Okay. That's pretty sharp timing.

Good morning. Welcome.

Thank you very much for coming. My name is Charlie Green, and I'm the CEO of Workspace.

Like to introduce Tom Edwards-Moss, our CFO. Today we're going to be talking to you about our full-year results for FY26.

We're going to run through those, and Tom will run through in detail. I'll just sort of touch on giving an overview and touch on the summary.

We'll talk about where this business is today, and then, whilst we're referencing our FY26 numbers, I think the thrust of the presentation today is really about what is this business and where can we take this business, and how do we move forward, and what does that look like? Tom and I have been with the business for four months.

I'm a little over four months. Tom's a little shy of four months.

I would say that in that period, we've worked very, very hard to get a very deep understanding of this business. That means we've looked at the financials, we've really dug into the underlying performance of this business.

We've really understood the balance sheet, and we've done the modeling to look at how we can take this business forward and what that looks like. We've looked at the product.

We've looked at the buildings. We've looked at what is Workspace today, because we need to understand where we are today in order to understand where we're going to take this business moving forward.

We've looked at the demand. That's the demand: who are our customers today?

What do they want? What do they need?

As importantly, we've looked at the demand of the wider market. Just by way of a little bit of background, I really know this market.

I really understand this market, I've worked in this sector, in the flex sector, for over 25 years, I have a deep understanding of actually what Workspace needs to do. I'm very clear on what's required for us to get there.

If we look at a very sort of broad overview of the business, it's been a difficult year. FY26 results has been quite tough, we're down, and we'll touch on the numbers, but we're down on our trading profit after interest down 9.4%.

What that tells us is we have to reposition this business. The opening slide is a transformation to an earnings-focused business.

This is a transformation. It's really important to be clear.

If we look at the second box here, actually our starting point is stable. That's really important as well, because this isn't a transformation because we're on a slide or we're on tilt and we're moving backwards at pace.

We're actually in a strong, stable position. Now, stability is great.

We'd rather be in a stable position up here, we have to move towards that, but as a platform, as a baseline, I think we're in a really good place. We're not doing this for the sake of doing this.

The market opportunity is significant. We'll talk about what that market is, and there is both a medium-term transformation, because it will take some time.

There's also some near-term gain that we can achieve as well, which we'll talk about. Just to touch on very high level, Tom's about to go into the detail.

Tom, by the way, I think we have established in the four months a very strong working relationship, and I think that he's really very good, and I'm very grateful to have Tom by my side as we move forward, because, of course, the financials are so important. The balance sheet is so important.

We are down on our occupancy year on year by 1.4%, we're low. We want to be in the high 80s.

We're at 81.6% at the moment, but it's okay because we're sort of solid. Our trading profit, down 9.4%, as I said.

Tom, I've set you up now. Sorry about that, but over to you to run through the numbers.

Thank you, Charlie, and good morning. As Charlie says, the focus of this presentation is on the future and our plans for the business.

We have the opportunity to recycle capital into low-risk refurbishment projects, generate returns for shareholders well in excess of our cost of capital. First, look at the FY26 numbers.

Net rental income was £113.4 million, down 7.1% on prior year. Stripping out the impact of disposals, the underlying net rental income decline was 2.4% year on year.

Admin expenses and finance costs reduced, taking trading profit after interest to £60.5 million, down 9.4%. After revaluations, losses on disposals, and exceptional items, the loss before tax for the year was £120.5 million.

As we announced in our Q4 trading update, we have returned to a dividend policy of 1.2 times earnings cover. This allows us to retain enough of our free funds from operations to cover maintenance CapEx while balancing this with returns to shareholders.

On this basis, we've declared a final dividend per share of 16.7 pence, which gives a full-year dividend per share of 26.1 pence per share, down 8.1% on prior year. On the balance sheet, we saw a 7% decline in property portfolio to £2.1 billion.

Net debt reduced 7.6% due to disposals to £758 million, and net assets reduced 11.6% to £1.3 billion, with EPRA NTA per share at £6.87, down 11.2%. Just to dig into the portfolio valuation in a little bit more detail.

As I said, there was a 7% like-for-like decline in portfolio value. This was driven by decreases in ERVs, more of which came in the first half of the year.

If we look at the stabilized portfolio, which is the majority of the assets, the decline was 5.6%. As you'll see, there was some inward movements on yields.

That occurred in the first half of the year and was really due to a slight difference in valuers when we rotated them. If we look at our largest 15 assets, they performed better with an average 3% decline over the year and 1% in the second half.

