3rd Quarter & 9 Mths Results
Workspace Group PLC
19 February 2001
WORKSPACE ACQUISITIONS ROLL ON
AS SME SECTOR GROWS
Workspace Group PLC ('Workspace') the leading provider of flexible
accommodation to small and medium sized enterprises (SME's) in London and the
South East, today announces its third quarter results for the nine months
ended 31 December 2000.
Financial Highlights
* Headline pre-tax profits for the three quarter period up 193% to £16.6
million
* Trading pre-tax profit for period up 10.0% to £6.88 million
* Annual Rent Roll for the three quarter period increased by £1.66m to £
27.52 million (up 6.4% since 31 March 2000)
* Sale of 1-10 Union Street and Phoenix Business centre for a total of £
29.25 million producing £9.72 million profit.
* Basic EPS 30.0p (up 4.5%) for the three quarter period (excluding
exceptional items and property sales).
* NAV per share at 31 December 2000 at £10.94 up 42.4% year on year (31
March 2000: £9.04, 31 December 1999: £7.68).
Commenting on the results, Harry Platt, Chief Executive said,
' This has been an excellent quarter for Workspace. The disposal of the
Sainsbury's building at Union Street has released significant resources, which
we are re-investing into properties with good potential. During the quarter we
have agreed five acquisitions totalling over £20m.
' Our strategy remains focused on enhancing the rental streams at all our
properties. We are also striving to provide our customers with the services
that growing businesses need, at cost-effective levels. For the future, we are
planning to roll out telecommunications and digital communications services
that will sit alongside our existing energy and insurance services.
' Demand for our type of flexible business space is excellent. We are
confident that we will continue to drive the rent roll forward. We are keen to
continue our expansion and to develop further our dominant position as the
leading SME accommodation provider in the South East.'
- ends -
Date: 19 February 2001
For further information contact:
Harry Platt, Chief Executive
Workspace Group PLC
020-7247-7614
e-mail: info@workspacegroup.co.uk
web: www.workspacegroup.co.uk
Simon Courtenay
Ed Senior
City Profile
020-7726-8588
e-mail: sc@profilecomms.co.uk
Operating and Financial Review
Review of Activities
Trading activity continues to be strong, with occupancy stable and rents in
London rising by some 10.3% per annum. As a result of this, excluding profits
arising on the sale of properties and exceptional costs, basic pre-tax profits
for the three quarter period were £6.88 million, up 10.0% on the same period
for 1999.
The rent roll now totals £27.52 million, up 6.4% since 31 March 2000. Of this
increase rents on the core like for like portfolio grew by £1.54 million or
6.1%.
Net asset value per share is now £10.94 up 42.4% on a year ago. The slight
fall of 10.0p since the half year is because of the tax charge (some £3.28
million) on the sale of 1-10 Union Street. As is customary there has been no
further property revaluation at the quarter end (the last being at 30
September 2000; and the next being with the full year's accounts at 31 March
2001).
Profits from the sale of 1-10 Union Street and the Phoenix Business Centre
dominate the headline profit figures for the quarter. Union Street was
acquired in 1998 as a vacant building for refurbishment as a business centre.
In September 1999 J Sainsbury agreed to take the whole property on a 15 year
lease at a rental of £2 million per annum, commencing in March 2001, subject
to the completion of certain refurbishment works (costing some £11 million).
Works were completed in September 2000, Sainsbury took up occupation, and the
building was sold in December 2000 for £27.75 million generating a profit of £
9.16 million. The Group has retained three parcels of land adjacent to the
site for development. Phoenix Business Centre, which was acquired as part of
the Tonex portfolio and valued at £0.9 million at 31 March 2000 was sold for £
1.5 million.
Acquisitions and Disposals
The Group has focused increasingly on expanding its portfolio in London and
the South East and as a result is currently looking at the alternatives for
its Midland portfolio. With recent disposals and the consequent fall in
borrowing, gearing is now 73.6% and the Group has substantial capacity to make
acquisitions in its core areas.
