3rd Quarter Results
Workspace Group PLC
18 February 2002
WORKSPACE REPORTS EXCELLENT TRADING AND ACQUISITIONS PROGRESS
Workspace Group PLC ('Workspace'), today announces its results for the nine
months ended 31 December 2001. Workspace is the leading provider of flexible
business accommodation to small and medium size enterprises ('SMEs') in London
and the South East.
• Pre-tax trading profits for 9 months up 24% to £8.53 million (31 December
2000: £6.88 million*)
(*excluding exceptional profit on disposal of investment property)
• Trading earnings per share up 29% to 38.7p (31 December 2000: 30.0p)
• Annual rent roll during quarter up to £28.0 million (30 September 2001:
£26.6 million)
• Average rent of core portfolio improved to £7.20 psf (30 September 2001:
£7.03 psf)
• Occupancy of core portfolio 89.1% (30 September 2001: 89.9 %)
• £43 million of acquisitions completed (in the three quarter period)
• Gearing 75%
• Net asset value per share up to £13.02 (30 September 2001: £12.90)
Commenting on the results, Harry Platt, Chief Executive, said,
' The demand from SME's for business space in London and the South East remains
buoyant. Current trading continues to be strong and the prospects for the
business are good.
' I am delighted that despite the uncertainties following September 11 rentals
have continued to grow and occupancy levels have remained stable. Both our
recent acquisitions and initiatives that we have underway at other sites will
contribute to continued rental growth.
' During the quarter we have been very active on the acquisition front,
investing over £27 million in London property. This brings the level of
acquisitions over the nine-month period to £43 million with a further £12m
secured since the quarter end. Further acquisitions are under negotiation.
' Our programme of added value initiatives is gathering pace. Outline planning
consent has been granted for a residential development on land at our Three
Mills site in East London. During the quarter we have submitted planning
applications for an extension to the Barley Mow Workspace in Chiswick and we are
awaiting the outcome of two other planning applications.'
-ends-
Date: 18 February 2002
For further information please contact:
Workspace Group PLC City Profile Group
Harry Platt, Chief Executive Simon Courtenay
Mark Taylor, Finance Director Ed Senior
020 7247 7614 020 7448 3244
e-mail: info@workspacegroup.co.uk e-mail: simon.courtenay@city-profile.com
Web: www.workspacegroup.co.uk
Operating and Financial Review
Review of Activities
The pattern of good progress extended through the third quarter.
High levels of occupancy have been maintained together with continuing
improvements in rental income. This has lead to trading profits for the quarter
of £2.95 million, up 9.8% on the same period last year - with trading earnings
per share for the nine month period of 38.7 pence per share, up 29%. Meanwhile,
there has been considerable acquisition activity totalling some £27.5 million in
the quarter making £43.25 million for the three quarter period. Since the
quarter end a further £12.5 million acquisitions have been made. Planning
consent for a residential development at 3 Mills was secured during the quarter
and a number of other applications made. In time these will add significant
value to the related properties.
Occupancy of the core portfolio of estates (those not in development and held
throughout the year) was 89% at 31 December 2001. Including acquisitions during
the year, overall occupancy of the Group's portfolio was 84.5% reflecting the
voids inherited at the time of acquisition.
The rent roll has increased during the quarter by £1.4 million or 5.3% from
£26.6 million to £28.0 million. Of this increase £1.0 million reflects the net
effect of acquisitions whilst £0.4 million reflects underlying rental growth.
Core average rents are now £7.20 per sq. ft, having increased by 2.4% in the
quarter, and over 7.8% over the nine month period.
Acquisitions and Disposals
During the quarter the Group acquired 5 properties for £27.48 million. The table
below shows the main details of acquisitions in this period, including
acquisitions since 31 December 2001 on 2 properties of some £12.5 million.
Further acquisitions are under negotiation.