Turning to our debt position, at March 2026, we had £761 million of drawn debt, which gives available liquidity of over £240 million and significant headroom on our covenants. We've recently exercised the extension option on our £200 million revolving credit facility, moving the maturity back by one year to June 2030.

We have no maturities in 2026, and our 2027 maturities can be covered out of existing liquidity, we have some flexibility as we assess our refinancing options. We've also announced today that we're moving our credit rating to Fitch, which has initiated today at a BBB- with a stable outlook.

Fitch rates more of the UK property sector, and we believe their methodology is more appropriate for a company of Workspace's scale. A few financial points to leave you with.

We're moving to focus on earnings as our key performance indicator to manage the business. As guided in the Q4 trading update, we're expecting a substantial step down in trading profit in FY27.

We're expecting CapEx of around £55 million during the year as we start to invest in improving the portfolio, and as you can see on the slide, the majority of that is in value-add projects. We'll be funding our accretive investment and increasing balance sheet capacity through completing the £75 million of disposals as planned, and we also have a further £100 million of disposals under consideration.

As I said already, we're actively assessing our refinancing options. FY27 will be a year of transition.

There are a lot of moving parts, and we'll keep you updated as the year progresses. We have the opportunity to invest substantially ahead of our cost of capital and drive returns for shareholders, and we're excited for the future.

With that, I'll hand back to Charlie.

Thanks, Tom. We'll get into those returns and we'll look at them shortly.

I think important to look at Workspace today and just sort of examine where we are. Workspace is 40 years old.

In fact, I know Workspace really, really well because I did consultancy for the business before I set up my own business, which was The Office Group, it was now called Fora. Before that, and in many ways, what informed much of what we did in our business was how Workspace approached the market.

They were market leaders. They were pioneers in flex.

In fact, they understood brand better than anybody else in the real estate market. I think it's also fair to say that in that success, they sort of stayed where they were, and the market has evolved.

Lots of reasons why the market has changed, but principally, occupiers have altered everything. Occupiers are driving what is now being provided in all sectors and very clearly expressed in the office world.

Workspace have sort of stayed over here, and we'll talk about then how we move forward from that point. The flex market, and this is a really exciting point, because the flex market is structurally growing, we're moving into that market.

We're there now, but we need to really be actively moving into that market and adapting to the changes. We have the strategy to do that.

That is about modernizing this business, elevating the product, improving the product, and creating a product that very much is relevant to today's market. That is then going to drive our occupancy, and that's going to drive our pricing.

This is really a slide I think important to demonstrate sort of where we are today, and again, just to emphasize the point that we are stable. Our inquiries year to date are pretty much in line with year on year.

We always have a spike in June, for the quarter, it will move on up. Our lettings actually slightly higher in terms of conversion, a slightly stronger conversion rate.

That's a good indicator that actually the quality of our inquiries are a good quality, strong inquiries. Our occupancy for the stabilized portfolio, 81.6%, again, quite flat, and that's okay.

A slight downward trend in our rent per square foot, and that's because previously, as a business, we've used the policy of using rent as a lever to drive occupancy. We reduce rent to drive occupancy.

Does work, but not sustainable in the long term or the medium term, because ultimately, the financials start to fall away from you. This is a really important slide, and we've anonymized the buildings, because we're showing here the delta between the lowest rent paid in a building and the highest rent paid in a building.

We've anonymized this because we actually have some customers in the room, and we don't want them to think that they're overpaying.

This is the top 10 buildings. This is,

thank you, Tom, this is the top 10 buildings that we have that generate close to 50% of our revenue. Really interesting to focus on these buildings.

I guess the dots are important to examine, because they represent the average rent. The point being that the delta between the lowest rent we're achieving in a building and the highest rent we're achieving is very, very wide, and we need to narrow that and move that average rent up.

There's a reason, I think, that we have that delta, and that is because historically, we've been quite complex in how we structure our pricing. We're not consistent in our pricing.

We have some leases inside the act, some outside the act. We have some rents where you pay a service charge on top.

Sometimes that's capped; sometimes it's not. Sometimes it's included.

Sometimes we include Wi-Fi; sometimes we include electricity. It really is a little too complex.

We believe that we can restructure the pricing, and I had a call from one of our customers in one of our buildings, which I seem to get quite a lot of these days, and that's fine. I'm very open to having those calls.

