results presentation | half-year ended 31 december 2019 ... · coworking space in coworking areas...

Results Presentation | Half-Year ended 31 December 2019 | 28 February 2020

Contents

2

1. Overview 32. Financial Information 73. The Business 124. The Market 165. Outlook 19

WE MIND YOUR BUSINESS

Overview – 1HFY2020 Highlights

3WE MIND YOUR BUSINESS

Number of locations 10 17 20

Locations opened 4 6 1

▪ Operating revenue up 29% to $26.5

million (Dec-19 revenue $5m+)

▪ EBITDA up 26% to $18.0 million

▪ Operating cash flows up 32% to

$13.3 million

▪ Net profit after tax of $3.3 million

impacted by substantial new

location costs and more

conservative depreciation than prior

period

▪ Net profit after tax from ‘mature’

locations (excluding impact of new

location) was $4.1 million

▪ Occupancy at 76% at Dec-19 up to

80% by Jan-20

Growing revenues from flexible workspace services

Total square metres 16,693 24,005 29,156

A solid half-year of revenue growth

Notes: (1) Excluding the impact of the new location opened in 1HFY2020 net profit after tax was $4.1 millionin 1HFY2020 for the ‘mature’ locations that were in existence at 30 June 2019

-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

1HFY2018 1HFY2019 1HFY2020

Summary metrics 1HFY2020

($'million)

1HFY2019

($'million)

Revenue from flexible workspace services $26.5 $20.6

EBITDA $18.0 $14.3

Net profit after tax(1) $3.3 $3.9

Operating cash flows $13.3 $10.1

Net assets $48.0 $10.8

Overview – History of Victory Offices

Victory Offices Overview

▪ Victory Offices is an Australian company that provides a suite of premium flexible workspace solutions as an

alternative to traditional office spaces

▪ Established in 2013, Victory has grown to:

❑ 30 locations across six states and territories(1)

❑ ~2,330 customers

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❑ 76% mature occupancy as at December

❑ Over 144,000 square feet of floor space(1)

December 2013Victory Officesfounded

December 20165th location opened and first in Sydney CBD

August 201920th location opened in Melbourne

June 2019Victory Offices successfully completes IPO and lists on the ASX

March 201919th location opened at

Chadstone in VIC

November 201710th location opened and

first in Brisbane (CBD)

August 20141st location opened in

Melbourne CBD

September 201814th location opened in Melbourne CBD

July 201812th location opened and

first in Perth CBD

WE MIND YOUR BUSINESSNotes: (1) Including 20 locations open at 31 December 2019 with a further 10 scheduled to open in 2HFY2020

Overview - Geographic Spread

▪ Victory Offices has 30 locations across Australia (open or scheduled to open in FY2020), with locations concentrated in Melbourne and Sydney as these are the two largest markets within Australia

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Perth CBD1 location (open)

Brisbane CBD1 location (open)2 locations (opening in 2HFY2020)

Sydney CBD3 locations (open)5 locations (opening in 2HFY2020)

Chadstone2 locations (open)

Box Hill2 locations (open)

Sunshine1 location (open)

Dandenong1 location (open)

Melbourne CBD9 locations (open)


Diversified Australian portfolio

Cremorne1 location (opening 2HFY2020)

Canberra1 location (opening in 2HFY2020)

Adelaide1 location (opening 2HFY2020)

Overview - Client Base

High quality customer base seeking a premium service

▪ Multinational corporates – establishing a presence within Australia, without the requirement for traditional commercial office space

▪ Large local corporates – seeking to optimise costs, outsource non-core functions and have flexibility to scale up and down

▪ SMEs – wanting access to high quality facilities and a more prestigious address in proximity to clients

▪ Professionals – seeking high quality facilities with flexible leases and minimal lead times to set-up

The customer base is growing in number and diversity

▪ Diversified revenue across customers – top 40 customers account for only 27% of revenue