Name of Property Description Acquisition/ Initial Annual
Sale Price Income
In the third Acquisitions
Quarter Windmill Place, Hanwell, 25,800 business centre; with £3.35m £305,000
Middlesex 63 units
Surrey House 16,695 sq. ft over 5 floors £5.0m £335,000
(currently single let)
Lavington Street, SE1
Clerkenwell Workshops 69,583 sq. ft, subject to
head lease expiry in 2003 and
EC1 150 individual business £9.1m £109,000
sub-tenants
Union Court 67,500 sq. ft ; 13 units £6.5m £301,000
business centre
Clapham, SW4
Alpine Way, Beckton, E6 1.75 acre site for £3.53m £350,000
development of 35,000 sq. ft
new build warehouse (£1.2m land purchase) when complete
Post December Westbourne Studios 63,963 sq. ft, 95 units £12.25m £807,000
2001 business centre
Ladbroke Grove
London, W10
School Road, Acton, London, 2,895 sq. ft, 1 unit, £0.245m £24,000
NW10 adjacent to Europa Building
Added Value Initiatives
Outline planning consent (subject to a Section 106 Agreement) has been granted
for a residential development at Three Mills. This scheme is in joint venture
with Copthorn Homes.
During the quarter a planning application has been submitted for a 65,000 sq. ft
extension to Barley Mow Workspace in Chiswick. This scheme will be undertaken in
partnership with the London Borough of Hounslow.
The Group awaits the outcome of its planning applications for a retail warehouse
scheme at Thurston Road Industrial Estate, Lewisham and for a residential
development at Hooley Lane, Redhill. It is anticipated that further planning
applications on other estates will be made over the next few months.
Cash Flow and Financing
There was a net cash outflow of £0.85 million during the quarter (2000: inflow
of £0.84 million). For the year to date there was an inflow of £0.82 million
(2000: £2.86 million inflow). Capital expenditure for the year to date, net of
disposal proceeds was an outflow of £4.05 million (2000: inflow of £16.22
million). At the quarter end gearing stood at 74.5% (2000: 73.6%) and interest
cover for the year to date was 2.14 times (2000: 2.94 times). A new £100 million
loan facility has been negotiated with the Group's bankers NatWest. This will
provide capacity for the acquisition programme for the immediate future.
Occupancy and Trading Statistics
The Group's key statistics relating to its trading operations are given in the
table below.
31 December 30 September 30 June 31 March
2001 2001 2001 2001
Number of estates 83 80 79 78
Total floorspace at end of period 4,702,550 4,520,707 4,513,937 4,525,030
of which:
London and South East (sq. ft) 4,315,664 4,134,148 4,127,378
Three Mills and developments (sq. ft). 386,886 386,559 386,559
Lettable floorspace of core portfolio 4,003,557 3,996,025 4,001,944 3,988,450
Lettable units (number) 3,587 3,489 3,521 3,507
Annual rent roll of occupied units £28,003,732 £26,573,800 £25,570,817 £24,941,423
Average rent (£/sq ft) £7.05 £6.91 £6.71 £6.39
Average rent of core portfolio (£/sq ft) £7.20 £7.03 £6.90 £6.68
Occupancy overall 84.5% 85.1% 84.2% 86.2%
Occupancy of core portfolio 89.1% 89.9% 89.4% 90.6%
All figures exclude the Midlands portfolio, which was sold on 15 June 2001.
Comparisons of overall occupancy and rent roll are distorted by acquisitions,
disposals and transfers. The 'core portfolio' is defined as those properties,
excluding Three Mills (which due to the short term nature of the lettings of
studio space has a volatile occupancy rate which in turn can obscure overall
patterns), that have been held throughout the year to date and which are not
subject to refurbishment/development programmes.
Current Trading
At mid February trading remains strong with good enquiries and continuing rental
uplift - albeit at lower rates of increase than were experienced a year or so
ago. Prospects are therefore good. Negotiations continue on a number of
potential acquisitions which will bring additional long term value to
shareholders.