She had a business where her office was directly next door to an exact replica of her office, and she found out we were charging them an all-inclusive price, and she was paying her electricity separately. She was furious.

She was furious because she thought she was paying more than them. In fact, when she learned that she wasn't, it was the same cost in total, she was relieved, but she was furious, she was pissed off because she was having to deal with the electricity.

She was having to deal with red-letter reminders on her electricity. People want life to be easier.

It is our role in providing the space, providing the buildings, to make that life easier. We're not doing it at the moment, or not as well as we should.

We have that opportunity, and I think in simplifying our pricing structure, it allows us to build in an operating margin. That's a critical point, we can start to drive that price upwards.

This is near-term upside. We have the medium-term transformation, but we also, and this process has started, we're doing this now, and we'll roll this out through all the renewals and all the new lettings that we're doing.

I think when we talk about transforming Workspace, we should understand what the market is and what the market wants. When we think about occupiers today, they're seeking more.

They're seeking better. I think that there has been an overarching theme following the pandemic that there has been a sort of flight to quality, where all occupiers, agnostic of size, want better and want more, whether you're a corporate in prime West End or whether you're a startup that's taking space in Clerkenwell.

If I just run through these: design, people want sort of the aesthetic. They want a better aesthetic, but they also want a better functionality of that space.

How are we thinking about work behavior? The need for privacy, acoustic privacy, visual privacy as people are working, and how are we responding to that and adapting to that change?

Service, we have to learn from the hospitality industry, we have to understand how better to care for our customers. Amenities are really important, but it's also important that we're balanced on that.

The top of every list of amenities that occupiers want are meeting rooms. Convenience is about reducing friction; is about making life easier.

Tech and AI is the same: how do we use tech? How do customers benefit from tech that makes their lives easier?

Brand [snort] this is an area that really the real estate industry hasn't really grasped. The operators have, but customers need brand resonance.

They need to understand who they are actually dealing with. It's the ability to penetrate a market.

Value is not about budget. Value is not about cheap.

Value is about the return on the pound that is spent. I would argue that we've moved away, this market is moving away actually from a flight to quality that we've seen post-pandemic to a flight to value, as people seek better value from their space.

With all that said, where do we sit in the market? Workspace, if you think of it on this scale, Workspace have been here for many years.

The market has moved away from them, our role now is to bring Workspace towards these other operators. There are many other brands are available, we've just got a short selection here, but these operate at the premium end of the market, and they're very good, especially Fora, but I'm slightly biased there.

GPE have captured this sort of managed part of the market, it sits slightly behind the serviced. We need to move towards them, but we don't want to be them.

We don't want to compete with them. We don't want to imitate them.

In fact, if we get this right, we can own this category, and we're calling this category the best-value category. Just to repeat, this is not about cheap.

This is not about budget. This is about giving people the best value.

That means that we're targeting our small business, SME, startup, scale-up market. That is our market.

It always has been our market. We'll continue to target that.

We're just going to give them something that's better. The product then and how we actually deliver on that is we're going to sort of split the product into two.

Space is really about saying, we have 81%, 81.6% occupancy. We need to protect that.

We need to protect that income, we'll continue in our repricing and reframing the pricing a simple offer, which is space. Space is really still appealing to that customer base today, but we'll build in that operating margin.

That is room only. Then we're going to be investing in this elevated product of managed.

That is where we just deliver more. We fit out the offices.

We put in the furniture. We might build in meeting rooms, phone booths.

We'll put plants. We'll put artwork in.

We'll do the cleaning. We'll do the maintenance.

We'll give more shared spaces. Both of these will have access to building amenities.

Then there's the opportunity to drive additional revenue, something that we're not really tapping into enough at the moment, but there's an opportunity that we estimate to be around

3%

to 5%. 3% to 5%.

3% to 5%. Yeah.

I think that just goes straight to the bottom line. If it's the highest sought-after amenity, we've got some extraordinary buildings and it's not for every building, but the buildings that are in the strong locations where we can create these spaces, we're going to start to drive revenue.

In order to get there, we've announced, we know that we've got the £200 million of disposals. That's in the strategy already.

We're on track to deliver that by year-end '27. We are then considering an additional £100 million of disposals over and above that.

Then how are we going to use the money? There's looking at our balance sheet, and then there's investing in the buildings.

We want to make sure that we're doing refurbishments only. That is low risk for a high return.

We don't want to be taking on new-build projects or cuts and carves in this market. Construction costs are just too high for us to embark on those sorts of projects.

