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RNS Number : 5477W
MWB Business Exchange Plc
29 January 2013
MWB Business Exchange Plc
(the "Company" or "Business Exchange" and, together with its
subsidiaries and subsidiary undertakings, the "Business Exchange
Group")
London, 29 January 2013
Trading update and profit estimate for six months ended 31
December 2012
Continuing strong trend in underlying operating performance
during the period
At the time of publication in November 2012 of the audited
results of the Business Exchange Group for the year ended 30 June
2012, the Board reported that trading in the early part of the new
financial year was in line with expectations, sustaining the
positive momentum generated in the second half of the 2011/12
financial year.
Key management initiatives which have contributed to this
positive momentum were the implementation of new management
structures and responsibilities in 2011; strong focus on
hospitality and service excellence; targeted refurbishment of
existing centres; and brand and website development including the
introduction of the Signature Offices and Business Exchange
Essentials brands.
The Board of Business Exchange is pleased to report that this
encouraging performance has continued. Revenue for the six months
ended 31 December 2012 continued in line with revenue of GBP61.1m
for the six months ended 30 June 2012. Annualised Revenue per
Available Workstation ("REVPAW") increased to GBP7,447 at 31
December 2012 (GBP6,969 at 31 December 2011), and Annualised
Revenue per Occupied Workstation ("REVPOW") increased to GBP8,931
at 31 December 2012 (GBP8,477 at 31 December 2011). The Business
Exchange Group maintained occupancy of 83 per cent. during the six
months ended 31 December 2012. The Business Exchange Group's
meeting venues business and revenue from IT and related services
also continued in line with expectations.
The combination of the continuing positive trends in operating
key performance indicators described above, together with strong
control of costs, enables the Board of Business Exchange to
estimate that Operating EBITDA* for the six months ended 31
December 2012 was not less than GBP4.9m. This compares to Operating
EBITDA of GBP1.0m for the same period in 2011 and Operating EBITDA
of GBP3.3m for the six months ended 30 June 2012. Net cash at 31
December 2012 was GBP0.8m, after making rent, rates and service
charge payments during December 2012 totalling GBP14.1m. These
payments were in respect of the Business Exchange Group's operating
properties and predominately relate to the quarter ending 24 March
2013. The Business Exchange Group's cash generation continues to be
in line with expectations.
As announced in December 2012, the Business Exchange Group has
returned to a December financial year-end in line with the internal
management of the business. The Business Exchange Group has entered
the new financial year in a positive position. The Business
Exchange Group's client and licence fee profile provides forward
visibility over a substantial proportion of projected revenues for
the year to 31 December 2013. The Board's strategy includes the
reinvestment of a proportion of net operating cash flow in
acquiring new leased centres in Central London with a similar
profile to those successfully rolled out in recent years, thus
underpinning further growth.
Financial and Operational Review
As noted above, the Business Exchange Group's revenue for the
six months ended 31 December 2012 continued in line with the
GBP61.1m generated in the six months ended 30 June 2012. Revenue
continues to principally comprise licence fees and related income
which represented 77 per cent. of total 2012 Business Exchange
Group revenue. Meeting and conference rooms; IT and telephony
services; and sublets and management fees; represented
respectively, 8 per cent., 8 per cent. and 7 per cent. of total
2012 revenue.
The Board believes that small and medium enterprises ("SMEs")
continue to favour serviced offices, particularly when requiring
small numbers of workstations, as landlords are often unwilling to
lease smaller units of office space. Business Exchange continues to
focus on SMEs and their needs, and as a consequence does not have
high dependency on larger businesses. At November 2012, the average
Business Exchange Group client had five workstations and only 7 per
cent. of the Business Exchange Group's clients currently have 20 or
more workstations.
As a consequence of this diversified client offering, the
Business Exchange Group typically sees over 70 per cent. of clients
renewing contracts, with an average renewal length of a further six
months. Whilst the average initial contract length for new clients
is eight months, the average length of stay at Business Exchange is
a healthy 27 months. The Business Exchange Group's average
occupancy levels for the calendar year 2012 were in excess of 80
per cent., higher than the levels achieved in 2011, especially in
London.
The London market has been, and is expected by the Board to
continue to be, the main driver behind the Company's growth. This
is illustrated by 96 per cent. of the Company's Total Centre
EBITDA** for the calendar year ended 31 December 2012 being
generated by the Company's London centres. The Board continues to
actively manage the Business Exchange Group's property portfolio
and is currently renegotiating certain of its leases on more
favourable terms.
