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Your Space plc ('YSP') interim results

23 December 2008

Period ended: 30 September 2008

Headlines

• Group revenue now solely derived from services

• Rents and Services revenue increased by 10% to £1.45m (£1.32m same period 2007) 

• Contract services revenue of £2.2m (£nil same period 2007)

• New centre added in prime location of Manchester 

• EBITA £254k 

• Pre-tax profit £2k 

Post interim period

• Expansion into Northern Ireland with new business centre

• Your Space solutions in negotiations to secure further contracts

• Enquiry levels within serviced office centres at an all time high

• Revenue growth continuing 

• Banking facilities are in place and are reviewed regularly

Chairman's statement

The predominant theme in the market at present is the slowdown in the economy. We haven't been immune to this and have increasingly looked at ways to provide innovative solutions to protect both our existing market and attract new customers.

It is pleasing to report however that the serviced office division is reaping the rewards of the recent infrastructure investment with like for like revenue up 10% from £1.322m in 2007 to £1.454m in 2008.

Our contract services division is also performing in line with our expectations with revenue of £2.2m in the period. There was no comparable figure for this revenue stream in 2007. 

It is important to emphasise however that group activities are now solely derived from a mixture of services. Indeed we undertook a policy of disposing of assets at the peak of the property cycle and repaid bank borrowings linked to these assets. Our lead bank is continuing to provide us with banking facilities. 

Given the turbulence in the property investment market we acted quickly to reposition the business and we are also benefitting further from our specialist service offering to landlords throughout the UK which in turn enables us to expand our portfolio of business centres. We see many opportunities to secure additional specialist restoration contracts as we continue to increase our presence throughout the UK

Our serviced office centres are experiencing record enquiry levels for office space as more and more businesses see the benefits of flexible space in quality buildings. We anticipate this level of activity will continue. YSP has a somewhat counter cyclical operation and by selling our specialist skills we offer a fixed price turnkey solution to landlords and institutions alike. Your Space solutions is in advanced negotiations to add even more centres to the portfolio and we look forward to the future with much optimism despite these economic uncertainties.

To summarise we are well positioned following the swift action we took to adapt the business model and take advantage of the current market conditions. We do however remain resolute in our prudent management of the business given the current difficult market conditions.  

The board has determined not to issue a dividend at the interim stage. Changes in the banking sector's appetite for funding has placed an ever greater reliance on retained earnings as a means of funding growth in the business. The board believe that a review of dividend policy will be considered at the year end in the light of these unprecedented times.

Chris Philips  

Chairman  

Chief Executive's Statement

This year has presented many challenges in the current climate and it is therefore important to explain our strategy for the business. We have moved away from investment deals and have focused fully on the services business. As a consequence all our revenue this year is now derived from services. This is through Your Space solutions which offer a one stop shop for landlords and institutions. The specialist skills within our construction division enable us to restore quality listed buildings and convert these to serviced offices. Previously we would have acquired freehold buildings for restoration/conversion to serviced offices before selling on via a lease arrangement. The fluctuations and uncertainties in the investment market not to mention the levels of capital tied up in any one project meant that our growth aspirations would have been severely hampered. We believed that the current unpredictability of bank appetite levels would have placed further strains on our expansion plans. Indeed whilst others seem to have been affected as a result of high gearing levels we have been deliberately seeking where possible to reduce our borrowing levels and have done so at a time when property values were at their peak. 

Our latest 3 projects had a real estate value of almost £40m at the time of structuring these deals with the landlords which when added to the total restoration costs would have meant that the capital required for these ventures and the associated borrowing levels would have been significant. The Your Space solutions approach enables us to expand our business model without increasing our indebtedness. We are able to apply our skills to produce a quality product in prime locations for the occupation of our clients and work in partnership with the landlord of these buildings.

The fundamentals of buildings we seek, their locations and the restoration works carried out ensure we are providing a superior product to our clients. Our contract services design team is also able to maximize the use of these buildings by ensuring every inch of space is utilised to its full potential. Many of these buildings are also listed which adds to their quality and importance. The other benefit of course is the empty rates relief we enjoy which can be substantial in prime locations. 

