monitoring the tenure of Non- and his roles have included the Global Head Please read on for more information about ### Executive Directors to eectively of Real Estate at Schroders plc, and the CEO the work of the Committee. of Immobel Capital Partners, a pan-European ### manage succession planning specialist ‘Green’ real estate investor in the oce and residential sectors. Until recently, Duncan was on the Board of Governors for the Church Commissioners and chaired its Stephen Hubbard Property Investment Committee. Chair of the Nominations Committee 6 June 2023 144 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPOSITION, SUCCESSION AND EVALUATION CONTINUED LETTER FROM THE SENIOR INDEPENDENT DIRECTOR Stephen Hubbard was appointed to the The Nominations Committee considered BOARD DEVELOPMENT SINCE 2020 Board in July 2014 and has held the role carefully who would be an appropriate of Chair since 9 July 2020. Consequently, successor to Mr Hubbard and concluded that GENDER DIVERSITY OF THE BOARD | Stephen will have served on the Board for | Mr Owen has the appropriate knowledge, | 1 APRIL 2020 – 31 MARCH 2023 | | --- | --- | --- | | nine years in July 2023, the maximum time | experience and time available to undertake | | | that the UK Corporate Governance Code | the role of Chair. Mr Owen will be appointed | | | 2018 recommends that the Chair should | Non-Executive Chair of the Company at the | | | remain in post from the date of their initial | conclusion of the Company’s 2023 Annual | | 2020 2023 appointment. General Meeting. Given Stephen’s tenure and the likelihood On behalf of the Board, I would like to take Rosie Shapland that he would step down from the Board the opportunity to thank Stephen for his Senior Independent Non-Executive Director at the end of nine years, the Nominations support and guidance since joining the Board 2020 2023 | Committee had for some time been | and for his excellent chairship over the past | | | | --- | --- | --- | --- | | | | Men (including those self | 67.0% 62.5% | | considering succession planning for the | three years. He has played a key role in the | | | identifying as men) | Chair. Duncan Owen was appointed as a | growth of the Company and was especially | | | | --- | --- | --- | --- | | | | Women (including those self | 33.0% 37.5% | | Non-Executive Director of the Company in | instrumental in helping us successfully navigate | identifying as women) | | ### While the Board will miss July 2021, with his appointment forming part the challenges during the pandemic and in Representation of women (including self identifying as ### Stephen’s guidance, I am of the Company’s long-term succession refreshing the composition of the Board. women) on the Board has increased 4.5% since April 2020. planning. A thorough search was conducted ### delighted that Duncan is by the Company’s Board-level external search Stephen leaves the business with our very ETHNIC DIVERSITY OF THE BOARD ### taking over the role of Chair agency, Fidelio, identifying a number of best wishes. 1 APRIL 2020 – 31 MARCH 2023 diverse and suitable candidates and through ### of the Company a robust process, coming to the successful selection and appointment of Duncan Owen. As part of that process, a candidate brief | had been prepared which specified the | Rosie Shapland | 2020 2023 | | --- | --- | --- | | experience that the Company was looking for, | Senior Independent Non-Executive Director | | | including deep property knowledge, long- | 6 June 2023 | | term expertise in asset management and utilisation, understanding of capital markets and investor communications. Although this 2020 2023 recruitment process was primarily for a White British or other White 100% 75% (including minority-white groups) Non-Executive Director role, the specifics Asian/Asian British 0 12.5% of the brief were designed in part because Black/African/Caribbean/ 0 12.5% the Nominations Committee was conscious Black British that Stephen’s nine-year maximum tenure on the Board would be reached in 2023, and consequently the Committee was keen Chair succession to identify candidates who could potentially Page 146 be suitable for the Chair role when it ## +25% became vacant. Duncan Owen’s biography BOARD ETHNIC DIVERSITY Page 116 SINCE APRIL 2020 145 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPOSITION, SUCCESSION AND EVALUATION CONTINUED ### The role of the Nominations Committee The Nominations Committee is responsible The Committee also plays a key role How the Committee operates Nominations Committee responsibilities for monitoring that the Board, its Committees in supporting inclusion and diversity at The Committee held three meetings, The Nominations Committee considers the and Workspace’s senior management have a Workspace, which at Board level involves primarily to progress the appointment structure, size and composition of the Board, good balance of skills, knowledge, alignment reviewing and monitoring processes and of our new Chair. its Committees and members of the to the needs of the business and experience, initiatives in the Group, with employee – The meetings are usually held immediately Executive Committee. The Nominations to lead Workspace eectively both now and engagement playing an important role. prior to or following a Board meeting, Committee also receives oversight from the in the long term. although the Committee also meets Chief Executive Ocer on the Company’s The Committee is responsible for on other occasions on an ad hoc basis, leadership roles, which include the Executive This is achieved through succession planning recommending candidates for the role of Non- as required Committee members and their direct reports. and talent development, and an understanding Executive Director responsible for employee – Only members of the Committee have The Committee’s responsibilities include: of the changing competencies required to engagement. The Committee also oversees the the right to attend meetings. However, an – Leading the process for new Board support the Group’s strategy, purpose, vision, development of Board members who are keen invitation to attend meetings is, on occasion, appointments and reviewing succession culture and values. The way in which this is to expand their competency and knowledge. extended to the Chief Executive Ocer, in for Directors and senior management supported through the current Board order that the Committee can understand – Regularly reviewing the structure, size and composition is set out on page 148. his views, particularly on key talent within composition of the Board and its Committees the business – Facilitating an eectiveness review of the – All Directors can, for the purpose of Board, its Committees and Directors discharging their duties, obtain independent – Reviewing the time commitment expected professional advice at the Company’s from the Chair and Non-Executive Directors expense. No Director had reason to use – Recommending the election and re- this facility during the year election by shareholders of the Directors, having due regard to their performance and ability to continue to contribute to the Board, taking into consideration the skill, experience and knowledge required along with the need for progressive refreshing of the Board Key activities Pages 146 to 158 Board succession Page 147 146 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPOSITION, SUCCESSION AND EVALUATION CONTINUED CHAIR SUCCESSION 1 ### Nominations Committee ### activities in 2022/23 During the year, the Committee continued Key considerations for the search process Our extensive search and selection process to fulfil its core responsibilities of reviewing conducted in 2021 which resulted in the Fidelio were engaged to conduct the selection 1. Chair succession Page 146 | | | the structure of the Board and its Committees. | appointment of Duncan Owen. | process. They were asked to draw up a | | --- | --- | --- | --- | --- | | 2. Board Succession Planning Page 147 | | A key focus of the Committee has been to | The Nominations Committee discussed the | detailed role specification. This was reviewed | | | | identify a successor to Stephen Hubbard, who | skills and experience required for new | with the Chair who then engaged with the | | 3. Performance of the | Page 147 | | | | | | | will have completed nine years on the Board | members joining the Board. It was concluded | Nominations Committee. Final role specification | Nominations Committee | | in July 2023. The Committee determined that | that the successful candidate would bring the | was then approved. | | --- | --- | --- | --- | | 4. Board composition Page 148 | Duncan Owen should succeed Stephen. | following attributes: | | | | Duncan was appointed as a Non-Executive | – Deep property expertise and familiarity | In follow-up discussions held between the | 5. Diversity & inclusion Page 148 | | Director of the Company in July 2021, with his | with tenant and occupier trends. | Chair and the Committee, they reflected upon | | --- | --- | --- | --- | | 6. Board evaluation Page 155 | appointment forming part of the Company’s | – An understanding of the investment markets. | the experience of the candidates and their | | | long-term succession planning. On his | – Strong operational focus and ability to | specific skill sets. The Nominations Committee | | | appointment in 2021, Duncan underwent | contribute to Workspace’s ambition to | considered that given Duncan’s experience | | | a formal appointment and induction process. | develop its customer-centric business model. | and the roles he was performing at that time, | | | At that time, a thorough recruitment and | – The ability to draw on long-term, relevant | he would bring a fresh and complementary | | | selection process had been undertaken, | experience of driving value for the customer. | perspective to an existing Board of Directors, | | | assisted by the Company’s Board-level | – An ability to constructively challenge and | who already bring valuable knowledge, | | | external search agency Fidelio Partners | support the management team and the | expertise and diversity from roles in property, | | | Board Development & Executive Search Ltd | Board while maintaining a highly | finance and government. | | | (‘Fidelio’). Fidelio is an external and | collaborative approach and collegiate style. | | | | independent board consultancy which | – Familiarity with the requirements of being | Further details of the recruitment process for | | | specialises in building board capability and | a Board member of a listed company. | Duncan Owen can be found on pages 131 to | | | is recognised for its commitment to ESG, | – A keen awareness of stakeholder interests | 132 of the 2022 Annual Report. | | | diversity and inclusion. Fidelio has been | and a strong interest in ESG and how it is | | | | accredited for the sixth year in succession by | shaping the work of the Board and the | Recommendation | | | the FTSE Women Leaders Review (formerly | impacts on the business. | In February 2023, after taking all of the above | | | the Hampton-Alexander Review) for their | – A good understanding of the parameters of | into consideration, the Nominations Committee | | | contribution towards achieving greater | being a Non-Executive Director and possess | concluded that it should recommend to the | | | gender balance including for FTSE 350 | a strong capability to add value to the role. | Board that Duncan be appointed to the role | | | boards and leadership teams. Fidelio also | – Understand the importance of diversity and | of Chair. The Board formally approved the | | | supports the work of the Parker Review. | inclusion agendas and the value this brings | appointment in February 2023. | | | Fidelio’s commitment to identifying the most | to an organisation. | | | | qualified and inclusive candidates for roles has | – Excellent judgement, able to lead logical | | | | resulted in strong and diverse shortlists for | and evidence-based discussions. | | each of the Board appointments Workspace made over the last three years. In addition, there was a clear expectation that candidates would be able to devote sucient Fidelio has also supported with regard time to the role. to Board eectiveness but has no other connection with the Company or the individual Directors. 147 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2022/23 CONTINUED BOARD SUCCESSION PLANNING PERFORMANCE OF THE 32 NOMINATIONS COMMITTEE Board succession The Committee also recognises that there The performance of the Nominations The Committee regularly reviews the is value in the Non-Executive Directors being Committee was assessed during the year. composition of the Board to ensure it continues active on other Boards in an Executive or ### A diverse workforce that brings to have the appropriate balance of skills to Non-Executive Director capacity. From the responses provided, it was support the Company in achieving its strategy. an appropriate balance of skills, concluded that the Nominations Committee When considering any future appointments Directors’ induction programmes was operating eectively. ### experience and knowledge, | the Committee will continue to make decisions | | All new Non-Executive and Executive Directors | | --- | --- | --- | | in consideration of our Board diversity | as well as fresh perspectives, | joining the Board undertake a formal and | | principles, detailed on page 154. | | personalised induction programme, designed | ### enriches our business and to provide an understanding of the Company’s ### Following refreshment of the Board in the contributes to our long-term business, strategy, culture, ESG, governance, last three years, with five new Non-Executive management and stakeholders. This covers the ### success Directors joining the Board during that time, operation and activities of the Company, such this year the focus of the Committee was on as site visits, meeting members of the senior Stephen Hubbard Chair succession as detailed on page 146. management team across our key business Chair | No new Directors were appointed during this | areas and operations, the Company’s principal | | --- | --- | | year. The Group has initiatives to develop sta | strategic risks, the role of the Board, the | | with leadership potential which are detailed | decision-making matters reserved to the Board, | | on page 149. | and the responsibilities of Board Committees. | This is tailored to take into account a Director’s Time commitments previous experience and responsibilities. The Directors have demonstrated a strong | commitment to their roles on our Board and | The Company Secretary assists the Chair | | --- | --- | | Committees. The Directors attended meetings | in designing and facilitating an induction | | of the Board and Committees scheduled in | programme for new Directors and ongoing | | 2022/23 as well as additional ad hoc meetings. | training. | For further details of attendance at meetings see page 113. Directors are also briefed on their roles and responsibilities as a director of a listed company. The Directors have also given careful For Non-Executive Directors, specific committee consideration to their external time responsibilities relevant to their committee commitments to confirm that they are able to membership are covered, to enable them to devote an appropriate amount of time to their function eectively as quickly as possible. roles on our Board and Committees. For each | of the Directors, the Board considers that the | | In addition, Directors are oered follow-up | | --- | --- | --- | | time commitment that he or she is required | | sessions in any areas in which they want to | | to devote to those external roles does not | | increase their knowledge. We also oer | | compromise their role at Workspace. The | | ongoing bespoke development for Directors | | Nominations Committee reviews, on an | | and Committee Chairs. | | ongoing basis, Directors’ time commitments | Key activities | | | and confirmed that they were fully satisfied | Pages 146 to 158 | Directors are encouraged to continue to meet | | with the amount of time each Director | | with management after their induction on an | | devoted to the business. | Chair succession | ongoing basis to support them and pass on | | | Page 146 | their experience. | 148 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2022/23 CONTINUED DIVERSITY & INCLUSIONBOARD COMPOSITION 54 | | | Our Diversity & Inclusion Policy applies | Our plans for next year | | --- | --- | --- | --- | | Reviewing the Board and Committee | As at 31 March 2023, the Board comprised | | | | | | both to the Board and the wider business. | We are committed to continually progressing | | composition | the Chair, two Executive Directors and five | | | | | | Workspace’s purpose is to give businesses the | our initiatives to improve diversity. In the next | | As part of the Board’s annual eectiveness | Non-Executive Directors. Further details on | | | | | | freedom to grow. We know that a workforce | year we plan to: | | review, described on page 155, the Committee | the independence of the Directors and their | | | | | | made up of people with a wide range of | – Introduce further employee support | | considers the composition of the Board and | re-election can be found on pages 133 to 134 | | | | | | backgrounds and experiences will contribute | networks | | its Committees in terms of balance of skills, | and on pages 3 to 4 of the 2023 Notice of | | | | | | to our long-term success and help to achieve | – Review our benefits and policies and | | experience, length of service and wider | Annual General Meeting. | | | | | | our strategy (see page 32 for further details | implement any changes recommended | diversity considerations. on our strategy). We are committed to – Introduce ‘back to work’ inductions and In accordance with the Code, with the | | | supporting diversity and to creating an | coaching for those returning from parental | | --- | --- | --- | --- | | The Board and its Committees continue to | exception of Stephen Hubbard, all the | | | | | | inclusive culture that attracts the best | leave | | have a strong mix of experienced individuals | Directors will retire and oer themselves | | | | | | individuals to our workforce. | – Further increase the awareness of our sta | | on the Board who are not only able to oer | for re-election by shareholders at the 2023 | | | in all areas of diversity & inclusion, for | an external perspective on the business, but | Annual General Meeting. Having served | | | | --- | --- | --- | --- | | | | We value diversity in all its richness and work | example by making greater use of external | | also provide constructive challenge to review | on the Board for nine years in July 2023, | | | | | | hard to create an environment where talented | speakers and developing social impact | | the Group’s strategy. The Nominations | Stephen Hubbard will retire following the | | | | | | people can thrive, without regard to gender, | projects that connect our business centres | | Committee is satisfied that each Director | conclusion of the AGM. | | | | | | gender reassignment, race, ethnicity, age, | with their local communities | continues to make an eective contribution | | | religious or spiritual beliefs, sexual orientation, | – Trial job sharing in certain roles | | --- | --- | --- | --- | | to the Board and to fulfil their duty to promote | The biographies of all members of the Board, | | | | | | marital and civil partnership status, disability, | – Oer apprenticeships in certain roles | | the success of the Company. Furthermore, | outlining the skills and experience they bring | | | | | | education or social background. A diverse | – Review job descriptions to ensure the | | the respective skills of the Directors were | to their roles, are set out on pages 115 to 116. | | | | | | organisation benefits from the dierent | language used is fully inclusive and attracts | found to complement one another, enhancing perspectives inclusivity in these areas can a diverse pool of talent the overall operation of the Board. Stephen Hubbard was appointed as the bring, as well as from variety in skills, industry – Expand our career pathways to other roles Non-Executive Director for employee | | | experience and personality. | within the organisation where applicable | | --- | --- | --- | --- | | The Board has carefully considered the | engagement in July 2020. Further details | | | | guidance criteria regarding the composition | can be found on page 130. | | | We want to build a diverse pipeline of talented of the Board under the UK Corporate employees and senior managers to support Governance Code. In the opinion of the Chair’s evaluation for 2022/23 us as we continue to grow and achieve our Board, the Chair and all the Non-Executive The Senior Independent Director chaired a purpose. It is our policy to appoint the best Directors bring independence of judgement meeting of Non-Executive Directors, without person for the role and we are committed to and character, a wealth and diversity of the Chair present, to appraise the Chair’s ensuring that our processes and initiatives experience and knowledge and the performance and to address any other encourage diversity and allow a diverse group appropriate balance of skills. The Directors matters which the Directors might wish to of potential candidates to be identified at both give sucient time to enable them to carry raise. The outcome of these discussions was Board and Executive-level. out eectively their responsibilities and conveyed by the Senior Independent Director duties to the Board and the Committees on to the Chair. It was concluded that the Chair which they sit. They are suciently independent is highly respected and is valued for his of management and are free from any other industry knowledge and experience. The circumstances or relationships that could Board is satisfied that the Chair continued interfere with the exercise of their judgement. to be eective and shows a high level of commitment in discharging his With eect from the close of the 2023 AGM, responsibilities. no Non-Executive Directors will have been on the Board for more than six years. 149 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2022/23 CONTINUED DIVERSITY & INCLUSION CONTINUED HOW WE PROMOTE DIVERSITY & INCLUSION RECRUITMENT AND SELECTIONCULTURE TRAINING AND DEVELOPMENT Every employee has the right to be treated with respect and In 2022 we hired a Recruitment Manager to oversee our entire We promote progressive career development through dignity throughout their employment with us and not to be recruitment activity and process and we introduced a new encouraging lateral job moves where opportunities arise discriminated against. We have a zero tolerance attitude to recruitment policy which sets out fair and consistent This year, we introduced bi-monthly meetings between the bullying, harassment or victimisation of any kind recruitment procedures HR team and senior managers with a view to identifying Our recruitment and selection, training and development, We review and change job titles where appropriate. This year opportunities for sta development performance reviews and promotion processes are all based we changed the role of Receptionist to Centre Co-ordinator During our annual appraisal process, we identify employees solely on individual merit and free from bias to better reflect the role and to appeal to a wider pool who have strong potential for development, and put training of candidates We monitor and analyse the diversity of our employees and development plans in place for them so that we can track and progress our diversity initiatives. We review job specifications to ensure we consistently use We provide a Group-wide internal training programme to This year, we made changes to how we collect diversity inclusive language that encourages both male and female oer employees opportunities to learn and develop skills information from our sta in order to improve the quantity candidates such as organisation, people management and managing and quality of data available to us We provide unconscious bias and interview skills training for dicult situations Our Board and Executive Committee are regularly updated all hiring managers. In the coming year we intend to introduce During this year, we have started to oer Institute of on our progress with diversity initiatives and external further training for line managers, including managing Leadership & Management training for line managers guidance and recommendations for improving diversity. dicult conversations We provide unconscious bias and harassment training We support sta with further studies by sponsoring external Guidance and support notes are provided to hiring managers for all employees learning and development where appropriate to promote fair and thorough processes We oer flexible working options (including hybrid working) We trialled ‘career pathways’, for our centre team roles, to We advertise all vacancies internally before undertaking any to support employees with family and/or caring make it clearer to sta how they can progress their careers external advertisement, to encourage internal applications commitments at Workspace When we do advertise externally, we have increased our use of This year we introduced an employee support network social media and other direct recruitment methods in order to aiming to provide a forum for parents and carers, including reach a wider pool of talent, including encouraging applications how Workspace can better support them. In the coming from people who may be returning to work and from local year, we will factor any feedback from this network into our communities via local job centres, universities and schools processes for supporting returners to work Where we use recruitment agencies, we ensure they have a commitment and track record in diverse appointments When a senior role becomes available, we seek to encourage diverse applications and to shortlist an equal number of men and women where possible 150 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2022/23 CONTINUED SPOTLIGHT ON SUPPORT FOR PARENTS AND CARERS ## Q&A Satpreet Dhariwal Senior HR Manager and Chair of our Supporting Others group Q: What made you want to set up a group As a result we are planning to introduce some for those with caring responsibilities and new initiatives for those returning to work, how will it support our sta? including mini back-to-work inductions and As someone who has caring responsibilities training on any new systems and processes myself, I could really relate to this topic and that have been implemented while they have putting this network together was important been on parental leave. There has also been to me. It can be very dicult to balance a focus on the importance of ‘me time’ caring responsibilities while working as you amongst your work and caring responsibilities. are juggling two worlds. People can sometimes feel like they are alone and that Q: What are your plans for the network others don’t understand the challenges they in the next year? face. The Supporting Others group provides We plan to build on what we have achieved a forum for people to share their experiences this year, continuing to provide a space for – both the positives and the challenges – and employees to talk openly and support each learn from and support each other in a safe other. We would also love to invite some space. It’s an invaluable forum for discussing guest speakers, perhaps someone who has ideas on how Workspace can support those reached the very top of their career while with caring responsibilities. juggling caring responsibilities, so that they can share their experience and insights into Q: What have been the key matters raised the challenges they faced and the key to by the network so far? their success. Support on return from parental leave has been a key topic. Parents highlighted the ### It was very important challenges of coming back to work after an extended period, including switching your ### to me that we provide mindset back to work and understanding the ### a forum for those with changes that will inevitably have arisen in their absence. ### caring responsibilities ### to share experiences ### and support each other Satpreet Dhariwal Senior HR Manager and Chair of our Supporting Others group 151 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2022/23 CONTINUED GENDER AND ETHNIC DIVERSITY AT BOARD AND EXECUTIVE COMMITTEE LEVEL The Board is fully supportive of the Board positions are, by their nature, limited GENDER recommendations of both the FTSE Women in number meaning that vacancies are less Leaders Review (the successor to the common, but when vacancies do become Number of senior Hampton-Alexander Review) and the Parker available the Board will continue to recruit positions on | Review, and of the new requirements of | in a manner which attracts a diverse mix of | Number of | | | | | the Board | Number in | Percentage of | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | LR 9.8.6R(9). | candidates and to shortlist an equal number | | Board | Percentage of | | | (CEO, CFO, | executive | | executive | | | | members | | | the Board | SID and Chair) | | management | management | | of men and women wherever possible. For The tables to the right set out the numerical more information on our Board diversity Men (including those self data required to be disclosed in accordance principles and processes see page 148. identifying as men) 5 62.5% 3 6 75% with LR 9.8.6R(9), as at 31 March 2023. There Women (including those self have been no changes between 31 March 2023 The data contained in the disclosures to the identifying as women) 3 37.5% 1 2 25% | and the date of this Report. | right was self-reported by members of the | | | --- | --- | --- | | | Board and Executive Committee. The | Non-binary 0 0% 0 0 0% | | As at 31 March 2023, the Group has met two | Executive Committee were asked to specify | | Not specified/prefer not to say 0 0% 0 0 0% | of the three targets set by LR 9.8.6R(9). Rosie | their gender identity and ethnic origin via | | | --- | --- | --- | | Shapland is Senior Independent Director and | our HR system, with each question using | | | the Group therefore meets the LR 9.8.6R(9) | a dropdown menu with options to select. | | | target to have at least one of the senior Board | The Board were separately each asked the | ETHNICITY | | positions held by a woman. Two members of | same questions with the same options. | | Number of | the Board are from a minority ethnic | | | | | | | senior | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | background, meeting the LR 9.8.6R(9) target | Graham Clemett and Dave Benson are | | | | | positions on | | | | | | | | Number of | | | | the Board | | Number in | Percentage of | | | that at least one member of the Board should | members of both the Board and the Executive | | | | | | | | | | | | | | Board | Percentage of | | (CEO, CFO, | | executive | | executive | | be from a minority ethnic background. | Committee and therefore are included in both | members | | | the Board | SID and Chair) | | management | management | | the calculations relating to the Board and White British or other White As of 31 March 2023, the Board consists those relating to executive management. (including minority-white groups) 6 75% 4 8 100% of three women and five men, meaning the Board comprises 37.5% women, narrowly Mixed/Multiple Ethnic Groups 0 0% 0 0 0% missing the LR 9.8.6R(9) target that women Asian/Asian British 1 12.5% 0 0 0% should represent at least 40% of the Board. Black/African/Caribbean/ This represents an improvement from 33% as Black British 1 12.5% 0 0 0% at 1 April 2022. In addition, Stephen Hubbard will be stepping down from the Board from Other ethnic group, including the end of the Company’s AGM in July 2023, Arab 0 0% 0 0 0% at which point women will represent 42.9% Not specified/prefer not to say 0 0% 0 0 0% of the Board. Further information on the composition of the Board can be found on page 114 and on the composition of the Executive Committee on page 136. ## 37.5% Board composition FEMALE REPRESENTATION Page 148 AT BOARD LEVEL AS AT 31 MARCH 2023 152 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2022/23 CONTINUED DIVERSITY IN THE WIDER WORKFORCE | GENDER DIVERSITY OF ALL EMPLOYEES | ETHNIC DIVERSITY OF ALL EMPLOYEES | | --- | --- | | AS AT 31 MARCH 2023 | AS AT 31 MARCH 2023 | | Male: 123 42.0% | White: 206 70.3% | | Female: 170 58.0% | – English/Welsh/Scottish/Northern Irish/British | 151 | | --- | --- | --- | | | – White – Irish | 5 | | | – White – Other | 50 | Black: 26 8.9% The above disclosure is made in accordance with section 414C(8)(c)(iii) of the Companies Act 2006. The Board breakdown required by section 414C(8)(c)(i) of the Companies Act 2006 is set out on page 151. In addition, for the purposes of disclosure under section 414C(8)(c)(ii) of the – Black/African/Caribbean/Black British – Caribbean 14 Companies Act 2006, the Group had four male and two female senior managers as at 31 March – Black/African/Caribbean/Black British – African 10 – Black/African/Caribbean/Black British – Other 2 2023, calculated in accordance with sections 414C(9) and (10)(b) of the Companies Act 2006. Asian: 37 12.6% AGE DIVERSITY OF ALL EMPLOYEES | | – Asian/Asian British – Indian | 14 | | --- | --- | --- | | AS AT 31 MARCH 2023 | – Asian/Asian British – Bangladeshi | 5 | | | – Asian/Asian British – Pakistani | 2 | | | – Asian/Asian British – Chinese | 2 | 18–29: 76 25.9% – Asian/Asian British – Other 14 Mixed: 23 7.9% 30–39: 123 42.0% – Mixed – White and Black Caribbean 4 40–49: 62 21.2% | | – Mixed – White and Black African | 4 | | --- | --- | --- | | | – Mixed – White and Asian | 1 | | | – Mixed – Other | 13 | | 50–59: 20 6.8% | – Mixed | 1 | Other ethnic group: 1 0.3% 60–69: 11 3.8% 70–79: 1 0.3% 153 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2022/23 CONTINUED SPOTLIGHT ON PROGRESSION & DEVELOPMENT KEY FACTS I have been at Workspace for seven years. I joined in March 2016 as Centre Manager of The Light Bulb and Morie Street Studios and demonstrated great work ethic and commitment to prove myself in that role. ## £61k Just under two years later, I was entrusted with the management of the Group’s largest EMPLOYEE TRAINING site, Kennington Park business centre. SPONSORED The site requires a meticulous approach due to the range of spaces available, from traditional oce and studio space to commercial kitchens and industrial ## workshops. It usually has several appraisals 25 and projects ongoing at any one time. UNCONSCIOUS BIAS AND Managing it requires a greater level of HARASSMENT TRAINING knowledge and skill and I was glad for the SESSIONS opportunity to step up to the challenge. In 2021, I decided to undertake the qualification to become an Associate of RICS in the commercial property path, in order ## 9 to learn additional skills and open up future opportunities for my career. Workspace INTERNAL LATERAL were extremely supportive of me doing JOB MOVES the qualification. Not only did they provide financial funding for my studies, but my line managers and other senior colleagues dedicated their time to help me with any questions I had, and gave me the ## 29 opportunity to work on real business projects that I could then submit as case INTERNAL PROMOTIONS studies for my final assessment. In late 2022 I saw the role of Associate Asset ### Manager advertised internally. With the I was given the opportunity ## knowledge I have developed from my RICS 12 ### to work on real life business studies and my Centre Manager roles, I WORKSPACE WINNERS ### decided to apply for the promotion and was projects that also helped with delighted when I was successful. I started my ### my studies as well as my new role as Associate Asset Manager in April ### 2023 and I am looking forward to the fresh development at Workspace challenges and opportunities it will bring. Kennington Park Business Ewelina Vale Centre, Oval Associate Asset Manager 154 Workspace Group PLC^{}[] Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information # **COMPOSITION, SUCCESSION AND EVALUATION CONTINUEDNOMINATIONS COMMITTEE ACTIVITIES IN 2022/23 CONTINUED** # **BOARD DIVERSITY PRINCIPLES AND PROGRESS** At Board level, we recognise that a group that is diverse in nature, irrespective of characteristics such as 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 its Committees, and developing a pipeline of high potential diverse leaders and senior managers. | 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 2023, the Board discussed this year's 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. 37.5% female representation on our Board as at 31 March 2023 (2022: 33%). 25% ethnic minority representation on our Board as at 31 March 2023 (2022: 22%). | | 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. | The Board actively seeks diverse candidates. Over the last three years, five new Non-Executive Directors have been recruited. A thorough recruitment and selection process was undertaken, assisted by the Company's Board-level external search agency, Fidelio. As part of that process, candidate briefs were prepared and a diverse long and short-list was presented for each Non-Executive Director position. In making these appointments, the Board considered its Diversity & Inclusion Policy. | | 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 2022/23, 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 continuing to progress our existing initiatives to support development of a diverse pipeline of talent (see page 149 for further details) as well as delivering the new initiatives detailed on page 148. | During the year, the HR team continued to introduce and progress a number of initiatives aimed at increasing diversity across the workforce. See page 149 for more details for our diversity initiatives. | 155 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2022/23 CONTINUED We conducted an internal Board evaluation Fidelio has supported with regard to Board BOARD EVALUATION 6 for 2023 in line with best practice corporate composition. They have no other connection governance requirements. This followed an with the Company or individual Directors. internal evaluation facilitated by Fidelio in | 2022 and an external evaluation conducted | In conducting this evaluation, the Board was | | --- | --- | | by Fidelio in 2021, the outcomes of which are | conscious of ensuring that the process met | | detailed on page 156. | the requirements of the Code and had a clear | focus on enhancing the eectiveness of the | The evaluation focused on the overall | Board. Following Fidelio’s evaluation in 2021 | | --- | --- | | eectiveness of the Workspace Board, | and 2022 and the ongoing Board refreshment, | | building on the prior year’s evaluation which | the Board decided to leverage this momentum | | enabled the Board to monitor progress on | and conduct a review that would lead to | | key aspects of governance, including the | meaningful insights and enable the Board | | composition of the Board. In addition, the | to make further progress in enhancing | | 2023 evaluation provided a deep dive into | performance and its eectiveness. | how eectively the Board is contributing to strategy and horizon scanning. Fidelio worked with the Company to develop an innovative approach to the internal Fidelio prepared a tailored Board evaluation which met the needs of the Code questionnaire, including both a quantitative through the combination of a tailored and qualitative element, comprising open questionnaire and facilitated Board discussion questions around the Board’s oversight to explore the findings from the questionnaire. of strategy and emerging risk. 2020/21 2021/22 2022/23 ## An established EXTERNAL BOARD EVALUATION INTERNAL BOARD EVALUATION INTERNAL BOARD EVALUATION ## timeline with The Board eectiveness review was This process was developed with a The evaluation covered the conducted against a backdrop of clear focus on the ‘high-performing eectiveness of the Workspace Board, ## incremental change, with new appointments to the Board‘ and how the Board adds value. and how this has developed over the improvements made Board combined with the impact of This approach built on the prior Board past year. Looking ahead it has a clear the pandemic on both the business evaluation and the progress made and focus on the Board’s contribution to ## each year and the work of the Board. also contributed to the momentum and strategy and horizon- scanning. potential of a relatively new Board. Stephen Hubbard Chair of the Nominations Committee 156 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2022/23 CONTINUED BOARD EVALUATION – SPOTLIGHT ON DEVELOPING A HIGH-PERFORMANCE BOARD CONTINUED | JANUARY 2023 | FEBRUARY 2023 | | MARCH 2023 | APRIL 2023 | | | --- | --- | --- | --- | --- | --- | | Board discussion | | Focused | Meeting with | Key outcomes | | | | questionnaire | | the Board | | agreed | BOARD DISCUSSION FOCUSED QUESTIONNAIRE ISSUED MEETING WITH THE BOARD KEY OUTCOMES AGREED A discussion was held by the Board TO THE BOARD The Board then had the opportunity The feedback from this year’s Board to consider key subject areas for this Fidelio developed a tailored questionnaire, to explore the findings during its meeting evaluation was positive and concluded that external review. focused on Board eectiveness and in March. the Board worked well and the Committee contribution to strategy and horizon scanning. structure continued to evolve. Key questions Key focus areas Discussion points Specific development themes – Is there scope to develop the Board’s The quantitative questionnaire enabled The discussion was designed to review – The Board will continue to develop its contribution to strategy and horizon the Board to provide feedback on eight key progress on key aspects of governance and oversight of strategy and horizon scanning scanning? aspects on governance. This was broadly to consider whether specific steps needed to – Holding more regular strategy updates – How can Board Members and the comparable with the prior year and provided be taken. In addition the discussion enabled – Inviting external and internal speakers Executive Committee engage further the opportunity to monitor progress. a good debate around strategy formation, to focus on a particular area of interest. beyond the formal Board Meetings? The qualitative questionnaire enabled a horizon scanning and where there were – How eective are the various Board deep dive on four key aspects of strategy opportunities to increase eectiveness. Following the recommendations from this Committees and does the Committee and horizon scanning including examples external review, an implementation plan and structure remain appropriate? of best practice. progress tracker will be developed by Gillian – What is the quality of Board learning? Karran-Cumberlege from Fidelio and the – What are the next steps for the Workspace Company Secretary which will be reviewed Board to enhance performance and by the Board. eectiveness? 157 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2022/23 CONTINUED PROGRESS AGAINST THE EXTERNAL BOARD EFFECTIVENESS REVIEW CONDUCTED IN 2022 Item discussed by the Board Focus area Progress Strategy Continue to develop its The Board continues to consider the Group strategy at each Board meeting. An annual strategy day was held in September 2022 oversight of strategy and and this was attended by some members of the Executive Committee. Actions from the strategy day were then circulated to the Board. horizon scanning. This will remain a focus for the Board going forward. Board Committee Review of the Board A review of the Board Committee structure was undertaken during the year. It was concluded that membership of the Audit Committee structure Committee structure and would include Rosie Shapland (Chair), Lesley-Ann Nash and Manju Malhotra. Previously, the Audit Committee consisted of all Non- membership for the next Executive Directors. Other NEDs are invited to attend those meetings of the Audit Committee convened to review the full and half-year phase of Workspace’s results, typically held in May and November. development. No changes were proposed to either the Remuneration or Nominations Committees. Consider the formation of an ESG Board Committee The ESG Committee was formed during the year, with its first meeting held in September 2022. The Committee is chaired by Duncan and the disbandment of Owen. More details can be found on pages 172 to 177. the Risk Committee, with responsibilities to be The Risk Committee was disbanded during the year, with the final Risk Committee Report included in the 2022 Annual Report. integrated into the Board and The responsibilities of the Risk Committee have been integrated into the Board and Audit Committee remits. Audit Committee’s remits. Employee Continue to focus on eective During the year we continued with a programme of events outside of Board meetings at which members of the Board and the engagement workforce engagement. Executive Committee can build relationships on a more informal basis. The Chair also held breakfast meetings with sta during the year. Further details can be found on page 139. The Director of People and Culture attended the Board meeting in November 2022, where the Board were provided with feedback received from sta on the employee survey conducted during the year. The CEO provides the Board with oversight of the broader people agenda, succession planning, development and changes in sta across the business. This includes updates from town hall meetings. 