Workspace Group PLC on Tuesday reported a swing to a half-year loss, as robust interest rates hurt property valuations, though rental income improved.

Shares in the company were 5.3% lower at 559.00 pence each in London on Tuesday morning, the worst FTSE 250-listed performer.

The flexible workspace provider said it swung to a pretax loss of £147.9 million for the six months to September 30, from profit of £35.8 million a year prior.

The London-based firm was hurt by a £170.8 million negative fair value move in investment properties, compared to a £8.1 million gain a year earlier.

EPRA net tangible assets per share weakened 10% to £8.32, from £9.27 at its March 2023 year-end.

Net rental income rose 8.7% year-on-year, however, to £61.0 million from £56.1 million. It helped trading profit, which does not factor in fair value moves, improve 11% to £49.4 million from £44.7 million.

Workspace lifted its interim dividend by 7.1% to 9.0p per share from 8.4p.

‘Throughout the first half of the year, we have continued to actively manage our portfolio to meet changing customer needs. We have completed a wide range of smaller unit refurbishments and subdivisions, as well as making good progress on our larger projects. As expected, valuations are down as a result of movement in market yields. However, we have maintained a conservative level of gearing, with the continuing disposal of non-core properties further strengthening our balance sheet and we expect more over the next six months,’ Chief Executive Officer Graham Clemett commented.

‘We go into the second half of the year with good momentum. Our scalable operating platform gives us a competitive advantage and we have a clear pathway to unlock near and long-term income growth, both through capturing reversion on our like-for-like properties and active asset management opportunities.’

Looking to the rest of the year, Workspace expects inflation to up ‘service charge and administrative costs’.

It added: ‘In relation to service charge costs, where the majority of the cost is passed on to our customers, we have been able to limit the impact on customers by the hedging of our energy costs in October 2021. Staff costs are the most significant driver of our administrative expenses and, whilst we have limited inflationary salary increases to a maximum of 6% for staff earning more than £50,000, we have given higher increases for those on lower salary levels.’

It is seeing ‘good’ rental demand, however.

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