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Your Space PLC (YSP)

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Tuesday 23 December, 2008

Your Space PLC

Half Yearly Report

RNS Number : 6616K
Your Space PLC
23 December 2008
 

Your Space plc ('YSP') interim results


23 December 2008


Period ended: 30 September 2008


Headlines


  • Group revenue now solely derived from services

  • Rents and Services revenue increased by 10% to £1.45m (£1.32m same period 2007) 

  • Contract services revenue of £2.2m (£nil same period 2007)

  • New centre added in prime location of Manchester 

  • EBITA £254k 

  • Pre-tax profit £2k 


Post interim period

  • Expansion into Northern Ireland with new business centre

  • Your Space solutions in negotiations to secure further contracts

  • Enquiry levels within serviced office centres at an all time high

  • Revenue growth continuing 

  • Banking facilities are in place and are reviewed regularly



Chairman's statement


The predominant theme in the market at present is the slowdown in the economy. We haven't been immune to this and have increasingly looked at ways to provide innovative solutions to protect both our existing market and attract new customers.


It is pleasing to report however that the serviced office division is reaping the rewards of the recent infrastructure investment with like for like revenue up 10% from £1.322m in 2007 to £1.454m in 2008.


Our contract services division is also performing in line with our expectations with revenue of £2.2m in the period. There was no comparable figure for this revenue stream in 2007. 


It is important to emphasise however that group activities are now solely derived from a mixture of services. Indeed we undertook a policy of disposing of assets at the peak of the property cycle and repaid bank borrowings linked to these assets. Our lead bank is continuing to provide us with banking facilities. 


Given the turbulence in the property investment market we acted quickly to reposition the business and we are also benefitting further from our specialist service offering to landlords throughout the UK which in turn enables us to expand our portfolio of business centres. We see many opportunities to secure additional specialist restoration contracts as we continue to increase our presence throughout the UK


Our serviced office centres are experiencing record enquiry levels for office space as more and more businesses see the benefits of flexible space in quality buildings. We anticipate this level of activity will continue. YSP has a somewhat counter cyclical operation and by selling our specialist skills we offer a fixed price turnkey solution to landlords and institutions alike. Your Space solutions is in advanced negotiations to add even more centres to the portfolio and we look forward to the future with much optimism despite these economic uncertainties.


To summarise we are well positioned following the swift action we took to adapt the business model and take advantage of the current market conditions. We do however remain resolute in our prudent management of the business given the current difficult market conditions.  


The board has determined not to issue a dividend at the interim stage. Changes in the banking sector's appetite for funding has placed an ever greater reliance on retained earnings as a means of funding growth in the business. The board believe that a review of dividend policy will be considered at the year end in the light of these unprecedented times.


Chris Philips  

Chairman  



Chief Executive's Statement



This year has presented many challenges in the current climate and it is therefore important to explain our strategy for the business. We have moved away from investment deals and have focused fully on the services business. As a consequence all our revenue this year is now derived from services. This is through Your Space solutions which offer a one stop shop for landlords and institutions. The specialist skills within our construction division enable us to restore quality listed buildings and convert these to serviced offices. Previously we would have acquired freehold buildings for restoration/conversion to serviced offices before selling on via a lease arrangement. The fluctuations and uncertainties in the investment market not to mention the levels of capital tied up in any one project meant that our growth aspirations would have been severely hampered. We believed that the current unpredictability of bank appetite levels would have placed further strains on our expansion plans. Indeed whilst others seem to have been affected as a result of high gearing levels we have been deliberately seeking where possible to reduce our borrowing levels and have done so at a time when property values were at their peak. 


Our latest 3 projects had a real estate value of almost £40m at the time of structuring these deals with the landlords which when added to the total restoration costs would have meant that the capital required for these ventures and the associated borrowing levels would have been significant. The Your Space solutions approach enables us to expand our business model without increasing our indebtedness. We are able to apply our skills to produce a quality product in prime locations for the occupation of our clients and work in partnership with the landlord of these buildings.


The fundamentals of buildings we seek, their locations and the restoration works carried out ensure we are providing a superior product to our clients. Our contract services design team is also able to maximize the use of these buildings by ensuring every inch of space is utilised to its full potential. Many of these buildings are also listed which adds to their quality and importance. The other benefit of course is the empty rates relief we enjoy which can be substantial in prime locations. 


