Transcript investors.workspace.co.uk

Workspace Group PLC
Interim Results
for the six months ended
30 September 2006
1
Agenda
1. Results and Strategy
2. Financial Performance
3. Looking Forward
2
Headline results in Half Year
Valuation Surplus
£59m
Up 47%
Total Property Valuation:
Excluding JV
£933m
Up 7.7%
(excluding
(Over 6 months)
Including JV
£1,086m
Up 7.3%
acquisitions)
Adjusted NAV per share
£3.40
Up 9% over 6 months
£69.4m
Up 52%
Excluding JV
£43.01m
Up 8.3%
Including JV
£50.77m
Up 9.0%
1.38p
Up 10.4%
Pre-tax profit
Annual Rent Roll
Interim Dividend
3
IPD Performance
30.00%
Percentage Return
25.00%
20.00%
15.00%
10.00%
Workspace
5.00%
IPD
Workspace vs Universe
0.00%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
4
The Business – Hotelier of Space
to SMEs
To achieve profit and capital growth from:
• Providing workspace to SMEs in London
• Investing in properties with potential
- Income growth
- Capital growth
- Alternative use
• Increasing scale of portfolio, spreading overheads and
developing the brand
• The right financial platform
5
The Business – Hotelier of Space
to SMEs
“ We provide affordable, flexible space for new and
small businesses in London and the South East ”
•
c.4,300 customers over 113 estates; 6.0 million sq .ft
•
Over 9,900 enquiries a year; market leading brand in
fragmented market
•
A simple product offer
•
Superior service from in-house management
•
Customer focused
6
Workspace Portfolio 2006
7
Customer Profile
Typical Workspace tenant*:
•
•
Year of start
Turnover
Overheads
Profits
Median
1996
£250,000
£90,000
£40,000
% of median
turnover
—
—
36
16
Rent
£12,000
4.8
Rent under 5% of turnover
Average customer in 1,000 sq. ft paying £200 (approx) rent
per week
*Source: Kingston University survey of over 200 customers. Spring 2004
8
Total Percentage of Customers by
DTI Categories
DTI Classification of Tenants
5%
10%
12%
1%
2%
1%
6%
Manufacture
Retail
18%
Construction
Utilities/Infrastructure
Organisations
45%
Design & Creative
Services
Storage & Distribution
Unclassified
9
Trading: Occupancy
March 2006
September 2006
Difference
88.1%
88.0%
0.1%
0.1%
(1.3%)
Other significant movements (5
estates)
(0.5%)
(1.6%)
“Like for like” occupancy
87.7%
85.1%
Developments (4 estates)
(4.8%)
(3.2%)
Disposals
(0.1%)
“Adjusted like for like” (82 estates)
Future developments or disposals (4
estates)
Acquisitions
Overall Occupancy
- _
(0.2%)
83.0%
81.7%
2.6%
1.3%
10
Trading: Rents
•
Like-for-like average rents increased by 3.6%
in half year to £10.58 per sq.ft
•
3.6% increase for whole of 2005/06
11
Acquisitions
•
Leyton Industrial Village, Fairways Business Centre and Leyton
Studios, E10
•
1 Morie Street, SW18
•
14 Greville Street, EC1
•
T Marchant Trading Estate, SE16
•
Spectrum House, NW5
•
Seven Sisters, N15
Total
Initial Yield
Reversionary Yield
£42.3m (320,000 sq. ft)
4.8%
8.15%
£132 per sq. ft
12
Disposals
•
11 Estates to Joint Venture (exit IRR 24.1%)
•
Stevenage Enterprise Park (deferred sale) (exit IRR 21.2%)
•
Wharf Road, N1 – mixed use scheme
•
Park Avenue, Luton (exit IRR 15.2%)
Total
£171.7m
Exit Yield
4.66%
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Refurbishment Schemes
September
Occupancy
Complete
Under way
Timescale
Clerkenwell
50%
July 2006
Enterprise
71%
May 2006
Power Road
33%
November 2006
Lombard House
23%
February 2007
Kennington –
Canterbury Court
73%
October 2007
14
Clerkenwell Workshops
15
Kennington
16
Change of Use / Disposal