158 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 COMPOSITION, SUCCESSION AND EVALUATION CONTINUED NOMINATIONS COMMITTEE ACTIVITIES IN 2022/23 CONTINUED PROGRESS AGAINST THE EXTERNAL BOARD EFFECTIVENESS REVIEW CONDUCTED IN 2022 CONTINUED Item discussed by the Board Focus area Progress Board learning Continuous learning for The Board strategy day oers an opportunity for members of the Board to hear from internal and external speakers on a variety Board members to enhance of topics, including market trends and developments as well as strategic planning across areas of the business. understanding of the Company and the business Whilst the approach to Board learning will be kept under review, we shall continue to develop a dynamic programme of relevant it operates in. subject areas that reflect strategic priorities or challenges. Bespoke Board learning programmes will also continue, as appropriate. Diversity, inclusion Review progress on diversity For details of our progress with diversity and inclusion, see pages 148 to 154. and ESG and inclusion and ESG both at Board level and throughout A commitment to acting sustainably is one of the three pillars to our strategy which demonstrates how deeply it is embedded and the business. ensures we consider sustainability in all business decisions. The ESG Committee was established during the year and will review our sustainability strategy, governance, and science-based targets to transition to net zero. We have continued to progress our social impact through initiatives such as the InspiresMe programme and employee wellbeing activities. Read more on pages 50 to 57. 159 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### AUDIT, RISK AND INTERNAL CONTROL ### AUDIT COMMITTEE REPORT ## The Audit Committee plays a key ## role in promoting the maintenance ## of a strong and transparent control ## environment at Workspace. ### Rosie Shapland ### Chair of the Audit Committee QUICK LINKS Membership and attendance at Audit Committee meetings Page 160 Key topics considered Page 160 Chair’s letter Page 161 Role of the Audit Committee Page 163 Significant matters considered Page 164 Developing a robust Viability Statement Page 166 Fair, balanced and understandable Page 167 External audit Page 168 Risk management and internal controls Page 170 160 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 AUDIT, RISK AND INTERNAL CONTROL CONTINUED KEY TOPICS CONSIDERED BY THE COMMITTEE DURING THE YEARMEMBERSHIP AND ATTENDANCE AT AUDIT COMMITTEE MEETINGS The Committee is made up entirely of Non-Executive Directors and each Committee member Portfolio valuation has considerable commercial knowledge and broad industry expertise. The Committee is – Considered the objectivity and independence of the external valuers chaired by Rosie Shapland. Details of individual attendance at the meetings held during the – Discussed the presentation of the portfolio valuation by the external valuers year are set out below. More information on the skills and the experience of all Committee members can be found on pages 115 to 116. Financial and Narrative Reporting Member Meetings – Reviewed the year-end financial statements including key judgements, estimates since attended and assumptions | | | 1,2 | | 3 | | --- | --- | --- | --- | --- | | Rosie Shapland (Chair) | | | 2020 4/4 | | | | 2 | | | 3 | | Lesley-Ann Nash | | | 2021 4/4 | | External Audit 2 3 – Reviewed and discussed reports from KPMG, summarising their findings arising from Manju Malhotra 2022 4/4 the 2021/22 audit and the half-year review of the results of the Group for the six months 1. In accordance with the UK Corporate Governance Code 2018, the Board considers that Rosie Shapland has significant ended 30 September 2022 recent and relevant financial experience. – Assessed the independence and objectivity of the external auditors 2. Following Board discussions on the structure of its Committees, it was agreed that from 21 April 2022, the Committee will be made up of three members, Rosie Shapland, Lesley-Ann Nash and Manju Malhotra. Other Non-Executive Directors are welcome to attend meetings should they wish to do so. All Non-Executive Directors attended meetings held in May and November 2022 to review the full and half-year results and the first joint meeting of the Audit and ESG Committee Changes to principal risks meeting held in January 2023. – Reviewed management’s proposal to include climate risk as a principal risk 3. The Audit Committee meeting in January 2023 was a joint meeting with the ESG Committee. Internal controls and risk management – Reviewed and discussed an update from the Group’s Head of Technology on the Group’s business continuity plan and cyber security – Reviewed the eectiveness of the Company’s control environment and the Company’s process for self-certification of the operating eectiveness of controls Governance – Reviewed terms of reference – Discussed assessment of the eectiveness of the Audit Committee 161 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 AUDIT, RISK AND INTERNAL CONTROL CONTINUED Dear shareholder, We also considered, as we do on a regular ### Audit Committee basis, the potential for fraud in revenue ### Chair’s letter On behalf of the Board, I am pleased to recognition, scope for management override present the Audit Committee Report. This of controls and compliance with regulations. report is intended to provide shareholders We found no concerns arising from this review. with an understanding of the work we have | done to provide assurance on the integrity of | A description of the main activities that the | | --- | --- | | the Annual Report and Financial Statements | Committee considered during the year can | | for the year ended 31 March 2023. Much of | be found on page 160. | the work of the Committee is necessarily targeted around the key areas of financial Climate change Rosie Shapland reporting, external audit, internal control and As the Group is committed to being net Chair of the Audit Committee risk management, all of which is underpinned zero carbon by 2030, it is important that by a robust governance framework. our financial reporting reflects and supports this goal. The Board discussed the impact This has been a busy period for the finance of climate change on the Group’s financial team, with the McKay acquisition and reporting and financial statements and it ### The Audit Committee has a preparation for the implementation of a new considered the requirement for companies to ### key role in checking that the finance system. disclose, on a comply or explain basis, against the recommendations of the Task Force on ### Group’s narrative reporting Review of material issues Climate-related Financial Disclosures (TCFD). ### gives a fair, balanced and The Audit Committee has a key role in The Board received updates on the Company’s checking that the Group’s narrative reporting progress against this requirement from our ### understandable assessment gives a fair, balanced and understandable Head of Sustainability. More information can ### of the Group’s position assessment of the Group’s position and be found on page 118. prospects and establishing that the financial ### and prospects and establishing statements provide a true and fair view of As part of its review of Principal Risks, ### that the financial statements the Group’s financial aairs. As part of this and following the joint meeting with the MONITORING FUTURE DEVELOPMENTS | | provide a true and fair view | process, we considered the significant | ESG Committee in January 2023, the Audit | | --- | --- | --- | --- | | Continue to focus on climate change and its | | financial judgements made during the year, | Committee agreed that climate change be | | potential impact on the financial statements, | of the Group’s financial aairs | | | | | | along with other key financial reporting | included as a principal risk. | | review mitigation strategies whilst | | issues. In this context and in conjunction with | | | monitoring risk across business decisions | | the Board, we considered the twice annual | Cyber security | | including assurance from Accenture on our | | valuation of the investment portfolio, the | Cyber security remains a focus area for | | carbon emissions disclosures. See page 101 | | valuation process and the key assumptions | the Committee. The Head of Technology | | for more details. | | made by the valuers and their independence. | attended the March Audit Committee to give | | | | Following our review, we are satisfied that the | an assessment of cyber risk and update on | Jointly, with the ESG Committee, review valuation process is robust, the assumptions progress made in protecting the Group the programme of activity being undertaken and estimates used in the valuation are against evolving threats. to ensure the eectiveness of ESG policies appropriate and that the valuers remain and procedures. independent. Further details can be found Continue to focus on the Company’s on page 164. protection against cyber threats. The role of the Audit Committee Monitor proposed changes to the UK Pages 163 to 164 Corporate Governance Code, particularly Risk management and internal controls with respect to internal controls. Pages 170 to 171 162 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 AUDIT, RISK AND INTERNAL CONTROL CONTINUED | Viability and going concern statements | 31 March 2023, the Committee confirmed | and active management of physical risk, | | --- | --- | --- | | The Committee considered the going | to the Board it was satisfied that the Annual | it was concluded that given the nature of | | concern statements in the interim statement | Report and Accounts was fair, balanced | climate risk, which will require greater | ### The Committee was satisfied and the Annual Report, and the viability and understandable. oversight of mitigation strategies and ### statement in the Annual Report. This included monitoring of risk across business decisions, that management had reviewing the work undertaken by Committee eectiveness it should be considered as a Principal Risk. ### conducted robust viability and management, which considered plausible The Company undertook an internally downside forecasts factoring in the Group’s facilitated Board eectiveness evaluation this We do not have a formal internal audit going concern assessments principal risks and certain uncertainties, and year, which assessed our performance as a function, a matter which is kept under review the appropriateness of the five-year viability Committee. I am pleased that this concluded by the Audit Committee. The Group has, assessment period. Following this review, that we operate eectively and that the Board however, appointed a Head of Security and we were satisfied that management had takes assurance from the quality of our work. Risk Management whose remit includes conducted robust viability and going concern maintaining our risk management and control assessments and recommended approval of Risk, control and assurance framework and conducting regular these to the Board. The Group has several processes in place to independent assurance. provide eective internal control, including | See our viability and going concern | self-certification of controls by risk owners, | During the year the Head of Security and | | --- | --- | --- | | statements on pages 87 to 88. | reviews of fraud, anti-bribery and | Risk Management chaired monthly Risk | | | whistleblowing policies and a risk management | Management meetings attended by senior | | 2023 Annual Report | framework under which controls, and their | management, conducted bi-annual self- | | The External Auditor confirmed that they had | eectiveness, are managed and evaluated. | certification of controls across the Group, | | found no unadjusted material misstatements | Between the Audit Committee and the full | completed a principal risk review and | | in the course of their work. | Board, we have reviewed the eectiveness | mapped out our internal and external | | | of the Group’s risk management and internal | assurance activities. The focus for the | | After reviewing the reports from management, | control systems where we have not identified | following 12 months is to evolve our internal | | and following discussions with the External | any significant failings or weaknesses. | assurance programme with additional | | Auditor and valuers, the Committee is | | independent reviews across the business. | | satisfied that: | In January 2023, the Audit Committee held a | | | – the process used to determine the property | joint meeting with the newly established ESG | I hope that you find this report informative | | valuation was satisfactory | Committee. At this meeting, the Audit and | and can take assurance from the work | | – the financial statements appropriately | ESG Committees reviewed the Company’s | undertaken by the Committee during the year | | address the key judgements and the key | policies and procedures that support the | to deliver its key responsibilities. | | estimates | implementation of our ESG strategy, as well as | | | – the Group has adopted appropriate | the programme of assurance being undertaken | | | accounting policies | to ensure the eectiveness of these policies | | | – both the External Auditor and the valuers | and procedures. Both Committees were | | | remain independent and objective in | satisfied that the Company’s policies and | Rosie Shapland | | their work | procedures in this area operate eectively, | Chair of the Audit Committee | | | and that adequate assurance is undertaken. | 6 June 2023 | The Board as a whole is responsible for | assessing the Group’s position, performance, | The Committees also considered whether | | | --- | --- | --- | | business model and strategy. The | climate risk should be identified as a Principal | | | Committee’s role in this assessment is | Risk. Whilst the Company has an active | Developing a robust Viability Statement | | covered on page 167. For the year ended | programme of managing its climate risk | Page 166 | exposures through ongoing assessment of risk, the establishment of control measures Fair, balanced and understandable reporting Page 167 163 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 AUDIT, RISK AND INTERNAL CONTROL CONTINUED AUDIT COMMITTEE RESPONSIBILITIESHOW THE COMMITTEE OPERATES ### The role of the Audit ### Committee FORWARD PLANNING Financial reporting Subjects include climate change, ESG eectiveness, monitoring recommendations – Review the year-end and interim financial The Audit Committee reviews and monitors from BEIS, changes to the UK Corporate Governance Code statements and monitor the reporting the integrity of the Group’s financial reporting process, including key judgements, in advance of its consideration by the Board. estimates and assumptions and the The Committee oversees the relationship with AUDIT COMMITTEE presentation of significant transactions. the External Auditor in order to assess their Assess and discuss topics with senior management and External Auditor Information on significant matters in eectiveness and to annually assess their relation to the financial statements that independence and objectivity. Following the were considered by the Committee can changes in Committee structure, the Audit be found on page 164 Committee now also reviews and monitors Regular inputs received from: Workspace management and the External Auditor – Review the appropriateness of accounting the Group’s risk management and internal policies and practices controls framework. – Advise the Board on the Group’s viability and going concern statements including The Audit Committee is composed solely of The Committee receives information in the assumptions in plans, key risks independent Non-Executive Directors, with a advance of its meetings including information considered, and the sensitivities tested. wide diversity of experience. Rosie Shapland, from management and detailed reports from More information on the Committee’s as a Chartered Accountant with many years the External Auditor including the audit assessment of the Group’s viability and of senior financial experience, satisfies the report. The Committee meets privately with going concern status can be found on requirement of having appropriate recent the External Auditor, at least annually, and it pages 166 to 167 and relevant financial experience. The liaises with Company management in – Review the content of the Annual Report Committee as a whole has competence considering areas for review. and Accounts and advise the Board on in the sector in which the Group operates. whether, taken as a whole, they are fair, The Committee regularly invites the external balanced and understandable and provide Meetings of the Audit Committee coincide audit lead partner, the Chair of the Board, the information necessary for shareholders with key dates in the financial reporting and the Chief Executive Ocer, the Chief Financial to assess performance, the business model audit cycle. During the year, the Committee Ocer, the Group Financial Controller and the and strategy. The Group’s strategy and met on four occasions, in May and November Head of Security and Risk Management to business model are explained on pages 2022 and in January and March 2023. The attend Committee meetings. Representatives 32 to 35 and 64 to 68 respectively meeting in January was a joint meeting with from our external valuers, CBRE, attend Board the ESG Committee to review the Group’s ESG meetings twice per year to present the half- External audit related policies and procedures that support and full-year valuation reports. – Assess the work of the External Auditor in the implementation of our ESG strategy. relation to significant financial judgements Meetings of the Committee are held in advance made by management. More information | | A forward plan of agenda items guides the | of the Board meetings to allow the Committee | | | --- | --- | --- | --- | | Through our ongoing | | | is available on pages 168 to 169 | | | business to be considered at each meeting | Chair to provide a report on the key matters | | – Assess the eectiveness of the external ### programme we identified that, discussed to the Board, and for the Board and is regularly reviewed and developed. audit process and the ongoing relationship ### while the Company has an This pre-planning facilitates the work of the to consider any recommendations made. with the External Auditor. This is done by Committee, enabling it to give thorough considering their approach to the audit ### active programme of managing consideration to matters of particular All of this, along with ongoing challenge, and understanding of our business, ### its climate risk exposures, importance to the Group. debate and engagement, allows the Committee discussing their reporting and any issues to discharge its responsibilities eectively. ### climate change should be identified and obtaining the views of management ### considered a Principal Risk 164 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 AUDIT, RISK AND INTERNAL CONTROL CONTINUED AUDIT COMMITTEE RESPONSIBILITIES CONTINUED ### Significant matters considered ### by the Committee | – Review and monitor the objectivity and | – Review the eectiveness of the Group’s | – Keeping up to date with regulatory and | | | --- | --- | --- | --- | | the independence of the External Auditor, | control environment, including the | legislative matters relevant to the Group | Valuation of the investment property | | including its policy governing the provision | adequacy of key financial controls | – Considering ESG matters in all decision | portfolio | | of non-audit services. Refer to page 169 | – Review whistleblowing arrangements | making | The valuation of the investment property | | for more information on our process for | whereby employees may, in confidence, | – Approve the Committee timetable and | portfolio is inherently subjective, requiring | | maintaining their independence | raise concerns about possible improprieties | planner which detail the areas of focus | significant judgement. The outcome is | | – Agree the remuneration of the External | in financial reporting or other matters, | for the Committee each year | significant for the Group in terms of its | | Auditors | to receive assurance that there are | – Discuss the assessment of the eectiveness | investment decisions, results and | | | proportionate and independent procedures | of the Committee | remuneration, and is a major component of | | Portfolio valuation | in place. See page 91 for more information | – Review and approve changes to the | Total Property Return and Total Accounting | | – Consider the objectivity and independence | on our Whistleblowing Policy | Committee’s terms of reference | Return, two of our KPIs. | | of the external valuers | – Review the Group’s procedures for | | | | – Review and challenge the methodology, | preventing and/or detecting fraud | | Therefore, this matter is considered by both | | assumptions and judgements used by the | – Review the Group’s procedures for the | | the Board and the Audit Committee. | | external valuers to ensure they are | prevention and detection of bribery and | | | | appropriate | monitor the reports generated by such | | The valuation is conducted externally by | | – Review the External Auditor’s assessment | procedures. See page 91 for more | | independent valuers, CBRE, one of the world’s | | of the valuation, including an explanation | information on our Anti-Bribery Policy | | largest commercial real estate services firms. | | as to how the valuation is audited | – Consider whether the Group should have | | CBRE presented the year-end and interim | | | an internal audit function | | valuations to the Board and Committee, who | | Internal controls and risk management | | | reviewed the methodology and the outcomes | | – Review the adequacy and eectiveness of | Governance, best practice and development | | of the valuation, challenging the key | | the Group’s overall risk assessment processes | – Keeping up to date with expected changes | | assumptions and judgements. The Audit | | that inform the Board’s decision making, | to the Code, specifically regarding the | | Committee also considered the objectivity | | including the design, implementation and | control environment following the | | and independence of the valuers. | | eectiveness of those processes | recommendations of the BEIS consultation | | | | – Advise the Board on the Group’s overall risk | – Keeping up to date on investor, shareholder | | Following the acquisition of McKay in May | | appetite, tolerance and strategy, and the | and market sentiment (with advice from the | | 2022, the Board and Committee also reviewed | | principal and emerging risks the Company | Company’s brokers) | | the half-year McKay valuation prepared by | | is willing to take to achieve its long-term | – Ensuring compliance with applicable | | their previous valuers Knight Frank. | | strategic objectives. See page 170 for details | accounting standards, monitoring | | | | of how the Committee has considered risk | developments in accounting regulations | | KPMG met with the valuers and they | | appetite and strategy during the year | as they aect the Group and reviewing the | | presented their views on the valuation to the | | – Advise the Board on the likelihood and | appropriateness of accounting policies and | | Committee, as well as an explanation of how | | impact of principal risks materialising, | practices in place | | the valuation is audited. The Board and | | and the management and mitigation of | | | Committee considered that they were | | principal risks to reduce the likelihood of | | | satisfied that the methodology, assumptions | | their incidence or their impact. See pages | | | and judgements used by the valuers were | | 69 to 76 for information on the Committee’s | | | appropriate, that the valuations were suitable | Internal controls consideration of principal risks for inclusion in the financial statements and More information on the Group’s the work of the External Auditor was internal controls and risk management appropriate. process is available: Pages 170 to 171 165 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 AUDIT, RISK AND INTERNAL CONTROL CONTINUED | The Committee considers all financial | Given its significance, management, the | | | --- | --- | --- | | information published in the full and interim | Board and the Committee monitor the | | | financial statements and considers | objectivity and independence of the valuers, | | | accounting policies adopted by the Group, | and review the methodology and outcomes | £2.7bn | | presentation and disclosure of the financial | of the valuation, challenging the key | | PORTFOLIO VALUATION information and it challenges the key assumptions and judgements. judgements and estimates made by management in preparing the financial A number of meetings are held between statements. key management and CBRE ahead of the valuation at which the inputs and The Committee pays close attention to methodology of the valuation are discussed. matters it considers to be important by virtue Key discussions include: of their impact on the Group’s results, or the – London commercial property market: level of complexity, judgement or estimation current trends and circumstances expected involved in their application on the to aect the market are discussed consolidated financial statements. – comparable market evidence: recent transactions are considered and compared The Committee reviewed a number of other to assumptions made in valuing our key matters which have been considered portfolio by management and discussed with KPMG, – development projects: we provide CBRE including the uncertainty relating to collection with any updates to ongoing or future of trade receivables and the accounting for schemes and we discuss the assumptions the McKay acquisition and for the costs of CBRE has made, particularly for more the new ERP system implementation. complex schemes where more significant levels of judgement are required Portfolio valuation – estimated rental values: the estimated Our property portfolio, is independently rental values proposed by CBRE are ## 76 valued twice annually by our external valuers, discussed and reviewed, with management CBRE Limited. ensuring that these are in line with our CORE LOCATIONS recent rental activity Our properties are critical to our business – property information: we provide CBRE and the valuation demonstrates the value with information on any changes to that we are delivering to our shareholders. properties that may aect the valuation It is a measure of how well we are managing – other inputs used by the valuers are our buildings and driving rental income. reviewed and discussed Furthermore, the valuation is a significant part of both our net asset value and Total Property Return, which are both key performance indicators. 166 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 AUDIT, RISK AND INTERNAL CONTROL CONTINUED ### Developing a robust Viability Statement Our Viability Statement Pages 87 to 88 As part of the Group’s Viability Statement, the following factors were considered: Our Going Concern Statement – the Group’s current financial and operational position and the current economic outlook Page 87 – the Group’s cash flows, financing headroom and financial ratios – reassessment of key risks and their potential impact on the business model THE PROCESS WE UNDERTOOK WAS AS FOLLOWS: | STAGE 1: | STAGE 2: | STAGE 3: | STAGE 4: | | --- | --- | --- | --- | | Risk identification | Risk assessment | Scenario sensitivity analysis | Conclusions | | Responsibility | Responsibility | Responsibility | Responsibility | The Board Audit Committee Executive Committee Executive Committee Executive Committee Executive Committee Risk Management Group Risk Management Group Heads of Department Heads of Department Heads of Department Heads of Department External Auditor The strategic and operational risks were For each risk, the following factors were For those risks identified as being severe The Audit Committee considered the reviewed to identify the principal risks to considered: enough to impact the viability of the Group, findings from this analysis and made their viability over the period under consideration. – our risk appetite (the level of risk the sensitivity analysis was performed to recommendations to the Board, which was The risks that would impact solvency and Board is willing to take) understand the potential impact on liquidity given the opportunity to question the liquidity, either individually or in combination – the controls in place to mitigate the risk and financial ratios process and the findings with other risks, were considered – the quantum of risk 167 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 AUDIT, RISK AND INTERNAL CONTROL CONTINUED THE PROCESS WE FOLLOWED ### Fair, balanced and ### understandable reporting 1 On behalf of the Board, the Committee has AUDIT COMMITTEE REVIEW considered whether, in its opinion, this Annual Report and Accounts, taken as a whole, is fair The Committee reviewed the Annual Report at an early stage, and throughout the balanced and understandable and whether process, to enable sucient time for comment and review and to check overall balance it provides the information necessary for and consistency. shareholders to assess the Group’s position, performance, business model and strategy. 2 REPORT FROM THE CFO AND GROUP FINANCIAL CONTROLLER The Committee discussed a report from the CFO and the Group Financial Controller covering the financial statements within the Annual Report and Accounts: this highlighted the significant changes and the areas of focus in the financial statements and commented on any new accounting standards in the period. 3 FAIR, BALANCED AND UNDERSTANDABLE ASSESSMENT A fair, balanced and understandable assessment was prepared by the management team and circulated to the Committee. This assessment highlights factors which support the responsibility of the Committee. 4 EXTERNAL AUDIT REVIEW The External Auditor presented the results of its audit work to the Committee. 5 RECOMMENDATION TO BOARD AND BOARD’S CONCLUSION The Board consider the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Our strategy Andrew Dodson Group’s position and performance, business model and strategy. Pages 32 to 35 Group Financial Controller 168 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 AUDIT, RISK AND INTERNAL CONTROL CONTINUED THE EFFECTIVENESS OF EXTERNAL AUDIT ### External audit Following a competitive tender process, Annually, the Committee assesses the As part of the eectiveness review following the March 2022 year end, a questionnaire KPMG were appointed by shareholders as the qualifications, expertise, resources and was issued to Committee members, regular attendees of the Committee and those Workspace External Auditor for the financial independence of the Group’s External Auditor, involved in the external audit process. year ended 31 March 2018 and KPMG continue as well as the eectiveness of the audit to be Workspace’s External Auditor. process. The Chair of the Committee also QUESTIONS WERE POSED AROUND THE FOLLOWING SUBJECTS: meets with the KPMG partner. Following the completion of the former lead audit partner’s five-year tenure, a new lead audit engagement partner, Bano Sheikh, AUDIT AND NON-AUDIT FEES 2022–2023 was appointed for this reporting period. | | | | Eectiveness | Delivery | Eciency | Communication | Contact | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | Eectiveness of | Delivery and | Eciency and | Communication | Contact with | | Audit and non-audit fees | | | the external audit | execution of the | performance of | and engagement | the audit team | | Fees payable to the External Auditor for audit | £440k | | process, the | agreed external | the audit team | between the | outside of the | | and non-audit services are set out in note 2 | | | quality and scope | audit process | as well as | senior | audit | | | | | of the audit plan, | for the 2021/22 | relevant and | management | | | on page 232. This year, the non-audit services | 70 | Non-audit | | | | | | | | | | advising, on a | financial year | qualified | team, the | | performed by KPMG included the review of | | | timely basis, | specialists | finance team, | | --- | --- | --- | --- | --- | | the Group’s half-year results and Green Bond | AUDIT AND NON-AUDIT FEES | about any new | involved in the | KPMG and the | | use of proceeds assurance. | 2021–2022 | developments | audit process | Committee | | | | regarding risk | and continuity of | | | | | management, | sta during the | | Audit quality corporate audit process ## An important part of the Committee’s work £335k governance, | consists of overseeing the relationship with, | | | financial | | --- | --- | --- | --- | | and performance of, the External Auditor, in | | | accounting and | | | 55 | Non-audit | | | particular with regards to the independence, | | | related risks | quality, rigour and challenge of the external AUDIT AND NON-AUDIT FEES audit process. The Committee reviews the 2020–2021 eectiveness of the audit throughout the year taking into account: OUTCOMES From its discussions during the year, the challenges presented to the External Auditor and a – the detailed audit strategy for the year and ## £336k review of the reporting received, the Committee considers that the External Auditor provides coverage of any risks, scope, and level of appropriate professional challenge and reports its findings in an open and direct manner. fees for the audit Non-audit 96 The Committee remains satisfied: – the quality, knowledge and expertise of the with the eectiveness of the external audit and the interaction between the External Auditor engagement team and the Committee and with the External Auditor’s qualifications, expertise and resources. – insight around the key accounting and the audit judgements – the quality of reporting and discussions at the Audit Committee meetings – the outcome of the review of eectiveness The Committee discussed a summary of the key findings and results at its meeting of the External Auditor and the audit in November 2022 and no significant concerns were identified. process discussed below The results of the review were discussed with the External Auditor to monitor the continuing quality of audit services. The External Auditor, the Committee and management agreed to focus on improving communications going forward. The Committee’s relationship with the External Auditor is one of openness and professionalism. Audit Audit Audit 240 370 280 169 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 AUDIT, RISK AND INTERNAL CONTROL CONTINUED AUDITOR INDEPENDENCE AND OBJECTIVITY SAFEGUARDING AUDITOR INDEPENDENCE | In addition to the annual review of | The Committee is satisfied that the External | – As required by the Code, the Audit | – During the year, KPMG was asked to provide | | --- | --- | --- | --- | | eectiveness, the Committee considered the | Auditor is independent. | Committee has a formal policy governing | additional services in the form of assurance | | independence and objectivity of the External | | the engagement of our External Auditor, | over the allocation of proceeds from the | | Auditor through a combination of assurances | The Audit Committee will continue to review | KPMG, to supply non-audit services and | green bond | | provided by the External Auditor on the | the eectiveness and the independence of the | to assess the threats of self-review, | – If the External Auditor is to be considered | | safeguards in place to maintain independence; | External Auditor each year. | self-interest, advocacy, familiarity and | for the provision of non-audit services, the | | oversight of the Non-Audit Services Policy | | management. KPMG has discontinued the | scope of work and the fees must be | | and fees paid. | The Group complies with the Competition | provision of all non-audit services (other | approved in advance by the Chief Financial | | | and Markets Authority Order 2014 relating to | than those closely related to the audit) to | Ocer, the Company Secretary and the | | KPMG LLP have confirmed to the Committee | audit tendering and the provision of non-audit | all FTSE 350 companies, meaning non-audit | Chair of the Audit Committee. For larger | | that: | services, and it is the Group’s intention to put | services will be confined to a more limited | assignments, in excess of £100,000, this | | – the audit of the consolidated financial | the audit out to tender at least every ten years | scope of work than that defined by the | would involve a competitive tender process, | | statements is undertaken in accordance | as required by applicable law and regulation. | Audit Committee’s terms of reference | unless there are compelling commercial or | | with the UK firm’s internal policies and | The external audit was last tendered in 2017 | | timescale reasons to use the External Auditor | | procedures | following which the External Auditor changed | | or another specific accountancy firm | | – they have internal procedures in place | from PricewaterhouseCoopers LLP (PwC) | | | | to identify any aspects of non-audit work | to KPMG. | | | which could compromise its role as auditor | and to ensure the objectivity of their | It is currently anticipated that an audit tender | | --- | --- | | audit report | will be conducted before the end of the | | – they believe that, in their professional | financial year ending 31 March 2024 in respect | | judgement, the safeguards they have in | of the audit for the year ending 31 March 2025 | | place suciently guard against the threats | to allow sucient time for a handover period | | to independence | if required. | – the total fees paid by the Group during the year do not represent a material part of the There are no contractual obligations which firm’s fee income restrict the Committee’s choice of external – they consider that they have maintained auditor or which put in place a minimum audit independence throughout the year period for their tenure. 170 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 AUDIT, RISK AND INTERNAL CONTROL CONTINUED ### Risk management and internal controls The Committee, on behalf of the Board, keeps under review the eectiveness of the Group’s On the basis of the processes outlined on this page and having regard to the ‘Guidance on Risk risk management and internal control systems through management updates and output from Management, Internal Control and Related Financial and Business Reporting’ issued by the FRC the Group’s Risk Management Group to ensure that the controls in place are eective. This in September 2014, the Board, supported by the Audit Committee, has reviewed the framework is designed to manage rather than eliminate business risks and to provide reasonable eectiveness of the risk management and internal control systems. No significant control failings assurance against material misstatement in the financial statements. or weaknesses were identified during the period under review. The Directors confirm that the processes described below have been in place during the 2022/23 financial year and up to the date of approval of the Annual Report and Accounts. AUDIT COMMITTEE THE BOARD The Audit Committee has a key role in developing appropriate governance and challenge The Board has defined its risk appetite for strategic and operational risks. A standard around risk management and considering processes and assurance. It also sets the tone and methodology for risk assessment is applied across the Group to assist with monitoring inherent culture within the organisation regarding risk management and internal control. and residual risk and to assist with comparing residual risk against target risk. The Group had the following key procedures and monitoring processes in place during the year to provide eective internal control: – an ongoing process to identify, evaluate and manage risks, 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 are presented to the Board and Audit Committee – the Group’s key controls include appropriate segregation of duties that are embedded across the organisation – on behalf of the Board, the Audit Committee reviews fraud and anti-bribery policies and procedures; annual anti-bribery training is in place for all employees and there have been no reported instances of whistleblowing, bribery or corruption during the period under review – the Group has in place a system for planning, reporting and reviewing financial performance, including performance against strategy and its business plan – in April 2022, the Board formed an ESG Committee which reviews the Group’s environmental and social related risks – the Audit Committee reviews technology risks including IT systems and cyber risk, to ensure that the Group’s IT function eectively implements preventative and detective controls to monitor and to mitigate risk As required by the Code, the Board, through the Audit Committee has carried out a robust assessment of the principal and emerging risks facing the Group, including those that could threaten its business model, future performance, solvency or liquidity. This assessment is further described in the Strategic Report on pages 69 to 76. 