▪ Customer numbers increased to 2,330 in 1HFY2020 up from 1,662 in 1HFY2019

▪ A diverse spread of industries with a high proportion of customers in growing service related businesses - finance, legal, recruitment, technology and consulting

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Victory Offices customer breakdown by reporting period

Victory Offices customers by industry


Diverse customer base continuing to grow

Customer 1HFY2020 1HFY2019

Total Customers 2,330 1,662

Customers > $100,000 revenue 33 (25% revenue) 20 (24% revenue)

Customers $10,000 - $100,000 498 (59%) 505 (65%)

Customers < $10,000 1,799 (16%) 1,137 (11%)

Top 10 customers 12% of revenue 18% of revenue




2. Financial Information

Profit and Loss


Proven business model

Notes: (1) Excluding the impact of the new location net profit after tax was $4.1 millionin 1HFY2020 for the ‘mature’ locations that were in existence at 30 June 2019

Income Statement %

Revenue from suite services 26,484 20,590 p 29%

Service charges - 360 q -100%

Revenue 26,484 20,950 p 26%

Employee benefits (4,093) (3,121) p 31%

Other expenses (2,638) (2,123) p 24%

Occupancy costs (1,802) (1,419) p 27%

Operating expenses (8,533) (6,663) p 28%

EBITDA 17,951 14,287 p 26%

Depreciation and amortisation (8,872) (5,176) p 71%

EBIT 9,079 9,111 q 0%

Interest revenue 15 - p

Finance costs (4,340) (3,443) p 26%

Net Profit Before Tax 4,754 5,668 q -16%

Income tax expense (1,427) (1,761) q -19%

Net Profit After Tax(1) 3,327 3,907 q -15%

1HFY2020

($'000)

1HFY2019

($'000) Movement

Cash Flows


Growing operational cash flows

Cash Flow Highlights %

Receipts from customers 23,441 21,212

Operational payments (6,597) (8,959)

Interest received 15 -

Interest paid (leases) (3,586) (2,201)

Operational cash flows 13,273 10,052 p 32%

Purchase of P,P&E (11,764) (9,591)

Payment for bank guarantees (18,094) -

Term deposits 18,079 -

Investing cash flows (11,779) (9,591) p 23%

Landlord incentives received - 1,226

Related parties (net) 20 (993)

Lease liabilities (rent) (4,072) (1,611)

Hire purchase - (56)

Financing cash flows (4,052) (1,434) p >100%

Net cash flows (2,558) (973) p >100%

Opening cash 3,199 1,447

Closing cash 641 474

Term deposits available 2,041 -

Total cash and term deposits 2,682 474

1HFY2020

($'000)

1HFY2019

($'000) Movement

Balance Sheet


Continued investment in new locations

Balance Sheet Highlights %

Cash 641 3,199

Trade and other receivables 7,552 1,080

Financial assets - term deposits 2,042 10,795

Financial assets - bank guarantees 28,904 20,136

P,P&E - right of use assets 109,956 98,005

P,P&E - other assets (inc. fit out) 50,567 41,447

Deferred tax assets (net) 6,357 5,375

Total assets 206,019 180,037 p 14%

Trade and other payables 18,775 14,025

Provisions 2,125 1,384

Lease liabilities 131,047 116,522

Other liabilities 3,494 3,266

Provision for income tax 2,567 157

Total liabilities 158,008 135,354 p 17%

Net assets 48,011 44,683 p 7%

1HFY2020

($'000)

FY2019

($'000) Movement


Impact of Lease Accounting

▪ AASB 16 is the new leases accounting standard

replacing AASB 117

▪ The new standard is mandatory from 1 January

2020 although Victory Offices has adopted

early (pre FY2019) and retrospectively

▪ Under old standards leases treated as

operating leases (only impact lease expense)

