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Workspace trading profit plunges as property values decline

Workspace Group reported a 52% decline in trading profit after interest in its full-year results on Thursday, to £38.7m, from a 33% decrease in net rental income to £81.5m, which included £19.9m of rent discounts given to customers.
The FTSE 250 company’s total dividend for the year ended 31 March was 17.75p per share, down from 36.16p in the prior year.

Its property valuation at year-end totalled £2.32bn, which was an underlying reduction of £258m, or 10%, from the end of the 2020 financial year, driven by a fall in estimated rental values, with property yields said to be stable.

EPRA net tangible assets per share were down 13.8% to £9.38.

The firm had issued a £300m Green Bond in March 2021, with a seven-year term and an interest rate of 2.25% per annum, while Workspace reported exceptional finance costs of £16.4m on early repayment in April, of £148.5m of private placement notes due June 2023 that carried an interest rate of 5.6% per annum.

Its loan-to-value ratio stood at 24%, compared to 21% in the prior year, with £434m of undrawn facilities and cash at year-end, reducing to £269m on a proforma basis following the repayment of private placement notes.

Workspace reported a loss before tax of £235.7m, swinging from a £72.5m profit 12 months earlier, reflecting the fall in trading profit after interest, the reduction in property value and exceptional finance costs.

Looking at its activity levels, Workspace said it had seen a “significant” improvement in enquiries, viewings and lettings in recent months, and was now reaching pre-Covid levels.

Its occupancy and rent roll was adversely impacted over the year by customers leaving, existing customer activity and pricing on new lettings.

Like-for-like occupancy was down 11.7% to 81.6%, although it did stabilise in the fourth quarter, while like-for-like rent per square foot fell 12.9% to £36.57, and the like-for-like rent roll was off 23.9% at £85.1m.

The company reported “strong” levels of rent collection, with 95% of rents due for the year net of discounts and deferrals having been received.

“This has been an incredibly challenging year for the entire country, and we have seen first-hand the impact of Covid-19 on many of our customers,” said chief executive officer Graham Clemett.

“Despite the unprecedented circumstances, we have delivered a resilient performance which underlines the strength of our model, prudence of our financial strategy and enduring appeal of our flexible offer.

“Our focus throughout the pandemic has been on our customers, and we are pleased that so many of them have decided that Workspace will continue to be their home as they look ahead to the post-pandemic recovery.”

Clemett said the role of the office was being re-examined, with the signs highlighting flexibility, quality and wellbeing as becoming more important for businesses and people.

“We are perfectly positioned to benefit from this accelerated shift in attitudes by offering businesses a home they can grow in, without having to compromise their unique identity in a furnished or serviced office, or put up with the constraints of more traditionally leased offices.

“We are seeing encouraging signs of recovery in customer demand and we have a lot to be optimistic about in the next year and beyond.”

There were “significant” opportunities for organic and inorganic growth as the economy recovered, Clemett said.

“After an incredibly challenging year, we are confident that our customer-focused strategy will enable us to take a leadership position and seize the significant market opportunity in front of us.”

At 0835 BST, shares in Workspace Group were down 2.47% at 889p.

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