171 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 AUDIT, RISK AND INTERNAL CONTROL CONTINUED OUR RISK MANAGEMENT FRAMEWORK OUR RISK MANAGEMENT PROCESS With eect from 21 April 2022, the activities of the Risk Committee were integrated into the Audit Committee, with the Board retaining overall responsibility for risk management, 1 2 Risk identification Risk assessment and in particular for risks relating to valuation, development and real estate. This updated – Risks are identified when projects are – Each risk is assessed and scored risk management framework reflects the new structure from 21 April 2022. being considered or through being raised according to the potential impact and organically by members of sta likelihood of it materialising Board of Directors – Identified risks are captured in Risk Registers – Each risk is given an Inherent Risk Score – Sets the Group’s overall risk appetite, tolerance and strategy – A Risk Owner is assigned to each risk and has (pre-controls) and a Residual Risk Score – Oversees the Group’s principal risks, including property valuation, development responsibility for assessing and monitoring (post-existing controls) and real estate risks that risk – Each risk is also assigned a Target Risk – Receives advice and recommendations from the Audit Committee and Score representing the Group’s risk Executive Committee tolerance for that risk Audit Committee Risk monitoring and reporting 4 Risk response 3 – Oversees the Group’s risk management framework – Advises the Board on risk appetite, tolerance and – Risks are regularly monitored by the – Each Residual Risk Score is compared strategy Risk Owners to its Target Risk Score – Oversees all risks except risks related to property, – Control owners regularly certify that their – If the Residual Risk Score is higher than the valuation, development and real estate which are controls continue to operate eectively Target Risk Score, action is taken to reduce overseen by the Board – The Risk Management Group oversees this it towards the target activity and escalates significant changes – Controls are assigned an owner who is and new risks to the Executive Committee, responsible for monitoring whether the Audit Committee and/or Board as controls operate eectively appropriate Executive Committee – Oversees and manages the Group’s day-to-day risk management procedures – Reports to the Board and Audit Committee on the operation and INTERNAL AUDIT eectiveness of controls Due to its size, the Group does not have To supplement reviews of risk management an internal audit function, a matter reviewed and internal control, a programme of by the Audit Committee during the year. operational, facilities management and health Risk Management The Committee has advised the Board that, and safety reviews are undertaken across our Group – Responsible for the implementation and embedding of risk currently, it considers there to be no need properties by qualified senior head oce management activities for an internal audit function. The External personnel. Any significant findings will then be – Reviews and challenges the risk information provided by Risk Owners Auditor has confirmed this currently has reported to the Audit Committee. In addition, – Reports to the Executive Committee, although the Audit Committee no impact on their audit approach. all key controls are recorded on a central has the power to request attendance or reports from the Risk register and control owners are required to Management Group directly if it is felt this is necessary The Group has a Head of Security and Risk certify the eectiveness of controls for which Management whose responsibilities include they are responsible and to provide details of maintenance of our risk management and further actions to address any identified control processes. ineectiveness. No significant issues were Risk owners – Each risk identified by the Group is assigned a Risk Owner identified during the year. – Risk Owners are responsible for monitoring, managing and reporting on their risks, as well as identifying any emerging risks Whistleblowing policy Page 91 172 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### ESG COMMITTEE REPORT ## The ESG Committee’s role is to ## promote long-term sustainable ## success of the Company by ensuring ## environmental and social factors are ## fully integrated in business strategy ## and decision making. ### Duncan Owen ### Chair of the ESG Committee QUICK LINKS Membership and attendance at ESG Committee meetings Page 173 Key topics considered by the Committee during the year Page 173 Chair’s letter Page 174 Governance of ESG matters at Workspace Page 175 Spotlight on Net Zero Pathway Page 176 ESG policies, procedures and related assurance Page 177 173 Workspace Group PLC Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information # ESG COMMITTEE REPORT CONTINUED # MEMBERSHIP AND ATTENDANCE AT ESG COMMITTEE MEETINGS The Committee consists of six independent Non-Executive Directors, the Chief Executive Officer and the Chief Financial Officer (biographies are available on pages 115 to 116). At the request of the Committee, members of the Executive Committee, the senior management team and/or external advisers may be invited to attend all or part of any meeting, as and when appropriate. # Meetings of the ESG Committee During the year under review, the Committee held two meetings (in September 2022 and in January 2023). The September meeting established the Committee and approved its terms of reference. Moving forwards, the Committee has agreed to hold three meetings a year. These meetings are expected to be held in January, April and September. | | Member since | Meetings attended | | --- | --- | --- | | Duncan Owen (Chair) | 2022 | 2/2^{1} | | Rosie Shapland | 2022 | 2/2^{1} | | Lesley-Ann Nash | 2022 | 2/2^{1} | | Manju Malhotra | 2022 | 2/2^{1} | | Nick Mackenzie | 2022 | 2/2^{1} | | Stephen Hubbard | 2022 | 2/2^{1} | | Graham Clemett | 2022 | 2/2^{1} | | Dave Benson | 2022 | 2/2^{1} | 1. The ESG Committee meeting in January 2023 was a joint meeting with the Audit Committee. # KEY TOPICS CONSIDERED BY THE COMMITTEE DURING THE YEAR # Progress on net zero carbon - Reviewed net zero carbon pathway and progress made across all scopes of carbon - Discussed appropriateness of interim milestones and key metrics that should be prioritised - Reviewed the overall investment plan to 2030 - Considered key dependencies for successful delivery of net zero carbon commitment # Evidence of social impact - Reviewed the approach to social impact, key focus areas and progress made to date - Agreed key social programmes, as a key focus for the year along with performance indicators to measure progress - Reviewed industry best practice on social impact and identified improvement opportunities - Discussed the ambition to have a long-term flagship social impact target # ESG risk mitigation - Reviewed climate risk exposure of the business against a number of warming scenarios - Assessed the level of residual risk and mitigation strategy - Considered elevating climate risk as a principal risk for business # Governance and reporting - Established the ESG Committee and agreed the terms of reference - Agreed how sustainability will be governed at all levels of business, and set five ESG targets at Board level which are linked to remuneration - Reviewed and approved information reported on sustainability - Reviewed all ESG policies and effectiveness of programmes and audit procedures 174 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ESG COMMITTEE REPORT CONTINUED Dear shareholder, environmental commitment and conducting ### ESG Committee a critical review of ESG policies and | Chair’s letter | I am pleased to present to you the first | procedures. The Committee also received | | --- | --- | --- | | | report of the ESG Committee for the year | technical briefings from subject matter | | | ended 31 March 2023. | experts on a number of topics, including | evolving sustainability reporting requirements. The Committee was established in April 2022 I detail on page 173 an overview of the to strengthen the Board’s oversight of activities which we have carried out. environmental and social issues. The Board, recognising the increasing stakeholder focus Net zero carbon transition on ESG matters, considered it prudent to In 2019, Workspace made a commitment Duncan Owen have a dedicated forum in which to discuss to becoming a net zero carbon business by Chair of the ESG Committee | ESG-related matters. The proposal for | 2030. Workspace has signed up to the Better | | --- | --- | | establishing a Board-level ESG Committee | Buildings Partnership (‘BBP’) Climate | | was put forward in March 2022 when the | Commitment to deliver net zero carbon real | | Board was exploring the characteristics that | estate portfolios by 2030. Following a | | would make it a high performing Board. | detailed analysis of the emissions across the | ### I am proud to chair the ESG The ESG Committee was established the business and the value chain, Workspace ### Committee at Workspace, following month. have also developed a set of science-based targets which are aligned to the goals of the ### a business where sustainability, | | From the beginning, the Committee agreed | Paris Agreement and the IPCC’s 1.5°C report. | | --- | --- | --- | | social impact and strong | that there would be four key themes for it | These targets have been approved by the | | | to focus on: | Science Based Targets initiative (SBTi) and | ### governance is at the heart (i) having a clear and a credible path cover both our operational emissions and our ### of everything. There is a real to net zero; embodied carbon emissions. (ii) evidencing long-term commitment ### potential within the business to social welfare; Embedding ESG into the workings ### to be a market leader on (iii) active management of ESG risks and of other Committees ### sustainability and making opportunities; and To ensure the ESG agenda is not siloed, (iv) maintaining high standards of corporate we also identified ways in which ESG ### a positive impact for our governance and reporting. considerations are embedded within the ### customers. I am committed workings of other Committees. This year we Undeniably, the business has an inherent held a joint meeting with the Audit Committee ### to supporting the long-term sustainable business model, and as a to review the ESG policies and eectiveness ### sustainable success of the Committee our role is to ensure Workspace of the audit programme in place. ESG input continues to stay at the forefront of is also informing discussions at the ### Company sustainability performance. Nominations Committee regarding requisite expertise at Board level and with the In its first-year establishment, the Committee Remuneration Committee regarding aligning has eectively delivered on several tasks we compensation with ESG targets. had set out, including establishing a robust governance structure with clear terms of reference, deeper dive into the Company’s net zero pathway and climate risk profile, prioritising social impact alongside 175 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ESG COMMITTEE REPORT CONTINUED ESG COMMITTEE CHAIR’S LETTER CONTINUED Looking forward GOVERNANCE OF ESG MATTERS AT WORKSPACE Given the fast-evolving pace of the ESG agenda, the Committee recognises that it needs to be future-focused and evolve its priorities to maintain oversight of both existing flagship initiatives and capturing THE BOARD new opportunities. As such, we will be revisiting the materiality assessment for the business each year to identify new frontiers to focus on. Undeniably, the urgency will remain on driving net zero carbon transition NOMINATIONS COMMITTEE AUDIT COMMITTEE REMUNERATION COMMITTEE ESG COMMITTEE at pace and the Committee will continue Chaired by Stephen Hubbard Chaired by Rosie Shapland Chaired by Lesley-Ann Nash Chaired by Duncan Owen to closely monitor the Company’s progress on its net zero pathway. However, our Key responsibilities: Key responsibilities: Key responsibilities: Key responsibilities: responsibility towards our people, our – Ensuring requisite strength – Integrity of ESG reporting – Aligning compensation with – Detailed scrutiny and oversight customers and our communities take equal of Board ESG expertise & targets ESG goals of ESG priority. We believe there is both a moral – Strategic risk management, – Ensuring clarity of ESG metrics – Ensuring adequate resource and a commercial imperative to maximise including reputational risk and KPIs – Driving Board focus on ESG broader stakeholder value, ensuring the business is leading the way on responsible and inclusive practices for its employees, | customers, suppliers, and local communities. | The role of the Board | The ESG Committee also informs the working | of implementation plans and streamlines | | --- | --- | --- | --- | | To this end, the Committee will focus on | The Chief Executive Ocer along with the | of other Board Committees with ESG | communication to the wider Executive | | setting a framework for social impact | Workspace Board have the highest level of | considerations as it pertains to remuneration, | Committee and the Board. | | alongside long-term ambitious goals. | responsibility on all ESG matters. The role | nominations and audit functions. | | | | of the Board is to maintain close oversight | | Ownership and accountability | | | of the ESG programme, ensuring long-term | Management responsibility | ESG considerations are embedded across the | | | sustainable success of the business. | The Executive Committee at Workspace are | business, ensuring there is clear oversight and | | | | responsible for creating the ESG strategy | accountability at each level – at Board level, | | Duncan Owen | An ESG Committee comprising of six | for the business and individual Executive | at Executive level and at operational delivery | | Chair of the ESG Committee | independent Non-Executive Directors, the | Committee members are responsible for | level. Further, the core ESG targets for the | | 6 June 2023 | Chief Executive Ocer and the Chief Financial | leading on the delivery of environmental and | business have been translated into performance | | | Ocer is set up to assist the Board in | social programmes. The Executive Committee | objectives for all employees and are linked to | | | incorporating ESG considerations in business | receives monthly updates on ESG matters, | their remuneration. | | | strategy and decision making. | including progress against the annual | | | | | ESG targets. | Terms of reference | | | The ESG Committee receives a detailed | | The Committee’s role and responsibilities are | | | update on our sustainability and climate- | At operational level, the day-to-day | set out in the terms of reference, which were | | | related goals three times a year, from | management of ESG initiatives is managed by | last updated in September 2022 and which | | | members of the Executive Committee | the members of the Environmental and Social | are available on the Company’s website at | | | and the Head of Sustainability. The update | Sustainability Committee, a cross function | workspace.co.uk/investors/about-us/ | | | from the Committee and any associated | group comprising of heads of departments | governance/board-committees. | | | recommendations are then put forward | who are responsible for individual | | | | to the Board for consideration. | workstreams. Both these Committees include | | several Executive Committee members, which ensures senior level ownership and oversight 176 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ESG COMMITTEE REPORT CONTINUED ESG COMMITTEE CHAIR’S LETTER CONTINUED SPOTLIGHT ON NET ZERO PATHWAY TRACKING PROGRESS ON NET ZERO CARBON PATHWAY During the year, the Committee conducted Despite owning several historic buildings, Workspace has successfully refurbished a significant a deeper dive of the net zero pathway for the proportion of the portfolio to all electric, highly sustainable buildings, resulting in a significant business to ensure it is on track to achieving 27% reduction of scope 1 emissions this year. It is also very encouraging to see the level of full decarbonisation by 2030. knowledge within various teams on the topic and a real dedication towards driving positive impact. It is important that Workspace continues to maintain a lead on its decarbonisation journey and Whilst this will not be an easy undertaking, hence the Committee made a decision to govern progress on net zero pathway, as described below. I am pleased with the progress the business has already made by reducing its like-for-like scope 1 and 2 emissions by 11% compared to last year, particularly the significant reduction 1 achieved in fossil fuel use and achieving REVIEW OF EXISTING NET ZERO PATHWAY market-leading performance on embodied The Committee reviewed the scope of Workspace’s net zero commitment and the carbon associated with its development and proposed net zero pathway. Four key workstreams were identified as key levers for construction activity. achieving net zero carbon by 2030. Within each workstream, annual milestones were set and progress against these tracked at each Committee meeting 2 ESTABLISHING TARGETS AT BOARD LEVEL Given the strategic importance of net zero carbon to the business, the Remuneration Committee decided to link energy and carbon reduction targets to Director’s remuneration 3 NET ZERO DUE DILIGENCE It was agreed to implement detailed climate risk and net zero due diligence to inform all new acquisitions and establish alignment with the existing net zero pathway. The existing ### I am pleased with the progress pathway was subsequently updated to reflect the acquisition of the McKay portfolio ### made on the net zero pathway, ### particularly the significant ### reduction in embodied carbon 4 INVESTMENT DECISIONS ### associated with development ### activities The Board considered attainment of high energy and carbon performance as a key factor when evaluating and approving all capex decisions Duncan Owen Leroy House, Chair of the ESG Committee Islington 177 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ESG COMMITTEE REPORT CONTINUED ### ESG policies, procedures and related assurance Once a year, Workspace holds a joint Audit Environmental Climate change policy Ensures that Workspace conduct their business in a climate responsible way Committee and ESG Committee meeting. The objective of this meeting is to review and Environmental policy Ensures that Workspace conduct their business in an environmentally responsible way to approve a programme of assurance aimed Sustainable development brief Sets minimum requirements for our development and refurbishment projects on energy, at assessing the eectiveness of policies carbon, waste, water, materials, nature and wellbeing and processes relating to ESG matters. The detailed review conducted by the Committee Net zero pathway Ensures that Workspace have quantifiable emission reduction targets and a clear plan gave confidence that Workspace has a robust to achieve net zero carbon in alignment with a 1.5°C future assurance programme, supported by internal Green finance framework A framework used by Workspace to issue a green debt instrument including green bonds, and external checks to ensure compliance private placement, and green loans with policies. This year the Company also launched its Supplier Code of Conduct which Health and safety policy Ensures that Workspace delivers its obligations under health and safety legislation. The policy Social ensures all the suppliers are aligned with aims to reduce accidents and it endeavours to control health and safety risks to employees Workspace’s expectations and ambitions, and others who may be aected by Workspace’s activities especially when it comes to issues such as Supplier Code of Conduct Sets Workspace’s principles for ethical conduct and behaviour in business practices. living wage, modern slavery, anti-bribery, The Supplier Code of Conduct also ensures that Workspace’s suppliers, contractors, health and safety, equal opportunities, and service providers and representatives live up to our values and standards sustainability. Modern slavery statement Sets out a zero-tolerance stance towards slavery and human tracking for Workspace’s operations and amongst its suppliers The table to the right shows the list of policies and procedures that support the Equal opportunities and dignity Sets Workspace’s expectations and standards regarding equal opportunities and dignity implementation of our ESG strategy: at work policy at work. The policy also outlines managerial and sta responsibilities to ensure the business’ principles are observed Governance Risk management framework A five-step approach to ensure Workspace has a robust process to assess and to manage risks Anti-Bribery and Corruption, Sets out standards and expectations for employees to ensure relationships with suppliers are and Gifts and Hospitality policy conducted in an ethical way which is compliant with relevant legislation and provides guidance on how to recognise and deal with corruption issues Whistleblowing policy Ensures that sta are aware of how to raise serious concerns. The policy provides guidance, and it ensures a robust process exists to enable an adequate response to the concerns raised. Ensures that sta will be protected from retribution Inclusion and diversity policy Ensures that Workspace is committed to supporting diversity and to creating an inclusive culture ### Workspace has a robust ### assurance programme, ### supported by internal and ### external checks to ensure ### compliance with policies 178 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### REMUNERATION ## Our approach to Remuneration ## is designed to be simple and ## transparent and to support the ## Company’s strategy, values, and ## our purpose to give businesses ## the freedom to grow. ## Remuneration for 2023 has been ## framed by the Company’s excellent ## operational performance and the ## broader stakeholder experience. ### Lesley-Ann Nash ### Chair of the Remuneration Committee QUICK LINKS Membership and attendance at Remuneration Committee meetings Page 179 Chair’s letter Page 181 Remuneration at a glance Page 185 179 Workspace Group PLC^{}[] Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information # REMUNERATION CONTINUED # MEMBERSHIP AND ATTENDANCE AT REMUNERATION COMMITTEE MEETINGS The Committee consists of Non-Executive Directors and is chaired by Lesley-Ann Nash. 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 115 to 116. | | Member since | Meetings attended | | --- | --- | --- | | Lesley-Ann Nash (Chair) | 2021 | 6/6 | | Stephen Hubbard | 2014 | 6/6 | | Rosie Shapland | 2020 | 6/6 | # **Support for the Remuneration Committee** During the year, we sought external support from PwC and 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 attended each meeting as Secretary to the Committee. No Director was present for any discussions that related directly to their own remuneration. # KEY TOPICS CONSIDERED BY THE COMMITTEE DURING THE YEAR # **Remuneration Policy (the 'Policy') 2023** As part of the triennial review of the Directors' Remuneration Policy, the Committee undertook a review of the remuneration arrangements for the Executive Board Directors. This included a review of our key remuneration principles and a review of the current policy in order to agree initial proposals for the new Policy. Shareholders and proxy agencies were approached and consulted, with feedback reviewed and responded to by the Committee (further details can be found on page 190). The proposals were put forward and the changes were approved by the Committee. # **Wider workforce remuneration** The Committee reviewed wider workforce remuneration arrangements and took these into account when reviewing remuneration for the Executive Directors. One particular area of focus during the year was the Committee's approval of management proposals for staff in response to the increased cost of living. # **Executive and senior management remuneration framework** The Committee reviewed annual bonus outcomes for 2021/22 and reviewed performance outcomes under the 2019 LTIP. The Committee also set performance metrics and targets for the 2022/23 annual bonus, including appropriate sustainability and ESG metrics, and approved the 2022 LTIP awards. This year included a review of performance metrics for 2023/24 incentives against our strategy, including ESG, and a review of annual monitoring of shareholding guidelines. # **Reflecting ESG targets under the annual bonus and the LTIP** The Committee approved appropriate sustainability metrics in both the annual bonus for 2022/23 and for the 2023 LTIP grant. # **Gender Pay Gap** 2022 was the first year in which we met the requirement regarding employee numbers to publish our gender pay gap. The Committee received a presentation from Human Resources which outlined our gender pay gap and this was published in March 2023. # **Committee Governance** The Committee considered key executive remuneration trends and market practice including updates on the current executive pay environment, shareholder guidelines and corporate governance. A review of the results of the internal performance evaluation of the Remuneration Committee was conducted as well as a review of the Committee terms of reference. During the year, the Committee approved the Directors' Remuneration Report; Directors' Remuneration Policy; and Gender Pay Gap Report. 180 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 REMUNERATION CONTINUED ### Aligning our purpose and strategy with our remuneration principles and the experience of all our stakeholders OUR PURPOSE, STRATEGY AND STAKEHOLDERS OUR KEY REMUNERATION PRINCIPLES Alignment with our Workspace has worked hard to articulate and define our strategy and purpose purpose, alongside our established values and corporate strategy. Our remuneration is aligned with the Group’s objectives and long-term strategy through a mix of short and long-term performance metrics. This aligns with the ‘alignment to culture’ principle under Provision 40 of the UK Corporate Governance Code. ## D ## r i ## v ## e i A focus on risk A significant part of an Executive’s reward is linked to ## l n ## b g performance with a clear line of sight between business ## a c ## n u performance and the delivery of Shareholder value. Performance ## i ## a s measures applicable to the 2023 LTIP grant have been ## t n m e n t ## v i r o t o ## s e n reviewed and are based on a combination of financial, share ## e O m ## u h u ## s T r price, ESG and strategic measures aligned with the Company’s ## c e u s strategic plan. This aligns with the ‘risk’ and ‘proportionality’ ## g s t r ## e o - ## n i m principles under the UK Corporate Governance Code. ## i i t l ## e e n | e | u | | | | r | | d | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | s | | | Acting in a | Incorporating ESG into our incentive arrangements strongly | | b | m | | | | | | | | | | | | | | OUR | | | g | sustainable way | aligns to the sustainability pillar of our strategy. Staying ahead | | s | m | | | | | | | | | | | o | | PURPOSE | | | | r | | of the sustainability curve and delivering on our net zero | | y | c | | | | | | o | | | | a | r | | IS TO GIVE | | | | | | carbon commitments is a fundamental part of Workspace’s | | | u | | | | | | w | | | | | | | | | | e | | | long-term strategy. This aligns with the ‘alignment to culture’ | | w | O | BUSINESSES | | | | l | | | | | l | | | | | | | t | | | | | | | | | | p | h | | principle under Provision 40 of the UK Corporate | | a | | THE FREEDOM | | | | | | | | o e Governance Code. ## t O TO GROW. p ## s & u ## l r r Transparency and The Committee seeks to embed simplicity and transparency in ## i u s p ## h u a O simplicity for the the design and delivery of Executive reward. The remuneration p r ## w p t benefit of all our structure is simple to understand for both participants and n l i e ## e r s a stakeholders Shareholders and is aligned to the strategic priorities of the r s ## r s n t o business. This aligns with the ‘clarity’, ‘simplicity’ and ## O v e s d u r i n ‘predictability’ principles under Provision 40 of the UK ## d ## e e Corporate Governance Code. ## c l ## n v i ## e l e Consistency Short and long term incentive plans, operated across the ## l r ## e n i ## c g of application organisation, reward the delivery of the business strategy. ## x ## e l p o ## a n o i t a r e A high percentage of rewards are delivered in the form of equity, meaning that Executives are strongly aligned with Shareholders. Executives are also required to build significant shareholdings in Workspace. This aligns with the ‘risk’ principle under Provision 40 of the UK Corporate Governance Code. Stakeholder experiences in 2023 Pages 181 to 182 and 184 181 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 REMUNERATION CONTINUED Dear shareholder, in trading profit alongside a 34% increase in ### Remuneration Committee net rental income. This has been fuelled by | Chair’s letter | As Chair of the Remuneration Committee | resilient levels of customer demand, as our | | --- | --- | --- | | | and on behalf of the Board, I am pleased | flexible oer is an increasingly attractive | | | to present our 2023 Remuneration Report. | option for successful innovative businesses | in London’s SME community. The increased The report is split into: interest rates, in the case of Workspace, have – Remuneration at a glance: highlighting how therefore been largely oset by our improved executive pay, simply and transparently, ability to drive higher levels of occupation incentivises delivery of our strategy and through operational excellence. promotion of our values – pages 185 to 188 Lesley-Ann Nash – Our new Directors’ Remuneration Policy The integration of McKay has also been a Chair of the Remuneration Committee | that will be put to shareholders at our 2023 | focus for Workspace over the year. We have | | --- | --- | | AGM – pages 189 to 196 | successfully completed the operational | | – Annual Report on Directors’ remuneration | integration of the McKay portfolio. We | | explaining how our policy aligns with our | continue to make progress in our plan to add | | objectives and strategy including the | value to the portfolio by adapting the former | ### Our key priorities as a implementation of pay for 2023/24 – McKay buildings to fit our strategy, rolling out ### Remuneration Committee are pages 197 to 211 our flexible lease oer. We have also now disposed of the majority of the non-core ### to ensure that remuneration We as a Committee are highly conscious McKay assets. Initial delays did however mean ### arrangements attract and of our role in underpinning the Company’s the sales were a significant challenge for the ability to develop long-term value for all management team, against the negative ### retain a high-calibre team of stakeholders and none more so than at a time backdrop of rising interest rates and reduced ### Executive Directors and senior of significant economic uncertainty. The investor confidence. Committee continues to be guided by its key ### management and to oer them | | principles which are detailed on page 180. | Notwithstanding the above, we remain | | --- | --- | --- | | every encouragement to | | mindful that the negative valuation change | | successfully deliver our strategy | Business performance | has resulted in a falling EPRA NAV per share | | | This year has seen market volatility persist | of 6.2% for shareholders. We are aware of | ### and to create shareholder with increases in interest rates against a the challenges our customers and business ### value in a sustainable and backdrop of slow global growth and the partners are facing in the current economic ## 29% ongoing conflict in Ukraine. The increases environment. Therefore, we must remain ### responsible manner INCREASE IN TRADING PROFIT of interest rates has aected most real estate focused on continuously oering good value AFTER INTEREST markets globally resulting in higher yields and and great service. correspondingly lower values. This economic environment is a challenge for the real estate The experience of our stakeholders sector and only agile businesses which We as a Committee actively considered continue to evolve and provide excellent various aspects of the wider context in ## 20% | | operational performance will succeed. | reviewing outcomes for the 2022/23 | | --- | --- | --- | | INCREASE IN DIVIDEND PER SHARE | | remuneration of our Executive Directors, | | | Despite these challenges facing the market, | including the experience of all the Company’s | | | Workspace has made good progress against | stakeholders during the year, such as our | | | its strategic priorities and key performance | employees, customers and suppliers. | indicators. A strong trading performance ## 84% during the year resulted in a 29% increase Gender pay gap report CUSTOMER SATISFACTION Page 124 182 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 REMUNERATION CONTINUED REMUNERATION COMMITTEE CHAIR’S LETTER CONTINUED We remained mindful of the pressures and target outcomes under this measure of the SUMMARY OF EXECUTIVE DIRECTORS’ TOTAL REMUNERATION challenges faced by many of our employees bonus. With ESG at the top of the Company’s The tables below set out a single figure for the total remuneration received by each Executive in the current economic climate. As part of this, agenda, we have made real progress against Board Director for the year ended 31 March 2023. The full table can be found on page 200. the Company determined that our 2023/24 a number of objectives set in this area. sta salaries would increase by 6%, with a We are also pleased to report various GRAHAM CLEMETT 2022/23 | minimum uplift of £3,000 for sta earning | achievements under our strategic financial | Chief Executive Ocer | | | £000 | | --- | --- | --- | --- | --- | --- | | below £50,000, as well as that payment | and operational eciency metrics, including | FIXED PAY | | | | | | | | BASE SALARY | | 519.2 | | being accelerated to April. More information | the delivery of integration cost savings from | | | | | | | | | PENSION | 1 | | 51.9 about other benefits that are oered to the McKay acquisition and successful BENEFITS 2 22.5 | employees can be found on page 198. | integration of McKay’s sta and processes. | | | | | | --- | --- | --- | --- | --- | --- | | | This detail is set out on page 204. | | TOTAL FIXED | | 593.6 | | This year we also published our inaugural | | VARIABLE PAY | ANNUAL BONUS | 3 | | 448.6 | gender pay gap report which can be found | As a result, the formulaic outcome under the | | 4,5 | | | | --- | --- | --- | --- | --- | --- | | | | LTIP | | 391.1 | | | on our website. The Board and the Committee | bonus was 89% of maximum (106.4% of salary). | | | | | | | | OTHER – SAYE, SIP | | | 0 | are fully committed to eectively promoting | | | | TOTAL VARIABLE | 839.7 | | | --- | --- | --- | --- | --- | --- | | diversity throughout the business as an | The Committee assessed the outcome in the | | | | | | integral part of our corporate culture and | context of ensuring it is reflective of | TOTAL 1,433.3 | | | | | purpose. We are fully aware that a diverse | corporate performance as well as the | OF WHICH SHARE PRICE GROWTH | | | £0 | | workforce that brings an appropriate balance | experience and expectation of shareholders. | | | | | | of skills, experience and knowledge, as well as | The Committee has decided to use its | | | | | DAVE BENSON 2022/23 | fresh perspectives, enriches our business and | discretion to apply a reduction to the overall | | | | | --- | --- | --- | --- | --- | | | | Chief Financial Ocer | | £000 | | contributes to our long-term success. | bonus outturn for the CEO of 20% of salary. | | | | | | | FIXED PAY | BASE SALARY | 357.3 | This results in a bonus outcome of 72% of | | | PENSION | 1 | | | --- | --- | --- | --- | --- | | A summary of how the remuneration | maximum (86.4% of salary) for the CEO. | | | 35.2 | | outcomes align with the experience of our | | BENEFITS | 2 | | 0 | other stakeholders is set on page 184. | This equates to £448,589 for Graham Clemett | | TOTAL FIXED | | | 392.5 | | --- | --- | --- | --- | --- | --- | --- | | | and £380,167 for Dave Benson. Of the bonus | | | | 3 | | | | | VARIABLE PAY | ANNUAL BONUS | | | 380.2 | | Remuneration outcomes in 2022/23 | award, 33% will be deferred in shares for three | | | | | | | | | | LTIP | 4,5 | | | 269.1 After very careful consideration, and taking years under the Deferred Bonus Plan. OTHER – SAYE, SIP 0 into account all relevant factors as described | and detailed throughout this Annual Report, | Vesting of 2020 Long Term Incentive Plan | | TOTAL VARIABLE | 649.3 | | --- | --- | --- | --- | --- | | the Committee took the following decisions | The LTIP awards granted to Graham Clemett | TOTAL 1,041.8 | | | | in respect of remuneration for the Executive | and Dave Benson in 2020 were subject to | OF WHICH SHARE PRICE GROWTH | | | £0 Directors: performance conditions measured over the 1. Pension: During 2022/23 each of Messrs Clemett and Benson received a cash allowance in lieu of pension contribution. three financial years from 1 April 2020 to 2. Benefits: Taxable value of benefits received in the year by Executive Directors includes a car allowance, private health Base salary 31 March 2023. The vesting of 50% of the insurance and death in service cover. Executive Directors will receive a base salary awards was subject to Total Shareholder Return 3. Annual bonus: This is the total bonus earned in respect of performance during the relevant year. For 2022/23, the Committee set a minimum deferral requirement of 33% of the bonus earned. For 2022/23, this deferral was equivalent increase of 3% which is below the level awarded (TSR) performance relative to FTSE 350 real to £148,034 for Mr Clemett and £125,455 for Mr Benson. to the wider workforce (as set out above), estate companies (excluding agencies), with 4. None of the LTIP single figure is attributable to share price growth. and this will take eect from 1 April 2023. the remaining 50% subject to Total Property 5. The 2022/23 figure includes the estimated value of 50% of the 2020 LTIP shares that vested based on performance to 31 March 2023. The share price used is the three-month average to 31 March 2023 of £4.88. This will be updated in next Return (TPR) versus the IPD Benchmark. year’s report to reflect the share price on the date of vesting. As allowable under the relevant plan rules and approved | Annual bonus 2022/23 | | Policy, the Committee determined that dividend equivalents are payable under the 2020 LTIP award – this figure therefore | | --- | --- | --- | | Despite the challenges facing the market, | Having tested the performance conditions, | includes the value of dividend equivalents accrued on the shares that are vesting over the relevant performance period. | | it has been a productive year across the | TPR performance was above upper quartile, | | | Company. We delivered a strong trading | meaning this element vested in full. Therefore, | | | performance in the year leading to above | the overall formulaic outcome is 50%. | | 183 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 REMUNERATION CONTINUED REMUNERATION COMMITTEE CHAIR’S LETTER CONTINUED | This equates to a total of £391,084 for | were reflected in the new Policy and I would | The proposed LTIP measures and weightings | Changes to below Board remuneration | | --- | --- | --- | --- | | Graham Clemett and £269,114 for Dave | like to thank them for their highly valued time. | for the 2023 LTIP grant are: | Although the remuneration of below Board | | Benson (these figures include dividend | I outline a summary of the key changes here, | – TSR relative to FTSE 350 Real Estate | employees does not fall in the remit of the | | equivalents). The net vested shares will | and the full Policy is on pages 189 to 196. | companies (excluding agencies) (25%) | Policy, the Committee believes it is important | | be subject to a two-year holding period. | | – Earnings per Share (‘EPS’) growth (25%) | to communicate the proposed changes as | | | Maximum annual bonus opportunity | – Total Accounting Return (‘TAR’) (25%) | part of our open dialogue with shareholders. | | The Committee considered that the LTIP | for the CEO | – Environmental, Social and Governance | It is a priority of the Committee to ensure | | performance outturns were fair and reasonable | The outcome of our Policy review this year | (‘ESG’) metrics (25%) | that employees below Board are rewarded | | relative to the financial performance of the | determined that, whilst the measures and | | appropriately for their continued | | business and also stakeholder experience. | structure of our annual bonus Policy remain | The combination of these measures better | contributions to the business, incentivised to | | | fit for purpose, the current opportunity for | reflects the alignment with strategy and purpose. | remain with Workspace, and are fully aligned | | As disclosed in our 2020 Directors’ | the CEO is materially behind that of companies | | to the experience of our shareholders. We are | | Remuneration Report, the Committee was | within the FTSE 250 and the FTSE 350 real | EPS growth is an important headline measure | therefore proposing to grant restricted share | | mindful of the context prevailing on grant | estate sector. | of Workspace’s financial performance, with | awards (‘RSAs’) below Board in place of the | | of the 2020 LTIP awards. We concluded that | | outcomes better aligned to our success in | performance based LTIP structure. Executive | | the awards would be granted on the normal | Whilst the Committee does not solely base | active portfolio management and investment. | Directors will not receive RSAs. | | timetable but committed to remaining | the remuneration of Workspace on the | Including TAR as a measure in our LTIP | | | mindful of guarding against windfall gains | comparison with its peers, it is essential that | ensures we reward the creation of value for | Engagement with our shareholders | | as a result of share price movements over the | the CEO package remains competitive in the | shareholders in the form of dividends paid and | We are grateful for the feedback and support | | period. Taking into consideration a number | context of a complex and growing business | growth in Net Asset Value. Incorporating ESG | we receive from shareholders, and believe that | | of factors, including the current share price | such as Workspace. As such, we are proposing | strongly aligns to the sustainability pillar of | regular engagement with our stakeholders is | | compared to that at the time of the grant and | to increase the maximum bonus opportunity | our strategy, which includes focus on creating | key to our commitment to achieving the | | share price movements over the period, the | for the CEO from 120% to 150% of salary. | sustainable environments and achieving net | highest standards of corporate governance and | | Committee has concluded that participants | | zero by 2030. Full details on the targets for | integrity. As I mentioned above, in line with this, | | will not benefit from a windfall gain on the | This change enhances the portion of the CEO’s | the 2023 LTIP grant can be found on page 207. | the Committee consulted with our largest | | 2020 LTIP awards and therefore has | total remuneration that is subject to stretching | | investors ahead of the renewal of our Policy | | determined that no adjustment is required. | performance targets, ensuring Workspace | The Committee determined that 2023 LTIP | at our 2023 AGM. I am pleased to say that the | | | rewards for strong business performance. | awards would be granted at the normal level | shareholders that engaged with us | | Proposed changes to the Directors’ | | of 200% of salary for the CEO and CFO. | appreciated our approach. | | Remuneration Policy | The CFO’s maximum bonus opportunity will | When making this decision, the Committee | | | Our current Directors’ Remuneration Policy | remain at 120% of salary. | was mindful of our share price performance | I look forward to your continued engagement | | was approved by shareholders at our 2020 | | over the year, particularly since awards were | and I hope you will join the Board in | | AGM with a vote in favour of 99.54%. In line | The current annual bonus deferral of 33% | last granted, and determined that at the end | supporting our Directors’ Remuneration | | with the regulatory timeline for Policy reviews, | of the award into shares for three years will | of the performance period, careful | Report and Directors’ Remuneration Policy | | we will be seeking shareholder approval for | be retained, which alongside the CEO’s | consideration will be given as to whether any | at the upcoming 2023 AGM. | | a new Policy at our AGM in July this year. | shareholding requirement of 200% of salary, | windfall gains have arisen from these awards. | | | | ensures full alignment with the experience | Further to this, as with previous awards, | | | Having carried out a detailed review, the | of shareholders. | a performance underpin will apply to the | | | Remuneration Committee believes that whilst | | awards which allows the Committee to reduce | | | our current Policy has worked well for us and | LTIP performance measures | vesting should the Committee believe that the | Lesley-Ann Nash | | our stakeholders and remains strategically | For the past five years, awards granted under | outturn is inconsistent with the overall | Chair of the Remuneration Committee | | aligned, the review provides us an | the LTIP have been subject to TSR and TPR | performance of the business. | 6 June 2023 | | opportunity to further enhance this alignment | performance measures with equal weighting. | | | | with limited change in a couple of areas. | Following careful consideration, we are | No other changes are proposed to our Policy | | | | proposing to remove TPR from the LTIP and | which is set out on pages 189 to 196. A full | | | As part of the Policy review, the Committee | introduce three new measures to better align | summary of the implementation of Policy, | | | completed a comprehensive programme of | our LTIP with our strategic priorities. No changes | including annual bonus measures for the | | | shareholder engagement to ensure their views | are proposed to the existing TSR measure. | 2023/24 financial year, is set out on page 206. | | 184 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 REMUNERATION CONTINUED ### Consideration of the experience of our stakeholders Our investors Our communities OUR PURPOSE, STRATEGY AND STAKEHOLDERS We believe in an open dialogue with investors. We create a flatter, fairer London: by As part of our Directors’ Remuneration Policy providing high-quality, aordable space, we review, the Committee consulted with major bring employment into the local areas and shareholders and investor bodies, receiving help create community hubs. We strongly helpful and positive feedback. believe in giving something back to the communities where we have a presence, We ensure that shareholders’ experience which is why we oer employment support D r i is reflected in remuneration outcomes as to disadvantaged young people. l e v b i n a g demonstrated by our exercise of discretion to i n c a u the overall bonus outturn for the CEO this year. As part of our annual bonus sustainability t s s t i r o n m e n t metrics, our InspiresMe programme was u n v o s e O h e u m T r During the year, the Committee reviewed the launched to local schools, colleges and youth g c u e n s s t LTIP performance measures to ensure these organisations where students benefitted from i e o r t i m - e i l n e e continue to align to our strategic priorities. career sessions and work experience. b u r s d s m Subsequently, the Committee approved the OUR | y | m | | | | g | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | o | PURPOSE | | | | introduction of an EPS growth measure for the | The environment | | a | c | | | | r | | | | | r | IS TO GIVE | | | o | 2023 LTIP grant. EPS is an important headline | Sustainability is at the heart of our strategy | | w | u | | | | w | | | | l | | | | e | | | | | | O | BUSINESSES | | l | | measure of Workspace’s financial | and this is reflected in incentives for our | | a | | | | p | t | | | | t | | THE FREEDOM | | o | h | | | | | | | | e | | performance and profitability. The existing | Executive Directors. Whilst sustainability | | s | O | TO GROW. | | | | | | | l | | | p | | | | | | i | & u | | | | | relative TSR condition remains a performance | objectives are part of our annual bonus, | | | r | | r | | | | | | h | s | | u | | | | | p | | | u | a | | | | | | O | | measure for the 2023 LTIP grant and a key | during the year the Committee discussed and | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | w | | p | r | | | | | | | | | | | | | | p t n | | | | | | | | | | | | | | l i | e | | | | | | | measure in ensuring outcomes from the LTIP | approved the inclusion of ESG metrics within | | | | | e | r s | | | | | | | | | | | | | r | s | | | | s | | a | | | | | | | | | | | | o r | | n | align with the experience of our shareholders. | the LTIP for the 2023 grant. The measures | | | | | | | O | | e s t | | | | | | | | | | | | | u r i n | v | | | d | | | | | e | | | | | | | | | | | include key objectives which directly support | d | c | | | | | | | | | | | e | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | n | | | | | | | | | | | l | Our partners and suppliers | our strategy in focusing on creating | | | e l | | | | | | | | | v i | | | | | | l | | | | | | | | | e | | | | | | | e | | | | | | | r | | | We work with a broad range of long-term | sustainable environments and achieving | | | | c | x | | | | | n | i | | | | | | | | | e l | | | | | g | | | | | | | | | | | a | n | | p o | | | | | partners and these relationships are governed | net zero by 2030. | | | | | | | o i | t a r | e | | | | | | | by stringent ethical and sustainability | | | standards. As an accredited Living Wage | Our customers | | --- | --- | --- | --- | | | | employer ourselves, we are committed to | Our customers are at the heart of our business | | | | paying the Real London Living Wage to 100% | and this is reflected in our strategy, with one | | | | of our suppliers and partners working on | of our three strategic pillars relating to | | Our people | Employee engagement and wellbeing are | Workspace premises. | customer-led growth. Customer satisfaction | | Mindful of the challenging economic | reflected in our sustainability objectives as | | is a measure within our annual bonus for our | | environment faced by our employees, the | part of our Executive Directors’ bonuses. | | Executive Directors and the Committee was | | Committee oversaw the decision to award | The Committee set objectives on employee | | satisfied that the bonus outcomes for the year | | salary increases of 6% with a minimum uplift | wellbeing initiatives, achieved through the | | accurately reflected the experience of our | | of £3,000 to those earning below £50,000. | roll-out of a series of successful events. | | customers at Workspace. | The introduction of the restricted share award for senior employees below board level ensures these individuals can share directly in the success of Workspace and are fully Stakeholder experiences in 2023 aligned with shareholders’ experience. Pages 181 and 182 185 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 REMUNERATION CONTINUED WORKSPACE’S APPROACH TO REMUNERATION AND HOW WE INCENTIVISE AT ALL LEVELS WITHIN THE COMPANY ### Remuneration at a glance All sta in the Company are eligible to ELEMENTS OF PAY AT WORKSPACE participate in the Company’s annual bonus plan, all-employee share schemes, pension scheme, life assurance arrangements and BASE SALARY PENSION BENEFITS ANNUAL BONUS SHARE OWNERSHIP medical insurance benefits. Salaries are set to reflect market value While the Executive Directors participate in of the role and aid the Company’s LTIP, the rest of the Executive recruitment and Employees are Committee and some senior employees retention. eligible for a 2:1 receive the Company’s new Restricted Share match on employee Awards (‘RSA’). Executive Directors and pension contributions Employees receive a Executive Committee members are also of 3% or 5% of salary. combination of required to adhere to the Company’s benefits relevant for shareholding guidelines. their role including Opportunities and life assurance performance When making remuneration decisions for the arrangements and conditions are Executive Directors, the Committee considers medical insurance tailored to reflect an Share ownership pay and employment conditions elsewhere in benefits. individual’s role and enables all employees the Group. The Committee receives regular responsibilities. to share in the updates from the Executive Directors on long-term success employee feedback. The Committee also of the Group and monitors bonus payout and share award data. ELIGIBILITY WITHIN aligns them with WORKSPACE shareholder interests. In respect of share ownership we operate the following: Executive Directors LTIP SAYE and SIP LTIP: ## Reinforces a strong performance culture at 2 more senior levels and delivery of long-term sector outperformance. Executive Committee Restricted share awards Restricted Share Awards: SAYE and SIP ## Supports retention and motivation by 6 providing greater line of sight over outcomes and fully aligns participants to shareholders’ Other senior employees Restricted share experience. awards SAYE and SIP ## SAYE and SIP: 65 Provides all employees with the opportunity to become shareholders of the Company. Rest of employees SAYE and SIP ## 220 186 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 REMUNERATION CONTINUED REMUNERATION AT A GLANCE CONTINUED ### How our variable pay aligns to our strategic pillars – In executing our strategy we aim to create value and positive outcomes for our shareholders and all other stakeholders. – We frequently consider the performance measures we use for our incentives to check that they support the delivery of our strategy. 