Workspace Group Plc (WKP) Earnings Call Transcript & Summary

Okay. I think we're ready to start. So good morning, everyone, and welcome to our half year results presentation. I have to say it's great to be presenting back in person again and to see some of you actually in the room, it's great. Thank you for joining us. What I'd like to just highlight is -- 2 aspects we want to cover today. Firstly, of course, we'll be covering our half year results. But I think also, and probably more importantly, we want to just highlight what we see as a fantastic opportunity for us as a business to grow over the coming years. And that's both organic cue and through acquisition. So if I turn to the agenda. Well, I'll start today with introduction, covering some of the key trends we're seeing. And then Dave will take you through the financials in a little bit more detail. And then what I'll do then is I'll come back and take you through in a little bit more detail about how we're planning to grow this business sustainably over the coming years. So moving on to the introduction and really a quick snapshot of the first half of the year. And I think it's fair to say we're well on the road to recovery. And probably further along that road then if you would have asked me 6 months ago, I would have expected. We're seeing very strong levels of customer demand. And on the back of that, our occupancy has improved probably more quickly than I would have expected. And equally importantly, we're now seeing pricing stabilize. And alongside that, our customers are returning to their offices in increasing numbers. We'll come back to that a little bit later. And looking ahead, we've got an extensive project pipeline, and very much green in nature. And I'll again revisit that later on in the presentation. And then lastly, we're also looking at other opportunities for growth. And hopefully, you'll have seen this morning, we announced the acquisition of a further property in North London. But before we delve into our performance, what I'd like to do is perhaps to give you a little bit more of a context on our SME customer base. We've been doing quite a lot of analysis using company house data in just what the size of our SME population is across London. And our research indicates there are about 280,000 SMEs in total currently across London. And you can see from the chart on the left-hand side that, actually, that population has grown quite significantly over the last 10 years. Indeed, it's pretty much almost doubled. And you'll see equally, that there was a drop in 2020, which is no surprise given the impact of COVID. But I'd be expecting that to reverse quite quickly and actually that SME population continue to grow. And our research would indicate that there's around 40% of that market are our target customers, i.e., office-based companies in those service sectors that we appeal to. We've got about 3,000 customers. So we're about 3% of the market. We're the market leader. So it's a huge fragmented market with a huge opportunity for us going forward. We've also looked at the spread of those SMEs across London. And you'll see the map on the right-hand side, we've identicated this number in each of the regions across London. And on that, you'll see that actually in the central locations, it's around 26% of the SME population, but a very broad spread in the other region across London. So from our perspective, the opportunity is much broader than just around central locations. It's across the whole of London. And indeed, if you look at the growth rates, interestingly, the lower growth rate actually in those central locations, averaging growth over the last 10 years around 5% per annum, and with by far the strongest growth in the East and West regions of London, which are just below double-digits, 10% per annum. So really highlighting, I think, for us, a much broader picture of opportunity across London. So moving on to the next slide, Slide 6. You may recall at the end of last year, in our year-end results, we gave you some feedback from a survey that was done of SMEs around how they felt about life and some other questions around sort of the use of space, et cetera. We've now done an update, a follow-up survey of SMEs and compared that to the previous results. The results here show actually an improving picture from our perspective. SME businesses are more confident now than they were around their future business success. So either confident or very confident about the future of their businesses. 85% are now confident about the future success. Alongside that, an increasing number looking to move within the next 6 months, just under 30%. And when asked about what were the important priorities for them in terms of looking for new space, it's interesting that there has been some changes in those priorities. And I'd stress this is very much asking our customers, not maybe what we might have expected, but actually, the most important priority for them now is location, more of the value for money. But the most important one from our perspective actually is that, actually, flexibility has moved up very much higher in the list of priorities. So actually, while we wouldn't do actually -- just disagree with it, actually, it's very positive for us in much as we have a flexible offer and we have a great spread of locations across London. So I think for us, it's a very positive feedback around what SME is looking for, for space. Lastly, in terms of the use of their space, they're indicating that their staff are using space a little bit more than they might have done 6 months ago, no surprise there, but just under 3 days a week. Again, pretty consistent, I think you'll find with other surveys that have been done. So moving on to our performance and looking at the financial performance of the business. Firstly, on the left-hand side, in terms of trading performance. Net rental income, there's an uptick compared to last year. That's flowed through to the