Release Date: November 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Workspace Group PLC (WKPPF, Financial) reported a 5% increase in trading profit despite a slight decrease in rental income due to recent disposals.
- The company has seen a 6% growth in average rent per square foot over the last 12 months, aligning with its long-term average.
- Workspace Group PLC (WKPPF) has a strong operating platform that allows for significant reversion capture and rental growth through active asset management.
- The company has a robust debt structure with significant headroom and no additional refinancing required until 2027, providing financial flexibility.
- Workspace Group PLC (WKPPF) has a strategic focus on smaller units, which have shown strong demand and shorter void periods, contributing to rental growth.
Negative Points
- Workspace Group PLC (WKPPF) experienced a drop in occupancy due to a higher-than-usual number of customer vacations, impacting rental income.
- The company faces persistent wage inflation in the UK, affecting service charge costs and administrative expenses.
- There is a noted decline in demand for larger spaces, which has been a trend over the last few years, impacting like-for-like rental growth.
- The property valuation saw a small decrease, with NTA per share down 1.9% to GBP7.85.
- Workspace Group PLC (WKPPF) is dealing with temporary impacts on rental and occupancy due to asset management activities and refurbishments.
Q & A Highlights
Q: How do the lettings at Leroy House compare with the Estimated Rental Values (ERVs)?
A: Dave Benson, CFO, stated that the lettings are within a range, with some significantly ahead of ERV. The focus is on letting up the space first and then driving rents, and overall, the lettings are performing well.
Q: Is the decline in demand for larger spaces a recent trend or has it been ongoing for several years?
A: Dave Benson explained that the core market focus has always been on SMEs and smaller units. The decline in demand for larger spaces is partly due to market conditions and the timing of lease expirations from recent acquisitions, rather than a long-term trend.
Q: What has driven the improved conversion rates over the last couple of years?
A: Dave Benson attributed the improvement to significant changes in operations, including investments in brand and sales processes, and bringing the sales team in-house to ensure consistent delivery. These changes have yielded benefits and will continue to do so.
Q: Are there any plans to proactively take back larger spaces for subdivision, and how do replacement costs compare to book value?
A: Dave Benson noted that while they manage lease events to take back space as needed, taking back all larger spaces at once would be challenging. Regarding replacement costs, they are significant but not dissimilar to others in the market.
Q: Should there be concern about occupancy dropping below the typical 88%-92% range, and how will this be addressed?
A: Dave Benson emphasized that while they focus on driving occupancy, the current drop is due to a temporary impact from larger spaces being vacated and repositioned. This is part of their model, and they expect to drive rent growth as spaces are relet.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