During and since the quarter end, a number of acquisitions have been
completed, or committed. These are listed in the table below. Two of these
purchases stem from the Company's co-operation agreement with Greater London
Enterprise (Wandsworth Business Village and Villiers Road, Kingston), whilst a
further purchase is from Haringey Council (Bounds Green Industrial Estate).
The Group continues to target opportunities in London and the South East at
good immediate income yields and which have, with its flexible leasing
package, strong growth prospects and good reversionary income growth over the
next two years.
Name of Property Description Acquisition/ Annual Date of
Sale Price Income Completion
£m £000
Acquisitions:
Block F, Tower Industrial Unit of 141,881 6.5 355 10/01/01
Bridge (final part sq. ft (under review)
of Tonex purchase)
Bounds Green Industrial Estate, 110,703 5.1 449 31/01/01
Industrial Estate, sq. ft on a site of 6.5 acres
Haringey, N11
The Ivories, 6/18 Business Centre; 24 units; 4.0 332 09/02/01
Northampton
Street, 24,800 sq. ft
London N1
Wandsworth Business Centre 88,500 sq. ft 7.34 544 12/02/01
Business Village, (with planning consent for
London SW18 9,500 sq. ft additional
space)
Villiers Road, New Build Business Park; 20 4.2 - Late 2001
Kingston units ; 42,000 sq. ft
Disposals:
Union Street, SE1 Freehold building let to J
Sainsbury for £2m rent per
year commencing March 2001 27.75 Nil at 20/12/00
time of
sale
Phoenix Business Multi-storey industrial 1.5 41.3 22/12/00
Centre, Bow Common
Lane, E3
Cash Flow and Financing
There was a net cash inflow of 0.84 million during the quarter (1999 inflow
of: £0.09 million). For the year to date there was an inflow of £2.86 million
(1999: £1.72 million outflow). Capital expenditure for the year to date, net
of disposal proceeds, was an inflow of £16.22 million (1999: outflow of £83.30
million). At the quarter end gearing stood at 73.6% (1999: 122%) and interest
cover for the year to date was 2.94 times (1999: 2.03 times).
Occupancy and Trading Statistics
The Group's key statistics relating to its trading operations are given in the
table below: -
31 30 30 June 31 March
December September
2000 2000 2000 2000
Number of Estates 93 95 93 94
Total Floorspace at end of period 5,620,170 5,723,014 5,649,753 5,677,521
(sq. ft)
of which:
Available for letting 5,620,170 5,627,733 5,554,472
Undergoing development/refurbishment 0 95,281 95,281
Lettable Floorspace of core portfolio 5,530,891 5,430,115 5,416,723 5,401,601
Lettable Units (number) 3,570 3,568 3,546 3,523
Annual Rent Roll of Occupied Units 27,516,658 27,114,761 26,077,673 25,855,226
Average Rent (£/sq. ft) 5.64 5.42 5.30 5.21
Average Rent of Core Portfolio (£/sq 5.54 5.43 5.30 5.22
.ft)
Occupancy Overall 86.82% 87.38% 87.04% 87.35%
Occupancy of Core Portfolio 86.60% 88.66% 88.45% 88.68%
Comparisons of overall occupancy and rent roll are distorted by acquisitions,
disposals and transfers. The 'core portfolio' is defined as those properties
that have been held throughout the year to date and which are not subject to
refurbishment/redevelopment programmes.
Average occupancy is reduced by properties in which substantial areas are let
on a short term basis (e.g. Three Mills) and those where areas are being held
vacant pending redevelopment/improvement (e.g. Kingsland Viaduct and Wharf
Road). Excluding these occupancy is 91%.
Current Trading
The strong performance in previous periods has been maintained. There
continues to be good demand for our product at improving rentals. Initiatives
are underway at a number of estates which will improve rentals further. These
include refurbishment of the common areas of certain estates, increased floor
space at others, and over the next two years, the provision of a
telecommunications (broadband) and digital services infrastructure over our
main London business centres. These improvements will increase the attraction
of the Group's properties to our current and future customers.
Following the disposals in the latter part of 2000, Workspace is targeting
further acquisitions and an added value programme within London and the South
East. The Group aims to double the floorspace under ownership and management
for its target customers (small and medium sized enterprises) over the next
five years - and to strengthen its dominant position as the leading supplier
of space in the Capital for this market.