(next 18 months)
Current
Occupancy
Thurston Road, SE13
14%
§106 being completed
Parmiter, E2
79%
Under negotiation
Marshgate, E15
96%
Under negotiation
Greenheath, E2
74%
Sale of part complete
Highbury, N5
86%
Planning approval likely
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Progress of Joint Venture
11 estates:
50% owned
Occupancy:
92%
Progress on:
Wandsworth – Imminent Planning Application
Grand Union – Imminent Planning Application
Bow – In Public Consultation
Profit on sale £8.6m (before costs)
Equity stake £20m
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Income Statement
Trading
Operations
£m
Other
£m
Total
30/09/2006
£m
Turnover
29.6
-
29.6
29.2
Rent Payable and direct costs
(8.5)
-
(8.5)
(7.7)
Administrative Expenses
(4.7)
0.2
(4.5)
(4.2)
Operating Profit
16.4
0.2
16.6
17.3
Valuation Surplus
-
59.0
59.0
40.2
Other Income
-
1.6
1.6
Surplus on disposal of investment properties
-
4.4
4.4
(11.2)
0.4
(10.8)
(11.7)
(0.1)
(1.3)
(1.4)
-
5.1
64.3
69.4
45.8
(1.5)
(19.1)
(20.6)
Profit after Tax
3.6
45.2
48.8
32.1
Basic earnings per share
2.2
27.2
29.4
19.6p
Diluted earnings per share
2.1
26.2
28.3
18.8p
Net interest payable and fair value adjustments
Joint Venture
Profit before tax
Tax
Total to
30/09/2005
£m
-
(13.7)
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Title
Balance
Sheet
30/09/2006
IFRS
£m
31/03/2006
IFRS
£m
930.4
962.2
Investment in Joint Venture
16.2
-
Other Assets
13.8
10.6
Creditors (excluding borrowings)
(34.0)
(31.9)
Funding Short Term Borrowings
Long Term Borrowings
Cash and Investments
(22.3)
(327.2)
1.8
(3.6)
(426.1)
1.7
Deferred Tax Provision
(141.3)
(122.6)
437.4
390.3
NAV Per Share (IFRS)
2.58
2.37
NAV (Adjusted)
3.40
3.12
Net Borrowings
(347.7)
(428.0)
Gearing (IFRS)
80%
110%
Adjusted Gearing (EPRA)
63%
85%
Heading
Investment Properties
Insert text here
Net Worth
Immediate Investment Capacity = £90m (gearing 100% : IFRS)
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Convertible
and Debenture Loan
Title
Stock
Convertible:
Heading
•
Insert text here
£2.2m
converted @ 50p, 4.4m shares
•
Earnings (0.6p) and NAV (5.0p) dilutive
Debenture:
•
£19.5m @ average11.3%
•
Repayment 30 June 2007
•
Saving £1m p.a.
21
Key Elements on Valuation
•
ERV £60.5m; 90% ERV = £54.5m; Current net rental
income £42.4m leaving £12.1m of potential
•
Yield (at ERV) 6.5%
•
Capital value £187 per sq. ft (£173 including JV)
22
Workspace as a REIT
• Comfortably pass tests (ownership, property, trade mix
interest cover etc).
• Eliminate £140m deferred tax (80 pence per share)
• £20m entry cost – short payback
• Earnings (dividend) enhancing
• Strategic plan maintained
• May create acquisition opportunities
23
Business Plan: To double shareholder
value in 5 years
How?
• Focusing on London
• Growing market place of SMEs
• Rental growth from a low base
• Targeting acquisitions where long term value (through
database)
• Improving estates and pursuing mixed use intensification
24
APPENDIX
25
Ten Year Results to 31 March 2006
Five Year
Compound Growth
Ten Year
Compound Growth
Adjusted NAV per share
20.9%
21.9%
Property at Valuation
21.3%
22.6%
Trading PBT
9.9%
13.8%
Trading EPS
10.2%
13.0%
Dividend per share
10.2%
11.2%
26
Total Shareholder Return
Workspace Total Shareholder Return (TSR) Index
350
300
250
200
150
100
50
0
2001
Workspace
2002
FTSE Small cap
2003
2004
FTSE 250
2005
FTSE Real Estate
2006
FTSE All share
27
5 Year Share Price
28