Many of our competitors prefer the management contract route which we believe has its limitations and restrictions especially where landlords are reluctant to reinvest further to the detriment of the floor spaces occupied under these contracts. We would only consider this approach were we are able to carry out a full refurbishment of the building to our specification and IT requirements. This way we ensure the finish is befitting a service office environment in the 21st century and it is not a clinical feel that you get in other centres. The quality of the space and the infrastructure spend has never been more important in differentiating our product from other serviced providers. We would also prefer to occupy the whole building rather than take individual floor plates to ensure our clients enjoy the full benefits and aesthetics within. 


The YSP approach is to continually reinvest back into our centres and by using our own contract services division we are able to enjoy real economies of scale whilst at the same time we know what needs to be undertaken. This way we always ensure our product is fresh and appealing. 


The serviced office division has never been as busy with enquiry levels at an all time high. We have a good mix of clients and sectors ranging from the virtual start up /one person office types up to larger businesses. We are seeing a fundamental positive change of thinking towards the serviced office sector as more and more businesses are moving away from the traditional leasing route preferring flexible space that can meet their needs. This is of course even more prevalent at present as the economic uncertainty continues and businesses are restricted from being able to raise finance to reinvest in IT /Telco services and other related capital. We take away this worry via our own investment into providing quality infrastructure that allows them to enjoy these benefits and run their business.


As service providers we are continually looking at how we can improve our product offering to attract even more clients. We were the first national operator to offer a free inclusive telephone call package within the monthly fee. We are also currently piloting a one person office solution product for a small fixed monthly fee that enables clients to enjoy the experience of a serviced office based in a prime business address. In conjunction with this we are also shortly going to pilot a web hosted service. We believe this will have great potential for businesses wanting to either start up or alternatively for those who may spend longer periods out on site. 


We believe we have put our business in a position to take advantage of the market generally at all levels. The previous model where we disposed of our freehold property holdings and reduced bank borrowings has enabled us to both return capital to our shareholders whilst at the same time reinvesting back into the business through improvements in IT/Teleco services and building management processes. We are now able to expand our model further through the Your Space solutions division and provide SMEs (which account for a high proportion of employment in the UK) with our flexible quality product offering. Our vision is to have a Your Space centre in all major cities and regions across the UK. We believe we are well placed to take advantage of the fundamental changes we are seeing in our economy.


Finally I would like to thank all the staff and the management team for their hard work and dedication to the business. 


Shaun Mealey. 

Chief Executive Officer.


 













 Consolidated Income Statement 

notes

 6 months ended 30 September 2008 

 6 months ended 30 September 2007 

 Year ended 31 March 2008 




 £'000 

 £'000 

 £'000 


 revenue 






 rents and services 


1,454

1,322

2,790


contract services


2,272

-

-


 developments 


-

8,289

8,285




3,725

9,611

11,075


 direct costs 


(1,230)

(7,114)

(7,217)


 operating profit 


2,495

2,497

3,858


 Administration expenses 


(2,903)

(2,156)

(5,218)


 gain from change in fair value of investment property 

2

-

2,500

4,174


 impairment of inventories 


-

-

(1,076)


 loss on disposal of investment properties 


-

(220)

(523)




(408)

2,621

1,215


 exceptional items 

3

475

-

-


 profit after exceptional items before finance costs  


68

2,621

1,215


 finance income 


1

95

175


 finance costs 


(67)

(237)

(269)


 profit on ordinary activities before tax 


2

2,479

1,121


 taxation 


-

(201)

(299)


 profit after tax 


2

2,278

822








earnings per share (pence)







basic

4

0.07

11.67

3.90


diluted

4

0.06

11.32

3.60



 









Consolidated statement of changes in shareholders equity 






 share capital 






 share premium 

 





capital redemption 






 shares to be issued 

 





profit and loss reserve 






 total 


 £'000 

 £'000 

 £'000 

 £'000 

 £'000 

 £'000 

 at 31st March 2008 

  2,165 

  5,373 

  69 

  88 

  (1,092)

  6,603 

 Profit for the period 

-

-

-

-

  2

  2

 shares issued 

  50 

  225 

-

-

-

  275 


  2,215 

  5,598 

  69 

  88 

  (1,090)

  6,880 



 




