Workspace Group PLC Interim Management Statement (5471U)

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RNS Number : 5471U

Workspace Group PLC

19 January 2017

19 January 2017

Workspace GROUP PLC

INTERIM MANAGEMENT STATEMENT

STRONG CUSTOMER DEMAND AND ACTIVE ASSET MANAGEMENT CONTINUES TO DRIVE RENTAL GROWTH

Workspace Group PLC ("Workspace") announces its Interim Management Statement covering the period from 1 October 2016 to the date of this announcement, including the operational statistics for the quarter to 31 December 2016.

HIGHLIGHTS

 
 --   Total rent roll up 2.5% (GBP2.1m) in the quarter 
       to GBP86.9m and up 11.1% (GBP8.7m) over the 
       nine months from 31 March 2016 
 --   Like-for-like rent roll up 3.5% (GBP1.8m) in 
       the quarter to GBP53.3m and 9.3% (GBP4.5m) 
       over the nine months from 31 March 2016 
 --   Like-for-like rent per sq. ft. up 3.1% in the 
       quarter to GBP25.71 and up 7.8% over the nine 
       months from 31 March 2016 
 --   Like-for-like occupancy 90.6%, up from 90.3% 
       at September 2016 (31 March 2016: 90.0%) 
 --   Contracts exchanged in October 2016 for the 
       sale of three mixed-use redevelopments 
 --   Planning consents achieved in October 2016 
       for two refurbishments in Hackney and Ladbroke 
       Grove 
 

Commenting on the performance, Jamie Hopkins, Chief Executive Officer said:

"I am delighted to report another active quarter of strong rental growth, driven by ongoing customer demand for our product across London. As well as solid growth in like-for-like pricing levels, our completed projects continue to let up well and we are making good progress on our refurbishment and redevelopment pipeline. We also continue to explore acquisition opportunities that meet our strict investment criteria.

Workspace's unique combination of modern, designed office space and state of the art facilities are hugely relevant and increasingly attractive to our growing customer base of London businesses, and we have seen the robust levels of demand continuing into the final quarter of the financial year. With a strong balance sheet, established brand and high quality offer, despite the current challenging economic environment, I am confident that the business is well positioned to make further progress as we look forward to the year ahead."

For media and investor enquiries, please contact:

Workspace Group PLC 020 7138 3300

Clare Dundas, Head of Corporate Communications

Bell Pottinger 020 3772 2562

Victoria Geoghegan

Nick Lambert

Elizabeth Snow

Notes to Editors:

About Workspace Group PLC:

 
 --   Workspace is a FTSE250 property company and 
       has been listed on the London Stock Exchange 
       since 1993 
 --   Workspace has a unique business model, maintaining 
       direct relationships with customers and managing 
       all of its operational activity - from marketing, 
       viewings, lettings and lease renewals - in-house 
 --   Workspace provides the right properties in 
       the right locations to attract its customers 
       and the right services to retain them and help 
       them grow 
 --   Workspace is growing through deep market knowledge, 
       operational excellence and strong customer 
       relationships 
 --   Workspace is a member of the European Public 
       Real Estate Association 
 --   For more information on Workspace, please visit 
       www.workspace.co.uk 
 

Rent Roll Performance

Total cash rent roll is GBP86.9m at 31 December 2016, up 11.1% (GBP8.7m) from 31 March 2016 as detailed below:

 
                                                     GBPm 
--------------------------------------------------  ------ 
 At 31 March 2016                                    78.2 
 Growth at like-for-like properties                   4.5 
 Increase in rent at completed projects               4.7 
 Current refurbishment and redevelopment projects    (2.0) 
 Increase in rent from acquisitions                   1.5 
 At 31 December 2016                                 86.9 
                                                    ------ 
 

Like-for-like portfolio

The like-for-like portfolio represents 61% of the Group's total rent roll as at 31 December 2016. It comprises properties with stabilised occupancy over the previous twelve months, excluding those impacted by significant refurbishment or redevelopment activity.

We have achieved a strong quarter of like-for-like rent roll growth, with rent roll up 3.5% (GBP1.8m) in the quarter to GBP53.3m and up by 9.3% (GBP4.5m) from 31 March 2016. Like-for-like rent per sq. ft. is the main driver of rental growth up 3.1% in the quarter to GBP25.71 and up by 7.8% from 31 March 2016. Like-for-like occupancy has increased by 0.3% in the quarter and 0.6% since 31 March 2016 to 90.6%.

 
                                                        31 
Like-for-like   31 Dec    30 Sep    30 Jun    31 Mar     Dec 
 properties      2016      2016      2016      2016      2015 
--------------  --------  --------  --------  --------  -------- 
 
  Number        35        35        35        35        35 
Occupancy       90.6%     90.3%     89.6%     90.0%     90.6% 
Rent roll       GBP53.3m  GBP51.5m  GBP50.2m  GBP48.8m  GBP46.6m 
Rent per sq. 
 ft.            GBP25.71  GBP24.93  GBP24.57  GBP23.86  GBP22.92 
--------------  --------  --------  --------  --------  -------- 
 

Completed Projects

The continued strong demand for space at our completed schemes has resulted in the rent roll increasing by GBP0.5m in the quarter and GBP4.7m since 31 March 2016 to GBP13.9m. Occupancy at our completed projects reached 86.8% at 31 December 2016, an increase of 7.1% in the quarter and 17.7% since 31 March 2016. Most notably, the occupancy at Grand Union Studios, our new 65,000 sq. ft. business centre in Ladbroke Grove which opened in March 2017, has increased from 55% to 80% in the quarter.