We'll be investing in the offices themselves, doing the design and the fit-out. We'll be investing in people.

We have some skills gaps. We need to add, we've provided a contingency that allows us to add the right kind of core skills and deliver the tools to our team and give them the training and the L&D.

I'll come on to tech in a little bit; it deserves its own slide. We're going to rebrand this business.

That's underway, and our brand is our culture, and our brand is our ability to connect with our audience. It's a critical move for us to get right, and we're really excited by it.

It's a customer of ours who's actually doing that work for us, which I think is important, too, because then they understand us and who we want to be and who we're connecting with. Just to touch on the technology piece, we are embarking on a number of projects, and we're using agentic AI for inquiries out of office hours.

Actually, lots of people are doing that. It's really effective, going very, very well.

We're deploying AI to our credit control to manage our debt. We think that that is going to actually really deliver some results for us.

We're looking at our facilities management, and how can we just be better at delivering a level of service using AI, capturing data to make better-informed decisions. Really culturally, I want everybody at the business to really embrace AI, to be thinking about AI in their every day, and if we can get people individually to do that, then I think corporately, we start to reap the benefits of that.

We've targeted four buildings, and four buildings are our case study buildings. We've created contiguous space, some chunks of vacant space within each of these buildings.

Tom will talk about the returns in a sec. With Salisbury House, where we're obviously here today, we have an average rent of £68 a foot in this building, and other operators who are in prime City Grade A space achieving gross rents of around £300 a foot.

We have an opportunity here to say, okay, we can improve our offer, and we can create something that is quite significantly discounted to the prime, and yet we're in this core City location. There's a real opportunity for upside here.

This building's 220,000 square feet. We have five meeting rooms.

It's not enough. We should have 25 meeting rooms.

We know that meeting rooms generate a greater revenue per square foot than an office in the same room at a 55% utilization. That your optimal utilization should be 65% to 68%.

We know that 50% of our income comes from inside the building, 50% comes from outside the building. This is industry information, if we know this, let's generate more revenue by delivering more amenity, which, in turn, is more accretive to the offices and starts to drive rents in the offices above.

We're working at Cargo Works, which is close to Waterloo Station. Eden House, which is actually outside of our top 10 revenue-generating buildings, but I think important to try and demonstrate how we can do this in the more peripheral locations.

Then Centro in Camden. Centro, we're based, actually.

It's where our head office is. Centro is 205, 210,000 square feet.

It doesn't have a heart. It's just offices.

We need to create experiences for people. We need to deliver something that actually compels people to come back to the office, to come to the buildings.

That is about how we make people feel. With Centro, we're going to be activating the ground floor, where we're going to be putting in a bakery with likely some really, really unhealthy food, but it's okay because we're going to have a wellness hub next to it to just balance that out.

We're going to put in a meeting and events hub, and we'll think about how we use that space when it's not being used for events, and we'll do pop-ups and galleries. All of that, which is revenue generating in isolation, is accretive to the offices upstairs.

How are we creating a better experience for people who are coming to our buildings? That's just good business.

That means that we're going to let our spaces more quickly and at higher revenues. Tom, go through the numbers if you wouldn't mind.

On the returns, across the four buildings, relatively modest CapEx in what are low-risk refurbishments, in total, we're under £20 million across the four. We believe the returns we can generate from that are very substantial.

Incremental yields on cost of mid-teens or better and unlevered target IRRs of early teens as well, and in some cases better, particularly Salisbury House, where we're considerably ahead of that. Those are substantial returns for little risk.

Then

I think when you look at the wider portfolio, this is not just about saying here are four buildings, we'll work on this and we'll deliver this in the medium term. We're looking at the entire portfolio: where can we make improvements?

Where do we have tired common areas, poor entrances, where we can just lift it up by being very smart about how we spend our money? I think we need to be really careful about how we invest our cash, and I think I bring to this business a founder mentality.

I'm good at being careful about how we spend money, and I'll imbue that to the team to make sure that we're really on top of it, and still create space that actually starts to drive rents because we're giving something to tenants, we're improving the experience. Really, this is about driving improvements across the portfolio.

If we have an empty office that has been empty for two years, and we have some of those, how are we thinking about actually investing in that office and see how it lets when we actually add something? I'll let Tom talk through the bridging on this, but this is an important slide, because this is our ambition.