Unaudited Consolidated Profit and Loss Account
for the three and nine months ended 31 December 2001
3 months ended 31 December 9 months ended 31 December
Trading Other Total
Operations
Items
2001 2000 £000 £000 2001 2000
£000 £000 £000 £000
_______________________________________________________________________________
Turnover - continuing operations 9,518 9,365 28,926 - 28,926 26,298
Rent payable and direct costs (2,870) (2,611) (8,367) - (8,367) (7,240)
_______________________________________________________________________________
Gross profit 6,648 6,754 20,559 - 20,559 19,058
Administrative expenses (1,373) (1,161) (4,215) - (4,215) (3,586)
_______________________________________________________________________________
Operating profit - continuing 5,275 5,593 16,344 - 16,344 15,472
operations
Profit on Disposal of investment (16) 9,700 - 361 361 9,762
property
Interest receivable 53 76 282 - 282 333
Interest payable and similar charges (2,380) (2,985) (8,094) - (8,094) (8,922)
_______________________________________________________________________________
Profit on ordinary activities before 2,932 12,384 8,532 361 8,893 16,645
taxation
Taxation on profit on ordinary (813) (4,454) (2,304) (35) (2,339) (5,605)
activities
_______________________________________________________________________________
Profit attributable to shareholders 2,119 7,930 6,228 326 6,554 11,040
Dividends - - (1,143) - (1,143) (1,070)
_______________________________________________________________________________
Retained for the period 2,119 7,930 5,085 326 5,411 9,970
_______________________________________________________________________________
Earnings per shares (basic) 13.1p 50.0p 38.7p 2.0p 40.7p 69.6p
Diluted earnings per share 12.8p 47.3p 39.8p 66.6p
Statement of Total Recognised Gains and Losses
9 months ended 31 December
2001 2000
£000 £000
_______________________________________________________________________________
Profit for the financial period 6,554 11,040
Unrealised surplus on revaluation of investment properties 14,389 22,232
Taxation on revaluation surpluses realised on sale of properties (150) (510)
_______________________________________________________________________________
Total gains relating to the financial period 20,793 32,762
Consolidated Balance Sheet
Unaudited Audited
31 December 2001 31 March 2001
£000 £000
_______________________________________________________________________________
Fixed assets
Tangible assets
Investment properties 382,876 366,525
Other fixed assets 1,538 999
Investment in own shares 1,015 1,015
_______________________________________________________________________________
385,429 368,539
_______________________________________________________________________________
Current Assets
Debtors 6,950 5,844
Investments 6,100 5,373
Cash at bank and in hand 14 206
_______________________________________________________________________________
13,064 11,423
Creditors: amounts falling due within one year
loans and overdrafts (4,227) (4,355)
Others (21,620) (25,658)
_______________________________________________________________________________
Net current liabilities (12,783) (18,590)
_______________________________________________________________________________
Total assets less current liabilities 372,646 349,949
Creditors: amounts falling due after more than one year
loans (including Convertible Loan Stock) (160,148) (158,371)
_______________________________________________________________________________
212,498 191,578
_______________________________________________________________________________
Capital and reserves
Called up share capital 1,644 1,618
Share premium account 41,910 40,666
Revaluation reserve 132,358 122,739
Profit and loss account 36,586 26,555
_______________________________________________________________________________
Shareholders' funds - equity interests 212,498 191,578
_______________________________________________________________________________
Net asset value per share £13.02 £11.93
_______________________________________________________________________________
Movement in shareholders' funds
Profit for the financial period 6,554 13,222
Dividends (1,143) (3,723)
_______________________________________________________________________________
5,411 9,499
Issue of Shares 26 27
Share premium account 1,244 871
Revaluation reserve - increase 14,389 38,673
Taxation on valuation surpluses realised on sale of properties (150) (510)
_______________________________________________________________________________
Net movement in shareholders' fund for the financial period 20,920 48,560
Shareholders' funds as at 1 April 2001/2000 191,578 143,018
_______________________________________________________________________________
Shareholders' fund as at 31 December 2001/31 March 2001 212,498 191,578
_______________________________________________________________________________
Unaudited Consolidated Cash Flow Statement
for the nine months ended 31 December 2001
9 months ended 31 December
2001 2000
£000 £000
_______________________________________________________________________________
Net cash inflow from operating activities 16,913 15,168
Return on investment and servicing of finance (7,623) (8,953)
Taxation (4,780) (1,185)
Capital (expenditure)/proceeds - net (4,052) 16,224
Equity dividends paid (2,659) (2,391)
_______________________________________________________________________________
Net cash (outflow)/inflow before use of liquid resources and (2,201) 18,863
financing
(Outflow)/inflow from management of liquid resources (727) 358
Inflow/(outflow) from financing 3,749 (16,357)
_______________________________________________________________________________
Net cash inflow 821 2,864
_______________________________________________________________________________
Reconciliation of net cash flow to movement in net debt
Increase in cash 821 2,864
Increase/(Decrease) in liquid resources 727 (358)
(outflow)/inflow from movements in debt financing (2,662) 16,999
_______________________________________________________________________________
Changes in debt resulting from cash flows (1,114) 19,505
_______________________________________________________________________________
Net debt at 1 April (157,147) (148,731)
Net debt at 31 December (158,261) (129,226)
_______________________________________________________________________________
Notes to the Quarterly Results
1. Basis of Preparation
The unaudited financial information contained in this quarterly report does not
comprise statutory accounts within the meaning of Section 240 of the Companies
Act 1985. The statutory accounts for the year ended 31 March 2001 included an
unqualified report of the auditors. The Group's unaudited accounts for the
period ended 31 December 2001 have been prepared on the basis of the accounting
policies set out in the Annual Report and Accounts for the year ended 31 March
2001.