 Consolidated balance sheet 

 notes 

6 months ended 30 September 2008 

 6 months ended 30 September 2007 

 Year ended 31 March 2008 




 £'000 

 £'000 

 £'000 


 Assets 






 non current assets 






 investment properties 

5

  7,503 

  5,550 

  7,503 


 property plant and equipment 


  1,709 

  872 

  1,640 




  9,212 

  6,422 

  9,143 


 current assets 






 inventories 

6

  13,028 

  12,355 

  12,787 


 trade and other receivables 

7

  3,916 

  3,036 

  3,303 


 cash and cash equivalents 


-  

  4,410 

  68 




  16,944 

  19,801 

  16,158 








 total assets 


  26,157 

  26,223 

  25,301 








 Liabilities 






 non current liabilities 






 borrowings 


  829 

  - 

  839 


 deferred tax liability 


  1,957 

  1,350 

  1,957 


 other payables 


-

-

  237 


 derivatives 


  463 

 -

  647 




  3,249 

  1,350 

  3,680 








 current liabilities 






 short term borrowings and overdraft 

9

  12,078 

  14,568 

  11,385 


 trade and other payables 

8

  3,950 

  1,308 

  3,633 


 current tax liabilities 


  - 

  762 




  16,028 

  16,638 

  15,018 








 Equity 






 share capital 


  2,215 

  1,952 

  2,165 


 share premium account 


  5,598 

  4,625 

  5,373 


 shares to be issued 


  88 

  - 

  88 


 capital redemption reserve 


  69 

  69 

  69 


 profit and loss account 


  (1,090)

  1,589 

  (1,092)




  6,880 

  8,235 

  6,603 








 total equity 


  26,157 

  26,223 

  25,301 








   

 







 cash flow 


 notes 

 6 months ended 30 September 2008 

 6 months ended 30 September 2007 

 Year ended 31 March 2008 





 £'000 

 £'000 

 £'000 


 cash from operating activities 


10

  (440)

  (7,279)

  (8,718)









 interest received 



  1 

  95 

  175 


 interest paid 



  (67)

  (237)

  (269)


 net cash outflow from operating activities 



  (506)

  (7,421)

  (8,812)









 cashflows from investing activities 







 sale of investment property 



  - 

  3,781 

  3,477 


 fixed asset purchases 



  (255)

  (721)

  (1,777)


 net cash (outflow)/inflow from investing activities 



  (255)

  3,060 

  1,700 









 cashflow from financing activities 







 dividends paid 



  - 

  - 

  (1,213)


 convertible loan 



  - 

-

  1,488 


 ordinary share placing 


   

  - 

-

  961 



hire purchase agreements



-

-

356


 increase in bank and other borrowings 



  463 

  3,341 

  158 


 net cash inflow from financing activities 



  463 

  3,341 

  1,750 









 net decrease in cash and cash equivalents 



  (298)

  (1,020)

  (5,362)















Notes

   

1 Basis of preparation


These consolidated interim financial statements are for the six months ended 30th September 2008. They have been prepared with regard to the requirements of International Financial Reporting Standards as adopted by the EU. They do not include all of the information required for full financial statements, and should be read in conjunction with the consolidated financial statements (under IFRS) of the Group for the year ended 31st March 2007.


The financial statements have been prepared under the historical cost convention except that they have been modified to include the revaluation of certain non-current assets, financial assets and liabilities.


The directors have considered the inherent risks in the business and that of the wider economy. The following are risks which have been identified. 


The group has borrowings in place amounting to £11.8m with the Bank of Ireland. The board is satisfied that it will continue to be able to meet this liability. The facility is payable on demand. In addition there remains £1.3m of convertible loan due for maturity in December 2010. In the event that there are no further conversions the board believes that it will be in a position to repay this amount on the maturity date or before.


Generally all contract service work is undertaken in accordance with proven construction contracts in place. These allow for monthly certification of works and payment within a specified time. All serviced office income is billed in advance for rents and with 30 days credit given for services. Bad debt risk is considered minimal and active processes are in place to monitor and assess this at all times. .


The economic environment is challenging and the business must be prepared to engage with potential customers at very competitive rates while at the same time operating costs must be controlled in order to maximise available margin.


The directors are pursuing alternative sources of funding as distinct from bank funding however nothing has yet been secured. The forecasts adopted demonstrate that the business can continue to trade satisfactorily and meet its obligations however there is a risk that the business may not achieve its forecast for sales in development service work and serviced office centres. In this event the directors would seek to dispose of property stock and investments. This may prove to be a lengthy process in the current economic environment and the Company would therefore require the continued support of its bankers to meet its ongoing liabilities. 


After making enquiries the directors have a reasonable expectation that the company and the group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts.


Significant accounting policies include;


Revenue


Revenue is measured in accordance with IAS 18 Revenue.


