3rd Jun 2015 10:11
LONDON (Alliance News) - FTSE 250-listed property company Workspace Group PLC on Wednesday said its pretax profit surged in the financial year to the end of March, as its rental income increased, occupancy improved, and the underlying valuation of its portfolio jumped, sending its shares higher.
Workspace shares were up 4.3% to 959.50 pence late morning on Wednesday, the best performer in the FTSE 250 index.
Workspace, which provides office space for small and medium-sized businesses, said its pretax profit for 2015 was GBP360 million, up 43% from the GBP252.5 million it posted a year earlier. Total net rental income in the year was up by 15% to GBP57.7 million from GBP50.3 million, and its total rent roll rose by 19% to GBP69.4 million, driven by an 18% like-for-like increase. Total revenue for the company was GBP83.6 million, up from GBP73.6 million.
Like-for-like occupancy, excluding any properties which have been impacted by refurbishment or redevelopment activity over the past 24 months, also improved in the year to 92.2% from 91.4%. Total occupancy, including those properties, also improved to 88.7% from 85.8%.
The company's net asset value per share rose by 42% in the year to 703 pence from 496 pence, as the underlying valuation of its portfolio rose by 30% to GBP1.42 billion. The company acquired five properties over the course of the year, for a total cost of GBP80 million, and sold ten non-core industrial properties for GBP44 million.
Workspace said it opened two new and two refurbished business centres in the year, with both letting well, and has a further fourteen refurbishment and redevelopment projects underway.
The group said it will hike its final dividend payout by 15% to 8.15 pence per share, from 7.09 pence, meaning its total dividend is up 13% to 12.04 pence.
"Workspace has been extremely active across all parts of the business over the last twelve months and this is reflected in another exceptional year of both operational performance and financial results," said Chief Executive Jamie Hopkins.
Hopkins said the company is seeing an increased demand from its core new and growing companies base for space in London.
"To meet the strong demand we have experienced, as well as the new and refurbished space that we are launching across our existing portfolio, we have also expanded our footprint by acquiring five properties over the financial year, which all fit well within our core strategy. We continue to seek out further acquisition opportunities across London where we can add value, leverage our operational platform and drive strong returns," he added.
In a separate statement on Wednesday, Workspace said it has struck a GBP34 million deal to acquire the Angel House property near the Old Street area of London. The net initial yield on the purchase is 3.7%, it said. The property is a former tobacco warehouse and is currently let to five customers.
Analysts hailed the annual results, with Liberum and Panmure Gordon both lifting their target prices as Workspace beat their expectations.
Liberum says the 42% rise in net asset value for Workspace over the year was well ahead of its expectations and marks the second year of 40%-plus improvement. The outlook for the company to drive further double-digit increases in rent looks to be achievable, with the prospect for earnings to double within three years.
Shares in the company trade at a premium to the sector but this is more than justified by the company's latent potential to sustain double-digit growth, Liberum said. Liberum kept a Buy rating on the shares but hiked its target price to 1,100 pence from 836 pence.
Panmure said the results were "exceptional", with Workspace benefiting from the growth of the small company sector in the UK. This has combined with robust growth in the London market and the persistent low interest rate environment.
The results showed the strong momentum seen in the first half continued into the second and Panmure expects further robust growth as demand for London office space continues to outstrip supply. In addition, small- and medium-sized companies are getting encouragement and support from the new UK Conservative government, which should increase demand for Workspace's properties.
The broker keeps a Buy rating on the shares and hikes its target price to 1,010 pence from 957 pence.
By Sam Unsted; [email protected]; @SamUAtAlliance
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