Workspace Group PLC (LON:WKP), London’s leading owner and operator of sustainable, flexible work space has announced its results for the half year to 30 September 2023. The comments in this announcement refer to the period from 1 April 2023 to 30 September 2023 unless otherwise stated.
Financial highlights: Strong rental income growth driving increase in dividend, valuation reduction from yield expansion
· Net rental income up 9% (£4.9m) to £61.0m (September 2022: £56.1m)
· Trading profit after interest† up 7% to £31.1m (September 2022: £29.1m)
· Interim dividend per share up 7% to 9.0p per share (30 September 2022: 8.4p)
· Property valuation of £2,505m, an underlying1 reduction of 6.6% (£178m) from 31 March 2023
· Like-for-like portfolio valuation down 5.6% with equivalent yield out 45bps to 6.7%
· Loss before tax of £147.9m (30 September 2022: £35.8m profit) reflecting the reduction in the property valuation
· EPRA net tangible assets per share down 10.2% from 31 March 2023 to £8.32
· Robust balance sheet with £133m of cash and undrawn facilities and LTV stable at 34% (30 September 2022: 33%)
· Average cost of debt over the half year was 4.0% with 76% of debt at fixed rates
· Bank facilities extended to April/December 2026 in November 2023, with a pro-forma weighted average maturity of drawn debt of 4.1 years as at 30 September 2023
Customer activity: Stable occupancy and continued pricing growth
· Good customer demand with 583 lettings completed in the half year with a total rental value of £15.0m, highlighting the appeal of our flexible offer
· Strong rental growth with like-for-like rent roll up 3.0% in the quarter, up 6.3% in the half year to £108.6m
· Improved pricing with like-for-like rent per sq. ft. up 3.3% in the quarter, the ninth consecutive quarterly increase, and 6.6% in the half year, to £42.98
· Like-for-like occupancy stable at 88.7% (30 September 2022: 89.2%)
Portfolio activity: Active capital recycling
· Good progress on disposals of non-core assets, with £92.8m completed in the first half of the year, and a further £13.5m of disposals completed in October and November
Project activity & Sustainability
· Three major and five smaller projects underway delivering 360,000 sq. ft. of new and upgraded space. Further 1.0m sq. ft. of projects in the pipeline
· Active asset management delivered a 7% reduction in operational energy intensity, 37% reduction in gas use and a 5% increase in EPC A and B rated space to 48%
Commenting on the results, Graham Clemett, Workspace Chief Executive Officer said:
“Over 35 years we have developed a deep understanding of what SMEs want from their working space. This experience and knowledge of our customers is difficult to replicate. Our flexible offer is built with the needs of their businesses and their teams at its heart. Now more than ever this means control over their space, being part of a community of like-minded businesses and having the freedom to grow and move within our portfolio of characterful and well-located buildings. Today, demand from businesses across London increasingly points towards this holistic flexibility. This is coming through in our results as we report good customer demand and strong rental income growth, driven by increased pricing and stable occupancy.
Throughout the first half of the year, we have continued to actively manage our portfolio to meet changing customer needs. We have completed a wide range of smaller unit refurbishments and subdivisions, as well as making good progress on our larger projects. As expected, valuations are down as a result of movement in market yields. However, we have maintained a conservative level of gearing, with the continuing disposal of non-core properties further strengthening our balance sheet and we expect more over the next six months.
We go into the second half of the year with good momentum. Our scalable operating platform gives us a competitive advantage and we have a clear pathway to unlock near and long-term income growth, both through capturing reversion on our like-for-like properties and active asset management opportunities.”
Summary Results
| September2023 | September2022 | Change | |
| Financial performance | |||
| Net rental income | £61.0m | £56.1m | +8.7% |
| Trading profit after interest† | £31.1m | £29.1m | +6.9% |
| (Loss)/profit before tax | £(147.9)m | £35.8m | |
| Interim dividend per share | 9.0p | 8.4p | +7.1% |
| September2023 | March2023 | Change | |
| Valuation | |||
| EPRA net tangible assets per share† | £8.32 | £9.27 | -10.2% |
| Property valuation† | £2,505m | £2,741m | -6.6%1 |
| Financing | |||
| Loan to value | 34% | 33% | |
| Undrawn bank facilities and cash | £133m | £148m |
† Alternative performance measure (APM). The Group uses a number of financial measures to assess and explain its performance. Some of these which are not defined within IFRS are considered APMs.
1 Underlying change excluding capital expenditure and disposals.
Details of results presentation
Workspace will host a results presentation for analysts and investors on Tuesday, 21 November 2023 at 9:00am. The presentation will take place at our recently opened Eventspace, at our refurbished Salisbury House, 114 London Wall, EC2M 5QA.
The presentation can also be accessed live via webcast or conference call.
Webcast
The live webcast will be available here: https://secure.emincote.com/client/workspace/workspace024
Conference call
In order to join via phone at 9:00am, please register at the following link and you will be provided with dial-in details and a unique access code: https://secure.emincote.com/client/workspace/workspace024/vip_connect
