Workspace hikes dividend as income grows despite second half slowdown
By Duncan Ferris
Date: Wednesday 05 Jun 2019
(Sharecast News) - Workspace hiked its dividend on Wednesday after an increase in annual rental income and trading profit, though overall profits dipped after lower disposal profits and a slowdown in rental growth per square ft in the second half of the year.
The flexible office space company reported revenue of £149.4m for the 12 month period ended 31 March, marking an increase of 16% compared to the year before, as net rental income jumped by 16% to £111.0m following the completion of eight new projects.
This lifted trading profit after interest 19% higher to £72.4m, leading Workspace to up its total dividend by 20% to 32.87p.
However, the FTSE 250 traded company said lower uplift in property valuation and a 69% reduction in disposal profits to £8.3m left overall profit before tax 19% lower at £137.3m.
Occupancy decreased by 0.9% to 90.9% after the launch of new buildings, with underlying occupancy flat for buildings unaffected by new project completions, while growth in rent per square ft came in at 3.8% for the year, though slowed to just 1% for the second half of the year.
Graham Clemett, interim chief executive of Workspace, said: "We have made good progress over the year in upgrading and expanding our property footprint across London. We completed eight refurbishments which have been met with very strong demand and acquired two well located properties in Camden and Shepherd's Bush."
Of the nine refurbishment projects currently underway, Workspace said it is currently on-site at eight with completion expected at six during the coming financial year.
Cash and cash equivalents stood at £26.7m at the end of the year, up from £18.0m at the same point 12 months earlier.
"While businesses are inevitably cautious in light of the continuing political uncertainty, we are still seeing good customer demand for space. We believe our distinctive approach to the flexible office market is the right one and will continue to deliver value for shareholders," said Clemett.
"The property company is performing well when you compare it to firms that invest in retail assets, such as British Land and Hammerson. The poor performance of many of the retail-focused property group's is often blamed on Brexit uncertainty, but it reality the rise in online shopping is hurting the sector a lot more. Some investors are shying away from big retail parks as it viewed as a struggling industry with a mediocre outlook," said David Madden, market analysts at CMC Markets UK.
"Workspace's desirable office locations and flexible contracts are actually benefiting from Brexit uncertainty as some companies don't want to be locked into long-term deals ,and the shorter-term contracts offered by Workspace are appealing to a certain type of client."
Workspace Group's shares were down 0.11% at 902.50p at 0813 BST.
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