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Workspace on a (rental) roll

Workspace is the place to be for investors as it ups dividend 20 per cent
June 5, 2019

Workspace (WKP) saw its pre-tax profit and earnings fall in the year to 31 March but has lifted its all-important dividend, off the back of 16 per cent year-on-year growth in net rental income.

IC TIP: Buy at 896p

The London-focused Reit brought in £111m in net rental income and made a trading profit of £72.4m, a 19 per cent year-on-year increase. Workspace said a softer rental environment in the second half saw the like-for-like rental roll stay flat at £76m, while growth in the total number came through eight newly completed projects and three acquisitions.

“We did take advantage of some very strong demand over the past couple of years [and now] it has fallen back a bit,” said interim chief executive Graham Clemett. The bottom line contracted due to a lower revaluation hike (£60.8m compared with £82.5m in the previous year) and a drop in profits from selling properties (£8.3m against £26.6m).

Mr Clemett, who took over from Jamie Hopkins at the start of June and has put his hand up for the permanent job, said Workspace was still keen on acquisitions after spending £213m in the 2019 financial year. “We're still tracking around a half a billion [pounds] of property,” he said. “Pricing's important and we're very selective about the returns we want. We demand 10 per cent, ungeared, IRR, over five years for us to really make the numbers work.”  

Panmure Gordon forecasts NAV of 1,153p at the March 2020 year-end.

WORKSPACE (WKP)   
ORD PRICE:896pMARKET VALUE:£1.62bn
TOUCH:892-895p12-MONTH HIGH:1,170pLOW: 778p
DIVIDEND YIELD:3.7%TRADING PROPERTIES:nil
DISCOUNT TO NAV*:17.5%NET DEBT:29%
INVESTMENT PROPERTIES:£2.59bn  
Year to 31 MarNet asset value (p)*Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201570336023112.04
201692339124015.05
2017953895521.07
20181,03717010527.39
20191,08613778.932.87
% change+5-19-25+20
Ex-div: 4 Jul   
Payment: 2 Aug   
*EPRA adjusted