workspace group plc interim results for the six months to 30 september 2004
TRANSCRIPT
Headline results
• Trading PBT £6.92m Up 4.7%
• Trading EPS 29.6p Up 2.8%
• Headline PBT £6.54m Down 1.5%
• Headline EPS 27.6p Down 4.5%
• Valuation surplus in half year £27.0m £1.60 per share
• Net Asset Value (per share) £19.87 Up 23% on 12 months
• Annual Rent Roll £40.3m Up 5.9% on 6 months
• Total Property Valuation £655m Up 16% on 12 months
• Gearing 94%
• Interim Dividend 11.3p Up 10%
The Business – A Simple Model
To achieve profit and capital growth from:
• Providing workspace to SMEs
• Investing in properties with potential- Income growth- Capital growth- Alternative use
• Increasing scale of portfolio, spreading overheads and developing the brand
• The right financial platform
Our Business – A Reminder
“ We provide affordable, flexible space for new and small businesses in London and the South East ”
• 3,900 customers over 100 estates; 5.0 million sq .ft
• 6,000 + enquiries a year; market leading brand in fragmented market
• A simple product offer
• Superior service from in-house management
• Customer focused
Customer Profile
Median % of median
turnover Year of start 1996 —
Turnover £250,000 —
Overheads £90,000 36
Profits £40,000 16
Rent £12,000 4.8
Typical Workspace tenant:
Rent under 5% of turnover
Source: Kingston University survey of over 200 customers. Spring 2004
Occupancy and Rents
• Continuing occupancy improvements –
88.5% overall
• Rents stable with low base
• Cautious approach to rent reviews
• Lettings underway at Barley Mow, Quality
Court, Europa, Leathermarket
Acquisitions & Disposals
Acquisitions
Quadrangle, SW6
Southbank House, SE1
Southgate Office Village, N14
Total £28.3m
Net Yield 6.9%
Disposals
Hooley Lane, Redhill
Union Street Sites, SE1
Three Mills, E3
£34.5m
2.6%
Adding Value: Schemes in 2004/05
Enterprise
Clerkenwell
Thurston Road
Wharf Road
Aberdeen Studios
Greenheath Business Centre
Further reorganisation of space and extra floors
Phase Two completes September 2005
Full Refurbishment Underway: To complete late 2005
Mixed use (housing/retail warehousing)
Discussions with Council proceeding. Further planning application in Spring
Mixed use (housing/workspace) Planning appeal lodged; Council to consider new application by March 2005
Mixed use (housing/workspace)Council to consider Planning Application in December 2004
Mixed use (housing/workspace) Council to consider Planning Application in February 2005
2004 H1 Results: P & L Account
Trading
2003
£m
Increase
%
Trading
Operations
£m
Other
£m
Total
2004
£m
Turnover 24.0 12.1% 26.9 26.9
Rent Payable and direct costs (6.7) 6.7% (7.1) (7.1)
Administrative Expenses (3.4) 15.3% (3.9) _____ (3.9)
Operating Profit 13.9 13.8% 15.9 15.9
Surplus on disposal of investment properties - - - (0.4) (0.4)
Net interest payable (7.3) 22.0% (9.0) _____ (9.0)
Profit before tax 6.6 4.8% 6.9 (0.4) 6.5
Tax (2.0) 6.8% (2.1) - (2.1)
Profit after Tax 4.6 3.9% 4.8 (0.4) 4.4
Basic earnings per share 28.8p 29.6p (2.0)p 27.6p
Diluted earnings per share 28.2p 28.9p (1.9)p 27.0p
2004 H1 Results: Balance Sheet
30/09/2004
£m
31/03/2004(restated)
£m
Investment Properties 652.4 626.1
Other Assets 11.4 10.4
Creditors (excluding borrowings) (33.6) (29.6)
Funding: Short Term Borrowings - (1.3)
Long Term Borrowings (306.2) (305.7)
Cash and Investments 4.0 1.3
Deferred Tax Provision (5.8) (5.5)
Net Worth 322.2 295.7
NAV Per Share £19.87 £18.43
Net Borrowings £302.2m £305.8m
Gearing 94% 103%Immediate Investment Capacity = £68.3m (Gearing 115%)
Key Elements on Valuation
• Income up 3.9%, ERV up 2.1% (like-for-like)
• ERV £54.8m; 90% ERV = £49.3m current rent roll £40.3m
• Net initial yield 6.27%, reversionary yield 8.36%, equivalent yield 7.37%
• Valuation surplus: 50% rent, 50% yield
• Capital value £126 per sq. ft
Looking Forward: The Same Business Model
• As stated September 2003 - 5% per annum rental increases
- No movement in yields/occupancy
- Conservative gearing- Annual investment £50m - £60m
• Aim: - Doubling value in 5 years to 2008 - £1bn portfolio
• On track
Looking Forward: Occupancy and Rents
• SME confidence improving
• SME numbers growing
• London economy robust
See: Investor Relations/Company Presentationssection of www.workspacegroup.co.uk