Workspace Group, the London flexible office provider, reported a sharp fall in EPRA net tangible assets (NTA) in annual result to 31 March 2024, as valuations in the office sector continue to tumble.
The group’s EPRA NTA was down 13.7% to £8.00 over the year, mainly due to a like-for-like portfolio valuation decline of 8.1% to £2,446m. The portfolio yield moved out 78 basis points (0.78%) to 7.0%, due to the higher interest rate environment and malaise in the investment market.
Operationally, results were strong, with net rental income up 8.2% to £126.2m and like-for-like rent per square foot up 10.4% to £44.27.
Adjusted underlying earnings per share was up 7.6% to 34.1p, which covered its annual dividend of 28.0p (which was up 8.5% on 2023) by 1.22x.
Loan to value nudged up to 35% (from 33%), with the debt having an average cost of 3.8% (89% at fixed rates) and a weighted average drawn debt maturity of 3.6 years. The company has £145m of undrawn facilities and cash.
Portfolio highlights
- Like-for-like occupancy broadly stable at 88.1% (31 March 2023: 89.1%)
- 1,238 lettings and 705 renewals completed with a total rental value of £53.3m
- Like-for-like rent roll up 9.6% to £111.2m
- £143m of disposals exchanged or completed in the year, and a further £4.6m exchanged in April 2024
- Nine refurbishment projects underway delivering 390,000 sq ft of new and upgraded space. Further 1.0m sq ft of projects in the pipeline
Commenting on the results, Graham Clemett, chief executive, said:
“It has been a year of continued progress at Workspace, driven by the resilience and dynamism of our 4,000 SME customers. The strong trading performance has once again been underpinned by rental growth with stable occupancy, delivering an 8.5% growth in the total dividend to shareholders of 28p per share.
“We actively manage our portfolio to align our spaces with customer needs. Over the past year, we have successfully completed a wide range of projects delivering strong income returns alongside excellent progress against our 2030 environmental targets. At the same time, we are continuing with non-core disposals to further strengthen our balance sheet and invest in our value-add project activity.
“Our valuation was down in the year by 9.5%, although the reduction was significantly lower in the second half. I would expect this valuation to be the low point of the current cycle given the forecast of interest rate reductions combined with our ability to continue to deliver pricing growth and value-add asset management activity.
“Looking ahead, the future is bright for Workspace as London’s leading provider of flexible, sustainable work space to SME’s. Our scalable operating platform, combined with more than three decades of experience in the flex space, puts us in a strong position to maintain our leadership position in this growing market and continue delivering long-term income and dividend growth for our shareholders.”