2. Segmental Analysis 3 months ended 31 December 9 months ended 31 December
2001 2000 2001 2000
£000 £000 £000 £000
_______________________________________________________________________________
Rental Income 7,517 7,461 22,939 20,774
Service charge and other recoveries 1,612 1,513 5,006 4,470
Fees, commissions, and sundry income 389 391 981 1,054
_______________________________________________________________________________
9,518 9,365 28,926 26,298
_______________________________________________________________________________
3. Interest Payable 3 months ended 31 December 9 months ended 31 December
2001 2000 2001 2000
£000 £000 £000 £000
_______________________________________________________________________________
Convertible loan stock and debenture stock 631 663 1,935 1,987
interest
Mortgage interest 1,801 2,666 6,252 8,006
Bank and other interest 13 22 42 64
Net development interest capitalised (65) (366) (135) (1,135)
_______________________________________________________________________________
Charged to profit and loss account 2,380 2,985 8,094 8,922
_______________________________________________________________________________
4. Taxation
The taxation charge, excluding tax on property disposals, for the nine months
ended 31 December 2001 is based on the estimated effective tax rate for the year
ending 31 March 2002 of 27% (2001 estimated: 27%). Tax on property disposals is
only 9.7% due to tax losses made on some properties within the Midlands sale.
5. Earnings Per Share and Net Assets Per Share
Earnings per share have been calculated by dividing the profit after tax for
each period attributable to shareholders by the weighted average number of
ordinary shares in issue during the period less investment in own shares of
200,000 (16,115,912 shares). Net assets per share have been calculated by
dividing net assets at the end of each period by the number of shares in issue
at that time less investment in own shares of 200,000 (16,245,105 shares).
6. Valuation
The Group's investment properties were valued by Insignia Richard Ellis at 30
September 2001 on an open market existing use basis in accordance with the
guidance notes issued by the Royal Institution of Chartered Surveyors.
7. Creditors
Creditors falling due within one year include tenants' deposits of £3.94 million
(31 March 2001: £3.26 million) and deferred rental and service charges of £4.49
million (31 March 2001: £4.95 million).
8. Financial Instruments
In accordance with the requirements of FRS 13, an assessment of the fair value
of the Group's financial instruments held for financing purposes has been
undertaken as at 31 December 2001. The results are summarised as follows:
Book Value Fair Value Difference
£ Million £ Million £ Million
_______________________________________________________________________________
Short term borrowings and current part of long term borrowings (4.2) (4.2) -
Long term borrowings (160.1) (165.6) (5.5)
Financial Assets 6.1 6.1 -
Interest rate Cap / Collar 0.3 (2.3) (2.6)
_______________________________________________________________________________
(157.9) (166.0) (8.1)
_______________________________________________________________________________
This represents 49.9 pence per issued ordinary share and if applied to net asset
value per share at 31 December 2001 would reduce the latter to £12.52. On a
diluted basis, allowing for conversion of the Group's convertible loan stock,
this adjustment reduces to 31.8 pence per share. However, the Group has no
obligation or present intention to repay its Debenture and Convertible
borrowings other than at maturity, when they will be repaid at par. Cash
outflows arising from these borrowings will be limited to the future fixed
interest payments and redemption at par. These outflows are unaffected by the
notional market or fair values referred to above.
9. Quarterly Statement
Copies of this statement will be dispatched to shareholders on Monday 18
February 2002 and will be available from the Group's registered office at
Magenta House, 85 Whitechapel Road, London, E1 1DU from 9.00am on that day.
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