2023/24 ANNUAL BONUS AND LINK TO STRATEGY ANNUAL BONUS Measure: Measure: Measure: Measure: The component measures provide Financial objectives (Trading profit Sustainability Operational Customer a good balance of reward against after interest (50%), Strategic eciency satisfaction the three pillars of our strategy which financial (10%)) are the foundations of Workspace’s future growth. Measures shown as % of award Total: 10 0% Weighting: Weighting: ## 60% OUR THREE STRATEGIC PILLARS: Weighting: Weighting: ## 20% ## 10% 10% 2023 LTIP AND LINK TO STRATEGY LTIP We have amended the measures for 2023/24, as we believe there is an opportunity to better align our LTIP The balance of the measures is well with our strategy. aligned to our strategy of driving income Measure: Measure: Measure: Measure: growth and enhancing shareholder Total Shareholder Return Total Accounting Return Earnings Per Share Environmental, Social value over the longer term whilst (TSR) relative to FTSE 350 (TAR) (EPS) Growth and Governance always acting in a sustainable way. Driving customer-led growth Real Estate companies (ESG) metrics Delivering operational excellence (excluding agencies) Measures shown as % of award Being sustainable Total: 10 0% THE 2022 LTIP MEASURES WERE AS FOLLOWS Link to Measure and % weighting strategy Weighting: Weighting: Weighting: Weighting: 50%: Total Shareholder Return ## (TSR) relative to FTSE 350 25% 25% 25% 25% Real Estate companies (excluding agencies) 50%: Total Property Return (TPR) versus IPD benchmark 187 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 REMUNERATION CONTINUED REMUNERATION AT A GLANCE CONTINUED ANNUAL BONUS ### Summary of Executive OUTCOMES UNDER THE 2022/23 ANNUAL BONUS ### Directors’ Total Remuneration Threshold Maximum Outcome CEO actual Measure: (0% payable) (100% payable) (% of salary) £000 ### Graham Clemett TRADING PROFIT AFTER INTEREST ### 264.8 | Chief Executive Ocer | | | £57. 3m £62.3m | | | 51.0% | 60% | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | Actual: £61.4m | 1 | | | | FIXED COMPONENTS | £000 | | | | | | | | OF EXECUTIVE PAY | | STRATEGIC FINANCIAL OBJECTIVES | | | | | | ### 46.7 0% 100% 9.0% 12% BASE SALARY Actual: 75% ### 519.2 SUSTAINABILITY OBJECTIVES ### 124.6 0% 100% 24% 24% PENSION ### 51.9 Actual: 100% OPERATIONAL EFFICIENCY ### 57.6 BENEFITS 0% 100% 11.1% 12% ### 22.5 Actual: 92.5% | TOTAL FIXED | | | CUSTOMER SATISFACTION | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 593.6 | | | | | | | | 58.6 | | | | | | 72% 80% | | | 11.3% | 12% | | | | | | | | Actual: 84% | 2 | | | | | VARIABLE COMPONENTS | | £000 | FORMULAIC OUTTURN | | | | | | | ### 106.4% 120% 552.4 OF EXECUTIVE PAY DISCRETIONARY REDUCTION APPLIED TO OUTTURN OF 20% OF SALARY ### 86.4% 448.6 ANNUAL BONUS 1. This excludes the impact of the McKay acquisition. ### 448.6 2. With adjustment, see page 201. LTIP LTIP ### 391.1 OUTCOMES UNDER THE 2020 LTIP PERFORMANCE MEASURES OVER THE PERIOD 1 APRIL 2020 TO 31 MARCH 2023 OTHER – SAYE, SIP ### 0 Threshold Maximum Formulaic outcome CEO actual Measure: (20% payable) (100% payable) (% of award) £000 TOTAL VARIABLE ### 839.7 TOTAL SHAREHOLDER RETURN (TSR) ### £340.7 MEDIAN UPPER QUARTILE 0% 50% OF WHICH SHARE PRICE: RELATIVE TO FTSE 350 REAL ESTATE £NIL COMPANIES (EXCLUDING AGENCIES) SINGLE FIGURE FOR Actual: 5th percentile ### 1,433.3 2022/23 TOTAL PROPERTY RETURN (TPR) ### £50.4 MEDIAN UPPER QUARTILE 50% 50% DIVIDEND EQUIVALENT: VERSUS IPD Actual: 77th percentile TOTAL ### 50% 100% £391.1 188 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 REMUNERATION CONTINUED REMUNERATION AT A GLANCE CONTINUED ANNUAL BONUS ### Summary of Executive OUTCOMES UNDER THE 2022/23 ANNUAL BONUS ### Directors’ Total Remuneration Threshold Maximum Formulaic outcome CFO actual Measure: (0% payable) (100% payable) (% of salary) £000 ### Dave Benson TRADING PROFIT AFTER INTEREST ### 182.2 | Chief Financial Ocer | | | £57. 3m £62.3m | | | 51.0% | 60% | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | Actual: £61.4m | 1 | | | | FIXED COMPONENTS | £000 | | | | | | | | OF EXECUTIVE PAY | | STRATEGIC FINANCIAL OBJECTIVES | | | | | | ### 32.2 0% 100% 9.0% 12% BASE SALARY Actual: 75% ### 357.3 SUSTAINABILITY OBJECTIVES ### 85.8 0% 100% 24% 24% PENSION ### 35.2 Actual: 100% OPERATIONAL EFFICIENCY ### 39.7 BENEFITS 0% 100% 11.1% 12% ### 0 Actual: 92.5% | TOTAL FIXED | | | CUSTOMER SATISFACTION | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 392.5 | | | | | | | | 40.3 | | | | | | 72% 80% | | | 11.3% | 12% | | | | | | | | Actual: 84% | 2 | | | | | VARIABLE COMPONENTS | | £000 | BONUS OUTTURN | | | | | | | ### 106.4% 120% 380.2 OF EXECUTIVE PAY 1. This excludes the impact of the McKay acquisition. 2. With adjustment, see page 201. ANNUAL BONUS ### 380.2 LTIP LTIP ### 269.1 OUTCOMES UNDER THE 2020 LTIP PERFORMANCE MEASURES OVER THE PERIOD 1 APRIL 2020 TO 31 MARCH 2023 OTHER – SAYE, SIP ### 0 Threshold Maximum Formulaic outcome CFO actual Measure: (20% payable) (100% payable) (% of award) £000 TOTAL VARIABLE ### 649.3 TOTAL SHAREHOLDER RETURN (TSR) ### 234.5 MEDIAN UPPER QUARTILE 0% 50% OF WHICH SHARE PRICE: RELATIVE TO FTSE 350 REAL ESTATE £NIL COMPANIES (EXCLUDING AGENCIES) SINGLE FIGURE FOR Actual: 5th percentile ### 1,041.8 2022/23 TOTAL PROPERTY RETURN (TPR) ### 34.7 MEDIAN UPPER QUARTILE 50% 50% DIVIDEND EQUIVALENT: VERSUS IPD Actual: 77th percentile TOTAL ### 50% 100% 269.1 189 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 REMUNERATION CONTINUED ### This section sets out the ### Directors’ Remuneration Policy ### and Annual Report on ### Remuneration. A binding ### shareholder resolution to approve ### the Directors’ Remuneration ### Policy (pages 190 to 196) will be ### put forward at the 2023 Annual ### General Meeting (‘AGM’) of the ### Company on 6 July 2023. 190 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 REMUNERATION CONTINUED REMUNERATION POLICY TABLE Our new Remuneration Policy The table below describes the Policy in relation to the components of remuneration for Executive Directors. This section sets out the Directors’ FIXED COMPONENTS OF EXECUTIVE PAY Remuneration Policy. A binding shareholder resolution to approve this section will be PURPOSE AND LINK TO STRATEGY OPERATION MAXIMUM OPPORTUNITY PERFORMANCE METRICS CHANGES FROM PREVIOUS POLICY proposed at the 2023 Annual General Meeting | (‘AGM’) of the Company on 6 July 2023. The | BASE SALARY | | | | | | Salaries are normally | Increases are applied in | Both Company and | None. | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Policy will be eective from the 2023 AGM | To reflect market | | | | | | reviewed annually. | line with the outcome of | individual performance | | | subject to shareholder approval and will be | value of the role and | 2023/24 | 2024/25 | 2025/26 | 2026/27 | 2027/28 | | the review. There is no | are considered when | | Salary levels take account of: available to view at workspace.co.uk/investors an individual’s prescribed maximum. setting Executive – Role, performance and in the corporate governance section. experience, Director base salaries. experience. Increases for Executive performance and – Business performance Board Directors will CONSIDERATION OF SHAREHOLDER VIEWS contribution. and the external economic typically be in line with The Committee values ongoing dialogue with environment. those of the wider shareholders and welcomes feedback on – Salary levels for similar workforce. Directors’ remuneration. As part of the Policy roles at relevant review, the Committee directly consulted with comparators. major shareholders. A letter setting out our – Salary increases across proposals was shared with investors reflecting the Group. over two-thirds of our issued share capital, as well as with investor bodies, including ISS, Glass Lewis and the Investment Association. | | PENSION | | | | | | Directors participate in | Up to 10% of salary. | None. None. | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | To provide market | | | | | | adefined contribution | | | | Through this process, the Committee | | | | | | | | For individuals with less | | | | competitive | 2023/24 | 2024/25 | 2025/26 | 2026/27 | 2027/28 | pension scheme or may | | | | responded to questions raised and held | | | | | | | | than a year’s service with | | | | pensions. | | | | | | receive a cash allowance in | | | | meetings where requested to further clarify | | | | | | | | Workspace, this will be | | lieu of pension contribution. the proposals. 6% of salary. We were grateful for the feedback received | and pleased that this was positive overall. | BENEFITS | | | | | | Benefits typically include | Benefits may vary by role | None. None. | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | To provide market | | | | | | carallowance, private health | and individual | | | | competitive benefits. | 2023/24 | 2024/25 | 2025/26 | 2026/27 | 2027/28 | insurance, and death in service | circumstance, and are | | | | | | | | | | cover. Where appropriate, | reviewed periodically. | | other benefits may be oered There is no overall including, but not limited to, maximum. allowances for relocation. In addition, Directors are Include car allowance, eligible to participate in private health insurance all-employee share plans, and other benefits. currently the SAYE and Share Incentive Plan. 191 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 REMUNERATION CONTINUED OUR NEW REMUNERATION POLICY CONTINUED VARIABLE COMPONENTS OF EXECUTIVE PAY PURPOSE AND LINK TO STRATEGY OPERATION MAXIMUM OPPORTUNITY PERFORMANCE METRICS CHANGES FROM PREVIOUS POLICY | ANNUAL BONUS | | | | | A portion of the annual bonus is | The maximum bonus | Performance is measured relative to financial, operational, | The maximum bonus | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | To reinforce and reward | | | | | deferred into shares for a period | potential for Executive | ESG, strategicandindividual objectives in the year aligned | potential for the CEO | | delivery of annual | 2023/24 | 2024/25 | 2025/26 | 2026/27 | 2027/28 of three years. The deferral is 33% | Board Directors is | with theCompany’s strategic plan. | is now 150% of salary, | | strategic business | | | | | of bonus earned. | asfollows: | | the maximum bonus | Performance measures and weightings are reviewed each | priorities, based on | | CEO: 150% of salary | | potential for the CFO | | --- | --- | --- | --- | --- | | | Dividend equivalents may be | | year to ensure they remain appropriate and reinforce the | | | performance measures | | p.a. | | remains at 120% | | | accrued on deferred shares. | | business strategy. Atleast 60% of the total bonus will be | | | relating to both Group and | | CFO: 120% of salary | | ofsalary. | based on financial measures. individual performance. The Committee may apply malus p.a. and clawback in circumstances of Bonus awards are at the Committee’s discretion and the Bonus deferral provides gross misconduct, material Committee will consider the Company’s performance in the alignment with misstatement of the Group’s round. The Committee may override the formulaic bonus shareholder interests. results, an error in calculation, outcome within the limits of the plan where it believes the serious reputational damage, and outcome is not reflective of performance, to ensure fairness corporate failure up to the end of to both shareholders and participants. the deferral period. The bonus pays out on a straight-line basis from threshold to 100% at maximum performance. | LONG TERM | | | | | The Committee may grant | Normal maximum | Performance share plan awards will be based on a | None. | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | INCENTIVE PLAN (LTIP) | | | | | annualawards of Performance | award of up to 200% | combination offinancial, share price, ESG and strategic | | | To reward and align to the | 2023/24 | 2024/25 | 2025/26 | 2026/27 | 2027/28 Shares which vest after three | of salary p.a. | measures aligned with the Company’sstrategic plan. | | | delivery of sustained | | | | | years, subject to performance | | | | For 2023 awards the performance measures will be: long-term performance conditions. An award of 300% – Total Shareholder Return (TSR) relative to FTSE 350 | and to align the interests | | of salary p.a. may be | | | --- | --- | --- | --- | | | Vested shares are subject to a | | Real Estate companies (excluding agencies) (25%) | | of participants with those | | made in exceptional | | | | further two-year holding period. | | – Earnings Per Share (EPS) Growth (25%) | | of shareholders | | circumstances. | | – Total Accounting Return (TAR) (25%) The Committee has discretion to – Environmental, Social and Governance (ESG) (25%) apply malus and clawback to awards (circumstances as listed in A performance underpin will apply which allows the the Annual Bonus row above) up Committee to reduce vesting if performance is inconsistent to the end of the holding period. with the overall performance of the business. Dividend equivalents may be For threshold performance, vesting is typically 20% accrued on shares in respect of maximum. ofthe performance and holdingperiod. The Committee may, in the context of the underlying business strategy, use dierent measures and/or vary the weightings of the measures. The Committee would consult with major shareholders prior to making any significant changes. 192 Workspace Group PLC Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information # REMUNERATION CONTINUED OUR NEW REMUNERATION POLICY CONTINUED # Notes to the Remuneration Policy table Share awards will be operated in accordance with the rules of the relevant plan. In accordance with those rules, the Committee has discretion in the following areas: - In the event of a variation of share capital or a demerger, delisting, special dividend, rights issue or other similar event which may, in the Committee's opinion, affect the current or future value of shares, the number of shares subject to an award and/or any performance condition attached to awards, may be adjusted - The Committee may determine that awards may be settled in cash - The Committee may determine the basis on which dividends will be calculated which may include notional reinvestment. The Committee may increase the time horizons for deferral or holding periods # REMUNERATION POLICY TABLE CONTINUED | PURPOSE AND LINK TO STRATEGY | OPERATION | CHANGES FROM PREVIOUS POLICY | | --- | --- | --- | | **SHAREHOLDING REQUIREMENT** | Shareholding guideline for Executive Board Directors of 200% of salary. Post-cessation shareholding requirement of 200% of salary for two years post-departure. In the event a leaver has not met the 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. | None. | # NON-EXECUTIVE DIRECTORS' REMUNERATION | PURPOSE AND LINK TO STRATEGY | OPERATION | CHANGES FROM PREVIOUS POLICY | | --- | --- | --- | | **FEES** To reflect the time commitment in performing the duties and responsibilities of the role. | The Chair receives an annual fee. Non-Executive Directors receive an annual base fee. Additional fees are paid to Non-Executive Directors for additional responsibilities such as chairing a Board Committee. Fees are reviewed from time to time, taking into account time commitment, responsibilities and fees paid by companies of a similar size and complexity. | Expenses incurred in the performance of non-executive duties for the Company may be reimbursed or paid for directly by the Company, including any tax due on the expenses. Non-Executive Directors do not normally receive any benefits, however these may be provided in the future if in the view of the Board this was considered appropriate. Total fees paid to Non-Executive Directors will remain within the limit stated in the Articles of Association. | 193 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 REMUNERATION CONTINUED OUR NEW REMUNERATION POLICY CONTINUED PERFORMANCE MEASURES AND TARGETS RECRUITMENT AND PROMOTION POLICY The Committee will appoint new Executive Board Directors with a package that is in line with As part of the review of the Policy, the The Committee will set Group financial the Remuneration Policy in place and agreed by shareholders at the time. Committee gave careful consideration to targets for the annual bonus with reference to performance measures and targets for the prior year and forward-looking business incentives to ensure that they are aligned to forecasts, ensuring the levels of performance Component Approach the Company’s strategy and to performance required are appropriately challenging. for our shareholders. To that end, no changes BASE SALARY The base salaries of new appointees will be determined by reference to the annual bonus measures are proposed The measurement of performance against to the individual’s role and responsibilities, experience and skills, at this stage. performance targets is at the Committee’s relevant market data, internal relativities and their current basic salary. discretion, which may include appropriate Base salary may be higher or lower than the previous incumbent. The annual bonus measures are intended adjustments to financial or non-financial Salaries may be set at an initially lower level with the intention of to provide a good balance of rewarding elements and/or consideration of overall increasing salary at a higher than usual rate as the executive gains operational excellence, customer performance in the round. experience in the role. relationships and building deep market knowledge which are the foundations of the Performance conditions and targets may Company’s future growth, whilst ensuring be varied if an event occurs or circumstances PENSION New appointees will be eligible to participate in the Group’s defined a greater focus on sustainability. arise which cause the Committee to contribution pension plan or receive a cash alternative, in line with determine that they have ceased to be the Policy. | To better align with Workspace’s strategy, | appropriate. If they are varied, they must, | | --- | --- | | the performance measures for the 2023 LTIP | in the opinion of the Committee, be fair, | | award will be: | reasonable and materially no less dicult | BENEFITS New appointees will be eligible to receive benefits in line with the – Total Shareholder Return (TSR) relative than the original condition when set. Policy, including relocation benefits if appropriate (relocation to FTSE 350 Real Estate companies benefits are subject to a maximum time limit of two years). excluding agencies (25%) – Earnings Per Share (EPS) Growth (25%) – Total Accounting Return (TAR) (25%) ANNUAL BONUS The structure described in the Policy table will normally apply to – Environmental, Social and Governance new appointees with the relevant maximum being pro-rated to (ESG) (25%) reflect the proportion of the year served. The Committee may, in the context of the The Committee retains the flexibility to determine that for the first underlying business strategy, use dierent year of appointment any annual incentive award will be subject to performance measures and/or vary the such terms as it may determine. weightings of the measures. Major shareholders would be consulted prior to any significant changes. LTIP New appointees will be eligible for awards under the LTIP which will normally be on the same terms as other executives, as described in the Policy table. The maximum aggregate value of incentives (excluding buyouts) on appointment will be in line with the aggregate maximums in the Policy table. 194 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 REMUNERATION CONTINUED OUR NEW REMUNERATION POLICY CONTINUED RECRUITMENT AND PROMOTION POLICY TERMINATION POLICY CONTINUED To facilitate recruitment the Committee may Payments of basic salary, benefits and Component Approach need to ‘buy out’ remuneration forfeited on pension made up to the termination date joining the Company. This will be considered are in line with contractual notice periods. ANNUAL BONUS There is no automatic entitlement to an annual bonus. The Committee on a case-by-case basis and may comprise Payments in lieu of notice are limited to the retains discretion to award bonuses for leavers taking account of the cash or shares. In general: Executive Board Director’s basic salary for circumstances of departure. Leavers during the plan year normally – If such remuneration was in the form of the unexpired portion of the notice period. lose any entitlement to bonus unless the individual is considered a shares, compensation would be in the A payment may be made in lieu of unused 1 ‘good leaver’ . Good leavers are eligible for an award to the extent that Company’s shares holiday entitlement. The Company may make performance conditions have been satisfied and pro-rated for the – If remuneration was subject to achievement phased payments which are paid in monthly proportion of the financial year served, with Committee discretion of performance conditions, compensation instalments and subject to mitigation. to treat otherwise. would normally be subject to performance – The timing of any compensation will, where The Committee reserves the right to make practicable, match the vesting schedule of any other payments in connection with a DEFERRED BONUS Deferred bonus shares normally lapse unless the individual is the remuneration forfeited Director’s cessation of oce or employment 1 SHARES considered a ‘good leaver’ , in which case awards normally continue where the payments are made in good faith and are released at the usual time, although the Committee has the The over-riding principle would be that the in discharge of an existing legal obligation discretion to allow earlier release. value of any replacement buy out awards (or by way of damages for breach of such should be no more than the commercial value On death, awards typically vest immediately. an obligation) or by way of a compromise or of awards which have been forfeited. For any settlement of any claim arising in connection buyout award, the leaver provisions may be with the cessation of a Director’s oce or determined at the time of the award. LTIP Under the LTIP, unvested shares normally lapse unless the individual is employment. Any such payment may include 1 but is not limited to paying reasonable considered a ‘good leaver’ , in which case awards are normally tested The approach in cases of appointing a new for performance over the full performance period and pro-rated for relocation costs, any reasonable level of fees Executive Board Director by way of internal time based on the proportion of the vesting period served, with for outplacement assistance and/or the promotion will be consistent with the policy Committee discretion to treat otherwise. On death, awards will Director’s legal or professional advice fees for external appointees detailed above. Where typically vest immediately subject to the satisfaction of performance in connection with his cessation of oce such an individual has contractual commitments conditions as determined by the Committee. or employment. made prior to their promotion to Executive LTIP awards which are subject to an additional holding period will Board Director level, the Company will continue In the event that a participant ceases to typically be retained and released at either to honour these arrangements. Similarly, be an employee of Workspace, treatment if an Executive Board Director is appointed (a) the end of the holding period; or of outstanding awards under the Group’s following a merger or an acquisition of a incentive plans will be determined based (b) two years from cessation – whichever is soonest, although the company by Workspace, legacy terms and on the relevant plan rules. Committee has the discretion to allow earlier release. conditions may be honoured. For interim positions a cash supplement may ALL-EMPLOYEE For all-employee HMRC registered plans such as SAYE and SIP, leavers be paid rather than salary (for example a PLANS will be treated in accordance with the approved rules of these plans. Non-Executive Director taking on an executive function on a short-term basis). 1. A good leaver is defined as an employee who ceases to hold employment during the plan year by reason of: injury, ill-health or disability proved to the satisfaction of the Committee; retirement with the agreement of the Group Company by which he is employed; the participant’s employing Company ceasing to be a Group Company; the business or part of the business to which the participant’s employment relates being transferred to a person who is not a Group Company; or any other reason which the Committee in its absolute discretion so permits. 195 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 REMUNERATION CONTINUED OUR NEW REMUNERATION POLICY CONTINUED TREATMENT OF CORPORATE EVENTS CONSIDERATION OF EMPLOYMENT LEGACY COMMITMENTS MINOR AMENDMENTS CONDITIONS ELSEWHERE IN THE COMPANY In the event of a change of control or winding The Committee reserves the right to make any When setting remuneration for Executive The Committee may make minor amendments up of the Company, the LTIP awards will vest remuneration payments and payments for loss Directors the Committee takes into account to the Policy (for regulatory, exchange control, based on the extent to which the Committee of oce (including exercising any discretions contextual information about pay and tax or administrative purposes or to take determines that the performance conditions available to it in connection with such conditions within the Group, including salary account of a change in legislation) without have been or would have been met. Pro-rating payments) notwithstanding that they are not increases and bonus awards for all employees. obtaining shareholder approval. for service in the vesting period will apply in line with the Policy set out above where the unless the Committee decides otherwise. terms of the payment were agreed: (i) before The Committee members receive regular Outstanding deferred bonus awards will vest 16 July 2014 (the date the Company’s first updates from the Executive Directors in in full as soon as practicable in such shareholder-approved Directors’ relation to employee feedback, and on pay circumstances. In the event of a variation of Remuneration Policy came into eect); and employment conditions elsewhere in the share capital, demerger, special dividend or (ii) before the Policy set out above came into Company. Our Chair, Stephen Hubbard, is any other transaction which will materially eect, provided that the terms of the payment our designated Non-Executive Director impact the value of shares the Committee were consistent with the shareholder-approved responsible for overseeing employee may, at its discretion, allow deferred bonus Directors’ Remuneration Policy in force at the engagement. During the last financial year, and LTIP awards to vest on the same basis as time they were agreed; or (iii) at a time when employees were not formally consulted on for a change of control described above. the relevant individual was not a Director of the the design of the Executive Directors’ Policy Alternatively, an adjustment may be made to Company and, in the opinion of the Committee, but were informed of the Company’s the number of shares if considered appropriate. the payment was not in consideration for the performance and key remuneration decisions. individual becoming a Director of the Company. For these purposes ‘payments’ include the We are committed to sharing business Committee satisfying awards of variable success across the organisation with all remuneration and, in relation to an award over employees participating in a short-term shares, the terms of the payment are ‘agreed’ incentive plan. At more senior levels, at the time the award is granted. remuneration is more long term and larger proportions are dependent on both Group and individual performance and paid in the form of shares. We operate both an SAYE and a SIP open to all employees. The illustration on page 185 provides an overview of remuneration throughout Workspace and the way in which our share incentive plans cascade through the organisation. 196 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 REMUNERATION CONTINUED OUR NEW REMUNERATION POLICY CONTINUED SINGLE FIGURE SCENARIOS SINGLE FIGURE SCENARIOS ### Possible payouts under policy Graham Clemett, CEO Dave Benson, CFO Based on our proposed Remuneration Policy, Base salary Base salary we set out below scenarios for the potential remuneration to be earned by our Executive Salary as at 1 April 2023. Salary as at 1 April 2023. Directors under the Policy for various performance assumptions. In line with Pension Pension the Companies (Miscellaneous Reporting) Current contribution rate of 10% of salary. Current contribution rate of 10% of salary. Regulations 2018, we have included the impact of a potential scenario of a 50% share price appreciation on the LTIP. Benefits Benefits As provided in the single figure table on page 200. As provided in the single figure table on page 200. A high proportion of the Executive Board Directors’ packages are made up of shares, supporting the alignment of executive pay Annual bonus Annual bonus with the interests of our shareholders. The Minimum – no bonus payable; Minimum – no bonus payable; increased value in remuneration from share On-target – 50% of maximum potential bonus; On-target – 50% of maximum potential bonus; price appreciation is beneficial for both Maximum – maximum potential bonus. Maximum – maximum potential bonus. Executive Directors and shareholders. LTIP LTIP | | | Minimum – no LTIP vesting; | | | Minimum – no LTIP vesting; | | --- | --- | --- | --- | --- | --- | | On-target – 20% of maximum (threshold vesting); | | | On-target – 20% of maximum (threshold vesting); | | | | | Maximum – maximum LTIP vesting. | | | Maximum – maximum LTIP vesting. | | Share price growth Share price growth Impact of 50% share price appreciation over three years (on the LTIP). Impact of 50% share price appreciation over three years (on the LTIP). £000 0 03,500 3,5003,000 3,0002,500 2,5002,0002,000 1,5001,500 1,0001,000500 500 £000 Fixed pay Fixed pay On-target On-target Maximum Maximum | Maximum with | Maximum with | | --- | --- | | 50% share price | 50% share price | | appreciation | appreciation | 197 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 REMUNERATION CONTINUED WHAT WE PAID OUR DIRECTORS IN 2022/23 ### Annual report on remuneration This section sets out the Annual Report TOTAL TARGET COMPENSATION COMPARED TO OUR PEERS Chart B below shows that, in the year, the CEO met his minimum on Remuneration. An advisory shareholder Chart A below shows the relative position of target total compensation shareholding requirements. The CFO joined in April 2020 and is resolution to approve this section, together for our Executive Directors compared to our peers. When we set the building his shareholding. with the Chair’s statement on pages 180 to 183 target total compensation for the Executive Directors, one of the factors will be put forward at the 2023 AGM of the the Committee considers is the competitive market for our Executive | | | CHART B | Owned outright or vested. | | --- | --- | --- | --- | | Company on 6 July 2023. | Directors, which we believe is the FTSE 250 and FTSE 350 Real Estate | | | | | | OUR SHAREHOLDING | Unvested and not subject to performance. | companies, and the size of the Company compared to these peers. REQUIREMENT HAS BEEN MET Subject to performance. The Committee has been pleased to report above target-performance CEO against market benchmark has been achieved over recent years. CFO | CHART A (I) — GRAHAM CLEMETT | Positioning of total remuneration of the | | | | | --- | --- | --- | --- | --- | | CHIEF EXECUTIVE OFFICER | Company relative to market benchmarks. | | | | | | | % OF SALARY | 0% 100% | 200% 400%300% | MINIMUM SHAREHOLDING FTSE 350 REQUIREMENT REAL ESTATE 1. All shares that are either unvested and not subject to performance or subject to FTSE 250 performance have been included on a net of tax basis (i.e. at a 50% discount). 2. This is based on a share price of £5.2854 being the average share price over the year to 31 March 2023 and salaries of £519,200 and £357,300 for Graham Clemett and Dave BOTTOM THIRD SECOND TOP Benson respectively. QUARTILE QUARTILE QUARTILE QUARTILE OVERALL LINK TO REMUNERATION AND EQUITY OF THE EXECUTIVE DIRECTORS CHART A (II) — DAVE BENSON Positioning of total remuneration of the Table A below sets out the single figure for 2022/23, the number of CHIEF FINANCIAL OFFICER Company relative to market benchmarks. 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 350 price and closing price for the year. REAL ESTATE TABLE A FTSE 250 Graham Clemett Dave Benson BOTTOM THIRD SECOND TOP 2022/23 single figure (£000) 1,433.3 1,041.8 QUARTILE QUARTILE QUARTILE QUARTILE Shares held at start of year 135,311 20,085 Shares held at end of year 141,930 39,765 1 Value of shares at start of year (£000) 926.9 137.6 OUR SHAREHOLDING REQUIREMENTS (AUDITED) 2 Our Executive Directors are encouraged to hold a high number of Value of shares at end of year (£000) 620.2 173.8 shares in order to align their interests to those of the shareholders, and Dierence (£000) (306.7) 36.2 to encourage a long-term view of the sustainable performance of the Company. As such, our Directors are impacted by the share price over 1. Based on a closing share price on 31 March 2022 of £6.85. 2. Based on a closing share price on 31 March 2023 of £4.37. the year in the same way as our shareholders. 198 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED OUR APPROACH TO FAIRNESS AND WIDER WORKFORCE CONSIDERATIONS THE YEAR ON YEAR CHANGE IN OUR DIRECTORS’ REMUNERATION The table below sets out the changes year on year between our Director pay and average When making remuneration decisions for the Share schemes employee pay. As per our Policy, salary increases applied to Executive Directors will typically Executive Board Directors, the Committee Share schemes are a long-established and be in line with those of the wider workforce. considers pay, policies and practices successful part of our total reward package, elsewhere in the Group. encouraging and supporting employee share Table B below shows the percentage change in Director remuneration, comprising salary, ownership. In particular, all employees are taxable benefits and annual bonus, and comparable data for the average of employees within We receive regular updates from the invited to participate in the Company’s the Company. The comparator group is based on all employees (excluding the CEO, CFO and Executive Board Directors, and we monitor Savings Related Share Option Scheme and Non-Executive Directors), normalised for joiners and leavers during the year. The average bonus payout and share award data. the Share Incentive Plan. number of people employed by the Company during the year was 291 (2022: 249). All employees are eligible for consideration for an annual bonus. In this section, we provide context to our Equal opportunities Executive Board Director remuneration by Workspace is committed to an active Equal TABLE B | explaining our employee policies and our | Opportunities Policy from recruitment and | | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | approach to fairness, as well as the ratio | selection, through training and development | | | | 2023 2022 2021 | | | | | | | | | | of CEO pay to that of the wider workforce. | and in performance reviews and promotion. | | Salary/ | | Taxable | Annual | Salary/ | | Taxable | Annual | Salary/ | Taxable | Annual | | | All decisions relating to employment | Director | | fees | benefits | variable | | fees | benefits | variable | fees | benefits | variable | | Communication and engagement | practices are objective, free from bias and | Executive | | | | | | | | | | | | | with employees | based solely upon work criteria and individual | Directors | | | | | | | | | | | | | The Board is committed to an open dialogue | merit. We consider the needs of all employees, | | | | | | | | | | | | | Graham Clemett 3% 4% -11% 2% 1% 157% 9% -15% -54% with our employees over various decisions. customers and the community. Dave Benson 3% n/a 10% 2% n/a 157% n/a n/a n/a Our Chair, Stephen Hubbard, is our designated Non-Executive Non-Executive Director responsible for We use everyone’s talents and abilities, and Directors | overseeing employee engagement. During | we value diversity. The Company aims to | | | | | --- | --- | --- | --- | --- | | the last financial year, employees have been | make our promotion and recruitment practices | Stephen Hubbard 6% n/a – 24% n/a – 198% n/a – | | | | informed about activities, performance and | fair and objective. We encourage continuous | | 1 | | | | | Damon Russell | | -65% n/a – 10% n/a – 10% n/a – | | the Company’s response to the increased | development and training, as well as the | | | | Rosie Shapland 31% n/a – 194% n/a – n/a n/a – cost of living through sta briefings held by provision of equal opportunities and career Lesley-Ann Nash 15% n/a – 345% n/a – n/a n/a – the CEO and other members of the Executive development for employees. Further details 2 Duncan Owen 73% n/a – n/a n/a – n/a n/a – team. Mr Hubbard also held three informal sta of this are shown on pages 148 to 154. 2 events during the year. Employees are kept Nick Mackenzie 491% n/a – n/a n/a – n/a n/a – 2 | informed about activities and performance | Retirement benefits | Manju Malhotra | 491% n/a – n/a n/a – n/a n/a – | | --- | --- | --- | --- | | not only through these briefings but also by | The Company provides pension benefits for | All other | | | the circulation of corporate announcements | the majority of its employees. The Company’s | employees 19% -4% -11% 5% -24% 58% 5% -5% -5% | | | and other relevant information to all sta, | commitment to pension contributions, | | | | supplemented by updates on the intranet. | consistent with last year, ranges from 6% | 1. Damon Russell stepped down from the Board on 22 July 2022, therefore the above information reflects his time in role. | | | | to 10% of an employee’s salary. The pension | 2. Duncan Owen joined the Board in July 2021 with both Nick Mackenzie and Manju Malhotra joining the Board in January 2022, | | and therefore were paid a partial fee in the prior year. scheme is open to every employee in 3. This increase is a result of the acquisition of McKay Securities and the inclusion of these employees in the figures for 2023. accordance with the new Government auto-enrolment rules. 199 Workspace Group PLC^{}[] Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information # **REMUNERATION CONTINUED**ANNUAL REPORT ON REMUNERATION CONTINUED # **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 2013. We have also included our TSR performance over this period. - ● PTSE 390 Real Estate Supersector Index CHART C ![img-12.jpeg](img-12.jpeg) TABLE C | CEO single figure of total remuneration 6000 | 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 | 31 Mar 2023 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Graham Clemett^{1} | - | - | - | - | - | - | 1,349.9 | 764.4 | 1,080.0 | 1,433.3 | | Jamie Hopkins^{2} | 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) | - | - | - | - | - | - | 78% | 33% | 83% | 72% | | Jamie Hopkins (% of maximum opportunity) | 97.8% | 97.2% | 95.3% | 100% | 100% | 95.8% | - | - | - | - | | LTIP vesting | - | - | - | - | - | - | - | - | - | - | | Graham Clemett (% of maximum opportunity) | - | - | - | - | - | - | 87.24% | 0% | 0% | 50% | | Jamie Hopkins (% of maximum opportunity) | - | 100% | 100% | 88.7% | 62.7% | 50.7% | 87.24% | - | - | - | | Ratio of single total remuneration figure shown to employees as a whole | 34x | 128x | 79x | 72x | 48x | 53x | 47x | 23x | 32x | 43x | | | - | - | - | - | - | 33x | 43x | 15x | 23x | 29x | | | - | - | - | - | - | 23x | 23x | 11x | 15x | 20x | 1. Mr Clemett assumed the role of interim CEO on 1 June 2019 and was appointed CEO on 24 September 2019. 