Outlook
The focus of the Business Exchange Group in 2013 continues to be
driving workstation rate and maintaining occupancy. London's
leading position among global cities gives the Business Exchange
Group a valuable advantage as the capital's largest serviced office
provider. After a period of consolidation by the Business Exchange
Group, the Board is now looking to acquire up to four new centres
in London over the coming year.
As awareness of the Business Exchange Group's service offering
grows, the Board is increasingly confident about prospects over the
short and medium term, and remains focused on clear visibility of
future committed income to deliver continuing profitable
growth.
MWB Group Holdings Plc ("MWB Group") and offer for the Company
announced by Regus plc ("Regus")
On 16 November 2012, MWB Group, Business Exchange's 75.22 per
cent. indirect shareholder, announced its intention to appoint the
administrators. On 21 December 2012, the Board of Regus announced
the terms of a cash offer made by Marley Acquisitions Limited
("MAL"), a wholly owned subsidiary of Regus, for the entire issued
and to be issued ordinary share capital of Business Exchange at a
price of 61.576 pence per share in Business Exchange (the "Regus
Offer"). On the same day, the joint administrators of MWB Group
(the "Joint Administrators") announced that they would be
commencing a sale process for some or all of the shares of Business
Exchange held by MWB Property Limited ("MWBPL"), an indirect
subsidiary of MWB Group, and that interested parties had an eight
week period during which to submit a higher offer for the shares in
Business Exchange held by MWBPL (the "Marketing Period"). Business
Exchange is due to issue its response document to the Regus Offer
on or before 31 January 2013. In the meantime, the Board of
Business Exchange continues to emphasise that the Marketing Period
under the sale process being conducted by the Joint Administrators
runs until 14 February 2013. The Board of Business Exchange further
emphasises that the sale process may or may not result in the
receipt of a higher offer for the shares in Business Exchange held
by MWBPL than the Regus Offer, but in any event, if it does not,
MAL is bound to proceed with the Regus Offer. Accordingly, the
Board of Business Exchange encourages minority shareholders in
Business Exchange to continue to take no action and to await
further developments.
* Operating EBITDA is the consolidated earnings of Business
Exchange and its subsidiaries for the period before net finance
costs, taxation, depreciation, amortisation, accelerated
depreciation on impairment of fixed assets, profits/losses on
disposal of fixed assets and provisions made against balances with
MWB Group Holdings Plc and its subsidiaries (including property
prepayments).
** Total Centre EBITDA for 2012 includes a profit estimate for
the six months ended 31 December 2012 which includes an assumption
that Business Exchange receives a waiver from the joint
administrators of MWB Group Holdings Plc of certain disputed
intra-group amounts totalling GBP3.1m. Centre EBITDA is before
regional costs and central overhead.
Enquiries:
MWB Business Exchange Plc
John Spencer Chief Executive 020 7868 7268
Andrew Blurton, Corporate Finance Director 020 7868 7321
Nplus1 Singer Advisory LLP
Sandy Fraser 020 7496 3000
Baron Philips Associates
Baron Philips 020 7920 3161
Important Information
The directors of Business Exchange each accept responsibility
for the information contained in this announcement, except that the
only responsibility accepted by them in respect of the information
contained in this document relating to Regus, MAL and any member of
MWB Group and its subsidiaries and subsidiary undertakings
(excluding the Business Exchange Group), which has been compiled
from published sources, is to ensure that such information has been
correctly and fairly reproduced and presented. Subject as
aforesaid, to the best of the knowledge and belief of each of the
directors of Business Exchange (who have taken all reasonable care
to ensure that such is the case), the information contained in this
announcement for which they accept responsibility is in accordance
with the facts and does not omit anything likely to affect the
import of such information.
Nplus1 Singer Advisory LLP, which is authorised and regulated in
the United Kingdom by the Financial Services Authority, is acting
for Business Exchange and no one else in connection with the
matters referred to herein and will not be responsible to anyone
other than Business Exchange for providing the protections afforded
to clients of Nplus1 Singer Advisory LLP or for giving advice in
relation to such matters.
Forward-looking statements
This announcement contains statements that are, or may be,
forward-looking statements. All statements other than statements of
historical facts included in this announcement may be
forward-looking statements. Without limitation, any statements
preceded or followed by or that include words such as "target",
"plan", "believe", "expect", "aim", "intend", "will", "should",
"could", "would", "may", "consider", "anticipate", "estimate",
"synergy", "cost saving", "project", "goal" or "strategy" or words
or terms of similar substance or the negative of such words are
forward-looking statements. Forward-looking statements include
statements relating to the following: future capital expenditures,
expenses, revenues, earnings, synergies, economic performance,
indebtedness, financial condition, losses, profits and future
prospects of the Company and/or the Business Exchange Group.
