Workspace Group Plc shares fell on Tuesday after the company reported half-year results that showed further pressure on occupancy and portfolio valuations, even as management said operational progress was being made under its new 'fix, accelerate and scale' strategy.
The FTSE 250 London-focused flexible workspace operator said trading was broadly in line with expectations, but market conditions remained challenging and rental income and asset values declined over the period.
Net rental income decreased 3% to £58.7m, reflecting the impact of disposals, while trading profit after interest fell 6.4% to £30.6m.
Workspace posted a pre-tax loss of £71.1m compared with a £10.2m profit a year earlier, driven by a 3% like-for-like valuation decline and a 2.3% drop in estimated rental value per square foot.
EPRA net tangible assets per share fell 6.8% to £7.21, and the total portfolio was valued at £2.28bn, down 4% on an underlying basis from March.
Chief executive Lawrence Hutchings said the group's priority remained stabilising and rebuilding occupancy across the portfolio.
"As expected, occupancy was lower in the first half, but we are seeing encouraging signs that the actions we are taking are positively impacting customer retention and conversion," he said.
Hutchings added that Workspace was "laser focused on delivering the self-help measures we have identified and pulling every lever within our control to maximise the potential of our platform to generate income and deliver attractive, dividend-led returns for investors."
Workspace said enquiry-to-letting conversion improved to 17% in October from 16% in the first half, while the like-for-like 12-month retention rate for small-unit customers rose to 85% from 83% in March.
The group completed 604 lettings with a total rental value of £14.4m, broadly flat on the prior year, and delivered £2m in annualised cost efficiencies.
It also signed a 20-year lease with Qube for 32,000 square feet at The Old Dairy in Shoreditch and acquired a minority stake in the content-creation platform for £3m as part of a strategic partnership aimed at expanding demand in adjacent industries.
The company accelerated its portfolio optimisation efforts, completing or exchanging £52.4m of disposals against its £200m two-year target, while 12,000 square feet of refurbishment and subdivision projects were delivered during the period.
Like-for-like occupancy fell 2.5 percentage points to 80%, rent per square foot edged up 0.1% to £47.55 and the like-for-like rent roll declined 3.3% to £107.1m.
The interim dividend was held at 9.4p per share.
Workspace ended the period with £167m of cash and undrawn facilities, net debt equivalent to a 36% loan-to-value ratio, and an average cost of debt of 3.8%, with 82% of borrowing fixed.
The group extended the maturity of £215m of bank facilities by one year in November.
At 0906 GMT, shares in Workspace Group were down 5.63% at 379.85p.
Reporting by Josh White for Sharecast.com.