bottom line through -- we've got a trading profit after interest, just shy of GBP 22 million for the first half of the year, up some 40% compared to last year. And on the back of that and the positive outlook we have for the second half of the year, we're actually going to be paying an interim dividend of 7p. You may recall that last year, we didn't pay an interim dividend. And that was because at the time, we were just about to enter another lockdown. And we didn't feel actually the time it was appropriate to be making an interim dividend, although we did, of course, make a final dividend at the year-end. On the right-hand side, in terms of the balance sheet, you'll see that actually the property valuation has fallen. The underlying valuation fall was a shade under 1%, 0.7%. And that's largely the legacy of the pricing that we've seen over the last year during the lockdown period, where we were pricing deals into a very thin market. And we price to go. So the reality is that we did see quite significant drops in pricing through the last year, and that's obviously impacted the CBRE view of our values across our portfolio. And as a result of that, we saw a 10p drop in our net tangible assets to GBP 9.28. But the good news is actually, we're still running with a very conservative balance sheet with loan-to-value at 23%. Moving on to Slide 8 and our operational performance. On that, you'll see that actually very strong pickup in the metrics, the key metrics for the business. Inquiries, viewings, lettings all up compared to the prior year. They're now running pretty much at pre-COVID levels. And indeed, if you look at the chart, bottom left, the monthly inquiries data, which we always give you, you'll see now we're hitting around that 1,000 inquiries a month, which is really our benchmark for normality. So very heartening to see we're back at those strong levels of demand. And on the back of that, as I mentioned earlier, we have seen a good recovery in occupancy. Our like-for-like occupancy is just under 86%. And I would expect that to continue to improve through the second half given the strength of demand we're continuing to see. And one of the values of our intangible operating model is we do have huge amounts of market intelligence. So the inquiries, viewings and lettings data is hugely informative to us about managing our portfolio day-to-day. If you think about that data on a weekly basis, that's receiving 235 inquiries every single week of the year. We're doing 155 customer viewings every week. We're doing 33 lettings every week. Huge amounts of market intelligence, which helps us both operationally, but also strategically when we look at acquisition opportunities. So moving on to Slide 9, looking at customer activity. Using our viewings data, what you'll see is actually in terms of viewings, as I said earlier, we've now recovered to levels of viewings very much comparable to pre-COVID levels, 622 viewings every month. And you may recall, at the year-end, I did highlight that actually we saw quite a significant drop in viewings in the more central areas last year. And actually, that's far of greater drop than it was in the more sort of the regional areas outside the center. Well, I'm pleased to say that actually, we've seen a very strong recovery in demand in those more central locations, and around 45% viewings in the first half of the year were actually those more central locations. Very much back to the normal spread you'd expect to see given the spread of our buildings across London. Then looking at the lettings in the first half, we did just under 800 lettings. And looking at that by sector, it's interesting that, as we've highlighted before, that very diverse nature of our portfolio in terms of sector spread. And that's probably the most striking thing I'd say to pick up from this slide on customers' lettings by sector. It's a very, very diverse portfolio, which gives us real resilience through the cycles as we've seen over the last 1.5 years with COVID. No surprise that at the top of the list in terms of demand continued to be e-commerce and technology. And another sector that actually surprised in some ways, the strength of demand continues to be from fashion design, both niche and actually some very well-known names within that sector. We've also seen some interesting new sectors emerge. In food and drink, for example, we've been doing lettings to the likes of Gorillas, the grocery delivery business, Gousto, and [ Dispatch ] who is sort of, if you like, home delivery guide businesses. It's great to see there's a whole range of activity which -- with customers coming to us for their offices. Then lastly, in terms of customers' use of their office, which is obviously something that a lot of you do ask us about, we have seen a steady improvement in utilization. At the end of sort of October -- or middle of -- actually, towards the end of October, it's running around now at 55% overall. And it continues to tick up, and I'd expect that to continue for some time to come. Equally, we've shown here the spread of that utilization across the week. And there's no surprise that actually we are seeing high utilization, Tuesday, Wednesday, Thursday. Thursday is probably the peak day now. And Monday has become the new Friday. So definitely, we are seeing much lower levels of utilization on Mondays. In terms of where do we see those trends going, well, I think it's still early days. And indeed, when I talk to customers, they're still finding their ways in terms of what works for them in terms of a working week for their staff. So I think there's some way to go, and I wouldn't want to forecast where we'll end up. But equally, what's very clear by I thought the customer is they still value their office space. So despite those changes in working habits, our customers are still saying they value the office space that they retain. So on that point, I'd like to now hand over to Dave to take you through the financials.