Unaudited Consolidated Profit and Loss Account
for the 3 and 9 months ended 31 December 2000
3 months ended 9 months ended
31 December 31 December
Trading Other Total
Operations Items
2000 1999 £000 £000 2000 1999
£000 £000 £000 £000
________ ______ _________ ______ ______ ______
Turnover - continuing operations 9,365 8,627 26,298 - 26,298 21,394
Rent payable and direct costs (2,611)(2,263) (7,240) - (7,240)(5,593)
________ ______ _________ ______ ______ ______
Gross profit 6,754 6,364 19,058 - 19,058 15,801
Administrative expenses (1,161)(1,004) (3,586) - (3,586)(3,133)
________ ______ _________ ______ ______ ______
Operating profit - continuing 5,593 5,360 15,472 - 15,472 12,668
operations
Profit on Disposal of investment 9,700 356 - 9,762 9,762 351
property
Interest receivable 76 62 333 - 333 122
Interest payable and similar (2,985)(2,731) (8,922) - (8,922)(7,470)
charges
______ ______ _________ ______ ______ ______
Profit on ordinary activities 12,384 3,047 6,883 9,762 16,645 5,671
before taxation
Taxation on profit on ordinary (4,454) (853) (2,128)(3,477)(5,605)(1,588)
activities
______ ______ _________ ______ ______ ______
Profit attributable to 7,930 2,194 4,755 6,285 11,040 4,083
shareholders
Dividends - - (1,070) - (1,070) (941)
______ ______ _________ ______ ______ ______
Retained for the period 7,930 2,194 3,685 6,285 9,970 3,142
______ ______ _________ ______ ______ ______
Earnings per shares (basic) 50.0p 14.0p 30.0p 39.6p 69.6p 26.0p
Diluted earnings per share 47.3p 13.9p 66.6p 25.8p
Statement of Total Recognised Gains and Losses
9 months ended 31 December
2000 1999
£000 £000
___________ ___________
Profit for the financial period 11,040 4,083
Unrealised surplus on revaluation of investment 22,232 10,371
properties
Taxation on revaluation surpluses realised on sale of (510) -
properties
___________ ___________
Total gains relating to the financial period 32,762 14,454
Consolidated Balance Sheet
Unaudited Audited
31 December 2000 31 March
2000
£000 £000
_______________ ___________
Fixed assets
Tangible assets
Investment properties 320,130 304,248
Other fixed assets 987 1,117
Investment in own shares 1,015 1,015
_______________ ___________
322,132 306,380
_______________ ___________
Current Assets
Debtors 6,738 5,236
Investments 11,067 11,424
Cash at bank and in hand 101 201
_______________ ___________
17,906 16,861
Creditors: amounts falling due within one year
loans and overdrafts (3,034) (5,511)
others (24,158) (19,867)
_______________ ___________
Net current liabilities (9,286) (8,517)
_______________ ___________
Total assets less current liabilities 312,846 297,863
Creditors: amounts falling due after more than one
year
loans (including Convertible Loan Stock) (137,359) (154,845)
_______________ ___________
175,487 143,018
_______________ ___________
Capital and reserves
Called up share capital 1,614 1,591
Share premium account 40,549 39,795
Revaluation reserve 106,245 86,412
Profit and loss account 27,079 15,220
_______________ ___________
Shareholders' funds - equity interests 175,487 143,018
_______________ ___________
Net asset value per share £10.94 £9.04
_______________ ___________
Movement in shareholders' fund
Profit for the financial period 11,040 6,523
Dividends (1,070) (3,298)
_______________ ___________
9,970 3,225
Issue of Shares 23 3
Share premium account 754 127
Revaluation reserve - increase 22,232 31,209
Taxation on valuation surpluses realised on sale (510) -
of properties
_______________ ___________
Net movement in shareholders' funds for the 32,469 34,564
financial period
Shareholders' funds as at 1 April 2000/1999 143,018 108,454
_______________ ___________
Shareholders' funds as at 31 December 2000/31 175,487 143,018
March 2000
_______________ ___________
Unaudited Consolidated Cash Flow Statement
for the 9 months ended 31 December 2000
9 months ended 31 December
2000 1999
£000 £000
__________ ___________
Net cash inflow from operating activities 15,168 12,821
Return on investment and servicing of finance (8,953) (6,600)
Taxation (1,185) (2,372)
Capital expenditure (net receipts/(net expenditure)) 16,224 (83,304)