Current Projects

We currently have an extensive programme of project activity ongoing. During the current calendar year, we are expecting to complete on four refurbishments and open one new business centre from our redevelopment programme, delivering 344,000 sq. ft. of new and upgraded space in total.

Rent roll has decreased by GBP0.1m in the quarter and GBP2.0m since 31 March 2016 to GBP13.5m at properties undergoing refurbishment or redevelopment. This includes a reduction of GBP0.7m at Cremer Business Centre, Hoxton, where demolition has commenced in the quarter.

Acquisitions

Acquisitions are held separately from our like-for-like category until we have at least twelve months of stabilised occupancy following any upgrade and refurbishment works. Rent roll fell by GBP0.1m in the quarter as a result of obtaining vacant possession at Easton Street, Clerkenwell following the planned vacation of Amnesty International. We are now progressing with the GBP7m refurbishment and extension of this property.

Enquiries and Lettings

Enquiry levels have been strong, averaging 1,009 per month in the quarter and 1,019 in the nine months since 31 March 2016. Lettings in the quarter, which includes the seasonal impact of Christmas, are favourable to the comparative quarter in the prior year. We have continued to see a good level of demand in the first two weeks of January 2017.

 
                                        Quarter Ended 
                 -----------  ---------------------------------- 
Average number   31 Dec 2016  30 Sept  30 June  31 March  31 Dec 
 per month                      2016     2016     2016     2015 
---------------  -----------  -------  -------  --------  ------ 
 
  Enquiries          1,009       999    1,050    1,070     994 
Lettings             85         103      106      116       73 
---------------  -----------  -------  -------  --------  ------ 
 

Disposal Activity

In October 2016 we contracted to sell three mixed-use redevelopments:

 
 --   Arches Business Centre, Southall, which has 
       planning consent for 110 residential units, 
       was sold for GBP13.0m 
 --   The second phase at The Light Bulb, Wandsworth, 
       comprising planning consent for 77 residential 
       units, was sold for GBP7.75m together with 
       the return of 17,000 sq. ft. of new commercial 
       space 
 --   Lombard Business Centre, Croydon, which has 
       planning consent for 96 residential units, 
       was sold for GBP5.75m 
 

Refurbishment and Redevelopment Activity

In October 2016, we obtained planning permission for the extension and upgrade of Mare Street Studios, Hackney and Pall Mall Deposit, Ladbroke Grove. They will provide 115,000 sq. ft. of new and upgraded space at an estimated cost of GBP27m. We expect to commence these projects in 2018, with completion in 2019.

Key Property Statistics

 
                                   Quarter    Quarter    Quarter    Quarter    Quarter 
                                    ending     ending     ending     ending     ending 
                                    31 Dec     31 Sep     30 Jun     31 Mar     31 Dec 
                                      2016       2016       2016       2016       2015 
-------------------------------  ---------  ---------  ---------  ---------  --------- 
 Workspace Group Portfolio 
 
   Number of estates                    69         69         69         69         77 
 Lettable floor space (million 
  sq. ft.) (U)                         3.6        3.7        3.7        3.8        4.2 
 Number of lettable units            4,258      4,521      4,513      4,554      4,725 
 Cash rent roll of occupied       GBP86.9m   GBP84.8m   GBP82.0m   GBP78.2m   GBP80.8m 
  units 
 Average annual rent per          GBP27.38   GBP26.86   GBP26.06   GBP24.32   GBP22.39 
  sq. ft. 
 Overall occupancy                   87.4%      84.2%      84.5%      85.8%      85.8% 
 
 Like-for-like lettable 
  floor space (million sq. 
  ft.)                                 2.3        2.3        2.3        2.3        2.3 

 Like-for-like cash rent          GBP53.3m   GBP51.5m   GBP50.2m   GBP48.8m   GBP46.6m 
  roll 
 Like-for-like average annual     GBP25.71   GBP24.93   GBP24.57   GBP23.86   GBP22.92 
  rent per sq. ft. 
 Like-for-like occupancy             90.6%      90.3%      89.6%      90.0%      90.6% 
-------------------------------  ---------  ---------  ---------  ---------  --------- 
 

U Excludes storage space

Note:

The like-for-like category was restated in the first half of 2016/17 for the following:

-- The exclusion of Pall Mall Deposit, Ladbroke Grove and Southbank House, Vauxhall and the Chocolate Factory, Wood Green which are subject to major refurbishment activity

-- The inclusion of Cargo Works, Southbank and Peer House, Midtown which have reached stabilised occupancy levels over the last 12 months, post refurbishment and acquisition respectively

There were no further category changes in the quarter to December 2016

This information is provided by RNS

The company news service from the London Stock Exchange

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January 19, 2017 02:00 ET (07:00 GMT)