▪ Under new standard requirement to create a

right of use asset and corresponding liability at

fair value of expected lease payments

▪ Right of use asset amortised on a straight-line

basis through depreciation & amortisation

expense

▪ Lease liability unwound through finance costs

▪ Material impact on balance sheet and profit

▪ No impact on cash flows apart from disclosure

of finance costs

Lease accounting has a material impact on financial reporting

AASB 16 treatment

Depreciation and amortisation 5,728 4,273

Finance costs 4,239 3,275

Total AASB 16 lease expenses 9,967 7,548

AASB 117 treatment

Lease expense 8,677 6,474

Total AASB 117 lease expenses 8,677 6,474

Impact on profit (pre-tax) 1,290 1,074

Impact on profit (post-tax) 903 752

1HFY2020

($'000)

1HFY2019

($'000)Lease accounting impact

3. The Business

New Locations (FY2020 openings)


Continuing to secure high quality locations

▪ 30 locations expected to be open by end

FY2020, up from 19 at end FY2020

▪ Ten locations scheduled to open in 2HFY2020

▪ Geographical footprint increasing to include

Canberra and Adelaide as well as a further

expansion in Sydney and Brisbane

▪ Adding over 49,000 square feet of floorspace in

FY2020 taking total footprint to over 144,000

square feet

▪ By end FY2020 will be second largest operator

(by number of locations) in Australia

The Victory Offering

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Serviced offices

Serviced private offices, typically on 12-18 month terms.

Virtual office services

Provision of virtual receptionist services, including phone and mail handling and providing a primary business address.

Coworking Space in coworking areas on typically 12-18 month terms.

Day suites Single use licence fee for private offices.

Meeting and training rooms

Single use licence fee for meeting and training facilities.

Hot desks Licensing of desks in coworking areas.

Lounge membership

Members of Victory Lounge can utilise meeting and entertaining facilities.

Services offered by Victory Offices

Additional services offered by Victory include: reception and

administration; marketing and printing; professional (legal, financial,

accounting, HR); finance administration (e.g. bookkeeping and

payroll); chauffeur; concierge; health and wellbeing; interpreter; and

office furniture hire. This list is not exhaustive.


Why Victory Offices

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Product Suite

▪ Providing a full suite of premium office spaces and additional value-add services to clients on flexible terms with no hidden costs.

ICT Capability

▪ Continuous investment in Victory’s technology platform. Victory has a in-house development team which has delivered a leading technology platform.

Brand & Scale

▪ Size of network, brand and existing relationships provide scale efficiencies with suppliers and access to favourable locations through off-market transactions with landlords.

Business Support

▪ Comprehensive business support services to suit all sizes and types of businesses. These services are delivered consistently across all locations.

Growth in Victory Offices brand driving interest from commercial landlords


4. The Market

The Australian Workplace is Changing

Australia's changing workplace

▪ The flexible workspace industry has existed

for over 40 years within Australia and has

evolved from individual desk space to

coworking spaces, virtual offices, meeting

rooms and hybrid combinations of all services

▪ In 2018 approx. 65,300 sqm(2) of commercial

space was used for flexible office solutions,

more than the combined amount for 2015

through 2017

Growth in demand

▪ According to the ABS, Sydney and Melbourne

(almost 40% of Australia’s population) are

forecast to experience double digit

population growth between 2018 and 2027(1)

▪ Growing demand for flexibility and cost

efficiencies with 23 days on average to source

a space and 99% of flexible workspace leases

are less than 24 months

▪ Appeals to the preferences of millennials who

will represent 42% of the Australian

workforce by 2025(1)

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Australia office market vacancy rate(1)

Notes: (1) Property Council of Australia, Office Market Report 2019(2) Office Hub, The Australian Coworking Market Report 2017/2018

Sydney & Melbourne population growth(2)

3

3.5

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4.5

5

5.5

6

6.5

7

7.5

1991 1998 2005 2012 2019 2026 2033 2040

mill

ion

Greater Sydney Greater Melbourne

0%

5%

10%

15%

20%

25%

1990 1994 1998 2002 2006 2010 2014 2018

Vac

ancy

Rat

e (%

)