Many of our competitors prefer the management contract route which we believe has its limitations and restrictions especially where landlords are reluctant to reinvest further to the detriment of the floor spaces occupied under these contracts. We would only consider this approach were we are able to carry out a full refurbishment of the building to our specification and IT requirements. This way we ensure the finish is befitting a service office environment in the 21st century and it is not a clinical feel that you get in other centres. The quality of the space and the infrastructure spend has never been more important in differentiating our product from other serviced providers. We would also prefer to occupy the whole building rather than take individual floor plates to ensure our clients enjoy the full benefits and aesthetics within. 

The YSP approach is to continually reinvest back into our centres and by using our own contract services division we are able to enjoy real economies of scale whilst at the same time we know what needs to be undertaken. This way we always ensure our product is fresh and appealing. 

The serviced office division has never been as busy with enquiry levels at an all time high. We have a good mix of clients and sectors ranging from the virtual start up /one person office types up to larger businesses. We are seeing a fundamental positive change of thinking towards the serviced office sector as more and more businesses are moving away from the traditional leasing route preferring flexible space that can meet their needs. This is of course even more prevalent at present as the economic uncertainty continues and businesses are restricted from being able to raise finance to reinvest in IT /Telco services and other related capital. We take away this worry via our own investment into providing quality infrastructure that allows them to enjoy these benefits and run their business.

As service providers we are continually looking at how we can improve our product offering to attract even more clients. We were the first national operator to offer a free inclusive telephone call package within the monthly fee. We are also currently piloting a one person office solution product for a small fixed monthly fee that enables clients to enjoy the experience of a serviced office based in a prime business address. In conjunction with this we are also shortly going to pilot a web hosted service. We believe this will have great potential for businesses wanting to either start up or alternatively for those who may spend longer periods out on site. 

We believe we have put our business in a position to take advantage of the market generally at all levels. The previous model where we disposed of our freehold property holdings and reduced bank borrowings has enabled us to both return capital to our shareholders whilst at the same time reinvesting back into the business through improvements in IT/Teleco services and building management processes. We are now able to expand our model further through the Your Space solutions division and provide SMEs (which account for a high proportion of employment in the UK) with our flexible quality product offering. Our vision is to have a Your Space centre in all major cities and regions across the UK. We believe we are well placed to take advantage of the fundamental changes we are seeing in our economy.

Finally I would like to thank all the staff and the management team for their hard work and dedication to the business. 

Shaun Mealey. 

Chief Executive Officer.

 

	Consolidated Income Statement	notes	6 months ended 30 September 2008	6 months ended 30 September 2007	Year ended 31 March 2008
			£'000	£'000	£'000
	revenue
	rents and services		1,454	1,322	2,790
	contract services		2,272	-	-
	developments		-	8,289	8,285
			3,725	9,611	11,075
	direct costs		(1,230)	(7,114)	(7,217)
	operating profit		2,495	2,497	3,858
	Administration expenses		(2,903)	(2,156)	(5,218)
	gain from change in fair value of investment property	2	-	2,500	4,174
	impairment of inventories		-	-	(1,076)
	loss on disposal of investment properties		-	(220)	(523)
			(408)	2,621	1,215
	exceptional items	3	475	-	-
	profit after exceptional items before finance costs		68	2,621	1,215
	finance income		1	95	175
	finance costs		(67)	(237)	(269)
	profit on ordinary activities before tax		2	2,479	1,121
	taxation		-	(201)	(299)
	profit after tax		2	2,278	822
	earnings per share (pence)
	basic	4	0.07	11.67	3.90
	diluted	4	0.06	11.32	3.60

 

Consolidated statement of changes in shareholders equity	share capital	share premium	capital redemption	shares to be issued	profit and loss reserve	total
	£'000	£'000	£'000	£'000	£'000	£'000
at 31st March 2008	2,165	5,373	69	88	(1,092)	6,603
Profit for the period	-	-	-	-	2	2
shares issued	50	225	-	-	-	275
	2,215	5,598	69	88	(1,090)	6,880

