1 workspace group plc preliminary results for the year ended 31 march 2006
TRANSCRIPT
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Workspace Group PLC
Preliminary Results
For the year ended
31 March 2006
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Agenda
1. 2006 Results
2. Financial Performance
3. Joint Venture
4. Business Plan - Targets
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2006 - Results
Harry Platt
Workspace Group PLC
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Headline results
• Valuation Surplus £131m Up 16%
• Total Property Valuation £964m Up 34%
• Adjusted NAV per share £3.12 Up 36%
• Trading pre-tax profit £15.1m Up 4%
• EPS per share 65p Up 80%
• Annual Rent Roll £46.6m Up 10%
• Dividend 3.76p Up 10%
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Ten Year Results
Five Year Ten Year
Compound Growth 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%
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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
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“ We provide affordable, flexible space for new and small businesses in London and the South East ”
• c.4,000 customers over 105 estates; 5.8 million sq .ft
• Over 6,600 enquiries a year; market leading brand in fragmented market
• A simple product offer
• Superior service from in-house management
• Customer focused
The Business – Hotelier of Space to SMEs
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Our Buildings
Westbourne - external Westbourne – Internal
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Customer Profile
Median % of median
turnover Year of start 1996 —
Turnover £250,000 —
Overheads £90,000 36
Profits £40,000 16
Rent £12,000 4.8
Typical Workspace tenant*:
Rent under 5% of turnover
Average rents at 31 March 2006: £9.58 per sq. ft
Average customer in say 1,100 sq.ft.
Average rent per week £203
*Source: Kingston University survey of over 200 customers. Spring 2004
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Our Customers
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Total Percentage of Customers by DTI Categories
DTI Classification of Tenants
12% 1%
2%
1%
6%
18%
45%
10%
5%
Manufacture
Retail
Cons truction
Utilities /Infras tructure
Organisations
Des ign & Creative
Services
Storage & Dis tribution
Unclass ified
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Workspace Group portfolio 2005/06
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Trading: Occupancy & Rents
31 March 2005 31 March 2006
• Core occupancy 90.2% 86.7%Overall occupancy 88.3% 84.3%
• 75% of change relates to opportunities to improve values
• Like-for-like average rents increased by 3.6% to £9.48 per sq.ft.
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Acquisitions
• 111 Power Road, Chiswick, London W4
• Marshgate Business Centre, Stratford, E15
• Evelyn Court, Deptford, SE8
• Uplands Business Park, Walthamstow, E17
• Kennington Park, Kennington, SW9
• Horton Road Industrial Estate, West Drayton, UB7
• Sundial Court, Kingston-upon-Thames
• Park Royal Business Centre, NW10
• 10 Bowling Green Lane, London EC1
• Langdale House, Borough, SE1
Total £127.42mInitial Yield 6.4%Reversionary Yield 8.5%
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Disposals
• Payne Road Studios and 5 Payne Road, Bow, E3
• Alpine Park, Beckton, London E6
• Magenta Portfolio
Total £47.60m
Exit Yield 6.4%
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Acquisitions & Disposals- 5 year Record
Acquisition & disposals: 5 year record
0
20
40
60
80
100
120
140
2002 2003 2004 2005 2006
£m
Acquisition value Disposal value
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Financial Performance
Mark Taylor
Workspace Group PLC
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2006 Results: P & L Account
Trading
2005
£m
Trading
Operations
£m
Other
£m
Total
2006
£m
Revenue
Rent Payable and direct costs 40.9 46.3 0.1 46.4
Administrative Expenses (7.6) (9.2) 0.1 (9.1)
Operating Profit 33.3 37.1 0.2 37.3
Surplus on disposal of investment properties
Gain on changes in fair value
Net interest payable
-
-
(18.8)
-
-
(22.0)
3.4
131.7
(1.4)
3.4
131.7
(23.4)
Profit before tax 14.5 15.1 133.9 149.0
Tax (4.3) (3.4) (39.0) (42.4)
Profit after Tax 10.2 11.7 94.9 106.6
Basic earnings per share 6.3p 7.1 58.0p 65.1p
Diluted earnings per share 6.2p 7.0 55.7p 62.7p
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Title
Heading
Insert text here
31/03/2006
£m
31/03/2005(restated)
£m
Investment Properties 962.2 716.5
Other Assets 10.6 9.1
Creditors (excluding borrowings) (31.9) (29.0)
Funding: Short Term Borrowings (3.6) (0.8)
Long Term Borrowings (426.1) (322.4)
Cash and Investments 1.7 1.2
Deferred Tax Provision (122.6) (86.1)
Net Worth 390.3 288.5
NAV Per Share – adjusted £3.12 £2.30
Net Borrowings (428.0) (322.0)
Gearing 110% 112%
2006 Results: Balance Sheet
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Key Elements on Valuation
• ERV £66.5m; 90% ERV = £59.8m; Current net rental
income £47.1m leaving £12.7m of potential
• Yield (at ERV) 6.9%
• Capital value £162 per sq. ft
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IPD Performance
Total Return (p.a.) One
Year
Three
Years
Five
Years
Ten
Years
Workspace Group 23.0 18.9 17.0 19.3
IPD March Universe 20.9 16.6 12.9 13.0
Workspace Group
Percentile Rank
IPD Comparator
23
20.7%
22
14.7%
5
10.8%
Top
12.8%
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Benchmarks Performance
Internal Benchmark comparison shows:
Performance Measures
2006 2005 2004 2003 2002
Turnover per member of staff (£000) 410 380 332 314 294
Year-end investment in property per member of staff (£000)
6,248 5,006 4,092 3,261 2,984
Administration costs as a percentage of revenue
14.4% 13.9% 13.9% 14.6% 15.3%
Total return on equity 40.7% 27.1% 26.2% 15.0% 20.6%
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Joint Venture With Glebe
Harry Platt
Workspace Group PLC
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Latent Value
• 45% portfolio subject to intensification
- change of use on 10 year basis
• Top 26 estates being worked on (5 year target)
• Comprise: 2.2m sq.ft. of space Value (March 2006) £312m.
