REG - Workspace Grp PLC - WORKSPACE GROUP PLC 2Q BUSINESS UPDATE

WorkspaceAnnouncement

13/10/2022 07:00

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RNS Number : 7183C  Workspace Group PLC  13 October 2022

 

13 October 2022

                                                               Workspace GROUP PLC

 

Second quarter BUSINESS UPDATE

FOR THE PERIOD ENDING 30 SEPTEMBER 2022

 

 

Workspace Group PLC, London's leading provider of flexible work spaces,
provides a business update for the second quarter ending 30 September 2022,
unless otherwise stated.

 

HIGHLIGHTS

 

·   Continued resilient levels of customer demand and letting activity
highlighting the appeal of our flexible offer

·    Further improvement in pricing with like-for-like rent per sq. ft. up
1.3% in the quarter and 4.0% in the half year to £38.59

·   Strong conversion of demand into lettings with 317 lettings completed
in the quarter and 642 lettings in the first half, with a total rental value
of £17.5m

·    Like-for-like occupancy stable at 89.6%

·    Like-for-like rent roll up 3.6% (£3.3m) in the first half to £94.5m

·   Strong demand at recently completed projects with occupancy up 2.7% in
the second quarter and 7.5% in the first half to 76.7%

·  Operational integration of McKay substantially complete and McKay debt
facilities successfully amended

·  Expect to complete the sale of the residential component of our
mixed-use redevelopment at Riverside, Wandsworth for £55m in December 2022

·    Progressing with the planned disposal of McKay non-core assets, with
timing dependent on market conditions

·    Robust balance sheet with £263m of cash and undrawn facilities and
proforma LTV of 32% before proceeds from our disposal programme

·  Average cost of debt of 3.5% with 71% at fixed rates (at current debt
levels) and a weighted average drawn debt maturity of 4.1 years

 

Graham Clemett, Chief Executive Officer, Workspace Group PLC, commented:

 

"Our trading performance in the first half of the year has been good with
resilient demand, stable occupancy and improving pricing levels. It's a
testament to our understanding of the needs of our SME customer base who want
flexible, quality space at competitive prices - which we can offer in a unique
portfolio of well-located properties across London.

 

The integration of our McKay acquisition is largely complete and performing
ahead of our original expectations. We are making progress on the sale of
non-core assets, although it is likely to take longer than we originally
envisaged given market conditions, as we remain focused on maximising value
from these quality assets.

 

There are clearly challenges ahead in light of the wider economic issues and
inflationary cost pressures facing the country, but we are confident in our
ability to navigate successfully through them. Our SME customers have
demonstrated through many previous economic cycles their ability to adapt and
in many cases prosper in these fast-changing times. At Workspace we have a
hugely experienced team, the right offer and a proven flexible operating model
supported by a robust balance sheet, putting us in a strong position to
capture the market opportunities ahead of us".

 

Customer and Portfolio Activity

 

We saw resilient underlying demand in the second quarter, although activity
levels were impacted by the extreme hot weather and disruption caused by tube
and rail strikes.

 
 

            Monthly Average               Monthly Activity
            Q2        Q1        FY        30 Sep  31 Aug  31 Jul

2022

            2022/23   2022/23   2021/22   2022            2022

 Enquiries  780       757       917       823     762     756
 Viewings   495       508       598       517     524     444
 Lettings   106       108       127       134     87      96

 

Leasing activity was strong with 317 lettings in the second quarter and 642 in
the first half with a total rental value of £17.5m. This trend has continued
into the third quarter.

 

We have seen overall growth of £3.1m in rent roll in the first half as
detailed below:

 

 Total Rent Roll          £m
 At 31 March 2022*        131.6
 Like-for-like portfolio  3.3
 Completed projects       1.3
 Projects underway        (1.4)
 McKay portfolio           0.4
 Other                    (0.5)
 At 30 September 2022     134.7

*Adjusted for McKay portfolio acquired in May 2022

 

Occupancy in our like-for-like portfolio has remained stable at 89.6%, and we
have seen continued improvement in pricing with like-for-like rent per sq. ft.
up by 1.3% in the quarter and 4.0% in the half year to £38.59.