If we think about where we want to be in the medium term, that sort of four- to six-year period, because Tom won't let me give a defined date on which to deliver, because apparently I'll get in trouble if we don't get it. This is about understanding how we can drive our revenue then from a trading profit before interest, which we think is the right metric to really then give a transparent view of the performance of this business.

Tom, if you want to chat through it.

Starting place, reported trading profit before interest at March of around £90 million, stripping out disposals made in the year and also non-recurring items, that's more like £80 million. I suppose we've put in a stairway of the different levers will drive substantial uplift in earnings over time.

What I would say is this is illustrative, the size of the boxes is the same. There will be different weightings to each, but really, it's across occupancy growth.

We're at 81.6% today on stabilized portfolio, just under 80% on the whole portfolio, there's a significant opportunity to get that back up to probably where we've historically been, which is closer to 90%. We have in our portfolio and in our existing leases contracted rent increases after year one.

That will continue in future, there's an element of that which will drive income. Then the big piece, enhanced product and pricing, as we've spoken about, and we will be recycling capital out of existing assets into that over time.

As we said, then there's also operational efficiencies and the additional revenue of meeting rooms, etc. Taking all that together, that comes to our medium-term ambition of over £125 million, which would be more than 50% up on the £80 million we're starting place from.

Important to add not to scale, but also important to add that when we start to get this right, and we've rebranded this business, and we can deliver the returns that we're aiming for, this isn't just about building on the organic portfolio that we have. This is about saying we can be a bigger business, but we're only going to be a bigger business if we get the fundamentals right.

I think that ambition then to take this business forward beyond the portfolio that we have today is really important. I think to summarize really, the market that we are in that is there to take advantage of is structurally growing.

That flex market is structurally growing. We have an extraordinary portfolio.

These buildings are really quite something. I think that if we take advantage of our scale, which allows us really to then own this best-value category and own it in a way where nobody else is really going for this area of the market, and yet it's the biggest pool of demand for office space in London, it's an extraordinary opportunity.

There's low-risk, high-return investments that will maximize earnings, and if we get our earnings right, then that has that positive impact on our capital values as well. I think just to close, and to repeat, I'm really, really clear on what we need to do, and that clarity comes from the experience that I've got.

This is not a standing start. I'm not starting in this business four months ago and trying to figure this out.

I already knew what the answer was. The nuance then is how we execute on that.

I think with that clarity, with a great team, for which I'm really grateful for the hard work that's gone in today and the hard work that's got us to that stabilized position, I think it's really a very exciting and interesting opportunity moving forward. We'd love to take some questions.

I say love; depends on the questions, but we're going to take a seat and field some questions. Thank you very much.

That was quite upbeat, too. I agree.

Thanks.

Hi, morning. Denese Newton from Stifel.

Just going back to that sort of segment of the market that you're looking to operate in, moving up the sort of value chain, I think you just said that that's the biggest addressable market you see in sort of flexible space, and that no one else is really taking advantage of it. Where are those customers going at the moment?

I think that the opportunity is to create the product that they are sort of needing and wanting. I think it's quite disparate at the moment, some of them are in our buildings.

Some are in other buildings in our areas. Some are in areas that we are not in, but we hope to attract them to our buildings.

The market is very strong, very much there. I think there's a debate that's been ongoing for too many years actually on sort of the return to work, the hybrid work, the remote working.

Actually, what we know is if we get our product right, that will attract them to our buildings. This is about giving a tool to employers to say, okay, you want your people to come in.

It's not for us to tell people they should be in for three days or five days. Our responsibility as a provider of space and owner of these assets is to say, this is the best possible environment that you can have that we're creating for you, and then it's over to you.

Okay. I've just got a second question just on your medium-term target, hitting that £125 million in 4 to 6 years.

Do you see that as a sort of steady progression, or are you expecting that the real fruits of that will come towards the end of that period once you've put the investment in?

I think there will be some time, Denese, to see it. There are, as Charlie said, there are things we can do in the near term, but I think if we're going to really achieve much higher pricing, that does require us to invest the money in buildings, and that is, even if it's not huge capital, but that will take time to deliver, it will be, I think, more back-end weighted.

Okay. Great.

Thank you very much.

Thank you. Ashnaa De Vyas from Deutsche Numis.

Just two questions. One on the quantum of CapEx we should expect over the medium term as you transform the portfolio.

The second one, if you could talk a bit more about the rental uplifts that you can achieve on your managed offer versus the space-only on a net basis?

I'll let Tom answer on the CapEx. On the rental uplifts, we should be seeing on the managed space, we should be sort of almost seeing a sort of net position, a premium to ERV rents of around really 30% to 40% over and above what we'd be achieving on a traditional basis.