Thanks, Graham, and good morning, everyone. And just from a personal perspective, it's very nice to be here in person for the first time since I joined Workspace. So good to see you all. So as Graham said, I'll first run you through the financial performance for the first half of the year and then touch on the outlook moving forwards. So starting with operating performance for the first half. Net rental income was GBP 41 million, up 12%. And that reflected the impacts of discounts given to customers in the first half of last year. Administrative expenses were down 7%, with discretionary costs remain under tight control and with a reduced charge for share-based payments. Net finance costs were down 11%, reflecting the refinancing done earlier in the year, resulting in a lower average interest rate. Trading profit after interest was therefore up 42% to GBP 21.8 million. We saw an underlying reduction of GBP 14.9 million in the property valuation. And this, with a small loss on disposal of Fitzroy Street, resulted in profit before tax of GBP 3.4 million, up 43% -- sorry, with EPS up 43% to 12p. Slide 14 looks at the movement in net rental income in a bit more detail. As shown in the right-hand column, the first half of last year was impacted by those one-off discounts given to customers during the first lockdown, reduced ancillary income and an increased charge for expected credit losses. But service charge costs were low, in line with the reduced numbers of customers physically utilizing our centers. In the middle column, you can see that in the second half of last year, the discounts were not repeated, but we did see a reduction of around GBP 9 million in underlying rental income as a result of customers leaving or downsizing and a reduction in the average rent per square foot. The fall in occupancy meant that we saw void costs start to increase. And the extension of the government moratorium on rent collection resulted in a further increase in the charge for credit losses. So then in the first half of this year, we've seen occupancy start to increase, pricing stabilize. And that's resulted in a far smaller reduction in underlying rental income. As expected though, we have seen an increase in unrecovered service charge costs as the increasing numbers of customers in our centers means that the costs are returning to normal levels. Other nonrecoverable costs have also increased in line with the increased sales and marketing activity. Pleasingly though, cash collection has continued to improve. And the charge for expected credit losses in the first half was much more in line with pre-COVID levels, although the government moratorium does remain in place for the remainder of the year. Turning on to the balance sheet. The small underlying fall in the property valuation and the net impact of the acquisition of The Old Dairy and the disposal of Fitzroy Street meant that there was a GBP 53 million reduction in the carrying value of investment properties. This reduction was partially offset by a fall in net debt, with net assets remaining stable at GBP 1.7 billion and EPRA NTA per share down 1% to GBP 9.28. Slide 16 analyzes the movement -- the underlying movement in the property valuation, a decrease of 0.7%. Looking at the like-for-like portfolio, which accounts for 80% of the overall value. ERV per square foot was down 3.1%, reflecting, as Graham said, the pricing of deals that we did in the first half and the tail end of last year. But this was largely offset by a 15 basis point inward movement in equivalent yield, with capital value per square foot remaining unchanged at GBP 633. It was a similar underlying picture across the rest of the portfolio, including completed projects such as Maire Street, which is at an early stage of letting up, having launched during lockdown last year. But with positive developments on some of our projects, such as Parkhall in Dullitch, where ERVs have increased following completion of refurbishment works, and Havelock Terrace in Battersea where we've had positive preplanning conversations with planners on a major refurbishment scheme. Moving on to cash flow and net debt. Cash conversion remains strong with 97% of rent collected in the first half of the year. And this has generated operating cash flow of GBP 21 million, which was largely offset the payment of last year's dividend. We received GBP 92 million from the sale of Fitzroy Street, and recycled half the capital into the purchase of The Old Dairy for GBP 43 million. We also continued with our planned pipeline of refurbishment activity with GBP 15 million of CapEx in the first half. So overall, net debt decreased to GBP 532 million, resulting in LTV of 23%. Following the issue of our green bond in March and the subsequent repayment of GBP 148 million of private placement notes, average cost of drawn debt is now 3.1% and the average maturity of our facilities is 4.8 years. We have good liquidity with GBP 318 million of cash and available facilities and significant headroom to our financial covenants. Moving on to the near-term outlook then. Slide 19 is an update and one that I showed at the year-end. In the chart on the top left, you can see that monthly inquiries and lettings are now consistently strong, back up to those pre-COVID levels. In the chart on the top right, you can see that customers downsizing leaving have also returned to pre-COVID levels. And as a result, we've seen occupancy -- like-for-like occupancy in the first half increased by 3.7% to 85.6%. As occupancy has recovered, so we've seen pricing stabilize, with like-for-like rent per square foot up marginally in the second quarter. And overall, therefore, like-for-like rent per square foot is up 2.1% across the first half to 87 point -- sorry, like-for-like rent roll up 2.1% in the first half to GBP 87.3 million. In the second half of the year, the focus will continue to be on driving that occupancy. And we're on track to make significant progress towards pre-COVID levels by the end of this financial year. We will also look to selectively start increasing pricing, although more meaningful price increases are likely next year. We would therefore anticipate underlying rental income starting to increase in the second half of this year. Although until occupancy recovers to pre-COVID levels, we're likely to continue to see a drag from unrecovered service charges and empty rates. Over the medium term, we believe there is opportunity for a very significant increase in rent roll. Letting up like-for-like properties to 90% at current ERVs would add GBP 18 million to the rent roll. Doing the same for current projects and those recently completed would take rent rental to around GBP 130 million, an overall increase of nearly 30%. But I think there's scope for pricing growth beyond that. There remains strong customer demand for our distinctive flexible offer. And we should remember that currently ERVs are still 10% to 15% below their pre-COVID peaks. At the same time, we can significantly increase our footprint. We have an extensive project pipeline, with the opportunity to increase our square footage by over 20%, and further acquisitions like The Old Dairy and the Busworks will accelerate growth further. And with that, I'd like to hand back to Graham to talk further about the growth opportunity ahead.