Equity dividends paid (2,391) (2,116)
__________ ___________
Net cash inflow/(outflow) before use of liquid resources 18,863 (81,571)
and financing
Management of liquid resources 358 (4,471)
Financing (16,357) 84,323
__________ ___________
Net cash inflow/(outflow) 2,864 (1,719)
__________ ___________
Reconciliation of net cash flow to movement in net debt
Increase/(Decrease) in cash 2,864 (1,719)
(Decrease)/Increase in liquid resources (358) 4,471
Cash outflow/(inflow) from decrease/(increase) in debt 16,999 (84,297)
__________ ___________
Changes in debt resulting from cash flows 19,505 (81,545)
__________ ___________
Net debt at 1 April (148,731) (68,457)
Net debt at 31 December (129,226) (150,002)
__________ ___________
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 2000
included an unqualified report of the auditors. The Group's unaudited
quarterly accounts for the period ended 31 December 2000 have been prepared on
the basis of the accounting policies set out in the Annual Report and Accounts
for the year ended 31 March 2000.
2. Segmental Analysis 3 months ended 31 9 months ended 31
December December
2000 1999 2000 1999
£000 £000 £000 £000
________ ___________ __________ ________
Rental Income 7,461 6,563 20,774 16,938
Service charge and other recoveries 1,513 1,628 4,470 3,499
Fees, commissions, and sundry 391 436 1,054 957
income
________ ___________ __________ ________
9,365 8,627 26,298 21,394
________ ___________ __________ ________
3. Interest Payable 3 months ended 31 9 months ended 31
December December
2000 1999 2000 1999
£000 £000 £000 £000
________ ___________ __________ ________
Convertible loan stock and 663 663 1,987 1,987
debenture stock interest
Mortgage interest 2,666 2,132 8,006 4,794
Bank and other interest 22 108 64 242
Net development interest (366) (172) (1,135) (490)
capitalised
Loan breakage costs - - - 937
________ ___________ __________ ________
Charged to profit and loss account 2,985 2,731 8,922 7,470
________ ___________ __________ ________
4. Taxation
The taxation charge, excluding tax on property disposals for the nine months
ended 31 December 2000 is based on the estimated effective tax rate for the
year ending 31 March 2001 of 27% (2000 estimated 28%), which is increased to
30.9% due to a prior year adjustment of £0.3 million. Tax on property
disposals of £3.48 million (shown as other items) has been provided for at
35.6% leading to an overall effective rate for the period of 33.7%.
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 (15,865,134 shares). Net assets per share have been calculated by
dividing net assets at the end of each period less investment in own shares by
the number of shares in issue at that time less 200,000 (15,942,393 shares).
6. Valuation
The valuation of the Group's investment properties is based upon the
independent valuation by Insignia Richard Ellis at 30 September 2000 on an
open market existing use basis in accordance with the guidance notes issued by
the Royal Institute of Chartered Surveyors, net of subsequent acquisitions and
disposals.
7. Creditors
Creditors falling due within one year include tenants' deposits of £3.03
million (31 March 2000: £2.60 million) and deferred rental and service charges
of £4.49 million (31 March 2000: £4.29 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 2000. The results are summarised as follows:
Book Fair Difference
Value Value
£ £ £
Million Million Million
__________ ________ _________
Short term borrowings and current part of long (3.0) (3.0) -
term borrowings
Long term borrowings (137.4) (143.6) (6.2)
Financial Assets 11.2 11.2 -
Interest rate Cap / Collar 0.3 0.2 (0.1)
__________ ________ _________
(128.9) (135.2) (6.3)
__________ ________ _________
This represents 40 pence per issued ordinary share (diluted 20 pence per
share) and if applied to net asset value per share at 31 December 2000 would
reduce the latter to £10.54 (£10.21 diluted). 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 19 February
2001 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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