I think in terms of the delta between space and managed, it's not a question that you can answer, because we have to look at every individual asset. I can answer it on an individual asset basis, but I think there isn't a blanket approach that allows us to give an answer on that, because some buildings will be all managed.

Some buildings will be all space, and some will have a mix. Then that's where you'll see the delta, but that will be driven by sort of where they are in the buildings and the quality of that space.

On the CapEx, sorry, you're behind the pillar. I'm behind the pillar, let me move a bit.

We're budgeting, as I said, £55 million for this year, which over £40 million is value-add CapEx. In the future years, we expect that to be more like £45 million, just over £30 million of value-add CapEx per year.

What I would say, though, is there are moving parts to this, if we can find opportunities to deploy more capital more quickly, generate greater returns, we will do that. I think that it will grow over time.

I suppose when we look at the moment at that plan, it's really around £200 million or so of CapEx over the 5 years or so.

Tom, you had a question.

Morning, it's Tom Musson at Berenberg. Can I just follow up on the £125 million trading profit target, which is pre-interest?

Are you able to give us a sense at the moment of what your internal modeling is suggesting for that profit journey? Because you guide to the step-down in FY27 profits, but then FY28, I presume you have the annualization of this year's disposals, higher debt costs, I guess, as well if you need to start addressing the green bond ahead of time using facilities.

Just trying to search maybe for where you expect profitability to trough out and at what level before the benefits of those investments start coming through? I think

as we look here, I think it's likely to be, given the refinancing, I think that's likely to be FY28, because there will be refinancing we do over the next 12 to 18 months, Tom, which will have a significant impact in FY28. I think we will start seeing operating improvements through '27 and into '28, but I suspect that will be outweighed by the impact of the refinancing we need to do.

Got it. Thanks.

Separately, can you give a sense of what proportion of your tenants benefit at the moment from small business rates relief, just because wondering whether the Valuation Office's decision to reclassify serviced offices and co-working spaces as single properties rather than multiple spaces is impacting you at all? Have you had to support any tenants, or has there been any sort of reduced interest in smaller units as a result of that?

No, in actual fact, our position has been quite neutral on that. Because we let our spaces on leases typically, then they're all considered to be individual hereditaments.

To date, we've had our customers pay the rates themselves, so that we are not being then considered under this change in policy where the building is considered as a single hereditament, and we'll continue to do that. I think the industry actually is seeing a change where the clients or the customers will be responsible for their rates, but there's a pass-through element.

We may, moving forward, manage that for them, but we're literally a conduit, it's still their responsibility. If the rates goes up, it's their responsibility.

If it comes down, it's to their benefit, but we just then become a conduit for the payment of that. We don't see any need to sort of anticipate any sort of provision against any risk on that.

That's clear. Thanks.

Maybe last one if I can: you decided to switch your credit rating to Fitch from S&P. What was different about Fitch's methodology that means you think it's more appropriate for a business of your scale?

It is really the size point, Tom. S&P kind of starts penalizing you if you get below certain scale, which we're very close to, whereas that isn't the way the Fitch model works.

Given that we expect that we will be making further disposals, as we said today, we are just conscious that we're right at the bottom end already of S&P's sort of scale matrix before they start expecting more from you in terms of credit metrics, and we have more flexibility under Fitch. They also happen, for what it's worth, they also cover more of the UK real estate sector.

Okay. Thank you.

Hi, Hemant Kotak from Green Street. Charlie, just going back to what you were saying earlier, you've obviously got a lot of experience in this area, as you've alluded to.

How has the industry changed? Because obviously when you founded The Office Group, it was less competitive.

These concepts were really quite new. Is it more competitive now, or is there a different playbook now?

I think the playbook is different because it's responding to the changing needs of occupiers. That's really driving all the changes.

Is it more competitive? There are certainly more operators in the sector.

I always believe with The Office Group, and I think this applies to Workspace as well, that we should have an awareness of our competition, but we should not be making decisions based on our competition. We have our portfolio.

It's a great portfolio. We need to be the very best version of ourselves.

We can learn from others. I think when I think back to 2011, when I went to New York and I met WeWork and Adam Neumann then, and we didn't want to be them.

In fact, in some ways, we liked being not them. We learned about actually having a bit more courage to go further, to be more bold with what we were trying to do.