The Future of Flexible Working in Australia

Global trends provide a positive outlook for Australia

▪ The global market for flexible workspaces has been growing annually by an average of 13% over the past decade(1)

▪ The global co-working sector is projected to grow at 24% CAGR between 2016-2020(1)

▪ It is estimated that 30% of corporate real estate portfolios could be flexible workspace by 2030(2)

▪ Flexible work space has greater market penetration in more developed markets overseas which Australia may follow

▪ Large corporates increasingly recognise the efficiencies in complementing fixed office space to improve utilisation

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City Penetration

Sydney 2%

Melbourne 2%

Hong Kong 3%

Singapore 5%

Chengdu 6%

Shanghai 5%

Delhi 6%

Source: Colliers International, The Flexible Workspace Outlook Report, 2019

Office space occupied by flexible workspaces

Largest operators in the Australian market by locations(3)

Highly fragmented market

▪ The market is highly fragmented and segmented across

differing key target markets

▪ The four large comparable Australian flexible solution

providers account for only 162 centres

▪ Australia’s total office stock increased by 4.8% over the

five years to 2017 to reach 25.3 million sqm

▪ Similar growth through to 2030, would increase total

office stock to around 28.5 million sqm

Notes: (1) GCUC and Emergent Research: Number of U.S. and Global Coworking Spaces and Members (2) JLL Research: Technology and real estate: the road to 2030(3) Company websites correct as at 25 February 2020(4) Property Council of Australia, quoted in Office Market Report, Preston Rowe Paterson, First Half 2017


5. Outlook


Outlook

▪ Expecting to achieve 20% year-on-year

revenue growth in FY2020

▪ Expect NPAT to revenue margin to remain

close to the 20% margin reported in FY2019

for ‘mature’ locations (i.e. excluding impact of

new locations)

Important Notice and Disclaimer

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This presentation is issued by Victory Offices Limited, (“VOL, Victory Offices or Victory”) to provide summary information about Victory Offices Limited and its associated entities and their activities current as at the date of this document. The information contained in this document is of a general background nature and does not purport to be complete. It should be read in conjunction with VOL’s other periodic and continuous disclosure announcements lodged with the Australian Securities Exchange, which are available at www.asx.com.au.

This presentation has been prepared by VOL based on the information available. To the maximum extent permitted by law, no representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions or conclusions in this presentation and VOL, its directors, officers, employees, agents and advisers disclaim all liability and responsibility (including for negligence) for any direct or indirect loss or damage which may be suffered by any recipient through use or reliance or anything contained in or omitted from this presentation.

Past performance information contained in this presentation is given for illustrative purposes only and should not be relied upon (and is not) an indication of future performance.

This presentation contains certain “forward looking statements” and prospective financial information. These forward looking statements and information are based on the beliefs of VOL’s management as well as assumptions made by and information currentlyavailable to VOL’s management, and speak only as of the date of this presentation. All statements other than statements of historical facts included in this presentation, including without limitation, statements regarding VOL’s forecasts, business strategy, synergies, plans and objectives, are forward looking statements. In addition, when used in this presentation, the words “forecast”, “estimate”, “expect”, “anticipated” and similar expressions are intended to identify forward looking statements. Such statements are subject to significant assumptions, risks and uncertainties, many of which are outside the control of VOL and are not reliably predictable, which could cause actual results to differ materially, in terms of quantum and timing, from those described herein. Readers are cautioned not to place undue reliance on forward looking statements and VOL assumes no obligation to update such information.

The information in this presentation remains subject to change without notice.

In receiving this presentation, you agree to the foregoing restrictions and limitations.

All figures in this document are in Australian dollars (AUD) unless stated otherwise.

This presentation is not for distribution or release in the United States or to, or for the account or benefit of, US persons.


results presentation | half-year ended 31 december 2019 ... · coworking space in coworking areas...

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