Rent and service charge income


Revenue is measured by reference to the fair value of consideration received or receivable by the group for goods supplied and services provided, excluding VAT and trade discounts. Revenue is recognised upon the performance of services or transfer of risk to the customer.


Sale of property stock


Sale of property stock is recognised upon irrevocable exchange of contracts, when there are no further acts to perform.


2 Gains from change in fair value of investment property are carried to the income statement.

   

3 Exceptional profits have arisen from the decision to reverse accruals made in prior periods for costs which have not materialised.  


The calculation of the basic earnings per share is based on the profit after tax of £2,000 (6 months ended 30 September 2007 £2,278,000) and on 21,902,519 (2007: 19,524,868) ordinary shares being the weighted average number of ordinary shares in issue during the period. The fully diluted earnings per share is based on profit of £2,000 and on 23,332,519 ordinary shares.

   

5 Investment property consists of land. An indication of the fair value of the investment property was carried out by an independent third party in August 2008 and the directors believe that the amounts carried in the balance sheet represent fair value. .  



 stock of investment property 


 6 months ended 30 September 2008 

 6 months ended 30 September 2007 

 Year ended 31 March 2008 




 £'000 

 £'000 

 £'000 


 balance at beginning of period 


  7,503 

  2,004 

  2,004 


 additions 


  - 

  1,046 

  325 


 transfers from investment property held for sale 


  - 

  - 

  1,000 


 net gain from revaluations 


  - 

  2,500 

  4,174 


 balance at end of period 


  7,503 

  5,550 

  7,503 








6 Inventory comprises property being developed for sale. The directors have chosen to not have this valued at 30 September 2008 but believe that the amounts carried in the balance sheet represent fair value.


stock of trading property 


 6 months ended 30 September 2008 

 6 months ended 30 September 2007 

 Year ended 31 March 2008 



 £'000 

 £'000 

 £'000 

 balance at beginning of period 


  12,787 

  6,033 

  6,033 

 additions 


  241 

  12,355 

  12,787 

 disposal 


  - 

  (6,033)

  (6,033)

 balance at end of period 


  13,028 

  12,355 

  12,787 









7 Trade receivables

trade receivables 


 6 months ended 30 September 2008 

 6 months ended 30 September 2007 

 Year ended 31 March 2008 



 £'000 

 £'000 

 £'000 

 trade receivables 


  1,827 

  3,036 

  365 

 other receivables 


  1,557

  - 

  1,826 

 prepayments and accrued income 


  532 

  - 

  1,112 

 balance at end of period 


  3,916 

  3,036 

  3,303 




8 Current liabilities

trade and other payables 


 6 months ended 30 September 2008 

 6 months ended 30 September 2007 

 Year ended 31 March 2008 



 £'000 

 £'000 

 £'000 

 trade payables 


  1,908 

  1,308 

  2,012 

 social security and other taxes 


  537 

-

  258 

 Hire Purchase agreements 


  177 

-

  119 

 Accrued expenses 


  477 

-

  847 

 current tax 


  - 

  762 

  - 

 Other payables 


  851 

  1,658 

  397 



  3,950 

  3,728 

  3,633 

   



9 Borrowings

borrowings 


 6 months ended 30 September 2008 

 6 months ended 30 September 2007 

 Year ended 31 March 2008 

 bank overdraft 


  230 

  - 

  - 

 bank borrowings 


  11,848 

  14,568 

  11,385 



  12,078 

  14,568 

  11,385 







10 Net cash from operating activities


 6 months ended 30 September 2008 

 6 months ended 30 September 2007 

 Year ended 31 March 2008 

 net cash from operating activities 

 £'000 

 £'000 

 £'000 

 profit on ordinary activities before tax 

  68 

  2,621 

  1,121 

 depreciation 

  187 

  98 

  107 

 loss on disposal of fixed assets 

  - 

  220 

523  


tax paid

-

-

(252)

 gain from fair value of investment property 

  - 

  (2,500)

  (4,174)

 increase in stock 

  (241)

  (6,322)

  (6,754)

 increase in debtors 

  (612)

  (1,109)

  (1,376)

 (decrease)/increase in creditors 

  158

  (287)

  2,087 


  (440)

  (7,279)

  (8,718)




ENDS


For further information please contact:-


Steve Turton, Director, Your Space plc                           0151 229 1702

Sue Lace, Company Secretary, Your Space plc              0151 229 1703

Richard Hughes / Bobby Fletcher, Zeus Capital            0161 831 1512








 


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