These forward-looking statements are not guarantees of future
financial performance. Except as expressly provided in this
announcement, they have not been reviewed by the auditors of
Business Exchange. Such forward-looking statements involve known
and unknown risks and uncertainties that could significantly affect
expected results and are based on certain key assumptions. Should
one or more of these risks or uncertainties materialise, or should
underlying assumptions prove incorrect, actual results may vary
materially from those described in this document. Business Exchange
assumes no obligation to update or correct the information
contained in this announcement, whether as a result of new
information, future events or otherwise, except to the extent
legally required. Due to such uncertainties and risks, readers are
cautioned not to place undue reliance on such forward-looking
statements, which speak only as of the date of this
announcement.
All subsequent oral or written forward-looking statements
attributable to Business Exchange or any of its members, directors,
officers or employees or any persons acting on their behalf, are
expressly qualified in their entirety by the cautionary statement
above. Business Exchange and the directors disclaim any obligation
to update any forward looking or other statements contained herein,
except as required by applicable law. All forward-looking
statements included in this document are based on information
available to Business Exchange on the date of this document and are
made only as of the date of this document.
Estimate of Operating EBITDA
The statement above that Operating EBITDA for the six months
ended 31 December 2012 was not less than GBP4.9 million is
considered a profit forecast under Rule 28 of the Takeover Code. As
such it is a requirement under the Takeover Code that the estimate
of Operating EBITDA be reported on by Business Exchange's reporting
accountants and financial advisers. The bases behind the estimate
of Operating EBITDA and the reports of BDO LLP and Nplus1 Singer
Advisory LLP are set out below. BDO LLP and Nplus1 Singer Advisory
LLP have given and not withdrawn their consent to the publication
of their reports in the form and context in which they are included
in this announcement.
An estimate has been made of Operating EBITDA because Operating
EBITDA is consistent with the EBITDA measure that Business Exchange
has historically published in the segment reporting within its
financial statements, is a number to which, in the view of the
Directors, shareholders and analysts attach significance, and is a
measure used by Business Exchange's management to assess the
performance of the business.
Basis of preparation
Operating EBITDA is consolidated profits for the period before
net finance costs, taxation, depreciation, amortisation,
accelerated depreciation on impairment of fixed assets,
profits/losses on disposal of fixed assets, and provisions made
against balances with MWB Group Holdings Plc and its subsidiaries
(including property prepayments).
The estimate of Operating EBITDA for the six months ended 31
December 2012 has been prepared on a basis consistent with that
adopted by Business Exchange in the preparation of the segment
reporting in its Annual Report. The estimate of Operating EBITDA is
based on the unaudited consolidated trial balance for the six
months ended 31 December 2012.
The estimate of Operating EBITDA is subject to the following
assumptions:
i. there are no other events that are not known to the Directors
at the date of this announcement that will arise between the date
of this announcement and the date on which Business Exchange
announces its audited results for the six months ended 31 December
2012 which would require incorporation in the results for the six
months ended 31 December 2012 in accordance with Business
Exchange's accounting policies; and
ii. there will be no retrospective change in legislation or
regulatory requirements that will have a material impact on the
Business Exchange Group's operations.
BDO LLP
55 Baker Street
London W1U 7EU
The Directors 29 January 2013
MWB Business Exchange Plc
1 West Garden Place
Kendal Street
London W2 2AQ
Nplus1 Singer Advisory LLP
One Bartholomew Lane
London EC2N 2AX
Dear Sirs
We report on the profit estimate comprising an estimate of
earnings of MWB Business Exchange Plc (the "Company") and its
subsidiaries (together "the Group") before net finance costs,
taxation, depreciation, amortisation, accelerated depreciation on
impairment of fixed assets, profits/losses on disposal of fixed
assets and provisions made against balances with MWB Group Holdings
Plc and its subsidiaries (including property prepayments), for the
six month period ended 31 December 2012 (the "Profit Estimate").
The Profit Estimate and the basis on which it is prepared is set
out within the trading update issued by the Company dated 29
January 2013 (the "Trading Update") under the heading of 'Estimate
of Operating EBITDA'.
This report is required by Rule 28.3(b) of the City Code and is
given for the purpose of complying with that rule and for no other
purpose. Accordingly, we assume no responsibility in respect of
this report to Marley Acquisitions Limited (a wholly owned
subsidiary of Regus plc) (the "Offeror") or to any person connected
to, or acting in concert with, the Offeror or to any other person
who is seeking or may in future seek to acquire control of the
Company (an "Alternative Offeror") or to any other person connected
to, or acting in concert with, an Alternative Offeror.