Okay. Well, thanks, Dave. And really just bringing on -- coming on from where Dave left off in terms of the opportunity, as Dave says, a really great opportunities for growth. And in this sector, I'd like to talk a little bit more about that opportunity and also how sustainability is actually very much ingrained in our business model. But before we move on to that, just reference the shot of -- on the slide here. It's from our recent advertising campaign, which has been running on London buses and on social media. Hopefully, some of you may have seen these buses around London. But it's really just to recall that if -- our marketing team did their presentation at our Capital Markets Day earlier this year. And really, that was sort of highlighting the plans we have about raising our profile and brand awareness. And I have to say that I'm delighted with the progress we're making on that front. Moving on to Slide 22. A key part of our growth strategy is actually to keep ourselves rigorous around performance and plans for our properties and make sure they're achieving our return benchmarks. And in that light, we did look at our plan to Fitzroy Street. We previously planned to refurbish this building really to adapt it to our multi-let strategy once the sole occupier [indiscernible] left us as expected it in June. When we reviewed it though, I think our view was that there were potentially better opportunities and actually better returns from investing elsewhere. So we took the decision to sell that building, which we did complete in September. And I'm pleased to say that we're well progressed with now reinvesting that money in other opportunities. You may recall that we announced earlier in September that actually we acquired The Old Dairy in the shortage. This is completely right next door to an existing building of ours, The Frames in Shoreditch, it's very popular building. And it really does help to strengthen our presence in an area which is really strong in terms of demand from our type of customer. And then today, you will have seen earlier that we announced the acquisition of the Busworks. Now this is a fantastic site that we've been tracking for some time now. It's an off-market purchase for us. It really heritage, Victorian bus factory. That was adapted to the 80s to become a business center owned by a private individual. We'll be looking to upgrade that and reposition it for our type of customer, really well located, just next to Caledonian Road Tube Station and just north of Kings Cross. But I would say both Busworks and The Old Dairy are great examples of what I think Workspace does best: buying these interesting buildings in these dynamic areas of London where through repositioning and upgrading these types of buildings, we can capture both strong income and capital growth over time. And indeed, we're actively looking for other opportunities across London to progress our acquisition strategy. Just moving on to looking at the map of London. I think it's always a good reminder of the scale of our portfolio. And you'll see on this map, we've got some 60 locations, if you count all the dots across London, with just over 4 million square feet of leasable space. A really fantastic valuable portfolio. And you can see from the fact that most of the dots are red, that the majority of our buildings are in the like-for-like category. And these are those buildings where we're trying to maximize occupancy and really drive strong rental income growth over time. But we've also got a fast matching of those orange and black dots, which is really highlighting the level of project activity we've got going on across London as well. And in terms of those buildings, if you slide to Slide 25, we've just given you some pictures there, both internal and external shots, just highlighting and reminding you really about that fantastic range of buildings we've got, distinctive character buildings. And they are one of the key attractions for our customers. They are typically on scale, 50,000 to 100,000 square foot plus in terms of lettable area and often iconic or historic landmarks in their local communities. And this is our aim. Our aim is to nurture these buildings to make sure they can continue to live and breathe, meeting both the changing needs of our customers, but equally, the increasingly stringent sustainable requirements that we are seeing introduced. And on that