How Did WOTSO Grow Revenue 4% While Occupancy Fell in Q4 FY25?
WOTSO’s flexspace segment sustained growth in Q4 FY25 with a 4% year-on-year revenue increase, opening four new locations and expanding its footprint by 9%. Occupancy dipped slightly but remains robust at 75%.
- Revenue up 4% year-on-year in Q4 FY25
- Four new locations opened, adding 9% new space
- Occupancy declined modestly from 79% to 75%
- Q4 contribution margin affected by timing accruals
- Ongoing rent dispute impacting North Strathfield costs
Strong Expansion Amidst Market Challenges
WOTSO (ASX – WOT) has reported a solid finish to FY25 for its flexspace business, with revenue climbing 4% year-on-year in the fourth quarter. This growth was supported by the strategic opening of four new locations across New South Wales and Victoria, which collectively added 9% more space to the portfolio. Despite the staggered openings throughout the quarter, WOTSO managed to maintain a healthy occupancy rate, dipping only slightly from 79% in Q3 to 75% in Q4.
New Locations Bolster Footprint
The new sites launched in Q4 include co-owned and leased properties in Melbourne, Kogarah, North Sydney, and Jamisontown. These locations vary in size, with desk capacities ranging from 50 to over 300, reflecting WOTSO’s flexible approach to meeting diverse customer needs. This expansion underlines the company’s commitment to growing its presence in key urban markets, capitalising on the ongoing demand for flexible workspace solutions.
Financial Nuances and Operational Performance
While revenue growth is encouraging, the company’s contribution margin for the quarter was impacted by several timing-related accruals, including staff leave entitlements and annual audit fees. These accounting adjustments temporarily depress reported profits but do not reflect actual cash outflows, suggesting that operating cash flow remains stable. Additionally, a rent dispute at the North Strathfield site has resulted in rent payments below contracted levels, adding a layer of complexity to cost management.
Occupancy and Revenue Metrics
Occupancy rates, a key indicator of flexspace utilisation, showed a modest decline but remain strong relative to industry standards. Revenue per available desk held steady, indicating that the new space additions have not diluted overall revenue efficiency. Total revenue for Q4 reached $32.65 million, reinforcing WOTSO’s position as a significant player in the Australian flexspace market.
Looking Ahead
WOTSO’s ability to grow revenue while expanding its footprint and managing occupancy challenges will be closely watched by investors. The temporary margin impacts and rent dispute highlight operational risks that could influence future profitability. However, the company’s strategic expansion and resilient demand for flexible workspaces suggest a positive trajectory as it moves into FY26.
Bottom Line?
WOTSO’s Q4 growth underscores resilience but flags margin and occupancy dynamics to monitor closely.
Questions in the middle?
- How will the rent dispute at North Strathfield resolve and impact future costs?
- Can WOTSO sustain occupancy levels as new locations mature?
- Will contribution margins normalize as timing accruals reverse in coming quarters?