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 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED PAY COMPARISONS CONTINUED SINGLE FIGURE OF EXECUTIVE DIRECTORS (AUDITED) The illustrations below set out a single figure for the total remuneration received by each Chief Executive’s Pay Ratio as nil as they were not entitled to receive a Executive Board Director for the year ended 31 March 2023 and the prior year. The table below compares the single total 2021/22 financial year bonus. This means that figure of remuneration for the CEO with that the ratios are higher than if we were able to Graham Clemett, CEO Dave Benson, CFO | of the Group employees who are paid at the | include a bonus amount for these employees. | | | | | | --- | --- | --- | --- | --- | --- | | | | 2022/23 | 2021/22 | 2022/23 | 2021/22 | | 25th percentile (lower quartile), 50th | No elements of pay have been omitted. Where | £000 | £000 | £000 | £000 | | percentile (median) and 75th percentile | required, remuneration was approximately | | | | | Fixed pay | (upper quartile) of its employee population. | adjusted to be full-time and full-year | | | | | | --- | --- | --- | --- | --- | --- | | | equivalent basis based on the employee’s | Base salary 519.2 | | 357.3 | | | | | | 504.0 | | 346.8 | | Despite voluntarily disclosing the ratio of | average full-time equivalent hours for the | | | | | 1 | | | Pension | | 51.9 | | 35.2 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | CEO pay to workforce pay in previous years | year and the proportion of the year they were | | | | 50.4 | | | 30.8 | | | (see page 199, this is the first year in which | employed. No other adjustments were made. | | 2 | | | | | | | | | | Benefits | | 22.5 | | | 0 | | | | Workspace meets the requirement regarding | | | | | 21.6 | | | | 0 | | employee numbers as per the Companies | The table below sets out the salary and total | Total fixed 593.6 576.0 392.5 377.6 | | | | | | | | | (Miscellaneous Reporting) Regulations 2018. | pay and benefits of the employee at the lower | | | | | | | | | Variable pay quartile, median and upper quartile for the | | 25th | 50th | 75th | | | | | | | 3 | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | 2022/23 financial year. | | | | Annual bonus | | | 448.6 | | | 380.2 | | | | | | | | | | | | | | | | 502.0 | | | 345.4 | | | | percentile | percentile | percentile | | | | | | | | | | | | | | | Year Methodology | ratio | ratio | ratio | | | | | | 5 | | | | | | | | | | | | | | 25th | 50th | 75th | LTIP | | | 391.1 | | | 269.1 | | | | | | | | | | | | | | | | | 0 | | | – | | 2023 Option A 43:1 29:1 20:1 | | | | | percentile | percentile | percentile | | | | | | | | | | 4 | | | Other – SAYE, SIP | 0 | | 0 | | | --- | --- | --- | --- | --- | --- | --- | | | Salary £28,300 £41,200 £58,500 | | | 2.0 | | 2.0 | | Option A, as set out under the reporting | Total pay | Total variable 839.7 504.0 649.3 347.4 | | | | | | regulations, was used to calculate remuneration | and benefits £33,286 £48,886 £73,350 | | | | | | Total 1,433.3 1,080.0 1,041.8 725.0 for 2023, as well as 2022 and 2021. Of which share price growth 0 0 0 0 There is significant volatility in this ratio, The UK employees included are those caused by the following: 1. Pension: During 2022/23 each of Messrs Clemett and Benson received a cash allowance in lieu of pension contribution. employed on 31 March 2023 and remuneration 2. Benefits: Taxable value of benefits received in the year by Executive Directors includes a car allowance, private health – Our CEO pay was made up of a higher figures are determined with reference to the insurance and death in service cover. proportion of incentive pay than that of 3. Annual bonus: This is the total bonus earned in respect of performance during the relevant year. For 2021/22 and 2022/23, financial year ending on 31 March 2023. our employees, in line with shareholder the Committee set a minimum deferral requirement of 33% of the bonus earned. For 2022/23, this deferral was equivalent to £148,034 for Mr Clemett and £125,455 for Mr Benson. expectations. This introduces a higher We have chosen Option A as we believe 4. SIP awards granted in September 2021. See page 211 for details. degree of variability in his pay each year 5. The 2022/23 figure includes the estimated value of 50% of the 2020 LTIP shares that vested based on performance to that it is the most robust methodology for versus that of our employees 31 March 2023. The share price used is the three-month average to 31 March 2023 of £4.88. This will be updated in next calculating these figures. The value of each year’s report to reflect the share price on the date of vesting. As allowable under the relevant plan rules and approved – Long-term incentives, which make up employee’s total pay and benefits was Policy, the Committee determine that dividend equivalents are payable under the 2020 LTIP award – this figure includes a significant proportion of our CEO’s pay, accrued dividends on vested shares. calculated using the single figure methodology are provided in shares, and their value consistent with the CEO, with the exception on vesting, included in his single figure, of the annual bonus, which was calculated reflects the movement in share price using 2021/22 financial year bonuses (which over the three years prior to vesting. This were paid during 2022/23) as the individual outcome can add significant volatility to the 2022/23 financial year bonus information was CEO’s pay and this is reflected in the ratio not available at the last practical date before the finalisation of this report. For employees For these reasons, we believe the median pay who joined during the 2022/23 financial year ratio this year is consistent with pay, reward (82 employees), we’ve included their bonus and progression policies for UK colleagues. 201 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED ANNUAL BONUS PAYOUT IN RESPECT OF 2022/23 ### Annual bonus payout in ### respect of 2022/23 (Audited) ANNUAL BONUS For 2022/23 the maximum bonus opportunity OUTCOMES UNDER THE 2022/23 ANNUAL BONUS for the Executive Directors was 120% of salary. Payouts are subject to the assessment of performance against stretching financial, Threshold Maximum Formulaic outcome and strategic and business performance targets, Measure: (0% payable) (100% payable) opportunity as a % of salary and are calculated on a straight-line basis TRADING PROFIT AFTER INTEREST from 0% at threshold to 100% at maximum £57. 3m £62.3m 51.0% 60% performance. Both Graham Clemett and Dave | Benson are required to defer 33% of their | | | Actual: £61.4m | 1 | | | | --- | --- | --- | --- | --- | --- | --- | | bonus into Company shares for three years. | STRATEGIC FINANCIAL OBJECTIVES | | | | | | | The targets are set based on our budgeting | | 0% 100% | | | 9.0% | 12% | process, which takes account of market | expectations, planned acquisitions and | | | Actual: 75% | | | | --- | --- | --- | --- | --- | --- | | disposals of assets, and aspirations around | SUSTAINABILITY OBJECTIVES | | | | | | | | 0% 100% | | 24% | 24% | Company growth. Actual: 100% The performance measures, targets and OPERATIONAL EFFICIENCY outcomes for each measure are shown to 0% 100% 11.1% 12% the right. Actual: 92.5% CUSTOMER SATISFACTION 72% 80% 11.3% 12% Actual: 84% of this element 2 TOTAL 106.4% 120% OUTCOME (£000) FORMULAIC OUTTURN £552.4 GRAHAM CLEMETT, CEO DISCRETIONARY REDUCTION APPLIED TO OUTTURN OF 20% OF SALARY ### 86.4% £148.0 BONUS OUTTURN £448.6 TOTAL BONUS OF WHICH IS DEFERRED BONUS | OUTCOME (£000) | BONUS OUTTURN | | | | | | --- | --- | --- | --- | --- | --- | | | | £380.2 | 106.4% | | £125.5 | | DAVE BENSON, CFO | | | TOTAL BONUS | OF WHICH IS DEFERRED | | BONUS 1. This excludes the impact of the McKay acquisition. 2. The overall outcome was reduced as there was a 0.6% increase in the number of disagree/strongly disagree categories. 202 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED STRATEGIC FINANCIAL, OPERATIONAL EFFICIENCY, SUSTAINABILITY OBJECTIVES (AUDITED) ### Strategic financial, operational ### eciency and sustainability | objectives 2022/23 | Strategic financial | | Operational eciency | | Sustainability | | | --- | --- | --- | --- | --- | --- | --- | | | | 1 | | 2 | | 3 | | | objectives | | objectives | | objectives | | A summary of the strategic financial, operational eciency and sustainability objectives is shown to the right. Full details for each performance measure are set out Activity Activity Activity on pages 203 and 204. Disposal of non-core assets Integration of McKay sta and processes Progress our pathway to net zero carbon by 2030 Delivery of integration cost savings from Roll-out of new finance system McKay acquisition All lettable units to be A and B rated by 2030 New customer complaints policy and process Complete debt refinancing post McKay Improve customer advocacy of our Continued roll-out of Workspace Inclusive oer acquisition sustainable credentials Continue to build Workspace brand profile Launch our new InspiresMe programme to local schools, colleges and youth organisations Employee and customer well-being initiatives ### Opportunity ## Opportunity Opportunity 24% ## 12% 12% Outcome ## Outcome Outcome 24% ## 9% 11.1% Page 203 Page 203 Page 204 203 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED STRATEGIC FINANCIAL OBJECTIVES – OUTCOME 9%/12% 1 Target Achievement Disposal of non-core assets – Sale of McKay industrial portfolio – Exchanged for sale of 5 of the 9 non-core industrial assets on 16 May 2023 for £82m – Sale of other McKay non-core – Disposal of Newbury medical centre for £7m in July 2022 assets – Sale of Riverside residential scheme – Sale of Riverside residential scheme completed for £54m in March 2023 Delivery of integration cost – 50% reduction in McKay corporate – Costs reduced from £6.4m p.a. prior to acquisition to £0.9m p.a. based on average cost in Q4 (80% reduction) savings from McKay acquisition costs by exit 22/23 Complete debt refinancing – Rollover of Aviva debt facility – Completed transfer of Aviva facility in September 2022 avoiding £13m break cost post McKay acquisition – Replacement of short-term – Acquisition facility replaced by £135m of McKay revolver facilities transferred to Workspace on same terms acquisition facilities with long-term as existing facilities with maturity subsequently extended to April 2025 debt Continue to build Workspace – Raise brand awareness by 2% – Now reached 14% average spontaneous brand awareness (based on Opinium brand research) brand profile (average awareness in 21/22 of 11%) OPERATIONAL EFFICIENCY OBJECTIVES – OUTCOME 11.1%/12% 2 Target Achievement Integration of McKay sta – Completed successfully by – Integration completed in November 2022 and processes December 22 Roll-out of new finance system – Completed successfully by April 23 – System design, build, data load and testing substantially complete with end-user training under way by the end of April 2023. – System went live on 16 May 2023. New customer complaints – Roll-out new policy and process – Processes established and customer feedback portal launched 13 December 2022 – 56 cases raised to date policy and process across Company by December 22 – Monthly reporting in place with resolution of cases being monitored to ensure SLA’s being met Continued roll-out of – Roll-out to further 10 centres by – This has been rolled out to 9 out of 10 of the remaining centres in scope of the Workspace Inclusive Oer Workspace inclusive oer March 23 – The only exception is Canalot Studios which is undergoing refurbishment where the required Wi-Fi roll-out will be installed as part of the building upgrade 204 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED SUSTAINABILITY OBJECTIVES – OUTCOME: 24%/24% 3 Target Achievement | Progress of our pathway to | – Reduce energy intensity across the | – 5% reduction in energy intensity | | --- | --- | --- | | net zero carbon by 2030 | portfolio by 5% | | | | – Reduce scope 1 emissions (gas) per | – 27% reduction in gas consumption (subject to minor adjustment for emissions from refrigerant leaks) | sq. ft. by 5% All lettable units to be A and B – Eliminate all F and G rated units – No F, G or unrated units remaining rated by 2030 – Increase the percentage of A and B – 12% of floor area upgraded to EPC A/B rated area in the portfolio by 10% Improve customer advocacy – Improve our ‘agree and strongly – The percentage of customers who agree or strongly agree that Workspace is a socially and environmentally of our sustainable credentials agree’ customers satisfaction score responsible business has increased from 66% to 70.5% Source: Workspace 2023 customer survey to 70% (currently 66%) Launch our new InspiresMe – Successful roll-out at four centres – Achieved roll-out of InspiresMe at five pilot centres: Kennington Park, Brickfields, Cargo Works, The Chocolate programme to local schools, Factory and Mare Street colleges and youth – 182 students benefitted from CV workshops, career sessions and 20 students were hosted for work experience organisations – The responses from school partners and customers were extremely positive with 100% of the schools who took part agreeing they were keen to continue with this initiative next year Employee and customer – Continued roll-out of a variety of Employees well-being initiatives wellbeing events, both virtual and – 23 employee wellbeing and mental health events delivered with 600 attendees at these sessions physical – Over 160 employees utilised our wellbeing cashback programme (Healthshield) with claim back of circa £28,000 – We received an average score from the recent annual employee survey of 75% on employee wellbeing across six wellbeing questions Customers – Our central events team hosted 71 events of which 50 were wellbeing focused. This includes Paws in Work, cocktail master-classes, Leafage terrarium building, yoga classes, art for wellbeing initiatives, and were attended by 1,600 customers – In addition centre teams hosted 37 wellbeing themed events 205 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED LTIP AWARD VESTING IN RESPECT OF 2022/23 (AUDITED) LTIP AWARDS MADE DURING THE 2022/23 FINANCIAL YEAR (AUDITED) The 2020 LTIP awards measured performance over the period 1 April 2020 to 31 March 2023. Under the current Policy conditional share awards under the LTIP are granted to a maximum of Details of the performance targets and achievement against them are set out below. 200% of salary. Awards under the 2022 LTIP are subject to the performance conditions detailed in Table E below measured over the period 1 April 2022 to 31 March 2025. On this basis, 50% of the 2020 LTIP will vest. TABLE E Total Property The 2021 LTIP awards are based on the same targets and weightings as the 2020 LTIP award | | | | | Relative TSR | | | Return versus | | --- | --- | --- | --- | --- | --- | --- | --- | | shown below, measured over the period 1 April 2021 to 31 March 2024. | | | vs. sector group | | 1 | London IPD index | | | | | | (50% of the award) | | | (50% of the award) | | | TABLE D | | 3 | | | | | | | | Threshold | (20% vesting) Median Median | | | | | | 3 | | | | | | | Maximum | (100% vesting) Upper Quartile Upper Quartile | | --- | --- | --- | --- | --- | --- | --- | --- | | Measure Threshold | | | Maximum | Actual Formulaic outcome | | | | | | (20% payable) | (100% payable) | | | (% of award) | | | | TOTAL SHAREHOLDER | | | | | | 1. The comparator group for the 2022 LTIP cycle is FTSE 350 Real Estate companies excluding agencies. | | | | | | | 5th | 0%/50% | 2. For any shares to vest on relative TSR, the Company’s TSR outcome must exceed the median TSR of the comparator group | | | RETURN (TSR) RELATIVE | MEDIAN UPPER QUARTILE | | | PERCENTILE | | | | over the performance period. TO FTSE 350 REAL 3. There is straight-line vesting between the ‘Threshold’ and ‘Maximum’ performance levels. ESTATE COMPANIES (EXCLUDING AGENCIES) The following awards were granted during the year under the 2022 LTIP: TOTAL PROPERTY | | | 77th | 50%/50% | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | RETURN (TPR) VERSUS | MEDIAN UPPER QUARTILE | PERCENTILE | | | | | | Performance share award | | | | IPD | | | | | | | | | | Face value | | | | | | | Market price at | | Number | | | | | | | | | Director Date of grant | date of award | 1 | of shares | | £ % of salary | | LTIP (% MAXIMUM) ### 50%/100% Graham Clemett 24 June 2022 £6.2800 165,350 1,038,398 200% VESTING Dave Benson 24 June 2022 £6.2800 113,789 714,594 200% 1. The share price for calculating the levels of awards was £6.2800, the average mid-market closing price over the three CEO CFO dealing days 21, 22 and 23 June 2022, in accordance with the LTIP rules. NUMBER OF SHARES ### 69,819 48,044 VESTING (AUDITED) Deferred shares were granted (as conditional share awards) under the 2021/22 bonus of 25,380 shares to Mr Clemett and 17,463 shares to Mr Benson (33% of bonus awarded) on 27 June 2022. The share price on the date of grant was £6.475 which represented the average mid-market closing price. 206 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED ### How we will apply the policy in 2023/24 As explained in the Remuneration Committee Chair’s letter, we are seeking shareholder approval for a new Directors’ Remuneration Policy at the AGM on 6 July 2023. On the basis that it is approved by shareholders, it will be implemented as set out below. | BASE SALARY | | | PENSION | | --- | --- | --- | --- | | The Executive Directors will be awarded a 3% | CEO | CFO | In line with the proposed Policy set out in this report, the Executive Directors will receive | | salary increase which is below the average | £534,800 | £368,100 | a contribution to a defined contribution plan or a cash allowance in lieu of contribution of | | applied to the wider workforce. | | | 10% of salary respectively. | Salaries will be as follows: ANNUAL BONUS | As per the proposed Policy, there is a change | 33% of the total bonus paid will be deferred | practice disclosure. We therefore set out to the | Operational eciency objectives will include | | --- | --- | --- | --- | | to the CEO’s annual bonus maximum potential | into shares for three years. Dividend equivalents | right some examples of the objectives that the | elements which optimise value and service | | in 2023/24 and this will be 150% of salary. | may be accrued on deferred shares. | Committee will consider in respect of evaluating | such as centre and asset management. | | There is no change to the CFO’s annual bonus | | the strategic financial and operational eciency | Strategic financial targets will cover key | | maximum potential in 2023/24, and this will | Whilst we believe that disclosing the exact | and sustainability objectives. Full disclosure | drivers of our commercial success including | | continue to be 120% of salary. | performance conditions and targets for all | on the targets, performance achieved and | capital management and brand awareness. | | | measures would not be in the best interests | resulting bonus payouts for 2023/24 will | ESG metrics will align to our core | | | of shareholders, we remain committed to best | be provided in next year’s report. | sustainability focus including the reduction | in energy intensity and an increase in social value impact. 2023/24 ANNUAL BONUS AND LINK TO STRATEGY Full disclosure on the targets, performance achieved and resulting bonus payouts for Measure: Measure: Measure: Measure: 2023/24 will be provided in next year’s report. Financial objectives (Trading profit Sustainability Operational eciency Customer satisfaction after interest (50%), Strategic financial (10%)) Bonus weighting: Bonus weighting: ## 60% Bonus Bonus weighting: weighting: ## 20% LINK TO STRATEGY ## 10% 10% Driving customer-led growth Delivering operational excellence Being sustainable 207 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED HOW WE WILL APPLY THE POLICY IN 2023/24 LONG-TERM INCENTIVE PLAN (LTIP) Following careful consideration, we have decided to amend the performance measures of the 2023 PERFORMANCE MEASURES AND LINK TO STRATEGY 2023 LTIP, to better align with Workspace’s strategy. Measure: Measure: Total Shareholder Return (TSR) relative Total Accounting Return (TAR) Maximum award 200% of salary. The performance measures and targets for the four elements to FTSE 350 Real Estate companies are as follows: (excluding agencies) Total Shareholder Return relative to | | FTSE 350 Real | | | | | | Environmental, | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Estate companies | | Earnings Per Share | | Total Accounting | | | | Social and | | (excluding agencies) | | | (EPS) Growth | | Return (TAR) | Governance (ESG) | | | Weighting (% of award) 25% 25% 25% 25% Weighting: Weighting: Threshold (20% vesting) Median 5% p.a. 4.5% p.a. See below Maximum (100% vesting) Upper Quartile 10% p.a. 10% p.a. See below ## 25% 25% A holding period of two years will apply to any net vested shares under the LTIP. To allow any payouts to be fully reflective of underlying performance, the LTIP underpin allows the Committee to reduce vesting should the Committee believe that the performance is Measure: Measure: inconsistent with the overall performance of the business. | | | | | | Earnings Per Share (EPS) Growth | Environmental, Social and Governance | | --- | --- | --- | --- | --- | --- | --- | | ESG LTIP THREE YEAR TARGETS | | | | | | (ESG) metrics | | | | Threshold | | Maximum | | | | Environmental, social and governance (ESG) | (20% vesting) | | (100% vesting) Weighting | | | | Reduction in scope 1 gas emissions 15% 20% 50% Increase in percentage of EPC A or B rated space 20% 27% 50% Weighting: Weighting: ## 25% 25% NON-EXECUTIVE DIRECTOR FEES The fees for Non-Executive Directors are reviewed and agreed annually. The fees, which are eective from 1 April 2023, are set out in the table below. 2023/24 fee 2022/23 fee % change Chair £200,000 £200,000 0% NED base fee £55,000 £55,000 0% Chair of Audit Committee fee £10,800 £10,800 0% LINK TO STRATEGY Chair of Remuneration Committee fee £10,800 £10,800 0% Driving customer-led growth Chair of ESG Committee fee £10,800 £10,800 0% Delivering operational excellence Senior Independent Director fee £10,800 £10,800 0% Being sustainable 208 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 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 2023 and the prior year: TABLE F Stephen Hubbard Damon Russell Duncan Owen Rosie Shapland Lesley-Ann Nash Manju Malhotra Nick Mackenzie 2022/23 2021/22 2022/23 2021/22 2022/23 2021/22 2022/23 2021/22 2022/23 2021/22 2022/23 2021/22 2022/23 2021/22 Non-Executive Director £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 Base fee 200.0 188.0 19.2 51.0 55.0 35.4 55.0 51.0 55.0 51.0 55.0 9.3 55.0 9.3 Additional fees – – 2.7 10.8 6.3 – 21.6 7.6 10.8 6.3 – – – – Total 200.0 188.0 21.9 61.8 61.3 35.4 76.6 58.6 65.8 57.3 55.0 9.3 55.0 9.3 1. Expenses incurred by Non-Executive Directors represent the cost to the Group, being gross of taxation. In 2022/23 Nick Mackenzie was reimbursed for out of pocket expenses incurred in attending meetings, in connection with the discharge of his duties of £1,111.70. 2. Additional fees were paid during the year to Non-Executive Directors serving as Chairs of the Remuneration, Audit and ESG Committees. An additional fee is also paid to the Senior Independent Non-Executive Director. SHARE OWNERSHIP AND SHARE INTERESTS (AUDITED) The table below shows the interests of the Directors and connected persons in shares (owned Dave Benson, who joined the Company on 1 April 2020, acquired 19,850 shares in September outright or vested). There have been no changes in the interests in the period between 31 March 2020. Mr Benson was subsequently awarded 235 ordinary shares under the Workspace Group 2023 and 6 June 2023. PLC Share Incentive Plan and acquired a further 19,680 shares on 1 September 2022. | TABLE G | | | | | Table H below shows the Executive Directors’ interest in shares. | | --- | --- | --- | --- | --- | --- | | | 31 March | | 31 March | | | | | | 2023 | | 2022 | | TABLE H | Chair | | Owned | | Unvested and | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | outright | | not subject to | | Subject to | | | | Stephen Hubbard 41,500 23,640 | | | 2 | | 3 | | 4 | | | | Executive Director Type | or vested | | performance | | performance | | Total | Executive Directors Graham Clemett Shares 141,930 123,143 282,393 547,466 Graham Clemett 141,930 135,311 1 Market value options Nil 3,389 Nil 3,389 Dave Benson 39,765 20,085 Dave Benson Shares 39,765 70,757 194,330 304,852 Non-Executive Directors 1 Market value options Nil 5,649 Nil 5,649 Rosie Shapland Nil Nil Lesley-Ann Nash Nil Nil 1. Market value options include SAYE options outstanding and not yet matured as at 31 March 2023. The exercise price of these was set at 80% (in accordance with HMRC and the plan rules) of the market value of a share at the invitation date. Nick Mackenzie 12,400 Nil See page 211 for further details. 2. The total shares owned outright or vested. Manju Malhotra Nil Nil 3. This figure includes the deferred bonus shares awarded in 2020, 2021 and 2022 for Mr Clemett and the deferred bonus Duncan Owen 9,410 5,560 shares awarded in 2021 and 2022 for Mr Benson and the number of shares vesting, (gross), pursuant to the 2020 LTIP award. 4. The interest in shares of 282,393 for Mr Clemett consists of LTIP awards made in 2021 and 2022. The interest in shares Past Directors of 194,330 for Mr Benson consists of LTIP awards made in 2021 and 2022, details of which can be found on page 210 1 in this report. Damon Russell See note Nil 1. Damon Russell stepped down from the Board on 22 July 2022. As at the date of leaving, Damon Russell did not hold any shares. 209 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED ADDITIONAL INFORMATION Service contracts of Directors serving in the year External appointments Executive Directors are employed under contracts of employment with Workspace Group PLC. It is the Board’s policy to allow Executive Directors to take up one Non-Executive position The principal terms of the Executive Directors’ service contracts are as follows. 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 Notice period appointed a Non-Executive Director of The Restaurant Group PLC, eective 1 June 2016 and as Executive Director Position Eective date of contract From Company From Director Senior Independent Director on 6 November 2020. Mr Clemett is paid an annual fee of £69.3k. Graham Clemett Chief Executive Ocer 31 July 2007 12 months 12 months Mr Benson does not hold any external appointments. Dave Benson Chief Financial Ocer 1 April 2020 12 months 12 months Relative importance of spend on pay Chart D below shows the Company’s actual expenditure on shareholder distributions (including Graham Clemett joined the Company as CFO in July 2007 and was appointed as CEO on dividends and share buybacks) and total employee pay expenditure for the financial years 24 September 2019. Mr Clemett served as Interim CEO and CFO from 31 May 2019 until ended 31 March 2022 and 31 March 2023. September 2019. CHART D The Chair and Non-Executive Directors have letters of appointment. Dates of the Directors’ | EMPLOYEE REMUNERATION DISTRIBUTION TO SHAREHOLDERS | | | | | | letters of appointment are set out below: | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 2023 | | £29.5m | 2023 | | £49.4m | | Date of original appointment | | Date of appointment/ | | | | | | | | Name | (date of reappointment) | last reappointment at AGM Notice period | | | 2022 | £21.8m | | 2022 | £40.5m | | | | | | Stephen Hubbard 16 July 2014 (23 January 2020) 2022 6 months Rosie Shapland 6 November 2020 (n/a) 2022 3 months ### +35% +22% Lesley-Ann Nash 1 January 2021 (n/a) 2022 3 months Duncan Owen 22 July 2021 (n/a) 2022 3 months The estimated total dividend as reported in the financial statements for the year to 31 March 2023 Manju Malhotra 26 January 2022 (n/a) 2022 3 months was £49.4m. Nick Mackenzie 26 January 2022 (n/a) 2022 3 months Payments for loss of oce (audited) None. 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 Payments to past Directors (audited) registered oce. None. Mr Hubbard’s reappointment letter dated 23 January 2020 stated that his appointment would be for a period of three years commencing on the conclusion of the 2020 AGM. The AGM was held on 9 July 2020. Mr Owen, as Chair designate, signed a new letter of appointment dated 27 February 2023 which will take eect from the conclusion of the AGM on 6 July 2023. 210 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 REMUNERATION CONTINUED ANNUAL REPORT ON REMUNERATION CONTINUED ADDITIONAL INFORMATION CONTINUED Committee advisers Share based awards and dilution During the year, PwC LLP acted as independent adviser to the Committee. PwC LLP was The Company’s share schemes are funded through a combination of shares purchased in the appointed by the Committee in 2018 following a selection process. PwC LLP is a founding market and new-issue shares, as appropriate. The Company monitors the number of shares member of the Remuneration Consultants Group and voluntarily operates under the Code of issued under these schemes and their impact on dilution limits. The Company’s usage of shares Conduct in relation to Executive remuneration consulting in the UK. The Committee is satisfied compared to the relevant dilution limits set by the Investment Association in respect of that the PwC LLP engagement partner and team, which provide remuneration advice to the all-share plans (10% in any rolling ten-year period) and Executive share plans (5% in any rolling Committee, do not have connections with the Group that may impair their objectivity and ten-year period) as at 31 March 2023 is detailed below. independence. The fees charged by PwC LLP for the provision of independent advice to the Committee during the year were £113,605 (based on hourly rates). PwC LLP provided no other As of 31 March 2023, around 2.3% and 2.0% shares have been, or may be, issued to settle services during the financial year. 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 Voting at the Company’s AGMs from the calculations. The table below sets out the results of the most recent shareholder votes on the Policy Report and the advisory vote on the 2021/22 Annual Report on Remuneration at the 2022 AGM on ALL-SHARE PLANS EXECUTIVE SHARE PLANS 21 July 2022. The Committee views this level of shareholder support as a strong endorsement LIMIT 10% LIMIT 5% of the Company’s Policy and its implementation. ACTUAL ACTUAL 2.3% 2% Percentage of votes cast Number of votes cast For and For and Discretion Against Discretion Against Withheld 1 Outstanding LTIP awards Policy Report (2020 AGM) 99.54 0.46 116,307,019 539,870 1,666 Details of current awards outstanding to Graham Clemett and Dave Benson are detailed below. Annual Report on | Remuneration (2022 AGM) 98.55 1.45 144,279,654 2,123,283 4,663 | | | | Lapsed during | | Vested during | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | At 1 April 2022 | | | the year | | the year | At 31 March 2023 | | | | Executive Director | Performance | 2 | Performance | | Performance | | | Performance | 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. Graham Clemett 18/06/2019 71,814 71,814 – – 18/06/2020 139,638 – – 139,638 24/06/2021 117,043 – – 117,043 24/06/2022 – – – 165,350 Dave Benson 18/06/2020 96,089 – – 96,089 24/06/2021 80,541 – – 80,541 24/06/2022 – – – 113,789 1. Awards will vest subject to the satisfaction of performance conditions detailed on page 207 over the three-year performance period. 2. LTIP awards made to the Executive Directors. In June 2020, 2021 and 2022 awards were in respect of 200% of salary based on a share price at date of award of £7.0767, £8.6117 and £6.2800 respectively. The 2020 LTIP awards vested at 50%. 211 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 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. | | | | Granted | Lapsed | | | | | | Normal exercise date | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | At | during | during | Vested | | At | Exercise | | | | | Executive Director | 01/04/2022 | | the year | the year | in year | 31/03/2023 | | | price | | 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 awards 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 6 June 2023. 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 6 June 2023 212 Workspace Group PLC^{}[] Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information ## 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 2023. Workspace Group PLC is incorporated in the UK and registered as a public limited company in England and Wales with company number 02041612 and registered office at Canterbury Court, Kennington Park, 1-3 Brixton Road, London SW9 6DE. It is listed on the main market of the London Stock Exchange. It is the ultimate holding company of the Group, a full list of its subsidiaries is set out in note 27 to the financial statements set out on pages 249 and 250. Where reference is made in this Directors' Report to other sections of the Annual Report, those sections are incorporated by reference into this Directors' Report. Certain disclosures required to be contained in the Directors' Report have been incorporated into the Strategic Report as set out in 'Other information' below. #### Dividends An interim dividend of 8.4 pence was paid in February 2023 (2022: 7.0 pence) and the Board is recommending the payment of a final dividend of 17.4 pence (2022: 14.5 pence) per share to be paid on 4 August 2023 to shareholders whose names are on the Register of Members at the close of business on 7 July 2023. This makes a total dividend of 25.8 pence (2022: 21.5 pence) for the year. #### Disclosure of information to auditors The Directors who held office at the date of approval of this Directors' Report confirm that, so far as they are each aware, there is no relevant information of which the Company's auditor is unaware; and each Director has taken all the steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information. #### Directors' indemnities Under the Company's Articles of Association the Company may, to the extent permitted by law, indemnify any Director, Secretary or other Officer of the Company against any liability and the Company 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 the Board believes that it is in the best interest of the Company to provide such indemnities in order to attract and to 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 these provisions 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. #### Employment policies Workspace recognises that a diversity of skills and experiences in our workforce will provide a competitive advantage. The Company has various employment policies, including in relation to recruitment, diversity & inclusion, health & safety and wellbeing. We monitor these practices to ensure that they are fair and objective. This includes giving full and fair consideration to applications from prospective employees who are disabled, having regard to their aptitudes and abilities, and not discriminating against employees under any circumstances (including in relation to applications, training, career development and promotion) on the grounds of any disability. In the event that an employee, worker or contractor becomes disabled in the course of their employment or engagement, Workspace aims to ensure that reasonable steps are taken to accommodate their disability by making reasonable adjustments to their existing employment or engagement. Further detail on our employment policies and how we invest in our workforce can be found on pages 50 to 53 and 149. Details of how we reward our employees can be found on pages 181 and 198 and in notes 23 and 24 to the financial statements. #### Share capital As at 31 March 2023, the Company's issued share capital comprised a single class of 191,638,357 ordinary shares of £1.00 each. Details of the Company's issued share capital are set out on page 246. #### Restrictions on transfer of shares There are no restrictions on the transfer of ordinary shares in the Company other than restrictions that are imposed by law or regulation (for example, insider trading laws). In addition, pursuant to the Company's Dealing Code, Directors and certain employees of the Group require the approval of the Company to deal in ordinary shares of the Company. The Company is not aware of any agreements between shareholders that may result in restrictions on the transfer of securities. 213 Workspace Group PLC^{}[] Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information # REPORT OF THE DIRECTORS CONTINUED # Substantial shareholdings in the Company As at 31 March 2023 and 15 May 2023, the following interests in voting rights over the issued share capital of the Company had been notified: | Shareholder | 31 March 2023 | | 15 May 2023 | | | --- | --- | --- | --- | --- | | | Number of shares | Percentage held | Number of shares | Percentage held | | The London & Amsterdam Trust Company Limited | 53,749,281 | 28.05% | 53,749,281 | 28.05% | | BlackRock, Inc. | 23,204,769 | 12.11% | 22,449,889 | 11.72% | | Janus Henderson Investors | 10,933,585 | 5.71% | 11,004,298 | 5.74% | | Columbia Threadneedle Investments | 9,246,497 | 4.82% | 9,410,346 | 4.91% | | The Vanguard Group Inc | 7,258,575 | 3.78% | 7,291,439 | 3.80% | | Legal & General Investment Management Ltd | 5,846,861 | 3.05% | 5,496,379 | 2.87% | # Articles of Association The following description summarises certain provisions of the Company's Articles of Association and applicable English law concerning companies. Any amendment to the Articles of Association of the company may be made in accordance with the provisions of the Companies Act 2006, by way of special resolution. # Directors Unless otherwise determined by ordinary resolution of the Company, the Board shall be comprised of not less than two or more than ten Directors. 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. Directors may be elected by the members in a general meeting or appointed by the Board. The Company's Articles of Association require any new Directors to stand for election at the next AGM following their appointment. The Articles of Association also require each Director to stand for 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 6 July 2023. 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. # Voting and other rights Subject to the provisions of the Companies Act 2006, to any special terms on which shares may have been issued or to any suspension or abrogation of voting rights pursuant to the Articles of Association, every member who is present in person shall have one vote on a show of hands or, on a poll, one vote for each share of which they are a holder. The Company is not aware of any agreements between shareholders that may result in restrictions on voting rights. The Company may, by ordinary resolution, declare dividends but no dividend shall exceed the amount recommended by the Board. Subject to the provisions of the Companies Act 2006, the Board may also declare and pay such interim dividends as appears to the Board to be justified by the profits of the Company available for distribution. Except as otherwise provided by the rights attached to shares, all dividends shall be paid to shareholders according to the amounts paid up on the shares on which the dividend is paid. Subject to the terms of allotment of shares, the Board may only make calls on shareholders in respect of any amounts unpaid on the shares held by them. All shares are fully paid. # Purchase of own shares and issuing shares Under the Company's Articles of Association, the Company may purchase any of its own shares. The Company was granted authority at the 2022 Annual General Meeting to make market purchases of its own ordinary shares. This authority will expire at the conclusion of the 2023 Annual General Meeting and a resolution will be proposed to renew this authority. No ordinary shares were purchased under this authority during the year. The Company was granted authority at the 2022 Annual General Meeting to allot and/or grant rights to subscribe for, or convert securities into, shares in the Company up to an aggregate nominal amount as set out in the Notice of Annual General Meeting 2022. This authority will expire at the conclusion of the 2023 Annual General Meeting and a resolution will be proposed to renew this authority. # Significant agreements on change of control The Group's borrowing facilities and other financial instruments (details of which can be found in note 16 to the financial statements) are agreements that could allow counterparties to terminate or to alter those arrangements in the event of a change of control of the Company. # Compensation for loss of office in the event of a takeover There are no agreements in place between the Company and its employees or Directors for compensation for loss of office or employment that occur because of a takeover bid. 214 Workspace Group PLC^{}[] Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information # REPORT OF THE DIRECTORS CONTINUED # **Employee Share Trusts** The Company operates an Employee Share Ownership Trust ('ESOT') and a trust for the Share Incentive Plan ('SIP'). The trusts are used to purchase Company shares in the market from time to time and hold them for the benefit of employees, including for satisfying awards that vest under the Company's various share incentive plans. The ESOT also holds some Company shares in particular ringfenced accounts for specific employees who have options over such shares vest under the Company's share incentive plans but have not yet exercised those options. The trustee of the ESOT may vote the shares it holds in the Company at its discretion, but where it holds any shares in a ringfenced account for particular employees it will seek their instructions on how it exercises the votes attached to those shares. The trustee of the SIP trust does not vote the rights attached to shares held in the trust. # **Information required under LR9.8.4R** | Interest capitalised | Note 10 to the financial statements | | --- | --- | | Details of long-term incentive schemes | Remuneration Report, pages 187 and 188, 191 and 205 | There is no further information required to be disclosed under LR9.8.4R. # **Other information** Other information relevant to the Directors' Report may be found in the following sections of the Annual Report: | Information | Location in Annual Report | | --- | --- | | Corporate governance statement, prepared in accordance with rule 7.2 of the Financial Conduct Authority's Disclosure Guidance and Transparency Rules | Corporate Governance Report, pages 106 to 215 Principal risks and uncertainties, pages 69 to 76 | | Culture, purpose, values and strategy | Strategic Report, pages 14 and 32 to 35 Corporate Governance Report, pages 118 to 120 | | Directors | Directors' biographies, pages 115 and 116 Our Board, page 113 | | Directors' training and development | Corporate Governance Report, page 140 | | Diversity & inclusion | Corporate Governance Report, pages 148 to 154 | | Employee share schemes | Note 23 to the financial statements | | Engagement with employees | Strategic Report, page 21 Stakeholder engagement, page 122 Section 172(1) Statement, page 125 | | Engagement with suppliers, customers and others | Strategic Report, pages 16 to 25 Stakeholder engagement, pages 121 to 123 Section 172(1) Statement, page 125 | | Financial risk management | Note 18 to the financial statements Principal risks and uncertainties, pages 69 to 76 | | Future developments | Chair's Letter, page 11 CEO Letter, page 13 Our business model, pages 64 to 68 Our strategy, pages 32 to 35 | | Greenhouse gas emissions and energy consumption | GHG/SECR Emissions, page 101 | | Political donations | Compliance Statements, page 91 | | Post balance sheet events | Note 29 to the financial statements | | Principal risks and uncertainties | Principal risks and uncertainties, pages 69 to 76 | | Research and development | The Company does not undertake research and development activities | By Order of the Board **Carmelina Carfora** Company Secretary 6 June 2023 215 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### 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 sucient to show and explain the parent Company’s transactions and disclose with reasonable accuracy at ### The Directors are responsible for preparing the Annual Report any time the financial position of the parent Company and enable them to ensure that its financial and the Group and parent Company financial statements in statements comply with the Companies Act 2006. They are responsible for such internal control accordance with applicable law and regulations. as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to Company law requires the Directors to prepare Group and parent Company financial statements prevent and detect fraud and other irregularities. for each financial year. Under that law they are required to prepare the Group financial statements in accordance with UK-adopted international accounting standards and applicable Under applicable law and regulations, the directors are also responsible for preparing a Strategic law and have elected to prepare the parent Company financial statements in accordance with Report, Directors’ Report, Directors’ Remuneration Report and Corporate Governance UK accounting standards and applicable law, including FRS 101 Reduced Disclosure Framework. Statement that complies with that law and those regulations. Under company law the directors must not approve the financial statements unless they The directors are responsible for the maintenance and integrity of the corporate and financial are satisfied that they give a true and fair view of the state of aairs of the Group and parent information included on the company’s website. Legislation in the UK governing the preparation Company and of the Group’s profit or loss for that period. In preparing each of the Group and and dissemination of financial statements may dier from legislation in other jurisdictions. parent Company financial statements, the Directors are required to: – select suitable accounting policies and then apply them consistently; In accordance with Disclosure Guidance and Transparency Rule 4.1.14R, the financial statements – make judgements and estimates that are reasonable, relevant, reliable and prudent; will form part of the annual financial report prepared using the single electronic reporting format – for the Group financial statements, state whether they have been prepared in accordance under the TD ESEF Regulation. The auditor’s report on these financial statements provides no with UK-adopted international accounting standards; assurance over the ESEF format. – for the parent Company financial statements, state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained Responsibility statement of the directors in respect of the annual financial report in the parent Company financial statements; We confirm that to the best of our knowledge: – assess the Group and parent Company’s ability to continue as a going concern, disclosing, – the financial statements, prepared in accordance with the applicable set of accounting as applicable, matters related to going concern; and standards, give a true and fair view of the assets, liabilities, financial position and profit or – use the going concern basis of accounting unless they either intend to liquidate the Group loss of the Company and the undertakings included in the consolidation taken as a whole; or the parent Company or to cease operations or have no realistic alternative but to do so. – the strategic report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and – we consider the Annual Report and Accounts, taken as a whole, is fair, balanced and unstandable and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy. Signed on behalf of the Board on 6 June 2023 by: Graham Clemett Chief Executive Ocer Dave Benson Chief Financial Ocer 216 Workspace Group PLC Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information # 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 2023 which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated and Parent Company Balance Sheet, the Consolidated and Parent Company Statement of Changes in Equity, the Consolidated Statement of Cash Flows, and the related notes, including the accounting policies on pages 229 to 231 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 2023 and of the Group's loss for the year then ended; - the Group financial statements have been properly prepared in accordance with UK-edited 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 6 financial years ended 31 March 2023. 