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Releasing Latent Value
• Pace is quickening
- External driver = London
- Internal driver = Time assets held
• Our approach - Balance existing / future uses- Minimise on balance sheet development risk- Participate in value
- Right Skills – Right Partners
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Properties in Joint Venture: Timings
Development Timings
2007 2008 2009 2010 2011
Grand Union
Bow Enterprise Park
Wandsworth Business Village
Zennor Road Trading Estate
Hamilton Road
Parkhall Road B
Riverside Business Centre
Tower Bridge H
Tower Bridge E
Highway Business Park
Tower Bridge remaining
Parkhall Road A
Rainbow Industrial Estate
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Why Glebe?
• Entrepreneurial approach – David Phillips
• Known to Workspace
• Experience of relevant property schemes
- Site assembly / Change of Use / Development
• Substantial financial resources
• Size of transaction
• Specific Director for JV
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Glebe Joint Venture
• 11 properties acquired by JV - 50% owned by Workspace/ Glebe
• Workspace responsible for management - Glebe for promotion
• Value of properties into JV £8.6 million above March valuation
• Equity stake of Workspace £20 million
• Company retains 55% uplift from original Workspace properties
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Transaction Impacts
£mSales Proceeds 146.0Book Value (137.4)Costs provision (3.0)Profit 5.6
Net Worth at 31/03/2006 390.3Revised net worth 395.9
Sales proceeds 146.0Equity Stake (20.0)Costs provision (3.0)
123.0Borrowing 31/03/2006 428.0Adjusted Borrowing 305.0Gearing 77%
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Business Plan - Targets
Harry Platt
Workspace Group PLC
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The Business Plan: As stated September 2003
Aim: Continuing to grow shareholder value in 5 years to
September 2008 - £1billion portfolio
- 5% per annum rental increases
- No movement in yields / occupancy
- Conservative gearing
- Annual investment £50m - £60m
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New Plan: Continue to grow Shareholder Value
How?
• Our growing market place of SMEs
• Targeting areas
• Rental growth
• Refurbishments
• Mixed use intensification of sites
• Continuing acquisitions – where we see value
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Focusing on Growth: London Dynamics
London is a global city
London is a growing city
Centre of finance – commerce – culture – knowledge – creativity – power and
influence
London’s population likely to grow by
800,000 to 8.1m by 2016
The working population will rise by 516,000
Net internal migration continues to run at
about 100,000 a year
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Focusing on Growth: London SMEs
London is theSME incubator
• 1.07m employ 1 - 20 people
• 30% of these are in London and SE
• 85% of those businesses with employees in London have less than 10 employees
• In 2005, London accounted for 22% (87k) of all new business starts in the England and Wales
• London has the highest concentration of the fastest-growing and most productive business sectors in the UK
London is our Marketplace
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Focusing on Growth: Rents
Rental Growth in Core Portfolio (The 55%!)
Average Rent per sq.ft
Current £9.58
£1 increase £10.88
5% per annum:
5 years £12.27
Affordable?
£20 a week extra
£57 a week extra
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Focusing on growth: Refurbishments
Scheme Description Current Net Rent £000
30 May
Market Rents
£000
Southbank, SE1 Full refurbishment of external envelope, internal M&E etc, partial refurbishment and sub division
1,049 2,310
Clerkenwell, EC1
Major extension and refurbishment of centre.
14 1,655
Enterprise, SE1 Extension, refurbishment and sub-division of space to create enlarged business centre
652 1,915
Power Road, W4 Full internal re-modelling and refurbishment to form new business centre
166 1,150
Total 1,881 7,030
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Summary
1. Releasing Latent Value
- Glebe Joint Venture- Other Added Value/Refurbishment programmes
2. Focus on London
- International City- SME Incubator
3. Robust and Growing Business Model- ‘THE’ SME Brand- Scale of property knowledge- Trusted Partner
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APPENDIX
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Total Shareholder Return
Workspace Total Shareholder Return (TSR) Index
0
50
100
150
200
250
300
350
2001 2002 2003 2004 2005 2006
Workspace FTSE Sm all cap FTSE 250 FTSE Real Es tate FTSE All share
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5 Year Share Price
Workspace 5 year share price
0
50
100
150
200
250
300
350
400
Mar
-01
Jun-
01
Sep
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Dec
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Mar
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Jun-
03
Sep
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Jun-
04
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-05
Jun-
05
Sep
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Mar
-06
Workspace FTSE Small cap FTSE 250 FTSE Real Estate FTSE All Share