I think, we'll probably take more lessons from outside the office world than from inside the office world. I think also where we're aiming with this business of owning that best-value category and targeting the SME market, there isn't a lot of competition.

There are some independents, but our scale is what gives us the significant advantage. If we get our branding right, the ability to penetrate the market, competition doesn't actually come into the vernacular for us other than, and not in an arrogant way, but other than to just be aware of what's happening in the market, but we really should dominate.

That's our objective.

Okay. Thank you.

When I look at the ERV numbers for what's happened to your business, I think it was down 3% for the smaller space and 5% on the bigger space, and you look at competitors, that was up. Could you just help us understand where that path is going forward and something to help us understand what the delta was?

Yeah.

I think that's a reflection of our buildings and our locations. What we've seen in the macro market, and our market follows the macro market, but the macro market of core West End, prime West End, prime City is a very short supply.

The macro market then feeds through to the flex market, so that short supply has meant that actually the sort of the best operators in those locations are going to start to be driving up occupancy and they're going to be driving up rents. What we believe is going to be the trend moving forward is that because of that short supply, and because of bigger macro factors that are softening yields and construction costs and cost of debt, really the only lever for the traditional market is to drive rent, and again, that flows through to the flex world.

As therefore the space becomes much more expensive, this kind of flight to quality that I mentioned that moves towards a flight to value, that is really the driver for that. We'll see that actually there will be a ripple effect where we see the demand for offices start to move out from prime and move more towards our secondary locations.

Of course, we're in a prime City location now, but this is really our only Zone 1 asset, we're excited about that trend moving forward.

I think the other thing, Hemant, just to say is given that price has been used as a lever over the last few months for occupancy, which we say we're moving away from, that has ultimately created evidence which has been used by our valuers as well. That's another reason why I think you've seen our ERVs going down.

As we say, we don't expect that that's going to be the way we run things going forwards. Great.

Just one final question if I may on dividends. I think there's been some discussions around where you expect your pre-interest profit to go to, and then obviously, we just talked about the cost elements, the interest costs, and things like that.

Where do you expect your dividend to be, and you've reduced your dividend for this year versus last year. Was there scope to reduce it more this year, you sort of put a floor on it, or within the REIT rules?

How do you see the dividend playing out in the future?

I think the policy shift we've done, Hemant, ties dividends directly to earnings, earnings will be 1.2 times the dividend. I'm not going to give specific guidance on what I think is going to happen to the dividend, because I would then be doing the same for earnings.

In answer to your question about FY26 and what we've done, around for us, 1.2 times earnings is around the right level to maintain our compliance with the REIT regime going forwards. We had a little bit of extra capacity this year if we wanted to reduce it further, but we've set a consistent policy.

We're not going to chop and change for one year.

Matt.

Hi, Matt Norris from Gravis. Thanks for the presentation.

Looking at slide 22 and the rollout of the strategy, you've identified a gap in the market. Is the strategy bold enough?

Why not more than £200 million of CapEx? Why not faster than 5 years?

I think the process has started now, when I talk about on page 23 the sort of rolling the improvements out throughout the portfolio, I think that's part of that, and these buildings have offered up vacant space, we can get onto that very, very quickly. I think we'll assess more, and that's why we're considering an additional £100 million of disposals to look at where else we can push this and drive change quicker.

I think that the nature of real estate is that you identify the space, you get vacant possession of some, you design it, you get on site, you do the works, and then you launch it and you fill it. This is not going to happen too quickly, and we think the medium term is the right timeframe for us to examine that.

Greg, have we got questions coming in?

Thank you. Yes, we've got a number of questions coming in.

A couple of questions from Bjorn Zietsman at Panmure Liberum, who asks firstly about the assets under consideration for disposal. Could you talk about what types of assets are being targeted, how should we think about the characteristics of those assets being sold versus those being retained and reinvested into, and could you also give a sense of how much of the disposal program relates to assets acquired through the McKay transaction?

I think the first thing to say is that there are no trophy assets, everything is up for consideration, and that's an important point. We are looking at sort of the brand and the cohesiveness of this business, and therefore examining all the properties and how they sit within our strategy as a whole.

I think it's really important that we have as a brand that we have that consistency. Of course, we're looking at sort of running the numbers and modeling all the buildings so that we understand what the potential upside is if we invest in those buildings.

The driver is to maximize shareholder returns. The driver is to maximize earnings and drive capital values.