 

	Consolidated balance sheet	notes	6 months ended 30 September 2008	6 months ended 30 September 2007	Year ended 31 March 2008
			£'000	£'000	£'000
	Assets
	non current assets
	investment properties	5	7,503	5,550	7,503
	property plant and equipment		1,709	872	1,640
			9,212	6,422	9,143
	current assets
	inventories	6	13,028	12,355	12,787
	trade and other receivables	7	3,916	3,036	3,303
	cash and cash equivalents		-	4,410	68
			16,944	19,801	16,158
	total assets		26,157	26,223	25,301
	Liabilities
	non current liabilities
	borrowings		829	-	839
	deferred tax liability		1,957	1,350	1,957
	other payables		-	-	237
	derivatives		463	-	647
			3,249	1,350	3,680
	current liabilities
	short term borrowings and overdraft	9	12,078	14,568	11,385
	trade and other payables	8	3,950	1,308	3,633
	current tax liabilities		-	762	-
			16,028	16,638	15,018
	Equity
	share capital		2,215	1,952	2,165
	share premium account		5,598	4,625	5,373
	shares to be issued		88	-	88
	capital redemption reserve		69	69	69
	profit and loss account		(1,090)	1,589	(1,092)
			6,880	8,235	6,603
	total equity		26,157	26,223	25,301

   

 

	cash flow		notes	6 months ended 30 September 2008	6 months ended 30 September 2007	Year ended 31 March 2008
				£'000	£'000	£'000
	cash from operating activities		10	(440)	(7,279)	(8,718)
	interest received			1	95	175
	interest paid			(67)	(237)	(269)
	net cash outflow from operating activities			(506)	(7,421)	(8,812)
	cashflows from investing activities
	sale of investment property			-	3,781	3,477
	fixed asset purchases			(255)	(721)	(1,777)
	net cash (outflow)/inflow from investing activities			(255)	3,060	1,700
	cashflow from financing activities
	dividends paid			-	-	(1,213)
	convertible loan			-	-	1,488
	ordinary share placing			-	-	961
	hire purchase agreements			-	-	356
	increase in bank and other borrowings			463	3,341	158
	net cash inflow from financing activities			463	3,341	1,750
	net decrease in cash and cash equivalents			(298)	(1,020)	(5,362)

Notes

   

1 Basis of preparation

These consolidated interim financial statements are for the six months ended 30th September 2008. They have been prepared with regard to the requirements of International Financial Reporting Standards as adopted by the EU. They do not include all of the information required for full financial statements, and should be read in conjunction with the consolidated financial statements (under IFRS) of the Group for the year ended 31st March 2007.

The financial statements have been prepared under the historical cost convention except that they have been modified to include the revaluation of certain non-current assets, financial assets and liabilities.

The directors have considered the inherent risks in the business and that of the wider economy. The following are risks which have been identified. 

The group has borrowings in place amounting to £11.8m with the Bank of Ireland. The board is satisfied that it will continue to be able to meet this liability. The facility is payable on demand. In addition there remains £1.3m of convertible loan due for maturity in December 2010. In the event that there are no further conversions the board believes that it will be in a position to repay this amount on the maturity date or before.

Generally all contract service work is undertaken in accordance with proven construction contracts in place. These allow for monthly certification of works and payment within a specified time. All serviced office income is billed in advance for rents and with 30 days credit given for services. Bad debt risk is considered minimal and active processes are in place to monitor and assess this at all times. .

The economic environment is challenging and the business must be prepared to engage with potential customers at very competitive rates while at the same time operating costs must be controlled in order to maximise available margin.

The directors are pursuing alternative sources of funding as distinct from bank funding however nothing has yet been secured. The forecasts adopted demonstrate that the business can continue to trade satisfactorily and meet its obligations however there is a risk that the business may not achieve its forecast for sales in development service work and serviced office centres. In this event the directors would seek to dispose of property stock and investments. This may prove to be a lengthy process in the current economic environment and the Company would therefore require the continued support of its bankers to meet its ongoing liabilities. 