note, our project pipeline, obviously, is very much focused around upgrading those buildings. And you'll see we continue to have an extensive pipeline, stretching out over the next 5 years. We've got over about 1 million square feet of new and upgraded space to come as we complete those projects. In terms of the current year, we already completed one major refurbishment of Pall Mall Deposit in Ladbroke Grove, really beautiful building. And we've also completed last week also -- opened last week a building, Mirror Works, a new building, just South of Olympic Stadium in Stratford. And looking further out, you'll see that actually we've got some quite substantial projects to deliver, not least at Kennington Park, where we've now got planning for 200,000 square feet of new business space. But equally, we're well advanced in discussions with the ones with counsel around a major refurbishment, Havelock Terrace. This is a sort of industrial state at the moment, just south of the battery power station, a really exciting opportunity for us. What I want to do now on Slide 27 is start to talk a little bit more about sustainability. You may have seen that we made an announcement recently of a new Head of Sustainability, Sonal -- Sonal Jain, who joined us. She joined us from Jones Lang. And to give -- to be fair to have, we've gotten a little bit of time to pull together her ideas and thoughts. But what we're going to be doing is doing a Capital Markets Day in the spring of next year. And really what Sonal will be doing then is really bringing together the full details of an update on our plans and ambitions around sustainability. But I want to do today, just maybe focus on 2 areas of sustainability in our strategy. One is around repurposing our buildings. So on this slide, you'll see a picture of Hackney -- in Hackney of our building a Mare Street Studios, which we transformed from what was, I mean, best described as a tired workshop and studio building that we owned into now a high-spec business center, a really fantastic center. I recommend if you're in the area to pop in. It's a great example of how we repurpose our buildings. Our research indicates that the embodied carbon impact of this type of refurb business is about 70% less than a new build. So we really do think actually, it ticks a box around the sort of consciousness now around embodied carbon. But it's not just embodied carbon. Operationally, actually, it's 20% reduction in carbon emissions. It's also bream excellent and also got an EPCB rating. So it's a great example of what we can deliver through our refurbishment and redevelopment pipeline over the coming years. Just turning on to Slide 28. Another important aspect of our model is about reviving local communities. And the fuel tank redevelopment we've done in Deptford, just next Debtford Creek, is a great example where we through our redevelopment created a thriving residential and business hub, in an area where there was a real lack of good quality commercial office space. And our business center there now is really caught the imagination of local businesses. We've got a great range of creative sectors within that building, including actually some very well-known in design and fashion businesses. It's a great example of what I highlighted earlier around the SME population. It's a very diverse broad spread of opportunities for us across London. So on Slide 29, in conclusion then. What I'd say is we're seeing really good momentum across the business, and the customer demand back to pre-COVID levels, well on the road to recovery. But beyond that, we've got a distinctive flexible offer that stands us apart from others in the market. We've got a clear strategy, a sustainable business model and plenty of opportunities. And those are both organic through our pipeline, but equally, through acquisitions. And most importantly, in that regard, we've got an experienced team. We've got a scalable operating platform that can actually readily deal with the challenges of supporting these growth ambitions. So overall, I think we've got a compelling, sustainable business model and story for both investors, and equally importantly, for our customers. So thank you all for your time today. What I'd like then is to open the floor for questions. We'll start with questions from the room and then actually move to the conference call and webcast. [Operator Instructions] Thank you.

