Victory Offices confirms complete exit from co-working in Sydney CBD, CFO resigns

Victory Offices confirms complete exit from co-working in Sydney CBD, CFO resigns

Australian operator of co-working spaces Victory Offices (ASX: VOL) has confirmed it no longer has a presence in the Sydney CBD, announcing yesterday the closure of four ‘loss-making’ locations over the course of the past six weeks, following media reports into the matter.

The company has since gone into a trading halt this morning after also announcing the resignation of chief financial officer Keith Pollock, with an update on his replacement to come “in due course”.

The closures in Sydney mean Victory has no presence in the New South Wales capital, with the company today reaffirming its focus on suburban centres and locations other than the Sydney CBD following a strategic review.

Victory’s ASX statement took about 24 hours to be released to the market following an Australian Financial Review report about the closure of Level 25, 300 Barangaroo Avenue which was published on Monday.

It also confirms that over the course of the past six weeks, in addition to 300 Barangaroo Avenue, it has closed three other Sydney CBD locations including:

  • Level 29, 85 Castlereagh Street
  • Level 26-26, 100 Mount Street
  • 420 George Street

The closures of both 100 Mount Street and 420 George Street were revealed by the press weeks before Victory made its announcement today.

The news comes just under a year after VOL announced it had been locked out from three offices in Melbourne and Sydney over allegations of unpaid rent as well as outgoings and cleaning contributions.

Victory appointed Robert Grays Lawyers to deal with the matters across the three locations which were Collins Place and Bourke Place in the Melbourne CBD, and the EY Centre in the Sydney CBD.

“The Sydney CBD locations were likely to continue to operate at a loss for some time into the future and the decision to exit is expected to have a positive impact on the recovery of the company’s portfolio of office locations,” Victory said.

“This determination has been assessed following the significant negative impact of COVID-19, the increased normality of many staff working from home and the increasing business costs of Sydney CBD operations.

“The company expects the ceasing of the Sydney CBD locations to have a negative impact on revenue for the financial year ending 30 June 2022 but is not expected to have a significant impact on profitability.”

The resignation of Pollock comes just over a week after former Victorian Premier Steve Bracks resigned from his role of Victory Offices chairman, replaced by managing director Dan Baxter.

The announcements are in contrast to an upbeat trading update issued in April, in which Victory claimed it was witnessing “improvement in business conditions”, with the company “confident that flexible workspaces are important to the way the world does business going forward”.

At the time, Victory said its cash balance was $8.6 million - which is $2.6 million more than the serviced offices provider’s current market capitalisation.

In February, the company detailed its first half financial results and blamed its “difficult period” on COVID-19 driving a trend toward people choosing to work from home instead of in its serviced offices and co-working spaces.

At the time, the company reported revenue from flexible workspaces was $7 million, compared to $6.6 million in 1H21.

The company delivered a net loss after tax in the period of $25.9 million, including an impairment on assets of $2.4 million. By comparison, the company’s loss for 1H21 was $17.7 million.

Victory’s share price has never recovered from the market crash witnessed at the beginning of the COVID-19 pandemic. At the beginning of 2020, shares in VOL were trading at around $1.60 per share. Today, the company is barely hitting prices of 4 cents per share.

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