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:** | £28.0m (2022: £24.5m) | | --- | --- | | Group financial statements as a whole | 0.99% (2022: 0.98%) of Total Assets | | **Coverage** | 100% (2022: 100%) of Total Group's Assets | | **Key audit matters** | **vs 2022** | | **Recurring risks** | **Group:** Valuation of Investment Property | | | **Parent Company:** Recoverability of Investments 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 (unchanged from 2022), in decreasing order of audit significance, in arriving at our audit opinion above, together with our key audit procedures to address those matters and, as required for public interest entities, our results from those procedures. These matters were addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on these matters. 217 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 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 Subjective valuation We performed the tests below rather than seeking to rely on any of the Group’s controls investment property Investment properties (incorporating Assets held for sale) is the largest because the nature of the balance meant that detailed testing is inherently the most eective (Group) balance in the financial statements and is held at fair value in the Group’s means of obtaining audit evidence. financial statements. Investment properties: Our procedures, assisted by our own property valuation specialist, included: (£2,643.3 million; The portfolio is externally valued by a qualified independent valuer. 2022: £2,366.7 million) Assessing valuer’s credentials: We assessed the external valuers objectivity, independence, Each property is unique and determining fair value requires significant professional qualifications and experience through research, discussions with them and reading Assets Held for Sale: judgement and estimation, in particular over the key assumptions of their valuation report. (£123.0m; 2022: the estimated rental value and the yield. The key assumptions will be £65.9m) impacted by a number of factors including location, quality and Methodology choice: We critically assessed the methodology used by the external valuer by condition of the building and occupancy. Valuing investment properties using our own property valuation specialist to assist us in checking whether the valuation report Refer to page 159 either under development or with development potential can be further is in accordance with the RICS Valuation Professional Standards ‘the Red Book’, IFRS and that (Audit Committee complicated by the need to assess the likelihood of planning consent, the valuation methodology adopted is appropriate by reference to acceptable valuation practice. Report), page 229 an allowance for developer’s profit and forecast of construction costs. (accounting policy) and Whilst comparable market transactions can provide valuation evidence, Benchmarking assumptions: We held discussions with the external valuer and challenged their page 236 (financial the flexible oce sector is still maturing and the unique nature of each assumptions used in valuing the investment properties including the market evidence used by disclosures). property means that a key factor in the property valuations are the them to support their assumptions. assumptions made by the external valuer. For a sample of properties selected using various criteria including analysis of the value of a Furthermore, each property valuation includes source data provided by property as well as correlation with movements in market rent, we evaluated and challenged the management and relied on as accurate by the external valuer, primarily appropriateness of the key assumptions upon which these valuations were based, including the database of tenancy contracts. For some properties, the relatively those relating to forecast market rents and yields, by making a comparison to our own short average lease length in the Workspace portfolio and reduced understanding of the market and to industry benchmarks. market comparable information for such flexible oce space means the external valuer is more reliant on tenancy data to support their market Retrospective review: We performed a retrospective review by comparing disposals during the rent assumptions than may be the case in other property sectors. year to the latest valuation performed and challenged management on material dierences. Therefore the valuation is more 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 lease contracts. The eect of these matters is that, as part of our risk assessment, we determined that the valuation of investment properties has a high For redevelopment properties, we assessed the future construction costs and agreed a sample degree of estimation uncertainty, with a potential range of reasonable of contractual costs to contracts. outcomes greater than our materiality for the financial statements as a whole, and possibly many times that amount. We assessed the completeness of the year end tenancy schedule and compared this to the post year end schedule. We challenged management on any material dierences in leases. We assessed the appropriateness of adjustments made by the external valuer to the tenancy data provided by management. For a sample of adjustments, we challenged the external valuer and assessed whether the adjustments were reasonable. Our results We found the resulting estimate of valuation of investment properties to be acceptable (2022: acceptable). 218 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WORKSPACE GROUP PLC CONTINUED The risk Our response Recoverability of Low risk, high value: We performed the tests below rather than seeking to rely on any of the Company’s controls Parent Company’s The carrying amount of the Parent Company’s investments in because the nature of the balance is such that we would expect to obtain audit evidence investments in subsidiaries represents 70.8% (2022: 66.6%) of the Company’s total primarily through the detailed procedures described. subsidiaries assets. Their recoverability is not at a high risk of significant misstatement or subject to significant judgement. However, due to Our procedures included: (£1,313.2 million; their materiality in the context of the Parent Company financial 2022: £929.8 million) statements, this is considered to be the area that had the greatest Test of detail: We compared the carrying amount of 100% of investments with the relevant eect on our overall Parent Company audit. subsidiaries’ prior year financial statements and current year draft balance sheets to identify Refer to page 159 whether their net assets, being an approximation of their recoverable amount, were in excess (Audit Committee of their carrying amount. Report), page 252 | (accounting policy) and | Our results | | --- | --- | | page 253 (financial | We found the Company’s conclusion that there is no impairment of its investments in | | disclosures). | subsidiaries to be acceptable (2022: acceptable). | 219 Workspace Group PLC Annual Report and Accounts 2022 Strategic Report Our Governance Financial Statements Additional Information # INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF WORKSPACE GROUP PLC CONTINUED # 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 £28.0 million (2022: £24.5 million), determined with reference to a benchmark of total Group Assets, of which it represents 0.99% (2022: 0.98%). Materiality for the Parent Company financial statements as a whole was set at £18.50 million (2022: £14.03 million), determined with reference to a benchmark of Company total assets, of which it represents 1% (2022: 1%). In addition, we applied materiality of £2.9 million (2022: £2.45 million) to certain components of adjusted 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. 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% (2022: 75%) of materiality for the financial statements as a whole, which equates to £21.0 million (2022: £18.4 million) for the Group and £13.8 million (2022: £10.52 million) 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 £1.40 million (2022: £1.23 million) for the Group and exceeding £0.93 million (2022: £0.70 million) for the Parent Company; or £0.15 million (2022: £0.12 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 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's internal control over financial reporting. # Total Group assets and Materiality TOTAL GROUP ASSETS £3,839/m (2022: £2,519m) GROUP MATERIALITY £28.0m (2022: £24.5m) ![img-13.jpeg](img-13.jpeg) 220 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 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 aect the liquidity, covenant compliance or In planning our audit we have considered the potential impacts availability of borrowings and debt refinancing in the going concern period by assessing the of climate change on the Group’s business and its financial degree of downside assumption that, individually and collectively, could result in a liquidity issue, statements. Climate change impacts the Group in a number of taking into account the Group’s current and projected cash and facilities (a reverse stress test). ways: – through its own operations (including potential reputational risk associated with the Group’s We assessed the completeness of the going concern disclosure. delivery of its climate related initiatives), – through its portfolio of investment properties and the greater emphasis on climate related Our conclusions based on this work: narrative and disclosure in the Annual Report. – we consider that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate; The Group’s main potential exposure to climate change in the financial statements is primarily – we have not identified, and concur with the directors’ assessment that there is not, a material through its investment properties as the key valuation assumptions and estimates may be impacted uncertainty related to events or conditions that, individually or collectively, may cast by climate risks. As part of our audit we have made enquiries of Directors and the Group’s significant doubt on the Group’s or Company’s ability to continue as a going concern for the Corporate Sustainability team to understand the extent of the potential impact of climate going concern period; change risk on the Group’s financial statements and the Group’s preparedness for this. We have – we have nothing material to add or draw attention to in relation to the directors’ statement in performed a risk assessment of how the impact of climate change may aect the financial the basis of preparation note in the financial statements on the use of the going concern basis statements and our audit, in particular with respect to the valuation of investment properties. of accounting with no material uncertainties that may cast significant doubt over the Group and Company’s use of that basis for the going concern period, and we found the going Given that these valuations are largely based on comparable market evidence we assessed that concern disclosure in the basis of preparation note to be acceptable; and the impact of climate change was not a significant risk for our audit nor does it constitute a key – the same statement is materially consistent with the financial statements and our audit knowledge. audit matter. We held discussions with our own climate change professionals to challenge our risk assessment. We have also read the Group’s disclosure of climate related information in the However, as we cannot predict all future events or conditions and as subsequent events may front half of the Annual Report as set out on pages 92 to 103, and considered consistency with result in outcomes that are inconsistent with judgements that were reasonable at the time they the financial statements and our audit knowledge. We have not been engaged to provide were made, the above conclusions are not a guarantee that the Group or the Company will assurance over the accuracy of these disclosures. continue in operation. 5. GOING CONCERN The directors have prepared the financial statements on the going concern basis as they do not 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 have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a going concern for at least a year from the date of approval of the financial statements (“the going concern period”). 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 aect 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 aect the Group’s and Company’s available financial resources, liquidity and covenant compliance over this period were: – A fall in customer demand as a result of economic downturn over the next two years and reduction in the like for like occupancy over the period of March 2024, with a gradual recovery by March 2028; – New lettings at below the average price per sq. ft. of vacating customers; – Higher levels of counterparty risk, with increased levels of bad debt; – Higher level of cost inflation. 221 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 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 Identifying and responding to risks of material misstatement due to fraud with laws and regulations To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or We identified areas of laws and regulations that could reasonably be expected to have a conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity material eect on the financial statements from our general commercial and sector experience, to commit fraud. Our risk assessment procedures included: through discussion with the directors and other management (as required by auditing – Enquiring of directors and inspection of policy documentation as to the Group’s high-level standards), and discussed with the directors the policies and procedures regarding compliance policies and procedures to prevent and detect fraud, including the Group’s channel for 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 committee any indications of noncompliance throughout the audit. meetings. – Considering remuneration incentive schemes and performance targets for management, The potential eect of these laws and regulations on the financial statements varies considerably. including total shareholder return, total property return compared to IPD and growth in trading profit after interest targets for management remuneration. Firstly, the Group is subject to laws and regulations that directly aect the financial statements including financial reporting legislation (including related companies legislation), distributable We communicated identified fraud risks throughout the audit team and remained alert to any profits legislation and taxation legislation (including conditions to maintain UK Real Estate indications of fraud throughout the audit. Investment Trust (“REIT”)) status in accordance with the REIT regime) and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related As required by auditing standards, and taking into account possible pressures to meet profit financial statement items. targets and our overall knowledge of the control environment, we perform procedures to address the risk of management override of controls, in particular the risk that Group Secondly, the Group is subject to many other laws and regulations where the consequences management may be in a position to make inappropriate accounting entries and the risk of bias of non-compliance could have a material eect on amounts or disclosures in the financial in accounting estimates and judgements such as significant assumptions used in the valuation of statements, for instance through the imposition of fines or litigation. We identified the following investment properties, including estimated rental values and market based yields. On this audit areas as those most likely to have such an eect: landlord and tenant legislation, property laws we do not believe there is a fraud risk related to revenue recognition because of the relative and building legislation, environmental and sustainability legislation and certain aspects of simplicity of revenue streams. We did not identify any additional fraud risks. company legislation recognising the financial nature of the Group’s activities and its legal form. We performed procedures including: Auditing standards limit the required audit procedures to identify non-compliance with these – Identifying journal entries and other adjustments to test based on risk criteria and comparing laws and regulations to enquiry of the directors and other management and inspection of the identified entries to supporting documentation. These included those with unusual regulatory and legal correspondence, if any. Therefore if a breach of operational regulations is account combinations. not disclosed to us or evident from relevant correspondence, an audit will not detect that – Assessing whether the judgements made in making accounting estimates are indicative breach. of a potential bias. Context of the ability of the audit to detect fraud or breaches of law or regulation Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed noncompliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by 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 noncompliance with all laws and regulations. 222 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 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 AND ACCOUNTS during our financial statements audit. As we cannot predict all future events or conditions and The directors are responsible for the other information presented in the Annual Report together as subsequent events may result in outcomes that are inconsistent with judgements that were with the financial statements. Our opinion on the financial statements does not cover the other reasonable at the time they were made, the absence of anything to report on these statements information and, accordingly, we do not express an audit opinion or, except as explicitly stated is not a guarantee as to the Group’s and Company’s longer-term viability. below, any form of assurance conclusion thereon. Corporate governance disclosures Our responsibility is to read the other information and, in doing so, consider whether, based on We are required to perform procedures to identify whether there is a material inconsistency our financial statements audit work, the information therein is materially misstated or between the directors’ corporate governance disclosures and the financial statements and our inconsistent with the financial statements or our audit knowledge. Based solely on that work we audit knowledge. have not identified material misstatements in the other information. Based on those procedures, we have concluded that each of the following is materially Strategic report and directors’ report consistent with the financial statements and our audit knowledge: Based solely on our work on the other information: – the directors’ statement that they consider that the annual report and financial statements – we have not identified material misstatements in the strategic report and the directors’ report; taken as a whole is fair, balanced and understandable, and provides the information necessary – in our opinion the information given in those reports for the financial year is consistent with for shareholders to assess the Group’s position and performance, business model and the financial statements; 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 eectiveness 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 on page 87 that they have carried out 8. WE HAVE NOTHING TO REPORT ON THE OTHER MATTERS ON WHICH WE ARE REQUIRED a 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 Principal Risks and Uncertainties disclosures describing these risks and how emerging risks – adequate accounting records have not been kept by the Parent Company, or returns adequate are 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 87 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. 223 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF WORKSPACE GROUP PLC CONTINUED 9. RESPECTIVE RESPONSIBILITIES 10. THE PURPOSE OF OUR AUDIT WORK AND TO WHOM WE OWE OUR RESPONSIBILITIES Directors’ responsibilities This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 As explained more fully in their statement set out on page 215, the directors are responsible for: of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might the preparation of the financial statements including being satisfied that they give a true and fair state to the Company’s members those matters we are required to state to them in an auditor’s view; such internal control as they determine is necessary to enable the preparation of financial report and for no other purpose. To the fullest extent permitted by law, we do not accept or statements that are free from material misstatement, whether due to fraud or error; assessing assume responsibility to anyone other than the Company and the Company’s members, as a the Group and Parent Company’s ability to continue as a going concern, disclosing, as body, for our audit work, for this report, or for the opinions we have formed. 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 Bano Sheikh (Senior Statutory Auditor) Our objectives are to obtain reasonable assurance about whether the financial statements as for and on behalf of KPMG LLP, Statutory Auditor a whole are free from material misstatement, whether due to fraud or error, and to issue our Chartered Accountants opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not 15 Canada Square guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material London, E14 5GL misstatement when it exists. Misstatements can arise from fraud or error and are considered 6 June 2023 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. The Company is required to include these financial statements in an annual financial report prepared using the single electronic reporting format specified in the TD ESEF Regulation. This auditor’s report provides no assurance over whether the annual financial report has been prepared in accordance with that format. 224 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### CONSOLIDATED INCOME STATEMENT CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2023 FOR THE YEAR ENDED 31 MARCH 2023 | | | 2023 | 2022 | | | 2023 | 2022 | | --- | --- | --- | --- | --- | --- | --- | --- | | | Notes | £m | £m | | Notes | £m | £m | | Revenue 1 17 4.2 132.9 | | | | (Loss)/profit for the financial year (37 .8) 123.9 | | | | 1 | Direct costs | 1 (57 .6) (46.2) | Other comprehensive income: | | --- | --- | --- | | Net rental income 1 116.6 86. 7 | | Items that may be reclassified subsequently to profit | | Administrative expenses 2 (21.5) (19.3) | | or loss: | | Trading profit 9 5 .1 6 7. 4 | | Change in fair value of other investments 0. 4 – | Fair value of investments recycled to retained earnings – 2 .1 Cash flow hedge – transfer to income statement – (0.3) (Loss)/profit on disposal of investment properties 3(a) (0.7) 7. 8 Items that will not be reclassified subsequently to profit Other income 3(b) – 0.6 or loss: Other expenses 3(c) (3.8) – Pension fund movement 24 0. 9 – Change in fair value of investment properties 10 (88.0) 68.7 Other comprehensive income in the year 1.3 1.8 Impairment of assets held for sale 10 (5. 1) – Total comprehensive (loss)/income for the year (36.5) 125.7 Operating (loss)/profit (2.5) 144.5 The notes on pages 227 to 250 form part of these financial statements. Finance costs 4 (34.4) (20.5) Exceptional finance costs 4 (0.6) – (Loss)/profit before tax (37 .5) 124.0 Taxation 6 (0 .3) (0. 1) (Loss)/profit for the financial year after tax (37 .8) 123.9 Basic (loss)/earnings per share 8 (19.9p) 68.5p Diluted (loss)/earnings per share 8 (19 .9p) 68. 1p 1. Direct costs in 2023 includes impairment of receivables of £1. 1m (2022: £1.5m). See note 1 for additional information. 225 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### CONSOLIDATED BALANCE SHEET AS AT 31 MARCH 2023 | | | | 2023 | 2022 | | | 2023 | 2022 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Notes | | £m | £m | | Notes | £m | £m | | Non-current assets | | | | | Shareholders’ equity | | | | | Investment properties 10 2,643.3 2,366.7 | | | | | Share capital 20 191.6 181. 1 | | | | | Intangible assets 2.0 1.9 | | | | | Share premium 20 295.5 295.5 | | | | | Property, plant and equipment 11 4.4 2.9 | | | | | Investment in own shares 22 (9.9) (9.9) | | | | | Other investments 12 2 .1 1 .7 | | | | | Other reserves 21 91.0 32.6 | | | | | Deferred tax 6 – 0.3 | | | | | Retained earnings 1,219.5 1,300.3 | | | | | | | 2,651.8 2,37 3.5 | | | Total shareholders’ equity 1,787.7 1, 799.6 | | | | The notes on pages 227 to 250 form part of these financial statements. Current assets Trade and other receivables 13 45.8 23.5 The financial statements on pages 224 to 250 were approved and authorised for issue by the Assets held for sale 123.0 65.9 Board of Directors on 6 June 2023 and signed on its behalf by: Cash and cash equivalents 14 18.5 49.0 187 .3 138.4 Total assets 2,839. 1 2,511.9 Graham Clemett Dave Benson Current liabilities Director Director Trade and other payables 15 (107 .8) (85.8) Borrowings 16(a) (49.8) – Company registration number – 02041612 (157 .6) (85.8) Non-current liabilities Borrowings 16(a) (859. 1) (595.5) Lease obligations 17 (34.7) (31.0) (893.8) (626.5) Total liabilities (1,051.4) (712.3) Net assets 1,787.7 1, 799.6 226 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 MARCH 2023 FOR THE YEAR ENDED 31 MARCH 2023 Attributable to owners of the Parent 2023 2022 Notes £m £m Total | | | | Investment | | | | | | share- | | Cash flows from operating activities | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Share | Share | | in own | | Other | Retained | | holders’ | | | | | capital | premium | | shares | | reserves | earnings | | equity | | Cash generated from operations 19 110.5 80.5 | | Notes | £m | £m | | | £m | £m | | £m | | £m | | Interest paid (31.7) (22.6) Balance at 31 March 2021 181. 1 295.5 (9.6) 33. 1 1,219.4 1,719.5 Net cash inflow from operating activities 78.8 5 7. 9 Profit for the financial year – – – – 123.9 123.9 Other comprehensive Cash flows from investing activities income for the year – – – – 1.8 1.8 Purchase of investment properties (184.4) (88.4) Total comprehensive Capital expenditure on investment properties (56.2) (29.8) income – – – – 125. 7 125.7 Proceeds from disposal of investment properties Transactions with owners: (net of sale costs) 7. 1 117 .3 Purchase of own shares 22 – – (0.3) – – (0.3) Proceeds from disposal of assets held for sale (net of Dividends paid 7 – – – – (44.8) (44.8) sale costs) 41.4 – Share based payments 23 – – – 1.6 – 1.6 Purchase of intangible assets (0.8) (0.5) Recycled OCI to retained Purchase of property, plant and equipment (3. 1) (0.7) earnings 21 – – – (2. 1) – (2. 1) Other (expenses)/income (2.9) 4.5 Balance at 31 March 2022 181. 1 295.5 (9.9) 32.6 1,300 .3 1,7 99.6 Settlement of defined benefit pension scheme (1.3) – Loss for the financial year – – – – (3 7 .8) (3 7 .8) Proceeds from sale of investments 3(b)/12 – 6.8 Other comprehensive Net cash (outflow)/inflow from investing activities (200 .2) 9.2 income for the year – – – 0. 4 0.9 1.3 Total comprehensive Cash flows from financing activities income – – – 0.4 (36.9) (36.5) Finance costs for new/amended borrowing facilities (1.6) (1.3) Transactions with owners: Exceptional finance costs – (16.4) Shares issued 20 10.5 – – 56.6 – 6 7. 1 Settlement of derivative financial instruments – 0.7 Dividends paid 7 – – – – (43.9) (43.9) Repayment of bank borrowings and Private Share based payments 23 – – – 1.4 – 1.4 Placement Notes 16(g) (150.0) (17 3.5) Balance at 31 March 2023 191.6 295.5 (9.9) 91. 0 1,219.5 1,787.7 Draw down of bank borrowings 16(g) 286. 0 25.0 Own shares purchase (net) – (0 .3) The notes on pages 227 to 250 form part of these financial statements. Dividends paid 7 (43.5) (43.3) Net cash inflow/(outflow) from financing activities 90.9 (209. 1) Net decrease in cash and cash equivalents (30.5) (142.0) Cash and cash equivalents at start of year 14 49.0 191.0 Cash and cash equivalents at end of year 14 18.5 49.0 The notes on pages 227 to 250 form part of these financial statements. 227 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information ## NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2023 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 presentational currency, and have been prepared and approved by the Directors on a going concern basis, in accordance with United Kingdom adopted international accounting standards. The Company has elected to prepare its Parent Company financial statements in accordance with FRS101; these are presented on pages 251 to 254. The Board is required to assess the appropriateness of applying the going concern basis in the preparation of the financial statements. Macroeconomic and political issues, including the war in Ukraine, have heightened wider concerns around the UK economy meaning there is a continuing risk of an economic downturn. In this context, the Directors have fully considered the business activities and principal risks of the Company and Group. Further details of the principal risks can be found on pages 69 to 76. In preparing the assessment of going concern, the Board has reviewed a number of different scenarios over the 12-month period from the date of signing of these financial statements. These scenarios include a severe, but realistically possible, scenario which includes the following key assumptions: - A reduction in occupancy, reflecting weaker customer demand for office space. - A reduction in the pricing of new lettings, resulting in a reduction in average rent per sq. ft. - Elevated levels of counterparty risk, with bad debt significantly higher than pre-pandemic levels. - Continued elevated levels of cost inflation. - Further increases in SONIA rates impacting the cost of variable rate borrowings. - Estimated rental value reduction in-line with the decline in average rent per sq. ft. and outward movement in investment yields resulting in a lower property valuation. The appropriateness of the going concern basis is reliant on the continued availability of borrowings, sufficient liquidity and compliance with loan covenants. All 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 36% compared to the March 2023 Net Rental Income and a fall in the asset valuation of 42% compared to 31 March 2023 before these covenants are breached, assuming no mitigating actions are taken. As at 31 March 2023, the Company had significant headroom with £150.0m of cash and undrawn facilities. The majority of the Group's debt is long-term fixed-rate committed facilities comprising a £300.0m green bond, £300.0m of private placement notes, and a £65.0m secured loan facility. Shorter-term liquidity and flexibility is provided by floating-rate bank facilities which comprise £335.0m of sustainability-linked revolving credit facilities (RCFs), £2.0m overdraft facility and £50.0m of facilities put in place for the acquisition of McKay Securities (formerly McKay Securities PLC) which matures in September 2023. The RCF facilities comprise £135.0m due in April 2025 and £200.0m due in December 2025, with both facilities having the potential to extend by a further year. The £200.0m RCF also has the option to increase the facility amount by up to £100.0m, subject to lender consent. For the full period of assessment under the scenarios tested, the Group maintains sufficient headroom in its cash and loan facilities. Consequently, the Directors have a reasonable expectation 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 the financial statements have been prepared on a going concern basis. ### Consideration of climate change In preparing the financial statements, the Directors have considered the impact of climate change, particularly in the context of the risks identified in the TCFD disclosure on pages 92 to 103 this year. There has been no material impact identified on the financial reporting judgements and estimates. In particular, the Directors considered the impact of climate change in respect of the following areas: - The potential impact on the valuation of our investment properties due to transition risks; - Going concern and viability of the Group over the next three years; - The capital expenditure required to upgrade our assets EPC ratings and deliver our net zero targets. Whilst there is currently minimal medium-term impact expected from climate change, the Directors are aware of the ever-changing risks attached to climate change and will regularly assess these risks against judgements and estimates made in preparation or the Group's financial statements. 228 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED NEW ACCOUNTING STANDARDS, AMENDMENTS AND GUIDANCE a) During the year to 31 March 2023 the Group adopted the following accounting standards and guidance: IFRS Standards 2018-2020 Annual Improvements to IFRS Standards 2018-2020 IAS 37 (amended): Onerous Contracts Cost of Fulfilling a Contract IAS 16 (amended) Property, Plant and Equipment – Proceeds before Intended Use IFRS 3 (amended) Reference to the Conceptual Framework There was no material impact from the adoption of these accounting standard amendments on the financial statements. b) The following accounting standards and guidance are not yet eective not yet effective but are not expected to have a significant impact on the Group’s financial statements or result in changes to presentation and disclosure only. They have not been adopted early by the Group: IAS 12 (amended) Deferred Tax related to Assets and Liabilities arising from a Single Transaction IAS 8 (amended) Accounting Policies, Changes in Accounting Estimates and Errors: Definition IAS 1 (amended) and IFRS Practice Statement 2 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements IFRS 17 Insurance Contracts IFRS 9 Comparative Information IAS 1 (amended) Classification of Liabilities as Current or Non-Current; Non-Current Liabilities with Covenants; Deferral of EectEffective Date Amendment IFRS 16 (amended) Lease Liability in a Sale and Leaseback SIGNIFICANT JUDGEMENTS AND CRITICAL ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and judgements that aect the reportt affect the reported amounts of assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results ultimately may dier from those estimay differ from those estimates. The Group’s significant accounting policies are stated below. Not all of these accounting policies require management to make subjective or complex judgements or significant estimates. The following is intended to provide an understanding of the significant estimates within the accounting policies that management consider critical because of the assumptions or estimation involved in their application and their impact on the consolidated financial statements. Critical Estimate: Investment property valuation The Group uses the valuation performed by its independent valuer as the fair value of its investment properties. The valuation is based upon the key assumptions of estimated rental values and market-based yields. With regard to redevelopments and refurbishments, future development costs and an appropriate discount rate are also used. In determining fair value, the valuers make reference to market evidence and recent transaction prices for similar properties. 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. Significant Judgement: McKay Securities acquisition IFRS 3: Business Combinations outlines a series of steps to establish whether a company purchase is an asset acquisition or a business combination. The Group considered whether substantially all of the fair value of the gross assets acquired were concentrated in a single asset or group of similar assets and reviewed the relevant criteria to determine whether there were substantive processes present at the point of acquisition. Following this review, the Group concluded that the transaction should be treated as an asset acquisition, refer to note 10. Accordingly, no goodwill or additional deferred tax relating to pre-acquisition valuation gains arises. 229 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented unless stated otherwise. Basis of consolidation The consolidated financial statements include the financial statements of the Company and all its subsidiary undertakings up to 31 March 2023. Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to aect those rability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group until the date that control ceases. A list of subsidiaries has been disclosed in note 27. Inter-company transactions, balances and unrealised gains from intra-group transactions are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Investment properties Investment properties are those properties owned or leased by the Group that are held either to earn rental income or for capital appreciation, or both, and are not occupied by the Company or subsidiaries of the Group. Investment property is measured initially at cost, including related transaction costs. After initial recognition, investment property is held at fair value based on a valuation by an independent professional external valuer at each reporting date. The valuation methods and key assumptions applied are explained in note 10. Changes in fair value of investment property at each reporting date are recorded in the consolidated income statement. Investment properties acquired under leases are capitalised at the lease’s commencement at the lower of the fair value of the leased property and the net present value of the minimum lease payments. The investment properties acquired under leases are subsequently carried at fair value plus an adjustment for the carrying amount of the lease obligation. The corresponding rental obligations, net of finance charges, are included in current and non-current borrowings. Each lease payment is allocated between liability and finance charges so as to achieve a constant rate on the outstanding finance balance. The interest element of the finance cost is charged to the consolidated income statement. Properties are treated as acquired at the point which the Group assumes the significant risks an1wards of ownership and are treated as disposed when they are transferred outside of the Group’s control. Existing investment properties which undergo redevelopment and refurbishment for continued future use remain in investment property where the purpose of holding the property continues to meet the definition of investment property as defined above. Subsequent expenditure is charged to the asset’s carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Group, and the cost of each item can be reliably measured. Certain internal sta cosertain internal staff costs directly attributable to capital/redevelopment projects are capitalised. All other repairs and maintenance costs are charged to the consolidated income statement during the period in which they are incurred. Capitalised interest on refurbishment/redevelopment expenditure is added to the asset’s carrying amount. Capitalised borrowing costs are calculated by reference to the actual interest rate payable on borrowings or, if financed out of general borrowings, by reference to the average rate payable on funding the assets employed by the Group and applied to the direct redevelopment expenditure. Interest is capitalised from the date of commencement of the redevelopment activity until the date when all the activities necessary to prepare the asset for its intended use are substantially complete. Investment properties are recognised as ‘assets held for sale’ when it is considered highly probable that sale completion will take place. This is assumed when the property has been actively marketed for a buyer, supported by either the exchange of a contract or agreement of terms with a buyer by the balance sheet date and it is highly probable that its carrying amount will be recovered within one year. Income from the sale of assets is recognised when the significant risks and returns have been transferred to the buyer. In the case of sales of properties this is generally taken on completion of the contract. In the case of a part disposal agreement, the part of the asset being disposed will be derecognised from investment property when completion is reached or when a lease agreement is signed (i.e. when the risks and rewards of this part of the site transfer to the developer). Profit or loss on disposal is calculated as the consideration receivable (net of costs) less the latest valuation (net book value) and is shown in other income/expense. Consideration can take the form of cash, new commercial buildings and a right to future overage (generally being a share in the proceeds of any future sale of the residential development to be constructed by the developer). Revenue is recognised in the period when all relevant criteria in IFRS 15 are met under the five-step model. Consideration (including overage) is measured at the fair value of the consideration received/ receivable. Commercial property to be received is fair valued using the residual method described in note 10 and is included in investment property. Changes in fair value are recognised through the consolidated income statement in accordance with IAS 40. 230 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED Overage is only recognised once an agreement has been signed with a residential developer. Overage represents a financial asset and is designated as a financial asset at fair value through profit or loss upon initial recognition. The carrying value of overage is assessed at each period end and changes in fair value are taken to other income/expense. Acquisitions An acquisition is recognised when the risks and rewards of ownership have transferred, usually on completion of the transaction. The acquisition method measures assets based on their cost, which is allocated to the property assets on a fair value basis, and includes directly related acquisition costs. Business combinations are accounted for using the acquisition method. Any discount received or acquisition-related costs are recognised in the consolidated income statement. Intangible assets Intangible assets are stated at historical cost, less accumulated amortisation. Acquired computer software licences and external costs of implementing or developing computer software programmes and websites are capitalised. These costs are amortised over the asset’s estimated useful life of five years on a straight-line basis. Costs associated with maintaining computer software programmes including Software as a Service (SaaS) are recognised as an expense as they fall due. Property, plant and equipment Equipment and fixtures are stated at historical purchase cost less accumulated depreciation and impairment. Historical cost includes the original purchase price of the asset and the costs attributable to bringing the asset to working condition for its intended use. Subsequent expenditure is charged to the asset’s carrying amount or recognised as a separate asset only when it is probable that future economic benefits associated with the expenditure will flow to the Group and the cost of each item can be reliably measured. All other repairs and maintenance costs are charged to the consolidated income statement during the period in which they are incurred. Depreciation is provided using the straight-line method to allocate the cost less estimated residual value over the assets’ estimated useful lives which range from four to ten years. The assets’ residual values and useful lives are reviewed and adjusted, if appropriate, at least at each financial year end. An asset’s carrying amount is written down immediately to its recoverable amount if its carrying amount is greater than its estimated recoverable amount. Other investments Investments in unlisted shares are accounted for under IFRS 9 at fair value, using a valuation multiple and financial information. Changes in fair value are shown in the consolidated statement of comprehensive income. Trade and other receivables 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 lifetime expected loss allowance for all trade receivables based on the individual occupier’s circumstance. The amount of the provision is the dierencvision is the difference between the asset’s carrying amount and the present value of estimated future cash flows. The provision is recorded in the consolidated income statement. Deferred consideration on the disposal of investment properties is included within trade and other receivables. It is fair valued on recognition and at each year end with any movement taken to other expense. Trade and other payables Trade and other payables are initially recognised at fair value and subsequently held at amortised cost. Cash and cash equivalents Cash is represented by cash in hand, restricted cash in the form of tenants’ deposit deeds and deposits held on call with banks and money market funds. Cash equivalents are highly liquid investments that mature in no more than three months from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value. Bank overdrafts are included in current liabilities but within cash and cash equivalents for the purpose of the consolidated cash flow statement. Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost, with any dit amortised cost, with any difference between the initial amount (net of transaction costs) and the redemption value being recognised in the income statement over the period of the borrowings, using the eectivwings, using the effective interest method, except for interest capitalised on redevelopments. Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Investment in own shares The Group operates an Employee Share Ownership Trust (‘ESOT’) and a trust for the Share Incentive Plan (‘SIP’). When the Group funds these trusts in order to purchase Company shares, the loan is deducted from shareholders’ equity as investment in own shares. 231 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED Operating segments Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker is the person or group that allocates resources to and assesses the performance of the operating segments of an entity. The Group has determined that its chief operating decision maker is the Executive Committee of the Company. As at 31 March 2023, the Group considers that it has only one operating segment, being a single portfolio of commercial property providing business accommodation for rent in and around London. Revenue recognition Revenue comprises rental income, service charges and other sums receivable from the Group’s 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 sundry income. All the Group’s properties are leased out under operating leases and are included in investment property in the consolidated balance sheet. In accordance with IFRS 16, rental income from leases is recognised in the consolidated income statement on a straight-line basis over the lease term. Rent received in advance is deferred in the consolidated balance sheet and recognised in the period to which it relates. If the Group provides significant incentives to its customers the incentives are recognised over the lease term on a straight-line basis. Service charges and other sums receivable from tenants are recognised on an accruals basis by reference to the stage of completion of the relevant service or transactions at the reporting date. These services generally relate to a 12-month period. Direct costs Direct costs comprise service charges and other costs directly recoverable from tenants and non-recoverable costs directly attributable to investment properties and other revenue streams. Exceptional items Exceptional items are those items that, in the Directors’ view, are required to be separately disclosed by virtue of their size or incidence to enable a full understanding of the Group’s financial performance. Share based payments The Group operates a number of share schemes under which the Group receives services from employees as consideration for equity instruments of the Company. The fair value of the employee services received in exchange for the grant of share awards and options is recognised as an expense over the vesting period. Fair value is measured by the use of Black-Scholes and Binomial Option Pricing modelling techniques. In valuing equity-settled transactions, assessment is made of any vesting conditions to categorise these into market performance conditions, non-market performance conditions and service conditions. Pensions The Group operates a defined contribution pension scheme. Contributions are charged to the consolidated income statement on an accruals basis. As part of the McKay Securities PLC acquisition in May 2022 the Group took over all responsibilities in relation to the existing McKay defined benefit pension scheme. Subsequent to this, the Group entered into a pension buy-out transaction whereby an insurance company took on all current and future liabilities of this defined benefit pension scheme, along with related assets. Taxation Current income tax is tax payable on the taxable income for the year and any prior year adjustment, and is calculated using tax rates that are relevant to the financial year. Deferred tax is provided in full on temporary divided in full on temporary differences between the tax base of an asset or liability and its carrying amount in the balance sheet. Deferred tax is determined using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised when it is probable that taxable profits will be available against which the deferred tax asset can be utilised. Compliance with the Real Estate Investment Trust (‘REIT’) taxation regime The Group is a REIT and is thereby exempt from tax on both rental profits and chargeable gains from its UK property rental business. In order to retain REIT status, certain ongoing criteria must be maintained. The main criteria are as follows: – At the start of each accounting period, the assets of the tax-exempt business must be at least 75% of the total value of the Group’s assets. – At least 75% of the Group’s total profits must arise from the tax-exempt business. – At least 90% of the tax-exempt business earnings must be distributed. Dividend distributions Final dividend distributions to the Company’s shareholders are recognised as a liability in the Group’s financial statements in the period in which the dividends are approved, while interim dividends are recognised when paid. 232 Workspace Group PLC^{}[] Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information # NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 MARCH 2023 CONTINUED # 1. ANALYSIS OF NET RENTAL INCOME AND SEGMENTAL INFORMATION | | 2023 | | | 2022 | | | | --- | --- | --- | --- | --- | --- | --- | | | Revenue £m | Direct costs/ £m | Net rental income £m | Revenue £m | Direct costs/ £m | Net rental income £m | | Rental income | 136.7 | (4.2) | 132.5 | 104.3 | (2.9) | 101.4 | | Service charges | 30.0 | (35.7) | (5.7) | 21.1 | (25.9) | (4.8) | | Empty rates and other non-recoverable costs | - | (10.6) | (10.6) | - | (10.6) | (10.6) | | Services, fees, commissions and sundry income | 7.5 | (7.1) | 0.4 | 7.5 | (6.8) | 0.7 | | | 174.2 | (57.6) | 116.6 | 132.9 | (46.2) | 86.7 | 1. There are no properties within the current or prior period that are non-rent producing. Included within direct costs for rental income is a charge of £1.0m (2022: £1.5m) and within direct costs for service charges is a charge of £0.3m (2022: £nil) for expected credit losses in respect of receivables from customers in the period. All of the properties within the portfolio are geographically close to each other and have similar economic features and risks. Management information utilised by the Executive Committee to monitor and review performance is presented as one portfolio. As a result, for the year ended 31 March 2023, management have determined that the Group operates a single operating segment providing business accommodation for rent in and around London. # 2. OPERATING (LOSS)/PROFIT The following items have been charged in arriving at operating (loss)/profit: | | 2023 £m | 2022 £m | | --- | --- | --- | | Depreciation^{1} (note 11) | 1.6 | 1.8 | | Staff costs (including share based costs)^{1} (note 5) | 25.3 | 19.6 | | Repairs and maintenance expenditure on investment properties | 5.4 | 2.0 | | Trade receivables impairment (note 13) | 1.1 | 1.5 | | Amortisation of intangibles | 0.7 | 0.9 | | Audit fees payable to the Company's Auditor | 0.4 | 0.3 | 1. Charged to direct costs and administrative expenses based on the underlying nature of the expenses. | Auditor's remuneration: services provided by the Company's Auditor and its associates | 2023 £000 | 2022 £000 | | --- | --- | --- | | **Audit fees:** | | | | Audit of Parent Company and consolidated financial statements | 330 | 245 | | Audit of subsidiary financial statements | 40 | 35 | | | 370 | 280 | | **Fees for other services:** | | | | Audit-related assurance services^{1} | 70 | 55 | | Total fees payable to Auditor | 440 | 335 | 1. Audit-related assurance services consist of £56k for half year review (2022: £40k), and £14k for Green Bond use of Proceeds Assurance (2022: £15k). | | 2023 £m | 2022 £m | | --- | --- | --- | | **Total administrative expenses are analysed below:** | | | | Staff costs | 13.4 | 10.7 | | Equity settled share based payments | 1.4 | 1.6 | | Other | 6.7 | 7.0 | | Total administrative expenses | 21.5 | 19.3 | # 3(a). (LOSS)/PROFIT ON DISPOSAL OF INVESTMENT PROPERTIES AND ASSETS HELD FOR SALE | | 2023 £m | 2022 £m | | --- | --- | --- | | Proceeds from sale of investment properties (net of sale costs) | 70 | 117.3 | | Proceeds from sale of assets held for sale (net of sale costs) | 52.1 | - | | Book value at time of sale | (59.8) | (109.5) | | (Loss)/profit on disposal | (0.7) | 7.8 | # 3(b). OTHER INCOME | | 2023 £m | 2022 £m | | --- | --- | --- | | Sale of investment | - | 0.6 | | | - | 0.6 | In the prior year, the Group disposed of the investment in Lovespace Ltd, resulting in a gain of £0.6m in the year. 233 Workspace Group PLC^{}[] Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information # NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 MARCH 2023 CONTINUED # 3(c). OTHER EXPENSES | | 2023 £m | 2022 £m | | --- | --- | --- | | Change in fair value of deferred consideration | (0.1) | - | | Other expenses | (3.7) | - | | | (3.8) | - | The value of deferred consideration (cash and overage) from the sale of investment properties has been revalued by CBRE Limited at 31 March 2023 and 31 March 2022. This resulted in a reduction in the fair value of deferred consideration of £0.1m at 31 March 2023 (31 March 2022: £nil). The amounts receivable are included in the consolidated balance sheet under current trade and other receivables (note 13). Other expenses include exceptional one-off costs relating to the acquisition and integration of McKay Securities Limited (formerly McKay Securities PLC) (£1.9m), including the cost of buying out the McKay Securities Limited defined benefit pension scheme (see note 24) and the implementation costs to date of replacing our finance and property system (£1.8m). These costs are outside the Group's normal trading activities. # 4. FINANCE COSTS | | 2023 £m | 2022 £m | | --- | --- | --- | | Interest payable on bank loans and overdrafts | (11.9) | (1.4) | | Interest payable on other borrowings | (19.0) | (16.7) | | Amortisation of issue costs of borrowings | (2.0) | (1.1) | | Interest payable on leases | (1.9) | (1.7) | | Interest capitalised on property refurbishments (note 10) | 0.2 | 0.4 | | Interest receivable | 0.2 | - | | **Finance costs** | **(34.4)** | **(20.5)** | | Exceptional finance costs | (0.6) | - | | **Total finance costs** | **(35.0)** | **(20.5)** | The exceptional finance costs in the year related to unamortised finance costs for McKay Securities Limited's previous bank loan which were written off when this was refinanced in September 2022. All finance costs have been calculated in accordance with IFRS 9, re-estimating the cash flows based on the original effective interest rate with the adjustment being taken through profit and loss. # 5. EMPLOYEES AND DIRECTORS | Staff costs for the Group during the year were: | 2023 £m | 2022 £m | | --- | --- | --- | | Wages and salaries | 23.3 | 17.4 | | Social security costs | 3.8 | 2.0 | | Other pension costs (note 24) | 1.0 | 0.8 | | Equity-settled share based costs (note 23) | 1.4 | 1.6 | | | 29.5 | 21.8 | | Less costs capitalised | (4.2) | (2.2) | | | 25.3 | 19.6 | | The monthly average number of people employed during the year was: | 2023 Number | 2022 Number | | --- | --- | --- | | Head office staff (including Directors) | 154 | 124 | | Estates and property management staff | 137 | 125 | | | 291 | 249 | The emoluments and pension benefits of the Directors are determined by the Remuneration Committee of the Board and are set out in detail in the Directors' Remuneration Report on pages 178 to 211. These form part of the financial statements. Total Directors' emoluments for the financial year were £3.0m (2022: £2.3m), comprising of £2.2m (2022: £2.2m) of Directors' remuneration, £0.7m (2022: £nil) gain on exercise of share options and £0.1m (2022: £0.1m) of cash contributions in lieu of pension in respect of two Directors (2022: two). # 6. TAXATION | | 2023 £m | 2022 £m | | --- | --- | --- | | **Current tax:** | | | | UK corporation tax | - | - | | Adjustments to tax in respect of previous periods | - | - | | | - | - | | **Deferred tax:** | | | | On origination and reversal of temporary differences | 0.3 | 0.1 | | | 0.3 | 0.1 | | Total taxation charge | 0.3 | 0.1 | Taxation chargeable in the year relates to income from non-REIT activities such as overage, meeting room income and utilities recharges. 234 Workspace Group PLC^{}[] Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information # NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 MARCH 2023 CONTINUED # 6. TAXATION CONTINUED The tax on the Group's profit for the year differs from the standard applicable corporation tax rate in the UK of 19% (2022: 19%). The differences are explained below: | | 2023 £m | 2022 £m | | --- | --- | --- | | (Loss)/profit before taxation | (37.5) | 124.0 | | Tax at standard rate of corporation tax in the UK of 19% (2022: 19%) | (7.1) | 23.6 | | Effects of: | | | | REIT exempt income | (12.1) | (11.3) | | Changes in fair value not subject to tax as a REIT | 17.7 | (13.1) | | Share based payment adjustments | (0.3) | 0.4 | | Unrecognised losses carried forward | 1.8 | 0.4 | | Other non-taxable expenses | 0.3 | 0.1 | | Total taxation charge | 0.3 | 0.1 | The Group is a Real Estate Investment Trust ("REIT"). The Group's UK property rental business (both income and capital gains) is exempt from tax. The Group estimates that as the majority of its future profits will be exempt from tax, future tax charges are likely to be low. 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 charge accordingly. The Group currently has an unrecognised asset in relation to tax losses from the non-REIT business carried forward of £7.4m (2022: £7.3m) calculated at a corporation tax rate of 25% (2022: 25%). | | 2023 £m | 2022 £m | | --- | --- | --- | | **Deferred tax assets:** | | | | - Deferred tax to be recovered within 12 months | - | 0.4 | | **Deferred tax liabilities:** | | | | - Deferred tax liabilities to be realised within 12 months | - | (0.1) | | **Deferred tax assets (net)** | - | 0.3 | The movement in deferred tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows: | | Other income (average receipts) £m | | --- | --- | | Deferred tax liabilities | | | At 1 April 2021 | 0.1 | | Credited to income statement | - | | At 31 March 2022 | 0.1 | | Credited to income statement | (0.1) | | **At 31 March 2023** | - | | | Expense (share based payment) £m | | --- | --- | | Deferred tax assets | | | At 31 March 2021 | (0.5) | | Charged to income statement | 0.1 | | At 31 March 2022 | (0.4) | | Charged to income statement | 0.4 | | **At 31 March 2023** | - | # 7. DIVIDENDS | | Payment date | Per share | 2023 £m | 2022 £m | | --- | --- | --- | --- | --- | | For the year ended 31 March 2021: | | | | | | Final dividend | August 2021 | 17.75p | - | 32.1 | | For the year ended 31 March 2022: | | | | | | Interim dividend | February 2022 | 7.0p | - | 12.7 | | Final dividend | August 2022 | 14.5p | 27.8 | - | | For the year ended 31 March 2023: | | | | | | Interim dividend | February 2023 | 8.4p | 16.1 | - | | Dividends for the year | | | 43.9 | 44.8 | | Timing difference on payment of withholding tax | | | (0.4) | (1.5) | | Dividends cash paid | | | 43.5 | 43.3 | The Directors are proposing a final dividend in respect of the financial year ended 31 March 2023 of 17.4 pence per ordinary share, which will absorb an estimated £33.3m of retained earnings and cash. If approved by the shareholders at the AGM, it will be paid on 4 August 2023 to shareholders who are on the register of members on 7 July 2023. The dividend will be paid as a REIT Property Income Distribution ("PID") net of withholding tax where appropriate. 235 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information # NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED # 8. EARNINGS PER SHARE | | 2023 £m | 2022 £m | | --- | --- | --- | | Earnings used for calculating earnings per share: | | | | Basic and diluted earnings | (37.8) | 123.9 | | Decrease/(increase) in fair value of investment properties | 88.0 | (68.7) | | Impairment of assets held for sale | 5.1 | - | | Loss/(profit) on disposal of investment properties | 0.7 | (7.8) | | EPRA earnings | 56.0 | 47.4 | | Adjustment for non-trading items: | | | | Other expenses/(income) | 3.8 | (0.6) | | Exceptional finance costs | 0.6 | - | | Taxation | 0.3 | 0.1 | | Trading profit after interest | 60.7 | 46.9 | Earnings have been adjusted to derive an earnings per share measure as defined by the European Public Real Estate Association ('EPRA') and an adjusted underlying earnings per share measure. | | 2023 Number | 2022 Number | | --- | --- | --- | | Number of shares used for calculating earnings per share: | | | | Weighted average number of shares (excluding own shares held in trust) | 190,470,363 | 180,983,916 | | Dilution due to share option schemes | 1,129,310 | 998,280 | | Weighted average number of shares for diluted earnings per share | 191,599,673 | 181,982,196 | | In pence | 2023 | 2022 | | Basic (loss)/earnings per share | (19.9p) | 68.5p | | Diluted (loss)/earnings per share | (19.9p) | 68.1p | | EPRA earnings per share | 29.4p | 26.2p | | Adjusted underlying earnings per share^{1} | 31.7p | 25.8p | 1. Adjusted underlying earnings per share is calculated by dividing trading profit after interest by the diluted weighted average number of shares of 191,599,673 (2022: 181,982,196) The diluted loss per share for the period to 31 March 2023 has been restricted to a loss of 19.9p per share, as the loss per share cannot be reduced by dilution in accordance with IAS 33 Earnings per Share. # 9. NET ASSETS PER SHARE AND TOTAL ACCOUNTING RETURN | | 2023 Number | 2022 Number | | --- | --- | --- | | Number of shares used for calculating net assets per share: | | | | Shares in issue at year end | 191,638,357 | 181,125,259 | | Less own shares held in trust at year end | (152,550) | (162,113) | | Dilution due to share option schemes | 1,201,277 | 1,078,852 | | Number of shares for calculating diluted adjusted net assets per share | 192,687,084 | 182,041,998 | # EPRA Net Asset Value Metrics The Group measures financial position with reference to EPRA Net Tangible Assets (NTA), Net Reinvestment Value (NRV) and Net Disposal Value (NDV). | | March 2023 | | | March 2022 | | | | --- | --- | --- | --- | --- | --- | --- | | | EPRA NRV £m | EPRA NTA £m | EPRA NDV £m | EPRA NRV £m | EPRA NTA £m | EPRA NDV £m | | **IFRS Equity attributable to shareholders** | 1,787.7 | 1,787.7 | 1,787.7 | 1,799.6 | 1,799.6 | 1,799.6 | | Intangibles per IFRS balance sheet | - | (2.0) | - | - | (1.9) | - | | Excess of book value of debt over fair value | - | - | 86.6 | - | - | 13.0 | | Purchasers' costs | 186.4 | - | - | 163.3 | - | - | | **EPRA measure** | 1,974.1 | 1,785.7 | 1,874.3 | 1,962.9 | 1,797.7 | 1,812.6 | | **EPRA measure per share** | £10.24 | £9.27 | £9.73 | £10.78 | £9.88 | £9.96 | # Total accounting return | | 2023 £ | 2022 £ | | --- | --- | --- | | Total Accounting Return | | | | Opening EPRA net tangible assets per share (A) | 9.88 | 9.38 | | Closing EPRA net tangible assets per share | 9.27 | 9.88 | | (Decrease)/increase in EPRA net tangible assets per share | (0.61) | 0.50 | | Ordinary dividends paid in the year | 0.23 | 0.25 | | Total return (B) | (0.38) | 0.75 | | Total accounting return (B/A) | (3.8%) | 8.0% | The total accounting return for the year comprises the movement in absolute EPRA net tangible assets per share plus dividends paid in the year as a percentage of the opening EPRA net tangible assets per share. The total return for the year ended 31 March 2023 was -3.8% (31 March 2022: 8.0%). 236 Workspace Group PLC^{}[] Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information # NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 MARCH 2023 CONTINUED # 10. INVESTMENT PROPERTIES | | 2023 £m | 2022 £m | | --- | --- | --- | | Balance at 1 April | 2,366.7 | 2,349.9 | | Purchase of investment properties | 426.6 | 88.4 | | Capital expenditure | 55.8 | 30.0 | | Change in value of lease obligations | 3.7 | 4.7 | | Capitalised interest on refurbishments (note 4) | 0.2 | 0.4 | | Disposals during the year | (5.5) | (109.5) | | Change in fair value of investment properties | (88.0) | 68.7 | | Less: Classified as assets held for sale | (116.2) | (65.9) | | Balance at 31 March | 2,643.3 | 2,366.7 | Investment properties represent a single class of property, being business accommodation for rent in and around London. Capitalised interest is included at a rate of capitalisation of 3.9% (2022: 3.0%). The total amount of capitalised interest included in investment properties is £15.1m (2022: £14.9m). The change in fair value of investment properties is recognised in the consolidated income statement. Investment properties include buildings with a carrying amount of £321.9m (2022: £315.4m) for which there are lease obligations of £34.7m (2022: £31.0m). Investment property lease commitment details are shown in note 17. During the period, the Group acquired McKay Securities Limited (formerly McKay Securities PLC) adding 32 properties in and around London to the portfolio. One of the properties classified as held for sale at the end of the prior year was not sold during the year. It is retained within current assets as it is still expected to sell within the next 12 months of 31 March 2023 and has been subject to an impairment charge of £5.1m following the valuation carried out at 31 March 2023. Ten (2022: two) additional properties were reclassified as held for sale at year-end. Five of these properties have exchanged for sale and are likely to complete within the next 12 months. The transfer value is their year-end valuation per CBRE. # Valuation The Group's investment properties are held at fair value and were revalued at 31 March 2023 by the external valuer, CBRE Limited, a firm of independent qualified valuers, in accordance with the Royal Institution of Chartered Surveyors Valuation – Global Standards. 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 still being used for business accommodation in their current state. However, the valuation at the balance sheet date includes 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 and that valuations are appropriate. Meetings are held with the valuers to review and challenge the valuations, to confirm that they have considered all relevant information. 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 make allowance 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. 237 Workspace Group PLC^{}[] Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information # NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 MARCH 2023 CONTINUED # 10. INVESTMENT PROPERTIES CONTINUED # Valuation continued Redevelopment properties are also valued using the residual value method. The proposed redevelopment which would be undertaken by a residential developer is valued based on the market value for similar sites and then adjusted for costs to complete, developer's profit margin and a time discount factor. Allowance is also made for planning and construction risk depending on the stage of the redevelopment. If a contract is agreed for the sale/redevelopment of the site, the property is valued based on agreed consideration. For all methods, the valuers are provided with information on tenure, letting, town planning and the repair of the buildings and sites. The reconciliation of the valuation report total to the amount shown in the consolidated balance sheet as non-current assets, investment properties, is as follows: | | 2023 £m | 2022 £m | | --- | --- | --- | | Total per CBRE valuation report | 2,741.1 | 2,402.2 | | Deferred consideration on sale of property | (0.5) | (0.6) | | Head leases treated as leases under IFRS 16 | 34.7 | 31.0 | | Less: tenant incentives recognised under IFRS 16 | (8.8) | - | | Less: Reclassified as assets held for sale | (123.2) | (65.9) | | Total investment properties per balance sheet | 2,643.3 | 2,366.7 | The Group's investment properties are carried at fair value and under IFRS 13 are required to be analysed by level depending on the valuation method adopted. The different valuation methods are as follows: Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2 - Use of a model with inputs (other than quoted prices included in Level 1) that are directly or indirectly observable market data. Level 3 - Use of a model with inputs that are not based on observable market data. As noted in the significant judgements and critical estimates section, property valuations are complex and involve data which is not publicly available and involves a degree of judgement. All the investment properties are classified as Level 3, due to the fact that one or more significant inputs to the valuation are not based on observable market data. If the degree of subjectivity or nature of the measurement inputs changes then there could be a transfer between Levels 2 and 3 of classification. No changes requiring a transfer have occurred during the current or previous years. CBRE have made enquiries to ascertain any sustainability factors which are likely to impact on value, consistent with the scope of their terms of engagement. Sustainability encompasses a wide range of physical, social, environmental, and economic factors that can affect the value of an asset, even if not explicitly recognised. This includes key environmental risks; such as flooding, energy efficiency, climate, design, legislation and management considerations - as well as current and historic land use. Where CBRE recognise the value impacts of sustainability, they reflect their understanding of how market participants include sustainability factors in their decisions and the consequential impact on market valuations. The following table summarises the valuation techniques and inputs used in the determination of the property valuation at 31 March 2023. # Key unobservable inputs: | Property category | Valuation £m | Valuation technique | ERVs - per sq. ft. | | Equivalent yields | | | --- | --- | --- | --- | --- | --- | --- | | | | | Range | Weighted average | Range | Weighted average | | Like-for-like | 1,886.9 | A | £21-£79 | £48 | 5.0%-7.7% | 6.2% | | Completed projects | 264.8 | A | £24-£51 | £34 | 5.8%-6.8% | 6.5% | | Refurbishments | 171.9 | A/B | £21-£53 | £35 | 4.5%-6.7% | 5.8% | | Redevelopments | 25.4 | A/B | £16-£35 | £28 | 4.8%-6.9% | 5.5% | | Acquisitions | 268.4 | A | £13-£70 | £34 | 5.2%-10.8% | 7.4% | | Less : tenant incentives | (8.8) | N/A | - | - | - | - | | Head leases | 34.7 | N/A | - | - | - | - | | Total | 2,643.3 | | | | | | A = Income capitalisation method. B = Residual value method. 238 Workspace Group PLC^{}[] Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information # NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 MARCH 2023 CONTINUED # 10. INVESTMENT PROPERTIES CONTINUED # Valuation continued A key unobservable input for redevelopments at planning stage and refurbishments is developer's profit. The range is 10%-16% with a weighted average of 13%. Costs to complete is a key unobservable input for redevelopments at planning stage with a range of £262-£448 per sq. ft. and a weighted average of £356 per sq. ft. Costs to complete are not considered to be a significant unobservable input for refurbishments due to the high percentage of costs that are fixed. # Sensitivity analysis: A +/- 10% movement in ERVs or a +/- 25 basis points movement in yields would result in the following increase/decrease in the valuation. | £m | +/- 10% in ERVs | +/- 25 bps in yields | | --- | --- | --- | | Like-for-like | +189/-189 | -76/+83 | | Completed projects | +23/-27 | -10/+11 | | Refurbishments | +23/-23 | -10/+11 | | Redevelopments | +6/-6 | -3/+3 | | Acquisitions | +23/-27 | -9/+9 | The following table summarises the valuation techniques and inputs used in the determination of the property valuation at 31 March 2022. # Key unobservable inputs: | Property category | Valuation £m | Valuation technique | ERVs - per sq. ft. | | Equivalent yields | | | --- | --- | --- | --- | --- | --- | --- | | | | | Range | Weighted average | Range | Weighted average | | Like-for-like | 1,865.1 | A | £20-£66 | £42 | 4.1%-7.3% | 5.5% | | Completed projects | 185.6 | A | £21-£44 | £28 | 4.9%-6.4% | 5.6% | | Refurbishments | 161.3 | A/B | £18-34 | £25 | 3.6%-6.4% | 5.3% | | Redevelopments | 35.3 | A/B | £13-25 | £16 | 4.5%-6.5% | 6.0% | | Acquisitions | 88.4 | A | £33-£53 | £40 | 4.9%-5.8% | 5.4% | | Head leases | 31.0 | N/A | - | - | - | - | | Total | 2,366.7 | | | | | | A = Income capitalisation method. B = Residual value method. A key unobservable input for redevelopments at planning stage and refurbishments is developer's profit. The range is 13%-19% with a weighted average of 14%. Costs to complete is a key unobservable input for redevelopments at planning stage with a range of £213-£280 per sq. ft. and a weighted average of £250 per sq. ft. Costs to complete are not considered to be a significant unobservable input for refurbishments due to the high percentage of costs that are fixed. # Sensitivity analysis: A +/- 10% movement in ERVs or a +/- 25 basis points movement in yields would result in the following increase/decrease in the valuation. | £m | +/- 10% in ERVs | +/- 25 bps in yields | | --- | --- | --- | | Like-for-like | +186/-186 | -82/+90 | | Completed projects | +19/-19 | -8/+9 | | Refurbishments | +13/-17 | -8/+9 | | Redevelopments | +4/-4 | -1/+1 | | Acquisitions | +9/-9 | -4/+4 | 239 Workspace Group PLC^{}[] Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information # NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 MARCH 2023 CONTINUED # 11. PROPERTY, PLANT AND EQUIPMENT | Cost or valuation | Equipment and fixtures £m | | --- | --- | | 1 April 2021 | 10.6 | | Additions during the year | 0.7 | | Disposals during the year | (1.8) | | Balance at 31 March 2022 | 9.5 | | Additions during the year | 3.3 | | Disposals during the year | (0.3) | | **Balance at 31 March 2023** | **12.5** | | Accumulated depreciation | | | --- | --- | | 1 April 2021 | 6.6 | | Charge for the year | 1.8 | | Disposals during the year | (1.8) | | Balance at 31 March 2022 | 6.6 | | Charge for the year | 1.6 | | Disposals during the year | (0.1) | | **Balance at 31 March 2023** | **8.1** | | **Net book amount at 31 March 2023** | **4.4** | | --- | --- | | Net book amount at 31 March 2022 | 2.9 | # 12. OTHER INVESTMENTS The Group holds the following investments: | | 2023 £m | 2022 £m | | --- | --- | --- | | 2.8% of share capital of Wavenet Limited | 2.1 | 1.7 | | | **2.1** | **1.7** | In the prior 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 £0.4m movement in the financial year (2022: no movement), recognised in the consolidated statement of comprehensive income. In addition, included within other income (note 3(b)) in the prior year 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 | 2023 £m | 2022 £m | | --- | --- | --- | | Trade receivables | 16.9 | 11.9 | | Less provision for impairment of receivables | (4.6) | (5.2) | | Trade receivables – net | 12.3 | 6.7 | | Prepayments, other receivables and accrued income | 22.3 | 16.2 | | Deferred consideration on sale of investment properties | 11.2 | 0.6 | | | **45.8** | **23.5** | # Receivables at fair value Included within deferred consideration on sale of investment properties is £0.5m (2022: £0.6m) of overage which is held at fair value through profit and loss. As the amounts 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 was a £0.1m decrease (31 March 2022: £nil) (note 3(c)). | | 2023 £m | 2022 £m | | --- | --- | --- | | Deferred consideration on sale of investment properties: | | | | Balance at 1 April | 0.6 | 5.1 | | Cash received | - | (4.5) | | Additions | 10.7 | - | | Change in fair value | (0.1) | - | | Balance at 31 March | 11.2 | 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. 240 Workspace Group PLC^{}[] Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information # **NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 MARCH 2023 CONTINUED** # **13. TRADE AND OTHER RECEIVABLES CONTINUED** Movements on the provision for impairment of trade receivables are shown below: | | 2023 £m | 2022 £m | | --- | --- | --- | | Balance at 1 April | 5.2 | 4.6 | | Increase in provision for impairment of trade receivables | 1.1 | 1.5 | | Receivables written off during the year | (1.7) | (0.9) | | Balance at 31 March | 4.6 | 5.2 | # **14. CASH AND CASH EQUIVALENTS** | | 2023 £m | 2022 £m | | --- | --- | --- | | Cash at bank and in hand | 12.0 | 42.3 | | Restricted cash – tenants' deposit deeds | 6.5 | 6.7 | | | 18.5 | 49.0 | Tenants' deposit deeds represent returnable cash security deposits received from tenants and are held in ring-fenced bank accounts in accordance with the terms of the individual lease contracts. # **15. TRADE AND OTHER PAYABLES** | | 2023 £m | 2022 £m | | --- | --- | --- | | Trade payables | 15.4 | 13.2 | | Other tax and social security payable | 15.9 | 3.8 | | Tenants' deposit deeds (note 14) | 6.5 | 6.7 | | Tenants' deposits | 30.5 | 26.5 | | Accrued expenses | 26.1 | 27.4 | | Deferred income – rent and service charges | 13.4 | 8.2 | | | 107.8 | 85.8 | There is no material difference between the above amounts and their fair values due to the short-term nature of the payables. # **16. BORROWINGS** # **(a) Balances** | | 2023 £m | 2022 £m | | --- | --- | --- | | **Current** | | | | Bank loans (unsecured) | 49.8 | - | | **Non-current** | | | | Bank loans (unsecured) | 197.2 | (2.1) | | Other loans (secured) | 63.9 | - | | 3.07% Senior Notes (unsecured) | 79.9 | 79.9 | | 3.19% Senior Notes (unsecured) | 119.8 | 119.8 | | 3.6% Senior Notes (unsecured) | 99.9 | 99.8 | | Green Bond (unsecured) | 298.4 | 298.1 | | | 859.1 | 595.5 | | **Total borrowings** | **908.9** | **595.5** | # **(b) Net debt** | | 2023 £m | 2022 £m | | --- | --- | --- | | Borrowings per (a) above | 908.9 | 595.5 | | Adjust for: | | | | Cost of raising finance | 5.1 | 4.5 | | | 914.0 | 600.0 | | Cash at bank and in hand (note 14) | (12.0) | (42.3) | | Net debt | 902.0 | 557.7 | At 31 March 2023, the Group had £136.0m (2022: £400.0m) of undrawn bank facilities, a £2.0m overdraft facility (2022: £2.0m) and £12.0m of unrestricted cash (2022: £42.3m). 241 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information # NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED # 16. BORROWINGS CONTINUED (c) Maturity | | 2023 £m | 2022 £m | | --- | --- | --- | | Repayable within one year | 50.0 | - | | Repayable between one and two years | - | - | | Repayable between two and three years | 279.0 | - | | Repayable between three years and four years | - | 80.0 | | Repayable between four years and five years | 420.0 | 80.0 | | Repayable in five years or more | 165.0 | 440.0 | | | 914.0 | 600.0 | | Cost of raising finance | (5.1) | (4.5) | | Total | 908.9 | 595.5 | # (d) Interest rate and repayment profile | | Principal at period end £m | Interest rate | Interest payable | Repayable | | --- | --- | --- | --- | --- | | **Current** | | | | | | Bank overdraft due within one year or on demand | - | Base + 2.25% | Variable | On demand | | Bank Loan | 50.0 | SONIA + 1.75%^{1} | Monthly | September 2023 | # Non-current | Private Placement Notes: | | | | | | --- | --- | --- | --- | --- | | 3.07% Senior Notes | 80.0 | 3.07% | Half yearly | August 2025 | | 3.19% Senior Notes | 120.0 | 3.19% | Half yearly | August 2027 | | 3.6% Senior Notes | 100.0 | 3.60% | Half yearly | January 2029 | | Bank Loan | 123.0 | SONIA + 1.77%^{2} | Monthly | December 2025 | | Bank Loan | 76.0 | SONIA + 1.80%^{2} | Monthly | April 2025 | | Other Loan (Secured) | 65.0 | 4.02% | Monthly | May 2030 | | Green Bond | 300.0 | 2.25% | Yearly | March 2028 | | | 914.0 | | | | 1. This is an average over the life of the facility. The margin increases from 1.5% to 2.0% over the facility availability period. 2. The base margin is dependent upon the LTV as reported in the client certificate, which is submitted twice a year. The base margin can be adjusted further by up to 4.5bps dependent upon achievement of three ESG-linked metrics. # (e) Financial instruments and fair values | | 2023 Book value £m | 2022 Fair value £m | 2022 Book value £m | 2022 Fair value £m | | --- | --- | --- | --- | --- | | **Financial liabilities held at amortised cost** | | | | | | Bank loans | 247.0 | 247.0 | (2.1) | (2.1) | | Other loans | 63.9 | 63.5 | - | - | | Private Placement Notes | 299.6 | 287.8 | 299.5 | 301.8 | | Lease obligations | 34.7 | 34.7 | 31.0 | 31.0 | | Green Bond | 298.4 | 224.0 | 298.1 | 282.8 | | | 943.6 | 857.0 | 626.5 | 613.5 | | **Financial assets at fair value through other comprehensive income** | | | | | | Other investments | 2.1 | 2.1 | 1.7 | 1.7 | | | 2.1 | 2.1 | 1.7 | 1.7 | | **Financial assets at fair value through profit or loss** | | | | | | Deferred consideration (overage) | 11.2 | 11.2 | 0.6 | 0.6 | | | 11.2 | 11.2 | 0.6 | 0.6 | In accordance with IFRS 13, disclosure is required for financial instruments that are carried or disclosed in the financial statements at fair value. The fair values of all the Group's bank loans and Private Placement Notes have been determined by reference to market prices and discounted expected cash flows at prevailing interest rates and are Level 2 valuations. There have been no transfers between levels in the year. The different levels of valuation hierarchy as defined by IFRS 13 are set out in note 10. ![img-14.jpeg](img-14.jpeg) 242 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information # NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED # 16. BORROWINGS CONTINUED # (f) Financial instruments by category | Assets | 2023 £m | 2022 £m | | --- | --- | --- | | **a) Assets at fair value through profit or loss** | | | | Deferred consideration (overage) | 0.5 | 0.6 | | | 0.5 | 0.6 | | **b) Loans and receivables** | | | | Cash and cash equivalents | 18.5 | 49.0 | | Trade and other receivables excluding prepayments^{1} | 31.7 | 8.4 | | | 50.2 | 57.4 | | **c) Assets at value through other comprehensive income** | | | | Other investments | 2.1 | 1.7 | | | 2.1 | 1.7 | | **Total** | **52.8** | **59.7** | | **Liabilities** | **2023 £m** | **2022 £m** | | **Other financial liabilities at amortised cost** | | | | Borrowings | 908.9 | 595.5 | | Lease liabilities | 34.7 | 31.0 | | Trade and other payables excluding non-financial liabilities^{2} | 78.5 | 73.8 | | | 1,022.1 | 700.3 | 1. Trade and other receivables exclude prepayments of £13.6m (2022: £14.5m) and non-cash deferred consideration of £0.9m (2022: £0.4m). 2. Trade and other payables exclude other tax and social security of £15.9m (2022: £3.8m), corporation tax of £nil (2022: £nil) and deferred income of £13.4m (2022: £8.2m). # (g) Changes in liabilities from financing activities | | Bank loans and borrowings £m | Lease liabilities £m | | --- | --- | --- | | Balance at 1 April 2022 | 595.5 | 31.0 | | Changes from financing cash flows: | | | | Proceeds from bank borrowings | 286.0 | - | | Repayment of bank borrowings | (150.0) | - | | Finance costs for new/amended borrowing facilities | (1.6) | - | | Finance costs assumed on asset acquisition | (1.6) | - | | Total changes from cash flows | 132.8 | - | | Exceptional finance costs | 0.6 | - | | Amortisation of issue costs of borrowing | 2.0 | - | | Debt assumed on asset acquisition | 178.0 | - | | Changes in leases | - | 3.7 | | **Total other changes** | **180.6** | **3.7** | | **Balance at 31 March 2023** | **908.9** | **34.7** | | | Bank loans and borrowings £m | Lease liabilities £m | Derivatives used for hedging assets £m | | --- | --- | --- | --- | | Balance at 1 April 2021 | 752.8 | 26.3 | 8.7 | | 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 | - | - | (0.7) | | Total changes from cash flows | (149.8) | - | (0.7) | | Foreign exchange differences | (8.6) | - | (8.0) | | Amortisation of issue costs of borrowing | 1.1 | - | - | | Changes in leases | - | 4.7 | - | | **Total other changes** | **(7.5)** | **4.7** | **(8.0)** | | **Balance at 31 March 2022** | **595.5** | **31.0** | **-** | 243 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information # **NOTES TO THE FINANCIAL STATEMENTS CONTINUED** **FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED** # **17. LEASE OBLIGATIONS** Lease liabilities are in respect of leased investment property. Minimum lease payments under leases fall due as follows: | | 2023 £m | 2022 £m | | --- | --- | --- | | Within one year | 2.1 | 1.9 | | Between two and five years | 8.4 | 7.4 | | Between five and fifteen years | 19.0 | 18.6 | | Beyond fifteen years | 180.8 | 162.4 | | | 210.3 | 190.3 | | Future finance charges on leases | (175.6) | (159.3) | | Present value of lease liabilities | 34.7 | 31.0 | 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 £2.1m (2022: £1.9m) is offset by future finance charges on leases of £2.1m (2022: £1.9m). All lease obligations are long leaseholds, therefore, the majority of the obligations fall beyond fifteen years. # **18. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICY** The Group has identified exposure to the following financial risks: - Market risk - Credit risk - Liquidity risk - Capital risk management 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 2023, 73% (2022: 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. As at year end, a reasonably possible interest rate movement of +/-1.0% would have increased or decreased net interest payable by £2.5m (2022: £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 2023 interest cover was 3.8x. 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. 244 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED To manage its liquidity eectivo manage its liquidity effectively, the Group has an overdraft facility of £2.0m (2022: £2.0m), two revolving loan facilities totalling £335.0m (2022: one facility of £200.0m) and an acquisition loan facility of £50.0m (2022: £200.0m). At 31 March 2023 headroom excluding overdraft and cash was £136.0m (31 March 2022: £400.0m). The following is an analysis of the contractual undiscounted cash flows payable under financial liabilities, derivative financial instruments and trade and other payables existing at the balance sheet date. Contracted cash flows are based upon the loan balances and applicable interest rates payable on these at each year end. | | | | | | Due | | Due | | Due | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | Due | between | | between | | 3 years | | | Total | | | Carrying | 2 | within | | 1 and | | 2 and | | and | contracted | | | | amount | | 1 year | 2 years | | 3 years | | beyond | | cash flows | | | 31 March 2023 | | £m | £m | | £m | | £m | | £m | | £m | Financial liabilities Private Placement Notes 300.0 9.9 9.9 88.3 234.5 342.6 Green Bond 300.0 6.8 6.8 6.8 312.9 333.3 Other loans 65.0 2.6 2.6 2.6 75.4 83.2 Lease liabilities 34.7 2.1 2.1 2.1 204.0 210.3 1 Trade and other payables 78.5 78.5 – – – 78.5 778.2 99.9 21.4 99.8 826.8 1,047.9 | | | | | | | Due | | Due | | Due | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | Due | between | | between | | 3 years | | | Total | | | Carrying | 2 | within 1 | | 1 and 2 | | 2 and 3 | | | and | contracted | | | | amount | | | year | | years | | years | beyond | | cash flows | | | 31 March 2022 | | £m | | £m | | £m | | £m | | £m | | £m | Financial liabilities Private Placement Notes 300.0 9.9 9.9 9.9 322.6 352.3 Green Bond 300.0 6.8 6.8 6.8 319.5 339.9 Lease liabilities 31.0 1.9 1.9 1.9 187.8 193.5 1 Trade and other payables 73.8 73.8 – – – 73.8 704.8 92.4 18.6 18.6 829.9 959.5 1. Trade and other payables exclude other tax and social security of £15.9m (2022: £3.8m), corporation tax of £nil (2022: £nil) and deferred income of £13.4m (2022: £8.2m). 2. Excludes unamortised borrowing costs . 18. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICY CONTINUED (b) Credit risk continued 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 4,910 lettable units at 86 properties with overall occupancy of 81.5%. The largest 10 single tenants generate around 10.3% 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 mitigated by requiring that tenants provide a deposit equivalent to three months’ rent on inception of lease as security against default. Total tenant deposits held are £37.0m (2022: £33.2m). The Group monitors aged debt balances and any potential bad debts every week, the information being reported to the Executive Committee every month as part of the performance monitoring process. The Group’s debt recovery is consistently high and as such is deemed a low risk area. 