Denese Newton from Stifel. Just a bit more on your acquisition strategy. Obviously, you've got quite a specific detailed shopping list in terms of the buildings you want to look at. They're quirky. They're one-off, and they're not necessarily readily available. And in the past, you've talked about how there's a mismatch between sellers' expectations and what buyers are willing to pay. Is that something you're continuing to see? Or has that got narrowed somewhat?

I think always in London, we're going to be fighting against others to acquire properties. I mean it's certainly challenging to make the numbers work. We're pretty rigorous around the returns we want. So you're absolutely right that we've unfortunately had to walk away from things we'd love to have bought. And I mean the advantage we've got is we've got a huge database of the sort of properties that would work for us. So we're continually knocking on doors, walking around London, looking for opportunities. There is more availability of stock at the moment than there has been probably over the last 6 months. So we're more excited now about opportunities, but never say never about the ability to buy them. I think it is challenging. We are well placed in terms of we've got plenty of capacity in terms of debt. So we can move quickly where others may take time. But yes, I mean, it is a competitive market, but I think we're well placed to actually take advantage of opportunities out there. Any other questions from you? No?

I've got a couple of questions from the webcast. So from Punam at Numis, what proportion of inquiries now come via brokers and agents? And has this increased over the last 18 months? And any change in the fee structure?

Dave, do you want to?

Yes. I mean, the first -- second point first. No, there have been no real change in the fee structure over the last 18 months. And in terms of the proportion of inquiries, it's -- I mean, it's typically been sort of anywhere up to sort of about 30%, that sort of level. Certainly, we do think it's an important channel to market. And the advantages of it, obviously, we only pay a commission when there is actually someone takes space. And very often, if people don't take space, then they may come back to a sort of a later date anyway. So actually, it serves a dual function. And so no, we've engaged positively with brokers over the last year. And we see it very much as a tool, very much in the same way that we use the website as a tool. And investing as we have done in the brand over the last year really helps to drive their customer interest through all channels actually. So no, we continue to use it. As I say, it's been important over the last year, and -- but we use it selectively.

And a couple of questions from Kanad Mitra at Barclays. First, on office utilization. What's the view on how this will impact demand over time? And can 60% to 70% utilization versus pre-COVID level support similar and growing or growing office demand?