In terms of the McKay portfolio, we have a number of those assets that are in negotiation, under offer, and under contract. It's probably a better question to answer in a few weeks' time, but I think when we dispose of the ones that we're in negotiations on, we'll be left with three maybe, I think.

Bjorn also asks about the earnings focus that's been a key focus of today's presentation. Could you expand on what that means in practice, and what changes operationally versus the way Workspace has been run historically, and what do you think has prevented the business from fully optimizing earnings in the past?

What gives you the confidence the actions being taken today can unlock the opportunity that you see?

I think it's really hard for me to speak to the past, having not been here, but what I can say is that for me is running this business, earnings is about, in many ways, it's about cash, and that is understanding that actually if we're driving our revenue, how are we thinking about both our OpEx and our CapEx. With the focus on OpEx to then deliver the earnings, that earnings is our profitability in real terms, and cash is such a strong representation of that.

For me, there's a cultural shift to make sure that everybody's buying into that, to be really efficient. Just some simple things like our procurement: how do we procure so many different things, whether it's our cleaning supplies or our furniture?

We haven't been thinking about that in the right way, and we need to be more commercial. There's a commerciality here that sort of I think that the ethos that I bring, the discipline Tom definitely brings, we're really aligned on that, and that to me is really how we can focus on earnings.

A question from Sareen Choudhury from Jefferies, who asks, can you provide some color to your EPRA cost ratio, and the impact AI can have on lowering your cost base?

Look, I'll let you dig out the EPRA, but for AI on the cost base, I'm not sure anybody's got the crystal ball that can really accurately predict how we're going to make efficiencies and savings, but I would say that this is not to replace people. AI for us is a tool to make us better at what we do, and we should therefore make cost efficiencies through that.

In terms of the EPRA?

It depends which of the two measures you're looking at, but we are, if we're including direct vacancy, we're kind of high 20s, I think, and if we're excluding it, we're closer to 20%, which is not out of line with where other peers in the industry are. It is something we look at closely, and we'll continue to do so.

A couple of questions from Adam Shapton at Green Street, who asks, could you talk more about the competitive environment in the value segment? Do you think most operators are meeting their cost of capital at current market rents, and are you seeing new entrants?

Again,

hard to talk about other operators. The competitive arena, maybe if I answer it this way, there's a lot of sort of talk about the statistics of how much of the traditional market flex will consume, and a lot of numbers get thrown out, and the one that people land on tends to be 20%, and so that's good.

That's nice. It's a good, big chunk of the market.

In my view, I actually think that if you look particularly at the sub-5,000-square-foot market, that you could invert that, and that flex should be actually taking 80% of the market. When we talk about competition, this is then the norm and the mainstream as we move forward.

I guess the breadth of the market means that there's room for lots of players in the market.

Another question from Adam, who asks, what do you model for overheads by, say, FY29? In the bridge slide, you say investment in people, but also operational efficiencies, for example.

I think we're really modeling that overheads should be effectively not keeping pace with inflation over time. That's really probably the best way of answering that one.

A question from Paul May at Barclays, who asks, specifically, when will we see the first returns coming through from the proof-of-concept schemes, the case studies? Is there any risk that as you transition, you remain behind the increased competition that appears to have a head start in the structurally supported segment?

I think on the case studies that we'll start to evidence the performance of those within the next 12 to 18 months, and that's just by virtue of the fact that we have construction work to carry out. No, I don't think we'll fall behind, because, in fact, in many ways, I think we'll lead the way, because we have this near-term upside.

That's about our pricing structure, and looking at the rest of the portfolio, we're going to start to show evidence of this quite quickly, I would say. It may be piecemeal, but in time, that will all come together.

I don't see us falling behind at all. I think, in many ways, others may take our lead.

The final question is an anonymous one that asks, how have you sized the further £100 million of disposals?

How have we...

How have you sized the further £100 million of disposals?

I would say that that's under consideration. We have a number of assets that we're looking at of varying lot sizes.

It was reported that we were selling Salisbury House. We're not, but we might, but for now, we're investing in this building.

That's obviously a sort of significant lot size. I think on the smaller lot sizes, what we've seen evidence in our disposals on the £200 million with the £75 million balance that we're moving through, is that the buyers for this kind of lot size of between sort of £5 and £30 million to £40 million, actually there are some cash buyers out there.

That sort of that size of buyer seems to be quite comfortable in that market, we're seeing good interest in that. Are there any other questions from the room?

In which case, I think I need another coffee, but thank you all very much for coming, and look forward to seeing you all again soon. Thank you.