The market for flexible business space should be booming as more and more individuals set out with their own business ventures. And so it would seem from the latest figures from Bizspace.

On sales improved 35 per cent to £6.32 million for the year to end-February, Bizspace lifted pre-tax profits 44 per cent to £1.91 million and earnings per share 11 per cent to 3.09p.

The improvement in earnings would have been much larger had the group not increased the number of shares in issue by completing a placing and open offer in October that raised £4.95 million.

With this cash and more borrowings (which increased net debt from £17.6 million to £29.6 million) the group embarked on an opportunistic spending spree, buying seven centres in Manchester for £15.8 million and two centres in Birmingham/Wolverhampton for £2.35 million.

All of this ensured net asset value per share improved to 46p, a seven per cent hike. Says managing director Neill Corderey: 'Our new centres only contributed to the figures for a short period. And, despite the increase in debts, gearing stands at just 113 per cent, a figure that is much smaller than we, and no doubt the market, anticipated.'

Since the year-end, Bizspace has continued with its swift business development, offloading two centres in London for a profit of more than £1.1 million and acquiring two others – in Camberwell, London and Letchworth – for a combined £3.63 million.

As events now stand, Bizspace has 28 centres in its portfolio – up from 19 this time last year – which between them offer no less than 2.2 million sq ft of space to the nation's small businesses. In all, it has over 1,485 units of space and houses 1,100 small companies of every hue and cry.

'We are bullish because we have a very simple business model,' says Corderey. 'We are the owner of substantial property which we divide up and lease out to anyone who needs it. If it has a value we will lease it – we recently bought a centre that backed onto a canal and, in a deal which made many of us smile, managed to lease the mooring rights which came with the building.'

This is indicative of the opportunistic approach Bizspace takes – something that has helped it achieve regular occupancy rates of over 80 per cent.

Corderey reckons that, more than most ventures, Bizspace is relatively immune from any downturn, either in the property market or the economy at large.

In boom times, he says, 'demand for flexible space from small companies increases'. In downturns 'many businesses gravitate to this sector because of the short-term nature of the lease agreements and their flexibility'.

Another attraction is the fact that despite being in the rental game, bad debts are a rarity. Corderey's comments on this issue are very blunt – 'if someone doesn't pay their monthly rent they have to leave immediately'.

On top of this, the sheer number and diversity of those leasing the property provides a fantastic safety blanket. 'No matter how harsh the economic environment, it is very unlikely that our 1,100 business customers would all go bust at the same time,' he opines.

For the year ahead, the expectation is that growth will continue at a rapid pace. Corderey has plans to lift occupancy to around 90 per cent and intends to add two more acquisitions to the business. These will be funded according to past rules (30 per cent equity/70 per cent debt) and gearing is not likely to peak at more than 120/130 per cent.

From an operational point of view, Bizspace should benefit from the arrival of a facilities management executive ('to drive down costs constantly') and a chief operating officer, who will manage the day-to-day business leaving other senior directors to look after expansion and strategy.

House broker Teather & Greenwood forecasts that the group will make £2.65 million pre-tax in the year to end-February 2005 on sales of £8.7 million. This should deliver earnings per share in the region of 3.35p, putting the shares on a forward p/e of just 11.7. The multiple should fall to 11.1 the following year.

Leaving out all the trading issues, the current discount to net asset value is nine per cent. T&G's Stephen Thomas believes this will widen to 18 per cent in nine months – and to 27 per cent a year later. He terms the shares a 'strong buy'.

There is also a very interesting shareholder register to contemplate. Chairman Larry Lipman's Safeland Group (from which Bizspace was spun out) still holds 11.6 per cent while property speculator and timeshare pioneer Jack Petchey has upped his stake to 9.08 per cent.

With the existing business roaring, cash flooding in and expansion very likely, Bizspace offers a tantalising means to get exposure to a burgeoning area of the economy. Buy.