Yes. I mean it's a good question. And as I said earlier, when we talk to customers that even though they're not using their space fully throughout the week, they still are saying, we want to retain our office space. And interestingly, you could argue maybe they want to take less space. Actually, what they are saying is actually when people come in generally all come in together. So actually, they need the same amount of space. So I think what is important now is to make sure that our buildings are appealing to people to make sure they -- if and when they do come in, actually, everything is there in terms of facilities. So the cafe's are there. Things like -- we're seeing more requirement for things like cycle storage. These all seems quite minor things, but actually, you've got to cater for all of those facilities now, because what employees are very cognizant of is actually -- it's really much more in consideration of what works for the employee rather than what works with employer. But in terms of utilization rates, I think we'll just monitor it. But I'm not seeing any indication yet that, that means that people don't want to take the same amount of office space. And indeed, what we're seeing in demand at the moment is actually people are still very keen to take space with us even if they aren't using it fully at the moment.

Second question there. With your recent acquisitions and disposals, you seem to be making a clear strategic move by selling core West end and buying in areas like Shoreditch and Islington. What are the drivers behind this decision? And is it a precursor of more to come?

Well, we -- it's interesting. We've never been particularly strong in the West end. I mean we've only got -- we only ever had one big building, which was Fitzroy. So I don't think it's necessarily a major change. I mean it was a thought that we did think there would potentially going to be very strong demand in some of those areas and affected by Crossrail. It may well still be the case. But on reflection, we still think that actually our core markets, which are the markets like Shoreditch and the outer regions, are as appealing. And in some ways, when you look at the overall returns, both from an income and capital perspective, we have nurtured our better returns from some of these more interesting dynamic areas of London than from our more central locations potentially. So I don't think it's necessarily a major change in strategy. I'd say it's a continuation of what has made Workspace successfully it has been over the last 10, 15 years.

Question from James Carswell at Peel Hunt. Does the occupancy gain in Q2 reflects pent-up demand from lockdown? Or do you expect the rate of increase to moderate over the coming quarters?

One for you, Dave.

Yes, sure. I mean I think it's certainly -- I mean we've seen consistently good demand really over the -- pretty much the whole of first half. But certainly, the occupancy did accelerate in the second quarter. And I think part of that is timing. So people coming back in September contributes quite significantly to that. And I think that was probably anticipated, to be honest. I think we always anticipate the summer would be relatively a little quarter and then picking up when the people came back after the holidays or schools return. I think what we've seen historically is that Christmas is a quiet time, and I would anticipate that will be the case again. But then usually, we see quite a strong Q4 for us, say, January through March next year. So I would have thought we'll probably see a similar pattern this year actually.

And a sustainability question from Andrew Gill at Jefferies. Is there less awareness of likely incoming EPC legislation in our market? Could there be more of a rush to the door by owner of assets difficult to upgrade given the different ownership profile compared to Central London assets?

I think absolutely right. There is a growing awareness from some of the private owners that we're looking at in terms of acquisition opportunities around the potential cost of upgrading. And the beauty for us around a lot of our upgrading of facilities and the buildings across London is we also see a pricing uplift as well. So actually, they pay for themselves as well as then obviously being able to comply with these increasingly stringent requirements from a sustainability perspective. So it is a real opportunity. And Busworks was probably one of the first examples of that.

Okay. A question from Chris Spearing at Liberum. You've restated your 31st of March 2021 EPRA NDV, reducing it by GBP 44 million or 3%, with a change to the fair value of debt adjustment. What was the reason for this? And does that also apply to other prior periods?

That's definitely one for Dave.

Yes. We got a cash out in the detail there. No, it didn't apply to prior periods is the -- and I think from memory, it was a technical adjustment in the calculation. There was no change in the underlying. I'll have to come back to you on the detail of the calculation there.

Unless there's anymore from the room, I don't think we've got any further questions at the moment.

Okay. All right. Well, thanks, everyone, for joining us today. And on that note, we'll close the meeting.