Responsibilities
It is the responsibility of the directors of the Company (the
"Directors") to prepare the Profit Estimate in accordance with the
requirements of the City Code. In preparing the Profit Estimate the
Directors are responsible for correcting errors that they have
identified which may have arisen in the unaudited consolidated
trial balance used as the basis of preparation for the Profit
Estimate.
It is our responsibility to form an opinion as required by Rule
28.3(b) of the City Code as to the proper compilation of the Profit
Estimate and to report that opinion to you.
Save for any responsibility arising under Rule 28.3(b) of the
City Code to any person as and to the extent there provided, to the
fullest extent permitted by the law we do not assume any
responsibility and will not accept any liability to any other
person for any loss suffered by any such other person as a result
of, arising out of, or in connection with this report or our
statement, required by and given solely for the purposes of
complying with Rule 28.4 of the City Code consenting to the
publication of the Trading Update with the inclusion of this
report.
Basis of preparation of the Profit Estimate
The Profit Estimate has been prepared on the basis stated above
and is based on the unaudited consolidated trial balance for the
six months ended 31 December 2012. The Profit Estimate is required
to be presented on a basis consistent with the accounting policies
of the Group.
Basis of opinion
We conducted our work in accordance with the Standards for
Investment Reporting issued by the Auditing Practices Board in the
United Kingdom. Our work included evaluating the basis on which the
historical financial information for the six months to 31 December
2012 included in the Profit Estimate has been prepared and
considering whether the Profit Estimate has been accurately
computed using that information and whether the basis of accounting
used is consistent with the accounting policies of the Group.
We planned and performed our work so as to obtain the
information and explanations we considered necessary in order to
provide us with reasonable assurance that the Profit Estimate has
been properly compiled on the basis stated.
However, the Profit Estimate has not been audited. The actual
results reported, therefore, may be affected by revisions required
to accounting estimates due to changes in circumstances, the impact
of unforeseen events and the correction of errors in the trial
balance. Consequently, we can express no opinion as to whether the
actual results achieved will correspond to those shown in the
Profit Estimate and the difference may be material.
Our work has not been carried out in accordance with auditing or
other standards and practices generally accepted in the United
States of America or other jurisdictions outside the United Kingdom
and accordingly should not be relied upon as if it had been carried
out in accordance with those standards and practices.
Opinion
In our opinion, the Profit Estimate has been properly compiled
on the basis stated and the basis of accounting used is consistent
with the accounting policies of the Group.
Yours faithfully
BDO LLP
Chartered Accountants
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127)
Nplus1 Singer Advisory LLP
One Bartholomew Lane
London EC2N 2AX
The Directors
MWB Business Exchange Plc
1 West Garden Place
Kendal Street
London W2 2AQ
29 January 2013
Dear Sirs
We refer to the report on the profit estimate comprising an
estimate of earnings of MWB Business Exchange Plc (the "Company")
and its subsidiaries (together "the Group") before net finance
costs, taxation, depreciation, amortisation, accelerated
depreciation on impairment of fixed assets, profits/losses on
disposal of fixed assets and provisions made against balances with
MWB Group Holdings Plc and its subsidiaries (including property
prepayments), for the six month period ended 31 December 2012 (the
"Profit Estimate"). The Profit Estimate and the basis and
assumptions on which it is prepared is set out within the trading
update issued by the Company dated 29 January 2013 (the "Trading
Update").
We have discussed the Profit Estimate, together with the bases
and assumptions upon which it has been prepared, with you as
Directors of Business Exchange.
We have also discussed the accounting policies and calculations
for the Profit Estimate with BDO LLP, Business Exchange's auditors,
and we have considered their letter of today's date addressed to
you and us on this matter.
On the basis of the foregoing, we consider that the Profit
Estimate, has been made with due care and consideration. This
letter is provided to you solely in connection with Rule 28.3(b)
and Rule 28.4 of the City Code on Takeovers and Mergers and for no
other purpose.
Yours faithfully
Sandy Fraser
Partner, Corporate Finance
for and on behalf of
Nplus1 Singer Advisory LLP
Nplus1 Singer Advisory LLP is a limited liability partnership
registered in England and Wales (with registered number OC364131).
Nplus1 Singer Advisory LLP is authorised and regulated in the
United Kingdom by the Financial Services Authority.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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