 

                                        Quarter Ended
                                        30 Sep 22  30 Jun 22  31 Mar 22
 Like-for-like occupancy                89.6%      89.6%      89.5%

 Like-for-like rent per sq. ft.         £38.59     £38.07     £37.12
 Like-for-like rent per sq. ft. change  1.3%       2.6%

 Like-for-like rent roll                £94.5m     £93.8m     £91.2m
 Like-for-like rent roll change         0.8%       2.9%

 

We have made strong progress in letting up our recently completed projects,
with occupancy across these properties increasing by 2.7% in the second
quarter and 7.5% over the first half to 76.7%. As a result, rent roll has
increased by £1.3m (19.6%) to £7.9m with rent per sq. ft. up 8.3%.

 

We are progressing with obtaining vacant possession at our Riverside property
in Wandsworth, SW18 ahead of a major mixed-use redevelopment which resulted in
a £1.4m reduction in rent roll in the projects underway category.

 

The integration of McKay, acquired in May 2022, is largely complete with all
operational activity now utilising the Workspace platform. We are making good
progress in letting up the vacant and refurbished space across the seven
London assets alongside the subdivision of space tailored to the Workspace
offer at four of the properties. Occupancy of the South-East office and
business park portfolio has remained high at 89.2%.

 

Disposals

 

We expect to complete on the sale of the residential component of our
mixed-use redevelopment at our Riverside property for £55m in December 2022.

 

In July 2022 we completed the sale of a medical centre in Newbury from the
McKay portfolio for £7.25m (£1.15m ahead at the March 2022 valuation).

 

We remain in active discussions on the disposal of the other non-core assets
in the McKay portfolio, primarily the light industrial and logistics assets.
Whilst market conditions are dictating a slower pace than originally
envisaged, we are focused on achieving appropriate disposal values on these
attractive assets. In the meantime, we are achieving good rental pricing
growth on both renewals and new lettings with overall occupancy at 91%.

 

Financing

 

Net debt as at 30 September 2022 was £937m, an increase of £28m in the
quarter, following payment of the final dividend in respect of the previous
financial year. As at 30 September 2022 the average maturity of drawn debt was
4.1 years, and the average effective interest rate was 3.5% based on SONIA at
2.2%, with 71% of the net debt (£665m) at fixed rates. A 1% increase in SONIA
would increase the average effective interest rate by 0.3% (at current debt
levels).

 

Total facilities at 30 September 2022 were £1.2bn, with cash and available
facilities of £263m. During the second quarter we successfully completed the
amendment of the £65m Aviva loan facility and McKay Revolving Credit Facility
(RCF), with the McKay RCF interest cost aligned with Workspace's existing RCF
and the facility amount reduced from £180m to £135m. There were no changes
to the quantum, term or interest rate of the Aviva loan facility.

 

LTV at September 2022 was 32% on a proforma basis, based on the 31 March 2022
property valuations for Workspace and McKay (adjusted for completed
disposals).

 

 

- ENDS -

 

 

For further information, please contact:

 

 Workspace Group PLC                      020 7138 3300
 Graham Clemett, Chief Executive Officer

 Dave Benson, Chief Financial Officer

 FGS Global                               020 7251 3801
 Chris Ryall
 Guy Lamming

 

 
 

Details of Half Year Results Presentation

 

Workspace will host a results presentation for analysts and investors on
Tuesday 15 November 2022 at 10:45am at the London Stock Exchange.

 

Notes to Editors

 

About Workspace Group PLC:

 

Established in 1987 and listed on the London Stock Exchange since 1993. We are
home to thousands of businesses, including fast growing and established brands
across a wide range of sectors.

 

Workspace is geared towards helping businesses perform at their very best. We
provide inspiring, flexible work spaces in dynamic London locations.

 

Workspace (WKP) is a FTSE 250 listed Real Estate Investment Trust (REIT) and a
member of the European Public Real Estate Association (EPRA).

 

Workspace® is a registered trademark of Workspace Group Plc, London, UK.

 

LEI: 2138003GUZRFIN3UT430

 

For more information on Workspace, please visit www.workspace.co.uk
(http://www.workspace.co.uk)

 

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