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 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: 2023 £m 2022 £m Cash and cash equivalents (note 14) 18.5 49.0 Trade receivables – current (note 13) 12.3 6.7 Deferred consideration – current (note 13) 11.2 0.6 42.0 56.3 The Group’s assessment of expected credit losses involves estimation given its forward-looking nature. Assumptions used in the forward-looking assessment are continually reviewed to take into account likely rent deferrals. (c) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to target a minimum headroom on loan facilities of £50.0m, so as to have sucient funds to meet financial obligations as they fe sufficient funds to meet financial obligations as they fall due. This is performed via a variety of methods including daily cash flow review and forecasting, monthly monitoring of the maturity profile of debt and the regular revision of borrowing facilities in relation to the Group’s requirements and strategy. The Board reviews compliance with loan covenants which include agreed interest cover and loan to value ratios, alongside review of available headroom on loan facilities. 245 Workspace Group PLC^{}[] Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information # **NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 MARCH 2023 CONTINUED** # **18. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICY CONTINUED** # **(d) Capital risk management** The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern, and monitor an appropriate mix of debt and equity financing. Equity comprises issued share capital, reserves and retained earnings as disclosed in the consolidated statement of changes in equity. Debt comprises the Green Bond, Revolving Credit Facilities from banks, Private Placement Notes less cash at bank and in hand. At 31 March 2023, Group equity was £1,787.7m (2022: £1,799.6m) and Group net debt (debt less cash at bank and in hand) was £902.0m (2022: £557.7m). Group gearing at 31 March 2023 was 50% (2022: 31%). The Group's borrowings are all unsecured apart from £65.0m. The loan to value covenant applicable to these borrowings is 60% and compliance is being met comfortably. Loan to value at 31 March 2023 was 33%. This is calculated using the total CBRE investment property valuation (as per note 10) and the current net debt (as per note 16(b)). Our target is to maintain loan to value below 30%. This may from time-to-time be exceeded up to a maximum of 40% as steps are taken to reduce loan to value to below 30%. # **19. NOTES TO CASH FLOW STATEMENT** Reconciliation of profit for the year to cash generated from operations: | | 2023 £m | 2022 £m | | --- | --- | --- | | (Loss)/profit before tax | (37.5) | 124.0 | | Depreciation | 1.6 | 1.8 | | Amortisation of intangibles | 0.7 | 0.9 | | Letting fees amortisation | 0.5 | – | | Loss/(profit) on disposal of investment properties | 0.7 | (7.8) | | Other expenses/(income) (note 3c) | 3.8 | (0.6) | | Net loss/(profit) from change in fair value of investment property | 88.0 | (68.7) | | Impairment of assets held for sale | 5.1 | – | | Equity-settled share based payments | 1.4 | 1.6 | | Finance costs | 34.4 | 20.5 | | Exceptional finance costs | 0.6 | – | | Changes in working capital: | | | | (Increase)/decrease in trade and other receivables | (6.4) | 1.4 | | Increase in trade and other payables | 17.6 | 7.4 | | Cash generated from operations | 110.5 | 80.5 | For the purposes of the cash flow statement, cash and cash equivalents include restricted cash – tenants' deposit deeds (note 14). 246 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information # NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED # 20. SHARE CAPITAL AND SHARE PREMIUM | | 2023 £m | 2022 £m | | --- | --- | --- | | Issued: Fully paid ordinary shares of £1 each | 191.6 | 181.1 | | | 2023 Number | 2022 Number | | Movements in share capital were as follows: | | | | Number of shares at 1 April | 181,125,259 | 181,113,594 | | Issue of shares | 10,513,098 | 11,665 | | Number of shares at 31 March | 191,638,357 | 181,125,259 | The Group issued 10,513,098 shares as part of the consideration for the acquisition of McKay Securities Limited (formerly McKay Securities PLC) during the year. The average share price on issue was £6.38 leading to an increase in the merger reserve of £56.6m in the period. In the year there were no share scheme options issued (31 March 2022: 11,665 with net proceeds £nil). | | Share capital | | Share premium | | | --- | --- | --- | --- | --- | | | 2023 £m | 2022 £m | 2023 £m | 2022 £m | | Balance at 1 April | 181.1 | 181.1 | 295.5 | 295.4 | | Issue of shares | 10.5 | - | - | 0.1 | | Balance at 31 March | 191.6 | 181.1 | 295.5 | 295.5 | # 21. OTHER RESERVES | | Other investment reserve £m | Equity-settled share based payments £m | Merger reserve £m | Total £m | | --- | --- | --- | --- | --- | | Balance at 1 April 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 | | Share based payments | - | 1.4 | - | 1.4 | | Issue of shares (note 20) | - | - | 56.6 | 56.6 | | Change in fair value | 0.4 | - | - | 0.4 | | **Balance at 31 March 2023** | **0.4** | **25.3** | **65.3** | **91.0** | In the prior year, 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 2023, the number of shares held by the ESOT totalled 75,226 (2022: 75,226). The SIP is governed by HMRC rules (note 23). At 31 March 2023, the number of shares held for the SIP totalled 77,324 (2022: 86,887). | | 2023 £m | 2022 £m | | --- | --- | --- | | Balance at 1 April | 9.9 | 9.6 | | Shares purchased for the trusts | - | 0.3 | | Balance at 31 March | 9.9 | 9.9 | # 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: - Relative TSR - Total Property Return compared to the IPD benchmark The shares are issued at nil cost to the individuals provided the performance conditions are met. Under the 2022 LTIP scheme, 848,199 performance shares were awarded in June 2022 to Directors and Senior Management (2021 LTIP scheme: 495,474 were awarded in June 2021 and 25,781 in November 2021). Details of the movements for the LTIP scheme during the year were as follows: | | LTIP Number | | --- | --- | | At 1 April 2021 | 1,366,292 | | Granted | 521,255 | | Exercised | - | | Lapsed | (500,681) | | At 31 March 2022 | 1,386,866 | | Granted | 848,199 | | Exercised | - | | Lapsed | (470,877) | | **At 31 March 2023** | **1,764,188** | 247 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information # NOTES TO THE FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED # 23. SHARE BASED PAYMENTS CONTINUED # (a) Long Term Incentive Plan ('LTIP') continued The 2019 LTIP scheme was due to vest in June 2022 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 £nil (2018 LTIP scheme: £nil). A binomial model was used to determine the fair value of the LTIP grant for the Relative TSR element of the schemes. Assumptions used in the model were as follows: | | 2022 LTIP | November 2021 LTIP | June 2021 LTIP | 2020 LTIP | 2019 LTIP | | --- | --- | --- | --- | --- | --- | | Share price at grant | 642p | 841p | 842p | 706p | 862p | | Exercise price | Nil | Nil | Nil | Nil | Nil | | Average expected life (years) | 3 | 3 | 3 | 3 | 3 | | Risk-free rate | 1.96% | 0.49% | 0.16% | 0.61% | 0.52% | | Average share price volatility | 41.5% | 42.6% | 39.5% | 35% | 21% | | Correlation | 46% | 47% | 45% | 46% | 49% | | TSR starting factor | 0.85 | 1.14 | 1.11 | 0.65 | 0.92 | | Fair value per option - Relative TSR element | 333p | 446p | 475p | 207p | 322p | 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 642p for the 2022 LTIP Scheme in June. At each balance sheet date, the Directors will assess the likelihood of meeting the conditions under this element of the scheme. The impact of the revision to original estimates, if any, is recognised in the income statement with a corresponding adjustment to equity. The assessment at year end for the 2022 LTIP Scheme was that 75% of the Total Property Return element will vest (LTIP 2021: 50%, LTIP 2020: 100%). The expected Workspace share price volatility was determined by taking account of the daily share price movement over a three-year period. The respective FTSE 250 Real Estate share price volatility and correlations were also determined over the same period. Assessment is made of any vesting conditions to categorise these into market performance conditions, non-market performance conditions and service conditions to value equity-settled transactions. The risk-free rate has been determined from market yield curves for government zero-coupon bonds with outstanding terms equal to the average expected term to exercise for each relevant grant. # (b) Employee share option schemes The Group operates a Save As You Earn ('SAYE') share option scheme. Grants under the SAYE scheme are normally exercisable after three or five years' saving. In accordance with UK practice, the majority of options under the SAYE schemes are granted at a price 20% below the market price ruling at the date of grant. Details of the movements for the SAYE schemes during the year were as follows: | Options outstanding | SAYE | | | --- | --- | --- | | | Number | Weighted exercise price | | At 1 April 2021 | 363,849 | £5.60 | | Options granted | 46,554 | £6.70 | | Options exercised | (11,665) | £7.44 | | Options lapsed | (71,357) | £5.78 | | At 31 March 2022 | 327,381 | £5.65 | | Options granted | 132,890 | £5.59 | | Options exercised | - | - | | Options lapsed | (173,364) | £5.75 | | **At 31 March 2023** | **296,907** | **£5.56** | The average closing share price at the date of exercise for the SAYE options exercised (for the three-year 2019 and the five-year 2017 schemes) during the year was not applicable because no shares were exercised (2022: £8.69). The fair value has been calculated using the Black-Scholes model. Inputs to the model are summarised as follows: | | 2023 SAYE 1 year | 2023 SAYE 3 year | 2022 SAYE 1 year | 2022 SAYE 3 year | | --- | --- | --- | --- | --- | | Weighted average share price at grant | 559p | 559p | 846p | 846p | | Exercise price | 508p | 508p | 670p | 670p | | Expected volatility | 41% | 34% | 38% | 35% | | Average expected life (years) | 3 | 5 | 3 | 5 | | Risk free rate | 2% | 2% | 0% | 0% | | Expected dividend yield | 4% | 4% | 2% | 2% | | Possibility of ceasing employment before vesting | 25% | 25% | 25% | 25% | The expected life is the average expected period to exercise. The risk free rate of return is the yield on zero-coupon UK Government bonds of a term consistent with the assumed option life. The expected dividend yield is based on the present value of expected future dividend payments to expiry. ![img-15.jpeg](img-15.jpeg) 248 Workspace Group PLC^{}[] Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information # NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 MARCH 2023 CONTINUED # 23. SHARE BASED PAYMENTS CONTINUED # (b) Employee share option schemes continued Fair values per share of these options were: | | 2023 | | 2022 | | | --- | --- | --- | --- | --- | | | Grant date | Fair value of award | Grant date | Fair value of award | | SAYE - three year | 27 July 2022 | 144p | 23 July 2021 | 261p | | SAYE - five year | 27 July 2022 | 136p | 23 July 2021 | 261p | # (c) Share Incentive Plan ('SIP') All staff were granted £1,000 worth of shares in September 2015, £2,000 in August 2017, £2,000 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 be held for a further two years in order to qualify for tax advantages. No shares were granted in the year (2022: 52,170), 15,259 (2022: 6,124) shares were exercised in the year and 9,619 (2022: 9,587) shares lapsed. # (d) Year-end summary At 31 March 2023, in total there were 2,111,777 (2022: 1,850,331) share awards/options exercisable on the Company's ordinary share capital. These are analysed below: | Date of grant | Exercise price | Ordinary shares Number | Vested and exercisable | Exercisable between | | | --- | --- | --- | --- | --- | --- | | **LTIP** | | | | | | | 18 June 2020 | - | 519,141 | - | 18.06.2023 | - | | 18 June 2021 | - | 469,238 | - | 18.06.2024 | - | | 24 June 2022 | - | 775,810 | - | 24.06.2025 | - | | **SAYE** | | | | | | | 26 July 2018 - five year | £8.60 | - | - | 01.09.2023 | 01.03.2024 | | 25 July 2019 - five year | £7.02 | - | - | 01.09.2024 | 01.03.2025 | | 27 July 2020 - three year | £5.31 | 135,193 | - | 01.09.2023 | 01.03.2024 | | 27 July 2020 - five year | £5.31 | 7,116 | - | 01.09.2025 | 01.03.2026 | | 23 July 2021 - three year | £6.70 | 27,813 | - | 01.09.2024 | 01.03.2025 | | 23 July 2021 - five year | £6.70 | 894 | - | 01.09.2026 | 01.03.2027 | | 27 July 2022 - three year | £5.59 | 96,230 | - | 01.09.2025 | 01.03.2026 | | 27 July 2022 - five year | £5.59 | 19,661 | - | 01.09.2027 | 01.03.2028 | | **SIP** | | | | | | | 5 September 2019^{1} | - | 21,436 | 21,436 | 05.09.2022 | - | | 29 September 2021^{1} | - | 39,245 | - | 29.09.2024 | - | | **Total** | | **2,111,777** | **21,436** | | | 1. The number of ordinary shares in the SIP scheme does not include 16,843 unallocated shares. The share awards/options outstanding at 31 March 2023 had a weighted average remaining contractual life of: LTIP - 1.4 years (2022: 1.3 years), SAYE - 1.5 years (2022: 1.4 years), SIP - 1.0 year (2022: 1.1 years). # (e) Cash-settled share based payments National Insurance payments due on the exercise of non-approved ESOS options and shares from the LTIP are considered cash-settled share based payments. The estimated fair value of the National Insurance cash-settled share based payments have been calculated using the share price at the balance sheet date. At each balance sheet date, the Group revises its estimates of the number of options that are expected to vest. It recognises the impact of the revision to original estimates, if any, in the income statement. # (f) Share based payment charges The Group recognised a total charge in relation to share based payments as follows: | | 2023 £m | 2022 £m | | --- | --- | --- | | Equity-settled share based payments | 1.4 | 1.6 | | Cash-settled share based payments | - | - | | | **1.4** | **1.6** | The total liability at the end of the year in respect of cash-settled share based schemes was £0.3m (2022: £0.4m). ![img-16.jpeg](img-16.jpeg) 249 Workspace Group PLC^{}[] Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information # **NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 MARCH 2023 CONTINUED** # **24. PENSIONS** The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Group in an independently administered fund. The pension cost charge for this scheme in the year was £1.0m (2022: £0.8m) representing contributions payable by the Group to the fund and is charged through trading profit. The Group's commitment with regard to pension contributions, consistent with the prior year, ranges from 6.0% to 16.5% of an employee's salary. The pension scheme is open to every employee in accordance with the Government auto-enrolment rules. The number of employees, including Directors, in the scheme at the year end was 261 (2022: 238). As part of the McKay Securities Limited (formerly McKay Securities PLC) acquisition in May 2022 the Group became liable for the existing McKay defined benefit pension scheme. Subsequent to this, on 12 October 2022, the Group entered into a pension buy-out transaction whereby an insurance company took on all current and future liabilities of the scheme in exchange for the assets of the scheme, valued at £5.4m at that date, and a cash contribution from the Company of £1.3m. The scheme had a deficit of £0.3m at the half year with the excess settlement charge of £0.9m included within other expenses in the consolidated statement of comprehensive income. The scheme is currently being wound up with completion expected within the next few months. # **25. RELATED PARTY TRANSACTIONS** Key management for the purposes of related party disclosure under IAS 24 are taken to be the Executive Board Directors, the non-Board Executive Directors and the Non-Executive Directors. Key management compensation is set out below: | | 2023 £m | 2022 £m | | --- | --- | --- | | Key management compensation | | | | Short-term employee benefits | 5.7 | 4.7 | | Total | 5.7 | 4.7 | # **26. CAPITAL COMMITMENTS** At the year end the estimated amounts of contractual commitments for future capital expenditure not provided for were: | | 2023 £m | 2022 £m | | --- | --- | --- | | Investment property construction | 34.4 | 4.6 | For both current and prior period, there were no material obligations for the repair or maintenance of investment properties. All material contracts for enhancement are included in the capital commitments. # **27. SUBSIDIARY AND OTHER RELATED UNDERTAKINGS** The Company's subsidiary and other related undertakings at 31 March 2023, and up to the date of signing the financial statements, are listed below. Except where indicated otherwise, the Company owns 100% of the ordinary share capital of the following subsidiary undertakings incorporated and operating in the UK, all of which are consolidated in the Group's financial statements. # **UK subsidiaries** The registered address of all UK subsidiaries is Canterbury Court, Kennington Park, 1-3 Brixton Road, London SW9 6DE. | Name | Company Number | Nature of business | | --- | --- | --- | | Workspace 12 Limited | 05764838 | Property Investment | | Workspace 13 Limited | 05834824 | Property Investment | | Workspace 14 Limited | 05834831 | Property Investment | | Omnibus Workspace Limited^{1,3} | 01444827 | Non-trading | | United Workspace Limited^{1,3} | 01749661 | Non-trading | | Busworks Limited^{1,3} | 04108036 | Holding Company | | Workspace Glebe Limited^{3} | 05834811 | Non-trading | | Glebe Three Limited^{3} | 05830231 | Non-trading | | IJ Property Services Limited^{3} | 02134039 | Insurance Agents | | Workspace Management Limited | 02841232 | Property Management | | Workspace 1 Limited | 03726272 | Dormant | | Workspace 10 Limited | 02985018 | Dormant | | Workspace 11 Limited | 05764848 | Dormant | | Workspace 15 Limited | 05834840 | Dormant | | Workspace Holdings Limited^{3} | 03729646 | Non-trading | | Anyspacedirect.co.uk Limited^{3} | 07117982 | Non-trading | | Workspace Newco 1 Limited | 10195676 | Dormant | | Workspace Newco 2 Limited | 10195681 | Dormant | | McKay Securities Limited^{3} | 00421479 | Property Investment | | Baldwin House Limited^{3,3} | 00692181 | Non-trading | | Workspace Projects (KP) Limited | 14186009 | Property Investment | 1. 100% of the ordinary share capital of this subsidiary is held by other Group companies. 2. McKay Securities Limited (formerly McKay Securities PLC) and Baldwin House Limited were acquired on 6 May 2022. 3. The following subsidiary undertakings are exempt from the Companies Act 2006 requirements relating to the audit of their individual accounts by virtue of Section 475A of the Act as Workspace Group PLC has guaranteed the subsidiary companies under Section 476C of the Act. 250 Workspace Group PLC^{}[] Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information # **NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 31 MARCH 2023 CONTINUED** # **27. SUBSIDIARY AND OTHER RELATED UNDERTAKINGS CONTINUEDNon-UK subsidiaries** | Name | Country of Incorporation | Registered address | Nature of business | | --- | --- | --- | --- | | Workspace 16 (Jersey) Limited | Jersey | Gaspé House, 66-72 The Esplanade, St Helier, Jersey JE2 3GT | Non-trading | | Workspace 17 (Jersey) Limited | Jersey | 44 Esplanade, St Helier, Jersey JE4 9WQ | Holding Company | | Workspace Salisbury Limited^{1} | Jersey | 44 Esplanade, St Helier, Jersey JE4 9WQ | Property Investment | | Centro Property Limited^{1} | Guernsey | Martello Court, Admiral Park, St Peter Port, Guernsey GY1 3HB | Non-trading | | Stamfordham Road (IOM) Limited^{1} | Isle of Man | 33-37 Athol Street, Douglas, Isle of Man, IMI 1LB | Non-trading | 1. 100% of the ordinary share capital of these subsidiaries is held by other Group companies. # **28. LEASES** The majority of the Group's tenant leases are granted with a rolling three to six-month tenant break clause, although property acquisitions have included customer leases which are much longer, with fewer break clauses. The future minimum rental income under leases granted to tenants are shown below. | Land and buildings | 2023 £m | 2022 £m | | --- | --- | --- | | Within one year | 85.0 | 61.1 | | Between one and two years | 28.4 | 15.9 | | Between two and three years | 16.3 | 9.6 | | Between three and four years | 9.5 | 6.5 | | Between four and five years | 8.0 | 4.4 | | Beyond five years | 18.4 | 13.3 | | | 165.6 | 110.8 | # **29. POST BALANCE SHEET EVENTS** On 16 May 2023 the Group announced the exchange for sale of five light industrial and logistics properties in the South East of England for a total consideration of £82.0m. The sale price is in line with the 31 March 2023 valuation and is at a net initial yield of 4.5%. 251 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information ## PARENT COMPANY BALANCE SHEET AS AT 31 MARCH 2023 | | Notes | 2023 £m | 2022 £m | | --- | --- | --- | --- | | **Fixed assets** | | | | | Investments | C | 1,313.2 | 929.8 | | | | 1,313.2 | 929.8 | | **Current assets** | | | | | Debtors: amounts falling due within one year | D | 534.1 | 439.1 | | Cash and cash equivalents | | 7.0 | 34.3 | | | | 541.1 | 473.4 | | **Total assets** | | **1,854.3** | **1,403.2** | | **Current liabilities** | | | | | Creditors: amounts falling due within one year | E | (255.2) | (168.9) | | Borrowings | F | (50.0) | - | | | | (305.2) | (168.9) | | **Creditors: amounts falling due after more than one year** | | | | | Borrowings | F | (719.4) | (595.5) | | **Total liabilities** | | **(1,024.6)** | **(764.4)** | | **Net assets** | | **829.7** | **638.8** | | **Capital and reserves** | | | | | Share capital | | 191.6 | 181.1 | | Share premium | | 295.6 | 295.6 | | Investment in own shares | | (9.9) | (9.9) | | Other reserves | G | 90.6 | 32.6 | | Retained earnings^{1} | | 261.8 | 139.4 | | **Total shareholders' equity** | | **829.7** | **638.8** | 1. Retained earnings for the Company include profit for the year of £166.5m (2022: £75m less). The notes on pages 252 to 254 form part of these financial statements. The financial statements on pages 251 to 254 were approved by the Board of Directors on 6 June 2023 and signed on its behalf by: **Graham Clemett** Director **Dave Benson** Director Workspace Group PLC Registered number 02041612 252 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### PARENT COMPANY STATEMENT OF CHANGES IN EQUITY NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2023 FOR THE YEAR ENDED 31 MARCH 2023 | | | | | | | Total | A. ACCOUNTING POLICIES | | --- | --- | --- | --- | --- | --- | --- | --- | | | | Investment | | | | share- | These financial statements were prepared in accordance with Financial Reporting Standard 101 | | Share | Share | | in own | Other | Retained | holders’ | | ‘Reduced Disclosure Framework’ (‘FRS 101’). capital premium shares reserves earnings equity £m £m £m £m £m £m Basis of accounting Balance at 31 March 2021 181.1 295.6 (9.6) 31.0 191.7 689.8 The financial statements are prepared and approved by the Directors on a going concern basis Loss for the year – – – – (7.5) (7.5) under the historical cost convention and in accordance with Financial Reporting Standard 101 Total comprehensive loss – – – – (7.5) (7.5) ‘Reduced Disclosure Framework’ (‘FRS 101’). Transactions with owners: Dividends paid – – – – (44.8) (44.8) In preparing these financial statements, the Company applies the recognition, measurement and Own shares – – (0.3) – – (0.3) disclosure requirements of UK-adopted international accounting standards (‘Adopted IFRSs’), but makes amendments where necessary in order to comply with Companies Act 2006 and has Share based payments – – – 1.6 – 1.6 set out below where advantage of the FRS 101 disclosure exemptions has been taken. The Balance at 31 March 2022 181.1 295.6 (9.9) 32.6 139.4 638.8 financial statements are presented in Sterling. Profit for the year – – – – 166.3 166.3 Total comprehensive income – – – – 166.3 166.3 a) The requirements of IAS 7 to provide a statement of cash flows and related notes for the year. Transactions with owners: b) The requirements of IAS 1 to provide a statement of compliance with IFRS. Shares issued 10.5 – – 56.6 – 67.1 Dividends paid – – – – (43.9) (43.9) c) The requirements of IAS 1 to disclose information on the management of capital. Share based payments – – – 1.4 – 1.4 Balance at 31 March 2023 191.6 295.6 (9.9) 90.6 261.8 829.7 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 yet eective. The notes on pages 252 to 254 form part of these financial statements. e) The requirements in IAS 24 ‘Related Party Disclosures’ to disclose related party transactions entered into between two or more members of a Group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member. f) The requirements of IFRS 7 on financial instruments disclosures. g) The requirements of paragraphs 91-99 of IFRS 13 ‘Fair Value Measurement’ to disclose information of fair value valuation techniques and inputs. The above disclosure exemptions are allowed because equivalent disclosures are included in the Group’s consolidated financial statements. 253 Workspace Group PLC Annual Report and Accounts 2023 Strategic Report Our Governance Financial Statements Additional Information # **NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED** # **A. ACCOUNTING POLICIES CONTINUED** # **Significant accounting policies** # **i. Investments** Investments are carried in the Company's balance sheet at cost less impairment. Impairment reviews are performed by the Directors when there has been an indication of potential impairment. Impairment and reversal of impairment is taken to the profit and loss account. # **ii. Share based payment and investment in own shares** Incentives are provided to employees under share option schemes. The Company has established an Employee Share Ownership Trust ('ESOT') to satisfy part of its obligation to provide shares when Group employees exercise their options. The Company provides funding to the ESOT to purchase these shares. The Company has also established an employee Share Incentive Plan ('SIP') which is governed by HMRC rules. The Company itself has no employees. When the Company grants share options to Group employees as part of their remuneration, the expense of the share options is reflected in a subsidiary undertaking, Workspace Management Limited. The Company recognises this as an investment in subsidiary undertakings with a corresponding increase to equity. The disclosure requirements for share based payments are met in note 23 of the Group's consolidated financial statements. # **iii. Borrowings** Details of borrowings are described in note F to the Parent Company financial statements. Costs associated with the raising of finance are capitalised, amortised over the life of the instrument and charged as part of interest costs. # **Taxation** Current income tax is tax payable on the taxable income for the year and any prior year adjustment, and is calculated using tax rates that are relevant to the financial year. Deferred tax is provided in full on temporary differences between the tax base of an asset or liability and its carrying amount in the balance sheet. Deferred tax is determined using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised when it is probable that taxable profits will be available against which the deferred tax asset can be utilised. # **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. # **B. PROFIT FOR THE YEAR** As permitted by the exemption in Section 408 of the Companies Act 2006, the profit and loss account of the Company is not presented as part of these financial statements. The profit attributable to shareholders, before dividend payments, is £166.3m (2022: £7.5m loss). £179.5m were received in the year from subsidiary undertakings (2022: nil). Dividend payments are disclosed in note 7 to the consolidated financial statements. # **C. INVESTMENTS** | | Investment in subsidiary undertakings £m | | --- | --- | | **Cost** | | | Balance at 31 March 2022 | 1,064.1 | | Additions in the year | 383.4 | | **Balance at 31 March 2023** | **1,447.5** | | **Impairment** | | | Balance at 31 March 2022 and 31 March 2023 | 134.3 | | **Net book value at 31 March 2023** | **1,313.2** | | Net book value at 31 March 2022 | 929.8 | An impairment test has performed at the year end by comparing the carrying amount of 100% of investments with the relevant subsidiary financial information to identify whether their net assets, being an approximation of their recoverable amount, are in excess of their carrying amount. # **D. DEBTORS** | Amounts falling due within one year | 2023 £m | 2022 £m | | --- | --- | --- | | Amounts owed by Group undertakings | 533.5 | 438.0 | | Corporation tax asset | 0.6 | 11 | | | **534.1** | **439.1** | Amounts owed by Group undertakings are unsecured and repayable on demand. Interest is charged to Group undertakings. At the balance sheet date, there is no expectation of any material credit losses on accounts owed by Group undertakings. 254 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED FOR THE YEAR ENDED 31 MARCH 2023 CONTINUED | E. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR | | | | 2023 | 2022 | | --- | --- | --- | --- | --- | --- | | | | | Maturity analysis of borrowings: | £m | £m | | | 2023 | 2022 | Repayable within one year 50.0 – | | | | | £m | £m | | | | Repayable between one and two years – – Amounts owed to Group undertakings 250.8 165.0 Repayable between two and three years 203.0 – Withholding tax 1.9 1.5 Repayable between three and four years – 80.0 Accruals and deferred income 2.5 2.4 Repayable between four and five years 420.0 80.0 255.2 168.9 Repayable in five years or more 100.0 440.0 773.0 600.0 Amounts owed to Group undertakings are unsecured and repayable on demand. Interest is paid to Group undertakings. G. CAPITAL AND RESERVES F. BORROWINGS Movements and notes applicable to share capital, share premium account, investment in own shares, other reserves and share based payment reserve are shown in notes 20 to 23 on pages 2023 2022 246 to 248 and in the statement of changes in equity. Borrowings and financial instruments Interest rate Repayable £m £m Creditors: amounts falling due within Equity-settled one year share based payments Merger reserve Total Bank overdraft due within one year Other reserves: £m £m £m or on demand Base + 2.25% On demand – – Balance at 31 March 2021 22.3 8.7 31.0 1 Bank Loan SONIA + 1.75% September 2023 50.0 – Share based payments 1.6 – 1.6 Creditors: amounts falling due after Balance at 31 March 2022 23.9 8.7 32.6 more than one year Share based payments 1.4 – 1.4 3.07% Senior Notes 3.07% August 2025 80.0 80.0 Issue of shares – 56.6 56.6 3.19% Senior Notes 3.19% August 2027 120.0 120.0 Balance at 31 March 2023 25.3 65.3 90.6 3.6% Senior Notes 3.60% January 2029 100.0 100.0 2 Bank Loan SONIA + 1.77% December 2025 123.0 – Green Bond 2.25% March 2028 300.0 300.0 Total borrowings 773.0 600.0 Less cost of raising finance (3.6) (4.5) Foreign exchange dierences – – Net borrowings 769.4 595.5 1. This is an average over the life of the debt. The margin increases from 1.5% to 2.0% over the facility availability period. 2. The base margin is dependent upon the LTV as reported in the client certificate, which is submitted twice a year. The maximum margin is 2.15%. The base margin can be adjusted further by up to 4.5bps dependent upon achievement of three ESG-linked metrics. All the above borrowings are unsecured. 255 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### FIVE-YEAR PERFORMANCE (UNAUDITED) PERFORMANCE METRICS (UNAUDITED) 2019–2023 | | 31 March | | 31 March | | 31 March | | 31 March | | 31 March | | | 31 March | | 31 March | | 31 March | | 31 March | | 31 March | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | | | £m | | £m | | £m | | £m | | £m | | | £m | | £m | | £m | | £m | | £m | | Rents receivable 136.7 104.3 118.0 132.7 123.7 | | | | | | | | | | | Workspace Group: | | | | | | | | | | | | Service charges and other income 37.5 28.6 24.3 28.7 25.7 | | | | | | | | | | | Number of estates 86 57 58 59 64 | | | | | | | | | | | | Revenue 174.2 132.9 142.3 161.4 149.4 | | | | | | | | | | | Lettable floorspace (million sq. ft.) 5.2 4.0 3.9 3.9 3.9 | | | | | | | | | | | | Trading profit before interest 95.1 67.4 62.5 104.3 93.9 | | | | | | | | | | | Number of lettable units 4,910 4,482 4,196 4,009 4,796 | | | | | | | | | | | 1 Net interest payable (34.4) (20.5) (23.8) (23.3) (21.5) Average unit size (sq. ft.) 1,065 844 942 922 975 Trading profit after interest 60.7 46.9 38.7 81.0 72.4 Rent roll of occupied units £140.1m £111.0m £103.9m £132.8m £127.5m Profit/(loss) before taxation (37.5) 124.0 (235.7) 72.5 137.3 Overall rent per sq. ft. £32.86 £33.26 £33.90 £39.18 £38.45 Profit/(loss) after taxation (37.8) 123.9 (235.7) 72.1 137.3 Overall occupancy 81.50% 84.3% 77.8% 87.0% 84.8% Basic earnings/(loss) per share (19.9)p 68.2p (130.3)p 40.0p 78.9p Enquiries (number) 10,563 11,007 8,870 13,041 12,575 Dividends per share 25.8p 21.5p 17.75p 36.16p 32.87p Lettings (number) 1,312 1,520 1,146 1,454 1,238 Dividends (total) 49.4 40.6 32.1 65.4 59.3 EPRA Measures Investment properties 2,643.3 2,366.7 2,349.9 2,586.3 2,591.4 EPRA Earnings per share 29.4p 26.2p 21.3p 44.5p 40.3p Other assets less liabilities 46.4 (9.4) (65.5) (47.1) (29.2) EPRA Net Tangible Asset per share £9.27 £9.88 £9.38 £10.88 £10.85 Net debt (902.0) (557.7) (564.9) (541.2) (580.2) Net assets 1,787.7 1,799.6 1,719.5 1,998.0 1,982.0 Gearing 50% 31% 33% 27% 29% Loan to value 33% 23% 24% 21% 22% EPRA Net Tangible Assets (NTA) £9.27 £9.88 £9.38 £10.88 £10.85 1. Excludes exceptional items. 256 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### PROPERTY PORTFOLIO 2023 (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. £ Ancells Road GU51 2UN Acquisitions 34,577 422,979 Gainsborough House SL4 1TX Acquisitions 18,661 548,417 Archer Street Studios W1D 7AZ Like-for-like 14,984 854,489 338 Goswell Road EC1V 7LQ Like-for-like 41,490 1,952,558 Ashcombe House KT22 8LQ Acquisitions 17,452 148,468 Grand Union Studios W10 5AD Like-for-like 62,958 1,742,997 Barley Mow Centre W4 4PH Refurbishment 77,995 1,856,864 60 Gray’s Inn Road WC1X 8AQ Like-for-like 36,139 1,918,031 Blackthorne Road SL3 0AH Acquisitions 73,507 814,741 9 Greyfriars Road RG1 1NU Acquisitions 38,493 918,503 Brickfields E2 8HD Like-for-like 56,755 2,236,916 20-30 Greyfriars Road RG1 1NL Acquisitions 33,344 586,000 Brunel Road RG7 4XE Acquisitions 135,094 1,361,312 Havelock Terrace SW8 4AS Refurbishment 58,164 1,252,217 Building 329 RG12 8PE Acquisitions 32,516 547,097 Ink Rooms WC1X 0DS Like-for-like 22,235 887,176 Busworks N7 9DP Refurbishment 104,571 1,280,589 Kennington Park SW9 6DE Like-for-like 348,879 10,088,945 Canalot Studios W10 5BN Like-for-like 48,030 1,173,776 Leroy House N1 3QP Refurbishment 0 0 Cannon Wharf SE8 5EN Like-for-like 32,619 608,021 Lock Studios E3 3YD Redevelopment 54,237 1,060,164 Cargo Works SE1 9PG Like-for-like 65,942 3,277,690 Lower Cherwell Street OX16 5AY Acquisitions 40,060 277,498 Castle Lane SW1E 6DR Acquisitions 14,254 796,923 Mallard Court TW18 4RH Acquisitions 22,176 335,058 Centro Buildings NW1 0DU Like-for-like 203,183 8,329,087 Mare Street Studios E8 3QE Refurbishment 54,863 1,419,496 China Works SE1 7SJ Like-for-like 68,809 2,225,162 Metal Box Factory SE1 0HS Like-for-like 106,316 6,433,969 Chiswick Studios W4 5PY Like-for-like 11,378 375,441 Mirror Works E15 2NH Redevelopment 39,669 668,478 Chocolate Factory (part) N22 6XJ Refurbishment 28,752 493,928 Morie Street SW18 1SL Like-for-like 21,707 445,183 Clerkenwell Workshops EC1R 0AT Like-for-like 52,879 2,393,340 Oakwood Trade Park RH10 9AZ Acquisitions 51,834 838,924 Columbia House GU14 0GT Acquisitions 40,756 660,000 Pall Mall Deposit W10 6BL Refurbishment 60,092 1,373,871 Corinthian House CR0 2BX Acquisitions 43,749 647,426 Parkhall Business Centre SE21 8EN Refurbishment 122,665 1,967,982 Crown Square GU21 6HR Acquisitions 47,97 1 668,778 Parma House / Chocolate Factory N22 6XF Redevelopment 34,983 179,660 Cygnet House TW18 4RH Acquisitions 3,437 76,727 Peer House WC1X 8LZ Like-for-like 9,739 272,663 E1 Studios E1 1DU Like-for-like 40,430 913,514 Pegasus Place RH10 9AY Acquisitions 50,544 1,128,060 East London Works E1 1DU Like-for-like 38,333 936,022 Pill Box E2 6GG Like-for-like 50,409 1,133,569 Edinburgh House SE11 5DP Like-for-like 64,513 2,578,617 Poplar Business Park E14 9RL Like-for-like 65,178 1,030,806 Evergreen Studios TW9 1QE Acquisitions 17,323 920,000 Portsoken House EC3N 1LJ Acquisitions 49,640 1,604,519 Exmouth House EC1R 0JH Like-for-like 51,106 2,531,786 Prospero House RH1 1LP Acquisitions 48,934 1,208,782 Five Acre Site CT19 5DR Acquisitions 60,536 327,489 Q West TW8 0GP Redevelopment 54,960 610,119 160 Fleet Street EC4A 2DQ Refurbishment 42,566 1,458,694 Rainbow Industrial Park (Part) SW20 0JK Like-for-like 21,180 428,461 Fuel Tank SE8 3DX Like-for-like 35,189 702,685 Rainbow Industrial Park (Phase 2) SW20 0JK Redevelopment 89,934 250,707 257 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 PROPERTY PORTFOLIO 2023 (UNAUDITED) CONTINUED Lettable Net rent roll of floor area occupied units Property name Postcode Category sq. ft. £ Rivergate House RG14 2PZ Acquisitions 61,396 1,244,886 Riverside (Commercial) SW18 4UQ Refurbishment 43,000 0 Salisbury House EC2M 5QQ Like-for-like 215,594 10,555,322 ScreenWorks N5 2EF Like-for-like 63,974 2,116,254 Sopwith Drive KT13 0UZ Acquisitions 62,198 0 Swan Court SW19 4JS Acquisitions 57,543 1,679,741 The Switchback SL6 7RJ Acquisitions 36,817 715,629 The Biscuit Factory (Cocoa Studios) SE16 4DG Like-for-like 39,298 1,045,538 The Biscuit Factory (Part) SE16 4DG Like-for-like 122,724 2,184,430 The Biscuit Factory (J Block) SE16 4DG Refurbishment 83,811 1,240,566 The Frames EC2A 4PS Like-for-like 51,864 3,099,879 The Leather Market SE1 3ER Like-for-like 146,925 5,069,539 The Light Box W4 5PY Like-for-like 74,135 1,780,953 The Light Bulb (part) SW18 4GQ Like-for-like 52,699 1,218,489 The Light Bulb (Phase 2) SW18 4WW Redevelopment 17,226 317,091 The Mille TW8 9DW Acquisitions 96,698 2,085,628 The Planets GU21 6HR Acquisitions 98,255 0 Three Acre Site CT19 5FG Acquisitions 44,300 349,525 Old Dairy EC2A 4HT Refurbishment 56,983 2,180,261 The Print Rooms SE1 0LH Like-for-like 45,622 2,457,785 The Record Hall EC1N 7RJ Like-for-like 57,015 3,011,278 The Shaftesbury Centre W10 6BN Like-for-like 12,627 261,912 The Shepherds Building W14 0DA Like-for-like 141,805 5,222,800 Thurston Road SE13 7SH Redevelopment 7,133 123,033 Vox Studios SE11 5JH Like-for-like 106,944 4,214,705 Wenlock Studios N1 7EU Refurbishment 30,939 921,189 Westbourne Studios W10 5JJ Refurbishment 56,756 1,775,290 Willoughby Road RG12 8FB Acquisitions 54,157 594,947 66 Wilson Street EC2A 2BT Acquisitions 11,893 461,472 258 Workspace Group PLC Strategic Report Our Governance Financial Statements Additional Information Annual Report and Accounts 2023 ### GLOSSARY OF TERMS | Earnings per share (‘EPS’) is the profit after | Equivalent yield is a weighted average of | Like-for-like are those properties with | Rent roll is the annualised net rent of | | --- | --- | --- | --- | | taxation divided by the weighted average | the initial yield and reversionary yield and | stabilised occupancy, excluding recent | occupied units for a property or portfolio of | | number of shares in issue during the period. | represents the return a property will produce | acquisitions and buildings impacted by | properties at a reporting date. | | | based upon the timing of the occupancy of | significant refurbishment or redevelopment | | | Employee Share Ownership Trust (‘ESOT’) is | the property and timing of the income | activity. | Reversionary yield is the anticipated yield, | | the trust created by the Group to hold shares | receivable. This is approximated by the | | which the initial yield will rise to once the | | pending exercise of employee share options. | reversionary yield multiplied by the Group | Loan to Value (‘LTV’) is net debt divided by | rent reaches the estimated rental value. | | | trend occupancy of 90%. | the current value of properties owned by the | It is calculated by dividing the ERV by | | EPRA EPS is a definition of earnings per share | | Group as valued by CBRE. | the valuation. | | as set out by the European Public Real Estate | Estimated Rental Value (‘ERV’) or market | | | | Association (‘EPRA’). It is based on operating | rental value is the Group’s external valuers’ | LMA is the Loan Market Association. | SONIA is the Sterling Overnight Interbank | | earnings where profit before tax is adjusted to | opinion as to the open market rent which, | | Average Rate, an important interest | | exclude the impact of any changes in property | on the date of valuation, could reasonably | MSCI IPD MSC Inc is a company that produces | benchmark administrated by the Bank of | | valuation, gains or losses on property | be expected to be obtained on a new letting | independent benchmarks of property returns | England. | | disposals and fair value movements. | or rent review. | under the brand IPD. | | Total Accounting Return is the growth in | EPRA Net Asset Value (‘EPRA NAV’) is a | Exceptional items are significant items of | Net Asset Value per share (‘NAV’) is net | absolute EPRA net asset per share plus | | --- | --- | --- | --- | | definition of net asset value as set out by | income or expense that by virtue of their size, | assets divided by the number of shares at the | dividends paid in the year as a percentage of | | EPRA. It is adjusted to include investment | incidence or nature are shown separately on | period end. | the opening EPRA net asset value per share. | | properties at fair value and to exclude certain | the consolidated income statement to enable | | | | items not expected to crystallise in a long- | a full understanding of the Group’s financial | Net debt is the amount drawn on bank and | Total Property Return (‘TPR’) is a percentage | | term investment property business model. | performance. | other loan facilities, including overdrafts, less | measure calculated by MSCI IPD and defined | | | | cash deposits. This excludes any foreign | in the MSCI Global Methodology for Real | | EPRA Net Reinstatement Value (‘EPRA NRV’) | Gearing is the Group’s net debt as a | exchange movements. | Estate Investment as the percentage of value | | represents the value required to rebuild an | percentage of net assets. | | change plus net income accrued relative to | | entity, assuming that no asset sales takes | | Net rents are rents excluding any contracted | the capital employed. | | place. Assets and liabilities that are not | Green Finance Framework is aligned with | increases and after deduction of inclusive | | | expected to crystallise in normal | ICMA’s Green Bond Principles (2018 edition) | service charge revenue. | Total Shareholder Return (‘TSR’) is the | | circumstances, such as fair value movements | and LMA’s Green Loan Principles (2021 | | growth in ordinary share price as quoted on | | on derivatives and deferred tax on property | edition) and addresses UN SDGs 7, 11, 12 and | Occupancy is the area of space let divided by | the London Stock Exchange plus dividends | | valuation movements, are excluded. | 13. The framework allows Workspace to issue | the total net lettable area (excluding land used | per share received for the year, expressed as a | | | a variety of GDIs and sets out the principles | for open storage) expressed as a percentage. | percentage of the share price at the beginning | | EPRA Net Tangible Assets (‘EPRA NTA’) | for the use and management of proceeds | | of the year. | | focuses on a company’s tangible assets and | from GDIs. | Property Income Distribution (‘PID’) a | | | assumes that entities buy and sell assets, | | dividend generally subject to withholding tax | Trading profit after interest is net rental | | thereby crystallising certain levels of | ICMA is the International Capital Market | that a UK REIT is required to pay from its | income, less administrative expenses and | | unavoidable deferred tax. | Association. | tax-exempted property rental business and | finance costs (excluding exceptional finance | | | | which is taxable for UK resident shareholders | costs). | | EPRA Net Disposal Value (‘EPRA NDV’) | Initial yield is the net rents generated by | at their marginal tax rate. | | | represents the shareholders’ value under a | a property or by the portfolio as a whole | | UN SDGs is UN Sustainable Development | | disposal scenario, where deferred tax, financial | expressed as a percentage of its valuation. | REIT is a Real Estate Investment Trust as | Goals which are addressed in the Green | | instruments and certain other adjustments are | | set out in the UK Finance Act 2006 Sections | Finance Framework. | | calculated to the full extent of their liability, | Interest cover is the number of times net | 106 and 107. REITs pay no corporation tax on | | | net of any resulting tax. | interest payable is covered by net rental | profits derived from their property rental | | | | income. | business. | | ### 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 | 150 Cheapside | | of all press announcements. The site can be | London EC2V 6ET | found at www.workspace.co.uk/investors Registered oce and headquarters Canterbury Court Kennington Park FSC® certified paper 1–3 Brixton Road London SW9 6DE Printed to the EMAS standard and its Environmental Management System certified to ISO 14001. 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Designed and produced by Gather www.gather.london Workspace Group PLC Annual Report and Accounts 2023 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