After making enquiries the directors have a reasonable expectation that the company and the group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts.

Significant accounting policies include;

Revenue

Revenue is measured in accordance with IAS 18 Revenue.

Rent and service charge income

Revenue is measured by reference to the fair value of consideration received or receivable by the group for goods supplied and services provided, excluding VAT and trade discounts. Revenue is recognised upon the performance of services or transfer of risk to the customer.

Sale of property stock

Sale of property stock is recognised upon irrevocable exchange of contracts, when there are no further acts to perform.

2 Gains from change in fair value of investment property are carried to the income statement.

   

3 Exceptional profits have arisen from the decision to reverse accruals made in prior periods for costs which have not materialised.  

4 The calculation of the basic earnings per share is based on the profit after tax of £2,000 (6 months ended 30 September 2007 £2,278,000) and on 21,902,519 (2007: 19,524,868) ordinary shares being the weighted average number of ordinary shares in issue during the period. The fully diluted earnings per share is based on profit of £2,000 and on 23,332,519 ordinary shares.

   

5 Investment property consists of land. An indication of the fair value of the investment property was carried out by an independent third party in August 2008 and the directors believe that the amounts carried in the balance sheet represent fair value. .  

	stock of investment property		6 months ended 30 September 2008	6 months ended 30 September 2007	Year ended 31 March 2008
			£'000	£'000	£'000
	balance at beginning of period		7,503	2,004	2,004
	additions		-	1,046	325
	transfers from investment property held for sale		-	-	1,000
	net gain from revaluations		-	2,500	4,174
	balance at end of period		7,503	5,550	7,503

6 Inventory comprises property being developed for sale. The directors have chosen to not have this valued at 30 September 2008 but believe that the amounts carried in the balance sheet represent fair value.

stock of trading property		6 months ended 30 September 2008	6 months ended 30 September 2007	Year ended 31 March 2008
		£'000	£'000	£'000
balance at beginning of period		12,787	6,033	6,033
additions		241	12,355	12,787
disposal		-	(6,033)	(6,033)
balance at end of period		13,028	12,355	12,787

7 Trade receivables

trade receivables		6 months ended 30 September 2008	6 months ended 30 September 2007	Year ended 31 March 2008
		£'000	£'000	£'000
trade receivables		1,827	3,036	365
other receivables		1,557	-	1,826
prepayments and accrued income		532	-	1,112
balance at end of period		3,916	3,036	3,303

8 Current liabilities

trade and other payables		6 months ended 30 September 2008	6 months ended 30 September 2007	Year ended 31 March 2008
		£'000	£'000	£'000
trade payables		1,908	1,308	2,012
social security and other taxes		537	-	258
Hire Purchase agreements		177	-	119
Accrued expenses		477	-	847
current tax		-	762	-
Other payables		851	1,658	397
		3,950	3,728	3,633

   

9 Borrowings

borrowings		6 months ended 30 September 2008	6 months ended 30 September 2007	Year ended 31 March 2008
bank overdraft		230	-	-
bank borrowings		11,848	14,568	11,385
		12,078	14,568	11,385

10 Net cash from operating activities

	6 months ended 30 September 2008	6 months ended 30 September 2007	Year ended 31 March 2008
net cash from operating activities	£'000	£'000	£'000
profit on ordinary activities before tax	68	2,621	1,121
depreciation	187	98	107
loss on disposal of fixed assets	-	220	523
tax paid	-	-	(252)
gain from fair value of investment property	-	(2,500)	(4,174)
increase in stock	(241)	(6,322)	(6,754)
increase in debtors	(612)	(1,109)	(1,376)
(decrease)/increase in creditors	158	(287)	2,087
	(440)	(7,279)	(8,718)

ENDS

For further information please contact:-

Steve Turton, Director, Your Space plc                           0151 229 1702

Sue Lace, Company Secretary, Your Space plc              0151 229 1703

Richard Hughes / Bobby Fletcher, Zeus Capital            0161 831 1512

 

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