12th Nov 2014 13:46
LONDON (Alliance News) - Workspace Group PLC Wednesday raised new funding in a share placing for its refurbishment programme and potential building acquisitions, as it reported a big increase in pretax profit for the first half of its financial year driven by a combination of higher rents and property valuations.
The company reported a pretax profit of GBP173.7 million for the six months to end-September, up from GBP107.8 million a year earlier, as its total rent roll rose to GBP61.3 million from GBP58.3 million and its underlying property valuation rose by 15% or GBP157 million to GBP1.23 billion.
It said its adjusted trading profit, which excludes property value movements, rose to GBP12.4 million, from GBP9.7 million.
Worskspace's underlying net rental income, which excludes disposals, was GBP27.1 million, up from GBP24.2 million. Its like-for-like rent roll rose 6.5% to GBP42.4 million, with like-for-like occupancy stable at about 90% and like-for-like rent per square foot up 6.0% to GBP15.47.
It also said it had experienced strong demand at recently completed buildings, with rent roll up 39% in the half to GBP8.0 million.
"This has been a great first half of the financial year, with continued strong demand and income growth across the portfolio. Our newly opened centres, Pill Box and ScreenWorks, are performing well ahead of our expectations, and we have two further business centres opening on Bankside and Wandsworth in the second half of the year," Chief Executive Jamie Hopkins said.
Workspace raised GBP96.5 million in a cash-box placing, representing around 9.99% of its current issued share capital. The company issued 14.6 million shares at 660 pence per share in a deal managed by Liberum Capital Ltd and Bank of America Merrill Lynch International.
The company said the funds will be used to extend its current refurbishment programme and progress acquisition opportunities in core London locations. It said it also intends to increase its debt facilities for extra funding "whilst maintaining an appropriate level of gearing".
"We are progressing well with the next phase of our redevelopment and refurbishment activity, as well as looking to acquire further complementary properties in strategic locations across London where we can utilise the strength of our brand, marketing and asset management skills to generate superior value for our shareholders," Hopkins said.
"London is currently undergoing a great deal of change, particularly with the introduction of CrossRail, and we believe we are well positioned to take advantage of opportunities in locations where we can apply our operating model to meet the significant customer demand, and generate value for our shareholders," he added.
The company last raised about GBP63 million in a rights issue back in 2011, but is now looking to progress a pipeline of 11 further refurbishment projects that is expected to deliver 560,000 square foot of new and upgraded space at an estimated cost of approximately GBP128 million.
It said its acquisition strategy remains focused on multi-let properties with values typically between GBP15 million and GBP50 million, and over the past 12 months, it has formally bid on 24 properties with a combined value of GBP575 million, and currently has one property under offer at GBP6 million.
"The placing will allow the company to move more quickly, in order to take advantage of future opportunities as they occur," it said.
Workspace raised its interim dividend to 3.89 pence, from 3.54 pence.
Investec raised its price target and forecasts for the company and reiterated its Buy recommendation, forecasting strong earnings growth in 2015 and 2016 on the back of pricing growth and rental income from development completions.
The broker forecast further strong earnings growth of 9.6% for full year 2015 and 19% for full year 2016.
"Workspace remains well positioned to continue benefiting from the strong fundamentals of the London property market," Investec said, noting its shares are trading at a 12.2% premium to the net asset value it reported in its half-year results.
Shares in Workspace were up 1% to 677 pence on Wednesday afternoon, putting it among the best performers in the FTSE 250.
By Steve McGrath; [email protected]; @stevemcgrath1. Additional reporting by Sam Unsted; [email protected]; @SamUAtAlliance
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